Every once in a while, a book comes across your path that inspires the thought, “I really, really wish that I had written that.” For me, Business Model Generation, by Alex Osterwalder and Yves Pigneur, was that book. Not that business models are necessarily my thing, mind you; while they relate to strategy and projects, they are more focussed on organizational design.
But the design, the layout, the practicality and the thought that had gone into making a complex idea simple and understandable resonated strongly with me.
As Einstein famously said, “If you can’t explain it simply, you don’t understand it well enough.” The writers of Business Model Generation knew what they were doing.
So I was more than curious to see the next book produced by the same team. Value Proposition Design takes two critical (but frequently misunderstood) dimensions of the business model canvas and zooms in more closely. Specifically, the book explores how to effectively design value propositions (the heart of the business model canvas) in order to meet the needs and respond to the pains and gains of prospective customer segments. What this means in layman’s English is that Value Proposition Design evaluates how well the features of a product or service address the needs and requirements of real people trying to do real things.
Business Model Generation focussed on organizational design, and how to design a business model that would deliver sustained and meaningful value of the organization. Value Proposition Design lives within the framework of the business model canvas, but focusses on how to design products and services that deliver meaningful value to customers. Both concepts are necessary. They are complementary. They are interrelated. Most importantly, they use different tools to answer different questions.
Having taken the time to read the new book, I have to say that for anyone focussed on the problem of how to develop effective solutions—whether products or services—Value Proposition Design proposes a useful framework. The structure of the model in the value proposition canvas described in the book is deceptively simple. The richness comes from the guidance that the authors provide in how to use the tools. In particular, the Strategyzer team (Alex Osterwalder and Yves Pigneur are joined here by Greg Bernardo and Alan Smith, the designer of Business Model Generation) have done a lot of work to assess the appropriate fit of a value proposition. In evaluating fit, they ask three critical questions: Does the solution meet a critical customer need? Is there a market for the solution? Is there a business model to sustainably support an organization in delivering the solution?
More relevant than the model is the framework of testing and evaluating of hypotheses that underlie the development of a new solution. Rather than simply devising a solution and bringing it to market, the Strategyzer has relied heavily on the up-front testing principles of the Lean Startup movement. The manner in which they have done this, however, is nothing short of brilliant. They have distilled the principles of the scientific method that I was first taught in about grade 7, and produced two cards, a test card and a learning card, that enable you to state a hypothesis, define the methods of testing, analyze the results and draw conclusions. A simple concept, but one that lends itself to progressively greater degrees of complexity and insight as a solution is more fully developed, piloted and ultimately launched.
Overall, Value Proposition Design is a useful book. It is not a book that you simply sit down and read, mind you. At least, not after the first hundred pages or so of introducing the model. It is a practical, hands-on reference that is best utilized by testing the principles that are being talked about. After an initial period of familiarization, the book will be most helpful as a ready and available reference for how to think through the process of developing and testing a product or service.
While the practical nature of the book is certainly one of its strengths, for me it is also one of its detractions. I personally preferred the structure and approach of Business Model Generation. While employing the same horizontal format of the new Value Proposition Design, the earlier book explored extensively what was meant by the concept of a business model. It extensively walked through a wide range of examples of varying business model types. These provided profoundly useful illustrations that for me enabled a deeper understanding of the potential model. From these examples it is possible synthesize and integrate ideas in a number of different directions, limited only by your imagination.
I got to chat with one of the authors, Alan Smith, about this during the Toronto launch of the new book. Interestingly, the extensive use of examples had been a source of less positive feedback for them. Readers of the previous book wanted a lot more practical structure and guidance of precisely ’how to’ develop business models, and this is what they have tried to integrated into Value Proposition Design. For those who are unfamiliar with product design, development frameworks and group facilitation techniques, there are a lot of practical tools included in the new book. There is, unfortunately, less illustration of the results of the value proposition process. There are a few examples interspersed through the text, but no where near the conceptual and contextual richness of what Business Model Generation provided.
That said, if product and service design is the challenge you are facing, Value Proposition Design is a great resource. And it is one that can be further adapted and evolved in other contexts (as demonstrated below in my presentation about how to adapt the value proposition canvas to the challenge of project requirements development). It is practical, it is well laid out, and a great deal of care, thought and detail has gone into its development. The design is gorgeous, the structure is deceptive in its apparent simplicity (and actual complexity) and the ideas are genuinely useful.