Value Stream Discovery

Value Stream Discovery

Value Stream Discovery, introduced earlier, describes seven states a customer goes through, from becoming aware of a product to becoming passionate. I go into detail about each step below. It’s important to understand from the outset, however, that the path the entrepreneur takes is not the same one as the customer. The order in which you build the business works from the inside out.

As discussed before, the customer experiences the seven states in the order shown in Figure 24.

FIGURE 24

The entrepreneur might optimize the path in a variety of ways, but it’s generally similar to Figure 25.

FIGURE 25

You don’t want to start building the business by optimizing awareness, for example, since you don’t really have anything for them to be aware of. Again, more details below, but you must keep this simple principle in mind: your experience optimizing the Value Stream Discovery is different from your customer’s experience.

At first, the Value Stream Discovery Loop seems like a monster. But if you get through it, you will have documented the specific assumptions you need to test to get your business up and running. Who could ask for more? Even better, much of the entries in the canvases and the zoom tools will flow right into your Value Stream Discovery tool.

Be aware the actual path is neither truly linear nor are the states fixed in a particular order for all businesses. The above is generally true. Different products and different business models may present different paths. You need to do a bit of user acquisition to discover how to make customers intrigued or satisfied. The point is you do not want to launch a massive awareness demand creation program before you know you have a product they will buy or use.

I step through the states based on the entrepreneur’s experience, not the customer’s.

INTRIGUED

Customers are intrigued about a product when they have experienced the value proposition and desire the value. The message resonates with them. It “speaks” to them. The product’s promise is typically delivered in a marketing message that explains some variation of features, benefits, and achievable outcomes for a specific group of people.

A good message has two fundamental components:

  1. The utility value the product offers—in other words, the problem being solved or need being addressed
  2. An aspirational component that relates to the desired outcome from using the product—a larger goal the customer is pursuing, something the customer wishes to “be a part of”

For the Intrigued state, you need to not only formulate the message, but also determine how customers are going to experience the message, what you think customers are willing to do to express their desire, and how you will measure that.

On the Value Stream Discovery Loop, you document, for example:

Business Activity – How customers will experience the message: create landing pages with “intrigued” message

Customer Call-to-action – What you want customers to do to indicate they are in fact  intrigued: click “Sign me up!” button and include personal email address

Metric – How you will measure: number of signups per unique visit to the landing page

MUSIC APP ExAMPLE

An entrepreneur in Toronto was building a music app for the iPad.

He discussed his value proposition like this: “If your child uses the app, they will have fun and practice their music at the same time. They will continue to play and practice more.”

This is a strong utility promise. The child must practice more because of the app or the business is a non-starter. I asked why he was building the app, and the founder said, “To save parents’ money.”

I was trying to get to the entrepreneur’s “why.” Why did he feel driven to build a business around this concept? “To save parents’ money” is a pretty ludicrous answer.

When pressed, he said, “Because I’m a musician.”

When pressed more, he said, “Because I want kids to grow up to love music.”

Aha! Why do you think parents pay for music lessons to begin with? Most parents who provide their children lessons want them to grow up to love music, too. At least that’s why I did.

This is the shared journey—the aspirational component of the intrigued message.

The entrepreneur can’t promise the child will grow up to love music. But the journey the entrepreneur, the child, and the parents go on together, with the goal of the child loving music like the entrepreneur and the parents do, creates passionate customers. They are together on the journey.

For the Intrigued value stream state, the entrepreneur might set up a one-page website with this message:

“Download MusicApp and we guarantee you child will practice their music lessons!

This fun, interactive music app takes your child on a music adventure, where they learn and practice music while having fun. We know you want your child to grow up and love music and so do we! Download the app today to start the journey.”

Included is a link to download the app in the app store and a way to get updates by providing an email address.

The entrepreneur measures Intrigued by the number of downloads/week and the number of information requests.

SATISFIED

Customers are only satisfied if they receive the functional value they were promised in the Intrigued state. You only buy again or continue to use the product if you got what you were told you would get. In the Satisfied state, a business must provide some combination of product features or services that delivers the utility value promised in the Intrigued message.

Business Activity – Provide a product that does three things very well: x, y, z

Customer Response – Uses the product functions x, y, z in the manner expected over some period of time

Metric – Number of active users as defined by quantity of usage of x, y, z over expected time period

MUSIC APP ExAMPLE

The entrepreneur builds an Minimum Viable Product that includes:

  • Music theory for kids
  • Fun, age-appropriate characters and animation performing music exercises
  • Daily lessons with popular age-appropriate song snippets

The children of satisfied customers log in to the app and complete a lesson at least two times a week and spend more than five hours a week in the app performing exercises and interacting with the animations.

 

CONVINCED

You know customers are convinced when they buy. Some products are free, so perhaps they are convinced when they sign up. More likely in that scenario, they’re “convinced” and “satisfied” at the same time. In other words, they won’t become convinced until they’ve used the product and achieved the value promised.

For most businesses, the Convinced state is a sales activity. You must convince the buyer to part with some currency—usually money—in exchange for the value the product promises. You have to help customers overcome a number of objections, likely both conscious (like price) and subconscious (perhaps fear of wasting money).

Business activity – Provide a means to buy: provide e-commerce shopping cart

Customer Response – Purchase: input credit card number, click Buy

metric – Revenue; conversions per marketing campaign; other related metrics as business progresses: mo/mo growth; cost of acquisition; customer lifetime value.

MUSIC APP ExAMPLE

The entrepreneur makes the app available in the iPhone App Store as a free download. Convinced is measured not by downloads, but by subscriptions purchased.

PASSIONATE

Most entrepreneurs believe passion stems from the product. But that’s rarely the case. Passion is an emotional connection that more likely has to do with some other part of the business. The word passion might be overstating the case a bit for some businesses, but what is the behavior we’re trying to get to?

PASSIONATE DOCUMENTATION

Passionate customers refer other people to the product or company; they create new awareness without the business needing to spend money on marketing. It is word-of-mouth marketing. Customers only behave this way when a company or product goes above and beyond the utility function of the product.

Business Activity — Some endeavor to invite customers onto an aspirational journey,  creating delight or loyalty.

Customer Response — Share with others via invites, social media, providing a testimonial,  case study, or referral.

Metric —Number of customers willing to share; other related metrics as business progresses, e.g., viral coefficient.

Note that providing incentives for customers to refer others is okay, but should only be done after sharing is happening organically. The point isn’t merely that you can buy customers’ referrals, but that the nature of the product and company make customers want to refer.

MUSIC APP ExAMPLE

An entrepreneur launches a campaign to donate time and money to elementary schools serving underprivileged kids without access to music programs. The program is called #AllKidsLoveMusic. Parents are encouraged to participate and those who do get subscription discounts for inviting friends who sign up for the program.

 

HOPEFUL

Hopeful is a state customers go through after they’ve decided to buy, but before they know the product works. They hope they’ve made the right decision. The entrepreneur’s job is twofold:

  1. Ease customer fears and nurture them through the buy-to-try gap (the time lag between buying and opportunity to experience the product).
  2. Improve speed-to-value; get customers to their first instance of trying to achieve value as quickly as possible.

Did you know a bunch of digital music keyboards ship without batteries, and if you can believe it, without AC power adapters? The internet is (relatively) chock full of frustration stories from people who bought keyboards (and other products) without the means of using them once received. “Some assembly required” messages, meaning “PhD required for assembly,” buried in product literature are another example of “own-goal” scoring that is completely unnecessary.

It’s strange that I need to point this out, but you want to encourage customers to use your products as soon as possible. Many products have time gaps built in. They require assembly, shipping, installation, training, professional services, and so on. This is fine and necessary. But you want to consider what your customers are going through during this time, and you want to keep them aware, engaged, and looking forward to trying the product and getting the value they’ve paid for.

Business Activity — A means to keep customers happy until they attempt to achieve value promised; a user experience that enables getting to the point of value as soon as possible.

Customer Response — Uses product or shows commitment to pursuing first-value.

Metric — Number of times customers use specific functionality or program over some period of time or within some period of time.

MUSIC APP ExAMPLE

Some digital products require new users to jump through hoops before they get to the good part. Others get straight to the meat, but are too complex to use straight out of the gate. The music app entrepreneur included two modes in his product:

  1. Help the parent quickly evaluate out the program, manage its security features, set it up to be age-appropriate, and help get their child up and running.
  2. Provide a wow-experience the first time the child interacts with it.

 

The entrepreneur measures the time gap between parent setup and the child’s first use.

 

TRUSTING

Trust is developed as you successfully perform all the business activities discussed above, so it’s hard to imagine it’s all the way down here. But perhaps you can’t optimize trust until the steps before it are completed. Early adopters try products without trust. The early majority requires it.

Like most states, the things customers require to trust a product or company vary widely by industry, product, and market segment. Again, this is why you create a persona—so you can focus on a narrow market segment that will teach you what is required to convert that market. You leverage that information to build the right mechanisms into larger markets based on successes, not guesses.

Trusting might require endorsements from key individuals, magazines, specific websites, or data analysts. Customers might require certifications or badges indicating that third parties have vetted the product. Reviews, awards, and testimonials may be part of the equation. Infinite possibilities exist. What does your customer demand?

Business Activity — Presentation of one or more points of evidence of trustworthiness. Customer Response — What does the customer do short of buying that indicates trust? Metric — Number of customers who experience trusting activity and take specific action over the number presented with trusting activity.

 

MUSIC APP ExAMPLE

Parents want endorsements from educators, leading authorities, and media, as well as input from other parents. The music app entrepreneur seeks out music teacher authorities to endorse the legitimacy of the courses and methods used in the app.

AWARE

Second perhaps only to product (it must exist), customer awareness is the only thing needed to be successful, according to most entrepreneurs and innovators.

Entrepreneur: My product is obviously amazing; people just don’t know about it yet. Me: Uh huh.

Entrepreneur: So I’m doing a huge launch at SXSW. Me: [face palm]

Nothing kills a bad product faster than good marketing. For a vintage example:

Not long after the first edition of this book was released, back when the venture capitalists who had heard of Lean Startup openly mocked it, a startup called Color Labs opened its doors, developing (another) photo sharing app. In 2011, Color Labs launched at SXSW, made a big deal of its rock-star team, and received a lot of publicity. It got a huge number of app downloads, but the app reviews were poor. It announced a raise of $41M from tier-1 venture capitalists and received a lot of publicity. It got a huge number of app downloads, but the app reviews were poor. It did lots of interviews, but the app reviews were poor. It was out of business by 2012.

To acquire new customers, you need to hone your message and reach out to them where and when they are most receptive to it. When is that? Probably right around the time they’re experiencing the problem you’re trying to address. Yes, that’s difficult, maybe even impossible. But that’s why you experiment. You learn what the customer is up to at that time, who they share their experiences with, and where they gather with others who share similar characteristics and behaviors related to the shared need. If it’s possible to reach them proximate to any of these moments, you’ll be golden!

Business Activity — Generation of effective awareness message that speaks to the right people. It hits on the need or an aspiration. This message must be communicated in a marketing channel that reaches your intended recipient at the optimal time.

Customer Response — What does the customer do? Calls you on the phone? Pushes his shopping cart into the dairy aisle? Clicks on an ad?

 Metric — Number of customers who take action as a result of specific marketing campaign.

MUSIC APP ExAMPLE

The level and quality of awareness campaigns increases with success. Starting with a Super Bowl ad when no one knows you is a path to failure, but certainly an easy way to spend a lot of money. You are legitimately better going door-to-door and forming personal relationships with as many people you can fit into a day than spending millions on a TV ad.

The music app entrepreneur started by posting paper fliers in local music stores where he knew owners or managers. He then expanded to Facebook ads. He then reached out to music teacher organizations and internet platforms. Awareness campaigns are designed to graduate the company to the next level of raising awareness and there’s a requisite increase in costs. It only makes sense to graduate the campaign if your revenues have also graduated.

HOPPED-UP PB

Figure 26 shows the Value Stream Discovery Loop for Hopped-Up PB. Inside the loop is where Margot’s and Colin’s assumptions are documented—some with evidence, some without. Outside the loop are the items they will execute or experiment on.

FIGURE 26

FIGURE 27

FIGURE 28

FIGURE 29

FIGURE 30

FIGURE 31

FIGURE 32

DEVELOP EMPATHY

To validate or invalidate your assumptions, you must meet with those you believe will be ideal customers. To do so, you need to locate them, reach out, and invite interaction multiple times. Rather than thinking of this as a check-box item or a milestone, you should think of this as establishing a long-term relationship with your first customers.