E245 Value Proposition

Ann Miura-KoJanuary 2012

Some Announcements

• Asking for Email Introductions. Send the following:- Name of person to whom you want an intro- Why you’d like to speak to them (e.g. they lead

the IT security team at HP and we believe they might be an early adopter of our technology)

- What questions you’d like to ask (not the interview guide but topics to cover)

- Blurb about your company

Where we are…

Key Questions for Value Prop

• Problem Statement: What is the problem?

• Ecosystem: For whom is this relevant?

• Competition: What do customers do today?

• Technology / Market Insight: Why is the problem so hard to solve?

• Market Size: How big is this problem?

• Product: How do you do it?

Problem Statement

• What is the problem?

• How do you justify your existence?

The Ecosystem (“Customers”)

End User Day to day users May actually have zero influence in buying process

Preferences and decisions influence or impact buying decisions

The person who controls the purse strings or is in charge of the budget

The buck stops here

Influencer / Recommender

Economic Buyer

Decision Maker

The Ecosystem (The Rest)

• Group or organization that installs, distributes or sells the product in your place

Suppliers

Channels

Government

Partners

Entity that provides parts or services needed to manufacture your product

Organizations responsible for monitoring trading and safety standards related to your product

Other entities that provide products related to delivery of your final product

Key question to test:

Is your map of the ecosystem correct and complete?

Competition

• What are customers doing today?• Are competitors threatening to offer

better price or value?• How saturated is our market?

Market TypeExisting Resegmented New

Customers Known Possibly Known Unknown

Customer Needs Performance Better fit Transformational improvement

Competitors Many Many if wrong, few if right

None

Risk Lack of branding, sales and distribution ecosystem

Market and product re-definition

Evangelism and education cycle

Market Type determines: Rate of customer adoption

Sales and Marketing strategies Cash requirements

Existing MarketCharacteristics:• Customers are always hungry

for better performance• Incumbents exist• Usually technology driven• Positioning driven by product

and how much value customers place on its features

Risks:• Incumbents will defend their

turf• Network effects of incumbent• Continuing innovation

Resegmented Market Characteristics• Low cost provider or

unique niche• Eliminates factors on which

the industry competes• Raises certain factors well

above industry standards

Risks:• Incumbents will see this as

their turf• Continuing innovation

New MarketCharacteristics:• Customers don’t exist

todayRisks• “Life as is” is good

enough• Sizing the market• Accessing potential

customers and getting effective feedback

Key question to test:

How aware is your ecosystem of the existence of the problem?

Technology and Market Insight

Technology Insight• Moore’s Law• New scientific

discoveries• Typically applies to

hardware, clean tech and biotech

Market InsightValue chain disruptionDeregulationChanges in how

people work, live and interact and what they expect

Examples of Market Insight• People want to play more involved

games than what is currently offered• Facebook can be the distribution for

such games

Masses of people are more likely to micro-blog than blog

The non-symmetric relationships will allow companies and individuals to self-promote and will impact distribution

European car sharing sensibilities could be adopted in North America

People, particularly in urban environments, no longer wanted to own cars but wanted to have flexibility.

Examples of Technical Insight• Topological analysis enables

highly dimensional data to be analyzed without predetermining number of feature sets

Mass produced components can be used to create a miniaturized fluorescence microscope

Insight Characteristics

Non-Consensus

Consensus

Wrong Right

Biggest Potential Wins

Mindless Competition

Types of Product Value

Comes from Technical Insight Comes from Market Insight

Smaller

More Efficient

Faster Simpler

Lower cost Better

Bundling

Better Branding

Better Distribution

Key Question:

Is there a reason this idea is uniquely poised to take off today?

How do I test value proposition hypotheses?

Define Product

• Hardware• Service• Knowledge• Resources• Networks• Data

Minimum Viable Product (MVP)

• A product that solves a core problem for customers

• The minimum set of features needed to learn from earlyvangelists- Avoid building products nobody wants- Maximize the learning per dollar spent

The Art of the MVP

• A MVP is not a minimal product• “But my customers don’t know what they want!”• At what point of “I don’t get it!” will I declare defeat?

Testing the MVP

• Smoke testing with landing pages using AdWords

• In-product split-testing• Prototypes (particularly for hardware)• Removing features• Continued customer discovery and validation

The Value Proposition Pivot

Originally: Craigslist for colleges Became: Textbook rentals

Originally: Video dating site Became: Video uploading site

Originally: The Point (Collective action site) Became: Mass couponing site