Value canvas

Revision as of 20:00, 7 May 2023

Developed by Ali Abdul-Ghani - s184640

Abstract

The following article will introduce the "Value proposition canvas" and its context as an analytical tool in project assessment. The “Value Proposition Canvas” is a business model tool developed by Alex Osterwalder. The model was developed in addition to the existing “Business Model Canvas (BMC)”. By outlining the tasks, the businesses use the canvas to visualize, design and test, how to create value for customers, by describing, the jobs they want to accomplish, the gains they desire, and the pains they wish to avoid. ^[1] The Values Proposition Canvas is a pivotal element of the business model canvas (BMC) and focuses on two building blocks from the BMC. The Canvas is composed of two parts The “Customer Profile” and the “Value map”. ^[2] The customer profile is divided into three parts, that describe the jobs the customers trying to get done, and the pains and gains. The value map lists the products and services the value propositions build on, by describing the way the products, services, and features are pain relievers and how they eliminate, reduce, and minimize customers’ concerns, and outline which way these are gain creators, by how they produce, increase, or maximize outcome and benefits, that the customers desire. A “Fit” can be achieved when a clear connection between what matters to customers and how products, services, and features ease pain and create gains. The customer profile might contain numerous jobs, gains, and pain, however, the value map highlights the most important ones. ^[3] Values Proposition Canvas can be utilized and used by different businesses in all development stages for project managers, to obtain a better understanding of their customer's needs and utilize this to develop a better value proposition. Additionally, this tool can help enhance better communication between the stakeholders, for progressive success.

Big Idea

- Value Proposition Canvas

(about Value Proposition Canvas and its purpose) - Addition to the Business Model Canvas

(The cooperation between the models and how its fits)

- Using Value Proposition Canvas in project management to create value

(The idea of how Value Proposition Canvas can be used to create value for both Project managers / developer)

- The needs of businesses to use the Value Proposition Canvas

A description of the importance of operating businesses through the use of Value Proposition Canvas.

Application

Figure 1. Value Proposition Canvas- Value proposition design phases

Figure 2. Value Proposition Canvas- Value proposition and customer segment

- Business Model Canvas(BMC) and relations to Value Proposition Canvas and its applications.

Business Model Canvas is a strategic management tool to design, test, build, and manage business models. The model includes nine building block that forms the business model. In general, the model provides information about what the company delivers and to whom, how it's done, and the system design for that, as well as which cash flow it triggers in the form of revenues and costs. The model has not had a defined order, however, the creator recommends following the following order: customer segment, value proposition, channels to customers, customer relations, revenue stream, key resources, key activities, key partners, and cost structure. The Business model Canvas is a useful tool to understand the totality of the company strategy, marketing, and how customers are included in that. To get a more comprehensive view, the tool can be integrated and merged with Value Proposition Canvas which provides a detailed customer and value map exploration to detail these essential building blocks.

- Value Proposition Canvas

Value Proposition Canvas is a strategic model developed for companies to visualize, design and test a value proposition for the customers. The model was developed in connection to Business Model Canvas by Alexander Osterwalder. The Value Proposition Canvas zoom in on two of the main components of the Business model, the customer segment and value map. The idea of the model is to clarify the relations between the customer's conscious and unconscious needs and the real value. Whereby the purpose of the Business Model Canvas is to create value for the company, the Value Proposition Canvas goal is to create value for the customers. The Value Proposition Canvas is divided into two parts, with each part consisting of three subparts. Combining these parts provides an overall view of the customer segment and value proposition. The better the value creation or 'fit' between the two segments, the higher the likelihood of success for the product and project.^[4]

Customer profile:

The customer profile constitutes the right-hand side of the Value Proposition Canvas. The customer profile visualizes the customer/stakeholder segment that is intended to create value. This is done through the description of the pains and gains.

- Customer jobs

Describe the tasks that the customer wants to get done. This could be both in the workplace and in their personal life, as expressed in their own words. Jobs could be functional, social, or personal/emotional.

- Pains

Bad outcomes, risks, and obstacles that customers want to avoid since it prevents them from getting a job done (well). Pains can be specific barriers, frustrations, or negative situations that one hopes to avoid or ease/minimize.

- Gains

Outcomes and benefits customers must have, expect, desire, or hope to achieve. Gains can be basic, expectations, wishes, unexpected or unexpected benefits.

Value map:

- Products and Services

The items that the value proposition is based on that your customers can see. Products and services can be tangible, intangible, digital, and financial in nature.

- Gain creators

By getting a job done (well), products and services create gains for customers and help customers achieve the outcomes and benefits they expect, require, desire, or hope for. Gain Creators can both lead to benefits of a functional, economic, social, and emotional nature.

- Pain relievers

By getting a job done (well), products and services alleviate customer pains by eliminating or reducing risks, obstacles, and bad outcomes. Pain Relievers can be savings (time, and money), elimination of risks, or breaking down barriers that prevent happiness and well-being.

- The practice- Value proposition design

Value proposition design indicates how to use the value proposition canvas to design and test great value propositions. For the process to be up to date and keeping relevant for the customers, a constantly evolving value proposition is needed through an iterative search of customers' needs.

Canvas: The initial step in the design process is to create a value canvas consisting of the value proposition and value map. The canvas provides a visual representation of the intention to create value for the customer. A ‘fit’ is achieved when one meets the other.

Design: The following step is to design a prototype, that can be tested with customers. This involves creating a prototype that presents the key features of the product or service. This can be done by using quick and cheap prototypes that can be used to explore the possibilities and lead to testing with customers.

Test: To reduce the risk and uncertainty of the ideas, it’s necessary to conduct a test first by deciding what to test, followed by the test and drawing from the experiment library and bringing it all together and measuring the progress.

Evolve: The final step in the progress is constantly evolving based on feedback from the customers. This includes changes in the product based on their needs and requirement. The product or service is repeatedly evolved to seek the best value proposition through an iterative process.

Through these processes, businesses can create the best value proposition that meets the customer's needs and is constantly evolving to fit the market.

Limitations

- Using Value Proposition Canvas for best benefits in combination with other tools and not as a singular tool

Isolated the Value proposition Canvas appears simple and without research, data collection, testing and validation it only provides a suggestion regarding the value proposition that may be relevant for a company to focus on. The simplicity of the model makes it appears to be superficial without real value as a strategic management tool, however this is also clarified by Alexander Osterwalder, that the Value Proposition Canvas only has value when the tool is integrated with thorough research and repeated use of hypothesis-based testing and validation of data. The Value Proposition Canvas is only a practical tool that partly provides a summary overview of the intermediate calculations and results of the analysis and partly provides a framework and guidance in the company's work to invent or reinvent itself. ^[4]

In this regards ‘Value Proposition Canvas’ can be used in conjunction with other tools, to develop a successful business idea/product. Depending on the goal and scope of a project, a better understanding to choose the appropriate tools to best fit with the business model. There are several tools that can be used and integrated with ‘Value Proposition Canvas’ such as:

SWOT analysis: Allows the product managers a better idea of the strengths, weaknesses, opportunities, and threats of the company to give the manager insight to identify parts of the project that need correction or improvements in the Value Proposition Canvas.

Business model canvas: Although Value Proposition Canvas is a great tool to understand and visualize the customer and value segment, to analyze and understand their needs, the model fails to provide a view on the business aspect herby the economical and technical perspective. This can be explained by the limited focus on the customer segment. To get a better understanding of the larger perspective, the user needs to use another model such as Business Model Canvas in combination with it, to build on the overall understanding of the analytical output. The remaining building block will provide support for the overall comprehension. To help users create value for businesses the Business Model Canvas completes the strategic key factors for business management.

Environment Map: The environment map is a strategic foresight tool to map the context in which you design and manage value propositions and business models. Essentially it helps you understand the context in which you create.

Market research /analysis: Market research and analysis done by conducting interviews and surveys can help the product developer or manager to better understand the customers’ needs, which can help clarify the customer segment in the Value Proposition Canvas. Moreover, by analyzing the market, the manager can identify opportunities and competition in the field.

- Limitation of custumors

Limited information about customers and their behavior

- Application on divergent Companies

However The use of Value Proposition Canvas, does not necessarily fit all types of businesses.

- Value proposition Canvas as a tool and not a recipe for success

The Value Proposition Canvas is a powerful tool to use, however it’s important to note it’s a tool and not a recipe for success.

Annotated bibliography

References

1. ↑ Osterwalder, A., Pigneur, Y., Bernarda, G., & Smith, A. (2014). Value proposition design. Wiley.
2. ↑ Kyhnau, J., & Nielsen, C. (2015). Value Proposition Design: How to create products and services customers want. Journal of Business Models, 3(1), 81–89. https://doi.org/10.5278/ojs.jbm.v3i1.1105.
3. ↑ Strategyzer. (2016, November 22). The Value Proposition Canvas - 9 Steps to Creating Products Customers Love. YouTube. https://www.youtube.com/watch?v=ReM1uqmVfP0.
4. ↑ ^{4.0 4.1} Kyhnau, J. G. (2017). Value Proposition Canvas. In K. Buch-Madsen (Ed.), Marketingmodeller (1 ed., pp. 74-79). Samfundslitteratur.