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Startup Secrets - Building a Compelling Value Proposition
1. Proprietary and Confidential
START UP
SECRETS
An insider’s guide to unfair competitive advantage
Building a Compelling Value Proposition
@underscorevc
startupsecrets.com
3. Proprietary and Confidential
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)
Value Prop
3startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
4. Proprietary and Confidential
For Mobile Enterprises
Who are unable to deliver Apps to users bringing their own devices to
work
Our Enterprise App Services Environment (EASE)
Provides for users to securely access Apps and Information
Unlike (MDM), our patented Cloud based (MAM) solution is instantly
turned on and scales to tens of thousands of users
Example – Apperian (simplified)
4startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
5. Proprietary and Confidential
Where might you start?
Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution
5startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
7. Proprietary and Confidential
Evaluate Build
Gain Pain
Value
Prop
Define, Qualify
Agenda - Problem
Ideas
Problem
Solution
7startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
8. Proprietary and Confidential
Unworkable
Unavoidable
Urgent
Underserved
Problems worth solving
are usually 4U …
Problem
8startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
9. Proprietary and Confidential
Broken business process
Consequences ?
If the consequences are costly or painful,
so much the better.
E.g. who gets fired if this doesn’t work?
Unworkable
9startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
10. Proprietary and Confidential
Accounting
Regulation
Is the problem so fundamental
you can’t avoid it and just have to comply?
Unavoidable
10startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
11. Proprietary and Confidential
Relative to other needs …
Priority
• Determines resources allocated
If you’re not at the top of the list,
are you at least in the top 3?
If not will you get moved up or down over time
and why?
Urgent
11startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
12. Proprietary and Confidential
You will compete in a zero-sum game
Finite:
• $
• Time
• People
• Attention
Underserved – business…
12startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
13. Proprietary and Confidential
Examples…
• Social
– Find
– Connect
– Communicate
– Meet
– Share
– Entertain
– Date
Needs…
• Social
• Security
• Physical
• Economic
• Recognition
• Responsibility
• Achievement
• Growth
Underserved – consumers…
13startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
14. Proprietary and Confidential
Is it “blac” & white?
Blatant
Latent
Aspirational
Critical
Blatant
Latent
Aspirational Critical
Blatant
Critical
Qualify the problem
14startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
15. Proprietary and Confidential
Is it addressing a “white space” in the market?
• an open area of opportunity
• which you can capture
• Uniquely well
• AND defend with a moat
NOT just technology, business model too
Startup Secret: create a moat
15
Sunset of the Forbidden City, Beijing |Source=original creation by Wikipedian
|Date=June 09 2006 |Author=User:kallgan |Permission=GFDL |other_version
moat
startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
16. Proprietary and Confidential
Is it 4 U?
• Unworkable
• Unavoidable
• Urgent
• Underserved
Is it blac and white?
Problem - Summary
16startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
18. Proprietary and Confidential
4 U
Blatant
Critical
Ideas – fit to problem...
18Building a Compelling Value Proposition @underscorevc
19. Proprietary and Confidential
Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution
Agenda - Solution
19startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
21. Proprietary and Confidential
• Faster
• Cheaper
• Better
Startup
Opportunity?
21startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
22. Proprietary and Confidential
What is your compelling
breakthrough?
3 D
Break something!
22startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
23. Proprietary and Confidential
Discontinuous innovation
Defensible technology +
Disruptive business model
A breakthrough that
COMPELS people to
ACT !
23
Breakthrough opportunities
3 D
startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
24. Proprietary and Confidential
It’s often as much work going after a small fight…
Big problems often = big opportunities
Startup Secret: Pick a BIG fight!
24startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
25. Proprietary and Confidential
It’s often as much work going after a small fight…
Big problems often = big opportunities
Start small (Execution), think BIG (Vision), develop a ROADMAP
• See Roadmap to Success on startupsecrets.com
• EG Uber
An app…. with the potential to disrupt an industry
At Underscore.VC we look for bold, brave entrepreneurs with big vision
Startup Secret: Develop A Roadmap
25startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
26. Proprietary and Confidential
Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution
Agenda - Evaluate
26startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
27. Proprietary and Confidential
Before After
Acute Pain
Absolute Joy
Qualitative evaluation
27startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
28. Proprietary and Confidential
Before After
Acute Pain
Absolute Joy
Vitamin vs. Morphine
Qualitative evaluation
28startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
30. Proprietary and Confidential
For companies with web or mobile apps
Who are dissatisfied with apps that work as expected in the
QA lab, but not in the hands of end users
Our in-the-wild testing
Enables them to test their apps under real-world conditions
Unlike outsourced testing, which merely moves the QA lab to
a cheaper part of the world, but doesn’t actually improve app
quality
uTestBefore & AfteruTest
32startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
31. Proprietary and Confidential
Before: Test In The Lab & Hope
Testing inside the lab is vital. But today’s web & mobile apps require a new approach to
augment lab testing: in-the-wild testing
After: Test Where Your Users Are
Before & AfterBefore & After
33startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
32. Proprietary and Confidential
Introducing the gain/pain ratio
Quantitative Evaluation
Gain Pain
34startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
33. Proprietary and Confidential
The gain delivered to the customer
vs.
The pain and cost for the customer to adopt
“Gain/Pain ratio"
Gain Pain
35startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
34. Proprietary and Confidential
• Revenue
• Cost savings
• Time
• People
• Competitive advantage
• Reputation
• Etc..
Gain
Gain Pain
36startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
35. Proprietary and Confidential
• Find (See)
• Try
• Buy
• Implement
• Deploy
• Own – eg TCO
Pain
Gain Pain
37startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
36. Proprietary and Confidential
Gain from uTest:
• Scale infinitely and immediately
From 3 testers, to 30, to 300, and back to 0
• Lower total cost of testing
EG: SMBs - unlimited testing for ½ the cost of one FTE
• Test under real-world conditions
Live testers, real devices, imperfect conditions… in-the-wild
Pain from uTest:
• More testing reports, creating more work
Takes time to re-produce, vet and rate 50+ bugs
• More collaboration, creating more oversight
Coordination between in-house & crowd testers
Goal:
• Maximize in-the-wild testing, while minimizing overhead
38
uTest: Gain vs Pain
38startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
37. Proprietary and Confidential
• Switching costs?
• Default = do nothing
• Alternatives?
• Good enough =
good enough!
• RISK on a startup
Inertia,
RISK
Inertia
Gain Pain
39startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
38. Proprietary and Confidential
What’s the right ratio?
Inertia,
RISKGain Pain
40startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
39. Proprietary and Confidential
> 10 to overcome
• Inertia
• RISK
“Gain/Pain ratio”
Inertia,
RISK
Gain
Pain
>10
41startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
41. Proprietary and Confidential
Gain/Pain Ratio
Average of 30:1 benefit
• $34m vs $1.2m
• Recovery used to take 8 1/2 hours v 2
minutes
Inertia,
RISK
Gain
Pain
>10
startupsecrets.comBuilding a Compelling Value Proposition @underscorevc 43
42. Proprietary and Confidential
Customer view = Gain/Pain
• Revenue
• Cost savings
• Time
• People
• Competitive advantage
• Reputation
• Etc.
• Inertia
• Switching costs?
• Default = do nothing
• Alternatives?
• Good enough =
good enough!
• RISK on a startup
• Find (See)
• Try
• Buy
• Implement
• Deploy
• Own – e.g.TCO
Inertia,
RISKGain
Pain
45startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
43. Proprietary and Confidential
“An order of
magnitude”
Customer view = Gain/Pain
• Revenue
• Cost savings
• Time
• People
• Competitive advantage
• Reputation
• Etc.
• Inertia
• Switching costs?
• Default = do nothing
• Alternatives?
• Good enough =
good enough!
• RISK on a startup
• Find (See)
• Try
• Buy
• Implement
• Deploy
• Own – e.g.TCO
Inertia,
RISK
Gain
Pain
>10
46startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
45. Proprietary and Confidential 48
• Tough to quantify precisely, but here’s what we’ve learned
Gain vs. Pain Ratio
Gain Pain
Cost Savings: 10X
Lower Escape Rate by 75%
Make Testing Mirror User
Base
Launch Confidence
Higher Quality Apps
vs.
Increased Overhead
5:1
on cost basis
20:1
on cost + value basis
Customer Gain vs Pain Ratio
48startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
46. Proprietary and Confidential 49
• Test latest version of Google Chrome across 300 highest trafficked URLs
on the web
Traditional Outsourcing vs. uTest
Testers 8 Testers 30
Hours / Tester 40 Hours / Tester 10
# of Days 5 # of Days 2
# of URLs Tested 300 # of URLs Tested 300
# of Discovered Issues 19 # of Discovered Issues 129
Price $15,000 Price $10,000
Price-per-Issue $789 Price-per-Issue $78
Sample Customer ROIGain vs. Pain Ratio
Sample Customer ROI
49startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
48. Proprietary and Confidential
Increase revenue by 40% at counters
Roll out 17,000 iPads
Deliver worldwide no IT touch required
Saved $2.5M+ in direct IT costs
Example - Apperian
51startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
49. Proprietary and Confidential
Disruptive innovation
Yet..
NON disruptive adoption
Startup Secret…
52startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
50. Proprietary and Confidential
Agenda - Build
Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution
53startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
51. Proprietary and Confidential
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)
Value Prop
54startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
52. Proprietary and Confidential
What problems do you understand uniquely well?
What solution can you deliver uniquely well?
What kind of disruptive business model can you bring?
Build around – YOU…
55startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
53. Proprietary and Confidential
1. Define,
• 4U Need (Unworkable, Unavoidable, Urgent, Underserved)
• 3D Solution (Discontinuous, Defensible, Disruptive)
2. Evaluate
• Gain/Pain >10
3. Build
• Around YOU!
Summary
56startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
54. Proprietary and Confidential
START UP
SECRETS
An insider’s guide to unfair competitive advantage
Building a Compelling Value Proposition
@underscorevc startupsecrets
.com
56. Proprietary and Confidential
1 2 3
HOW DISQUS WORKS
Easy install for all platforms
Sites are part of the Disqus network
Sites integrate Disqus Users engage with Disqus
Users discover new content &
sites across Disqus
Sites see tangible benefits, including
increased traffic on their pages
Audience development made easy.
Millions of users use Disqus to participate online and we make
that valuable for publishers in a way that they can measure.
61startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
57. Proprietary and Confidential
THE
DISQUS
ECOSYSTEM
A COMMUNITY
ECOSYSTEM is the
foundation of our business.
USERS
GOALS
Discovery
Community
ADVERTISERS
GOALS
Acquisition
Retention
PUBLISHERS
GOALS
Engagement
Growth
Revenue
62@mjskok startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
58. Proprietary and Confidential
DISQUS – Value prop for publishers
FOR
· Publishers, like online media or bloggers
WHO CARE ABOUT
· Building more engaged, loyal audiences directly on their sites
OUR PRODUCT IS
· The most widely used discussion platform online
THAT PROVIDES
· An “engagement management platform” for publishers, and
· direct reach into millions of engaged community participants online
UNLIKE
· Social networks, which don’t properly serve the needs of publishers
· Or white-label software, which doesn’t provide the wide network reach of users
63@mjskok startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
59. Proprietary and Confidential
For those in the developing world
Who are dissatisfied with limited access to diagnosis
Our product is a patterned paper-based diagnostic technology
That provides low-cost, easy-to-use, point-of-care diagnostics
Unlike no diagnosis
Diagnostics For All - Alok
64@mjskok startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
60. Proprietary and Confidential
Before
Need
After
Solution
53%
of Rwandan women
cannot afford healthcare
26%
of Rwandan women
live too far from a hospital
[1] National Institute of Statistics of Rwanda (NISR) [Rwanda], Ministry of Health
(MOH) [Rwanda] http://www.measuredhs.com/publications/publication-fr259-
dhs-final-reports.cfm
Point-of-care
Minimal training required
Cost = 1¢
Diagnosis by telemedicine
Image: http://www.trust.org/alertnet/news/alertnets-top-20-big-ideas-that-dont-
cost-the-earth/
DFA
65@mjskok startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
61. Proprietary and Confidential
NO current solution => huge
NO infrastructure required
NO training required
NO time required
Customers Gain/Pain ratio = ∞
DFA Gain/Pain
66@mjskok startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
62. Proprietary and Confidential
At-risk pregnancy
Liver function
• 8 million affected globally
• conducting ~700 person
trial in Vietnam
• test for ALT/AST enzymes
• cost: $14 v. 1¢ (DFA)
Child nutrition
Small farmer support
Customer ‘pain’ is real pain
DFA Example
67@mjskok startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
63. Proprietary and Confidential
How thoroughly should you define?
A little and then iterate?
or
A LOT and then execute?
68@mjskok startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
64. Proprietary and Confidential
How thoroughly should you define?
“A problem well stated is a
problem half solved”
Charles Kettering
A little and then iterate?
or
A LOT and then execute?
69@mjskok startupsecrets.comBuilding a Compelling Value Proposition @underscorevc
65. Proprietary and Confidential
• Case studies
– Actifio
– Apperian
– Disqus
– DFA
– uTest
Follow online
www.startupsecrets.com
@mjskok
/mjskok
linkedin.com/in/mjskok
bit.ly/mjskok-google
bit.ly/mjskok-youtube
Thank you…
70@mjskok startupsecrets.comBuilding a Compelling Value Proposition @underscorevc