Understanding Value Proposition

Last week I posted here about my experience mentoring a start-up team from LSE’s Innovation Accelerator programme.

This week I have asked the team to get more ‘granular’ to better define, understand and analyse the problem they are focused on solving i.e. identify user pain-points, challenges, jobs to be done.

In the original Uber pitch deck the co-founders demonstrated a good understanding of the problem for the different stakeholders. Once this is done to a satisfactory level, you can then start to ‘test’ with customer research, experiments and MVPs.

To assist the team, below I provided some great videos from Strategyzer

The Value Proposition Canvas Explained
Value Proposition Canvas: Best Practices
The Basics Of Testing Business Ideas

Customer Discovery & Development

Last week I began mentoring a team who have entered the London School of Economics (LSE) Innovation Lean Accelerator Programme.

Team’s need to focus on improving their Lean Canvas which initially requires an in-depth understanding of the problem they are looking to solve.

This process of ‘customer development’ or ‘discovery’ is probably the most vital phase of a start-up’s life. However, in my experience advising would-be founders, it is often the least understood area of start-up development.

There are many reasons for this, but far too often I find that budding entrepreneurs are not willing to ‘get out of the building’ and talk to potential users/customers in the right way. And do this in an iterative and ‘lean’ way over time.

To help my team to better understand the process, I shared with them these resources. Whilst not comprehensive, provide a good introduction to better understanding and defining the problem (and most critically, how important it is for that user in the context of their life/work).

TechStarts Toolkit

Conducting Customer Discovery Interviews

Neil Patel 26 Customer Discovery Resources

Steve Blank Lean Launchpad Videos

Steve Blank Start-Up Tools – (focus on the Customer Discovery section)

If you come across any other interesting resources, please share in the comments or on twitter @andrewessa



Understanding Product-Market Fit

“The term product/market fit describes ‘the moment when a startup finally finds a widespread set of customers that resonate with its product” – Eric Ries

I’m currently advising the management team of a multi-national technology client who are looking to commercialise a B2B SaaS platform they acquired recently. The software isn’t a standalone product so doesn’t have market traction nor product-market fit (PMF). Whilst a plan to achieve PMF is critical, a more immediate task is to educate the management team on the actual concept. I’ve discovered recently that it isn’t a commonly understood term within the client, although the high-level meaning behind it is.

From my start-up days, the concept of product-market fit (PMF) is firmly engrained into my way of working (and thinking). Before that experience, I hadn’t come across it. I had forgotten that PMF within corporates probably isn’t an assumed way of understanding product development.

To help me plan and educate the client, I did a deep-dive into the research for articles. The best one is a brilliant summary from Tren Griffin reposted on the blog of Silicon Valley VC Andreesen Horwotiz. It is so good that I needed to share it here. It’s a must read for anyone working in business today.

Why Start-Ups Fail

I came across this infographic recently. It made me grin. As I’m a few years passed my own start-up failure, I can now chalk it up properly as lessons learned.

See the source image

Looking at the list, the scary thing is that just about all apply to my experience. The only ones that don’t apply are passion/burn-out (although the final year 4 was tough), poor marketing, ignore customers, location, & legal issues. Everything else was a contributing factor. Now, that’s a heck of a lot of (expensive) mistakes to make. I was in control of most of them as well. So it’s not as if I can shift responsibility to others. The buck stopped with me. So what happened? At the end of the day, I just didn’t have the product-market fit piece understood, let alone nailed. The words of Marc Andreesen (founder of Netscape turned VC) sums up nicely what was (or wasn’t) going on:

“You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of ‘blah’, the sales cycle takes too long, and lots of deals never close. And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck’s.”Marc Andreessen

1 Trillion Connected Devices

In a previous post I talked about how SoftBank recently announced that by 2035 1 Trillion devices would be connected. Whether or not that happens is not the point, as it’s about the ambition & not necessarily the result. But for that to happen, what needs to occur?

1. Market adoption by consumers and businesses of new products/services that help them solve most of their important daily problems & challenges;

2. Significant improvement in connectivity, cloud, data analytics & management, AI & other IoT solution & related technologies to help enterprises and the ecosystem handle all the real-time data being generated by the devices at such a significant scale;

3. Digital transformation of established enterprise & government to rapidly adapt to the new paradigm and compete with IoT focussed startups;

4. Deep ecosystem & cluster development with value-chain players working together & aligned in R&D and GTM within specific industry sectors or use cases.

5. Significant lowering of device manufacturing costs to enable business model innovations to drive market adoption, such as subscriptions, service models and so on.

There may be others but this is just a sample of my initial thoughts right now. If you have any others be sure to let me know

The Art of Customer Development

I recently crossed paths again with an excellent summary (from Mike Fishbein – link below) of key questions when developing a new product or exploring improving an existing one. It reminded me of how useful it was to be validating a potential new product idea back in 2013.

At that point I was desperately seeking a new product to hopefully facilitate a do-or-die pivot of my failing activities & experiences marketplace start-up (The Social Experiences Club). Although we had launched in 2011/12, it wasn’t on the back of much customer insight and their problems, needs, challenges etc. In fact, it was based on a tonne of assumptions. Some of these were tested (off-line by running a specific live experience/activity with paying customers), but the wider product concept (central place to discover and book all sorts of experiences) was not.

Back then there wasn’t a ‘handbook’ on running a start-up in the Internet/mobile era or properly managing customer development or producing tangible evidence of why the problem you’re solving is such a major problem for a big addressable market. Lean Start-up was only in the very early stages of traction and certainly no-one in London was talking about it. In hindsight, that lack of customer insight was one of the key reasons (and there were quite a few) for eventual failure.

In 2018, there are now a significant number of free (or cheap) online resources & services at the disposal for any budding entrepreneur to test, validate & build MVPs for that side project or next big thing. What an amazing time to be around and have an idea. The same old challenges remain however: to (a) find and solve a problem that is important enough to a significant number of people, and (b) stop watching Netflix in your spare time & get out there and work hard to find out if your idea has legs. Check out the questions below with thanks to Martin Fishbein

Customer Segmentation
Depending on how you obtained the interview/how much background you have on the person, you may need to make sure they are within your customer segment, and/or understand more about their demographic. I usually try to keep it to a max of three.
What do you do professionally?
Who handles [process you’re improving] at your home/office?
Tell me about your role at [company]?
How much time do you spend on [process you’re improving]?
[Specific questions related to your product/customer] – for example, do you have kids?

Problem Discovery
Questions to validate your hypothesis about a problem, or to learn about problems.
What’s the hardest part of your day?
What are some unmet needs you have?
What product do you wish you had that doesn’t exist yet?
What tasks take up the most time in your day?
What could be done to improve your experience with [process/role]?
What’s the hardest part about being a [demographic]?
What are your biggest/most important professional responsibilities/goals?
What are your biggest/most important personal responsibilities/goals?

Problem Validation
If your customer did not talk about the problem you wanted to address, use the below questions to begin validating/invalidating that your customer has the problem you think they have. In addition, it’s often not enough to just solve a problem, sometimes it also needs to be one that people are highly motivated to solve. Some of the below questions can help with that too.

Do you find it hard to [process/problem]?
How important is [value you’re delivering] to you?
Tell me about the last time you [process you’re improving] – listen for complaints
How motivated are you to solve/improve [problem/process]?
If you had a solution to this problem, what would it mean to you/how would it affect you?

Product Discovery
Questions to help generate ideas or to validate your idea. The below questions are intentionally very open-ended. By asking yes or no questions specifically related to your product, customers may feel inclined to agree with you or not be critical. By asking more open ended questions, you can be more confident that they’re giving you honest input. If in response to the questions below, your customers tell you they’re looking for similar to what you have in mind, you might be on to something.

What do you think could be done to help you with [problem]?
What would your ideal solution to this problem look like?
If you could wave a magic wand and instantly have any imaginable solution to this problem, what would it look like? – I’ve found that about 80% the time the answers I get to this question are not very informative – solutions that aren’t feasible or most certainly wouldn’t be profitable. But the other 20% of the time there are some really informative responses that make the other 80% acceptable.
What’s the hardest part about [process you’re improving]?
What are you currently doing to solve this problem/get this value?
What do you like and dislike about [competing product or solution]?

Product Validation
Questions to validate/invalidate your idea.
What do you think of this product? – this question is intentionally vague. Listen to whether they talk about wanting to use the product or how it could be improved. Given how vague the question is, the former is positive, while the latter may be a sign that improvement is needed.
Would this product solve your problem?
How likely are you/would you be to tell your friends about this product?
Would you ever use this product?
Would you be willing to start using this right away?
What might prevent you from using this product? – might reveal ways that you could improve the product. Potential hurdles might be budget, time, perception’s of the product’s value, a competing product, etc.
Will you pay $x for this product? – see if they will put their proverbial money where their math is. Often times when you ask this question, no matter how small the price, you will start hearing key insights that you wouldn’t have heard otherwise.

Product Optimization
Questions to help you improve your idea or product.
What could be done to improve this product?
What would make you want to tell your friends about this product?
What’s most appealing to you about this product?
What might improve your experience using the product?
What motivates you to continue using this product?
What’s the hardest part about using this product?
What features do you wish the product had?

Ending Interviews
Questions to ask at the end of an interview. You may also need to ask for their contact information if you don’t already have it.
[Summarize some of your key takeaways] – is that accurate? – I usually do this throughout the interview.
So based on the conversation, it sounds like x is really hard for you, but y is not. How accurate is that?
It sounds like x is very important to you, while y is not. How accurate is that?
Is there anything else you think I should know about that I didn’t ask?
Do you know anyone else who might also have this problem that I could ask similar questions to? – small form of validation if they’re willing to give you referrals
Can I keep you in the loop on how the product develops?
Can I follow up with you if I have more questions?