CVCI Module 3

Principles of Customer value creation

Value Proposition design
‘Jobs to be done’ concept of innovation
 1

Principles of
Customer value
creation
Principles
of
customer
value
creation
The 1st Principle: Customers tend to buy or use those
products or services that they perceive create greater value
for them than competitive offers. It is essential for
executives and leaders to create higher value for their
Customers than competition can.
The 2nd Principle: Customer Value Creation is applicable in all
fields, such as business, service, education and academics, society
and government, social work, innovation and entrepreneurship. It
impacts humanity.
The 3rd Principle: Customer Value Creation touches all
stakeholders, you, your colleagues, your employees, your
partners (supply chain, delivery chain, and unions), and
society to create resounding value for the Customer and
thereby for the shareholder. It is the source for creating
Customers and retaining existing ones, increasing loyalty,
market share and profits
The 4th Principle: Customer Value Creation is proactively
exceeding what is basically expected of you or your job and is
going beyond your functional and routine roles to creating
value in your eco-system. Value creation can be planned or
spontaneous, and in both functional and emotional thinking
The 5th Principle: Customer Value Creation leverages a
person’s or an organisation’s potential, learning and
creativity while making it meaningful and worthwhile for
people to belong and perform, both physically and
emotionally
The 6th Principle: Customer Value Creation presents a
very powerful decision making tool for companies to
decide on actions, programs, strategies for the Customer
that can increase the company’s longevity and
profitability.
The 7th Principle: Value Creation must exceed Value
destruction or reduce negative value and be done
consciously (not just unconsciously)
The 8th Principle: Values (what you stand for, integrity,
honesty, fairness etc.) creates Customer Value (that is
Customers Value your Values)
 2
Value
Proposition
Design
How to create products and
services customers want
Value Proposition Design
will help you successfully…

• Understand the patterns of value creation

• Leverage the experience and skills of your team
• Avoid wasting time with ideas that won’t work
• Design, test and deliver what customers want
The heart of Value Proposition Design is about applying
Tools to the messy Search for value propositions that
customers want and then keeping them aligned with what
customers want in Post search.

Value Proposition Design shows you how to use the Value

Proposition Canvas to Design and Test great value propositions
in an iterative search for what customers want. Value
proposition design is a never-ending process in which you
need to Evolve your value proposition(s) constantly to keep
it relevant to customers.
The Tools and Process of
Value Proposition Design

1. Canvas (tools)
2. Design (Search)
3. Test (Search)
4. Evolve (post search and progress)
Canvases
• The Environment Map
helps you understand the context in which you create

• The Business Model Canvas

helps you create value for your business.

• The Value Proposition Canvas

helps you create value for your customer
The Value Proposition Canvas

The Value Proposition Canvas is the tool at

the center of this book. It makes value
propositions visible and tangible and thus
easier to discuss and manage.

It perfectly integrates with the Business

Model Canvas and the Environment Map,
two tools that are discussed in detail in
Business Model Generation, the sister book
*

to this one. Together, they shape the

foundation of a suite of business tools.

The Value Proposition Canvas zooms into

the details of two of the building blocks of
the Business Model Canvas.
Use Value Proposition
Design to…
Use Value Proposition
Design to…
Value Proposition Design
works for…

Are you creating something from scratch on your own or

are you part of an existing organization? Some things will
be easier and some harder depending on your strategic
playground.

A start-up entrepreneur deals with different constraints than a project

leader for a new venture within an existing organization.
Start ups
The Value Proposition Canvas
has two sides.
With the Customer Profile you clarify your customer
understanding.
With the Value Map you describe how you intend to
create value for that customer.

You achieve Fit between the two when one

meets the other.
Customer
Profile
Customer
Profile

Customer Jobs
Customer Pains
Customer Gains
Jobs describe the things your customers are trying to
get done in their work or in their life. A customer job
could be the tasks they are trying to perform and

Customer
complete, the problems they are trying to solve, or the
needs they are trying to satisfy. Make sure you take
the customer’s perspective when investigating jobs.
What you think of as important from your perspective
might not be a job customers are actually trying to get
done. Jobs
Main types of customer jobs to be done and
supporting jobs:

Functional jobs Personal/emotional jobs

When your customers try to perform or complete a When your customers seek a specific
specific task or solve a specific problem, for example, emotional state, such as feeling good or
mow the lawn, eat healthy as a consumer, write a secure, for example, seeking peace of
report, or help clients as a professional. mind regarding one’s investments as a
consumer or achieving the feeling of job
Social jobs security at one’s workplace.
When your customers want to look good or gain
power or status. These jobs describe how customers
want to be perceived by others, for example, look
trendy as a consumer or be perceived as competent as
a professional.
 Customer Jobs
Supporting jobs
Customers also perform supporting jobs in the
context of purchasing and consuming value either
as consumers or as professionals.
These jobs arise from three different roles:
BUYER OF VALUE: jobs related to buying
value, such as comparing offers, deciding which
products to buy, standing in a checkout line,
completing a purchase, or taking delivery of a
product or service.
COCREATOR OF VALUE: jobs related to
cocreating value with your organization, such
as posting product reviews and feedback or
even participating in the design of a product
or service.
TRANSFERRER OF VALUE: jobs related to the
end of a value proposition’s life cycle, such as
canceling a subscription, disposing of a product,
transferring it to others, or reselling it.
Job context
Customer jobs often depend on the specific context in
which they are performed. The context may impose certain
constraints or limitations. For example, calling somebody
on the fly is different when you are traveling on a train
than when you are driving a car. Likewise, going to the
movies with your kids is different than going with your
partner.

Job importance
It is important to acknowledge that not all jobs have the
same importance to your customer. Some matter more in a
customer’s work or life because failing to get them done
could have serious ramifications.
Some are insignificant because the customer cares about
other things more. Sometimes a customer will deem a job
crucial because it occurs frequently or because it will result
in a desired or unwanted outcome.
Customer Pains
Pains describe anything that annoys your customers before, during, and after trying to
get a job done or simply prevents them from getting a job done. Pains also describe risks,
that is, potential bad outcomes, related to getting a job done badly or not at all.
Seek to identify three types of customer
pains and how severe customers find them:
Undesired outcomes, problems, Risks (undesired potential outcomes)
and characteristics What could go wrong and have important
Pains are functional (e.g., a solution doesn’t work, negative consequences (e.g., “I might lose
doesn’t work well, or has negative side effects), credibility when using this type of solution,” or
social (“I look bad doing this”), emotional (“I feel “A security breach would be disastrous for us”).
bad every time I do this”), or ancillary (“It’s
annoying to go to the store for this”). This may Pain severity
also involve undesired characteristics customers A customer pain can be extreme or
don’t like (e.g., “Running at the gym is boring,” or moderate, similar to how jobs can
“This design is ugly”). be important or insignificant to the
customer.
Obstacles
These are things that prevent customers from
even getting started with a job or that slow them
down (e.g., “I lack the time to get this job done
accurately,” or “I can’t afford any of the existing
solutions”).
 The following list of trigger questions can help you think of different
potential customer pains:
How do your customers define too costly?
Takes a lot of time, costs too much money,
or requires substantial efforts?
What makes your customers feel bad? What
are their frustrations, annoyances, or things
that give them a headache?
How are current value propositions
underperforming for your customers? Which
features are they missing? Are there
performance issues that annoy them or
malfunctions they cite?
What are the main difficulties and challenges
your customers encounter? Do they understand
how things work, have difficulties getting
certain things done, or resist particular jobs for
specific
reasons?
What negative social consequences do your
customers encounter or fear? Are they afraid of
a loss of face, power, trust, or status?
What risks do your customers fear? Are they
afraid of financial, social, or technical risks, or are
they asking themselves what could go wrong?
What’s keeping your customers awake at night?
What are their big issues, concerns, and worries?
What common mistakes do your customers
make? Are they using a solution the wrong way?
What barriers are keeping your customers from
adopting a value proposition? Are there upfront
investment costs, a steep learning curve, or
other obstacles preventing adoption?
 Customer Gains
Gains describe the outcomes and benefits your customers want. Some gains are required, expected,
or desired by customers, and some would surprise them. Gains include functional utility, social gains,
positive emotions, and cost savings.

Seek to identify four types of customer gains in Desired gains

terms of outcomes and benefits: These are gains that go beyond what we expect
from a solution but would love to have if we could.
Required gains
These are usually gains that customers would
These are gains without which a solution
come up with if you asked them. For example, we
wouldn’t work. For example, the most basic
desire smartphones to be seamlessly integrated
expectation that we have from a smartphone is
with our other devices.
that we can make a call with it.
Unexpected gains
Expected gains These are gains that go beyond customer
These are relatively basic gains that we expect expectations and desires. They wouldn’t even come
from a solution, even if it could work without up with them if you asked them. Before Apple
them. brought touch screens and the App Store to the
For example, since Apple launched the iPhone, mainstream, nobody really thought of them as
we expect phones to be well-designed and look part of a phone.
good
Gain relevance
A customer gain can feel essential or nice to have, just
like pains can feel extreme or moderate to them.
The following list of trigger questions
can help you think of different potential
customer gains:

Which savings would make your customers

happy? Which savings in terms of time, money,
and effort would they value?

What quality levels do they expect, and what

would they wish for more or less of?
How do current value propositions delight your
customers? Which specific features do they
enjoy? What performance and quality do they
expect?
What would make your customers’ jobs or lives
easier? Could there be a flatter learning curve,
more services, or lower costs of ownership?
What positive social consequences do your
customers desire? What makes them look good?
What increases their power or their status?
What are customers looking for most? Are they
searching for good design, guarantees, specific
or more features?
What do customers dream about? What do
they aspire to achieve, or what would be a big
relief to them?
How do your customers measure success and
failure? How do they gauge performance or cost?
What would increase your customers’ likelihood of
adopting a value proposition? Do they desire lower
cost, less investment, lower risk, or better quality?
Value Map
 Value Map

• Products (Goods and Services)

• Pain Relievers
• Gain Creators
Product
and
services
 Pain
Relievers
 Gain
Creators
Fit
Fit
 Customers expect and desire a lot from products
and services, yet they also know they can’t have
it all. Focus on those gains that matter most to
customers and make a difference.

Customers have a lot of pains. No organization can
reasonably address all of them. Focus on those
headaches that matter most and are insufficiently
addressed.
Your customers are the judge,
jury, and executioner of your
value proposition. They will be
merciless if you don’t find fit!
Jobs
to be done
concept of
innovation
The fundamental problem is, most of the masses of customer
data companies create is structured to show correlations:

This customer looks like that one, or 68% of customers say they
prefer version A to version B.

While it’s exciting to find patterns in the numbers, they don’t

mean that one thing actually caused another. And though it’s
no surprise that correlation isn’t causality, we suspect that most
managers have grown comfortable basing decisions on
correlations.
He’s 64 years old. He’s five feet ten inches tall. His shoe size is 7. He
and his wife have sent all their children off to college. He drives a
Honda minivan to work. He has a lot of characteristics, but none of
them has caused him to go out and buy the Times of India. His
reasons for buying the paper are much more specific. He might buy
it because he needs something to read on a plane or because he’s
a basketball fan and it’s March Madness time. Marketers who
collect demographic or psychographic information about him—and
look for correlations with other buyer segments—are not going to
capture those reasons.
After decades of watching great companies fail, we’ve come to
the conclusion that the focus on correlation—and on knowing
more and more about customers—is taking firms in the wrong
direction. What they really need to home in on is the progress
that the customer is trying to make in a given circumstance—
what the customer hopes to accomplish. This is what we’ve
come to call the job to be done.

Clayton Christensen

The focus on knowing more about customers

has taken firms in the wrong direction.
A decade ago, Bob Moesta, an innovation consultant was charged
with helping bolster sales of new condominiums for a Detroit-
area building company. The company had targeted downsizers—
retirees looking to move out of the family home and divorced
single parents. Its units were priced to appeal to that segment—
$120,000 to $200,000—with high-end touches to give a sense of
luxury. “Squeakless” floors. Triple-waterproof basements. Granite
counters and stainless steel appliances. A well-staffed sales team
was available six days a week for any prospective buyer who
walked in the door. A generous marketing campaign splashed ads
across the relevant Sunday real estate sections.

The units got lots of traffic, but few visits ended up converting to sales.
Maybe bay windows would be better? Focus group participants thought
that sounded good. So the architect scrambled to add bay windows (and
any other details that the focus group suggested) to a few showcase
units. Still sales did not improve.
Although the company had done a cost-benefit analysis of all the details in
each unit, it actually had very little idea what made the difference between a
tire kicker and a serious buyer. It was easy to speculate about reasons for
poor sales: bad weather, underperforming salespeople, the looming
recession, holiday slowdowns, the condos’ location.

But instead of examining those factors, Moesta took an unusual approach: He

set out to learn from the people who had bought units what job they were
hiring the condominiums to do. “I asked people to draw a timeline of how
they got here,” he recalls. The first thing he learned, piecing together patterns
in scores of interviews, was what did not explain who was most likely to buy.
There wasn’t a clear demographic or psychographic profile of the new-home
buyers, even though all were downsizers. Nor was there a definitive set of
features that buyers valued so much that it tipped their decisions.
But the conversations revealed an unusual clue: the dining
room table. Prospective customers repeatedly told the
company they wanted a big living room, a large second
bedroom for visitors, and a breakfast bar to make entertaining
easy and casual; on the other hand, they didn’t need a formal
dining room.

And yet, in Moesta’s conversations with actual buyers, the

dining room table came up repeatedly. “People kept saying, ‘As
soon as I figured out what to do with my dining room table,
then I was free to move,’” reports Moesta. He and his
colleagues couldn’t understand why the dining room table was
such a big deal. In most cases people were referring to well-
used, out-of-date furniture that might best be given to
charity—or relegated to the local dump.
But as Moesta sat at his own dining room table with his family over Christmas,
he suddenly understood. Every birthday was spent around that table. Every
holiday. Homework was spread out on it. The table represented family.

What was stopping buyers from making the decision to move, he

hypothesized, was not a feature that the construction company had failed to
offer but rather the anxiety that came with giving up something that had
profound meaning. The decision to buy a six-figure condo, it turned out, often
hinged on a family member’s willingness to take custody of a clunky piece of
used furniture.

That realization helped Moesta and his team begin to grasp the struggle potential
home buyers faced. “I went in thinking we were in the business of new-home
construction,” he recalls. “But I realized we were in the business of moving lives.”
With this understanding of the job to be done, dozens of small but important
changes were made to the offering. For example, the architect managed to
create space in the units for a dining room table by reducing the size of the
second bedroom.

The company also focused on easing the anxiety of the move itself: It provided
moving services, two years’ worth of storage, and a sorting room within the
condo development where new owners could take their time making decisions
about what to discard.
The insight into the job the customers needed done allowed the
company to differentiate its offering in ways competitors weren’t likely
to copy—or even comprehend. The new perspective changed
everything. The company actually raised prices by $3,500, which
included (profitably) covering the cost of moving and storage. By 2007,
when industry sales were off by 49% and the market was plummeting,
the developers had actually grown business by 25%.