E245 Value Proposition Ann Miura-Ko January 2012 Give me your elevator pitch – take 2-3 teams (do they describe value proposition or product?) – for whom? Is their view of the ecosystem wide enough?

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? Try it out with a few teams – toy team – what is the problem? What if you were to explain this to your users? What about your customers? What about a education blogger? Decision maker and economic buyer are the same Parkpoint Capital – government, payment processors, who else? Oral light – suppliers, channels (schein), contract manufacturer, etc. Use board to map out these different parts of the ecosystem – we will deep dive in the next 2 slides. WHO IS THE AUDIENCE? Is it an investor? Is it a customer? Is it a user?

The Ecosystem (“Customers”) Day to day users May actually have zero influence in buying process End User Influencer / Recommender Preferences and decisions influence or impact buying decisions Economic Buyer The person who controls the purse strings or is in charge of the budget Decision Maker The buck stops here

The Ecosystem (The Rest) Suppliers Entity that provides parts or services needed to manufacture your product Channels Group or organization that installs, distributes or sells the product in your place Government Organizations responsible for monitoring trading and safety standards related to your product Partners 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? What alternative does the customer have right now? How aware are they of the problem? Important context for value proposition – how new is this idea? – Market type

Market Type Existing 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 Market Characteristics: 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 Market Characteristics: Customers don’t exist today Risks “Life as is” is good enough Sizing the market Accessing potential customers and getting effective feedback Based on this, what types of markets are you attacking?

Key question to test: How aware is your ecosystem of the existence of the problem? But sometimes, awareness isn’t as important as how compelling your market or technical insight might be. This is how entrepreneurs often times create the illusion of “changing reality”.

Technology and Market Insight Technology Insight Moore’s Law New scientific discoveries Typically applies to hardware, clean tech and biotech Market Insight Value chain disruption Deregulation Changes in how people work, live and interact and what they expect Market insight is becoming more and more a requirement

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 Generally impacts some part of your business model diagram (usually NOT the product component) 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 Generally a product / value proposition question

Insight Characteristics Wrong Right Biggest Potential Wins Non-Consensus Mindless Competition What insight to I have that is not yet conventional wisdom? Insight is important because it helps us to identify the type of value that the product will deliver… What type of value do you think Market Insight brings? What about Technical Insight? Consensus

Types of Product Value Comes from Technical Insight Comes from Market Insight More Efficient Lower cost Better Distribution Better Bundling Smaller Simpler Others: Brand/Status, easier to access (distribution); fun; bundling (phone + camera) faster, simpler, smaller, lower cost, more efficient Faster Better Branding

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

How do I test value proposition hypotheses? First – how would you define product? (go through different teams)

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