“Your idea doesn’t mean anything”

How I learned about Value proposition

Wantrepreneurs (should I copyright this?) usually have misconceptions about what it is that actually makes their project interesting. We all think we have smart and bright ideas that, if we had the time, means and resources to work on, could turn into the next big thing. The next Procter&Gamble, Amazon, LVMH or Dangote Industries. I have personally woke up to such ideas every morning for the past two decades. I am barely exagerating.

But what makes your project is not just your idea. The idea means absolutely nothing until it’s well thought out, put into context and is completed by other ideas and hypotheses about the value it would potentially add. More importantly your idea doesn’t mean anything until it has found its market and you have identified potential clients. You find it out real soon after you start working on it.

We usually base our first analysis on hypotheses that will eventually reveal false. Then we have to reconsider and re-evaluate the entire thing. Only when one makes the assumptions that are closest to reality and when one can actually validate them by engaging with their projected audience, then we have a business model.

The model is to be executed. It defines your future company. The model is your project.

The world of entrepreneurs is the one Saint-Thomas. Nobody believes.

[Translated from French]

What is the model?

One of my teachers defines the business model (thus the company) as a coherent tryptic Value Proposition — Market segments — Product or Service

The trio is what positions your company on the market. Placing your value on your product itself is usually a mistake, especially when you are trying to innovate. Each of these aspects of your project has to be gaged, put in context and thoroughly thought out to fit with your entrepreneurial goal. Each aspect of the trio can be the source of an innovation. That’s why several companies can coexist on a given market with very similar products or services. Their differentiation and their appeal to their clientele lies on other aspects, maybe less tangible or visible.

A few words about Value Proposition

I have learnt that the value that your company adds in people’s lives should not be a simple presentation of your product’s features or the efficiency of your service. That kind of value proposition is usually quite weak. Why? Because people are intrigued by new stuff but remain comfortable with the way they used to do things.

Even when what you are producing actually addresses one of their very important functional needs, the response is usually of the type “I have lived with this issue and worked around it for years. Why would I bother buying or learning your new way”.

That’s why experts advice to situate your value proposition at a deeper level than functionality and practicality. Differentiation criteria with the other companies can not simply be “better than X / Different than Y”. Because your differentiation is still a reminder of what the other guy does and another argument for those who are not adept to change. You have to aim at being the “ONLY ONE TO…”

How do you that? By walking into your shoes and going deeper into your analysis to find what the end game is to them. What’s the ultimate gain they have from using your product or from doing business the way your model recommends? Only when you think that way you get to address the most important needs in the client’s personal Maaslow pyramid. These needs are more than functional. They are emotional or nostalgic, they might even be life-changing. The act of buying is thus more natural to them. It becomes evident. Your product or service just went from “Customer Delight or Nice-to-Have” to an absolute “Must-Have”.

Examples

Apple introduced the Macintosh to the world with an ad during 1984 Superbowl. The ad did not show the product, at all! But they shew their complete difference with existing solutions (that they kind of diabolized nonetheless with a Big-Brother like representation) by representing themselves with a young attractive womand dressed in a colorful manner, being completely free and joyful among a mechanic crowd of unhappy factory workers who all look alike and are lobotomized by a bossy figure on a huge screen.

Fedex came into a market dominated by a generalist giant at the time that could deliver all sorts of packages for a range of rates and an array of delays. They initially tried to face the competition upfront, only by specializing on small packages. Only with that specialty and a cheaper price, they were able to have some activity but not enough to grow. It’s only when they oriented their communication on the “small packages that need to get delivered overnight” that they caught a substantial market share. Same service, same or more expensive prices…but different value proposition = different model, hence different conpany, different revenues. They were not just another delivery firm, they were therefore THE professional overnight delivery company.

«FEDEX, When it absolutely, positively has to be there overnight »

Conclusion

Your idea does not mean anything!! We all have ideas. Taken alone, they have no value. Grow them, synthesize them, put them in context. Build a business model around them. Analyze your clients’ potential use cases, validate your hypotheses and go deeper into the value proposition so you can touch on the client’s real end game. The very undoubted reason they will pay for your product. Now you have a business model, Now you have a potential company.

The majority of this post comes from classes that I got from mr. Jacques Neirynck. I believed it was worth sharing. I thank him for the lessons and I am grateful for the knowledge that came out of it. It made me question the way I articulated my current projects but that’s obviously for the good of the future business. This post is the bulk of my recollection and understanding of the skills he was transmitting. It’s definetely better to ask yourself the right questions early and build the business on the right foundations.

Feel free to comment if you want to add or discuss anything on this topic. I also have bibliographic references that I can share. Clap if you appreciated the reading.

Follow, Tweet, Retweet, Share,.. All that good stuff

:)