The document discusses key concepts for developing a startup value proposition including: 1) Defining the problem the product solves, determining the potential market size, and understanding existing competition. 2) Developing insights into technology and market trends that address how the problem can be solved. 3) Creating a minimum viable product to test hypotheses about the product-market fit and learn from early customers.

1. E245 Value Proposition Ann Miura-Ko January 2011

3. Market Type

5. We start with the theory…

6. Key Questions for Value Prop Problem Statement: What is the problem? Technology / Market Insight: Why is the problem so hard to solve? Market Size: How big is this problem? Competition: What do customers do today? Product: How do you do it?

7. Inspiration Where do these ideas come from? Flickr Image: Jeff Kubina

8. The Authentic Entrepreneur

9. Technology and Market Insight Market Insight Value chain disruption Deregulation Changes in how people work, live and interact and what they expect Technology Insight Moore’s Law New scientific discoveries Typically applies to hardware, clean techand biotech

10. 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 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.

11. Insight Characteristics Right Wrong Biggest Potential Wins Non-Consensus Mindless Competition Consensus

12. Key Thought What insight do I have that is not yet conventional wisdom?

13. Market Type Market Type determines: Rate of customer adoption Sales and Marketing strategies Cash requirements

14. 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

15. Resegmented Market Low cost provider (Southwest) Unique niche via positioning (Whole Foods) What factors can you eliminate that your industry has long competed on? Which factors should be reduced well below the industr’s standard? Which factors should be raised well above the industry’s standard? Which factors should be created that the industry has never offered? (blue ocean)

16. New Market Customers don’t exist today How will they find out about you? How will they become aware of their need? How do you know the market size is compelling? Which factors should be created that the industry has never offered? (blue ocean)

17. The Problem The “problem” justifies why the product is valuable to someone The Problem Statement: For whom? What issue do they face? Note: Doesn’t reference the product

18. Potency of the Problem

19. Competition Are substitute products and services available? Are competitors threatening to offer better price or value? How saturated is our market? How likely are customers to defect?

20. 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

21. Types of Product Value Lower Cost Faster More Simple More Efficient Smaller

22. 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

23. Wait! I thought this lecture was about products?!?

24. Product Service Hardware Knowledge Resources Data Network

27. 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 Surveys Interviews

28. Testing the MVP (Web Example) Can you get customers to pay for a product that doesn’t yet exist (or barely does)? Interview customers to make sure they have a matching core problem Set up web site landing page to test for conversion See what offers are required to get customers to use the product (e.g. prizes, payment) Use problem definition as described by customers to identify key word list – plug into Google search traffic estimator - high traffic means there is problem awareness Drive traffic to site using Google search and see how deep into a registration process customers are willing to go through

29. Example: Chegg

30. Testing the MVP (Non-Web) Can you get customers to pay for a product that doesn’t yet exist (or barely does)? Interview customers to make sure they have a matching core problem Set up web site landing page to test for conversion Set up a Lighthouse Customer Program where potential customers pay to get early access to product prototypes

32. Iteration without crisis

34. The Value Proposition Pivot Textbook rentals College students have unique sets of goods and services they need to trade, buy and sell at a local level Craigslist for Colleges College students have unique sets of goods and services they need to trade, buy and sell at a local level

35. Test these hypotheses for next week: Problem Statement: What is the problem? For whom? Technology / Market Insight: Why is the problem so hard to solve? Competition: What do customers do today? Product: How do you do it? Is this valuable or unique? What is the MVP? TEST THE MVP!