Years ago, Aaron Levie, the CEO and a co-founder of Box, wrote a post on TechCrunch entitled, “Rise Of The Enterprise ‘Toys’.” In his post, Levie talks about enterprise solutions that are initially viewed as “toys” and then they develop into “solutions”. As he puts it…
Students of the Innovator’s Dilemma know that a new technology starts out being just “good enough.” Often, an early solution only serves a niche part of the market with limited requirements. This naturally shields it from the incumbents’ radar, but what starts out as a nascent product attacking an unprofitable or unattractive market segment can quickly mature into a disruptive solution that becomes more than adequate for a broader population.
I completely agree with Levie’s thinking, and the success of Box (valued at over $2.7B, as of this writing) is an excellent case study for how such an approach can be successful.
Throughout the years, as I have worked with and consulted for many early-stage B2B startups, I have found that it is very difficult for many entrepreneurs, particularly those who have been in the enterprise space for a while, to think about developing a toy as they figure out how to penetrate the market. They often go after the big solution from the onset and end up having a difficult time experiencing much success. This is because having a solution mindset often results in trying to build a broad offering, which is difficult when you have limited resources. Also, communicating about a broad solution often diffuses the marketing message, which is not great when laser-focused messaging is critical to rising above the noise.
The approach I recommend is what I call, “delivering the smallest unit of value.” What is the smallest unit of value you can deliver to a segment of users/customers that is consistent with the broader vision you are trying to execute. Having this type of narrow approach will enable you to focus your development resources and your marketing messages.
I think it is important to note that taking a narrow approach initially does not take away from the ultimate vision of a company. But a company that doesn’t get started with a focused offering may never experience the early success they need to obtain the resources required to execute their long term vision.
Okay, so you might say that this all sounds good but how do you go about finding your smallest unit of value. Here is the framework I recommend:
Start with your vision. When a startup is initially formed, its founders usually have an understanding of the technology they want to build and how it will change the world. This can be considered the vision of the company.
Develop a list of “must have” needs your vision addresses. When developing this list, it is important to be critical and just include “must have” needs, not “nice to have” ones. Developing this list typically involves performing some market research; ideally, a mixture of qualitative interviews and quantitative surveys.
Develop at least one positioning statement for each of the “must have” needs. When developing positioning statements, I like to use the template presented in Geoffrey Moore’s landmark marketing book, Crossing the Chasm:
- For (target customers)
- Who are dissatisfied with (the current market alternative)
- Our product is a (new product category)
- That provides (key problem-solving capability).
- Unlike (the product alternative),
- Our product (describe the key product features).
This step in the process requires some creativity because it is being done, ideally, before the product is designed or built. It might make sense to develop more than one positioning statement for a particular need since there may be different approaches, from a product perspective, that can be taken to address a need.
Developing these positioning statements early in the process is important because it forces an organization to think about how they are going to talk about their offering, at a time when they have very few constraints. Most often, positioning statements are developed after a product is designed and built, and they end up being less than ideal since they are constrained by the product that was built.
Eliminate positioning statements from the list. Review the list of positioning statements critically, with the goal of reducing the number of statements. Questions to ask as you review the statements include:
- How easy/difficult is it to reach the target customer?
- Is the product description easy to communicate in a few words?
- Does the product category leverage any hot industry trends?
- How noisy is the market for the product category?
- How significant is the competitive differentiation?
Pick one positioning statement. It can be very difficult to get the list of positioning statements to just one. Sometimes, one statement will feel right and will jump out from the list. More times than not, however, coming up with the final statement involves a “gut feel.” No matter the process, the important thing is to come up with just one statement.
Start designing and building the product. Now that you have your one positioning statement and have an understanding for critical elements, like the target customer, the “must have” need you are addressing, and how you want to describe your product, you will be amazed at how easy it is to design and build your product. And later on, when you are ready to launch the product, much of the difficult positioning work has already been done and hopefully, you will just have to fine-tune your messages.
If you started to build your product before thinking about your smallest unit of value and your positioning statement, that’s okay. That is what most founding teams do. The earlier you can think about these things and interject this type of framework into your product development process, the better off you will be in the long run.