What is the Value Proposition of a Chicken?
Entrepreneurs are failing en masse in their single most important task: creating something that the market actually wants. In an orgy of hubris, billions of dollars are squandered each year on harebrained ideas that have little chance of success. Entrepreneurs and VCs could do themselves a huge favour by learning how to overcome delusional thinking. The story of Frank Perdue — the “Steve Jobs of Chickens” — shows how the discipline of objective research can clarify value propositions, generate fortunes, and change the course of industries.
As a society, we worship entrepreneurialism: 65% of young people want to start their own business, about $50 Billion per quarter is poured into startups, and cities around the world are clamouring to create innovation precincts. But beneath all the glitter is a pattern of chronic failure. Of the 100 million businesses launched every year, about 90% will fail. There are many reasons for this: poor marketing, stronger competition, the wrong team, a lack of capital, etcetera. But the number one reason for failure, by a long way, is lack of market-need. This one factor alone accounts for 38 Million failures per year. That’s 4,000 failures per hour. One per second.
Are entrepreneurs and their backers suffering some sort of mass hysteria? How can so many billions be squandered on harebrained idea after harebrained idea?
The source of this madness lies within our biology. Simple decision-making mechanisms allowed our ancestors to forage for food, avoid nasty creatures and select a mate without having to overthink. “That valley looks like a good spot to find food.” “Look out — snake!” “She’s interested in me.” These adaptions are the root of cognitive bias. In the savanna, such heuristics served us well. But in the jungle of business, they can be a huge disadvantage. Optimism bias, the belief that “my idea won’t fail”, is a particularly pernicious trap as the statistics clearly attest.
If we are to create a product or service that the market actually wants, the most important thing we need to know is what value means to the customer. Get this wrong and nobody buys.
A range of cognitive biases acts to distort our perspective of customer value. We filter out information that doesn’t resonate with our internal model (confirmation bias). We rely heavily on our initial assumptions (anchoring). We are heavily influenced by trends (bandwagon effect), and so on. These biases create serious flaws in business models.
To overcome bias, we need to hack evolution. Fortunately, there is a way. Tools such as the Jobs To Be Done Framework and the Value Proposition Canvas can be enormously helpful; but, be warned: these tools rely on fallible human minds. If cognitive bias is not deliberately counteracted then customer value might not be accurately defined. The best way we know to overcome bias is through deep research and experimentation.
A terrific lesson in deep customer research comes from an unlikely place, a chicken innovator. In the same way that the computer industry was irreversibly influenced by Steve Jobs, so too was the chicken industry by Frank Perdue — the “Steve Jobs of Chickens”.
In the late 60’s Frank Perdue was running the family chicken business A.W. Perdue & Son, raising chicks and growing feed which he sold to farmers. The industry was changing with the arrival of processing companies that froze chickens for distribution. They dominated the market and were squeezing down Frank’s profits. Frank wanted to cut out the middleman, process the chickens himself, and sell chickens directly to grocery stores. This was a bold and ambitious plan. He was taking on giant companies with far more resources and well-established distribution channels. They could have squashed him like a bug. His only chance was to compete on quality.
Frank then did what many entrepreneurs don’t do: he went on a journey of discovery to find out what people value in chickens. In Frank’s words, “before we processed any chickens, I spent ten weeks on the road talking to buyers and trying to figure out what they wanted. What kind of box? What kind of wing tag? What did they want that they were not getting? I had about 20 questions and returned with two thick notebooks full of answers. I used to call on a lot of butcher shops because they’ve always been quality experts.”
Frank didn’t just go to a few butchers, or talk to a few customers, to validate his ideas. He pounded the pavements of New York for over two months. He filled two thick notebooks. He distilled a list of 25-items that represented what butchers and their customers valued most in a chicken — 25! This is a remarkable achievement. Most people would have difficulty naming more than a few value-attributes of a chicken. Through exhaustive objective research, Frank hacked cognitive bias.
Once Frank had determined the value proposition of a chicken, only then did he set about the task of innovating.
- One of the items that people preferred their chickens to have was a golden yellow hue, so Frank and his team experimented with lots of different feeds until they came up a mix laced with marigold blossoms that produced the optimal colour.
- People didn’t like having to remove little wing hairs before cooking, so Frank and his team designed and build special blow torches to singe the fibres but leave the skin unaffected.
- People didn’t like bruised meat, so they established strict bird handling protocols.
- People valued tender white chicken meat, so he crossbred a Cornish male with a White Plymouth Rock female to create a proprietary Purdue chicken with lots of breast meat.
His rigorous approach to research and innovation delivered Frank a better quality chicken. The next job was to market it.
He did something which was rare for CEOs back then. He went on television to ram home his message. With the tagline, “It takes a tough man to make a tender chicken”, he created some of the era’s most iconic commercials.
Even though Frank was no Hollywood Star — he had a squawky voice and even looked like a chicken, according to Oprah — he used his deep understanding of value to draw a sharp distinction between his and his competitor’s products.
In his commercials he talked about how “Perdue chickens are better fed than many people”; how his competitors kill freshness by freezing their meet, poignantly using a competitor’s frozen chicken to hammer a nail into a lump of wood; how Purdue’s 65 quality checks are superior to the government’s mere 43; how dark bones inside a chicken are signs of poor quality, theatrically putting a competitor’s chicken bones into an envelope and demanding a refund.
Purdue understood what people valued in their chicken, innovated around that understanding, then based his marketing on it. The profit that Frank garnished harvesting customer value was substantial. He charged a premium of 10 to 30 percent over the competition, sold chickens in volume, and changed an entire industry.
In conclusion, if you want to maximise the probability of a business’s success you will need to innovate around what customers actually value, not what you think they might value. To do this you need to overcome cognitive bias, which is very difficult. Frank showed the way, via exhaustive customer research. Proper research will challenge your assumptions and either harden or destroy your business model.
It is hard work, and not for the chicken-hearted.
Originally published on LinkedIn and the basis of a lecture for the Sydney School of Entrepreneurship, November 6, 2017.
