The Design of Value Proposition Design with Alex Osterwalder

by Chad McAllister

Value Proposition DesignThis interview is rather meta. It’s a discussion about a book; not about the book itself, but about the product management decisions for creating the book.

This is the story of recognizing a problem that a target market has and addressing it with a product.

You likely already know the person I interviewed, Alex Osterwalder, as the inventor of the Business Model Canvas — a one-page business model — and author of the related book Business Model Generation. He is also the 2015 winner of the prestigious Thinkers50 Strategy Award and is ranked as the #15 most influential business thinker by Thinkers 50. Further, in 2013 he won the inaugural Innovation Luminary Award by the European Union. He more recently co-authored the book Value Proposition Design, which in a way, is the topic of our discussion.

However, I didn’t want to ask him the same questions he has been asked a hundred times that you can find in other interviews. Instead, I asked him to discuss the book from the perspective of a product manager and innovator — identifying the need for the book, its target market, the value it creates for customers and for his organization, as well as how the name was chosen. So, you not only get some insights into what Value Proposition Design is, you also get to see the book as a product and the product management thinking that went into its creation.

If you are new to Value Proposition Design, think of it as the third leg of a stool consisting of Lean Startup and Design Thinking as the other legs — all three are similar in intent and each provides valuable tools, arguably with Alex’s tools being most valuable to product managers who think like product leaders — or in my words, product masters.

Below is a summary of questions discussed followed by a link to the interview.

Why was this product needed – the Value Proposition Design book?

There were two triggers. The first one was that the Business Model Generation book was pretty successful and a lot of people started using the business model canvas. What we didn’t realize is that some people were repurposing the business model canvas to sketch out their value proposition. The business model canvas was never designed to help with that particular job. The only job to be done was how to sketch a business model. So we tried to figure out what would another tool be to satisfy the need. So that was the origin of the tool – addressing an unmet need of our existing customers. The second tool customers needed was the value proposition canvas. It’s like zooming in. The business model is the big picture perspective and you zoom into the value proposition. The other trigger was that we learned so much over the year since we launched Business Model Generation that we had a huge need to share that learning. We built upon what was working, integrating customer development and lean startup approaches into the new book with what we were learning as well.  Also, we had just launched the Strategyzer brand and the book was an opportunity to promote the brand with “Strategyzer” on the cover.

What opportunities would the book create for your company?

The original vision for Strategyzer was to be the SAP of strategy, or the strategic operating system. We wanted to build the enterprise software that would help senior leaders manage strategy, manage innovation, and create new growth engines. It’s like strategy support tools, computer-aided design for strategy. So that was the original vision. Ultimately what we learned over time was we need three pillars to realize the vision. One is the tools and the concepts and the content. How do we help business people better solve these jobs to be done? How do they create business models, value propositions, etc.? You do that with the right tools and right processes. We teach it to them with content. The second pillar is the platform. It’s like how computer-aided design helped architects, engineers, and ultimately also software engineers, work in a very different way. If we have computer-aided design that helps us create and test better business models and value propositions, then we’re really onto something. The third pillar is the services that we offer. We learned people don’t use software to design and test strategies and business models in companies. So we needed to build a consulting arm that would help them understand the tools and the concepts. Ultimately, our goal is to help business people do a better job. It’s as simple as that. The book is used as an element of each of the pillars and helps us to establish our vision.

How did you think about the market segments the book was targeted to?

There are several segments that we create the tools in Value Proposition Design for. Very surprisingly, they have similar jobs to be done even though they might be seen as different segments. Our tools were first used by entrepreneurs, because they were looking for tools that would help them structure their thinking. Over time large companies started to use our tools more. There we have several target segments: innovation teams, product managers, marketers, etc.  Today our main focus as a company is on large companies beyond 10,000 people. We identify three segments in these companies: innovation teams, C-suite executives, and the prosumer. We have free tools on our website from Value Proposition Design that appeal to the prosumers and then specific tools and training for the C-suite executives and innovation teams.

How did you choose the name for the product – Value Proposition Design?

This is a good example of the local maximum problem. We had a group of 100 pre-readers we selected to help us work on some of the book content. They contributed to crafting some potential titles. Then we took some of those initial titles and started to test them on our website to see which one performed best. We tested things like Customer Stampede, Value Proposition Toolbox, and the like. Value Proposition Design won. But here’s the catch, and it’s an important lesson also for innovation and product management. When your starting point is wrong, you’ll hit local maximum. What I realized later on is that some things were not very good with the choice of Value Proposition. It’s something we didn’t catch with testing.

 

Listen to the interview with Alex Osterwalder on The Everyday Innovator Podcast for product managers and innovators.

 

image credit: strategyzer.com
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Chad McAllisterChad McAllister, PhD is a product innovation guide, innovation management educator, and recovering engineer. He leads Product Innovation Educators, which trains product managers to create products customers love. He also hosts The Everyday Innovator weekly podcast, sharing knowledge from innovation thought leaders and practitioners. Follow @ChadMcAllister

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