5 Critical Tests for Your Product’s Value Proposition

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Recently I’ve had the opportunity to mentor aspiring entrepreneurs as part of an economic development initiative in a neighboring community.  These entrepreneurs are starting fundamental businesses: not the technology related enterprises where I have spent my time, but the principles for success remain the same.

Early Thinking

Doing this, I ended up falling back on an old friend, the “value proposition.”  To explain it to my entrepreneurs who had no business experience I needed to come up with a clear and exact definition.  I used three questions for this purpose, and you can apply them to your start-up:

  1. What is the reason your customer will buy from you?
  2. Why will your ideal customer buy from you and not your competitor?
  3. Why will your ideal customer not take an alternative action, such as not making a purchase?

Answer these questions and you have a good start. The value proposition is not what you do or a description of your business. Answer the question, “why buy” not “what you do.” What value does your business provide to the ideal customer?

Louisville Slugger’s #owntheplate marketing speaks to value:

“Turning Players into Legends since 1884” “Before Little League. Before the World Series. Even before the rule that says three strikes mean you’re out, Louisville Slugger was already perfecting the bats that would write the history of the game. Over the past 125 years, no other brand has logged more wins, captured more titles and set more records than the legendary bats of Louisville Slugger.”

Here is a more edgy example from PinchZoom:

“We create kick-ass mobile experiences – the best companies in the world use our amazing team to create apps that people love”.

Notice how both add their credentials.  Ideally, proving the value they offer will be delivered.

Blink Analysis

There is a lot more to creating a cogent business strategy than crafting a value proposition.  However, without defining the target customer and communicating the unique advantage of your business, do you have a substrate on which to build a great business strategy?

Test your value proposition with my list of common pitfalls:

  1. Buy Low Sell High Pitfall: Have you avoided weak general statement that anyone can make?
  2. Product Description Pitfall: Have you described value your buyer will receive and not provided a description of features and capabilities of your product or service?
  3. So What Pitfall: Do you communicate value that elevates you above the competition?
  4. Follow the Crowd Pitfall: Is your value proposition really different than your competition and unique when compared to them?
  5. Prove It Pitfall:  Are you providing evidence that supports your claims?
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Experimentation an Early Competitive Advantage for Startups

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I have a stack of articles that I plan to read, for a while I carry them around in my backpack. Then the article finds a resting place in my office.  Fortunately, the articles get re-discovered and read: eventually.

I found an article on Enlightened Experimentation that had been sitting unread for a while – published in HBR in 2001. But the advice is still fresh more than a decade later.

Large industrial companies such as BMW use “Enlightened Experimentation” for product innovation and experimentation is fundamental to innovation.  The essentials to Enlightened Experimentation are: 1) Organize for rapid experimentation 2) Fail early and often, but avoid mistakes 3) Anticipate and exploit early information 4) Combine new and traditional technologies. 1

Though the concept works both for large corporations and small start-ups can apply the principles of Enlightened Experimentation even more effectively.

Early Thinking:

Experiment your way to competitive advantage: Especially for smaller or start-up firms, quick experimentation can be your earliest, maybe only competitive advantage.  You would think experimentation is natural to young firms, and it is with the best, but certainly not all.  As a new firm or start-up, you cannot outspend a larger well-financed rival.  And non-domestic rivals have other advantages.

Experimenters win: In a globalized market place, your competition may have lower labor cost, less regulation and advanced technology.  Experimentation generates new property knowledge.  Experimentation must expand beyond the R&D teams.  Experiment with product and business model innovation simultaneously.  You have to discover new opportunities before your competition know they exist.

Blink Analysis:

The article entitled “Why Steve Jobs Couldn’t Find A Job”  sums it up.  “Today, value goes to those who know how to create, store, manipulate and use information.  And success in this economy has a lot more to do with innovation, and the creation of entirely new products, industries and very different kinds of jobs.” 2

  1. S. Thomke, “Enlightened Experimentation: A new Imperative for Innovation” Harvard Business Review, February 2001: 66-75.
  2. A. Hartung, “Why Steve Jobs Couldn’t Find A Job” blogs.forbes.com/adamhartung, Web. February 18, 2011.

Related Links:

Treating Innovation as an Experiment

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A New Lesson in Innovation for Entrepreneurs

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This entry was posted in Innovation, Social Entrepreneurs and tagged Innovation on February 28, 2011.

Food.  What is the first thing that comes to mind?  I bet it’s not innovation.  I recently had the opportunity to tour Rutgers University’s Food Innovation Center.  Rutgers has built an impressive facility with a food processing plant attached.  This facility is a past winner of NBIA’s  “Incubator of the Year”.  Local farmers can rent a food plant by the day to create new products from produce that would be normally discarded.  The design and flexibility of the facility has enabled a European firm to test launch a new food product. This visit got me thinking how uninventive we can be about innovation.

Early Thinking:

Avoid just a better product: Product innovation by itself is not sufficient for competitive advantage.  Thinking just about the product is a missed opportunity for more innovation.  The farmer that cannot sell bruised or imperfect fruit as fresh produce could focus instead on growing better peaches.

Or make a new drink product with unused product with greater profit margins. One peach grower did just that.

The simultaneous change in product delivery, value proposition, and profit model need to be farmed for innovation opportunities. That is, do not confuse product innovation with the broader concept of business model innovation.  This point is well made in a whitepaper entitled Business Model Innovation; When The Game Gets Tough, Change The Game. Take the example of Apple; its success is due to multiple simultaneous innovations in product, technology and service. The whitepaper outlines other company examples too1.

Simultaneous multiple innovations:  Think beyond your original innovation.  What other areas of your offering have not been looked at for change?  Look at innovative business models outside your industry for ideas.

Blink Analysis:

More than a better mousetrap: Thinking beyond product innovation is a seriously difficult task.  However, it appears organizations that do have been rewarded with market leadership.

  1. Z. Lindgardt, M. Reeves, G. Stalk, M. Deimler “Business Model Innovation, When The Game Get’s Tough, Change The Game”, Boston Consulting Group, (12/2009): 1-8. Bottom of Form
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OMG: Virtual-Matrix-Teams

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I’ve seen the Matrix Management structure get stuck in analysis and not achieve the desired objectives.

Add a virtual component and you have to take a different approach.  The authors of the paper Managing Collaboration: Improving Team Effectiveness Through A Network Perspective1 looked at team effectiveness in this environment for sales, innovation, and executive teams.

Early Thinking:

Cliques Are Not Teams: Watch for a coterie.  Teams can become insular: not seek outside expertise or data and inappropriately elevate individual team member expertise.  Effective teams focus a significant portion of their efforts outwardly.  Outward communications are predictors of high performance teams.

Don’t Collaborate With Just Anyone: Research indicates you need to be selective, people perform better when they invest in fewer quality relationships: as opposed to building larger networks.2.  Mom was right, don’t be promiscuous; be selective and seek contrarian views to prevent insularity.

You Can’t Virtually Catch Me: Have you participated in corporate team building exercises in which you fall backwards into a team member’s arms to build trust?  Not convinced that works: my point is our default thinking is to build working relationships via face-to-face communications.  I’ve lead virtual teams and never met members face-to-face.  Team building can be done virtually, but you have to focus on it.  Find ways to have one-on-one outside team meeting discussions as one example.

Blink Analysis:

Are the right connections being made internally and externally? Do not rely solely on traditional team evaluations such as process, strong team leadership, domain expertise etc.

Watch for teams becoming social gatherings and individuals that are relationship hoarders.  Consider 1) watching for groups becoming a social gathering and not working toward the business objective 2) beware of members that prevent internal lateral communications among team members or the sales executive that is overly protective of client relationships.

  1. R. Cross, K. Ehrlich, R. Dawson, J. Helferich, “Managing Collaboration: Improving Team Effectiveness Through A Network Perspective”, California Management Review, vol. 50, no 4 (summer 2008): 74-99
  2. J. Cummings, R. Cross, “Structural Properties of Work Group and Their Consequences for Performance,” Social Networks 25/3 (2003): 197-210
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American Bandstand and The Enterprise Center

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What could American Bandstand have to do with a Community Development Organization in Philadelphia?  I visited The Enterprise Center this week, which occupies the same building that first broadcasted Dick Clark’s famous TV show in 1952.  American Bandstand was an innovation and The Enterprise Center is making that a tradition by offering a broad range of initiatives to support community development.  They offer programs to support entrepreneurs in creating and accelerating already established businesses – my particular area of interest.

Early Thinking:

Teaching Students to Fish: One of the center’s programs is a youth entrepreneurship program (YES program) where high school students launch their own businesses.  The students I spoke with all had their “elevator pitches” down and were very articulate.

News about innovation and business creation comes at you from every direction; and has accelerated since the President’s January State of the Union Address.  Unfortunately, there is no innovation or business creation switch that one can just turn on: wish it were that simple.  I do not have the quantitative data to indicate the students will become entrepreneurs in their adult lives.  Certainly, working business creation problems will expose these students to important skills.

Blink Analysis:

My instincts tell me this program makes sense.   Starting with high school students and taking a long-term view is a way to build entrepreneurial skills.  These skills are useful even if they do not start a business beyond this high school project.

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Collaborators, Top Performers or Time Wasters?

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Have you observed certain individuals seem to be connected to every interesting project in organizations where you’ve worked?  In the paper, The Collaborative Organization: How to Make Employee Networks Really Work the authors used organizational network analysis (ONA) software to look at collaboration in large IT organizations.

Early Thinking:

Want a raise – Collaborate:  Collaborators cited as best performers, translated to better performance reviews.  Assuming better performance reviews results in better raises – get collaborating.

Feeling tired, low job satisfaction – then interact: The organizational network is a source of energy; collaboration with high performers increases participant energy level according to the research.  Research also concluded that “the energized” had greater job satisfaction. Generalizing, I agree that extroverts would consider the social interactions energizing.  I wonder how the introverts feel.

Need innovation – context shift:  Innovation often involves migrating ideas from one context to another. 1

Collaboration is not the intent – it’s results of course: This research found the least efficient IT programmers spent twice the time collaborating, as did the average programmer.2

Blink Analysis:

The collaboration paradox: Collaboration by itself does not create more innovation or high performing teams but without it, teams don’t win either.  Using standard management techniques may encumber it too.  Leadership should be an appropriate part of the network so it functions to meet the business objectives without weighting it down.  That takes skill indeed.

  1. A.B. Hargadon, “Firms as Knowledge Brokers: Lessons in Pursuing Continuous Innovation” California Management Review, 40, no. 3 (spring 1988): 209-227.
  2. R. Cross, P. Gray, S. Cunningham, M. Showers, R. Thomas, “The Collaborative Organization: How to Make Employee Networks Really Work”, MITSloan Management Review, 52, no. 1 (fall 2010): 83-90.
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New Shoes and New Blog.

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What is the origin of the theearlythinking.com name?

Many years ago I worked for AT&T and first heard the term “early thinking” at Bell Labs. I am not sure it was widely used. However, over the years, it has come to mean for me an approach to stimulate new ideas.  It is understood that you will nurture the specific idea: not shoot it down rather help shape it. This is decidedly different than brainstorming – a method for generating a large number of ideas as possible solutions to a problem. When engaged in “early thinking” you focus on a single idea adding your knowledge, experience and insight.

With this concept in mind, I start The Early Thinking Blog in the hope it grows into something.

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