Alex Osterwalder: Jobs, Pains and Gains & Designing Better Value Propositions

Alex is the author and inventor of Business Model Canvas, a best-selling book and tool to visualise, challenge and reinvent business models. At Business of Software Conference Europe 2017, he led us through an exercise to help identify the jobs your product should be doing to meet the needs and pains of their ideal customer.

Transcript

Alex Osterwalder: Good morning, everybody!

I want to talk a bit about what we’ve learned after doing these books. Most of the time I don’t actually write books, I’m trying to convert business executives in large companies to use our software which is a challenge in itself. It brings us to our little topic of not tooth whitening, but jobs to be done.

New Product Introductions

I want to start with an exercise to get into it. I will get you to do a little task for 3-4 minutes and it’s an exercise around, who’s heard of customer discovery and development, lean and start-up? Who’s heard of that before? You immediately will do a little exercise in this space. So Dave on now is a software leader, hardware leader at a company called Colgate. You’ve all heard of them. They came up with this tooth whitening device, you can make up the features, you’re the leader of this time and you’re starting customer discovery, getting out of the building, to start to talk to your first potential customers here to figure out if he and others in the room would be interested in this device and this technology and the software behind it. Simple task, customer discovery, Dave will talk to Gary. Everybody will do that with their seating neighbour and one person is the person from Colgate doing the customer discovery, the other person is a potential customer. Just ask the question as natural as possible, you don’t have to lie or make up anything. It’s just the innovator inside Colgate who has to – easy? Let’s get started!

Ok! Can we agree on something that you believe in the power of this cowbell? This is my timekeeper. When I ring the bell, is that ok with you to focus back on me? Hands up if you agree with that. Good. Saudi Arabia I did this and a guy came to me and said Alex, you can’t do that. That’s for the goats. I said yes, but it works! And it did. So why did we do this exercise kicking off BOS? You might find it’s a bit weird but turns out that even for doing something as simple as customer discovery interviews, you can really screw them up. I want you to think back to the questions and ask yourself did the interviewer mainly focused on opinions? Do you like this and think this is interesting? Is this a good feature? Would you buy this? How much would you pay? Opinions aren’t very good when you do customer discovery interviews. It’s better to ask for facts. When’s the last time you went to Google to search for tooth whitening? That’s a fact. I’ve never done that. Interesting! When’s the last time you talked to your dentist about dental hygiene? Those are all facts. So when we do customer discovery interviews, simple. Try to go for the facts rather than the opinions because what people say and do are very different things. So even if you look at the past, you can figure out what did they do?

The second thing here is I would guess that many of you, cause I led you a bit into a trap, focused on the solution, the device. Would you buy this device? Is this thing interesting? I led you to it talking about features but some of you who’ve done this before, maybe you focused first on the problem, the customer. The jobs they’re trying to get done, the pains they have related to those things. And that’s very, very important that when you start out – because I said this is the first time you’re going to do customer discovery interviews so you don’t know anything about them yet, so you need to start with the customers first. Because if this device, if people don’t like this – I show this and you’re the customer. You think this is interesting? If Gary says I don’t like this, you don’t know if he didn’t like it because of the features, the device or he doesn’t have the job pain or gain. So you want to put this in the back of your head and first focus on the customer. So you can still have this as an idea here, but first ask ok what are the things that you do regarding tooth hygiene or dental hygiene? Once you validated, the jobs, pains and gains you can start with your solution. But in particular, engineers they like to start with – lean start-ups build, measure and learn. People tell us build, engineers will start building. So you want to keep this in the back of your mind, ok?

7 out of 10 new product introductions flop

So just a little start to show you one of the many reasons why 7 out of 10 new product introductions – and this is not just software – software, hardware, anything you can imagine including services – why do 7 out of 10 new product introductions flop. Ok? Now, you know what this number means? Look around you! 7 out of 10 in this room so 70 out of 100 are working on something nobody cares about. Look around you! Decide who that is! Who is working on something nobody cares about? Some of you are actually honest. And it’s not because we’re stupid, it’s because the processes we use are often wrong. We first focus on the solution rather than jobs, pains and gains.

So we will try to figure out what we will scratch the surface and go into how can we avoid this? We will talk about jobs to be done which is being prominent at the BOS so there are a couple of resources online. I recommend you watch those, both people who made this popular Clay Christensen and Tony Ulwick spoke at BOS so I will build on their work. Then we will look at the value proposition canvas a little bit. I already spoke about this at the BOS so I’m gonna take a slightly different angle on this so I don’t repeat myself and then I’m gonna look at one or two things. Bring it back to this lean start-up thing and customer discovery but also just look at a specific angle, because this is an entire profession so I don’t think we got everything right yet.

Jobs to be done

Let’s start with jobs to be done. Let me first start with the roots of this cause I’m building on other people’s work and there’s a bit of a fight going on on who invented the concept so let’s just show everybody who is involved in coining this. Tony Ulwick, around outcome driven innovation, really good work. Rick Pedi, Bob Moesta also spoke I think at BOS and Denise Nitterhouse. They started this, so if you really are deeply interested you can go back to the literature. Then it was made extremely popular by Tony Ulwick and Clay Christensen, both spoke at Business of Software. They wrote a couple of articles and successful books and they made it so successful that it’s really now used. And this morning I was talking with someone from a company who is using this concept. It’s used quite a bit in the world. I will try to give you some angles on this and I’m sure many of you know jobs to be done.

Who of you has already applied the jobs to be done concept? So maybe a quarter. Who has never heard of jobs to be done? Maybe a third. So we have a mixed group so you can discuss in the break. I think it’s interesting to exchange experiences. Also what didn’t work because the best thing we can do in a conference like BOS is learn about other people’s mistakes so we don’t do them, cause it’s expensive. So don’t just share your successes, share the things you screwed up, that’s the most valuable thing you can share with other entrepreneurs. I would have saved a lot of money in my career if I had listened more to other people’s mistakes.

Who? Wants?

So traditionally if you look at marketing, there’s this whole idea of personas – who is this person, age bracket, social criteria and then we ask what does this person want? This is let’s say 20th century marketing, customer discovery. We will try to do is not to ask yourselves what do you want, what do your customers want? We will try to figure out what other jobs are customers trying to get done? This is not a small thing, it’s a big shift and I’ll show you why in a second.

‘If I had asked people what they wanted, they would have said faster horses’

Everybody knows this quote. If Henry Ford asked people what do you want? They would have said a faster horse. Turns out he probably never said that but it’s an excellent quote. So let’s still use it. Cause the point is if you ask customers what they want, you’re asking people who are not experts on the solution to come up with a solution. They won’t be able to do that, but they are experts of what they’re trying to get done, to achieve. The pains that they have that are holding them back from achieving something. Users and customers and clients are experts in the jobs they’re trying to get done. They aren’t experts of the solution. That’s us here in the room. We understand what our customers are trying to get done, then we can really figure it out.

So who of you if you’re honest, before when you did your customer discovery interviews, which groups focused mainly on what do you want? Focused on the solution and opinions? Hands up. So some honest people in the room, ok. Those of you who were better, big group here it appears, asked what are you trying to get done? What are you focusing on? I didn’t emphasise the title of the talk too much cause I didn’t want you to get the exercise right. If I would have said jobs to be done in the tooth whitening exercise you would have done that, which is the right behaviour. But it’s better to let people fail. So bad Swiss humour but it actually works to teach people things. Tony Ulwick said we will focus on the jobs the customers are trying to get done, not what they want. Ok? Don’t ask what they want, don’t try to figure out what they want.

Job based segmentation

So we will focus on the jobs and what’s happening now in marketing and in software development with users is that we’re starting to learn that we can segment customers not based on their characteristics, but on the jobs they’re trying to get done. So often, you might be segmenting your customers into large customers, medium and small customers and that can make sense sometimes, but sometimes you will realise that some users in a medium sized company and users in a large company have exactly the same jobs to be done. Sometimes it might make more sense to focus on the jobs and you might have some features or maybe even some value propositions that focus on the jobs, not on the type of company. When it comes to pricing, maybe it would be different. But it’s not so easy so we have to think about these things a bit more deeply. So job segmentation is pretty interesting.

So what is this jobs to be done thing? Definitions, it’s what customers are trying to get done, tasks, problems, needs, etc. but here’s what I think is interesting and important. There’s also a specific context in which one are they trying to get things done? Simple example when you’re making a phone call from a hotel, from an office or while you’re driving, very different contexts to making a phone call, the job, will be performed in a different way. So you do need to frame the context. In software it’s the same thing. Obvious if you have a sales force out in the field, different context than when the same sales force is in the office. So when you’re framing the jobs, you want to make sure you understand in which context your users and customers are performing that job?

Why is it so important to understand jobs? Because jobs don’t change that much over time, but solutions do. What you offer them, the valued propositions, the features in your software they do. Beautiful example here is the music industry. A simple silly job, this girl here wants to listen to music. Let’s look at the solutions she had access to since 1983. Some of us remember 1983, some of us apparently don’t. There used to be this thing that was called records, then we had – here’s CDs, that was cassettes before. Let’s look at what happened over the next 20 years. What happened is that CDs started to eat up cassettes and they were eating up vinyl. CDs got so strong that they ate up everything else. CD’s as a solution made everything else disappear, vinyl and cassettes going away and then slowly, now in 2004, CDs are getting eaten up by music downloads, music videos. So everything changes, 2012-2013-2014 we have this kind of picture. And now it’s different. I didn’t update the graph. But things are going on really quickly in the solutions space, but if we understand the jobs to be done and the pains and gains related to that really well, we can act faster. Our understanding of the customer won’t change. That’s something you need to have a very strong map about. And even if you with your solutions and value propositions change, your mapping of the customer should be something that you understand throughout the company cause that is actually not so – it isn’t something that changes so quickly. So it’s important to have a map of your customer’s jobs, pains and gainss.

Some of you probably discovered the jobs to be done concept to this milkshake video. Who’s heart Clayton talking about why people hire milkshakes? I’m not showing too much of it, but it’s easy to understand this thing just to repeat, the magic is in repetition as Dan Pink likes to say. When they did some research with these consumers of milkshakes and they asked them what do you want? They said chocolatier, fruitier, cheaper. They asked them what they want and they did all that. And guess what? Zero impact on results. Just to repeat this, it’s not about talking to customers, but what do you ask? So then they got out of the building and they asked what’s going on here? What are the jobs that these customers trying to get done? They started to observe. The same thing in our industry – you start observing how do people use existing software today, existing features today, maybe yours or the competitors, you just need to be an anthropologist to start with. In their case, what did they observe? The story is well known – well the people who come before 8 would buy it and would drive off. At 4, same customers would come back but with their children. Let’s focus on this, they realised that what these people were trying to get done is to grab something to go on their commute and have something to eat. They understood that, they changed the milkshake, they made it thicker so you couldn’t drink is as quickly, they put some fruit chunks and they made the straw thinner. That’s just gimmicky. It turns out it made a huge difference. They increased their sales by 10 in particular also, because they realised their market is not milkshakes, but all of these things. If you haven’t seen the video, it’s quite funny to see a Harvard professor talk about bananas, milkshakes and bagels. That was the market. So same thing in our industry, when we provide certain solutions think a little bit out of the box. What are the other solutions that are getting the same job done? Might not be 1:1 kind of competitors.

Ok, so gonna work on a little exercise in a second. Let’s just bring it back to our jobs. Who of you had to travel to get to the conference? Hands up! Great! Ask yourself what did you pack for this or your last business trip? You might hopefully have some fresh underwear with you. Changing in to fresh clothes every day, that was the job. The solution was to bring fresh underwear to throw it in the laundry at the hotel. Maybe you packed a nice Swiss watch so nobody wears one to read the time. You know that, right? So maybe you want to look successful with colleagues, maybe you made some new pictures, put them on your iPhone or Android phone. I want you to do, with your seat neighbour, very quickly I will show you. This can go deeper. Jobs to be done for the business traveller, we come to the conference, we need to stay somewhere overnight, reserve our accommodation, we want to feel connected home, we want to recover from jet lag, you want to feel safe, eat, look good with clients. Certain different jobs to be done. I want you with your seat neighbour to brainstorm very quickly who can do the fastest 20 jobs to be done in this context. Air travel. I got Swiss chocolate with me, so write down whoever gets to 20 first, that group wins Swiss chocolate which is basically – this is access to heaven, ok? It’s not just like a Belgian tells you their chocolate is better, they’re lying! So very easy! Brainstorm and list all the jobs you have to get done when you travel from A to B by airplane, in the context of air travel. Scribble it down, who gets to 20 jobs first? Let’s go! But you need to write them down! Ok, we’re done! Swiss chocolate is gone, you can stop! Challenge is over!

Social Jobs, Emotional Jobs, Supporting Jobs

Now what I want you to do next is actually ask yourself which job types did you focus on? So job types, some of you know the theory some are purely functional jobs, getting from A to B, checking in, that’s all functional stuff. Those of you who’ve already done this hopefully you already came up with social jobs, like why did people buy a Rolex? Not to read the time, the functional job not so important. Social jobs are about how others perceive you. And in software, even if you’re in B2B you want to make sure you focus on the social jobs. Oh how am I perceived by others if I buy this kind of solution, if I use this kind of computer? So focus on the social jobs as well.

Then there are the emotional jobs, feeling safe. That’s related to myself, if I sell investment products, probably the emotional job not being on a rollercoaster or investing in exciting new start-ups, that has a very, very big role to play. And then you have more of the supporting jobs which help you get the more functional or core jobs done. I want you to quickly discuss how many non-functional jobs did you come up with? So look at your list and identify if you came up with any social jobs or emotional jobs. Have a quick conversation, just 20 seconds.

Ok, so this is actually non-trivial stuff right? When I look in practice when people start with jobs to be done or the value proposition, they stay much too superficial. And again, software we can talk all the way down to features, but we can also talk about customer segmentation. This is a business conference so we need to play the whole range, to the more strategic decisions and which customers you focus on. If you don’t have 150 jobs per customer, you don’t understand them. We’ve seen that people are much too superficial and I mentioned 100 to 150 cause that’s what Tony Ulwick, one of the founders of the concept says. When they study customers and that’s what they do for a living for 20 years, they really go deep. We often stay too superficial and don’t focus on those social and emotional jobs, even in business to business software you can be sure there’s tons of social and emotional jobs. You’re selling to a CTO and guess what? One of the emotional jobs is they’re becoming irrelevant because everything is being outsourced. That’s a very emotional job, that you need to understand. We already did travel exercise 2, a bit faster than my slides, very good.

Understanding Customer Priorities

So now, what we also want to understand is the priorities, just understanding the different jobs is not enough. There’s a whole series of different things you can do in the whole lean start-up literature you can find. I will give you one example. Full disclosure, I’m helping these guys. It’s a company called shape scale. They are building a scale with a strong software component and the idea is you can visualise a person and then not just get the weight and fat and muscle mass, but you can get a 3D image and you can follow over time how your body evolves. You could come up with 1000s of features in this space. The question is what are customers trying to get done and which stuff should you focus on? One of the things they did is they went into the jobs to be done concept and they focused on jobs, pains and gains. They used all the tools from lean start-up to value proposition – very good behaviour. So let’s look at this took quickly, what they’re trying to do and then how they figured out which job to focus on. (video plays)

Ok, so their question was what do we focus on? What are the jobs our customers are trying to get done? And they had 4 segments they identified. And how should they prioritise the features in the software? They used something called cardsort. They talked to the customers and did some face to face and some online. They would make little cards for different jobs to be done. And they would ask customers to order them. And then it’s not just about the ranking, but about the conversation you have with your users at the same time to understand. It’s not just the list of priorities, you will see patterns there. What are they really trying to get done? They came up with these different cards here, which are nice because it would make it easy to understand. In this case, it mixed the jobs to be done with the solution, to a certain extent. You have tracking fat, muscle, measurements, timelapse videos, scary stuff? Specific goal, to get a job done in terms of muscle mass and so on. Then based on this, they talk to customers and they could start seeing the tops and flops. They did a lot of this with 1000s of users from different segments and they could get a better understanding because in this space, hardware prototyping is expensive. You could waste millions! Before you build anything, you want to focus on the jobs, pains and gains first, not the solution. So they are launching, they just launched now and starting the pre-sales.

The Value Proposition Canvas

So that was an introduction to jobs to be done, maybe some flavours that gave you some new ideas. Let’s take this to the bigger picture to your value proposition. Cause jobs alone is just the beginning of the journey, how are you creating value for the customers is another part of that journey. Let’s watch this. (video plays)

Ok, so that’s what we will focus on for a bit here. So we had the jobs to be done, we played around with that. But when you study jobs, you want to understand how customers measure success. What are the outcomes they are trying to achieve, how do they measure it? What results do they want? Down to quantitive results in terms of time, percentages and dollars. From features to more strategic things. Then you want to understand how they measure failure. What holds them back from performing a job well? You want to compliment that job to be done part with how they measure failure and success. Then you get a rounded picture. If you have that map and you evolve it, you will be a lot likelier to develop good solutions.

Outcomes, so this is based on Tony’s outcome driven innovation. How do they measure failure and success? Now, if we go through a high level thing, with not many sticky notes, if you take Tesla with the model S, who was their initial customer they focused on? It was male in the US with the income of $100,000 or more. They would look at a few jobs here, commuting to work, some long distance trips. Differentiating from others. I have a cool, electric car and it’s fast! The social jobs. If you look at the pains, it’s related at how electric vehicles were perceived at the time. This is the stuff you’d get. Straight out of Switzerland. That was a French one, even worse! Sorry for the French in the room! Then they would need to focus on what are the pains at that time, also meaning risks or things that people think about electrical vehicles that they would like to avoid? Battery, charging, geeky perceptions. I did it at SAP and I got them to put stickers in the right boxes and one engineer said Alex geeky perception is positive, right? I looked at him and said look at the customer’s segment there and ask yourself do they want to be perceived as geeky? Probably not! It depends on who you’re talking to if something is a positive or negative outcome. So in term of gains they would understand that for this customer segment, performance is huge. Design is huge, ok? They are not looking at the traditional potential buyer of an electric vehicle, but at the typical car buyer in that segment who is more likely to buy a German car than any other car. Meaning Mercedes, BMW, etc.

High value jobs

You could order this and just come up with priorities. You could do the same thing with the card sort, but there’s also something else that you want to think of. Not just how your customers prioritise jobs, but what you should focus on as an entrepreneur, as a software developer, an owner of a software business. Which ones are the high value jobs? And they are not necessarily those that the customer puts on top, ok? So forget the customer perspective for a second! Look at the business perspective! If you look at what a high value job is, it’s a job that’s interesting for you as a business to focus on to address as an organisation or product team. Now that means it’s important, tangible, unsatisfied and lucrative. You’re taking into account some customer aspects, but also some competitive aspects. If it’s a highly satisfying job, others are doing well, you won’t focus on it. There’s little value in differentiating there. What do I mean by that? We will go through each one of them and then you will do a little exercise.

High value job means it’s important to customers, it’s tangible to customers and I will explain this in a second, it’s unsatisfied and hopefully it’s lucrative jobs, they’re willing to pay for them in one way or another. So let’s look at important jobs, it’s jobs yes. In this case, customer perspective all the way to the top. How do you identify if they’re important or not to the customer? Very simple. You look at this part here. If failing that job leads to extreme pains, then it’s an important job. It’s not just how they rank it, but the pains related to that. So the security breach at the bank, it’s an important pain. Some obvious stuff here and when you do this with customers or users, it will be more nuanced. I am giving you some big picture examples here. Sometimes people say we will focus on the customer problem. Your customers don’t just have problems, they also have positive effects they want to achieve. When we design solutions, we need to focus on the upside. So in this case, a job can be important, if failing that job has an impact on not achieving certain gains. That turns into a problem but it’s about the gains. The sales force, getting more revenues, hitting their bonuses, it’s not a problem but something they want to achieve. If you work with a sales force, you want to know how much more important to them? 10-20-50%? Do they need to double their quota? That’s a high value job, it’s a pretty easy one.

Here’s one that as Strategyzer, in our company, we underestimated for a long time. How tangible are the jobs? It turns out some jobs aren’t as important but they’re present all the time and that’s why they kind of become important. What I mean with that, you can see or you can feel the pain often and strongly. So guess what? The daily email avalanche that is coming down on you, emails aren’t that important, but they are a real pain for many of us. Who has an email pain? Who thinks slack can solve their email pain? A controversial topic. Ok, so the other side of it is can you feel or see the gain? Why is Instagram so addictive? Because you can see and feel the gain. It’s a small thing, not important but it’s there and gets us hooked.

So this case I took anaesthesia because I want to show you an example that’s very, very easy to understand. Here’s something that’s very important that in a surgery room, doctors and nurses that they wash their hands, that has a huge impact, right? That’s very important because the patients won’t be infected and they won’t die. Seems like an important job, right? How big is the pain for the surgeon if the patient dies of an infection a week later? Is it a big pain for the surgeon? An immediate present pain? Terrible to say but it’s not. They can’t see it or feel it. Maybe they might not even know it cause it’s not in their department anymore. Take this one, this was in the 19th century when they operated people without anaesthesia. Was the pain to the surgeon present immediate? You bet! So adoption, and here you can read all about adoption theory, the adoption was obviously a lot faster of anaesthesia than of a simple best practice that would save lives. Intriguing no? That means how tangible is a pain or a gain? That one is often underestimated. It’s a very, very powerful thing in the software business in particular, cause that’s how you can get people hooked. Seems trivial, not often followed. For us, that was losing 3-4 years in our whole entrepreneurial journey thinking that an important job is important enough without it being present and tangible. Strategy, nobody gives a shit about it cause it’s on nobody’s job description and it’s not tangible and present every day.

Unsatisfied

This is an obvious one, unsatisfied. Are the pains unresolved? I took a silly example, ageing. When you’re an entrepreneur you either work on ageing or launching rockets and putting them into space. These are the 2 big unresolved pains you focus on. And then there are unrealised gains. Another obvious one. Instant translation, there aren’t a lot of good solutions out there although there are the first ones. It’s the obvious thing but it’s in combination with the others that you can really make a difference.

Lucrative

The last one, is the job lucrative? Understand if it’s a high value job. Meaning if there are a lot of people willing to pay a little bit, that’s a lucrative job. Or if there are few people who are willing to pay an insane amount of money? Travelling to space, I have some friends and their passion is to travel to space. So they put down the ten thousands of dollars to travel to space. So on their own, some of these are obvious. Maybe not the tangibility of a pain, but it’s together that you really identify the high value jobs.

If we can distribute these little sheets now. So you’re going to do another exercise cause just listening to me would be boring. So learning by doing. You will now take 2 of your travel jobs, that you came up with, in groups of 2, you will put them here, can everyone give me a second? You will score those two jobs, can everybody listen? You get one for each but you work in groups of 2. Doesn’t matter, you can download them on the website. Can everyone listen? You pick 2 travel jobs, pick 2 interesting ones that you think those are really important and then you give them a score from 1 to 10. So you pick 2-3 and you score them and then you add up the score. You can weight them however you want. You score their importance, tangibility, are they satisfied or not and lucrative? I will give you 3 minutes to do this exercise, let’s go!

Ok! Some are asking what does unsatisfied means? It means no other competitor or no other solution is out there that really solves the job well. This is obviously not an algorithm but it’s a series of questions that really allow you to ask should we as an organisation focus on those jobs or not? Remember what I said, of course you want the customer to understand is that an important job? It’s often not enough to just understand if it’s important for customers. You want to take your perspective, and ask is this a high value job? Meaning this one would be really interesting for you to focus on. It’s very important, because we hardly made the first step understanding customers but it’s not enough. The second step is what are the strategic decisions you’re making? It’s not every feature you want to solve, or customer job that you want to help with, it’s those that are important, tangible, unsatisfied and lucrative. So food for thought, to have better conversations among your team, but also with your customers. This will allow you to ask better questions when you’re talking to your customers. Doing customer discovery interviews is a very sophisticated thing to do when you do it well.

So we looked at customer jobs and we tried to understand what our gains that our customers want, what do they want to achieve and what pains do they have that are holding them back? So mapping customer insights could look something like this, you can do it in software, print it out. And then we you talk to customers they will say they’re right. 100 customers said they had that particular pain or job. So this is a real one from a company called Gore. They make Goretex. This is a materials company, they do tonnes of stuff. And they have tons of these and they start marking them up saying 11 of the people we talked to, they have this particular pain and then they say what if we could relate the jobs and the pains? If we look at that particular job, then these particular pains relate to that. So they’re starting to mark up the different jobs, pains and gains. Pretty interesting in the field.

Now, other ways to identify the pains. So just showing this one, so you’re creative in the way you talk to users and customers. I like this one coming from Luke who was in BOS 2 years ago or so. You could ask yourself what are some of the important jobs of our customers? Then you put a speedboat on the wall and tell them if this is your job to be done, what are the anchors, the pains, that are holding you back from doing that job well? And they will come up with all of these pains. And then you can say those are really holding you back, you put the anchor a lot lower. So you’re starting to see the visually ad you can have a playful conversation with them. That might seem a bit gimmicky but actually just asking won’t give you the same feedback than when you do it with some kind of visual artefact. These are powerful tools that you can use. I think the most important here when we do customer discovery is we remain creative, we don’t just ask questions, but try to use different kinds of tools, including call to action testing to figure out jobs, pains and gains of our customers.

Once you have a good picture of that you can start putting up these customer profiles and organise them and start to see patterns and once you see patterns in them, when you talk to 100s of users and then you can start designing your value proposition. It’s an insane amount of work that goes into understanding users and customers well. And we often don’t do enough though it’s now becoming a real profession. Let’s look at the second part. (video plays)

Canvas Map

Ok, so some of you have seen me talk about the value proposition canvas, so I will give you a quick example and move over. If we go back to our Tesla example, there was the model S and they addressed some of the pains down here so the battery capacity, the free charging which is starting to change now. You will have to start to pay for that. And then the luxury image which will push away the SAP engineers but will attract the customer segment that they’re looking at. And if we look at the gains, they really focused on what these customers here want. Performance, number 1. Some aspects related to the range of the car but then another important one was here, design. So when they were designing the car, they actually had in the courtyard for the designers and engineers, they had BMWs and Mercedes’ so every evening the engineers could have the experience of a German car. Not a French car, or American car or a Japanese car. A German car, they were very specifically competing against them.

Here it’s now a lot more a software product, you can get better parking and more speed, so car’s hardware is turning into software. The hardware and software sector are becoming one. So beyond the business to consumer. And then here the last one is rated as the safest car, not just the safest electric vehicle, it’s rated as the safest car. Whatever the US press tries to make us believe. So is there a fit between this? If you look at the results, it’s clear. They haven’t just outsold all other electric vehicles, but out sold the other cars in that category, meaning Mercedes, BMW, etc. When they launched the new model last year, they pre-sold in the first week over 300,000 cars. Pre-sold. People put down money, that’s spectacular and worth billions! But Elon Musk took that money, went to the banks and said we don’t have the factories yet to build those cars. Can you give us a couple more billions so we can build those factories? So this is customer discovery on a different scale with a call to action. I’ve just made 4 billion by pre-selling a couple of cars.

Fit

So fit – this is an important concept. When we look at the jobs our customers have and the pains and gains, here I think we don’t go far enough. We need to be able to quantify not just our solution, how fast is it and good is it in terms of quality. We need to be able to quantify them in terms of dollars, percentages or time. How much more do our customers want in terms of percentages or dollars or time? And we don’t do this well enough very often. If I go talk to business people and ask them how are you creating value for your customers? They will be able to quantify over here, our solution is this fast, and this much better but this much better only means something if it’s relevant to customers over here. So once you have those numbers, you can understand how does my solution or valued proposition eliminate, reduce or minimise pains? If you don’t have numbers, you can’t come up with that. The same for gains. How do I maximise the gains over there? I need to understand the quantification over there of the pains and gains. Again, think Tony Ulwick outcome driven innovation, your customers are good at how they measure failure and success. They know how to do that if you ask the right questions you can get that. So here is one little example, we had quantification of the gains. Turns out most people don’t drive more than 30km per day but the gain they want to have in their head is an independence of their vehicle over 300 km. So what they do and what they want or think they need is something else. So we focused on the valued proposition here but never forget as a business, you can even have the best solutions if you don’t have a great business model in the right environment you’re not going to succeed. We need to navigate between different level of abstractions. Here we’re talking jobs, here we’re talking value proposition which is embedded in a great business model which is embedded in an competitive environment. Following this? This is when you get in the Champions league, you understand this which the best entrepreneurs in this room are already doing.

So last exercise, got another 10 minutes to go, we’ll finish a bit early here. When you do lean start-up, who is practicing lean start-up customer discovery in their organisation? We’re doing this, not practicing. Only 2. Everyone else makes solutions and figures out if it will work? Is that true? Interesting! Now I understand the statistics even better, 7 out of 10 products, they flop. In this room it seems to be 9 out of 10. When we go from idea to profit, with the software we’re building and selling, at the beginning when you do something new, you don’t know if it’s gonna work. The more experienced you are, the harder it’s to admit that you have no f*cking clue. When you start out, uncertainty and risk is at its maximum. You’re launching a new feature, it’s maximum and your only task is to decrease uncertainty. It’s not to build anything, your task is to learn, that’s what the whole lean start-up concept is about. You learn by spending small amounts of money, talking to 1000 customers and further down the road, we build something. Even wire framing takes time. So you slowly invest more money and you build real prototypes and at one point you move into execution when you have evidence. It’s not about doing 10-20 interviews, but it’s serious stuff to de-risk the new stuff that you’re doing. Then you go further down and you can spend more money.

A real company coming out of Stanford, these guys here, they were going through Steve’s class and their idea was to create this drone and it would help them do precision agriculture so hyperspectral camera, flying over farms and helping the farmers with data. This is precision agriculture. It’s growing rapidly. If we look at the business model and I will keep it simple, they’re targeting farmers, drones that deliver crop data and they want to sell that data. We move in this canvas while they focus on these stuff here. They would say we will help them with our imaging data, we will allow them to do targeted interventions and improve their harvest. Straightforward, right? So what did they do? They got out of the building and said we’re gonna deliver more data. What did the farmers say? Of course we’re interested in more data. They – this is our hypothesis. We can build a drone, stich the software to get the image to the field and get it to the farmers. How do you test it? We gotta demonstrate that the software can work and we will buy a drone and a camera and software and we will engineer that altogether. So guess what? It’s costly and takes a lot of time, that’s the worst way to test if there’s a market cause they’re building the thing. But if you tell the engineers build, measure, learn guess what they do? They build. Then they go back to class with Steve and anybody who’s seen him, you know he can be violent when you don’t practice lean start-up. He told them are you sure you want to build all that stuff? The basic thing you need to do when you have the idea for a new software and features, you need to ask what needs to be true for your idea to work? That’s how you define the hypothesis. So here, around this idea, I give you these hypothesis and 11.

Last exercise, I want you to identify the top hypothesis, just pick the top 3 that if you were these guys from Stanford, which one would you test first? You enumerate the top 3, in groups of 2 I will give you a minute to discuss. Let’s go! Last exercise! Which ones would you test? Ok, so the reason I’m getting you to do this exercise is because it’s one of the biggest mistakes that we see when people talk about jobs to be done, value propositions and they don’t prioritise the most critical hypothesis. If that isn’t true, everything else doesn’t matter and it’s not building a drone, because maybe there’s no market. In this case, the top ones is farmers are interested in data about fields and crops. Who took that as number 1? This is not an exact science, but you can come up with 1-2. Who picked drones can deliver images as the top hypothesis to test? Are you starting a business? Hopefully not! I’m joking you, but I’m not joking. A lot of companies run out of money because they’re testing expensive stuff first. That’s why we have 7 out of 10. If you look at the statistics, many companies go bankrupt cause they run out of money.

I’m out of time and we’re almost done. So starting to test the most critical hypothesis and you can go towards pricing and drones would be a lot further down. They talked about their drones again and what did the farmers say I don’t care if you use drones. Why don’t you use these planes that fly over the fields? There’s 5,000 planes that fly over the fields already and they said maybe it’s a bit different, we’ll use the existing infrastructure, demonstrate we can collect the data and investigate if people want to pay for that. There’s a cheap experiment and these guys turned this into business that uses the planes. So it shifted away from drones and they weren’t happy they couldn’t build a drone, but they could build a business. Can we build it or should we actually do it? You always want to test desirability, viability and feasibility. Sometimes we get so excited about feasibility that we don’t get excited enough on desirability or viability. Focus on that! Seems like a trivial lesson, but how many times we focus on can we building?

That’s it from me! Thank you very much for your attention!

Mark Littlewood: Fabulous!

Alex Osterwalder

Dr. Alexander (Alex) Osterwalder, founder & CEO of Strategyzer, is one of the world’s most influential strategy and innovation experts. A leading author, entrepreneur, and in-demand speaker, his work has changed the way established companies do business and how new ventures get started.

Ranked no. 4 of the top 50 management thinkers worldwide and a visiting professor at IMD, Osterwalder is known for simplifying the strategy development process and turning complex concepts into digestible visual models. Together with Yves Pigneur, he invented the Business Model Canvas, Value Proposition Canvas, and Business Portfolio Map – practical tools that are trusted by millions of business practitioners from leading global companies, including Microsoft, Coca-Cola, Nestlé, Mastercard, Sony, Fujitsu, 3M, Intel, Roche, Colgate-Palmolive, and many more.

Strategyzer is an innovation powerhouse, providing online courses, applications, and technology-enabled services to help organizations effectively and systematically manage strategy, growth, and transformation.

Osterwalder’s books include the international bestseller «Business Model Generation», «Value Proposition Design», «Testing Business Ideas», «The Invincible Company,» and «High-Impact Tools for Teams».

He holds the Strategy Award from Thinkers50 and the European Union’s inaugural Innovation Luminary Award. In 2019, Osterwalder chaired the prestigious Drucker Forum, the premiere annual business management conference. A frequent and popular keynote speaker, Osterwalder travels the world discussing his ideas and strategies at Fortune 500 companies, premiere innovation conferences, and leading universities.

He holds a doctorate from HEC Lausanne/Switzerland and is a founding member of The Constellation, a global not-for-profit organization connecting local responses to global issues around the world.

More by Alex.

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