Startups – How to define the value proposition

Learn how to define, evaluate and build your value proposition to ensure your venture can break out and build a compelling and sustainable business. Learn about "pain gain ratios" and other ways to assess whether you are creating, delivering, and harnessing value in your venture.

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My notes:

Is your idea really worth building a business around?

Case studies mentioned in this presentation:

      • Apperian The mobile app security and management solution that works with or without device management. No SDK or device enrollment required.
      • Akiban Extremely fast queries service replacing the need to continually invest in architecture development
      • Disqus Consumer need for interacting / 75% of articles on the web / 900 million monthly users
      • DFA Diagnostics for all
      • uTest Testing for companies with web or mobile apps


The Value Proposition

      • For what target customers
      • Who are dissatisfied with (the current alternative)
      • Our product is a (new differentiated product)
      • That provides (key problem-solving capability)
      • Unlike the product alternative


Where might you start?

Ideas are "free floating" and not automatically oriented towards solving some fundamental problem. Park your idea until you can define what the problem space is where this idea really applies.

Start with the development of the problem (4Us).

Problem is ...

      • Unworkable

Eg. broken business process/lost customers, revenues. Identify someone who will get fired if this business problem doesn't get fixed)

      • Unavoidable

Eg. death, taxes/accounting, aging, compliance)

      • Urgent

The more urgent the need the earlier the revenue comes, this is crucial for startups. It is important that the urgency is relative to other needs that are already a priority for the business. 

      • Underserved

There is rarely budget approved for a solution that does not yet exist. This means that in order to succeed you will need to convince the business to take the budget from somewhere else. This is usually possible when the problem is underserved. You will compete in a "zero-sum" game and will need to compete for money, time, people and even attention.


Needs (Myer Briggs)

      • Social - Examples - find, connect, communicate, meet, share, entertain, date
      • Security
      • Physical
      • Economic
      • Recognition
      • Responsibility
      • Achievement
      • Growth


Qualify the problem (consumer needs)

      • Blatant
      • Latent (iPad example, didn't/wouldn't miss it until I started using it)
      • Aspirational (Something that makes us feel better, fashion, beauty care etc.)
      • Critical 

Look for blatant critical needs that are underserved (white space investors and consumers pay attention to).

Also; Is it addressing an area of opportunity which you can capture and defend?

At this point we have defined the problem, it's time to define the solution.


Discontinuous innovation - A radically different way of doing things, not something that has evolved over time but something that breaks the mould (uTest example, disrupted business model from pay per hour to monthly fee).


Defensive technology - N.B. Faster, better, cheaper is NOT a good way forward as a solution. What we are looking for is a complete breakthrough using the 3Ds. The faster, better, cheaper model is too easily repeatable by competitors. Game changing solutions offer higher defence.


Disruptive business model - Google disrupted Microsoft's business model by giving away software for free, focussing on acquiring users and searches.

Pick a big fight (big problem, big market place)

After defining my value proposition am I ready for funding? No. First evaluate.


Qualitative Evaluation

Describe the before and the after state of your value proposition (benefit).

Acute pain (before) - Absolute joy (after)

Nice to have/ Must have

Vitamin / Penicillin (Winner)

Wild testing - Asking users, and not accepting the first three answers because they will just be polite to you.


Willingness to pay for it

Gain / Pain ratio

The gain delivered to the customer vs the pain and cost for the customer to adopt

Gain: Revenue, cost savings, time, people, competitive advantage, reputation

Pain: How easy is it to find, see, try, buy, implement, deploy, own



Switching costs? Do nothing? Is there a "good enough" solution competing?

Then gain must be significantly better (10-1) than the pain.

How do you qualify the gain/pain ratio?

Users use your product, you use your own product, google chrome team example


Startup Secret

Disruptive innovation yet NON disruptive adoption (Billions invested in SQL means standard cannot be swayed)

Example: Akiban "plugged in" to an existing system.


The Value Proposition

      • For what target customers
      • Who are dissatisfied with (the current alternative)
      • Our product is a (new differentiated product)
      • That provides (key problem-solving capability)
      • Unlike the product alternative


Build around you

    • What problems do you understand uniquely well?
    • What solution can you deliver uniquely well?
    • What kind of disruptive business model can you bring?



Do you need help with your Digital Strategy?

If you just need advice or guidance about how to get started you can request a 60 or 120 minute consultation by appointment. If you have a team or intend to start building your project you can Hire me for a day. I can either consult, support, train, coach or manage. My job will be to empower your team and help them become expert Digital Professionals. If you are ready to launch (I mean really ready, you will need to have finance) then I would love to have the opportunity to discuss how I could join your team. Review my CV here.