According to McKinsey’s article “Understanding and shaping consumer behavior in the next normal” many consumers have changed their behaviors during the COVID-19 crisis. As many as 75% of consumers in United States have tried out a new brand, stores, or ways of shopping during the last two months. McKinsey conducted a survey among 20 000 European consumers and it is evident that many of the changed behaviors are here to stay. The survey also highlighted that the digital adoption jumped from 81% to 95% during the crisis, a rise that would normally take an industry two to three years to achieve with pre-pandemic growth rates.
One area where consumer behaviors have changed dramatically is public transport. As societies are opening again, public transport operators are faced with having to offer safe travelling with the ability to keep social distances even at peak hours. How can they use data to predict the number of travelers and guide them in choosing the safest option to get to their destination in time? Solutions could for example include apps where travelers in real time can see the occupancy rates on buses or trains. But will commuters be commuting to work in the same way as before, and if not, how do operators need to adjust timetables e.t.c. to ensure efficiency? These were some of the topics we discussed with Birgit Wirth, Customer Projects Director Arriva UK Trains at Arriva Group, in one of our episodes of Hello World.
By reinforcing positive beliefs and focusing on improving key moments, we can help transform new behaviors to lasting behaviors.
However, changing behaviors is one thing. More than 20% of the respondents in the McKinsey survey, were considering switching providers for e.g. better offers. Investing in customer insights is therefore critical to understand which new products and services will be demanded and how you need to adjust your operations and marketing to thrive in the next normal. It is time to up your game.
Using agile business innovation tools to evaluate your new normal
In my blogpost “96% of all B2B companies have changed their go-to-market model since the pandemic hit” from July 9, I touched upon the importance of innovation and the urgent need to allocate resources, both in terms of time and money, to stay ahead of competition. I suggested an easy way to get started by reviewing how your business environment is changing, to identify threats and opportunities that you should be aware of.
That small workshop should render you some ideas that you wish to elaborate further. Maybe you need to address your customer’s changing behaviors and find new channels, offer new products or services or maybe you need to find a plan to continue or scale up the service operations that you’ve been forced to handle remotely during COVID-19? Continue your innovation journey by adding a few more tools to your toolbox like the Business Model and Value Proposition canvas.
Focus on customer centricity
When Alexander Osterwalder first introduced the Business Model Canvas in 2011, one of its great features was the focus on customer centricity. Although it was not a must, it was encouraged that you explained your business model by first describing your customer segments and then the value proposition that you were offering the different segments. The canvas includes seven other building blocks that a business model consists of, and offers an easy way to describe and explain business logic and patterns, highlighting the dependencies of the different parts of a business. In my experience it is not uncommon for a cross-functional management team to, for the first time, fully understand how the different parts of the business model fit together when you visualize and explain it with the help of the canvas.
Image source : Strategyzer
The canvas also offers an excellent way to describe and visualize the logic of many new types of business models that have become common with digitalization. One is the double-sided business model like Airbnb or Uber. The business model is what we today often refer to as a platform business, where the digital platform offers a marketplace for buyers and sellers to meet and do business. The business model is dependent of a great value proposition to both parties (hence the reference to a double-sided business model) and have disrupted more than one industry during the last 10 years.
Another popular business model that has demonstrated a strong profitability, is based on subscriptions as the main revenue stream. McKinsey described the immense growth within e-commerce subscription business already in 2017 in the article “Thinking inside the subscription box: New research on e-commerce consumers” and during the last years, not the least driven by Industry 4.0 and industrial IoT, companies are seeking to offer either product as a service altogether or adding a service subscription to the transactional sales of the physical product, enabled by adding IoT sensors to the product. With the sustainability trend growing, this business model also offers a circular approach, making it even more attractive from that perspective as well.
Maybe one of these business models have come up as interesting options as you analyzed your environment and ideated around possible opportunities? Using the business model canvas to visualize and sketch out, especially new types of business models that you are unfamiliar with, is a great way to gain understanding of how it will affect your company. What type of value proposition do you need, what new customer segments can you attract but also what type of new activities do you need to add, which skillsets do you need to recruit and how will you need to tweak your operations? Gathering your initial thoughts and realizing the areas you need to investigate further is a perfect way to elaborate future possible business models.
The Value Proposition Canvas
It did not take long until the focus on customer centricity and the need for truly understanding the value proposition’s ability to help the customer solve the jobs-to-be done, begged for a canvas of its own and the Value Proposition canvas was born.
Image source : Strategyzer
The value proposition canvas consists of two parts – the customer profile and the value map. The customer profile is based on the theories around Jobs-To-Be-Done (JTBD) that were popularized and described by the late Harvard professor Clayton Christensen. Customers are per se not interested in buying or hiring a product but are looking to get a job done. This job can be functional, getting from A to B, social – how I want to appear to others or emotional – how I want to feel when I get a job done. When getting a job done, the customer will experience different hurdles or pains preventing him from solving it the best way (it can be expensive, take time, be difficult, risky etc.). The reasons behind why the customer wants to get the job solved are described in gains achieved (earning money, peace of mind, a great customer experience e.t.c.). Christensen explained this with the famous Milkshake experiment.
Once you have understood the customer profile, you can start evaluating the products and services you can offer to help your customer solve the jobs, remove some of the pains and create the gains. You do this by using the other part of the Value Proposition Canvas – the Value Map. No company solves all of the customer’s JTBD but choose to excel at solving the ones where they are able to do it better than the competition. Consider the combination of products and services you offer and describe how you are relieving pains and helping your customer create the gains they want to obtain. Understanding the pain relievers and gain creators help you understand your customers drivers and make up the basis of a compelling communication of your value proposition.
Ready, steady, prototype
You have already started your ideation process by analyzing your business environment. As we continue to explore how you can use the business model canvas and value proposition canvas to prototype your ideas, I will also introduce you to additional ideation methods like prototyping with design constraints. It is time to gather your team again and continue your innovation process – next steps will be described in a coming blogpost.
If you have reflections, questions or want some help getting started, maybe with the exercise above – reach out to me at firstname.lastname@example.org or via below contact form.