Tenet 2: Value Innovation
As digital product inventors, we must be hyperaware of all the changing digital market dynamics. We must understand how and why people use their digital devices and what defines a successful and failed UX. This is because a user’s first contact with the interface generally determines success or failure. It provides the user with their first impression of your value innovation, and it is value innovation that disrupts or creates new mental models for people. We definitely want to do that.
Before we dig into value innovation, let’s discuss the word value. The word is used everywhere. It’s found in almost all traditional and contemporary business books since the 1970s. In Management: Tasks, Responsibilities, Practices, Peter Drucker discusses how customer values shift over time. He gives an example of how a teenage girl will buy a shoe for its fashion, but when she becomes a working mother, she will probably buy a shoe for its comfort and price.  In 1984, Michael Lanning first coined the term value proposition to explain how a firm proposes to deliver a valuable customer experience. For a business to generate wealth, it needs to offer a superior product to that of its competitors but at a manufacturing cost below what customers pay for it. That same year, Michael Porter defined the term value chain as the chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product. Figure 2-4 illustrates a traditional value chain for a physical product manufacturer.
That is the business process that Toyota uses to make vehicles and that Apple uses to make computers and devices. During each of the activities in this value-chain of events, opportunities exist for a firm to outperform their competitors. But, all those terms apply to physical products. By contrast, virtual products allow for a value chain to have faster repeat loops and in some cases for the activities to happen in parallel. This is part of why traditional business strategy principles do not perfectly map to digital product strategy. When producing digital products, we must continuously research, redesign, and remarket to keep up with the rapidly evolving online marketplace, customer values, and value chains that are required to keep our products in production.
This brings us to another challenge of designing digital products: the software, apps, and other things that users find on the Internet and use everyday. As mentioned, a product needs to be valuable to customers to entice them use it. It also needs to be valuable to the business so that the business can sustain itself. However, the Internet is full of digital products for which the users don’t have to pay for the privilege of using them. If a business model is supposed to help a company achieve sustainability, how can you do that when the online marketplace is overrun with free products?
Value innovation is the key. In the book Blue Ocean Strategy, authors W. Chan Kim and Renée Mauborgne describe value innovation as “the simultaneous pursuit of differentiation and low cost, creating a leap in value for both buyers and the company.”  What this means is that value innovation occurs when companies align newness with utility and price (see Figure 2-5). Companies pursue both differentiation and cost leadership to create high-value and low-cost products for the customers andstakeholders. Consider how Waze found a sustainable business model—sharing its crowd-sourced data made it lucrative to other companies such as Google. Yet, to get the data, they had to provide a new kind of value to customers for mass adoption, and that value was based entirely on taking advantage of a disruptive innovation through the UX and business model.
Disruptive innovation is a term that was coined by Clayton M. Christensen in the mid-1990s. In his book The Innovator’s Dilemma, he analyzed the value chain of high-tech companies and drew a distinction between those just doing sustaining innovation versus disruptiveinnovation. A sustaining innovation, he described as any innovation that enables industry leaders to do something better for their existing customers.  A disruptive innovation, however, is a product that their best customer potentially can’t use and therefore has substantially lower profit margins than the business might be willing to support. However, this is where disruptive innovation can blindside established competitors. Christensen says that disruptive innovation usually is “a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves up market, eventually displacing established competitors.” 
Value innovation occurs when companies align newness with utility and price. Companies pursue both differentiation and cost leadership to create high-value and low-cost products for the customers and stakeholders.
Innovative means doing something that is new, original, and important enough to shake up a market, and this leads us right back to the book Blue Ocean Strategy. In the book, the authors discuss their studies of 150 strategic moves spanning more than a 100 years and 30 industries. They explain how the companies behind the Ford Model T, Cirque du Soleil, and the iPod won because of how they entered blue-ocean markets instead of red-ocean markets. The sea of other competitors with similar products is known as a red ocean. Red oceans are full of sharks that compete for the same customer by offering lower prices and eventually turning a product into a commodity. In contrast, a blue ocean is uncontested territory; it is free for the taking.
In the corporate world, the impulse to compete by destroying your rivals is rooted in military strategy. In war, the fight typically plays out over a specific terrain. The battle gets bloody when one side wants what the other side has—whether it be oil, land, shelf space, or eyeballs. In a blue ocean, the opportunity is not constrained by traditional boundaries. It’s about breaking a few rules that aren’t quite rules yet or even inventing your own game that creates an uncontested new marketplace and space for users to roam.
When we transpose Blue Ocean Strategy to the world of digital products, we must admit that there are bigger opportunities in unknown market spaces. A perfect example of a company that took advantage of a blue-ocean market is Airbnb. Airbnb is a community marketplace for people to list, discover, and book sublets of practically anything from a tree house in Los Angeles to a castle in France. What’s amazing about this is that its value proposition has completely disrupted the travel industry (see Figure 2-6).  It’s affecting the profit margins of hotels so much so that Airbnb was banned in New York City. Its value proposition is so addictive that as soon as customers try it, it’s hard to go back to the old way of booking a place to stay or subletting a property.
Airbnb achieves this value innovation by coupling a killer UX design with a tantalizing value proposition. And, as I mentioned earlier, true value innovation occurs when the UX and business model intersect. In this case, they intersected in a blue ocean because of how Airbnb broke and reinvented some rules.
For example, Craig’s List was a primary means for users to sublet before Airbnb, but it was a generally creepy endeavor. There were no user profiles. There was no way to verify anything about the host or guest in the transaction. Yet, that was the norm! However, Airbnb enabled a free-market, subeconomy in which quality and trust were given high value in the UX, much like in Amazon, Yelp, and eBay. Airbnb’s entire UX was built around the idea of ensuring that each guest and host was a good customer. It required its users to change their mental models. Formerly unwritten social etiquette now had to come into play if users were to host strangers or stay in a stranger’s home and for both parties to feel good about it.
For instance, I just came back from a weekend in San Francisco with my family. Instead of booking a hotel that would have cost us upward of $1,200 (two rooms for two nights at a 3.5 star hotel), we used Airbnb and spent half of that. For us, though, it wasn’t just about saving money. It was about being in a gorgeous and spacious two-bedroom home closer to the locals and their foodie restaurants. The six percent  commission fee we paid to Airbnb was negligible. Interestingly, the corporate lawyer who owned this San Francisco home was off in Paris with her family. She was also staying at an Airbnb, which could have been paid for using some of the revenue ($550-plus) from her transaction with us. Everybody won! Except, of course, the hotels that lost our business.
Airbnb’s business strategy is that they cater to both sides of their two-sided market—the people who list their homes and those who book places to stay. They offer incredible value through feature sets like easy calendaring tools, map integration for browsing, and, most crucially, a seamless transactional system that had not been previously offered by other competitors like VRBO, Homeaway, or Craig’s List. Ultimately Airbnb offered a more usable platform that minimized the risk of dealing with scary people coupled with fair market value pricing. All of this added up to serious disruption through value innovation for all customers and stakeholders in the online andoffline experience. That’s why it is winning so decisively.
There are many other products causing widespread disruption to the status quo through their combined value innovation of cost leadership and differentiation in blue-ocean marketplaces. And through their UX strategies, they are ultimately making people’s lives easier, bringing together customers in new ways and smashing mental models. Companies such as Airbnb, Kickstarter, and Eventbrite have completely upended how people rent homes, fund business ventures, and organize events, respectively. In fact, Eventbrite is how I tested my hypothesis that there were people out there with a thirst for knowledge about UX strategy. Using its interface, I quickly set up a 60-seat lecture at the price of $40 per person, and sold it out. If I didn’t have Eventbrite to experiment with as a promotional platform, there might have been no book for Jaime Levy. Thank you Eventbrite for enabling the one value innovation that other platforms like Meetup failed to offer: the ability to host paid ticketed events.
Tenet 3: Validated User Research
Not realizing a product’s value is one of the primary reasons why that product will fail. Stakeholders are dreamers in that they assume what is valuable to their customers instead of verifying it. Much like Kevin Costner in the movie Field of Dreams, these entrepreneurs believe that if they build it, they [the users] will come. But the truth is that any product is a risk. Remember our software engineer at the beginning of this book? His assumptions about what his customers wanted turned out to be wrong. His heart was in the right place. His idea was timely, different, very innovative, and even had a unique and sustainable business model. Nonetheless, the users didn’t come. And when my team eventually went out and asked his target users, we discovered that they wouldn’t pay for the product as it was being positioned.
User research is how you verify that you’re on the right track with your value proposition. There are lots of ways to do it—ethnographic field studies, contextual inquiries, focus groups, diaries and journals, card sorting, eye-tracking, personas, and more. I don’t want to talk about any of these traditional methods. Instead, I want to talk about Lean Startup.
It’s weird to admit, but before 2011 when Eric Ries’ Lean Startup  (which you must read) went critical mass, founders didn’t make it their mission to confront customers early and often. The empirical, fast-moving, and transparent nature of Lean Startup riffed on ideas from Steve Blank’s customer development methodology  and the highly theoretical Design Thinking approach. Sure, organizations had UX designers around to do user-centric design (as opposed to engineer-centric), but Lean Startup made conducting validated user research a make-or-break aspect of moving forward on a product. Lean Startup forced user research to become measurable.
This leads us to our third tenet—validated user research. Validation is the secret sauce of the Lean Startup business approach. Validation is the process of confirming that a specific customer segment finds value in your product. Without validation, you are simply assuming that customers will find use for your product. Validated user research goes beyond just observing and establishing empathy for potential users. It is a process based on a reality-check that focuses on direct feedback from interaction with users. It helps your team to determine if the vision of your product is a dream or a potential nightmare.
Eric Ries popularized the term Minimum Viable Product. It simply means learning if potential customers want your product by building just the core features of your value proposition. This is far different from traditional product development in which building a prototype was often a simulation to show potential investors the future product. By getting customer buy-in on your value proposition early, you are de-risking your product. And if users don’t like what they see, we need to either pivot to a different customer segment or pivot to a different problem that our value proposition can address.
Iterations like the Minimum Viable Product (MVP) require your team to conduct research and gain validation before developing a solution. It helps verify that your team is targeting the right customer (something our startup in Chapter 1 failed to do) and not just a general persona. When you’ve validated that a specific pain-point addresses your end user’s needs and wants, you continue to add features and then test those features using the same research methods. This is known as the Lean Startup feedback loop of build-measure-learn. Use your research to validate your decisions and ensure that the product vision is aligned with the end user’s needs.
Validated user research is a collaborative process that should involve as many members of the product team as possible. Collaboration will actually help organically build consensus on the value proposition and any pivots that follow. Now, this might sound naive, given that we are all working in different environments with a range of folks with dynamic personalities who are in various positions of power. In an enterprise environment, there are typically many stakeholders who each have a say on the product requirements based on their personal agenda or preference. When I work for agencies, the product requirements are typically locked in stone during a requirements gathering phase that I’m not involved in. For me to suggest doing validated user research or creating an MVP to test during the design phase is blasphemy because it’s counterintuitive to the agency model. The last thing an account executive wants to hear from his UX resources are ways to cut the project fee down for her client.
If you happen to find yourself in this familiar position, that’s the exact moment that you need to become intrapreneurial. Intrapreneurship is the act of behaving like an entrepreneur while working within a large organization. You need to decide to take the fate of the product into your own hands through assertive risk-taking and innovation. Stand up and ask for the extra week or two to conduct validated user research. If you get a “no” or are too afraid to ask, it’s time to start working off-hours. The worst thing that can happen is that you will discover something about yourself and/or start looking for ways to improve your own work process.
The bottom line is that confronting your target customers is nonnegotiable. We must learn as quickly as possible if the idea we are working on is stupid and worthless. We need to have an open mind to experiment and to fail. That’s right, we are betting. And the odds are against us. In the end, though, this approach is more cost-effective and efficient.
Tenet 4: Killer User Experience Design
In Lean Entrepreneur,  Patrick Vlaskovits and Brant Cooper advocate “If you are doing best practices, you are not innovating.” This is a provocative statement because established interaction design patterns help make consistent user experiences. Then again, there is no harm in breaking a rule or two through experimentation to make a killer user experience.
The user experience (UX) is how a human feels when using the interface of a digital product while attempting to accomplish a task or goal. Yes, we can say a door handle is an interface and go off the nondigital highway into the world of 100 percent physical products. But in practice, the term user experience refers to whether a person has a good or bad time trying to utilize a digital product.
Traditionally (if I dare use that word for a discipline barely two decades old), UX design is associated with deliverables for development and design execution—site maps, wireframes, process/task flows, and functional specifications. Recruiters for enterprises and agencies identify UX design with the job titles that create these deliverables, including interaction designer, information architect, and, shockingly, UX designers. These definitions are used by large enterprises and agencies and are pretty much how UX design is currently practiced. Yet, what ultimately happens in this traditional system is that the UX designer and therefore the UX design are often more focused on the issues of user engagement and design rather than customer development and business model generation.
The common problem that many product makers don’t realize is how much their UX decisions are tied to customer acquisition. Just think about any transactional Web site or even a simple sign-up process. The UX design should be very concerned with barriers to entry, which can prevent customers—even validated customers who have previously engaged with the product—from converting to customers. We’ll talk more about this in Chapter 9. Interfaces and user flows should be geared toward the desired response of the user. It’s all about engagement.
This is what distinguishes a novice UX designer from a killer UX designer. Killer UX designers know now to guide the value innovation of a product in the following ways:
- They work collaboratively with stakeholders and teammates at the idea’s inception. Then, the UX designer can be involved in designing structured experiments for validation. These experiments need to be focused on how successful the value proposition can be communicated to the customer from the moment the customer opens the landing page. Using measurable results, design decisions can be made based on real evidence rather than hunches.
- They help determine the key moments and features that are absolutely critical to your product. Chapter 6 focuses on tactics for helping you discover value innovations, concentrating on the primary utility of the product. We explore techniques such as storyboarding that will weave key experiences together in simple and elegant ways. We look at ways to poach and cherry-pick features from both competitors and noncompetitors so that we can put them together in new ways.
- They learn everything about the existing market space to identify UX opportunities that can be exploited. This allows your team to find ways to create a leap in value by offering something that makes peoples lives more efficient.
- They talk directly to potential users or existing power users of the product to discover and validate its primary utility with respect to the problem that must be solved.
- They weave the UX through all touchpoints—online and offline—enabling an experience that is frictionless. This is especially relevant in products such as Airbnb and Uber in which the transaction begins on the Internet, is fulfilled in the real world, but then loops the user back to the interface to write reviews.
You can’t merely design think your way to a killer UX design. It’s only when the UX is informed by and affects the other three tenets that mental models are broken. Disruption erupts!
Over the course of the book, I will discuss several case studies of products that have killer user experiences. These are UX designs that didn’t just happen through good luck or genius design. They’re killer through the manifestation of the tenets. It’s only with practice and mindfulness that we will come to understand the product as a sum of both its tangible and intangible parts. The examples include the following:
AirBnb—the listing service that is disrupting the travel industry (Figure 2-7).
Uber—the ridesharing application that is disrupting the taxi-service industry (Figure 2-8).
Waze—the map application that is disrupting how people get from Point A to Point B in their cars (Figure 2-9).
Tinder—the dating app that is threatening former dating-site disruptors such as OkCupid and eHarmony (Figure 2-10).
These products all got to where they are not by execution of a static business plan or a two-week UX discovery phase, but through experiments, failure, and iterations over months and sometimes years. It was the insights born out of structured strategic meanderings that blossomed into awe-inspiring product interfaces. It’s how the founders and teams behind-the-scenes took risks while assembling the building blocks of their products’ business models. They fine-tuned their value innovation, acquired fervent customers, which led to a competitive advantage such that they now swim in a blue ocean.
Top-10 Not-UX Strategies!
- A killer idea for a new product!
- A laundry list of features!
- A thoroughly researched game plan for which all possible scenarios have been considered and that is ready for implementation. No need for customer feedback because you are 100 percent certain you have nailed it!
- A creative permutation of trending buzzwords that were just used by another startup that raised financing—for instance, peer-to-peer sharing economies.
- A generic set of motivational statements such as Go Team Challenge Conquer
- An arrogant statement from some expert—“Our product sprung from the genius of Professor Iam Awesome, the visionary of Social Lean Disruption.”
- A hypothesis that has unvalidated risky assumptions—“Well, all women DO like pink.”
- A grandiose vision that doesn’t align with their core values that your company has no capability of delivering—for instance, a patent-pending, new-method-of-discovery dream.
- A vague affirmation that sounds like a good Hallmark card—“You, too, can achieve Social Lean Disruption.”
- The North Star.
UX strategy is a way of thinking. It’s not a means of formulating and executing a perfect plan; rather, it’s about being able to research what’s out there, analyze the opportunities, run structured experiments, fail, learn, and iterate until you devise something of value that people truly want. While devising a UX strategy, you will need to take risks and accept failure. You’ll learn how to fail smartly by doing small-structured experiments to validate that your strategy is moving your team in the right direction.