Value Proposition Design

By: Alexander Osterwalder



Without a doubt, understanding the core problems that are facing your customers, and designing a solution that solves those problems, is the most important step in creating a new venture - whether it’s a new business, or a new product line.

Marc Andreessen - the famous venture capitalist - coined the term “product/market fit” to mean the following:

Product/market fit means being in a good market with a product that can satisfy that market.

It’s a rather boring definition, but if you end up getting product/market fit, the results are anything but. This is when you have a business where demand outstrips supply, and you can’t make your product or service fast enough. This is a very good problem to have.

In their book, Value Proposition Design, the authors give you a step-by-step process you can use to unlock product/market fit, and ensure you can communicate that message in a way that is understood by your customers.

There are 2 parts to this process, but today’s summary is going to be focussed on understanding your customer.

There are 3 steps to truly understanding your customer profile. Let’s explore them in turn.

Step #1: Customer Jobs

Customer jobs describe what customers are trying to get done in their work and in their lives, as expressed in their own words.

It could be a functional job, like mowing the lawn, eating healthy, writing a report or helping their clients.

It could be a social job, like when your customer wants to look good or gain power or status. You’ll find this job is popular in large corporations where there is a lot of politics and bureaucracy, or with people who want to seem trendy or forward looking.

Lastly, it could be a personal or emotional job where your customers are seeking to get into a particular state. For instance, your customer might want to have peace of mind when it comes to their retirement investments, or having a sense of job security at work.

The most important thing here is to understand what job your customer is trying to get done in their own words. Learning the exact language that your customers use to describe the job is critical in understanding how to communicate it back to them later.

How do you unlock this insight? There are a number of ways, but the two most powerful I know of are to interview your current or potential customers, and to use a few survey questions.

For instance, if you sign up for a free account at, you’ll be asked the question “what are you hoping to get out of” The answers to this question alone have been gold for us in understanding exactly what jobs our customers are trying to get done (more knowledge in less time).

Lastly, not all jobs are created equal. You’ll want to understand how important the particular jobs are for your customers, and be able to rank them from important to insignificant.

Step #2: Customer Pains

Once you understand what job your customer is trying to get done, you can move on to Customer Pains.

Simply put, customer pains describe the things that annoy your customers before, during and after trying to get a job done. Sometimes it prevents them from getting the job done at all.

You should be looking to identify 3 different types of customer pains throughout the process. Again, try and use the same language that your customer uses to describe their current pains, and make it as specific as you can.

Potential Pain #1: Undesired outcomes, problems and characteristics

You will typically uncover 4 types of undesired outcomes:

  1. Functional pains, which describe a current solution that doesn’t work well;
  2. Social pains, which describe when a customer “looks bad” by using the current solution;
  3. Emotional pains, which describe when the current solution makes the customer feel badly when using it;
  4. Ancillary pains, which will usually describe some sort of annoyance with part of the current solution.

Potential Pain #2: Obstacles

Obstacles are things that could prevent your customer from getting started with a job, or that slow them down. It might be a lack of time or money, or that the tools they have to do the job are inadequate.

Potential Pain #3: Risks

Risks are things that could go wrong and that come along with negative consequences. For example, if there is a potential for a security breach in getting a job done, that would be a risk associated with the job.

Lastly, once you have collected all of the customer pains, your next task is to rank them in order of severity - the more severe the pain, the more a customer is willing to switch to a new product or service to meet their needs.

Step #3: Customer Gains

Customer gains describe what the customers want to get out of the job they want done.

You should be looking to identify four different types of gains through this process.

Potential Gain #1: Required

There are some things that are simply required for the solution to work. For instance, when you are buying a new car, it needs to be able to get you from point A to point B.

Potential Gain #2: Expected

Expected gains are the basic features that we expect to work well, even though the solution could still exist without it. For instance, you would expect the air conditioning to work well in your brand new Tesla.

Potential Gain #3: Desired

These are the gains that go beyond what we expect from a solution, but would really like to have if we could. Your customers can typically name these if you ask them to. For instance, you would want your smartphone to work seamlessly with your in-car sound system in your new Tesla.

Potential Gain #4: Unexpected

These are the gains that not only go beyond what we expect, your customers couldn’t name them if they tried. For instance, you probably never thought of a station just off a highway that could quickly swap out your depleted Tesla battery with a fresh one so that you could take long trips with your electric car.

Finally, just as you’ve done in the previous two steps, you’ll want to qualify all of the gains your customers have expressed to you. This time you’ll use relevancy as your yardstick.

Putting your findings into action

At the end of this process, you are going to be left with 3 very important lists. A list of the “jobs” that your potential customers are trying to get done, a list of the “pains” that are currently associated with the current solution they are using, and a list of the “gains” they are seeking from their ideal solution.

It’s hard to overstate the power of these three things. Most of your competitors will not take the time to understand their customers at this most intimate level, and for that reason, you will eat their lunch.

Onwards and upwards!