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What is a Value Proposition?

What is a Value Proposition?

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If there’s any common ground among all strategy, innovation, marketing, and new product development practitioners, it’s that we need to have a compelling and differentiated value proposition. But if we’re all aligned as to the importance of a value prop – are we similarly aligned as to what one is? (No, we are not!) So, just what is a value proposition?

Before we can even get started with this discussion, let’s define a “product” broadly to mean more than just a tangible product, but to also mean a product attribute (aka a feature), a service, a business model, etc. A “product” is any solution that helps a customer to get a job done. It’s unwieldy and bothersome to continually say “product, service, or business model”. So, let’s not do that.

According to the primary reference of our age, Wikipedia, the term “value proposition” is a recent one – originating with a McKinsey publication from 1988 in which a value proposition was defined as a “clear, simple statement of the benefits, both tangible and intangible, that the company will provide.”

In the original definition, the value prop is a description of customer benefits. A good start but not quite good enough. We need the Who, the What, the How, and the How it does it. To remember these elements, remember these initials: WWHH.

  • The “Who” – that is, “Who is the customer”? Who do we want to provide benefits for? Who do we want to help to accomplish a job better? This is typically the job executor (person who executes the JTBD). Our term for the “who” will usually be the “customer” or “job executor”. The term “customer” is a bit vague, as it could mean stakeholder or purchase influencer whereas the term “job executor” is precise – the person who executes the job. So, use “job executor” if you can.
  • The “What” – the customer’s job to be done (JTBD). Their primary goal, objective, or problem to be solved. We may refer to this as the “job to be done,” the “customer job”, the “job”, or the JTBD. Most of the time we will just simply use the term the “job.”
  • The “How”, that is, how we accomplish the job. The how is the product (please remember how we defined the word “product”). What’s the mechanism to deliver these benefits? How are we going to help them to accomplish a job better? Our term for this is most often the “product.”
  • The “How it does it” – This describes the performance improvement that the product will address. Our term for this is the PI.

Let’s look at an example. You work for the Acme Pillow Company – and your focus is healthcare. Here’s the value proposition for your new product, the Acme Super Pillow 2000:

The Acme Super Pillow 2000 (the “how” – the product) helps patients recovering from neck surgery (the “who” – the job executor) to obtain a restful night’s sleep (the “what”- the job) by providing sufficient vertical support to minimize stress on the neck (The “How it does it” – the PI).

The PI is a mini-VP itself. It lists a product attribute and the job that it addresses.

But what if the great and powerful Acme Super Pillow does more than just minimize stress on the neck to help patients obtain a restful night’s sleep? In other words, can you have multiple PIs? Yes, you can:

The Acme Super Pillow 2000 helps patients recovering from neck surgery to obtain a restful night’s sleep by 1) providing sufficient vertical support to minimize stress on the neck, by 2) emitting healing vibrations that increase blood flow to the neck and 3) playing nature sounds to minimize mid-sleep wake-ups.

The key thing is that all the PIs must support the primary customer job, which is this case is to “obtain a restful night’s sleep.”

Let’s try another example for the “obtain a restful night’s sleep” job. Imagine that we make nutritional supplements. Here’s our value proposition for an alternate audience:

The Acme Sublingual Magnesium Tablets help business travelers to obtain a restful night’s sleep by minimizing the number of times per night that they wake up.

Here’s the value proposition template used for each statement above:

The product (How) helps customers (Who) to better accomplish a job (What) by achieving a performance improvement (How it does it).

Of course, the template is just the beginning. We have a lot of work to do to create a winning value prop. We need customer insights to understand which jobs that customers want to do better. We need to determine what area in which to improve performance. And of course, you must have the technical and creative chops to develop new products to address those needs.

Let’s review the required WWHH elements for a Value Prop:

  • The “who” – the job executor, the customer to create value for
  • The “what” – the JTBD
  • The “how” – the product
  • The “how it does it” – the performance improvement

If we have done a good job in selecting a market, if we’ve done sufficient research to understand what to be improved, and if we’ve also done a great job generating a winning concept – then we can take our value prop to the next level: the DVP – the differentiated value proposition.

For the DVP, we add a description of how our VP compares to other alternatives, that is, to the competition. For the DVP, we must add one required element. And if we choose, we have an optional element that we can add as well.

The required element is the reference competitor group (RCG). After all, if our Acme Super Pillow helps patients recovering from neck surgery to obtain a better night’s sleep. The obvious question is, “Better than what?” A regular pillow? A competitor’s pillow? Better than nothing?

Here’s the template for our original value proposition (VP): The product helps customers to better accomplish a job by achieving a performance improvement.

And here’s the updated template that includes the reference competitor group, making it our differentiated value proposition (DVP):

The product helps customers to better accomplish a job by achieving a performance improvement as compared to the chosen reference competitor group.

(Doesn’t that just roll of the tongue? Aren’t templates a joy to read!)

Let’s build a DVP off our earlier example:

The Acme Sublingual Magnesium Tablets helps business travelers to obtain a restful night’s sleep by minimizing the number of times per night that they wake up as compared to a typical multivitamin.

The typical multivitamin is our competition (our RCG) as we have defined it. Alternatively, we could have defined it more broadly as “nutritional supplements” or more narrowly as “magnesium tablets.” We make this selection based upon our chosen positioning.

Now let’s add our optional element. It answers the question “How much?” We call this the Precise Performance Improvement (PPI). Unsurprisingly, this describes in precise terms the degree of improvement:

The Acme Sublingual Magnesium Tablets help business travelers to obtain a restful night’s sleep by minimizing the number of times per night that they wake up by 50% as compared to a typical multivitamin.

And there we have it. By adding the PPI, we provide the degree of performance improvement that our customers will enjoy.

Before putting a bow on this topic, let’s take care of a little business that will help us to better understand the role of VPs and DVPs in use.

First, the DVP is very close to a positioning statement, but there are a few differences to consider before we just copy and paste the DVP into our positioning document. The positioning statement considers broader issues such as:

  • What has our brand/product identity been? What do we want it to be?
  • What trends are going on with our competitors?
  • Strategically, how does this fit into the grand plan?
  • How credible is this statement in the mind of our customer? How much distance do we have to make up for them to believe?
  • Can we own this position in the minds of our customer?
  • Have we left room for growth?
  • How memorable would this position be in the minds of our customer?

The positioning statement must consider more than just a particular innovation or new product effort, it must also take into account the broader strategic scenario. However, with this as a caveat, the DVP can often be used as a positioning statement for the product it represents.

For either a DVP or a positioning statement, we must remember that we are crafting these for clarity, not for customer consumption. DVPs and positioning statements provide what we want to communicate but not how that message should be communicated. The process of creating a DVP or a positioning statement is a strategic one – usually executed by product managers and their leadership. The process of communicating the DVP or positioning statement is a tactical one – usually executed by the creative staff, marketing agencies, PR agencies, and business development pros. Once the DVP or positioning statement is delivered to the tactical marketing function, they are charged with determining how this message should be delivered. They have all media at their disposal. Print ads, white papers, videos, and whatnot. Tactical marketing will likely use elements of the DVP or positioning statement, but there is no expectation that they must use the specific language. They are responsible for communicating that message with whatever words and media work best.

Strategic marketing must trust the creative abilities of tactical marketing while holding them accountable for delivery of the correct message. This dance is never perfect but when each partner embraces their role, it’s more graceful. If tactical marketing tries to “lead” by changing the core message, toes are stepped on. Likewise, when strategic marketing tries to provide too much advice about creative decisions – like fonts, colors, chosen music, etc., conflict ensues with suboptimal results. In practice, the best outcomes are obtained when the strategic and tactical folks have worked with each other for a time and can trust each other’s abilities.

Nobody would disagree that the Value Proposition is critical to business growth and success. And yet, we have very little dialogue about what a value proposition is or how to create one. This reading is admittedly not the most interesting as we’re basically describing a template. But it provides something important – key questions to answer:

  • Who are our customers?
  • What is our product?
  • What job do we want to help our customers accomplish?
  • How does our product help them?
  • How much does it help them?
  • What is our competition?

It’s in answering these questions that the fun begins. Probably the best book on this topic is Value Proposition Design by Osterwalder and Pigneur. If you’re past that one already, note the books within the Strategic Marketing section of this reading list.

Nunc coepi.

 

 

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Who is the customer?

Who is the customer?

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A market is a job and a job executor. This is all we need to know to understand the answer to the question, “Who is the customer?”

To better explore this question – let’s begin with this: The goal of innovation is to help a customer to accomplish a job perfectly.

Question: Who gets to say what “perfect” is?
Answer: The customer (of course).
Question: Who is the customer?
Answer: The person executing the job.

We innovate for the person executing the job. They’ve felt the pain of the errors. They know all the irritating imperfections. They will be more than happy to fill your ears full of their troubles.

We analyze job executors as if studying a new culture. They have the information we need – and it consists of the rocks the inhibit perfection. We interview them. We observe them. We study their artifacts and do our best to understand their world.

If we want to learn what it means to prepare a meal perfectly, we must identify people who prepare meals. If we want to understand what it means to learn a new skill perfectly, we must identify people who learn new skills.

We call the person who executes the job the “job executor.” (Intuitive, no?) Though I do submit that “job executor” doesn’t roll off the tongue so easily. However, it’s much clearer than overly simple term “customer” that we kick around in our conversation like a hacky sack. Just like any technical terminology, it’s precise and beautiful in it’s clarity. You confuse me when you say “customer” but when you say, “job executor”, we are communicating.

The word “customer” could mean many things. It could mean job executor. It could also mean purchase influencer, job beneficiary, etc.

But “job executor” has only one meaning: the person who executes the job.

If we want to innovate for the job of losing weight, we must ask the question, “Who wants to lose weight?” This wonderful question spawns more: Do we want to study this job for everyone who wants to lose weight or just certain segments? Men over 40? Obese teenagers? New mothers?

But you protest still. You say, “We’re in B2B, and our markets are complex. We have to study more than just job executors.”

Yes, it is true that your markets are complex. But no, you’re still studying job executors.

Imagine you are producing hydraulic hoses for small tractors. You might identify the following stakeholders: procurement person, design engineer, product marketing manager, and manufacturing engineer. Consider the jobs that these folks will execute as they consume your product:

Procurement person: Purchase a hose.
Design engineer: Design a hydraulic system for a tractor.
Product marketing manager: Ensure that the tractor will have a valid value proposition.
Manufacturing engineer: Ensure the manufacturability of new tractors.

Some of these jobs are directly related to your hose such as “design a hydraulic system.” Others are more indirect such as “Ensure that the tractor will have a valid value proposition.”

If you are creating a new hydraulic hose, you will likely have to consider more than one job…. but don’t be seduced by the “our markets are more complex” line. Yes, there’s complexity. But so what? The markets you serve will still consist of jobs and job executors.

You might just have to work a bit to identify them.

Of course, we will still have to use the word “customer” because we can’t expect everyone to suddenly use our precise language. You are now like the scientist who sees a loblolly pine tree and recognizes it as a Pinus taeda. But with your less learned friends, you might still just call it a pine tree.

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The Origin Story for Jobs-to-be-Done Thinking (JTBD)

The Origin Story for Jobs-to-be-Done Thinking (JTBD)

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How did jobs-to-be-done (JTBD) thinking begin?

The cornerstone was laid way, way back in 1960 with the most famous HBR article ever written, Marketing Myopia. Ted Levitt told us us that “the railroads did not stop growing because the need for passenger and freight transportation declined. (but rather) …They let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business.” He further explains that the movie industry should likewise define itself as the entertainment business, not the movie business. This was 1960, mind you. (Years later, Blockbuster Video could have benefited from this idea.)

Levitt drew a distinction between customer needs and solutions. He further showed that solutions changed but that needs were stable. An important principle of what was to become JTBD thinking.

Next, we have Clayton Christensen. In the 1990’s, he wrote The Innovator’s Dilemma, a flawed but important work. The “dilemma” is really more of a contradiction. It’s this: Good companies listen to customers, invest in capabilities, seek higher margins and target large markets. These positive attributes help them to win in traditional, stable markets by improving their products with sustaining innovations.  However, a commitment to this strategy can leave them vulnerable to newer disruptive innovations.

He explains that sustaining innovations are improvements to current products. Companies like these upmarket moves because they can deliver higher performing products while staying within a technology they are comfortable with. But on this trajectory, Christensen asserts they will soon pass the performance level that customers can use. Higher performance can also make products become more complicated and expensive. It’s the new camera model with additional pixels. Sure, there was a time when extra pixels were better – but there’s a threshold beyond when customers just do not care any longer. Conversely, disruptive innovations use a different core technology – such as digital photography vs. film. They are often simpler, cheaper, and may even perform worse than incumbent products. Decision makers, biased and blind, look down upon the new disruptive innovation because they cannot imagine that customers would accept different products that may even perform worse.

Christensen was close to JTBD thinking – but not quite there yet. His definition of a disruptive innovation could be improved with this change: Disruptive innovations use a different core technology to accomplish the same job.

Still, The Innovator’s Dilemma was important because it helped us to see the dangers of continuous upmarket moves, the threat of new technologies that underperform current ones, and the traps of always pursuing the bigger market. It’s flawed with an overly narrow definition of a disruptive innovation however. His examples did happen to be cheaper, simpler, and with worse performance.  But he was incorrect in assuming that would always be the case. This error would be addressed nearly 10 years later with the publication of Blue Ocean Strategy. But that issue aside, The Innovator’s Dilemma advanced the JTBD conversation because it asked the right question – even though it did not answer it. The question was this, “What is common to sustaining and disruptive innovations?”

The answer is of course: the customer’s JTBD. It would be spelled out in Tony Ulwick’s 1999 work Business Strategy Formulation even though this book does not use the term “customer job.” However, other than not using the word, he describes the concept well. For example, Ulwick describes a customer need as something that is:

  • Stable over time
  • Independent of technology (or any solution)
  • A statement of benefit sought

Even though the phrase “job-to-be-done” isn’t used – the book’s definition of a need fits well a modern job definition. Additionally, it addresses many innovation myths of the day such as:

  • Customers do not know what they need
  • Customer requirements change quickly over time

Customers may not know what solution they want, but they do know what they are trying to accomplish. And where technologies certainly change over time, needs are stable. In the book, Tony builds upon the idea with this example: for the task of “Quickly communicate with others that are in a different physical location” he points out that from 1820 to 1999, the solutions changed from the horse to satellite communications. In my view, this book truly articulated the concept of a JTBD for the first time.

In 2003, Christensen’s book The Innovator’s Solution was more explicit as it spelled out JTBD using language that we still use today. Christensen spoke about the common practice of segmenting markets based upon demographics or even product categories. Christensen pointed out that this was flawed because these characteristics were not good predictors of what a customer would buy. The real segmentation should be around getting a job done. Customers “hire” products to accomplish a job – and gravitate towards the product that will do it best.

JTBD had graduated. The awkward teenage years now in the rear-view mirror. In 2005, it officially arrived with three important works:

  • Blue Ocean Strategy – Chan Kim and Renee Mauborgne
  • Marketing Malpractice – HBR article by Christensen
  • What Customers Want – Tony Ulwick

Blue Ocean Strategy did not actually use the words “job-to-be-done.” But it did correct errors in thinking from The Innovator’s Dilemma and The Innovator’s Solution. Christensen had an overly narrow view of disruptive innovations – only considering those where a new value curve was created because of the novel solution was simpler, more convenient, or cheaper. Blue Ocean Strategy simply described the concept of a new value curve where some elements of performance might be higher and others lower.  It uses the example of Cirque du Soleil which, when compared to more traditional circuses, delivers higher performance on artistry, lower performance on animal shows….and at a much higher price. Blue Ocean Strategy’s concept of the new value curve was a revolutionary idea. It was quite “disruptive” itself. It challenged Michael Porter’s idea that to succeed a business had to be either a low-cost provider or a niche-player. It torched the main idea from the popular strategy book The Discipline of Market Leaders – which stated that a business had to commit to operational excellence, customer intimacy or product leadership. Such commitments are not necessary. In the end, perhaps the most interesting thing about Blue Ocean Strategy is that it’s one of the most useful books for applying JTBD – and yet – it does not refer to the concept.

Christensen doubled down on the JTBD principle in his 2005 HBR article Marketing Malpractice, sharing the same alliteration with Levitt’s Marketing Myopia.  This article contains the famous “milkshake” example which goes as follows. He was consulting for a restaurant chain that wanted to increase milkshake sales. He observed an increase in milkshake sales during the morning hours. The breakthrough was that some customers hired milkshakes as their breakfast. As such, the milkshake would also provide entertainment during an otherwise dull commute. Provide breakfast. Provide entertainment. A customer hired the milkshake to do these jobs – and from that understanding, new solutions could be created– such as adding bits of fruit. This would help the milkshake to accomplish those jobs better.

Finally, Tony Ulwick’s What Customers Want completed the JTBD story with his Outcome-Driven Innovation process. It goes like this. A customer hires a product to accomplish a job. Customers use metrics to evaluate how well a solution performs to get that job done. WCW gave us something that we didn’t have before: a process to put JTBD into practice.

In the end, Christensen made huge contributions to JTBD thinking. Kim and Mauborgne’s Blue Ocean Strategy cleared the stage for new thinking with the value curve. And in the process, exposed flaws in two popular strategic models: Porter’s Five Forces and Value Disciplines. But it was Tony Ulwick, a veteran of the practitioner ranks rather than the academic ones, who completed the JTBD puzzle. With ODI, we had more than JTBD theory.

We knew how to put it into practice.

We knew what to do next.

For better understanding, consider reading these works referred to within this article:

 Then afterwards, to solidify JTBD in your noggin, I have two more for you:

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What’s really different about B2B market research?

What’s really different about B2B market research?

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From the book, New Product Blueprinting, we know that the B2B customer is generally more knowledgeable, more interested and more objective, which has implications for the quality of insight that we can learn from a customer interview. However, the most important  difference, and the most meaningful for B2B market research has to do with the markets themselves: they are more concentrated.

This simply means that there are fewer customers. Fewer customers for mining shovels than toothpaste. Think about it…packaging equipment, chemicals, computer chips, oil platform mooring systems, industrial HVAC units – concentrated markets all. If your customers are OEMs or B2B firms themselves, they are likely concentrated.

 

What are the implications for market research?
What should any Voice of the Customer (VoC) process deliver for market research? It should provide customer needs. We call this customer insight. We need to know our customers’ problems, their goals and objectives. In modern innovation parlance, we need to understand their jobs-to-be-done…just as the B2C marketer does. However, with a concentrated market, we have an additional consideration. We need to nurture relationships with the purchase decision makers. We call this customer engagement. Our process should gather customer needs while also inspiring trust. It should demonstrate competence, responsiveness, professionalism – inspiring confidence and even likeability. If we have positive “customer engagement,” then our customers will see us as partners in a common pursuit for collaboration and mutual benefit.

 

How do we obtain both customer insights and engagement with a VoC research process?

Finding a system that delivers is not easy. Strategic selling programs have been implemented for years with success because they are effective at selling while building engagement.  However, they do not provide the customer insight, data, and analysis needed to feed the front end of the New Product Development (NPD) pipeline with impactful ideas. On the other hand, some B2B firms have committed to generic “off the shelf” Voice of the Customer research methods. In this case, they obtain the insights for growth, but they miss an opportunity to use the process as a vehicle to engage customers and build relationships. To get both within, B2B marketers need a system that is designed to deliver both.

 

What are some practical ways that a B2B customer insight process for VoC research can also deliver engagement?

The process should use the fundamentals of VoC while delivering a professional and engaging experience. First, the interview should keep the customer’s objectives in the center. The interviewer probes to truly understand the customer’s problems – resulting in a customer that feels “heard” and appreciated. Although this is also a B2C process attribute, it has more usefulness in B2B. When an interviewer deeply listens to a customer, this endears the interviewee to them. It’s an antidote to any concern that the interviewer secretly is using the session as a selling opportunity. Meanwhile, the interviewing team respects the moderator’s role so that the session itself feels like an engaging conversation amongst peers.  Next, the interviewing process itself should deliver a professional experience. For example, with the flagship product of New Product Blueprinting, Blueprinter 5.0 software, the customer will see a professionally designed layout which features digital sticky notes, an agenda, multiple views, multiple languages (if applicable), even multiple colors to categorize customer data types. It is a simple and elegant display: attractive for the customer – and simple for the interviewer. Next the process should provide an attractive, professional account to recap the interview. Also within Blueprinter 5.0, the Blueprinting team can export the notes to an official report. As a PDF, the report will become a digital business card –  circulating amongst many decision makers within the walls of the customer’s business.  

Finally, a B2B-focused VoC process should be designed to maintain contact with the customer throughout development. To support this, Blueprinter software allows interviewing teams to capture tasks and assign them to team members – visible for all to see. This helps them to stay accountable for any promises made.

 

When the process builds engagement, it improves relationships. When it provides insight, it fills the pipeline with new ideas. But with both together, there is a third benefit: higher ROI for new products. How so? When customers are engaged from the beginning, they will buy not only because the product addresses their needs but also because they were included along the way. The respectful peer-to-peer conversations positioned the B2B marketer as a partner rather than a vendor. Also, during the selling process, the marketer won’t have to bore them with the 75 features the product has, but rather, they can just speak to the handful that matters. As everything comes together – the right product – pitched by a valued partner –  provides perhaps the biggest benefit of all to the B2B company: shorter sales cycles – “and there was much rejoicing.” Shorter sales cycles mean that the “time to money” will be much less.

 

For B2B, it would be hard to overstate the importance of a VoC system that drives both engagement and insight.

It’s the difference between opening a new manufacturing plant or closing an old one. The difference between maxed out bonuses versus watching the best employees leave. It’s the difference between having to justify poor EPS growth as opposed to reading about your latest stock upgrade. All B2B firms would certainly be wise to assess their VoC process for both engagement and insight.

 

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