“Business Ignition Series”, Volume 3 Value Proposition
Business is the wild west. There are so many established competitors and other ways for customers to solve the problem you are trying to solve for. Your light in the darkness is going to be value proposition you can provide to customers. This needs to be as defensible as possible and something that no other business can provide. If you make it your mission to deliver more value to your customers than anyone else in the market, you will do well.
Fail to do this and It’s like running on a treadmill, turning it up to full and then being given anaesthetic in your legs and “seeing how it goes.” The biggest reason why investors don’t invest is because of the so called ‘differentiation challenge.’ If you have no real differentiation in a saturated market, your chance of succeeding is very slim. Many founders make the mistake of just having 1 or 2 different features in order to overcome this challenge, but that often isn’t enough, especially if you’re going after a big market with many established competitors already dug in there. Look across any industry, let’s take fitness as an example, everyone has got a very similar product and they market it in a very similar way with a very similar message, bringing less variety than Britain’s Got Talent, which I argue should be renamed “sing a bit and dance about a bit.”
So you need to really carefully sit down and brainstorm what it is about your intellectual property and business that is your value proposition. If possible, you want to have a few different ones which intertwine together to make what you offer even more defensible and difficult to replicate by your competition. Then you need to be communicating this in the most concise, compelling way possible and make sure that value proposition aligns tightly to your persona’s biggest priorities. Then put this across in a really impactful, emotive way using storytelling as a further tool. As I mentioned before, this has a big effect on the limbic centres in our brain. When you hit a potential client with messaging that impacts the limbic brain, it leaves an emotional impression, they decide they like your company and then use logic to justify it to themselves and to other people. This is obviously a very good thing from a commercial perspective.
Always be thinking how you can further shore up your value proposition. This could be by partnering up with a strategic partner to offer more value to your customers, for example. A really great trait for any entrepreneur is to know what you don’t know, and know where you’re weak. I’m acutely aware than I’m great at about 5 things and crap at everything else. Whilst being good at business, medicine and sport science, I pretty much need a full time carer, a cleaner and one of those harnesses you put round toddlers to stop them walking into the road. I’m great at sports that aren’t quite sports, like snooker and table tennis and my ability to spot what other films actors have been in never quite gets the adoration it deserves in my opinion. Other than that though, pretty useless. But that’s ok, I acknowledge that and I can bring in the people that are strong where I’m weak. Remember, our lives are largely driven by our subconscious mind, our ego, and in some men’s case, a certain (usually small) appendage. If you can put your ego to one side and stare nakedly at your own inadequacies in business, you will be far better off. In fact, this is a good doctrine for life. Self-awareness is a trait that you can’t have too much of and in business, it will be the ace up your sleeve. Combined with hard work and a growth mindset, you will be in a very strong position to succeed when you layer in mastery in your field.
The reality is that you need to be cultivating your knowledge and skills with a relentlessness that other people think is mania. You need to be planting those seeds every day. What I love about knowledge is that when you read it perhaps you don’t realise its significance at that point. But the compound effect of it means that it will come to your aid at some point in the future and it may just be the spark that starts a new idea.
“If people knew how hard I worked to achieve my mastery, it wouldn’t seem so wonderful after all” – Michelangelo
But that’s the point isn’t it. You need to build yourself into someone who can achieve great things, where you can deliver something that to other people seems like magic. We give so much praise to people with talent but to me, talent in a hand-out, it wasn’t earned. People say that I must be clever and all that stuff, and that’s true to an extent, but it plays a subservient role to my drive and grit. To get yourself a truly great, defensible value proposition, you need to build it like you would a fortress that can stand for thousands of years. Build that knowledge, build those skills, they will come to your aid when you need it and help you build the legacy you’re trying to build.
Marketing is absolutely saturated and customers are utterly sick of being marketed to constantly, are used to hearing the same marketing strategies and tactics and have apathy and disdain for this approach. In order to really resonate with your user in the market, cut through the competition and position yourself as the authority, take your high level features that are most linked to your personas biggest priorities and quantify them in the way that your persona wants to hear. For example, if they want to lose weight, quantify how much weight they will lose with your product. If they want to save money on their energy bills, how much could they save?
What is also really useful is speaking to your persona and getting them to give you more detail on what the current state is, what their problems are and how much they spend trying to solve it, what other companies are charging and whether your persona is willing to pay for it. If not, why not?
- What is your unique skill, talent or intellectual property that nobody else can copy?
- Why should your future customers care about it?
- Do you have any IP protection or patents?
You should come out of all this value proposition work with a real understanding of what it is about you, your team and your offering to the market that is so unique and so defensible.
This is the thing that your entire business should be built around and heavy resources should be attributed to making sure that that most defensible, unique part of your offering is elegantly messaged to potential customers in a way that resonates with them and drives them to take action.
There are a few key criteria that you should run your value proposition through to make sure you are barking up the right tree:
- Something that your customer values very highly and is happy to spend money in solving. Again, this further validates the approach given in the customer development section as what these things are to the customer should now be very clear in your mind
- Unique and different. It needs to set you apart from your competition and you should already be making step to shoring this up further with partnerships, IP protection / patents.
- Growth potential. To be a really powerful value proposition, there should be elements to it that get ever stronger as you grow as a company. For example, having big data and machine learning would add more defensibility as you scale because the insights from that data make it increasingly difficult for your competition to beat you on that front. Equally, more revenue makes you even more defensible, as does establishing new partnerships and building a value in your brand. This final point is important. A great example of branding is that the likes of Starbucks are able to sell a product for £4 that many other low end cafes charge £1.50 for. Branding, when done right always increases your unit economics.
Knowing your competition is extremely important when starting a business. That is to say, as long as you still maintain an extremely strong focus on your customers. When I was at Loughborough University doing my sport science degree. Here was home to absolute freaks of nature. Guys whom haven’t seen their necks in years, who looked as if they must have grown up near a radiation leak. At that point, I was a guy who was out of shape and if I ever felt the urge to exercise, I would lie down until it passed. I found myself wanting to look that way, but I realised it wasn’t serving me well, so I just turned the dissatisfaction into doing something about it. Within 18 months I had lost 3 stone and became a fitness model. I even did a physique competition.
However, getting myself an hilarious tan, which was darker than Shane Mcgowan’s urine on a Monday morning and doing it again ranks on my priorities somewhere behind contracting scarlet fever. I could have spent my whole time focusing on everyone else and then be paralysed into inaction and from focusing on what I really should be focusing on. This is what businesses; they focus so much on what their competitors are doing that they can’t see the wood for the trees. Through all that time, their competitors are ruthlessly focused on providing value to their customers, which is why they will continue to eat your lunch, and your margins.
If a potential investor or partner does a little bit of due diligence and they find you have failed to recognise or mention a competitor, this will absolutely destroy your credibility and they will decide they would rather get circumcised by Edward Scissorhands than invest in your company. But on the other side of the coin, what investors and potential partners really love is an acknowledgment of the competitive landscape, an in depth understanding of they relative strengths and weaknesses and a compelling case for what makes you far superior and then taking that a step further and distilling a marketing and messaging plan that allows you to drive home that advantage to customers.
A really good way to think about your competition is in terms of direct competition, your competition that will be competing head on with you and have a similar offering to you. Indirect competitors are competitors that could easily move into your market with a change of strategy or focus. Alternatives are those that don’t really match your business feature for feature, but they have an offering that allows your potential customers to solve their problem.
Also, burn into your frontal lobes the fact that customer apathy and the status quo is your biggest competitor. Even if there are no established competition, you will face a fierce foe in overcoming these things. After all, the status quo and breaking ingrained user habits and creating enough value and a powerful enough message to break those habits and then form them into habitually using your product / service is hard. This is why an in depth understanding and customer development is so important as this will be the kryptonite and rocket fuel that compels your potential customers so much that they have no choice but to break what they currently do or who they do business with and sign up with your company.
As such, you should be mapping out your persona’s top 2 priorities and putting them onto a 2 x 2 grid and show how your company irrefutably beats all your competition when it comes to those main two priorities.
You can then take it another step further and rank your competitors on a 1-5 (or 10) scale on how their high level features list, which as you know by now, should be mapped to your persona’s biggest priorities.
The advantage of this approach is it shows that you know your competition in a lot of detail. It also allows you to distill out key takeaways. This is really important for your team to know as it helps you build a better business, but it is also absolute gold dust to investors and it shows that you really are thinking about this in the right way.
To do a really strong competitive analysis, you can be thinking about how well your competitors solve your customers main priorities and if they don’t, happy days. If they do, figure out how you can provide even more value than they do and communicate this value to your customers in a more compelling way than they do. You can take it a few tips further and use your competitors’ products. Find out what is good versus bad, what seems to be good about the user experience, what is resonating and not, what could be better, where the friction points in the business are.
Ask your customers what they think of competitors products, again, call on your loyal evangelists, they will help you as much as you can and give such valuable feedback. Draw out patterns in what they say and again, be committed to keep digging into why your customers believe what they do about a product, you just may uncover some really interesting themes you can exploit in a more effective way than your customers.
You can even dig in to your competitors’ business models and work out how they can be improved, which will help you outcompete them. Where could you provide more value? Is there a customer segment they haven’t considered? What partnerships could you set up to help you get to customers and communicate value in a way they don’t? How could you improve your revenue model versus what they do? You’d be surprised how many of your competitors will actually have a meeting with you if you frame it in the right way. Just like you have done with customer interviews, you can create a different set of questions to uncover their business models and what they are doing. You never know, you may end up having a few meetings and decide it is a good move to join forces. A famous example of this was PayPal, where 2 founding teams joined forces to create the founding team of the PayPal we know now.
By identifying your competitors, testing out their services and identifying their strong and weak points, you are able to fine-tune your niche. Start looking them up, as well as reading their reviews and press mentions. If you have the means, test out their product yourself, both with a user’s mind (“does this give me what I need?”) and from a business perspective (“could my product do this better?”).
It’s also useful to consider substitutes as well as direct competitors. For example, if you’d be developing a finance management app for small businesses, you’d consider similar apps or services, but also the idea that some small business owners would rather use a combination of documents and spreadsheets instead of an all-in one application.
Once you complete your competitive analysis matrix in the context of your industry, you’ll start to form an understanding of what you can do better, or what segment of audience you could service that is being ignored right now.
“Committed to your success.”
Dr Jack Darby