Startup Secrets Sandbox

Customer Value Proposition

Synopsis

Establishing a substantive value proposition is critical if you want to start the journey from your “idea” to building a successful company.

In its simplest terms, a

value proposition⁠

is like a positioning statement that explains what benefit you provide for who and how you do it uniquely well. It describes your target buyer, the problem you solve, and why you’re distinctly better than the alternatives.

As you set out to learn how to write a value proposition, consider the following four steps: Define, Qualify, Evaluate, and Measure:

Define the Problem

The inventor Charles Kettering is famous for saying, “A problem well stated is a problem half solved.”

Can you clearly state the problem you’re solving? Don’t make the mistake of diving head-first into a solution before you really understand the problem you’re trying to tackle.

And here’s the Startup Secret

Define the problem from your customer’s vantage point, not yours.

Once you understand how the customer sees their problem you will be able to not just understand them better, but confirm their problem impacts them and their overall business.

How do you do that?

There are some obvious first steps, but pay attention to the details here:

Research potential customers who you believe have the problem you’ve identified

Keep looking for the customers who speak of the same needs. This will later help you define your

Minimum Viable Segment⁠

Get in front of them, ideally in person, to start building a trusted relationship so you can follow the next steps

One way to do this is to treat them as though they already are customers

Interview them candidly and exhaustively. This REQUIRES trust if you are to get the substance and to the root cause of the issues

Details matter so record interviews and capture ALL the detail you can.

Verify what you’ve heard by playing it back to the interviewee. Never leave unsure of what you heard, in the customer’s voice, with your full understanding of what they mean.

Leave them wanting to learn more and with the door open for you to come back and validate as you progress your solution and business

Longer term, because things always change and so the problems evolve and you need to keep in touch with how effectively your solution is progressively meeting the changing needs

Each of the above steps has corresponding things you can do to improve your chances of success in defining the problem to the point where you can also describe it to anyone else so clearly that they can touch, feel and see it in all the dimensions it exists. The clearer it is, the more likely you are to be able to recruit people to work with you to solve it. But before you do that, determine if it’s really worth solving.

And to get really good at problem definition is an ongoing skill that you’ll always need as things change in the market and for solving your own problems as you grow.

Accordingly here are two resources for you to develop your problem solving muscles.

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Are you curious what mindset it takes to be a successful founder?⁠

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Whole Problem Definition (coming soon!)

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Determine if it’s Worth Solving

A significant part of defining a value proposition involves what we call the 4Us. If you find yourself answering a definitive yes to the majority of these questions, then you’re on the right track. If not, consider re-evaluating and revising your new venture.

Is the problem Unworkable? Does your solution fix a broken business process where there are real, measurable consequences to inaction? Will someone get fired if the issue is not addressed?

Startup Secret: If the answer is yes, then that person will likely be your internal sponsor.

Is fixing the problem Unavoidable? Is it driven by a mandate with implications associated with things like governance or regulatory control? For example, is it driven by a fundamental requirement for accounting or compliance?

Startup Secret: If the answer is yes, then understand the consequences of avoiding the problem, the more dire the better!

For example if you customer avoids paying taxes or government regulation or doesn’t comply with the law, could they get shut shown? If so figure out who would be held responsible. These people will be your champions

Is the problem Urgent? Is it one of the top few priorities for a company?

In selling to enterprises, you’ll find it hard to command the attention and resources to get a deal done if you fall below this line.

Startup Secret: If the answer is yes, then verify it because if it really is a top priority it will have the attention of the c-suite and likely even the board.

Is the problem Underserved? Is there a conspicuous absence of valid solutions to the problem you’re looking to solve? Focus on the whitespace in a market or segment.

Startup Secret: If the answer is yes, then you know the market is primed for the solution.

Qualify the Problem: Is it
`BLAC and White`⁠
?

Is it BLAC (Blatant, Latent, Aspirational, Critical) and does it address a WHITE space in the market, allowing you to capitalize on an open area of opportunity?

⁠

In B2B technology markets, you want to address problems that are Blatant and Critical, as they are far more acute than those that are Latent and Aspirational. Blatant and Critical problems stand in the way of business. They put careers and reputations at risk. Latent problems are unacknowledged, which means they often require costly missionary selling. Aspirational problems are optional, which is the hardest of places for a B2B startup to sell.

It should be noted that many successful B2C products are based on exposing latent aspirational needs. Facebook is a great example. Think about

Maslow’s hierarchy of needs⁠

. You can see how social needs might have driven Facebook’s success.

⁠

For more and examples, read more about how the

BLAC and White⁠

is ironically not just a black and white answer, but something to track as the market and technology or possible solutions evolve, as well as your own ability to execute progresses. See also

YouTube: A Case Example of BLAC and White⁠

and

BLAC and White moves⁠

3. Evaluate Whether Your Breakthrough is Unique and Compelling

After you determined the problem you’re solving and validated its criticality, ask yourself: What is unique and compelling about your breakthrough?

A useful approach is to think of your breakthrough in the context of the

3D⁠

s: What unique combination of discontinuous innovation, defensible technology, and disruptive business model are you bringing to bear and what makes it truly compelling—not just to you and your colleagues, but to your most skeptical customer?

Discontinous innovation offers transformative benefits over the status quo by approaching a problem differently.

Defensible technology offers a MOAT that might be built from things like a growing network or underlying intellectual property or anything that can be protected to create a barrier to entry and unfair competitive advantage.

Disruptive business models yield value and cost rewards that help catalyze the growth of a business.

Simply having a product or service that is faster, cheaper, and better is not enough to make it compelling, but evaluate it in 3D and you can really open up the potential for a breakout.

4. Measure Potential Customer Adoption Using the
`Gain/Pain`⁠
Ratio

Most entrepreneurs are so focused on the features they deliver, they forget to examine how hard it will be for customers to do everything from find to adopt and use their product. So the Gain/Pain ratio involves measuring the gain you deliver the customer vs. the pain and cost for the customer to buy and apply the product to get that gain.

⁠

⁠

If you can’t deliver a 10x gain of adoption/pain of adoption, customers will typically give in to inertia and will “do nothing” rather than bear the risk of working with you as a startup.

The gain startups deliver will always be discounted by the risk associated with betting on you as a young company.

Startup Secret: It often just as important to make your product NON disruptive to adopt as it is to make it innovative in the three dimensions of Disruption, Discontinuity and Defensibility.

Too much novelty can actually hold you back if for example it means unlearning and retraining people to use it.

Whereas the easier you make it to try, buy, use and maintain your product or solution, the more risk you take out for the buyer and the more likely they are to try it to get the gains you offer.

A successful venture delivers an order of magnitude improvement over the status quo. But if you can’t deliver that upfront, don’t give up, work on ways to improve your product, or delivery or relationship with your customer to overcome the risk, and improve the gains and pains. True entrepreneurs always find a way. If the venture and their vision and purpose behind it matters enough to them, they never give up.

Think of Elon Musk who was on the verge of bankruptcy at SpaceX after his first 3 rockets exploded. The third was the most embarrassing as he was so sure it would be successful it was carrying a valuable payload. That too blew up. Did he give up?

Of course not, in fact he risked everything he had and then even raised friends and family money to get the 4th rocket built and launched in just 5 weeks.

The result? A successful launch that built enough credibility to earn SpaceX a 1.6 billion dollar contract from NASA.

At Underscore, we look for non-disruptive disruptions: technologies that offer game-changing benefits with minimal modifications to existing processes or environments.

My favorite example is VMWare who took server utilization from the teens of percentages in typical use to 80+% in many applications, WITHOUT requiring rewriting of applications.

That then gave rise to the now hugely disruptive cloud computing cycle that has created trillions of dollars of value, including with highly disruptive business models like SaaS.

How to
`BUILD the Value Proposition`⁠
around
`YOU: Founder-Market Fit`⁠
⁠

Once you have gone through the defining, qualifying, evaluating, and measuring steps, you are ready to write your value proposition. This next outline is not original—it’s typical of

positioning statements⁠

to be consistent and reusable as such:

For (target customers)

Who are dissatisfied with (the current alternative)

Our product is a (new product)

That provides (key problem-solving capability)

Unlike (the product alternative).

That’s how to write a value proposition, but there’s one more important piece: you!

Don’t lose sight of the fact that you are at the heart of your venture’s value proposition. What problems do you understand uniquely well? What solution can you deliver uniquely well? What kind of disruptive business model can you bring? Be true to yourself as a thought leader and you will go far.

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