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Importance of a Problem Statement in the Business Model

| by Savita Pahuja Follow 3 Followers on Apr 10, 2015. Estimated reading time: 2 minutes |

The Business Model Canvas centers around a value proposition which describes the customer needs and value delivered to the customer. Ash Maurya, Founder and CEO at Spark59, recently posted that finding out the right problem is critical for the search of a working business model, which was his primary reason for modifying the original, Business Model Canvas invented by Alex Osterwalder, Entrepreneur and Cofounder of Strategyzer, to include a problem box in The Lean Canvas.

You can’t define a compelling value proposition without first understanding your customers and their problems.

Ash says that the search for problems isn’t limited to just the early stages. As the Toyota story highlights, continuous improvement is always ongoing and it always starts with exposing the right problems worth solving.

Ash explains that once the business model is underway, management tends to rely on data to identify the right metrics to focus on improving. The problem with metrics is that while they can tell us where we are failing, they can’t always tell us why. We need to rely on other qualitative techniques, like usability tests and customer interviews, to understand the underlying root causes.

Ash says that most organizations create a new Lean Canvas per release cycle and use it to the theme, each major release around key customer problems that have surfaced repeatedly over time. This exercise helps them drive organizational focus down to the right feature set (solution), metrics, and customer segments which in turn aligns sales, marketing, design, and the development efforts.

Figuring out the problems is also a critical skill. Most of the times, problems people put down tend to be so high-level that they are obvious and not actionable. For example, sales people want to sell more, people want the cure for cancer. Ash says that while writing problems you have to get more specific than that.

Bob Moesta put it well when he said that fundamentally everyone is in search of progress (outcomes) and it helps to think of problems in terms of the obstacles that keep them from achieving this progress. This is true whether you are describing a problem-led or desire-led product.

 

Customers desire a future state where they are better off than their current reality. Once you can identify the success dimensions of this desired future state and study the obstacles keeping them from achieving that state – therein lie the problems worth solving.

Nadia Goodman, Social Media Editor at TED Conferences explains creative problem-solving strategies to test a business Idea, in her recent blog. She mentions about the design thinking as a problem-solving approach. It's a set of tools that help you make decisions in the kinds of high uncertainty situations that entrepreneurs face. It helps you explore and guides you to find the problems that need to be solved.

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