Value Proposition Canvas

Revision as of 14:03, 17 February 2018

Abstract

An important aspect of project management is stakeholder management which contains many different tools and theories. An essential part of this management is the alignment of stakeholder expectations with project deliverables. The reason for a project initiation is a business case. These business cases are based on needs from stakeholders such as customers/users. Users are the persons or organizations who will use the project's product, service, or result.^[1] To make sure the project is a success the needs of users must be thoroughly understood. As an example a consulting company can have the government as a client on a project, but the users of the project outcome are the citizens. No matter how succesful the government finds the project, it can all go to waste if the users are not satisfied. A tool for analysing these needs is the Value Proposition Canvas. The canvas assesses two different aspects:

1. The internal organizational side containing which products and services the organization will provide to the user.

2. The external user side which represents the user needs in form of pains of status quo and gains of project success.

The project manager can use the tool to analyse and connect these two aspects to make sure that all needs of users are satisfied as well as being differentiated by bringing gain creators to the users.

Big idea & Project Management relation

Since the expectations of stakeholder groups will differ, it is not unusual for conflict to exist regarding the importance or desirability of aspects of strategy. ^[2]

Stakeholder management is an essential practice for the project manager. An important step is the identification of the relevant stakeholders. In the analysis of value propositions the two main stakeholders are the users and buyers/customers. It is important to distinguish between the two types of stakeholders, and even to differentiate within one type of stakeholder. If there are relevant differences between different user groups it is important to address them separately because they may have different needs, aspirations, abilities or expectations.^[3]

To demonstrate the method used in a case study, this article will use an example from a consultancy firm conducting a project for The Gambian Government. The project had a large scope and span over several years before being finished. The main goal was the improvement of water resource management and sanitation, to bring clean drinking water to the citizens of The Gambia.

Application

Customer segment: The focus on the customer segment side is on why; why is there a need for a project initiation?

Customer job(s): The customer job(s) asses what the customer want to do, which actions or tasks does the customer or user want to perform. In the Gambia case the users have a very basic customer job in the accessibility of clean drinking water.

Pains: The pains tell which negative effects the user is experiencing for status quo. This can be a result of competitors lacking the necessary capabilities to offer a proper product or service. It can also be a result of users not having access to any products or services to fulfil their customer job. The project manager must acknowledge these customer pains, in order to identify the benefits a project outcome needs to incorporate. ^[4]

Gains: Unlike pains, gains are not factors which are clear for the user. These are factors that the user is not necessarily expecting of a product or service, but are extra benefits supplied. Gains are not essential for project success, but rather an area where project managers can differentiate their project outcomes. In the Gambia case the gains delivered came in form of education in hygiene, local training of staff and clean toilet facilities. Instead of only providing clean drinking water, the consulting company provided extra features, which made them differentiate themselves in the highly competitive market of consultancy.

Value proposition: Going from the customer segment side to the value proposition the focus changes from why to what and how; what will the project deliver and how will the project deliverables satisfy customer needs?

Products & services: Outlines the products and services the project outcome is built around.

Pain relievers: Pain relievers are ways of removing the customer/user’s pains. These deliverables are essential for user satisfaction. The pain relievers are not always in form of products and services, but can be features of these deliverables that solves customer/user pain of status quo.

Gain Creators: The gain creators are deliverables creating the extra gains for the customer/user. In the Gambia case this was enabled by creating education and training programs, spending extra resources to create the extra value for the users.

Value canvas in practice: According to Alexander Osterwalder these are the steps to create a meaningful Value Proposition Canvas in practice: ^[5]

Create Value Proposition Canvas: First fill out the value canvas with the areas described, this will be based on initial market analysis and assumptions made by the project management team. This will be a subjective guess on who customers/users are and what they need.

Test your customer assumptions: To have a useful canvas a lot of customer/user input is needed. The initial assumptions need to be tested with the customers in order to determine which customer jobs are essential and to quantify which customer pains are most severe. This practice can be done using interviews and market surveys.

Adjust assumptions and redesign canvas: After customer/user testing has been conducted the assumptions can be adjusted and Value Proposition Canvas redesigned. According to Alexander Osterwalder it is important to be as focused as possible. It is not necessary to address all customer/user pains, but useful value proposition can address a few really well.

Test with customer: To finalize the value canvas testing with the customer/user is continued. This process can reoccur until the project manager has achieved a fit between the value proposition and customer/user expectations.

Limitations

^[6]

1. Not looking at the Value Proposition Canvas as two separate building blocks:

2. Mixing several customer segments into one canvas:

3. Creating your Customer Profile through the lens of your value proposition:

4. Only focusing on functional jobs:

5. Trying to address every customer pain and gain:

6. Difficulty of data collection:

Annotated bibliography

References

1. ↑ Project Management Institute, A Guide to the Project Management Body of Knowledge (PMBOK® Guide), Fifth Edition, 2013
2. ↑ Johnson, Gerry. (2015) Fundamentals of Strategy, Third Edition
3. ↑ den Ouden, E. (2012) Innovation Design. Springer
4. ↑ den Ouden, E. (2012) Innovation Design. Springer
5. ↑ http://businessmodelalchemist.com/blog/2012/09/test-your-value-proposition-supercharge-lean-startup-and-custdev-principles.html [Accessed 02-17-2018]
6. ↑ http://blog.strategyzer.com/posts/2015/2/19/5-common-mistakes-to-avoid-when-using-the-value-proposition-canvas [Accessed 02-16-2018]