Value Proposition Canvas

Revision as of 11:48, 18 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

The Value Proposition Canvas model is a great tool for the project manager in the initial phase of a project life cycle where the project's stakeholders are mapped. 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] An important step is therefore the identification of the relevant stakeholders and their expectations. Two main stakeholders are always the users of project outcomes and buyers/customers the project manager works with. 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] The Value Proposition Canvas can help the project manager in understanding these different needs and expectations, and how the project can satisfy them. The canvas will help creating a strategic alignment of value between users and the project outcomes. The finalized value proposition can be used when conducting a business model for the whole project and can lay the groundwork for value creation.

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

Business model relation

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

1. Not looking at the Value Proposition Canvas as two separate building blocks: It is important for the project manager to distinguish between the two sides of the value canvas, which many people can struggle with. ^[6]

2. Mixing several customer segments into one canvas: Mixing customer segments will create a chaotic analysis since they will have different customer jobs, pains and gains, hence the project manager will lose focus in terms of where to create value and to whom.

3. Creating your Customer Profile through the lens of your value proposition: The first step of creating the value proposition based on initial customer assumptions has a high level of bias. Project managers can create a perfect picture of the customer/user's needs that fits the project they want to deliver, but in reality the needs can be completely different, hence the canvas will need more adjustments and testing.

4. Only focusing on functional jobs: Functional jobs are the easiest to acknowledge, like people wanting to drink clean water, but there are often many more customer jobs. These can be social jobs such as being healthy and having high living standards.

5. Trying to address every customer pain and gain: If the project manager can't decide on a focus for the project deliverables, the quality of these can decline if the goal is to address every customer/user pains and gains.

6. Difficulty of data collection: The Value Proposition Canvas relies on customer insights. Collecting this data can be a difficult task. Interviews and surveys has to be done without forcing any bias on the customer, and can be very time consuming. Conducting customer surveys for a large segment is a very inflexible way to collecting data, and is not guaranteed to supply useful insights. ^[7]

Annotated bibliography

[2] Fundamentals of Strategy provides in-depth concepts and tools for strategy creation. The book provides insight on how to understand markets and customer segments, in order to create a coherent strategy.

[7] The Theory and Practice of Change Management Is a book providing guidelines on high to manage change within organizations. It provides tools for structuring of change, as well as guides on how to act as a project manager when addressing different stakeholders and when gathering information from these.

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]
7. ↑ Hayes J. The Theory And Practice Of Change Management, Fourth Edition, 2014