The Value Hypothesis

09.08.2020 |

Episode #2 of the course Product management toolkit by Rich Headley


Welcome to lesson two. So you’ve developed your problem and potential solutions. You should know the following:

Which customer persona has the most pain that you can take away?

What is the #1 problem causing that pain?

How can you relieve that pain?

What potential downsides / limitations are there to the way you intend to relieve the pain?

What are the competitors / substitutes for your product, how does your solution differentiate, and what value will that bring to your organization?

With answers to those five questions in mind, you’ll have the building blocks of your hypothesis!

You can structure the hypothesis in a format that follows those five data points. I’m going to give you the format and then follow with a real example. When I emphasize a word while telling you the format, keep in mind that that word is a fill-in-the-blank placeholder, so it’ll sound a bit weird without the actual substance written into it. Here’s the format:

1. I believe that [persona] experiences [pain] when [job-to-be-done].

2. They experience [pain] because [problem].

3. [Pain] can be relieved by [solution]

4. However, [persona] would have to be okay with [downside / limitation].

5. Unlike [competitor / substitute], [solution] will [differentiating advantage], allowing [company] to [current goal].

Remember the Value Proposition Canvas from the first lesson, where we talked about Tesla? This is how the Tesla hypothesis might sound based on the Value Proposition Canvas:

1. I believe that high-income men experience difficulty in choosing a vehicle when trying to strike a balance between utility, design, cool factor, autonomy, and performance.

2. They experience this difficulty because most high-end luxury and performance cars do not have electric or autonomous capabilities.

3. This purchasing decision challenge can be relieved by offering a high-performing, beautifully designed, autonomous, electric vehicle like none ever produced.

4. However, these high-income individuals would have to be okay with purchasing a vehicle with a relatively short range that needs frequent recharging, and which may experience rapid value depreciation.

5. Unlike other electric vehicles, our vehicle will be designed from the ground up based on freedom-enabling autonomous technology rather than just being an adaptation from a gas-powered vehicle, allowing Tesla to gain market share by creating a new product category fit for the 21st-century consumer.

That hypothesis, when written out, is a short and sweet paragraph that can serve as an executive summary of your product specification or pitch deck. It also happens to be just the right amount of information to be a 30-second elevator pitch for your product idea when you encounter a stakeholder at the water cooler.

Remember—I said that to be a good PM, you need to think of yourself as a pain scientist. It’s critically important to validate (or invalidate) your value hypothesis so that you don’t waste too much time building something that won’t relieve your customer’s pain and get you closer to your primary business goal!

In the next lesson, we’ll explore the Kano model to choose the right types of product features / benefits to make sure we’re satisfying customers’ basic expectations while also delighting them.


Recommended reading

When Coffee and Kale Compete by Alan Klement


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