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Expanding on Episode 166 to cover the full Value Innovation process for product managers.
The last interview, episode 166, was a panel discussion with innovators at companies using Value Innovation to discover what customers really want before building a product. The panel participants talked about a 10-step process they used. This discussion provides details for each step as well as where additional resources are found.
To learn the 10 steps, I invited Dick Lee, the founder of Value Innovations and a long-time practitioner of the Value Innovation method, to talk with us.
The 10 steps in Value Innovation are:
- Define project mission and objectives,
- Define value chain and identify the most important customer (MIC),
- Develop “as is” and “best in class” value curves
- Conduct contextual interviews to uncover unmet needs
- Develop “to be” value curve,
- Review “to be ” value curve with the MIC,
- Modify “to be” value curve,
- Define value proposition,
- Determine how to deliver the “what,” and
- Confirm with MIC that the “how” is compelling
Summary of some concepts discussed for product managers
[2:47] Step 1: Define Project Mission and Objectives
We assumed that teams would know what their project’s mission was, but found more and more that it wasn’t the case. This part of the process involves asking some very basic questions like what’s in scope, what’s out of scope, what’s the purpose of the project, and who is the project’s team leader. One example of this is a company called American Vanguard. They make pesticide products that were harming fish, but couldn’t develop a new formula because it would take too long to go through regulatory approvals. In this case, what’s in scope was creating a new delivery method rather than a completely new product.
[6:35] Step 2: Identify Most Important Customer (MIC)
In the B2B world, most people assume that the MICs are their direct customers, or the person that they sell their product to. We developed the Value Chain to help identify the MIC. It breaks down all of the transactions between you and the ultimate end user of your product. We ask three questions at each step of the way: Who is responsible for fixing a problem? Who loses the most money if there’s an issue? Who sees the value in your product? Many times we’ll find degrees of all three in each step of the process.
[11:07] Step 3: Develop “As Is” and “Best in Class” Value Curve
This is one that some companies are inclined to skip. A value curve breaks down a product or service into elements of performance, such as ease of use. Each element has its own attributes that are broken down even further. The value curve also helps prioritize which elements are worked on based on what’s most important to the MIC. You can only work on three or four within a reasonable time frame. You try to put yourself in the MIC’s shoes to develop the curve. This allows interviewers in the next step to connect what the interviewee is saying with the attributes in the value curve.
[13:32] Step 4: Conduct Contextual Interviews to Discover Unmet Needs
Contextual interviews take place in steps 4, 6, 7, and 10. Interviews take place with pairs of MICs so that you get varied perspectives. Step 4 specifically involves interviews with 6 pairs of people. The most important question in the first interview is “What keeps you awake at night?” We only ask open-ended questions and have no idea where they’ll go. Another example is “What do you expect the biggest challenges to be in your field over the next five years?” It’s important to have the right interviewer to draw information out of people and get them to think in an open-ended way. We did this with Chevron and interviewed 25 people, but learned that we didn’t learn anything after the first 5 or 6 interviews conducted in pairs.
[20:20] Step 5: Develop “To Be” Value Curve
The questions from step 4 help determine what a company needs to do to deliver value to the most important customer. Developing that curve involves considering what elements of performance should be increased, decreased, or eliminated. At this point in the process, we are only talking about what we need to do, not how we need to do it.
[23:16] Step 6: Review “To Be” Value Curve with the MIC
This involves going back to the same 6 pairs of interviewees to see whether they agree with each element of the curve and the order of importance for those elements. If the order isn’t correct, we ask them what they would move up or down and why. You can also verify whether the metrics you’re using to describe each attribute are correct. We also ask what is the value being delivered today on a 1-9 scale, and what they want the value to be in 12 months using that same scale. We want the MIC to think about where we can realistically improve value to them, recognizing that we can’t fix everything all at once.
[27:18] Step 7: Modify “To Be” Value Curve
The value curve is modified as needed based on feedback from the contextual interviews conducted in step 6. At the end, you should know exactly what you need to do to deliver exceptional value to the customers who are most important to you.
[27:43] Step 8: Define Value Proposition
This is the combination of the “As Is” and “To Be” Value Curves, taking into account priorities and constraints on time and budget. The end result will be a solution that delivers value that the MICs want to see and will make a difference to them.
[31:24] Step 9: Determine How to Deliver the “What”
This is the design phase. Up until this point, no one from engineering design has been involved in the process. Going through steps 1-8 provides them with a clear framework on which to base their work in turning the ideas generated by the MICs into actual products or product elements.
[32:32] Step 10: Confirm with MIC that “How” Is Compelling
This is the final set of interviews with the 6 pairs from steps 4, 6, and 7. Here, you are asking them to review and critique your design. Some companies are hesitant to do this because they are worried about information getting out to competitors. We recommend getting around this by having interviewees sign NDAs. We try to go through all 10 steps in 12 weeks, which keeps those MICs engaged and energized about their contributions. This can lead to MICs becoming part of an advisory board throughout the rest of the project. They understand how the solution was developed and are invested in seeing it succeed.
- Free course, Introducing the Value Innovation Process
- Value Innovation Works book
- Value Innovations, Dick Lee’s company
- Connect with Dick Lee via LinkedIn
“Fall down seven times, get up eight.” – Japanese proverb
Thank you for being an Everyday Innovator and learning with me from the successes and failures of product innovators, managers, and developers. If you enjoyed the discussion, help out a fellow product manager by sharing it on social media.