When you’re starting a new project, or a new company, you need practical tools to help you focus on executing things faster and better. Good strategy tools exist only to help you focus on getting the right things done. The value proposition canvas is a fairly simple tool that quickly gets you to the ‘minimum viable clarity’ required to start building and testing a product or service.
A value proposition sits at the pivot point of an entire business model. Mapping the business model of a new product or service is one of the most important parts of building an overall business strategy. Strategy frameworks have traditionally been the domain of MBAs and consultants but they are so important that these days the tools have been democratised for use by entrepreneurs, designers and technical teams.
Business model canvas
The Business Model Canvas is a toolkit from 2009 that drew on Michael Porter’s value chain maps and Peter Drucker’s theories of the firm (among other sources). The Business Model Canvas is a chart that maps the key things that a business needs to get right to be successful.
The Business Model Canvas has become the preferred tool for modern startups to use when rapidly testing a new business idea. It’s an attractive tool because it condenses years of business school and management consulting practise into a single page (with some straight-forward questions for each section). – This is either a good or a bad thing depending on how much you love management jargon.
Any strategy tool is only really as good as the facilitator or team who are using it. Each tool carries hidden biases and assumptions. So choosing a good tool is important. Strategy tools are great ways of providing structure to a conversation and allowing people outside of the pure strategy professions to think about whether they are doing the right things at the right time, in the right order.
Having used it in several client workshops, my issue with the traditional Business Model Canvas used to be that it didn’t do enough to encourage empathy with customers and to force the business to be accountable for how they communicated with their audience. In short, it didn’t place enough emphasis on the company’s value proposition.
A “value proposition canvas” is a chart that maps the key things that make up your product and why people buy it. There are many different value proposition canvases. Some are proprietary, some are open source and some are creative commons. Any canvas that helps you understand your customer, your offer and how the two fit together will help you clarify your value proposition.
Alex Osterwalder’s value proposition canvas
In 2012, Alex Osterwalder and his team released their Value Proposition Designer. Their version of the value proposition canvas is copyright and can only be used with credit to www.businessmodelgeneration.com. The Value Proposition Designer includes several bits of thinking from the Lean Startup movement such as “jobs to be done” and “customer pains”. It’s a good tool, but it’s not perfect.
The Business Model Generation team renamed their 2012 Value Proposition Designer as a value proposition canvas and published an excellent book in 2014 on the topic called Value Proposition Design. My critique of the Osterwalder (et al.) version of the value proposition canvas is that:
- The product proposition side isn’t grounded enough in marketing, branding and persuasion techniques. It doesn’t guide the user towards creative thinking and honest self-evaluation.
- The customer side isn’t grounded enough in behavioural psychology or customer behaviour research. It doesn’t guide the user into deep empathy for their customers or draw out enough new insights.
The psychology of why people buy things
I (like many brand strategists and advertising planners) often find myself standing in a supermarket transfixed, watching other people shop. I could literally stand for hours observing the range of human experience and emotions that go into making even the most seemingly banal shopping decisions. So many different parts of a person’s brain are engaged when they make even the smallest buying decision.
If you’ve ever eaten a doughnut while on a diet then you know that not all human decision making is fully rational. – But even if purchasing behaviour is irrational, it’s still predictable. That’s why I’ve drawn from behavioural economics and choice psychology to rebuild my own take on a value proposition canvas. Modelling human behaviour and decision making is a rich and diverse field of study. You can read more about how people make decisions and why they do what they do in books such as Nudge, Predictably Irrational, and Thinking Fast And Slow. Personally, I’ve drawn my models for the canvas mainly from the fields of cognitive psychology and behavioural economics.
A new value proposition canvas template
I’ve created a canvas to guide startups into examining the human experience of their customers. This canvas contains questions and sections that manoeuvre users of the canvas into thinking through the end-customer experience.
The new product section of the canvas uses the widely accepted marketing syntax of features and benefits with the addition of a box for “experience” (taking from the fields of design thinking and UX architecture). The product understanding section includes:
- Features – A feature is a factual description of how your product works. The features are the functioning attributes of your product. The features also provide the ‘reasons to believe’. Many FMCG marketers deride the importance of features because features are no longer a point of difference in most FMCG marketing. But for technology products and innovative new services the features on offer can still be an important part of your value proposition.
- Benefits – A benefit is what your product does for the customer. The benefits are the ways that the features make your customer’s life easier by increasing pleasure or decreasing pain. The benefits of your product are the really core of your value proposition. The best way to list out the benefits of your product on the canvas is to imagine all the ways that your product makes your customer’s life better.
- Experience – The product experience is the way that owning your product makes the customer feel. It’s the sum total of the combined features and benefits. Product experience is different to features and benefits because it’s more about the emotional reasons why people buy your product and what it means for them in their own lives. The product experience is the kernel that will help identify the market positioning and brand essence that is usually built out of the value proposition.
The customer section draws on nuero-lingusitic programming and psychology research into motivation and choice architecture. It focuses less on “pains” and “gains” because people can be motivated by both pains and gains in different ways. The customer empathy sections include:
- Wants – The emotional drivers of decision making are things that we want to be, do or have. Our wants are usually conscious (but aspirational) thoughts about how we’d like to improve our lives. They sometimes seem like daydreams but they can be powerful motivators of action. The wants speak more to the pull of our hearts and our emotions. I may need a car to get from A to B, but I want a BMW.
- Needs – The customer’s needs are the rational things that the customer needs to get done. Interestingly, needs are not always conscious. Customers can have needs that they may not know about yet. Designers call these “latent needs“. The best example is that none of us knew that we needed a portable music player until we saw an iPod for the first time (we also then suddenly wanted an iPod rather than any other perfectly good music player). The needs speak more to the pull of our heads and rational motivations.
- Fears – The dark side of making a decision is that it often carries a fear of giving up optionality. Fear of making a mistake, fear of missing out, fear of loss and dozens of other related fears. Fears can be a strong driver of purchasing behaviour and can be the hidden source of wants and needs. Customer fears are often the secret reason that no one is buying your widget. For any product there is a secret “pain of switching“. Even if your product is better than the competition, it might not be a big enough improvement to overcome the inertia of the status quo.
- Substitutes – Some companies claim that they have no direct competitors. The substitutes on the canvas aren’t just the obvious competitors, instead look for the existing behaviours and coping mechanisms. This is on the canvas because it shocks us into remembering that our customers are real people with daily lives who have made it this far in life without our product. No matter how much better your product is than the competition, if it isn’t better than the existing solutions then you don’t have a real-world value proposition.
A key finding from the process of mapping a value proposition is often “we don’t have enough information to answer this section”. That is a perfect moment to adopt a lean startup approach and to get out of the building to ask existing customers and potential customers about their wants, needs and fears. A value proposition canvas can be a great place to begin the process of identifying and validating your assumptions.
Examples of a value proposition canvas
Mapping a company’s value proposition is a great shared exercise for a cross-functional management team. It gets people from outside the marketing team to contribute to marketing insights without having to admit that what they are doing is “marketing” (because marketing can be a loaded term for some professions).
Startup accelerator: Uncovering new value in an existing feature
The Innovation Warehouse is an angel investing syndicate with a co-working space for the member investors and their portfolio of startups. Building a value proposition canvas helped them to identify that a key need for the startups that they want to serve is a quiet and productive space.
The productive environment was already a feature of the existing space but wasn’t being promoted in the existing marketing materials. It was a simple matter to add the feature into the collateral to address the customer need more clearly in their marketing.
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