The document outlines the key components of creating a successful value proposition within a business model canvas, emphasizing the importance of understanding customer problems, market insights, and competitive landscape. It discusses the need for minimum viable products (MVPs) to test hypotheses regarding product-market fit, advocating for iterative development based on customer feedback. Additionally, it highlights strategies for differentiating products in various market types and the significance of determining customer needs before scaling the business.

1. E245 Value PropositionAnn Miura-KoJanuary 2011

2. The Business Model CanvasTest Hypotheses:Product

3. Market Type

4. CompetitionKey Questions for Value PropProblem Statement: What is the problem?Technology / Market Insight: Why is the problem so hard to solve?Competition: What do customers do today?Product: How do you do it?

5. The ProblemThe “problem” justifies why the product is valuable to someone The Problem Statement:For whom?What issue do they face?Note: Doesn’t reference the product

6. Potency of the Problem

7. Technology and Market InsightMarket InsightValue chain disruptionDeregulationChanges in how people work, live and interact and what they expectTechnology InsightMoore’s LawNew scientific discoveriesTypically applies to hardware, clean techand biotech

8. Examples of Market InsightPeople want to play more involved games than what is currently offeredFacebook can be the distribution for such gamesMasses of people are more likely to micro-blog than blogThe non-symmetric relationships will allow companies and individuals to self-promoteEuropean car sharing sensibilities could be adopted in North AmericaPeople, particularly in urban environments, no longer wanted to own cars but wanted to have flexibility.

9. Insight CharacteristicsRightWrongBiggest Potential WinsNon-ConsensusMindless CompetitionConsensus

10. Key ThoughtWhat insight do I have that is not yet conventional wisdom?

11. Market TypeMarket Type determines:Rate of customer adoptionSales and Marketing strategiesCash requirements

12. Existing MarketCharacteristics:Customers are always hungry for better performanceIncumbents existUsually technology drivenPositioning driven by product and how much value customers place on its featuresRisks:Incumbents will defend their turfNetwork effects of incumbentContinuing innovation

13. Resegmented Market Low cost provider (Southwest)Unique niche via positioning (Whole Foods)What factors can you eliminate that your industry has long competed on?Which factors should be reduced well below the industr’s standard?Which factors should be raised well above the industry’s standard?Which factors should be created that the industry has never offered? (blue ocean)

14. New MarketCustomers don’t exist todayHow 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)

15. CompetitionAre substitute products and services available?Are competitors threatening to offer better price or value?How saturated is our market?How likely are customers to defect?

16. Minimum Viable Product (MVP)A product that solves a core problem for customers The minimum set of features needed to learn from earlyvangelistsAvoid building products nobody wants

17. Maximize the learning per dollar spentTesting Value Propositionhttp://www.youtube.com/watch?v=E4ex0fejo8w&feature=player_embedded#at=695

18. How Zynga Uses MVPFrom Mark Pincus, CEO & FounderCreate a 5-word pitch for a new product or feature

19. Put it up on a high traffic webpage

20. If it gets clicks, collect the emails of interested customers

21. Build a ‘ghetto’ version of the product or feature

22. Test everything

23. Iterate constantlySource: http://grattisfaction.com/2010/01/how-zynga-does-customer-development-minimum-viable-product/

24. Goal of MVPDetermine Product Market FitDon’t scale before Product Market FitWithout it, attracting interest from partners and investors will be harder/lower value

25. The Ecosystem (“Customers”)Day to day usersMay actually have zero influence in buying processEnd UserInfluencer / RecommenderPreferences and decisions influence or impact buying decisionsEconomic BuyerThe person who controls the purse strings or is in charge of the budgetDecision MakerThe buck stops here

26. The Ecosystem (The Rest)SuppliersEntity that provides parts or services needed to manufacture your product ChannelsGroup or organization that installs, distributes or sells the product in your placeGovernmentOrganizations responsible for monitoring trading and safety standards related to your productPartnersOther entities that provide products related to delivery of your final product

27. Testing the MVP (Non-Web)Can you get customers to pay for a product that doesn’t yet exist (or barely does)?Interview customers to make sure they have a matching core problemSet up web site landing page to test for conversionSet up a Lighthouse Customer Program where potential customers pay to get early access to product prototypes

28. Testing the MVP (Web Example)Can you get customers to pay for a product that doesn’t yet exist (or barely does)?Interview customers to make sure they have a matching core problemSet up web site landing page to test for conversionSee what offers are required to get customers to use the product (e.g. prizes, payment)Use problem definition as described by customers to identify key word list – plug into Google search traffic estimator - high traffic means there is problem awarenessDrive traffic to site using Google search and see how deep into a registration process customers are willing to go through

29. Testing the MVPSmoke testing with landing pages using AdWordsIn-product split-testingPrototypes (particularly for hardware)Removing featuresContinued customer discovery and validationSurveysInterviews

30. The Business Model CanvasTest Hypotheses:Product

31. Market Type

32. CompetitionThe PivotThe heart of Customer Development

33. Iteration without crisis

34. Fast, agile and opportunisticThe Value Proposition PivotTextbook rentalsCollege students have unique sets of goods and services they need to trade, buy and sell at a local levelCraigslist for CollegesCollege students have unique sets of goods and services they need to trade, buy and sell at a local level

35. The Value Proposition PivotUK-92480Problem: Angina (chest pains)Selectively blocking an enzyme called PDE5 could expand blood vessels and treat angina. Nuf said

36. Test these hypotheses for next week:Problem Statement: What is the problem? For whom?Technology / Market Insight: Why is the problem so hard to solve?Competition: What do customers do today?Product: How do you do it? Is this valuable or unique? What is the MVP? TEST THE MVP!