The Value Sweet Spot
This is the second in a series of articles in which we describe the design activities within the FromHereOn Business Design Method (BDM). Last time we covered Purpose Design, the process and the outputs. In this article, we will discuss Value Design.
Value Design is one of the three initial design activities (i.e., Purpose Design, Value Design and Service Model Design) that set the context for the rest of the BDM.
As we progress through the BDM it is important to understand that each of the BDM design activities (e.g., Purpose Design, Value Design, Business Model Design etc) is a complete design process in and of itself. Each of these design activities applies the FromHereOn Realisation Pattern to the design challenge at the heart of the activity.
The Realisation Pattern describes a familiar diverge/converge design process similar those documented by the UK Design Council and IDEO. Typically, the outputs from an iteration of the Realisation Pattern feed into subsequent design activities in the BDM. For example, a number of the outputs from Purpose Design as described in the previous article, are used in the Value Design activity that we will cover in this article.
WHAT IS VALUE DESIGN?
Value Design seeks to answer the question – “How might we deliver value to customers that enables them to realise the benefits they seek, in a way that delivers ongoing value to our business?”. This is a fine balancing act that all companies need to achieve – even in the not-for-profit sector. Value Design focusses on what Eric Ries calls the “value hypothesis”. The poor community sentiment experienced in both the banking and aged care sectors is a product of the perception at least of a single minded obsession with profit.
A business must be financially sustainable and must produce a product or service that customers find desirable. However, many contemporary firms also recognise that at least being seen to be ‘doing the right thing’ for the environment or people is also valuable in the sense that customers are attracted to companies that are environmentally responsible or take a stand on an issue of social inequality. However, we humans are skilled at detecting tokenism and react negatively to being taken in by an enterprise or proposition that is not genuine.
Another aspect to Value Design is that of employee experience. Again, many companies recognise that in order to deliver great customer experience (i.e., intangible value to customer) they need highly motivated employees – and while we all like a pay rise – there are dimensions to employee engagement other than remuneration.
The Value Design activity considers both tangible and intangible benefits to customer and company – in broader context of sustainability.
Value Design aims to achieve alignment between the intangible experiential benefits of both employee and customer experience. It also aims to achieve alignment between the tangible benefits to customer and profitability of business. In order to do this, Value Design centres on the concept of Brand Identity. Brand Identity can be thought of as your company’s brand personality. As such it needs to influence everything that both customers and employees are likely to experience of your business.
THE PROCESS OF VALUE DESIGN
Value Design starts by considering your Brand Identity. Like a personality it has certain characteristics or traits. These characteristics permeate everything about how your business behaves. In particular, Brand Identity and your Brand Characteristics shape your Brand Promise to your customer. Your Brand Promise is the point at which the interests of both customer and your business intersect.
A Brand Promise like any meaningful promise needs to be authentic, realistic, specific, and definite.
A Brand Promise has three parts that align to the Gain Creators, Pain Relivers and Customer Jobs sections of the Value Proposition Canvas. A useful pattern to use to construct a Brand Promise is “We will provide Services that are <insert Gain Creators here>, in a way that <insert Pain Relievers here>, so that you the customer can achieve <insert Customer Jobs here>”.
It is recommended that you test your Brand Promise with real customers, or even invite customers to participate in the process of formulating the promise to ensure that it really hits the Gain Creators and Pain Relievers that customers are looking for.
The other half of experiential value alignment is that of employee experience. Employee experience is a key determinant of customer experience. Company Values provide the context for describing and assessing intended employee experience.
The vertical components of Value Design are Value to Customer and Value to Company. These two components deal with the creation of tangible value. The Value Proposition Canvas is used to describe what customer value and customer ambition looks like. We use the Business Model Canvas together with the FromHereOn Value Driver Cards to describe Value to Company.
The Business Model Canvas is a great tool to use to simply represent the ‘building blocks’ of a business model. Value Levers are essentially ‘tactics’ that you can deploy to increase the sustainability of your business across the dimensions of profit, social and environmental impact (e.g., Rationalise your technology platforms, rationalise your vendor partners, improve critical process performance, use re-cycled materials in your product). The FromHereOn Value Lever Cards are a large set of these tactics that are categorised by the nine Business Model Canvas building blocks. The Value Lever Cards are used in a workshop setting to identify a core set of Value Levers for each Business Model Canvas building block that are consistent with the company Brand, applicable in the context of delivering value to customer, and represent opportunities to improve profitability and sustainability.
WHY IS VALUE DESIGN IMPORTANT?
Companies can do many things to achieve their goals and to return profits. However, in order to do so in a way that respects Brand means that only some of these actions are appropriate. Some company actions may return profit in the short term, but may damage Brand and eventually business viability in the long term. There must be a coherency between the tactics a company undertakes to be profitable, and what it claims to stand for via its Brand Identity. A disconnect can be very damaging (e.g., the current money laundering allegations surrounding the Commonwealth Bank of Australia). Value Design is key to identifying those actions that are good for the business, society and the planet, valued by the customer and true to brand. Value Design also ensures that we as a company are undertaking to do something that customers actually care about.
As noted in the previous article in this series – increasingly customers expect that businesses do more than simply sell goods and services and make a profit. Increasingly, making a positive environmental and social impact through the way you conduct your business is also seen as having value in the eyes of the customer.
Ultimately, Value Design is important because it sets out the broad parameters within which the business will simultaneously achieve two things, namely; deliver value to its customers while capturing value for shareholders in a way that is aligned to its purpose and brand identity.
Once we have a clear understanding of the boundaries within which we might both deliver value to customers and return value to the business we can begin to identify the Services we should deliver in this space.
We’ve mentioned a number of the tools we use in the Value Design process, we would be interested to hear about your experience with these or others that help identify value for customers, businesses or both.
The next article in this series will cover the Service Design activity in the Business Design Method where we will step through the development of a coherent portfolio of service concepts, and how to break these out in to Service Blueprints to guide implementation.