Featured
Customer value means business value
At the heart of Business Design is a diagram highlighting the essence of any healthy business: customer value means business value.
The visualization summarizes why Business Design is a clear, compact approach to connecting businesses with customers.
“Customer value is business value” — Kenneth Frazier, former CEO of Merck & Co Inc
Let me give a brief introduction to the visualization.
The left circle: “customer need”
People don’t purchase products because companies are selling them. People find themselves in situations where they are trying to achieve progress or reach a desired outcome (1). This can be articulated as a ‘need’ and is what motivates their action.
Without motivation people are not going to become customers and there is no benefit to the business.
This is an important insight for organizations: tapping into what already motivates people is key. If the customer is not motivated then the job of selling them something is infinitely harder.
The job of a Business Designer includes discovering, understanding and utilizing needs the customer already recognizes.
Attempting to create new ‘needs’ to fit your product is not a thing (companies can offer better ways to do things through products and services, and people can end up ‘yearning’ for these products, but that is different from the underlying motivation and desired outcome). You can always find the underlying need by answering the question: “why do people ‘yearn’ for the product?”.
The right circle: “business need”
As with people, businesses are also trying to achieve something. They have a strategy based on assumptions regarding what brings the desired results (5) and they have a view of who their most important customers and situations are which can help them get there.
In order to know how to collaborate with customers to achieve value, the starting point is always clarity on what the business wants to achieve (6). This sounds obvious, but I’ve lost count of how many times I’ve met businesses thinking that their own goals were implied, but when asking them it becomes obvious that they are unclear or disagree on what’s most important.
The overlap
The overlap indicates where customer and business needs meet. This is where there is a healthy, sustainable opportunity to deliver and receive value.
If a business is trying to serve their customer outside of what is valuable to the business we can call it charity. For some this is a business model, for others it’s sometimes a temporary business model (e.g. launch/scale-period), but most often it is not how a business intends to thrive in the long run.
If a business is offering services outside of what is valuable to the customer they are either solving problems that don’t exist (indicating the business is trying to solve something customers don’t care about) (7), or they might be operating a toxic business model where they are creating results at unfair cost to the customer (e.g. charging for services that are not provided). This might be the business model of malignant enterprises, which for a short or limited time wants to extort value from a market before the market understands they have been taken for a ride or before valid options emerge.
From my own work co-founding an energy efficiency startup we entered a market where companies had been sold “energy efficiency” from providers for years, but when we investigated what had been delivered we found little or zero delivery of value. Providers would lure companies to do expensive analysis where findings never led to improvements, or they would offer monitoring of technical equipment which the company couldn’t audit and which the providers never delivered.
Toxic business models can be very common and whole industries can be committed to them without reflecting or caring about the unfairness to consumers. The American Health Care System being one famous example.
Arrow 1: Offer of value / the Customer Value Proposition
People turn to companies for support: hiring, purchasing, renting or borrowing what the company is offering enabling a behavior maturing them towards their goal.
e.g. if I want to stay fit I purchase a membership at a gym which affords me the behavior of exercising. The gym is only selling me the means (access and equipment) allowing a behavior where I have to put in the effort myself.
There can be multiple behaviors and means supporting a customer’s motivation. Companies often find themselves competing against offers that might seem illogical from a product perspective, but makes complete sense from a motivation and needs perspective.
e.g. in his famous introduction to Jobs-to-be-done Clayton Christensen compares milkshake to donuts, bananas and chocolate bars (2). Alan Klement wrote a book on the same subject called “when coffee and kale compete” (3) and Reed Hastings , CEO of Netflix has been quoted saying that one of Netflix fiercest competitors is a glass of red wine (4).
Given that neither means nor behaviors motivate people, but progress towards the desired outcome does, companies can benefit from having a strategy that avoids limiting a company to specific means or behaviors, but rather focuses on the value they offer relevant to the customer need.
This can help an organization better see how it compares and competes with wildly different competitors while at the same time communicating to customers the benefit it offers towards their desired outcome, which is what customers care about.
The Customer Value Proposition (8) therefore wants to meet the customer where their motivation is and respond to why our offering is superior to others without diving into the details of the nuts and bolts.
e.g. a commuter in a cold climate wants to know if they have to plan for five extra minutes in the morning to scrape their car windows. They might decide to hang a thermometer on the wall outside their kitchen window to look at (behavior a), check their local weather mobile app (behavior b) or just schedule their car to de-frost and be ready for the departure time (behavior c). The customer value proposition would be focused on serving the same need: beating traffic and avoiding stress, but focused on the value of different ways of serving it: reliable indicator (thermometer), plan even before you go to bed (app), automatic (de-frost). All customers are different, and their personal preference would determine which option they choose.
With a good customer value proposition a company can make sure they are offering the customer relevant and unique value supporting a behavior the customer wants helping them progress towards their desired need.
It also gives the company ample space to perfect their means (product or service) or even pivot their behavior as they start learning from customer feedback and experience.
The Customer Value Proposition makes sure you understand your customer while retaining the flexibility to experiment with your offering.
Arrow 2: Behavior
Companies rarely create new behaviors for customers, some would even argue that a company’s ability to influence behavior is severely limited. But a company can support a wanted behavior, even make this behavior preferable to the customer.
By knowing the need and offering a matching Value Proposition the company can support a behavior that brings value back to the customer and the business.
e.g. cool equipment, or status might sway someone wanting to stay healthy into different types of sports to get there.
The customer behavior is critical and holds the key to the whole model: It is only through the behavior the customer unlocks value back to themselves and the business.
e.g. a customer won’t buy your skis if it weren’t for skiing, buy your hand soap if it weren’t for washing hands nor pay for electricity if it weren’t for having the lights and heating on.
Nobody needs a product, they use a product to do what they want in order to achieve what they need.
It is important therefore that the company identifies the behavior it wants to support and finds how to measure it.
A successful strategy means knowing a. the wanted behavior is performed while it at the same time b. delivers the desired outcome to both the customer and c. to the business.
The entire visualization
The visualization represents the essence of Business Design: finding which customer needs will lead to the desired business outcome, then offering the right value to the customer supporting a behavior that brings value back to both the customer and the business.
The Venn-diagram can help build a strategy narrative connecting all the necessary elements:
- What is the desired business outcome?
- Does our business outcome have customers needs?(can we find desired customer outcomes likely matching our desired business outcome)?
- Can we offer relevant and unique value to the customer?
- Is this offer likely to support wanted customer behavior ?
- Is this behavior leading to the desired outcomes for both the customer and the business?
This chain of events can also be measured:
- Are people engaging with our experiences?
- Are these experiences supporting the customer’s wanted behavior?
- Is the behavior driving value to the customer?
- Is the behavior driving value to the business?
Sources, Resources & Links:
(1). Clayton M. Christensen, Taddy Hall, Karen Dillon and David S. Duncan, Know Your Customers’ “Jobs to Be Done”, https://hbr.org/2016/09/know-your-customers-jobs-to-be-done
(2). Clayton M. Christensen, Understanding the Job, https://www.youtube.com/watch?v=sfGtw2C95Ms
(3). Alan Klement, When Coffee and Kale compete, https://www.goodreads.com/book/show/32493686-when-coffee-kale-compete
(4). Matthew Ball, Netflix and Video Games, https://www.matthewball.co/all/netflixgames
(5). Helge Tennø, Strategy needs experimentation, https://medium.com/everything-new-is-dangerous/strategy-needs-experimentation-146805986a73
(6). Helge Tennø, Writing your company’s customer centric mission statement using Jobs-to-be-done, https://medium.com/design-bootcamp/writing-your-companys-customer-centric-mission-statement-using-jobs-to-be-done-4edb6be8b37e
(7). Helge Tennø, Are You Solving Problems That Don’t Exist?, https://medium.com/better-programming/are-you-solving-problems-that-dont-exist-c36685ad8c8b
(8). Helge Tennø, How to write better Value Propositions, https://uxdesign.cc/how-to-write-a-customer-value-proposition-part-1-introduction-b28221718fd8?source=user_profile_page---------101-------------eef05560f145----------------------
