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E245 Value Proposition Ann Miura-Ko January 2012

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Some Announcements Asking for Email Introductions. Send the following: -Name of person to whom you want an intro -Why youd like to speak to them (e.g. they lead the IT security team at HP and we believe they might be an early adopter of our technology) -What questions youd like to ask (not the interview guide but topics to cover) -Blurb about your company

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Where we are

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

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Problem Statement What is the problem? How do you justify your existence?

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The Ecosystem (Customers) End User Day to day users May actually have zero influence in buying process Preferences and decisions influence or impact buying decisions The person who controls the purse strings or is in charge of the budget The buck stops here Influencer / Recommender Economic Buyer Decision Maker

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The Ecosystem (The Rest) Group or organization that installs, distributes or sells the product in your place Suppliers Channels Government Partners Entity that provides parts or services needed to manufacture your product Organizations responsible for monitoring trading and safety standards related to your product Other entities that provide products related to delivery of your final product

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Key question to test: Is your map of the ecosystem correct and complete?

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Competition What are customers doing today? Are competitors threatening to offer better price or value? How saturated is our market?

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Market Type ExistingResegmentedNew CustomersKnownPossibly KnownUnknown Customer NeedsPerformanceBetter fitTransformational improvement CompetitorsManyMany if wrong, few if right None RiskLack of branding, sales and distribution ecosystem Market and product re- definition Evangelism and education cycle Market Type determines: Rate of customer adoption Sales and Marketing strategies Cash requirements

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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

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Resegmented Market Characteristics Low cost provider or unique niche Eliminates factors on which the industry competes Raises certain factors well above industry standards Risks: Incumbents will see this as their turf Continuing innovation

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New Market Characteristics: Customers dont exist today Risks Life as is is good enough Sizing the market Accessing potential customers and getting effective feedback

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Key question to test: How aware is your ecosystem of the existence of the problem?

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Technology and Market Insight Technology Insight Moores Law New scientific discoveries Typically applies to hardware, clean tech and biotech Market Insight Value chain disruption Deregulation Changes in how people work, live and interact and what they expect

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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 and will impact distribution 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.

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Examples of Technical Insight Topological analysis enables highly dimensional data to be analyzed without predetermining number of feature sets Mass produced components can be used to create a miniaturized fluorescence microscope

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

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Types of Product Value Comes from Technical Insight Comes from Market Insight Smaller More Efficient Faster Simpler Lower cost Better Bundling Better Branding Better Distribution

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Key Question: Is there a reason this idea is uniquely poised to take off today?

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How do I test value proposition hypotheses?

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Define Product Hardware Service Knowledge Resources Networks Data

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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

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The Art of the MVP A MVP is not a minimal product But my customers dont know what they want! At what point of I dont get it! will I declare defeat?

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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

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The Value Proposition Pivot Originally: Craigslist for colleges Became: Textbook rentals Originally: Video dating site Became: Video uploading site Originally: The Point (Collective action site) Became: Mass couponing site