≡ Menu

Clarity and Value Proposition

Submitted by Adarsh in November 2012

 

Describe your product/service early and concisely and make sure you have a very well defined value proposition. Why is this invention/product valuable and to who is it valuable? Why would someone want to spend money on it? You need to be very explicit about this. “This is why it is valuable to these people…” Ultimately any product or service will be successful or fail because of the value it provides and you ability to articulate that value to prospective buyers. Once again, you need to be very explicit right up front about value to the customer.

Explain the disruption. Most good ideas stem from either finding a new and novel or more cost effective way of addressing some well understood problem or from leveraging a specific “disruption” . In either case as you present your idea to someone make it clear what category your idea fits into. That helps a reviewer to slot the discussion into a evaluation framework quickly. If it is a disruption then describe its nature (technical, regulatory, social, business structure, business cycle etc..) and its magnitude. It may be also useful to describe how some mega disruptions that people are familiar with (mobile, social networking, cloud computing, green regulation, analytics etc.) will impact the space into which you are trying to insert the product/service. Once again, this is important so that a reviewer can slot the discussion and evaluate value and viability quickly.

It needs to be feasible/ implementable. Nothing can shoot down a good idea faster than impossibility of implementation. Whether it is a problem of the energy requirements involving densities that are orders of magnitude greater than anything available or requiring some manufacturing process never before seen, or regulations prohibit it… make sure that it is feasible and even better, implementable in an economically realistic way. This means reaching out to experts to validate and help refine the idea and sensitize you to physical, chemical, manufacturing, and regulatory limitations. Talk to an electrical engineer. Talk to an environmental lawyer. Talk to manufacturing specialist. If the product/service does involve a disruption that does go beyond conventional feasibility (which happens all the time) then be sure to describe that disruption in some detail and provide evidence (a study, reference an expert opinion by name and reputation etc.) A proof of concept can help. This may be a prototype or may be a case study or an existing example of success with this type of product/service.

Lay the business model out in a very simple manner. This is how we are going to make it… This is how we are going to distribute it… This is how we are going to sell/ ,market/ support it… This is how we are going to make money… and how much. Is this a less expensive or better alternative to an existing product? Is this a standalone? Is this an accessory to something that has already succeeded? Is this a razor and razor blades model? Does it leverage the network effect or is viral? Does it benefit from ecosystem acceleration? Is it a loss leader and if so what follows it? Is it a freemium model? Etc…

Think about adjacencies. If you succeed with this product, are there any interesting adjacencies that allow you to leverage your insertion power? Are there follow-on or accessory products that can benefit form lower cost of sales and by extension higher revenue profits? Your base product may be closer to a loss leader if you can make profit on follow-on.

Describe the market dynamics in a concise manner. What is the target market and opportunity size? Are you proposing to commoditize an existing market and how are you going to/can you protect yourself against commoditization? What is the intellectual property landscape? Do you have patentable novelty. Who are your competitors? What strengths and weakness do you have relative to your competitors?

List your dependencies. What will it take to be successful? What partnerships/agreements do you need? What capital do you need and where are you going to get it from? What approvals are required? How much skill or manufacturing capacity do you need? What are the pitfalls? etc.

Be concise, respectful, and professional. When you are pitching an idea, respect the value and finite nature of the time that the reviewers are investing. This means being net, concise, well organized and well prepared. Get to the point. Edit out superfluous information. Be warm, engaging, enthusiastic, passionate…. but don’t do a comedy routine.

Engage cross discipline expertise, collaborate and iterate. Invention rarely happens in isolation and never becomes a real value proposition in the real world without engaging collaborators and critics form across disciplines. Concept development is a fundamentally collaborative and iterative process. Don’t forget it. Engage and refine through many iterations before you pitch it to an investor. First impressions make a big difference. You may only get one shot so make the best of it.

Think through and describe the product life cycle. Your costs aren’t only manufacturing, marketing and sales. They are also ongoing support and distribution. Once a customer buys your product they don’t automatically transform from being a revenue source to a cost center. They become evangelists/ influencers and repeat customers. The post sale life cycle may also be a revenue source such as licensing fees, upgrades, service for fee, supplies…etc. and as such may be an important part of the business model. The value proposition you are selling isn’t only about the point of purchase, it often involves a long term and ongoing relationship.

Don’t forget about brand equity. When you are selling a product you aren’t only capturing revenue and making profit, you are generating brand equity. Your potential value to a potential investor isn’t only how much free cash you can generate it is the real, intellectual and brand equity of the company. You should package and articulate this value and the plan to maximize it as part of your pitch.

Comments on this entry are closed.

Next post:

Previous post: