Your value proposition is never a no-brainer

​I spent a long and fascinating day this week talking about a string of early stage companies. I watched pitches from four interesting companies. I listened to reports from a portfolio of startup investments. Including one that has failed in the recent past. Then I had an intense meeting with two friends about the plans for a new business. All the lessons from the day would amount to a good snapshot of the whole Scottish startup ecosystem.

In this post I want to focus on just one. Many of the conversations turned on sales. How could these companies generate their first revenue? Or grow fast enough to reach scale? No surprise. At two separate moments this discussion went deeper. The real problem emerged. How to focus on and clarify the right value proposition?

Why is Startup value proposition so important?

​Value proposition is one of those buzzword bingo phrases business people use. It appears on the business model canvas. And it is used by McKinsey partners and Harvard Business School graduates. What do the fancy words mean?

Wikipedia says: A value proposition is a promise of value to be delivered and acknowledged and a belief from the customer that value will be delivered and experienced.

This seems a neat summary so let’s work with it for a minute. At the stage of proposition value is a promise from the seller and belief by the buyer. It matters because without that promise, your business has nothing to sell. If belief is absent, no customer will ever buy.

That is why it precedes actual selling. There is no point in rushing out to hire sales people if you don’t have a clear statement of the value you will deliver.

In fact your value proposition is fundamental to the whole customer lifecycle:

• You need a value proposition to begin selling. Without it, any sales you do achieve are based on a false premise. This will catch you out fast. Principle 1: Do not hire sales people or make sales without a clear value proposition.
• The value proposition is the core link between your business and your customer. A common understanding of the value promised is the best basis for closing any type of sale. Principle 2: Put the value proposition at the core of each and every sale.
• You must then deliver the value promised. Or even better over deliver. If you fall short that customer belief will be damaged. The reputation and future of your business will suffer. Principle 3: All your product and all your customer facing activities should be aligned. to deliver your value proposition.

Once you add up these three principles it is obvious that value proposition is about more than sales. It is about what you offer and deliver to your customer. To get it right you need to know what your product does. What benefits it offers? Which customer will gain those benefits? How the value of those benefits compares to the price? (i.e. can you make money!) Value proposition is the heart of your strategy. As well as your sales.

This value proposition stuff is simple?

All the above sounds obvious. Even without the theory any sensible founder would take this approach. Yet I meet many business that are struggling in this exact area. More often than not they don’t even realise. Some are head down convinced they are on track and confident of success. Others are finding it tough. But can find almost any other reason for their troubles. Not able to raise enough money to compete. Customers are not yet ready for their solution. Shortage of senior talent to do the selling. There is an endless list.

So what makes a good value proposition? Let me illustrate first with a negative example.

Digital health is a bit of a passion of mine. I am CEO of an early stage health startup called Triscribe. In the UK health is a common source of poor value propositions. Digital and more traditional life sciences alike. The usual story runs like this.

1. We have identified a health problem. We have found a clever solution by lateral thinking. This means we can solve the problem cheaper/ faster/ better than existing solutions.
2. There is a survey which shows the cost of this problem to be [INSERT HUGE NUMBER]. This will save the NHS £[INSERT AT LEAST 500 million].
3. We need investment to bring this to market. Selling to the NHS will be tough but this is a no brainer.

This all sounds great. Yet in practice it is no use to anyone. It has at least 4 fatal flaws:

1. The company has not identified and confirmed real patient benefits. Money is nice but health systems everywhere like stuff that saves lives. Or at least reduces pain and suffering. The NHS is no different. Yes their resources are strained but patients still come first.
2. In any case the cost is just a survey. And unless the team includes an expert health economist it is hard to analyse how this is made up. You pill may be cheaper than the existing pill. That does not guarantee the whole solution is lower cost.
3. And this example gives no sign how the problem will be solved. The founder thinks they can provide a pill or some data or whatever. And just expect things to get better. Delivering medical care is a little more complicated.
4. And nothing. Nothing. Nothing. Nothing. Is a no brainer. Nowhere. Never. No how. Until you have talked to real people who believe the promise you are making you do not have a value proposition.

What does great look like?

​I could wallpaper the Forth Bridge with more examples. There is no single solution to what a great value proposition looks like. Nor is there a template or model which always works. Or even works some of the time. I love listening to Guy Kawasaki, chief evangelist of Canva and tech marketing legend. He gives some great examples like:

“Our business will take off when kids film the effect of putting a pack of Mentos into a bottle of Diet Coke.” — YouTube value proposition.

“The secret sauce is going to be photos of cats scratching themselves.” Twitter value proposition.

I guess some people are just visionary. I am not. And I still don’t have a formula. The answers I look for/ hope for/ cry over include:

• I imagine I am a customer. Could I measure (or at least define) the value on offer?
• Is there a clear link between product features and product benefits?
• Are there specific measures of value?
• What else need to change for the customer to secure value from the product?
• What is the answer to the first question that popped into my head when the founder was talking?
• How will you share value with your customers?

The last question is often revealing. For example, think about the Kenyan mobile money system M-Pesa. One key to its success is ultra low rates for money transfer. Even with 20 million users it is far from obvious that Safaricom makes money from this product. However, the mobile operator has a dominant 60% share of the fast growing Kenyan market. Kenyan citizens get the value of low cost and extreme convenience. Safaricom has a loyal and valuable customer base.

Where does this fit in your business?

​I hope its clear why value proposition is so important. Your whole business strategy depends on it. You need it for everything you sell. It will change with time and as your markets needs and expectations evolve. I don’t think there is a template or a method which answers the question. I am suspicious of anyone who says there is.

I would offer two pieces of advice. Always think and reflect on the two key questions: What promise of value are you offering? Do your customers recognise and believe in that value?

These are not easy questions. If you are not sure of the answers, get out and talk to people. Best talk to some customers and potential customers. Otherwise talk to advisors, mentors, non-execs or anyone who will listen. There is no more important question on which to seek advice. By all means avoid the business jargon of the words value proposition. But keep the concept at the heart of your strategy.