Do you know the right job for your product?
From Innosight and authored by Clayton M. Christensen, Scott D. Anthony, Gerald Berstell, Denise Nitterhouse (though this conversation was about products it applies equally to service products):
The market segmentation scheme that a company chooses to adopt is a decision of vast consequence. It determines what that company decides to produce, how it will take those products to market, who it believes its competitors to be and how large it believes its market opportunities to be. Yet many managers give little thought to whether their segmentation of the market is leading their marketing efforts in the right direction. Most companies segment along lines defined by the characteristics of their products (category or price) or customers (age, gender, marital status and income level). Some business-to-business companies slice their markets by industry; others by size of business. The problem with such segmentation schemes is that they are static. Customers’ buying behaviors change far more often than their demographics, psychographics or attitudes. Demographic data cannot explain why a man takes a date to a movie on one night but orders in pizza to watch a DVD from Netflix Inc. the next.
Product and customer characteristics are poor indicators of customer behavior, because from the customer’s perspective that is not how markets are structured. Customers’ purchase decisions don’t necessarily conform to those of the “average” customer in their demographic; nor do they confine the search for solutions within a product category. Rather, customers just find themselves needing to get things done. When customers find that they need to get a job done, they “hire” products or services to do the job. This means that marketers need to understand the jobs that arise in customers’ lives for which their products might be hired. Most of the “home runs” of marketing history were hit by marketers who saw the world this way. The “strike outs” of marketing history, in contrast, generally have been the result of focusing on developing products with better features and functions or of attempting to decipher what the average customer in a demographic wants.
In a discussion, I had with Alex Osterwalder, he spent a great deal time talking about this concept and how it relates to Customer Value. Alex is the author of the Business Model Generation and featured in the related information section below.
This is a similar concept to Service Design via Service-Dominant Logic where the foundational belief is that value is derived through the use of your service product. Your service product is only an enabler of value. Utilizing this concept, can your product/service be given away for free and as a result be paid for through the use of it? Let’s say Xerox gives a printer and services the printer for free and gets paid on the use of it. Zipcar is another example – you only pay when you use it. There may be a minor membership fee but the real cost would be associated with the use.
Answer these question to yourself:
- Do you have examples where the value in use concept is used within your organization?
- Is highlighting ‘value in use” an effective marketing tactic?
- Can you segment markets through how a service product is used?
- Do you have other question that this concept raises?
Identifying Value with the Business Model Canvas
The Business Model Canvas is an analytical tool outlined in the book Business Model Generation. It is a visual template preformatted with the nine blocks of a business model, which allows you to develop and sketch out new or existing business models. This book has sold over 220,000 copies the past two years and has established itself as one of the leading sources of modeling for both startups and established businesses.
I have found it to be challenging for many companies to document and developing a consensus on Standard Work of a service product. It will meet resistance, but it is the one thing that can have a significant impact, almost immediately. I am not talking about developing call scripts, checklist, etc. I am talking about characterizing how we do things or in other words, provide clarity. At that point, best practices will surface and a few bad ones will be obvious even to the naysayers.
Many will want to jump into Lean Practices of Value Stream Mapping, Process Mapping and even Customer Journey Mapping as the first step, start improving a process. I think that is too cumbersome. I use the Business Model Canvas as my first step. The nine blocks that make up this canvas provides the organization the necessary structure needed. This video will explain how to complete and use the canvas:
Identifying Value with the Business Model Canvas
Dr. Alexander Osterwalder is a sought-after author, speaker, workshop facilitator and adviser on the topic of business model design and innovation. He has established himself as a global thought leader in this area, based on a systematic and practical methodology to achieve business model innovation. Executives and entrepreneurs all over the world apply Dr. Osterwalder’s approach to strengthen their business model and achieve a competitive advantage through business model innovation. Organizations that use his approach include 3M, Ericsson, IBM, Telenor, Capgemini, Deloitte, Logica, Public Works and Government Services Canada, and many more.
- Competitive Advantage Through Business Model Innovation
- Aligning Business Model Innovation and Information Technology
- From Business Model to Business Plan
- Private Banking Business Models – discover, understand, define
- Business Models in the Media Industry
- Business Models at the Bottom of the Pyramid
- Social Entrepreneurship Business models
- Design Thinking in Business
Alex’s Websites:
http://www.businessmodelalchemist.com
http://www.businessmodelgeneration.com/
Other Uses of the Canvas, remember making it your own has value!
Post from Alex Osterwalder discussed in the Business901 Podcast – The Customer-Value Map
Download both of these and tape to your wall!
Business Model Canvas Poster V.1.0 from Alexander Osterwalder
Customer Journey Canvas from the book, This is Service Design Thinking
Try to complete the Business Model Canvas from one of your previous service products. Pick the one you know best and see if you can complete the canvas. If you have to make a guess, use a different color post-it-note for that section. Part of creating a Lean Service Design is substantiating a few of your hypotheses. When finished, hand it off to a colleague and see if they agree. What is difficult to do is to remain in designing current state. If this particular service product has not been offered to the marketplace, pay attention not to change the current state. You may have a few gaps, but we are defining the current state at the moment.