Lecture_4_-_Combined_VP_and_CS

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Value Propositions
Value Proposition
What Are You Building and For Whom?
© 2012 Steve Blank
Customer Segments
Who Are Your Customers?
What Job Do They Want You to Do?
Customer Segments
• Who Are They?
• Why Would They Buy?
© 2012 Steve Blank
Product/Market
Fit
The Value Proposition
Gain Creators
Products
& Services
MVP
Pain Killers
Pain = Customer Problem
Gain = Customer Solution
The Customer Segment
Gains
• Jobs
• Problem
or Need
Persona
/Archetype
Pains
Market Type
Gain
Creators
Product
s&
Services
MVP
Gains
• Jobs
•
Proble
m or
Need
Pain
Killers
Persona
/Archetype
Pains
Product/Market
Fit
Jobs to Be Done
Problems/Needs
What is the customer segment trying to get
done?
Is it a problem or a need?
Customer Segments – Jobs/Needs
• What functional or social jobs are getting done?
– (e.g. perform or complete a specific task, solve a
specific problem or trying to look good, gain power or
status, ...)
• What emotional jobs?
– (e.g. esthetics, feel good, security, ...)
• What basic needs are you helping your customer
satisfy?
– (e.g. entertainment, communication, ...)
Buyer/Co-Creator/Transferor
• Are they buyers
– (e.g. comparing offers, deciding, buying, taking
delivery of a product or service, ...)
• Are they co-creators
– (e.g. co-designing with solution providers, contributing
value to the solution, ...)
• Are they transferors'
– (how customers dispose of a product, transfer it to
others, or resell, ...)
Jobs to Be Done
What is the customer segment trying to get
done?
Is it a problem or a need?
Customer Segment Jobs - Rank
• Rank each job according to its significance to
the customer.
• Is it crucial or is it trivial?
• For each job indicate the frequency at which it
occurs.
• Outline in which specific context a job is done,
because that may impose constraints or
limitations
– (e.g. while driving, outside, ...)
“job-to-be-done”
a fundamental problem (or set of problems) the customer is trying
to solve in a particular circumstance
“People don't want to buy
a quarter-inch drill…
SOLUTION
(WHAT)
…they want
a quarter-inch hole!"
JOB
(WHY)
Innosight LLC
JOB
“Help me perform like
a professional”
FUNCTIONAL
EMOTIONAL
SOCIAL
“Make me efficient at my
work”
“Make me confident that I
can get the job done”
“Convey my professional
status”
• Confidence ensure me
that I can count on my
equipment
• Value demonstrate my
ability to recognize value
• Power give me the
ability to cut through
thick/dense material
• Speed help me get the
project done quickly
• Versatility give me the
ability to work in different
environments
• Prestige show others
that I focus on quality
starting with my
equipment
Innosight LLC
So What?
The Jobs-Opportunity Equation
Important
• Job is important to
the target consumer
+
Unsatisfied
• Available solutions
fail to address job
– Overshot
• Failure to satisfy job
has significant
consequences
+
Frequent
=
Opportunity
• A sizeable population
holds the job
and/or
– Undershot
• Compensating
behaviors are not
enough
• Job occurs frequently
within a population
Innosight LLC
Guess the product from the job
I want the convenience of
shopping online
I want to be able to decide
how much I will pay for a
product
I want an easy way to sell
things I no longer need
I want an efficient way to
share my pictures with all
my friends and family
I want to feel ‘in-theknow’about things
happening in my social
circle
I want a way to reconnect
with friends I haven’t
talked to in a while
I want to feel confident
when having a
close conversation
I want my mouth
to feel refreshed
I want to kill the germs
that cause bad breath
I want to show that I have
the latest gadget
I want to be able to
get information easily
when on the go
I want to kill small snippets
of time productively
I want to feel like I’m
buying the best for my
family
I want to be socially
conscious
I want access to highquality grocery products
Innosight LLC
Value Proposition – Common Mistakes
• It’s just a feature of someone else’s product
• It’s a “nice to have” instead of a “got to have”
• Not enough customers care
Customer Pains
undesired costs and situations, risks,
negative emotions
Customer Segments – Pains
• What do your customers find too costly?
– (e.g. takes a lot of time, costs too much, requires
substantial efforts, ...)
• How are current solutions underperforming?
– (e.g. lack of features, performance, malfunctioning, ...)
• What are the customers main difficulties and
challenges?
– (difficulties getting things done, resistance, ...)
• What’s keeping your customer awake at night?
– (e.g. big issues, concerns, worries, ...)
Customer Segments – Pains
• What barriers are keeping customers from
adopting?
– (e.g. upfront investment costs, learning curve,
resistance to change, ...)
• What makes your customers feel bad?
– (e.g. frustrations, annoyances, things that give them a
headache, ...)
• What risks do customers fear?
– (e.g. financial, social, technical risks, or what could go
awfully wrong, ...
Customer Gains
benefits the customer expects, desires or
is surprised by. includes functional utility,
social gains, positive emotions, and cost
savings
Customer Segments – Gains
• Which savings would make your customer happy?
– (e.g. in terms of time, money and effort, ...)
• What outcomes do they expect and what would go
beyond their expectations?
– (e.g. quality level, more of something, less of something)
• How do current solutions delight your customer?
– (e.g. specific features, performance, quality, ...)
• What would make your customer’s job/life easier?
– (e.g. flatter learning curve, more services, lower cost of
ownership, ...)
Customer Segments – Gains
• What positive social consequences do they desire?
– (e.g. makes them look good, increase in power, status)
• What are customers looking for?
– (e.g. good design, guarantees, specific or more features)
• What do customers dream about?
– (e.g. big achievements, big reliefs)
• How does your customer measure success and failure?
– (e.g. performance, cost)
• What would increase the likelihood of adopting a solution?
– (e.g. lower cost, less investments, lower risk, better quality,
performance, design)
Customer
Persona/Archetype
Define Customer Archetype/Persona
• Who are they?
– Position / title / age / sex / role
• How do they buy?
– Discretionary budget (name of budget and amount)
• What matters to them?
– What motivates them?
• Who influences them?
– What do they read/who do they listen to?
• Draw a Day in the Life of the customer
Minimum Viable Product
Define Minimum Viable Product – Physical
• Need something customers can touch and feel
– Tests your understanding of the problem (pain)
– Tests your understanding of the solution (gain)
• The minimum set of features needed to learn
from earlyvangelists
- Interviews, demos, prototypes, etc
- Lots of eyeball contact
Define the Minimum Viable Product –
Web/Mobile
• NOW build a “low fidelity” app for customer
feedback
– tests your understanding of the problem
• LATER build a “high fidelity” app tests your
understanding of the solution
– Proves that it solves a core problem for customers
– The minimum set of features needed to learn from
earlyvangelists
- Avoid building products nobody wants
- Maximize the learning per time spent
Market Type
Type of Market Changes Everything
Existing
Market
Resegmented
Market
New
Market
Clone
Market
Type of Market
Changes Everything
Existing
Market
• Sales
– Sales Model
– Margins
– Sales Cycle
Resegmented
Market
• Market
–
–
–
–
–
New
Market
Clone
Market
• Customers
• Needs
Market Size
• Adoption
Cost of Entry
Launch Type
Competitive Barriers • Finance
• Ongoing Capital
Positioning
• Time to Profitability
Definitions: Four Types of Markets
Existing
Market
Resegmented
Market
New
Market
Clone
Market
• Existing Market
– Faster/Better = High end
• Resegmented Market
– Niche = marketing/branding driven
– Cheaper = low end
• New Market
– Cheaper/good enough can create a new class of
product/customer
– Innovative/never existed before
• Clone Market
• Local adaptation
Market Type
Existing
Resegmented
New
Clone
Customers
Known
Possibly Known
Unknown
Possibly
Known
Customer
Needs
Performance
Better fit
Transformational
improvement
Local version
Competitors
Many
Many if wrong,
few if right
None
None
Risk
Lack of
Market and
branding, sales product reand
definition
distribution
ecosystem
Evangelism
and education
cycle
Misjudge
local needs
Examples
Google
Southwest
Market
Type determines:Groupon
 Rate of customer adoption
 Sales and Marketing strategies
 Cash requirements
Baidu
Market Type - Existing
• Incumbents exist, customers can name the mkt
• Customers want/need better performance
• Usually technology driven
• Positioning driven by product and how much value
customers place on its features
• Risks:
– Incumbents will defend their turf
– Network effects of incumbent
– Continuing innovation
Market Type – Resegmenting
Existing
• Low cost provider (Southwest)
• Unique niche via positioning (Whole Foods)
• What factors can:
–
–
–
–
you eliminate that your industry has long competed on?
Be reduced well below the industry’s standard?
should be raised well above the industry’s standard?
be created that the industry has never offered? (blue ocean)
Market Type – New
•
•
•
•
Customers don’t exist today
How will they find out about you?
How will they become aware of their need?
How do you know the market size is compelling?
• Which factors should be created that the industry has
never offered? (blue ocean)
Market Type – Clone
• Takes foreign business model and adapts it to local
conditions
–
–
–
–
Language
Culture
Import restrictions
Local control/ownership
• Need market large enough >100 million
Corporate Customers
Business to Business (B to B)
What do they want you to do?
•
•
•
•
•
Increase revenue?
Decrease costs?
Get them new customers?
Keep up with or pass competitors?
How important is it?
Market Type & Ignoring Customers
• Existing Market?
• Resegmenting an Existing Market?
– niche or low cost
• New Market?
• When do I ignore customer feedback?
Who’s the Customer in a Company?
•
•
•
•
•
•
•
User?
Influencer?
Recommender?
Decision Maker?
Economic Buyer?
Saboteur?
Archetypes for each?
How Do They Interact to Buy?
• Organization Chart
• Influence Map
• Sales Road Map
Pass/Fail Signals & Experiments
•
•
•
•
How do you test interest?
Where do you test interest?
What kind of experiments can you run?
How many do you test?
How Do They Hear About You?
• Demand Creation
• Network effect
• Sales
Consumer Customers
Business to Consumer (B to C)
What do they want you to do?
•
•
•
•
•
•
Does it entertain them?
Does it connect them with others?
Does it make their lives easier?
Does it satisfy a basic need?
How important is it?
Can they afford it?
Market Type & Ignoring Customers
• Existing Market?
• Resegmenting an Existing Market?
– niche or low cost
• New Market?
• When do I ignore customer feedback?
Consumer Customers
• Do they buy it by themselves?
• Do they need approval of others?
• Do they use it alone or with others?
How Do They Decide to Buy?
•
•
•
•
Demand Creation
Viral?
SEO/SEM
Network effect?
Pass/Fail Signals & Experiments
•
•
•
•
How do you test interest?
Where do you test interest?
What kind of experiments can you run?
How many do you test?
The Consumer Sales Channel
• A product that’s bits can use the web
• But getting a physical consumer product into
retail distribution is hard
• Is Wal-Mart a customer?
Multi-Sided Markets
Business to Business to Consumer
(B to B to C)
Who’s The Customer?
• Consumer End Users, Corporate Customers
Pay
• Multiple Consumers
• Etc.
Multiple Customer Segments
•
•
•
•
Each has its own Value Proposition
Each has its own Revenue Stream
One segment cannot exist without the other
Which one do you start with?
Customer Segment Examples
Meet Xing Xie
International Graduate Student at Stanford
• Engineering graduate student
– Receives financial package to cover tuition,
fees, insurance and living expenses
• Chinese 4-2-1 family
– No siblings, spoiled by parents
– High disposable income
• 1st time to America
– No credit score, SSN, or US address
– Strong ties to his community in China
• Academically responsible
– Completes all homework on time
• Financially responsible
– Pays all bills on time and in full
• Social network is similarly responsible
Xing
Art
Results:
Our Customers
• Professional Kite Surfers
• Solely concerned with performance
• Average Kite Surfer
• Performance and cost sensitive
• “One less thing to carry” effect
• Prospective Kite Surfer
• Cost sensitive
• Learning barrier
Customer Archetype:
Joe “Dude” Marrama
• Loves to ski, surf, rock climb
• Salary ~100K/year
• Looking for something to do
when the surf’s blown out
• Intimidated by cost and learning
curve of kiting
“Companies need to offer more entry level
packages."
Matt Sexton
Founder Collegiate Kiteboarding Association
™
Customer Workflow
Phase I:
Design
Phase II:
Prototyping
Phase III:
Manufacturing
Phase IV:
Final Product
6-8 weeks
3-4 weeks
8-12 weeks
3-4 weeks
The
Ecosystem
IT
Gov’t
subsidies
Water
systems
Nutrient
management
Planting/tilling/harvest
Farmers
Hungry
folks or
cars
Heavy
equipment
Seed
banks,
Ag-Bio
Regulatory
fees
Mitigate fines
$$
Customer Segments
• Commercial Institutions:
– Primary Market
– $1.4B (Globally)
– License and Revenue
sharing agreements
• Academic Labs:
–
–
–
–
Secondary Market
Increase Visibility of Tech
$140 M (North America)
Product Sales
The Problem
Missing out
Lonely
Left aside
Frustrated
Disconnected
Multitasking
I’m busy
Living different lives
Send each other things
through email/text
Laugh less
Planning the next visit
Many short call
throughout day Post-poning couple time
Everything is an effort
Don’t communicate trivial things
Design
Sources and
Technical
Experts
Arka
Lights
Heat Exchanger
Manufacturer
Division?
Partnership?
Market
Market
…
What We Found: Patient Care Flow
Electronic
Health
Records
Actionable feedback
to doctors/institutions
Electronic
Records
Support Pump +
Services Controller
E-prescription / closing loop
Patient
Discharged
Trial period/
Home setting
Partners/
OEMS
Fluid Synchrony
Surgery/Rx/
reprogramming
Hospitals
(Anesthesiologists
Neurosurgeons)
Scheduled
follow-up
- Process shortened to days
- Improves outcomes
Bundled
Kits
What We Found: Value Chain
Patients
CPT reimbursement
Pump $13,305
Surgical Kit $2887
Refill Kit $200
Pay for coverage
Service provided
Hospitals /
Clinics
Fluid Synchrony
Product
purchase
Insurance
Hospital
Reimbursement
Position in Value Chain
OmegaChem
Value Proposition, Customer Segments: Results
Surfactants: new market ($24bn)
Monomer
manufacturer
Polymer
formulator
Polymer
user
“Have you
considered
surfactants space?”
- DSM
Monomer
manufacturer
Polymer
formulator
Surfactant
Formulator
Polymer
user
Surfactant
user
Consumer facing
company
Consumer facing
company
Consumer
Consumer
Product and Payment Flows
$250
Year
$200
unit
Contract
Manufacturer
MySkin Tech
Cosmetics
Firm or Spas /
Salons
Department
Stores or
Sales Reps
Increased
Sales
$500 - $1K
unit
MySkinTone Product
•
•
•
Money
Consumer
Cosmetics
Cosmetic Money
B2B2C customer relationship
MySkin Technology customer are also strategic partners
Instrument is simple and inexpensive enough for broad deployment
Distribution Food Chain
Reagents
• F-dopa iodonium intermediate
• F-dopamine iodonium intermediate
• ABX
• Siemens Explora
• Eckert & Ziegler
GMP Cassette
• GE MX module for TracerLab
Components
GMP
Compliant
Synthesizer
• Eckert & Ziegler
• Synthra
• Siemens Explora
• Neoprobe
• TracerLab/ GE
•
•
PET Drug •
Distributor •
Siemens PETNet
GE Amersham
Cardinal Health
AAA • Iason
Precursor Synthesis
Precursor in Cassette
Cassette (device)
Finished product
Sourcing for Expanded Product Offering
Electronic
Health
Records
Electronic
Records
Patients
OEMS
Fluid Synchrony
Support Pump +
Services Controller
Hospitals
(Anesthesiologists
Neurosurgeons)
Pain Clinic
(Anesthesiologists
Neurosurgeons)
Bundled
Kits
MammOptics
Private practice purchasing decision tree
MammOptics
Hospital purchasing decision tree
MammOptics
Customer Workflow
Insurance
Patient
PCP
OB/GY
N
Mammography
Technician
Radiologist
Hospital
Administration
MammOptics
ACOG
ACS
Doctor
specialty
committee
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