Business Model Validation and Value Proposition Design

Business Model Validation Steps

Successful business model validation typically involves four critical stages:

1. Problem Identification: Verify a customer segment experiencing a burning problem that they are willing to pay to fix.
2. Problem/Solution Fit: Verify a solution to their problem that they would buy right now if it were available.
3. Product/Market Fit: Verify a channel to reach customers for the sale and delivery of the solution.
4. Scalability: Verify that the business model can be scaled profitably and sustainably.

The Power of 'The Why' (Simon Sinek's Golden Circle)

Simon Sinek argues that most companies start backwards, focusing on ‘the how’ instead of ‘the why.’ Some organizations don’t even know why they do what they do. Companies like Apple started with ‘the why,’ which is fundamental to their massive success.

Sinek emphasizes: “People don’t buy what you do. They buy why you do it.”

He created the Golden Circle, which consists of three interconnected questions:

• Why? (Purpose)
• How? (Process)
• What? (Results)

Designing the Value Proposition Canvas

The Value Proposition Canvas is based on the products and services offered to the customer to create value for them. It consists of two main components: the Customer Profile and the Value Map.

Customer Profile

This section describes specific customer characteristics based on their needs and behaviors:

• Customer Jobs: Describe what your customers are trying to get done in their life (tasks they are trying to perform; problems they need to solve).
• Customer Pains: Describe anything that annoys your customer before, during, and after trying to get a job done (risks, obstacles, potential bad outcomes).
• Customer Gains: Describe the benefits that your customer wants. Gains include functional utility, social gains, and expected or desired outcomes.

Steps for Creating the Customer Profile:

1. Select customer segment.
2. Identify customer jobs.
3. Identify customer pains.
4. Identify customer gains.
5. Prioritize jobs, pains, and gains.

Value Map

The Value Map describes how you intend to create value for the customer segment:

• Products & Services: Describe the products and services you are offering (how they will help the customer, satisfy basic needs, or solve a specific problem).
• Pain Relievers: Describe how the product or service alleviates customer pains (eliminating something that annoys your customer before, during, or after a job).
• Gain Creators: Describe how the product or service will create benefits that the customer expects, desires, or will be surprised by.

Steps for Creating the Value Map:

1. List products and services.
2. Outline pain relievers.
3. Outline gain creators.
4. Rank by order of importance.

Crafting the Value Proposition Statement

A strong Value Proposition Statement explains:

• How your product solves customer’s problems (relevancy).
• Specific benefits delivered (quantified value).
• Why the customer should buy from you and not competitors (unique differentiator).

The statement needs to be concise, easy to understand, and focus on the concrete results a customer will get from purchasing and using your product.

Components of the Statement:

1. Headline: One sentence summarizing the end-benefit.
2. Sub-headline: Two to three sentences providing a specific explanation.
3. Three Bullet Points: Listing key benefits or features.
4. Visual Attraction: Supporting imagery or design element.