E245 Value Proposition
Ann Miura-Ko
January 2011
The Business Model Canvas


         Test Hypotheses:
         • Product
         • Market Type
         • Competition
How to Build A Startup

        Size of the   Business   Customer     Customer
Idea    Opportunity   Model(s)   Discovery ...
We start with the theory…
Key Questions for Value Prop

§ Problem Statement: What is the problem?
§ Technology / Market Insight: Why is the proble...
Inspiration



Where do these ideas come
          from?




                      Flickr Image: Jeff Kubina
The Authentic Entrepreneur



http://www.ted.com/talks/
erin_mckean_redefines_the_dictionary.html
Technology and Market Insight




      Technology Insight           Market Insight
§  Moore’s Law            §  Value c...
Examples of Market Insight
            §  People want to play more involved
                games than what is currently ...
Insight Characteristics

             Wrong             Right



  Non-
                       Biggest Potential Wins
Cons...
Key Thought



 What insight do I have that is not
   yet conventional wisdom?
Market Type
                     Existing         Resegmented              New
Customers        Known              Possibl...
Existing Market
                  Characteristics:
                  §  Customers are always hungry
                     ...
Resegmented Market
              §  Low cost provider (Southwest)
              §  Unique niche via positioning
        ...
New Market
             §  Customers don’t exist today
             §  How will they find out about
                 you...
The Problem
§ The “problem” justifies why the product is
   valuable to someone
§ The Problem Statement:
 § For whom?
 ...
Potency of the Problem
Competition




§  Are substitute products and services available?
§  Are competitors threatening to offer better price ...
The Ecosystem (“Customers”)
                 §  Day to day users
  End User       §  May actually have zero influence in...
Types of Product Value



                                Lower Cost

    Faster




                  More Simple

 More ...
The Ecosystem (The Rest)
             §  Entity that provides parts or services
 Suppliers
                 needed to man...
Wait! I thought this lecture was
      about products?!?
Product


             Service     Hardware




Knowledge                           Resources




            Data       N...
Minimum Viable Product (MVP)


           § A product that solves a core
              problem for customers

           ...
The Art of the MVP




§ A MVP is not a minimal product
§ “But my customers don’t know what they want!”
§ At what point...
Testing the MVP
§  Smoke testing with landing pages using AdWords
§  In-product split-testing
§  Prototypes (particular...
Testing the MVP (Web Example)
 Can you get customers to pay for a product
   that doesn’t yet exist (or barely does)?

§ ...
Example: Chegg
Testing the MVP (Non-Web)
 Can you get customers to pay for a product
   that doesn’t yet exist (or barely does)?

§ Inte...
The Pivot




§  The heart of Customer Development
§  Iteration without crisis
§  Fast, agile and opportunistic
The Value Proposition Pivot




§  UK-92480                   §  Nuf said
§  Problem: Angina (chest
    pains)
§  Sele...
The Value Proposition Pivot




§  Craigslist for Colleges         §  Textbook rentals
§  College students have        ...
Test these hypotheses for next week:

 § Problem Statement: What is the problem? For
  whom?
 § Technology / Market Insi...
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Lecture 2 value proposition

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E245 Stanford Lecture on Business Model Innovation. Focused on Product and Value Proposition. Addresses types of markets, where insights come from as well as type of insights. We talk about how we define Minimum Viable Product and examples of how one might test the Minimum Viable Product

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Lecture 2 value proposition

  1. 1. E245 Value Proposition Ann Miura-Ko January 2011
  2. 2. The Business Model Canvas Test Hypotheses: • Product • Market Type • Competition
  3. 3. How to Build A Startup Size of the Business Customer Customer Idea Opportunity Model(s) Discovery Validation Theory Practice
  4. 4. We start with the theory…
  5. 5. 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?
  6. 6. Inspiration Where do these ideas come from? Flickr Image: Jeff Kubina
  7. 7. The Authentic Entrepreneur http://www.ted.com/talks/ erin_mckean_redefines_the_dictionary.html
  8. 8. Technology and Market Insight Technology Insight Market Insight §  Moore’s Law §  Value chain disruption §  New scientific §  Deregulation discoveries §  Changes in how people §  Typically applies to work, live and interact hardware, clean tech and what they expect and biotech
  9. 9. 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.
  10. 10. Insight Characteristics Wrong Right Non- Biggest Potential Wins Consensus Consensus Mindless Competition
  11. 11. Key Thought What insight do I have that is not yet conventional wisdom?
  12. 12. Market Type Existing Resegmented New Customers Known Possibly Known Unknown Customer Needs Performance Better fit Transformational improvement Competitors Many Many if wrong, None few if right Risk Lack of branding, Market and Evangelism and sales and product re- education cycle distribution definition ecosystem Examples Google Southwest Groupon Market Type determines: §  Rate of customer adoption §  Sales and Marketing strategies §  Cash requirements
  13. 13. 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
  14. 14. 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)
  15. 15. 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)
  16. 16. 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
  17. 17. Potency of the Problem
  18. 18. 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?
  19. 19. The Ecosystem (“Customers”) §  Day to day users End User §  May actually have zero influence in buying process Influencer / §  Preferences and decisions influence or Recommender impact buying decisions §  The person who controls the purse strings Economic Buyer or is in charge of the budget Decision Maker §  The buck stops here
  20. 20. Types of Product Value Lower Cost Faster More Simple More Efficient Smaller
  21. 21. The Ecosystem (The Rest) §  Entity that provides parts or services Suppliers needed to manufacture your product §  Group or organization that installs, Channels distributes or sells the product in your place §  Organizations responsible for monitoring Government trading and safety standards related to your product §  Other entities that provide products related Partners to delivery of your final product
  22. 22. Wait! I thought this lecture was about products?!?
  23. 23. Product Service Hardware Knowledge Resources Data Network
  24. 24. Minimum Viable Product (MVP) § A product that solves a core problem for customers § The minimum set of features needed to learn from earlyvangelists - Avoid building products nobody wants - Maximize the learning per dollar spent
  25. 25. The Art of the MVP § A MVP is not a minimal product § “But my customers don’t know what they want!” § At what point of “I don’t get it!” will I declare defeat?
  26. 26. 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
  27. 27. 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
  28. 28. Example: Chegg
  29. 29. 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
  30. 30. The Pivot §  The heart of Customer Development §  Iteration without crisis §  Fast, agile and opportunistic
  31. 31. The Value Proposition Pivot §  UK-92480 §  Nuf said §  Problem: Angina (chest pains) §  Selectively blocking an enzyme called PDE5 could expand blood vessels and treat angina.
  32. 32. The Value Proposition Pivot §  Craigslist for Colleges §  Textbook rentals §  College students have §  College students have unique sets of goods and unique sets of goods and services they need to trade, services they need to trade, buy and sell at a local level buy and sell at a local level
  33. 33. 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!

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