Overcoming Blind Spots in Business Modeling

Osterwalder’s Value Proposition Design is the first step you need to do in the Business Model Canvas unless you’re doing Maurya’s Lean Canvas. But there’s a difference in doing one over the other.

By Dennis Clemente

When you’re trying to determine the viability of a business idea quickly, do you think about how you can create value for your business or customer? A business plan will help you answer that question but that takes time to know. If you need to move fast, what’s the better way than the Business Model Canvas (BMC) exercise developed by business theorist Alex Osterwalder?

Now, if somebody tells you that they can’t spare 40 minutes to do even BMC, you can do the Value Proposition Design exercise (VPD, see graphic and video below) instead and that should answer the most important thing when you’re starting a business: creating value for your customer.

Startups tend to focus on determining the viability of their business first, when it should be about knowing what their customers need or want. Which makes the VPD exercise the most important first step in your BMC exercise, especially with a limited window of time to do so.

Osterwalder puts it plainly yet clearly,

“The Business Model Canvas helps you create value for your business. The Value Proposition Design helps you create value for your customer.”

VPD is the most important step to nail down from the very beginning. To avoid missing VPD in your exercise, here’s a graphic showing where it resides in the canvas:

From the grid-like tool in BMC, the graphic above should help you determine your Customer Profile’s jobs, pains and gains — the use of the flag-looking square image (for value proposition) and circle (for customer development). This is for you to achieve fit when your Value Map meets your customer profile.

I agree with Osterwalder when he outlines how the Value Proposition Design will help you in…

• Designing, testing, and delivering what customers want

If you only have an hour to work with a client on figuring out their business model, start with VPD first.

Breaking down VPD

Here’s the following ways to break your VPD down using Customer Section (on the right) and Value Map (on the left):

Customer Jobs — List the key tasks your target customers have to complete. Think more broadly than functional jobs and include social jobs (relationships) and emotional jobs (feelings). Rank the jobs to be done by importance.

Customer Pains — List the pains people experience in getting their jobs done, pain points that annoy before, during, and after trying to get a job done. Rank the pains by severity

Customer Gains — List the gains that people require, expect or desire from getting a job done. These gains may be functional (utility), social, emotional, or financial. Rank these gains by relevance to the target segment

Value Map Section

Pain Relievers — List how you could alleviate specific customer pains identified in Customer Pains. Outline how you intend to eliminate or reduce things that annoy your customers before, during, or after they are trying to complete a job or that prevent them from doing so.

Gain Creators — List the ways you could create the customer gains identified in Customer Gains. Outline how you intend to produce outcomes and benefits that your customer expects, desires, or would be surprised by, including functional utility, social gains, positive emotions, and cost savings.

Product(s)/Service(s) — List product or service ideas that map to Customer Jobs, or in the case of a single product or service innovation project, attributes and features that could help people get their most important jobs done, alleviative the most pain, and create the most gains.

Difference between Osterwalder’s BMC and Maurya’s Lean Canvas

Why is it necessary to do BMS or VPD? They both organize one’s thinking. If you are intimidated in using any of this templates, see if Ash Maurya’s Lean Canvas suits you more.

Maurya adopted Osterwalder’s model (see graphic below) in order to address what’s foremost in startups’ minds: what problem they are trying to solve.

Ash Maurya’s Lean Canvas:

Osterwalder’s Business Model Canvas

Recently, I conducted two separate exercises using both templates, because of the time constraints of the participants. Maurya’s Lean Canvas was an entry point for a dietitian-client who was thinking of having an app that will make kids eat healthy, nutritious food.

She intimated to me how this is a big problem and for that reason, I used Maurya’s direct approach in determining her VPD.

On the other hand, I used Osterwalder’s model for an established company looking to expand and start a marketing department.

Make sure to allot 3 to 4 hours if you have 5 people or more doing the BMC; one or two hours for fewer participants

The two canvas models helped participants get into the ideation process. In conducting the workshop, you will notice people in general like that they are the ones coming up with ideas, not you (people don’t really like someone else’s idea).

But what if they don’t execute the results of the exercise? The onus is on clients to execute with the assistance of their staff. You’re just guiding them in their journey.

Findings

In using Lean Canvas, I regret holding the exercise with just one person — you never do that, no matter what, no matter how close you are to that person.

The exercise made the lone participant, the dietitian, doubt the ideas she got from it. She perceived that the project would be such a big undertaking that it made her give up based on the challenges she will face in developing it.

It’s unfortunate, though, because if there were other participants, with different inputs, they could have provided her support and encouragement to stick to the solution she arrived at, which showed potential.

Later, she said the exercise was a waste of her time which was ironic, considering that she came up with the solution herself — and she liked her solution. It’s important to point out here that the beauty of the exercise is the fact that I merely served as a facilitator and they were the ones who emboldened themselves to think what’s right for their customers.

For the established company who did the BMC exercise, the team of 5 was more appreciative in determining the solution to its problem, which set up the company for a rebrand of its image and services.

As for those who are already equipped with the knowledge and insights but still don’t follow through with the solutions they now have, it just means that it may take some time for them to pursue it because there’s a lot of work involved in creating value for a customer successfully.

Why you need these business model templates

It’s important to organize your thinking, if you are either the go-getter, the procrastinator/“overanalyzer” or an organized thinker.

Go-getters may want a website or app right away, while the procrastinators may not move an inch until they have a business plan.

Since the latter takes time to decide, procrastinators never end up doing anything. There’s the research part involved that takes a lot on them. Of course, the organized thinker will prefer to have some structure first, which will be the bulk of the work. The rest will be just a matter of organized execution.

The author writes for various publications, including NBC and BBC.