Good Value Proposition Design

by Innovation Excellence

Value Proposition Design Book CoverI had the opportunity to interview Alex Osterwalder about his new book Value Proposition Design. This is the second part of the two part interview. For fun I thought I would break the interview into two parts so we could take a look at his thoughts on both bad value propositions and good value propositions in turn. Below you will find my questions in bold and Alex’s answers immediately following the questions.

1. After the success of your Business Model Generation book, what led you to decide to write Value Proposition Design?

The Business Model Canvas, the heart of our first book, is just one tool. Its purpose is to help companies describe how they are creating value for their business. When you build a business you also want to describe how specifically you are creating value for your customer. That’s the purpose of the Value Proposition Canvas, the tool at the center of our new book.

In the new book we also wanted to more closely integrate our work with the Steve Blank’s and Eric Ries’ Lean Startup Thinking. We embrace their ideas and add some practical tools to the Lean Startup process. After all we are like business toolsmiths at Strategyzer.

We wrote Value Proposition Design because we learned a lot since publishing Business Model Generation. We didn’t want to keep that knowledge to us. We were ready to share.

2. How do the Business Model Canvas, the Value Map and the Customer Profile all interact?

The Value Proposition Canvas is really a zoom into the Business Model Canvas. They integrate 100%. At Strategyzer we envision a world in which every business practitioner masters a set of integrated tools. After all a surgeon is trained for 13 years before he/she is allowed to perform heart surgery. We should get better at using tools in strategy and innovation as well.

Alexander Osterwalder Quote

3. Which is more important, the Value Proposition or the Business Model behind an idea and why?

Both are important. There’s the myth that one is more important than the other. You need both to succeed. Kodak helped invent the digital camera and customers loved it. They basically innovated themselves to bankruptcy with a successful product, but without a sustainable business model. Great businesses have both, great value propositions embedded in great business models. Companies still have a hard time grasping that. We still have a lot to do. That’s basically why we launched an online course at Strategyzer – to help strategists, innovators, and entrpereneurs better understand business model thinking.

4. What are the characteristics of great value propositions? (shh, I know there are 10, go ahead and give them two)

1) Great value propositions are embedded in great value propositions. Ok, that’s not the answer most people are looking for, but nobody wants “a Kodak moment” nowadays.

2) Align with how customers measure success and failure. In other words, figure out what (quantitative) gains they want to obtain and what (quantitative) pains they want to avoid.

Get more in our book and download a free poster on our online companion once you got the book 😉

5. What is the role of the hypothesis in Value Proposition Design?

It’s essential. Ask yourself: what needs to be true for my idea to work. That will help you come up with the most important hypotheses. Then you go test the most important ones. If you do that you’ll reduce the risk of failure and substantially increase your success chances.

Thank you Alex for taking the time to answer the questions and to allow us to share your answers with the Innovation Excellence audience!

P.S. You can find the first part of this interview here – Bad Value Proposition Design

Image credits: Rugusavay, Strategyzer

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Braden KelleyBraden Kelley is a popular innovation speaker, builds sustainable innovation cultures, and tools for creating successful change. He is the author of the five-star book Stoking Your Innovation Bonfire and the creator of a revolutionary new change planning toolkit coming soon. Follow him on Twitter (@innovate) and Linkedin.