Building a Compelling Value Proposition - Competitive Advantage for Startups

Harvard innovation lab : Michael J Skok : Startup Secrets : Value PropositionHi @mjskok
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STARTUP
SECRETS
MICHAEL J SKOK
An insider‟s guide to unfair competitive advantage
Hi Harvard innovation lab
Building a Compelling
Value Proposition
twitter: @mjskok mjskok.com
North Bridge Venture Partners

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Agenda
Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution

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Value Proposition Template
• For (target customers)
• Who are dissatisfied with (the current
alternative)
• Our product is a (new product)
• That provides (key problem-solving
capability)
• Unlike (the product alternative)

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Apperian (simplified)
• For Mobile Enterprises
• Who are unable to deliver Apps to users bringing
their own devices to work
• Our Enterprise App Services Environment (EASE)
• Provides for users to securely access Apps and
Information
• Unlike (MDM), our patented Cloud based (MAM)
solution is instantly turned on and scales to tens of
thousands of users

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Where might you start?
Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution

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Ideas … free floating?

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Agenda - Problem
Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution

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Problem
• Unworkable
• Unavoidable
• Urgent
• Underserved
Problems worth solving
are usually 4U …

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Unworkable
• Broken business process
• Consequences ?
If the consequences are costly or painful,
so much the better.
EG who gets fired if this doesn’t work?

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Unavoidable
• Accounting
• Regulation
Is the problem so fundamental
you can’t avoid it and just have to comply?

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Urgent
• Relative to other needs …
• Priority
– Determines resources allocated
If you’re not at the top of the list,
are you at least in the top 3?
If not will you get moved up or down over time and why?

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Underserved – business…
• You will compete in a zero-sum game
• Finite:
– $
– Time
– People
– Attention

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Underserved – consumers…
• Examples…
• Social
– Find
– Connect
– Communicate
– Meet
– Share
– Entertain
– Date
• Needs…
• Social
• Security
• Physical
• Economic
• Recognition
• Responsibility
• Achievement
• Growth

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Qualify the problem
Is it “blac” & white?
• Blatant
• Latent
• Aspirational
• Critical
Blatant
Latent
Aspirational Critical
Blatant
Critical

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& white…
• Is it addressing a “white space” in the
market?
– an open area of opportunity
– which you can capture
– and defend
– uniquely

897MM monthly audience (uniques)
353MM monthly active users (participating)
5.8 Billion monthly page views
1.8MM web properties in network
75% marketshare for commenting platforms
#1 distributed social application
(comScore, Quantcast)
BUSINESS POLITICS NEWS MUCH MOREENTERTAINMENT SPORTSTECH
DISQUS
is the most ubiquitous
discussion platform on the web.

1 2 3
HOW DISQUS WORKS
Easy install for all platforms
Sites are part of the Disqus network
Sites integrate Disqus Users engage with Disqus Users discover new content &
sites across Disqus
Sites see tangible benefits, including
increased traffic on their pages
Audience development made easy.
Millions of users use Disqus to participate online and we make
that valuable for publishers in a way that they can measure.

THE
DISQUS
ECOSYSTEM
A COMMUNITY
ECOSYSTEM is the
foundation of our business.
USERS
GOALS
Discovery
Community
ADVERTISERS
GOALS
Acquisition
Retention
PUBLISHERS
GOALS
Engagement
Growth
Revenue

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DISQUS – Value prop for publishers
FOR
· Publishers, like online media or bloggers
WHO CARE ABOUT
· Building more engaged, loyal audiences directly on their sites
OUR PRODUCT IS
· The most widely used discussion platform online
THAT PROVIDES
· An “engagement management platform” for publishers, and
· direct reach into millions of engaged community participants online
UNLIKE
· Social networks, which don‟t properly serve the needs of publishers
· Or white-label software, which doesn‟t provide the wide network reach of users

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Problem - Summary
• Is it 4 U?
– Unworkable
– Unavoidable
– Urgent
– Underserved
• Is it blac and white?

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Ideas… can now be applied!

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Ideas – fit to problem…
4 U
Blatant
Critical

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Agenda - Solution
Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution

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Solution

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Startup opportunity?
• Faster
• Cheaper
• Better

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What is your compelling breakthrough?
Break something!
3 D

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Breakthrough opportunities…
• Discontinuous
innovation
• Defensible technology
• Disruptive business
model
3
D‟s

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Startup Secret: Pick a BIG fight!
• It‟s often as much work going after a small
fight…
• Big problems often = Big opportunities
At North Bridge we look for “Game Changers”

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Agenda - Evaluate
Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution

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Qualitative evaluation
Before After
Acute Pain

Absolute Joy


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Qualitative evaluation
Before After
Acute Pain

Absolute Joy

Vitamin vs. Penicillin

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DISQUS – Value Prop for Publishers
BEFORE AFTER
NEED SOLUTION
· Generic or white-label community software
· Or using social networking integrations
· A way for publishers to own their users
· Control, privacy, and monetization ability
· Community platform that is connected in a network
· Publisher-centric platform that allows for max control
· Easy to use Disqus integration
· Community platform plus revenue potential

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uTest
• For companies with web or mobile apps
• Who are dissatisfied with apps that work as
expected in the QA lab, but not in the hands of
end users
• Our in-the-wild testing
• Enables them to test their apps under real-world
conditions
• Unlike outsourced testing, which merely moves
the QA lab to a cheaper part of the world, but
doesn‟t actually improve app quality 34

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Before & After
Before: Test In The Lab & Hope
Testing inside the lab is vital. But today‟s web & mobile apps require a new approach to
augment lab testing: in-the-wild testing
After: Test Where Your Users Are

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Quantitative Evaluation
• Introducing the gain/pain ratio
Gain Pain

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“Gain/Pain ratio”
• The gain delivered to the customer
vs.
• The pain and cost for the customer to adopt
Gain Pain

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Gain
Gain Pain
• Revenue
• Cost savings
• Time
• People
• Competitive advantage
• Reputation
• Etc..

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Pain
Gain Pain
• Find (See)
• Try
• Buy
• Implement
• Deploy
• Own – eg TCO

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• Gain from uTest:
– Scale infinitely and immediately
- From 3 testers, to 30, to 300, and back to 0
– Lower total cost of testing
- EG: SMBs - unlimited testing for ½ the cost of one FTE
– Test under real-world conditions
- Live testers, real devices, imperfect conditions… in-the-wild
• Pain from uTest:
– More testing reports, creating more work
- Takes time to re-produce, vet and rate 50+ bugs
– More collaboration, creating more oversight
- Coordination between in-house & crowd testers
• Goal:
– Maximize in-the-wild testing, while minimizing overhead
uTest: Gain vs. Pain
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Inertia
Gain Pain
• Switching costs?
• Default = do nothing
• Alternatives?
• Good enough =
good enough!
• RISK on a startup
Inertia,
RISK

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What‟s the right ratio?
Gain Pain
Inertia,
RISK

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“Gain/Pain ratio”
• > 10 to overcome
– Inertia
– RISK
Inertia,
RISK
Gain
Pain
>10

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• Tough to quantify precisely, but here’s what we’ve learned
Gain vs. Pain Ratio
Gain Pain
Cost Savings: 10X
Lower Escape Rate
by 75%
Make Testing Mirror
User Base
Launch Confidence
Higher Quality Apps
vs.
Increased Overhead
5:1
on cost basis
20:1
on cost + value basis

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• Test latest version of Google Chrome across 300
highest trafficked URLs on the web
Traditional Outsourcing vs. uTest
Testers 8 Testers 30
Hours / Tester 40 Hours / Tester 10
# of Days 5 # of Days 2
# of URLs Tested 300 # of URLs Tested 300
# of Discovered
Issues
19 # of Discovered
Issues
129
Price $15,000 Price $10,000
Price-per-Issue $789 Price-per-Issue $78
Sample Customer ROI

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Gain/Pain ratio
• Revenue
• Cost savings
• Time
• People
• Competitive advantage
• Reputation
• Etc..
• Inertia
• Switching costs?
• Default = do nothing
• Alternatives?
• Good enough =
good enough!
• RISK on a startup
• Find (See)
• Try
• Buy
• Implement
• Deploy
• Own – eg TCO
Inertia,
RISK
Gain
Pain
>10

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Example - Apperian
 Increase revenue by 40% at counters
 Roll out 17,000 iPads
 Deliver worldwide no IT touch required
 Saved $2.5M+ in direct IT costs

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Startup Secret…
• Disruptive innovation
Yet..
• NON disruptive adoption

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Akiban - Value Prop
• For Software-as-a-Service (SaaS) providers
• Who are dissatisfied with their DB
performance and its inability to manage new
and complex data
• Our product is a unique database leveraging a
patented „SQL‟ and „NoSQL‟ architecture
• That provides 10-100X performance,
compelling new search features and real-time
actionable insights.
• Unlike NoSQL solutions that require a re-write,

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Akiban – Gain Pain
• 10x -> 100x performance improvement
• NO change to applications
• NO risk deployment (replicated data)
• Customers Gain/Pain ratio = 10 to 100
– Case study:
• Doubling revenue with Akiban
• Unworkable alternatives
– rewrite and lose revenue, with unsure outcome

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Agenda – Build
Evaluate Build
Gain Pain
Value
Prop
Define
Ideas
Problem
Solution

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Value Prop
• For (target customers)
• Who are dissatisfied with (the current
alternative)
• Our product is a (new product)
• That provides (key problem-solving
capability)
• Unlike (the product alternative)

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Diagnostics For All (DFA)
• For those in the developing world
• Who are dissatisfied with limited access to
diagnosis
• Our product is a patterned paper-based
diagnostic technology
• That provides low-cost, easy-to-use, point-of-
care diagnostics
• Unlike no diagnosis

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DFA
Before
Need
After
Solution
53%
of Rwandan women
cannot afford healthcare
26%
of Rwandan women
live too far from a hospital
[1] National Institute of Statistics of Rwanda (NISR) [Rwanda], Ministry of Health (MOH)
[Rwanda] http://www.measuredhs.com/publications/publication-fr259-dhs-final-reports.cfm
Point-of-care
Minimal training required
Cost = 1¢
Diagnosis by telemedicine
Image: http://www.trust.org/alertnet/news/alertnets-top-20-big-ideas-that-dont-
cost-the-earth/

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DFA Gain / Pain
• NO current solution => huge
• NO infrastructure required
• NO training required
• NO time required
• Customers Gain/Pain ratio = ∞

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DFA Example
At-risk pregnancy
Liver function
• 8 million affected globally
• conducting ~700 person
trial in Vietnam
• test for ALT/AST enzymes
• cost: $14 v. 1¢ (DFA)
Child nutrition
Small farmer support
Customer ‘pain’ is real pain

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Build around - YOU...
• What problems do you understand uniquely
well?
• What solution can you deliver uniquely well?
• What kind of disruptive business model can
you bring?

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Summary
1. Define,
– 4U Need (Unworkable, Unavoidable, Urgent,
Underserved)
– 3D Solution (Discontinuous, Defensible, Disruptive)
2. Evaluate
– Gain/Pain >10
3. Build
– Around YOU!

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Thank you…
• Apperian
• Akiban
• Disqus
• DFA
• uTest
Follow online
www.mjskok.com
@mjskok
/mjskok
linkedin.com/in/mjskok
bit.ly/mjskok-google
bit.ly/mjskok-youtube

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End Note
Most of the value of this presentation is in
the talk track on www.mjskok.com in the
resource
http://www.mjskok.com/resource/building-
compelling-value-proposition
Comments and questions are welcome on the
site.
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START UP
SECRETS
MICHAEL J SKOK
An insider‟s guide to unfair competitive advantage
Hi Harvard innovation lab
Building a Compelling
Value Proposition
mjskok.com twitter: @mjskok
North Bridge Venture Partners

Building a Compelling Value Proposition - Competitive Advantage for Startups