Market Requirements Document (MRD)
A Market Requirements Document (MRD) is a document that expresses the customer’s wants and needs for the product or service. For a product yet to be made, it explains the anticipated needs for product or service.
This is the highest level of definition of the envisioned product and everything else flows from it.
The audience of this documents are many:
1. Project Sponsors
3. Product Designers
4. Product Architects
5. Product Owner
6. Quality & Test engineers
7. Almost every other stakeholder
Key components of the documents are:
1. Value Proposition
2. Business Model
The document uses Osterwalder’s tools for value proposition and business model. At high level the canvases for Value proposition and business model are worked out and the document describes each element of these two canvases to a greater degree.
The document aims to give answers to following questions:
1. What (new) product is being discussed
2. Who the target customers are
3. What products are in competition with the proposed one
4. Why customers are likely to want this product.
A strong Value Proposition is the foundation of great product.
Osterwalder introduced this concept at depth in his book Value Proposition Design. The Value Proposition Canvas helps teams deepen their understanding of target customers. Solutions to the desired gains, existing pains, and Jobs-To-Be-Done of customers are also designed and tested.
Value proposition is defined in two parts:
1.3 Customer Jobs
2.1 Gain creators
2.2 Pain relievers
2.3 Product and services
Value Proposition Canvas Explained
Business leaders all over the world now rely on the Business Model Canvas and adaptations like the Lean Canvas. In a simple format, they describe how a company delivers its value proposition/s to its target customers.
Though it’s used by business stakeholders, the Business Model Canvas can and should form part of the design process. It’s a useful tool to help highlight the business value of the design function. It can also help you define the economics of design.
Business Model Canvas Explained
Detailed Explanation of Business Model Canvas
Key Activities: The most important activities in executing a company’s value proposition. An example for Bic, the pen manufacturer, would be creating an efficient supply chain to drive down costs.
Key Resources: The resources that are necessary to create value for the customer. They are considered an asset to a company, which are needed in order to sustain and support the business. These resources could be human, financial, physical and intellectual.
Partner Network: In order to optimize operations and reduce risks of a business model, organization usually cultivate buyer-supplier relationships so they can focus on their core activity. Complementary business alliances also can be considered through joint ventures, strategic alliances between competitors or non-competitors.
Value Propositions: The collection of products and services a business offers to meet the needs of its customers. A company’s value proposition is what distinguishes itself from its competitors. The value proposition provides value through various elements such as newness, performance, customization, “getting the job done”, design, brand/status, price, cost reduction, risk reduction, accessibility, and convenience/usability.
The value propositions may be:
Quantitative – price and efficiency
Qualitative – overall customer experience and outcome
To build an effective business model, a company must identify which customers it tries to serve. Various sets of customers can be segmented based on the different needs and attributes to ensure appropriate implementation of corporate strategy meets the characteristics of selected group of clients. The different types of customer segments include:
Mass Market: There is no specific segmentation for a company that follows the Mass Market element as the organization displays a wide view of potential clients. e.g. Car
Niche Market: Customer segmentation based on specialized needs and characteristics of its clients. e.g. Rolex
Segmented: A company applies additional segmentation within existing customer segment. In the segmented situation, the business may further distinguish its clients based on gender, age, and/or income.
Diversify: A business serves multiple customer segments with different needs and characteristics.
Multi-Sided Platform / Market: For a smooth day-to-day business operation, some companies will serve mutually dependent customer segment. A credit card company will provide services to credit card holders while simultaneously assisting merchants who accept those credit cards.
A company can deliver its value proposition to its targeted customers through different channels. Effective channels will distribute a company’s value proposition in ways that are fast, efficient and cost effective. An organization can reach its clients either through its own channels (store front), partner channels (major distributors), or a combination of both.
To ensure the survival and success of any businesses, companies must identify the type of relationship they want to create with their customer segments. Various forms of customer relationships include:
Personal Assistance: Assistance in a form of employee-customer interaction. Such assistance is performed either during sales, after sales, and/or both.
Dedicated Personal Assistance: The most intimate and hands on personal assistance where a sales representative is assigned to handle all the needs and questions of a special set of clients.
Self Service: The type of relationship that translates from the indirect interaction between the company and the clients. Here, an organization provides the tools needed for the customers to serve themselves easily and effectively.
Automated Services: A system similar to self-service but more personalized as it has the ability to identify individual customers and his/her preferences. An example of this would be Amazon.com making book suggestion based on the characteristics of the previous book purchased.
Communities: Creating a community allows for a direct interaction among different clients and the company. The community platform produces a scenario where knowledge can be shared and problems are solved between different clients.
Co-creation: A personal relationship is created through the customer’s direct input in the final outcome of the company’s products/services.
This describes the most important monetary consequences while operating under different business models. A company’s DOC.
Classes of Business Structures:
Cost-Driven – This business model focuses on minimizing all costs and having no frills. e.g. Low cost airlines
Value-Driven – Less concerned with cost, this business model focuses on creating value for their products and services. e.g. Louis Vuitton, Rolex
Characteristics of Cost Structures:
Fixed Costs – Costs are unchanged across different applications. e.g. salary, rent
Variable Costs – These costs vary depending on the amount of production of goods or services. e.g. music festivals
Economies of Scale – Costs go down as the amount of good are ordered or produced.
Economies of Scope – Costs go down due to incorporating other businesses which have a direct relation to the original product.
The way a company makes income from each customer segment. Several ways to generate a revenue stream:
Asset Sale – (the most common type) Selling ownership rights to a physical good. e.g. retail corporations
Usage Fee – Money generated from the use of a particular service e.g. UPS
Subscription Fees – Revenue generated by selling a continuous service. e.g. Netflix
Lending/Leasing/Renting – Giving exclusive right to an asset for a particular period of time. e.g. Leasing a Car
Licensing – Revenue generated from charging for the use of a protected intellectual property.
Brokerage Fees – Revenue generated from an intermediate service between 2 parties. e.g. Broker selling a house for commission
Advertising – Revenue generated from charging fees for product advertising.
Resources the main inputs that your company uses to create its value proposition, service its customer segment and deliver the product to the customer.
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