Okay, well thank you Marcus and Mark, and good afternoon everyone
who's joining us in Germany.
What I'd like to do today is talk with you about this concept of value
propositions.
And what I'd like to do in our time together, which is an hour, is to
cover these three basic areas.
I'd like to talk about customer value propositions.
What is a value proposition and what makes one persuasive?
I'd like to share our management practice research with you on that.
And I'd like to connect up this idea of customer value propositions
with the idea of customer value management, which is providing proof
or evidence of the superior value of our offering that customers seek.
Then what I'd like to do in our final segment is to talk more
specifically about tailoring value propositions as a tech startup.
And this draws on the management practice research that we've been
doing recently in Germany, as well as this past week here in the
United States.
Value propositions is a term that probably was used in our consumer
marketing counterparts earlier on, but relatively recently it's been
more used in business markets as well.
And when we started to hear it being used in business markets, being
naturally curious, we asked supplier managers, what do you mean by
that?
And we were struck by how little agreement or specificity there was in
what a value proposition is or what makes one persuasive.
So this was an opportunity for us to do some management practice
research where we went out to interview customers in the United States
and in Europe, and what we were looking for were customer managers who
were most often on the receiving end of value propositions.
And we found from our research that those were two types of customer
managers.
First of all, not surprisingly, were purchasing managers.
Second, though, we found was that new product development project
managers were the second type of customer manager that was most often
on the receiving end of a value proposition.
And that's because when you're leading a new product development
project for your company, you're naturally interested in looking out
to the supplier community to see what's new or innovative there that
you might incorporate into the offering you're responsible for making
for your company.
So when we talked to them, we found that there were three basic kinds
of meanings that were being used for this term of value proposition.
Before I get to those, what I'd like to show is a little picture that
kind of captures, I think, how value propositions are thought of still
by many suppliers.
I was out recently in the wine country in Oregon, and I hugely enjoy
Pinot Noirs.
And I happened upon this company as I was driving down the road, and I
thought, oh, I've got to get a picture of this.
This company, Oregon Trust, is a company that makes wood support
structures for buildings and others.
And I'm not a language expert or English teacher, but as I understand
it, those three dots before we're just better are called an ellipsis.
And what that means is that it's used in English to indicate
information that's been left out that's considered not important.
If you think about that, it probably is better for us to understand
why, what's the point of difference that makes Oregon Trust superior
to its competitors?
But you see there, they've judged that not to be worthwhile, and
instead, the important part is, we're just better.
And of course, you think about that, who sees this most often?
It's the employees of Oregon Trust when they're coming into that
facility.
And so when we're thinking about value propositions, all too often, as
suppliers, we're coming from that point of view that we come up with
value propositions that make us feel better about ourselves and our
offerings, rather than really addressing the customer's perspective.
Now, when we looked at the research, as I mentioned a moment ago,
there were three possibilities that came up for the basic meaning of a
value proposition.
And the first one is called all benefits.
So this is the value proposition as being all the benefits the
customer receives from a market offering.
But before I go into this, I think it's important to note that for
many tech startups, they don't even get to all benefits.
Instead, their value proposition is really about focusing on features,
and primarily those of their innovative technologies.
So rather than driving features to benefits, so rather than talking
about what it is, talking about what it does for the customer, we find
from our management practice research that many tech startups are more
comfortable talking about their technologies and what they are, as
opposed to really delving into what benefits those might have from the
customer's point of view.
You see here then what type of question that answers, and why this
turned out in our research to be the most prevalent meaning of
customer value propositions, I think is because it places the least
demands on our sales people and our marketing people.
All we need to really know is our own offering.
But of course, a potential pitfall of this is what we call benefit
assertion.
Just because we have a feature that's different from that of our
competitors, does not necessarily make that a benefit for that
customer.
And what we've heard from our management practice research, from
talking with customers, is that all too often tech startups are
focusing and talking about these features of their offerings, but even
because they have that, because they don't as well understand the
actual problem that the customer has, or how that technology will fit
with other things that the customer needs to do to realize that.
They often are asserting more benefits for the technology than what it
might be.
Now more importantly here also is that if you talk about something as
a benefit, well, that may be useful, but is it a point of difference
where you're offering a superior, or is it in fact a point of parity,
which would be essentially the same as that of the next best
alternative in the mind of the customer.
And if we don't know whether a benefit is a point of difference or a
point of parity relative to that next best alternative in the mind of
the customer, we might unwittingly be stressing to the customer how
our offering is the same as that next best alternative.
So it's really important to understand is it a point of difference or
is it a point of parity.
So when we move to the second possible meaning of this, this is the
favorable points of difference.
So now we have determined that those are points of difference in favor
of our offering, and we focus on those.
But just like all benefits, more is better.
The more that we have, the better we feel.
Likewise here, the more favorable points of difference we have, the
better we feel.
And again, you see the question that this answers, and I think this is
a more relevant question, because most customers, if they're going to
decide on making a purchase, are going to be considering some other
alternative that they would value as well.
So even if we, with our technology, get them interested in making a
change from the status quo, once they make that decision to change
from what they're presently doing, they're going to also then look
around and say, well what would some other possibilities be for change
besides what this particular supplier is offering.
So to do this, of course, means we have to have a better knowledge of
our own market offering, and the next best alternative offering.
And of course, that can be challenging for many tech startups.
A potential pitfall with this kind of value proposition is what we
call value presumption.
Just because we have a favorable point of difference, doesn't
necessarily make it valuable to the customer.
We had a recent example of this, and this was where a company was
looking for some power factor correction integrated circuits for a
control device that they were making.
And we were looking in the supply community, and there were two
suppliers.
We'll call them Supplier A and Supplier B.
Supplier A was charging 45 cents per IC.
Supplier B, 35 cents per IC.
The customer was anticipating buying 5 million units.
Well, unbeknownst to the two suppliers and their salespeople, the
customer had built a customer value model where they had looked at
what were the points of difference between these two ICs, and what
were they worth to their particular company.
They found that Supplier A's offering was worth 15.9 cents per IC more
than Supplier B's.
So the engineers who were involved in this project recommended to
purchasing, please go ahead and buy Supplier A's ICs at 45 cents per
IC, because even though they're 10 cents more than Supplier B's,
they're worth 15.9 cents more than Supplier B.
Well, the purchasing manager, being a clever person, he brought in
Supplier A's salesperson and Supplier B's salesperson and asked them,
well, what's the source of your superior value?
Well, Supplier A, being unaware of the two major value drivers for his
integrated circuit offering relative to B, said it was his dedicated
personal servicing of the account that was the point of difference.
Well, that turned out, in fact, to be a favorable point of difference.
It was worth only .2 cents per IC.
He was unaware of the other two major value drivers that accounted for
the other 15.7 cents of the superior value of his IC offering over
that of Supplier B.
Well, when the engineers came to tell the conclusion of their value
model analysis to that purchasing manager and recommended buying from
Supplier A for 10 cents more per IC, he smiled at them with that
fesher cat smile that seemingly purchasing managers learn over years
of these type of experiences.
And he said, well, that's interesting to learn what you've done in
your customer value model.
But I think you'll find it also interesting to learn that, meanwhile,
I've negotiated a price reduction with Supplier Salesperson A from 45
cents per IC to 35 cents per IC.
So you see there, what just happened in that one transaction with one
customer?
10 cents per IC times 5 million units, that's $500,000 of incremental
profit right out the door because that salesperson didn't understand
the sources of the superior value and was stressing one, probably
suspecting that his dedicated personal service wasn't worth the 10
cents per IC.
When push came to shove with the purchasing manager, he caved in and
reduced his price to the 35 cents per IC.
Let's look at the third one.
This is one that we recommend to suppliers.
And we call this one resonating focus.
Now, in contrast to the previous two, here, more is not better.
Less is more, provided we hit on what matters most to that customer
manager.
And that's why we call it resonating focus.
Because we focus on what matters most to that customer manager, they
say, aha, here's the supplier that gets it.
They understand my business.
And that resonates within them.
So that's why we use the term resonating focus.
So here, the value proposition is the one or two points of difference
and perhaps a point of parity whose improvement will deliver the
greatest customer value for this foreseeable future.
So you think about this.
What is most worthwhile?
Well, is it that number five priority or that number seven concern of
that customer?
No.
It's the top priority or the top concern that that customer has.
And by priority, I mean, where does that customer want to grow their
business?
And by concern, I mean, what's the uppermost problem that that
customer is experiencing in their business?
So what we want to do with the resonating focus value proposition is
to understand what that top priority or top concern of that customer
manager is, and then be able to show them how our offering will help
them achieve their top priority or eliminate their top concern better
than the next best alternative will do for them.
But of course, to do this, again, a pitfall is then we're going to
have to require some customer value research, because we'll have to
understand what are these points of difference of our offering
relative to the next best alternative for the customer, and what are
those differences worth in monetary terms to those customers.
Now, I'd like to give an example though.
Each of these pitfalls, of course, are something we have to consider.
But of the three, I would rather have this as a pitfall than the other
two.
So let me give an example for why I believe this.
Now, this is an example from a resin supplier.
For those of you not familiar with resins, resins are the backbone of
coatings, or what people might call paint.
But within the industry, they're called coatings.
And this particular example comes from architectural coatings.
So these are coatings or paint that's used to paint commercial and
institutional buildings.
So universities, like where we're sitting now, hotels, hospitals, and
so forth.
Well, this supplier realized that their customers who are making these
coatings were coming under more pressure to become environmentally
compliant and reduce these volatile organic compounds or VOCs in their
coatings.
You might think of these as solvents, which are transporting the
coating to the surface, and then they evaporate, leaving the coating
on the surface.
So doing some innovative research, this supplier came up with a new
resin.
And so the initial value proposition was that the new resin provides
coatings producers with volatile organic compound compliance while
retaining the performance of a similar non-compliant resins at a
somewhat higher price.
Well, to their surprise, when they visited their customers, the
coatings producers, they got a very lukewarm or tepid response from
those customers, particularly from the commercial managers at those
customers.
They sort of said, yeah, this is all nice to know.
We're happy to know you have done this and this is available.
Until environmental legislation compels us to change, we're going to
continue with what we're doing.
Well, this supplier was taken aback by this and forced to rethink
their new offering and its value proposition.
What they did, importantly, was they went out and did some customer
value research.
And not only do they do this at their immediate customer, the coatings
producer, but more importantly, they did it at the customer's
customer, which are the commercial or professional painting
contractors.
They went and joined their industry association.
They took courses on how do painting contractors use software to
estimate jobs, like what does it cost to repaint this building we're
in?
It's a university building here at Northwestern University.
What would it cost to do that and what should they bid?
They also went out on jobs with the crews of the commercial painting
contractors to see what they were doing and how the coatings were
used.
Well, what did they discover?
Was remaining environmentally compliant the top priority or the top
concern of the commercial painting contractors?
No, it wasn't.
What was it?
Not surprisingly, the two that came up were, show me how my crew, when
they're out on the job and they're using a roller or brush and they
put it into the coating and they remove it, there's more coating on
that.
That's called film build.
So when we put that on the wall, more paint is put on the wall with
each stroke.
Second concern or priority of the commercial painting contractor was,
show me how my crew can paint this room and then they can go off and
paint somewhere else and come back by the end of their shift and put a
second coat of paint on this room and finish off this room.
That's called close time.
Close time is how quickly after you put one coat on a surface, can you
put a second coat?
Well, why were these the top concerns or top priorities of the
commercial painting contractor?
Well, further analysis revealed that the price of the coating was only
15 % of the cost of that commercial or professional painting
contractor.
Of the remaining 85% of the cost, the highest component was labor
cost.
And that's the primary concern of that customer.
So what they did is they went back, and I'm not a technical person,
but they tell me with a minor tweaking of that resin, they were able
to produce a coating that would deliver on those top concerns of the
professional painting contractor.
So what that did is led them to this revised value proposition.
The new resin enables coatings producers to make architectural
coatings, providing higher film build, and the ability to put on two
coats within a single shift, thus increasing painter productivity
while also being VOC compliant.
Now you notice here, the top priorities and top concerns are coming
right to the front.
You notice where did VOC compliant come in?
In the beginning, that's what was being stressed.
Now it's being put on almost as an afterthought or tagline.
So you see how this shifts in terms of when we go to this idea of
resonating focus.
Now they went from getting a lukewarm or tepid response from the
customers, to getting a 40% price premium for that tweaked resin.
So maybe it's not such a pitfall after all, having to get out there
and actually gather some evidence about the value of our offering for
that customer.
So, let's continue here now.
What does a persuasive customer value proposition do, you might ask?
Well what we found was that persuasive value proposition earns the
supplier the chance to engage the customer in a conversation about the
market offering.
So it will get you that initial meeting with the customer.
But what we found from our management practice research was that
increasingly, every prospective supplier running in the door, making a
value proposition to the customer, says something to the effect of,
our product will save you money.
I don't know what it is about purchasing managers, whether it's having
that dry or wry sense of humor is what leads them to become purchasing
managers, or if it's yours of being a purchasing manager, give them
this dry or wry sense of humor.
But a purchasing manager in one of our interviews in Rotterdam, he had
a good quip here.
He said, you know, with all these supplier claims of the money they're
saving me, it's a wonder I have any cost left at all.
But he said, you know, whenever they start to make these claims, I
start to ask a few follow-up questions.
Let me believe what they're telling me true, or, as he put it, are
they telling me fairy tales, sprokjes in Dutch.
Well, he says, I ask questions to see do they have the people, the
process, the tools, and the experience to let me believe what they're
telling me.
But if they can't answer those questions, it leads me to question
whether they really can deliver what they're saying.
And in his conclusion, he said, you know what, most suppliers are
telling fairy tales, meaning they're not able to provide any
supporting proof or evidence of the claims they're making.
So in a world where everyone coming in is making these claims, you
have to be careful that you can provide, you've thought through and
gathered whatever support you can on the claims you want to make for
your innovative offering to those prospective customers.
Because you might be able to get that first meeting, but the question
is, are you going to be able to get that second meeting?
Well, to do that, to get that second meeting, you need to look to
customer value management, where suppliers are providing this support
or evidence for their offerings relative to the next best alternative.
Because this is what we need to substantiate, to prove those
resonating focus value propositions.
So depending on the situation, we might have value case histories, or
value calculators, or we might have justifier value cases to persuade
the customer to try it.
Now for most tech startups, it will be in this first category, they'll
be looking for the pilot program customers to work with them, and then
give them data on their experience using their innovative offerings,
so that they might be able to then create these value case histories,
which might name those customers, or might use disguised names for
those customers, but would provide some proof or evidence for the
claims that the tech startup is making for their innovative offering,
and why those customers should purchase that relative to the next best
alternative that they're considering.
So, let's consider a best practice example here.
Some of you may know this company, some of you may not be familiar
with it.
Sunoco is a materials company based in Hartsville, South Carolina.
And they're a very clever company.
They take products that many people think of as commodities, so a 55
-gallon steel drum, for example.
They do some clever material science, and they introduce a new
offering with this technology, and have great success.
And it's a very profitable company.
Well, their CEO, Harris Delos, Jr., had an analysis done that showed
that the profitability growth of the company was slowing down.
Now, as a CEO, you never want to be CEO when either the sales or
profits decline.
You want to keep those going up in a measurable way.
And that's why Jack Welsh, when he was CEO of GE, was renowned for
managing these, and the stock price of GE was suitably rising because
of that.
Well, Harris Delos said, we need to get a growth readiness program in
to counter this decline.
And fortunately for him, Eddie Smith, which was the executive vice
president for business development, persuaded him that value
propositions were the way to achieve it.
So the growth goal that was set was that they wanted, from each
business unit, they wanted double-digit growth, they wanted that to be
top and bottom line, they wanted that to be sustainable, so they
didn't want customer churn, and they wanted that every year.
So again, just to recount, they wanted double-digit growth, top and
bottom line, sustainable, they wanted every year.
Now some of you are probably thinking, gee, isn't it great to be CEO
of a big company?
You just can give these instructions and all the general managers, yes
sir, Harris, they run back to their business units and start to
implement this.
But Harris wasn't just content to believe that this would lead to the
results he was hoping with this growth readiness program.
He started to measure on these three criteria.
And in the twice yearly senior management review that the general
managers had, they were asked for each target market segment and each
key account to provide a distinctive value proposition, what they
called DVP.
And I'll remark here that their term DVP is what I'm meaning when I
said a minute ago resonating focus value proposition.
So the term they used for resonating focus value proposition was
distinctive value proposition.
So these DVPs were scored on three criteria.
Distinctive, so why was Sunoco uniquely able to do this and the next
best alternative was not.
Two, measurable, measurable monetary terms, so what was the worth of
these points of difference to the customer monetary terms.
The third is sustainable.
So how long would that value proposition hold before the competitors
were able to close the gap and force them to refresh the value
proposition.
Now in the Sunoco world, given the nature of their competition, they
set two years as a threshold.
So they wanted their value proposition to hold for two years before
then they would need to refresh that.
Now I would encourage each of you who are listening to adopt as I have
these criteria for judging the value propositions of your own
offerings.
How distinctive is it relative to the next best alternative?
Why are you uniquely able to do it?
How measurable is it in monetary terms?
So what kind of proof or evidence can you get about how this might
affect the customer's cost or their ability to earn additional revenue
and profit based on what you're providing to them.
And then thirdly, how long do you think this will last before someone
else in your world is able to close that gap?
So I would encourage you to adopt these and use them in your own
business.
Now, Harris Deloach had these scored and they evaluated them.
And they found that the scores that you got on those measures directly
predicted the progress you made towards achieving the growth readiness
goals that have been set.
So you see from this, when we talk about customer value propositions,
I'm using them in the same way that Harris Deloach was as well as some
of the other best practice companies in our research.
It's more than just something that marketing and sales people use to
come up with a snappy slogan for your trade show booth or to come up
with some riveting headline for an ad in your trade or industry
publication.
It's more fundamental than that.
It's a cornerstone or a guiding beacon of running the business.
In other words, we use the value proposition concept that why should
the customer spend their money with us?
What is unique about us?
We use that as a way of making decisions about how we're going to run
the business.
I would encourage you to do the same.
Let me give an example of how this has been put in place with a value
proposition at Sunoco.
Well, Sunoco, they had a situation where they, this was in the
previous recession, not the one that we're still having difficulty
with in Europe today, but the previous recession.
They went to one of their major customers who made consumer packaged
goods with a package redesign.
Now, in the Sunoco world, because they focus on this idea of how
sustainable is a value proposition, they know themselves that they
will at a certain point in time have to refresh that.
And in their world, they want as their strategy to obsolete their own
package.
So rather than having the competitor come in, close the gap, and
leapfrog them, they themselves make a redesign and leapfrog their own
packaging.
So they came in, and their package had six favorable points of
difference to the present package, which they were providing that
customer.
What's interesting is when you look at their DVP, you notice they
don't emphasize or stress those.
They take two of the six that they want to emphasize.
And in this case, they include a point of parity.
So you see, the redesigned packaging has the same price as the present
packaging.
You notice they start with a point of parity.
The price will be the same, because they know if they don't let those
customers know that, the customer will say to them, look, stop
talking.
If the price is going to be higher, I can't use it.
I don't want it.
I'm in a recession.
I need my costs to go down, not up.
So what they do is not have the customer be counter-arguing what
they're going to be telling them with their points of difference.
They start out with that point of parity to alleviate the customer's
concern that, hey, if this is new packaging that has all these
advantages, they're going to want a higher price for it.
So it has the same price as the present packaging, but delivers
significantly greater manufacturing efficiency in the customer's fill
lines through higher closing speed and provides a distinctive look
that customers find more appealing than the present packaging.
Now, what proof of support did they provide?
Well, they had done some research in conjunction with a couple of
pilot program customers, and they found that with this new packaging,
in the peak seasons, those customers could go from operating those
lines three shifts a day, seven days a week, to going five days a
week, two shifts per line, a significant reduction.
So they underpin this significantly greater manufacturing efficiency
in the customer's fill lines through higher speed closing with
supporting evidence that they can reduce the number of shifts and the
number of days during the peak season for that product, which is, of
course, the primary concern of that customer.
Then, they also provide a distinctive look that customers find more
appealing than the present packaging.
Now here, for proprietary reasons, I'm disguising what is the actual
feature and benefit.
I'm just calling it distinctive look.
But I'll tell you that it turned out that they did some customer
research with the customer's customer, the consumers, and they could
show that the customer's customer, the consumers, found this new
packaging increasing the appeal of their customer's product, such that
the consumers ate more of that product at each sitting, consuming more
of the customer's product.
So what's going to happen here, as you see, here is where Sunoco is
going to get a chance to earn more profit by making their customer
more profitable.
So they know that with this distinctive look, we'll call it, this new
packaging, will lead the consumers to consume more of the product,
which will lead to more sales for their customers, which will lead to
the need for more packaging, which will lead to more sales and profit
for Sunoco products.
So these are the kinds of thinking you need to be thinking about for
the value propositions in your business for your innovative offering,
and thinking about what kinds of proof or evidence can you get that
would support that for your prospective customers.
Well, what we'd like to do now is take a few minutes and go to some
charts that will directly talk about this idea of tailoring value
propositions as a tech startup.
This is based on our recent management practice research in Germany
and in the United States.
What we found is that a tech startup is often seeking more than just a
customer to purchase its innovative offering.
It requires something else, some type of assistance from the customer
to enable it to realize the offering.
And because there are these two concerns that are going to come up, we
are counseling startups to think of this as two separate value
propositions that you ought to construct and deliver to prospective
customers, and particularly pilot program customers or beta customers.
First, we're calling the innovative offering value proposition, which
is what's extraordinary about the startup offering that will enable
the customer to solve a problem or achieve a priority that it has.
And you notice we're putting in green the terms that we really want to
emphasize here or stress.
Being a startup presents challenges and additional risks to a customer
in doing business with you.
So in return for that, your offering has to be more than just
incrementally better than what they're presently thinking about.
It has to be significantly better.
So this idea of being extraordinary, but also it has to be
extraordinary in what it's going to do for that customer.
How will it be extraordinary in solving a problem or achieving a
priority?
What we have found in our research is all too often, tech startups,
because they're coming out of a university setting, they're used to
seeing how their advisors have been successful, and that is applying
for grants and so forth.
Well, there they're talking mainly about the technology and how cool
the technology is and how they can move that technology along.
They don't really focus on what problem the customer has will it
solve, or how will it enable that customer to achieve a priority that
they otherwise could not.
And that's really a big mind shift difference when folks are spun out
of university labs and start up a company trying to be commercial and
selling to commercial customers.
Now the second value proposition, which will have to complement this,
is what we're calling leveraging assistance.
So how will this assistance you're asking for, how will that allow you
to do something that you otherwise could not do with that offering?
And addressing that question is, why should the customer provide that?
What will make it worthwhile from the customer's perspective to do
this?
So what we need to do is we need to think through these questions and
be able to provide persuasive answers supported by the most evidence
of value or evidence of why it's worthwhile that we can.
Well, here's some guidance that we have found so far.
For the innovative offering value proposition, focus on a specific
customer problem or priority.
We can't stress this enough.
Focus, focus, focus, and be specific.
We hear routinely from the customers we've been interviewing, this is
lacking in this innovative offering value proposition from tech
startups.
Understand what is the next best alternative from the customer's
perspective.
Now we might think this is what the customer is presently doing,
status quo.
But we have to remember that us trying to sell to that customer moves
them to a different buying situation where they might then decide,
okay, we are going to do something, but now that we've decided to do
something from doing nothing, what else might we do?
So what would be the next best alternative technology that we might
also look at procuring to replace what we're presently doing?
And we know from our work that gathering information on value and
monetary terms for tech startups is difficult.
They don't have the relationships often with customers, they don't
know the details of the customer's operation well enough, and so
forth.
But customers have told us they appreciate that the tech startup has
at least taken a stab at it.
That means tried to make an initial set of evidence with assumptions
about what this might be worth.
And in fact, that's why we have found that some of the more successful
tech startups are started by individuals who were working at the
customer organization and have then left that and now are working on
something that they want to sell back to the customer that they used
to work for.
So they tend to have more knowledge about these kind of things.
Secondly, it might come from having individuals from the customer
industry on your advisory boards.
But please be explicit in the assumptions.
All too often the implicit assumptions we make about our technologies
is that they're fantastic without really addressing the assumptions
being made.
Now when we get to this leveraging assistance value proposition, we
found that being candid in your weaknesses as well as being persuasive
in your strengths is important because it shows the customer that you
have thought this through from their perspective.
And think creatively about positives in doing business with a startup.
For example, there's less bureaucracy.
You're able to move more quickly.
These are things we've been hearing recently.
Finally, then express openness to tweaking or making small changes in
the offering to make it better suited for that specific customer.
So expressing that openness can be a way for the customer to feel that
it's worthwhile for them to provide the assistance because they're
going to have that chance to have influence on how that innovative
offering will be developed.
Finally, then we want to open it up for some questions, some
conclusions.
First, we believe, as we've said, you will have to craft these two
value propositions because these things are concerns that are going to
come up.
It's better to focus on them separately.
Likewise, by doing so gives you a chance to see how well your
innovative offering value proposition does as a standalone.
And that is a way of pre-testing that for customers after your beta
customers or your pilot program customers.
We recognize that these might be targeted at different parties.
So one might be for the direct customer.
One might be for the customer's customer.
Or it might be for the direct customer and some other type of partner
like some type of outsourcing for channels or manufacturing of the
technology.
What we have found is that corporate venture capital units of large
firms are often the intended entry points for startups.
Even when those startups are not looking for venture capital, but that
they have the kinds of scouting and screening functions and personnel
and technology experts in those venture capital units who can do that
initial screening and scouting.
And then if it makes sense, pass those through for introduction to the
business units of the corporation.
So this is a natural place to look.
Finally, we believe that by having these two separate value
propositions, it will guide a tech startup to think through and gather
supporting evidence.
Those two things will enable you to make your answers persuasive to
the two primary concerns of the customer.
What will the value be for my business?
And why should our business provide the assistance to realize the
startup's offer?
These are unique challenges for tech startups' success.
Things that you have as a tech startup that established suppliers who
might be bringing innovative technology to those customers don't have.
So with that, what I'd like to do now is conclude with my formal
remarks and address any questions that might be among our listeners
and viewers today.
So if you have any questions, please type those into the screen and
we'll be happy to take those up at this point.
Yeah, or you can do it by email later to Marcus Kirchberger.
We'll give you a moment here to think of and address a question to you
if you have one.
Okay, well we get someone saying thank you for us.
We appreciate that.
Any other questions or comments that people have on what we've talked
about?
Are there any questions you think that we should be focusing on in our
research that will be helpful to you?
So if you'd like to know and we can address these to the customers or
these corporate venture capital customers that we're going to be
talking to, then we might ask that would be helpful to you to know.
Because the whole point about our current research is to try to see
how it is the more general ideas about customer value management, how
they need to be tweaked and fine-tuned to make it work even better for
startup companies.
Because they have some of their unique challenges.
It's not something you can maybe straightforwardly do.
That's where the idea of the two-part customer value proposition came
in.
You might have other ideas or questions you think are things that we
should address.
Okay.
Well, if there are no questions now, we would encourage you to think
about them.
And if you come up with those, we will be happy to address those.
You can address them to Marcus at KIT.
Okay.
How do you propose to formulate the innovator?
Well, again, this is coming from Lucas.
How do you propose to formulate the innovator VP?
We would say, again, doing it as a resonating focus.
So rather than talking about all of the features we have and how cool
those are, talking about those one or two that will be the real points
of difference that will either address the primary concern or top
concern of the customer or of the top priority, enabling them to get
into a market, get into a business that they otherwise could not.
So we would say use that notion of the resonating focus value
proposition.
Less is more.
Focus on the one or two.
And particularly here, the one that you think is the most
extraordinary point of difference for your technology over what's been
done.
Maybe to add to that, what we've also seen is that especially tech
startups who have brought technology as a platform find it difficult
to focus because they think, hey, it can be applied in that industry
and that industry and that industry.
It's all possible and shouldn't we go for all?
And that's tempting because it seems like a waste to just focus on one
industry.
But you have to remember that to really understand these concerns and
ambitions that your customers have, it's not easy.
So it's much better to focus on one industry and start to understand
your customers there really well than focusing on five at the same
time, which isn't really focusing, and then do a bad job everywhere.
So it seems like, oh, why should we close options?
But if you don't close options, if you don't focus on a better set,
then you will get nowhere.
And that's not always that intuitive for startups in our experience.
Yep.
Other questions or concerns or things you might like for us to address
in our research?
Okay, well, what we'll do is we'll sign off now.
And again, we are going to make this available.
Marcus will send this as a link so that others who have not been able
to...
How does the USP, Unique Selling Point, I guess it's, I think the US
Unique Selling Point is...
Oh, maybe you mean, yeah, USP, Unique Selling Proposition, yes.
Well, you have to remember, just because it's unique, doesn't make it
valuable.
Okay, so often we'll talk about what we have, again, that's what I was
talking about earlier, this idea of the favorable points of
difference, that we can get into this value presumption.
Well, that was the problem with the Unique Selling Proposition, the
old USP as we used to call it, is we would say what's unique or
different about our offering relative to the next best alternative.
But we didn't drive it to that next level of what is that uniqueness
worth to the customer in their business.
And that's really where customer value management comes in with this
idea of, you know, what's it worth in terms of lowering their costs or
enabling them to an additional revenue and profits.
So it might be something that's unique, but the customer doesn't care
about.
Just to give one small example, I was buying a service earlier this
week.
I had to get something repaired.
And they were all excited about, I could come back 45 minutes later
and pick it up.
If they had said two days later, that would have been fine too.
So it was something where they were unique, but I didn't care.
So unique is not the same as valuable.
We've had another question come up.
What about the contradicting feedback from customers regarding the
value proposition?
Now, this can be interesting for us in two ways.
One is that we want to always, in terms of feedback that customers
give us, we always want to ask them for the basis of that.
So what data are they basing that on?
What experience are they basing that on to separate perception from
data?
Because customers have beliefs and opinions, just like we do.
The question is, what's underpinning those beliefs and opinions?
So what we want to do is find that out.
Because you can find, if you go to different managers at a customer
firm, who are in different functional areas, they might have different
beliefs and opinions.
So the people in operations might believe one thing, people in
engineering believe another, and the people in purchasing and finance
believe still another.
So if we're seeing at the same firm differing feedback, then that
gives us an opportunity to go back to those managers and say, we've
been hearing these different things.
Can you help us resolve these differences in beliefs or opinions that
have been expressed to us?
So that can be a worthwhile thing to get further illumination of what
is behind this.
It could be, in our experience, that they're all making different
implicit assumptions about the offering and how the offering will be
incorporated into their business.
That can be one.
Now, if we're talking about contradicting feedback from different
customers regarding the VP, we again want to still ask them, what's
the basis or source for the feedback they're offering?
But here now, if we start to find it based on data or experiences,
this could be giving us an indication that what we're thinking as one
segment might actually be two sub-segments.
And again, with further focus, we might start to understand that it
might be about application, it might be about customer capabilities,
it might be about usage situation.
And each of these might allow us to have a more fine-grained
understanding of what our innovative offering might do for prospective
customers and how the value that those customers would get from our
innovative offering would vary depending upon which sub-segments
they're in.
So, back to what Mark said a minute ago, when we talk about focus,
this is something that we continually have to be open to refining as
we learn more about a particular market.
And in our experience in working with startups when trying them to
help craft a value proposition, we also find that there's this great
sort of tendency to try to have one.
This should be the customer value proposition.
Because that seems to be easy and uniform and elegant or whatever, but
we constantly have to press, well, this might be the customer value
proposition for that kind of application, but in another market,
really, you need to be open to making it different.
It's not the same for every type of customer.
That's sometimes counterintuitive, we find, in working with tech
startups.
Exactly.
Okay, we have one.
Right.
And again, this problem, of course, Lucas is saying that the problem
we often see with our B2B activities is that the VP for the decision
maker, actually buyer, is different than the one for the user in the
company.
Suggestions.
Well, again, this is what we talked about, that they have these
different beliefs and opinions.
And what we have to do is try to understand these different
perspectives.
And what are the basis for these in terms of actual data and
experience, as opposed to just beliefs and opinions.
And then what we have to do is we have to be open to how we might be
able to do different things for these different things.
So they might have different interests.
And we're talking about this idea of the leveraging assistance value
proposition, we might have to be open to different things that we
might do to make it worthwhile to these different parts of the
organization to participate with us as a pilot program customer.
Okay.
Well, our time is up.
We appreciate people taking the time to listen to us and see us.
As we said, we will make this available for those who haven't been
able to.
Maybe there's others at your firms who were not able to join us today.
You can make it available to them, as well as if there's any questions
or comments about what we might address in our management practice
research, please send those along.
To the email to Marcus Kirchberger, and we look forward to it.
Thank you.