A Very Simple Model for expressing a Customer Value Proposition

There are many frameworks available to help product teams develop and express a customer value proposition. One of my favourites is this Value Proposition Canvas, which was based on the canvas from the creators of the Business Model Canvas.

Expressing the proposition on this canvas is a great way of forcing you to think through the whole proposition, from beginning to end, and it is particularly useful for helping you identify problem-solution fit – that is, identify and articulate which needs or problems your product is addressing, and how.

While this model has worked very well for me, I would like to share a different, (even!) simpler model. It’s a well-known idea that any product or business should be able to be expressed within a single sentence. This model is all about getting to one sentence.

It’s as simple as answering three questions about your product:

  1. What it IS
  2. What it DOES
  3. HOW it does it

Step 1: Answer the three questions

What it IS

This describes the broad product category. What IS this thing you’re building? An app? What kind of app? Is it a service? What type?
Examples:

  • A messaging app
  • A maps app
  • A customer relationship management service

What it DOES

What does this product actually DO?
Or to put it another way – what are the benefits that this product provides to the customer? What needs does it solve?
Examples:

  • Send a text, image or video message to anyone you want, instantly, for free.
  • Find new and trending places to try that match your tastes in your neighbourhood.

HOW it does it

How does this product deliver the benefits you’ve described in the section above? What particular features or experiences are key to how your product will do this?
Examples:

  • Extremely simple interaction model with delightful user experience.
  • The fastest, most robust messaging cloud service.
  • Recommendations based on the activity/history of your friends.

Step Two: Prioritise

Do you have multiple answers under some or all of the questions above? If so, prioritise them. What is more important? What is critical? What is core to the whole product, and what is secondary?

Which items, if removed, would result in the product not being viable any more? These are your core propositions.

Step Three: Circle the differentiators

Which items you’ve circled are the ones that differentiate your product from others on the market? Which ones make your product truly different from the competition?

Step Four: Your proposition in one sentence

Now, try making a single sentence out of your answers in the three columns, focussing on a) what is top 1-2 in terms of priority, and b) what is differentiating.
(Hint: you don’t need to use every column!)

The formula for the sentence is as follows:
This product is a x (what it IS) that y (what it DOES) by z (HOW it does it).

Example: This product is a messaging app that allows you to send a text, image or video message to anyone you want, instantly, for free.

If you find that you cannot get everything you want into one sentence, or if your sentence is more than two lines long, start cutting. Keep cutting until you reach one sentence. What is really core? What is truly differentiating?

Why does this model work?

This model works by forcing you to prioritise. What is really important? What is really core? What is really differentiating?

It is also helpful because it helps visualise where your product’s differentiation lies. Some products differentiate on the benefits, or problems solved, and others differentiate on the solution to those needs. Knowing which is crucial when formulating your value proposition.

Try it, and see. I am interested to hear your feedback and if this model works for you.

The unbundling of Facebook and the evolution of mobile

Last week Facebook announced the new Paper app – an app that turns your Facebook news feed into your own personal newspaper. At the same time they announced Facebook Creative Labs and promised further small, single-purpose apps.

This is all part of a growing trend from Facebook to un-bundle their core mobile product/service into smaller, focussed single-purpose apps that solve specific problems. The first move here was Facebook Messenger, which was designed to compete head-on with the growing number of successful messaging apps that are growing incredibly in the marketplace (Whatsapp, Line, WeChat, Snapchat, etc).

When the giants of the desktop web era (Facebook, LinkedIn, Yahoo, and so on) moved to mobile, to begin with their service architectures stayed more or less intact. On the web, a single product has a single URL, a single brand and a single interface and structure. Facebook on the web is an entire product service that exists behind the facebook.com URL.

It turns out on mobile, however, that there are different dynamics driving user behaviour and expectations. On mobile, how users interact with apps, and how they choose to create and consume content, is very different than it was on desktop.

The structure of apps and the multi-tasking abilities of modern smartphones makes changing apps really easy. It is nearly always easier and quicker to press the ‘home’ button on your smartphone and open another app than it is to navigate the menu structure within the app you’re already in to access a different function.

This dynamic is driving the un-bundling of Facebook’s offer. Others are following. Yahoo already has offered a variety of mobile products since Marissa Mayer joined as CEO. Others, such as LinkedIn, will surely follow. (LinkedIn experimented with an email application, which they have since pulled. I predict they will release a news reader, similar to Paper, some time soon).

On mobile, users prioritise simplicity and speed over flexibility and broad functionality. Apps have a single use-case or purpose, as opposed to web products, or pre-mobile software in general, which cater for maximal different use-cases and functionality.

This is all a further acknowledgement that the paradigms that drove software and user behaviour in the pre-mobile world don’t fit completely to mobile, and the platforms are still evolving and changing.

Benedict Evans has posited that we really don’t know what it even will mean in 5 years to say “I installed an app on my smartphone”. So very little is settled – which means big opportunities – and also big risk – for mobile players.

Location-Based Services in 2014

I’ve been thinking a lot about the future of location-based services lately. The first thing that occurs to me: nobody talks about location-based services anymore. There are just ‘services’.

It occurs to me that Location, in and of itself, is not an ‘experience’, per se. It is an enabler of experiences. Allow me to explain.

There are two critical aspects that make up a location-based service:

  1. The ability to accurately detect the real-world location of the user (or, more specifically, the user’s device) and communicate this back to a service in real-time.
  2. The ability to accurately place this, and other, locations of interest on a map.

Take a classic “location-based service” such as Foursquare, where users ‘check-in’ to venues, stores or other locations with the app on their smartphone when they visit the store physically. The location of the user is the enabler that allows the check-in to take place, and the rendering of a map of the area is the enabler that allows the check-in to be viewed and consumed later.

Location itself isn’t the point or motivator for the experience. It’s just what makes the experience possible.

Hence the term “location-based service” has fallen a bit out of favour. Location is no longer an exciting differentiator among mobile experiences, and the location is very rarely the real point of the ‘service’. The point is always something else: find out how good a hotel is (TripAdvisor), review a restaurant (Yelp), find a new place for lunch (Foursquare), find deals nearby (Groupon, iBeacon), etc.

So the thing to remember about Location: it’s not an experience. Location is an enabler of experiences.

Mobile strategy in a rapidly evolving industry

Benedict Evans, the well-known mobile industry analyst, has posited that we actually have no idea what it will mean in five years to “install an app on my smartphone”.

The market and the technology that powers it is changing and evolving so fast that there is no way to know how the industry will look in five years time. Will a smartphone still be a rectangular device with a screen that you carry in your pocket? Will it have already been absorbed into an invisible network of embedded, connected, wearable devices? What will be the form factors that define ‘mobile’ in five year’s time? How would you develop experiences for them?

For everyone in the business of creating and distributing mobile experiences, the dependency you have to the mobile ecosystems is the single largest pertinent factor in your strategic profile. How does not having a clear view not the future impact your strategic planning? What will your business model be in five years? What will your business be at all in five years?

It is an interesting lesson in strategy definition to be able to separate the WHAT from the HOW.

The HOW is a constant evolution of the environment you’re operating in. The WHAT is much more constant, and can absorb even large changes in the environment.

The WHY… it could last perhaps forever.

Why you should love your computer and your phone

My father, in his younger years, was an interstate trucker. As was common in those days, he owned his own truck, instead of leasing one or driving one that belongs to a company. His truck, the trailer, the tarps and ropes and chains, were all the tools of his trade.

During the week he was always away, somewhere on the Pacific Highway, a roughy 1000 km stretch of coastal highway between Brisbane and Sydney. On the weekends at home, he would care for his tools.

He would start by washing the week’s worth of road grime, dirt and bugs from the truck. He would carefully unroll his tens of meters of tarps and inspect them for holes and scuffs. He would untangle the chains and oil the ratchets, fill the water tanks, check the tyres…

The point is, he loved his tools. His tools were a part of who he was, and he knew he would only be as effective as his tools were.

I don’t have a truck, and I don’t work with chains or ropes or tarps. The physical tools of my trade are my computing devices and my software. But I still love my tools as my father loved his.

You mean you love your MacBook? You really love Illustrator? Keynote? Outlook?

Yeah, I do.

(Ok, so I don’t love Outlook. It’s hard to love Outlook. But you get the point…)

To be truly productive, I think you must love your tools. You spend your whole life with them in your hands. They shape your words, they communicate your ideas, they turn your dreams into reality. How could you not love that?

How horrible it must be to spend your whole day working with tools you dislike, or even tools you hate. How can that be anything but negative for your productivity? For mental health? Your well-being?

There is nothing worse than poor quality tools. But, like spanners or wrenches or cordless drills, the tools of the information profession have a variety of quality levels, and as the saying goes, you really do get what you pay for.

A professional mechanic isn’t using the 30€ set of wrenches from the supermarket.

Invest in the tools of your profession. Buy the right tool for the right job, and pay for the right level of quality.

And love your tools.

Special note for employers: your employees will only be as productive as the tools you give them. Sure, the 500€ Dell PC might seem like a bargain now. But the question is: what price do you put on the productivity of your staff?

Are you in love with making software, or making products?

Software is a solution to a problem. Or rather, it is a part of a solution to a problem.

A product is more than just the software, and it’s more than the solution. A complete product encompasses an entire product business: a consumer value proposition, a profit model, resources, processes and tools. Marketing and channels. Suppliers and customers.

If a tree falls in the forest and no-one is there to hear it, does it make a sound?

If a product is designed, built and released, but no-body can find it and no-body uses it, does it exist at all?

Building products is a responsibility. Not just to create a great experience (great software, great hardware, great whatever), but to get that experience to your customers. Maybe also to their customers.

And most of all, to generate value for your business.

If you put on the hat of Product Manager, you’d better be ready to think bigger than just your software, because a product is much, much more.

So what are you in love with?

(If you’re not in love with either, then a career in software product management is maybe not for you.) 

Validation of the freemium model for mobile apps

Here’s an interesting statistic.

The top 20 grossing apps in the iOS App Store are all free apps, according to online app analytics platform Distimo.

In fact, from the top 100 grossing apps, only 9 of them are paid apps, with prices ranging from $0.99 to $8.99, but most hovering around the $2.99 mark.

Top grossing apps on the iOS App Store, 20 November 2013
Source: Distimo.

The Google Play store is similar. There, only three apps in the top 100 grossing apps are paid, with the first paid app coming in at position 33.

Top grossing apps on the iOS App Store, 20 November 2013
Source: Distimo.

The revenue for these free apps seems to be coming predominantly from in app purchases.

It certainly seems to validate the idea of the freemium model, and proves that customers are willing to pay for in-app purchases to upgrade their experiences.

When good enough is… good enough (and the power of convenience and platform lock-in)

The Guardian published a very eye-opening piece yesterday on the usage of the Google Maps app on iOS devices. The summary is: despite the massive consumer backlash when Apple ousted Google and launched Apple Maps in iOS6, and the huge number of downloads the Google Maps iOS app attracted, usage of Google’s app has been falling steadily. It is now estimated that only 6M users used the Google Maps app in September – a loss of 23M users. Meanwhile 35M people used the built-in Apple Maps app.

The lesson here is that consumers are not always willing to sacrifice convenience for a better experience.

If your app or service wants to compete against functionality that’s built into the system, then the experience must not just be better, but must be an order of magnitude better to encourage people to switch. Or, ideally, it needs to be something completely different.

You won’t change default user behaviour and you can’t compete against baked-in functionality. Sure, a portion of power users might go to the effort of using an extra app for certain key tasks – but that won’t be the majority of users.

Think about it: why use a special app for managing your calendar when your phone’s app is good enough?

What else does this tell us?

It tells us that the OS platforms have a clear advantage on engagement for built-in experiences – and that the engagement platforms that can attract usage independently from the OS platforms are those which need to be platform agnostic to work – the best example being messaging apps. Whatsapp would have a fraction of the value if it only ran on iOS. It needs to be on all platforms fulfil the promise to the user.

This is maybe Google’s advantage over Apple. Google is about reach, and is happy to provide services that work on all mobile OS platforms. Apple, on the other hand, is set up to keep their proprietary experiences within the walled garden… which is why there is no (official) iCloud app for Android, but there is are Gmail, Google Drive, Google+ and other Google apps for iOS.

In the mobile value chain, the long(er)-term strategic differentiators will be those built on engagement platforms that cross across the mobile OS platforms. Or, said another way: the apps that will drive large numbers of users will be engagement platforms built around utility that is not, or cannot, be provided by the OS.

Google is trying this with Google+.

So why doesn’t Apple build a messaging service, for example?

Well, they have one – iMessage – but it only works between other iOS devices, and as such will never be a threat to Whatsapp, or indeed Google. A more interesting question is: how long before Apple makes iMessage available as an Android app? Would Apple take on the expense in order to drive further platform engagement and possibly convert a few more Android users?

So far they don’t need to – but as social messaging platforms become distribution channels, they may start to feel the threat.

The evolution of the design discipline

I’m not a designer by trade (which means I have never been to design school or worked as a designer professionally), but I spend a lot of time designing things – websites, apps, experiences, presentations, flyers, posters and so on. The tools and resources needed to design beautiful things are more accessible than they have ever been before.

But what does this mean for designers? I mean, for people who call themselves designers; who are designers by profession?

I don’t think the design discipline is at risk of disappearing; of being absorbed by the greater masses. It is, however, becoming increasingly democratised and accessible. The lines between amateur and professional are blurred. That doesn’t force the designer into another profession – but it does force the designer to articulate his value in ways that differentiate him from the crowd.

Try this for a parallel: take a look at journalism. Journalism was also once a ‘closed system’, now it is hugely open and accessible. Journalism once required a degree in arts, journalism or literature, and your career started in the pit of some local rag newspaper writing articles by the thousands on local fairs, traffic jams and pub brawls. Now anyone has the ability to write something that reaches a million people instantly – and you don’t even need to be able to write a grammatically correct sentence to do it.

Modern forms of democratised media are changing traditional print journalism in big and irreversible ways – a situation nobody denies but nobody has a solution for. Partly because, I think, there is no ‘solution’. This isn’t a problem to be solved – it’s evolution.

What enabled this disruption? The internet, of course. But abstract it a different way and you see it was enabled by ubiquitous access to tools; tools that facilitate both creation and distribution.

Do should journalists start worrying about their jobs? Will they be replaced by citizen journalists and bloggers and twitterers? Maybe… it’s clearly happening faster than they think. Sure, a random blogger sitting in their bedroom cannot replace the TIME journalist who goes behind the lines in Afghanistan, Syria or wherever. But when a witness to a disaster or tragedy can upload a video to YouTube in seconds (think the recent chemical weapons attack in Syria), the role of that TIME journalist changes.

There’s another example that you might not have thought of: software engineering. Back in “my day”, you needed a computer engineering degree to write software (I know, I have one). Code was complicated and inaccessible. Now, anyone can write an app or build a website in minutes. There are frameworks and programs that let you build an app with a WYSIWYG interface and publish it directly to the store. There are code camps for designers and even code camps for CEOs.

So as a software engineer, does this make your profession less valuable? Maybe, maybe not. Right now there’s enough complexity in the growing infrastructure to keep plenty of software engineers busy (someone needs to build the frameworks and WYSIWYG editors, right?). But what it certainly means is that the lines between amateur and professional are becoming blurred. And why? Tools: tools that facilitate creation and distribution.

We can debate for hours whether using a WYSIWYG application framework to publish an app makes you a ‘software engineer’ or not. But in the end, does it matter? If the goal was to publish a well-crafted, functioning app, who cares if you’re a ‘software engineer’ or not?

So too with design. Like with software and journalism, the tools for the production of design, the availability of resources and materials and means for distribution have made design an accessible discipline. The lines between amateur and professional have blurred.

If I was an automobile designer, I wouldn’t be too worried that the average joe would put my job at risk. Yet. But what about the future? Imagine a time when you can design and build your own car with special software and a 3D printer? What role does the automobile designer have then? Would there still be automobile designers?

Professions evolve. You had to be a computer scientist to operate the first computers, now there’s one in your pocket. I also hear there used to be a profession called “Typesetter”. Where are they now?

My point is not that design is at risk of becoming extinct… on the contrary. Design is growing, evolving – it’s reaching the masses.

So where does that leave designers? I’d say: learn the lesson the journalists struggled to learn: lamenting the state of things and reminiscing on the days when only a ‘designer’ could design won’t stop help you any more than it helped the Typesetters. Embrace the evolution – see it as an opportunity to influence how millions (billions?) of people design, create and enjoy the world around them.

On monetising consumer experiences

At this weekend’s Product Camp in Berlin I held an interesting session on Monetising Consumer Experiences. The discussion was good and we had great input and perspectives from everyone in the room.

Here are my notes from the session:

Why do we care?

Every product manager needs to understand their business model. Remember, an idea is not a product – and it’s certainly not a business. Irrespective of who ‘owns’ business strategy in your organisation – whether it’s you, your CEO or a distant corporate strategy department – it’s critical that you understand the complete business model your product is a part of. A customer’s journey through your product doesn’t just start at the welcome screen of your app, website or whatever.

Monetisation models

  • User pays
    • Pay once per app/device/download
      The user pays one fee for each device they install the app on. Example: Angry Birds. The three main mobile ecosystems all have payment platforms built in, but beware: they’ll all take their 30% pound of flesh on every transaction.
    • Pay once for all devices
      The user pays once, and can use the app on any device they choose. Example: Diablo 3, or generally media content like eBooks or music.
    • Subscription
      The user pays a recurring fee which generally allows the user to access the app or service on any device. This model is most often seen with services, such as Evernote – but also traditional apps like Feedly have adopted the model.
  • In-app advertising
    The mainstay of traditional app monetisation. All three major mobile ecosystems offer an ad platform as part of the SDK, allowing app developers really easy access to ad content and revenue.
  • Demo/Trial
    Make your app available to users for free with a limited feature set, for a limited time, or a combination of both. The idea is to make the value of your app available in advance to make it easier for users to know what they’re in for and to help with the purchase decision. This method is great for apps or services where the value is hard to imagine/quantify without actually experiencing it.
  • Freemium
    In contrast to the demo/trial model, the freemium model aims to give all users a fully-functional, completely free app or service. The monetisation lies in the percentage of users who are willing to pay for a premium level of service. Here Evernote is another great example. Everyone has access to the basic app and service model, all for free. Those interested in the range of ‘power features’ pay a yearly subscription fee. Another example is Spotify.
  • Commission/Referrals
    • Lead generation
      If your product can identify sales leads for another organisation, you might be able to sell those qualified sales leads to other interested parties.
    • Affiliate model
      Take a commission/fee for forwarding a consumer who makes a purchase. There are many examples of this in the travel industry, where websites or products referring consumers who purchase a flight or a hotel take a percentage share of the revenue. Another example is Amazon, where as an ‘Amazon affiliate’ you can earn a small commission when you refer an Amazon product to a customer who buys it. This is also a model being used by Pinterest to monetise, where by the Pinterest experience is used not just as a product discovery portal, but also connects consumers with retailers (online and offline) who sell the product.
  • Content/Data monetisation
    If you can generate market insights through the usage of your data, you might be able to sell that to other companies or advertisers.
  • Bundling
    Group additional similar services together to increase the overall value, such that you can reach a point where a consumer is more likely/able to pay. A great recent example: Amazon’s planned Matchbook service, which bundles traditional print copies of books with their eBook equivalent for free or for a nominal fee.
  • Donations
    Popular among indie developers, you can try appealing to your users’ sense of charity.
  • Licencing
    If your product can fill a need within another company’s product portfolio, perhaps you can provide your app or experience as a white-label offer for a licence fee.

Whatever strategy you use, each requires you to understand where the value is, and what value a user is likely to be willing to pay for.

Also remember to ‘zoom’ out and look at the broader ecosystem. Who else is benefiting from your product? Who else should, or could, pay?

Challenges

  • Everybody wants free.
  • You need traffic before you can monetise it.
  • Changing or updating existing business models can cannibalise existing business.
  • Advertising
    • Old methods of presenting online or in-app advertising are becoming less effective.
    • UX designers and even product managers generally don’t like advertising in their products (ok, this is a gross generalisation), and there is often a perception that in-experience advertising degrades the quality of the experience for the user.
    • Hyper-targeted advertising appears to be the silver bullet for marketers, but is it all it’s cracked up to be?
      • Effective targeting is hard. Real hard. Even if you’re facebook – and most of us aren’t – the best targeting is nothing more than an estimated guess. The mobile marketer’s wet dream is the case: It’s 8:30am and sunny. You’re on the way to work. We know you like coffee in the morning, and there is a cafe just one block away that your friend really likes, and they have a deal right now. Ping! Your mobile sends you a notification that solves your need not only for coffee, but a new cafe, before you even knew you were thirsty. The problem? We don’t know that you want a coffee – we can only guess. If you don’t want a coffee right then in that moment, then that notification is just more noise that you’re likely to quickly disable.
      • Do people really want to be hyper-targeted? Lots of evidence and many studies point to increasing consumer distrust of services who try to know people better than they know themselves, especially when that knowledge is used to push products and services.

Monetisation at ProductCamp Berlin 2013

UPDATE: Added Amazon Matchbook service as example of Bundling.

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