Well it's nice to be back here again.
Yeah it feels like we're really building some momentum.
The show must go on.
Want to talk to you about understanding
how much value your product is going
to deliver to your customer.
We've talked about who the customer is.
We've talked about how they might use it.
Then we talked about what the product is.
Now we really have to get down to what value, concrete value
we bring to our customer.
Can you suggest a framework for thinking about this step?
So value proposition is the single most important thing
to your customer, and how will you
change it from what they're doing today
to what they will be able to do with your new product.
So what's the difference between the as-is state
and the new state that you'll bring them to
with your product.
So let's define value proposition.
What is the number one thing your customer cares about?
What is it that just keeps them awake at night?
What's that burning opportunity, burning problem
they need to have solved?
And once you understand that, you've
got the first part because that's
the dimension in which you're going to measure value.
The second thing is what's the as-is state?
How do they achieve what they achieved today
along this dimension?
It could be cost.
It could be time to market.
It could be net-present happiness.
It could be anything that the customer decides.
But how do they do it today?
And then that's usually pretty easy
because you just need to interview the customer.
The third part is what's the possible state that
could be achieved with your product?
So let me paraphrase to make sure that I follow you.
Value proposition is that number one factor
that your customer cares about.
It's potentially a problem that they have.
The as-is state is how the problem
is being solved today or, for example,
not being solved if it's an unmet need.
And thirdly it's how you could potentially solve that problem.
Absolutely.
But it's how it's solved in that first dimension.
What's the most important thing to them?
That's absolutely correct.
And once you understand those three things
you just need to put them together,
and then you have your quantified value proposition.
Yeah now I'm hearing you say quantified value proposition
not just value proposition.
What's the difference?
So whenever you can quantify something
you should try to do that, especially in business.
As Lord Kelvin said, if you can't measure something,
and you don't know what the number is,
your knowledge is insufficient.
So in business especially you want
to quantify whatever you can.
If it's cheaper, how much cheaper?
If it's faster, how much faster?
If the quality is higher, by how much is the quality higher?
Is the time to market shorter, by how much?
So whenever you can you should quantify things.
And that's why we put that into the process.
It seems to me that your insistence on quantified value
proposition versus just value proposition
is just another reflection of your methodology
that drives toward the holy grail of specificity.
Yeah.
And we do that with our entrepreneurs
all time, push them to really try
to make it easy for the customer to buy their product.
Do the work for it because it's not up to the customer
to do the work.
We should be doing that work for them.
And if we do, then buying the product
will be a delightful experience.
It'll be very rewarding for them.
That's why we look at quantifying it.
But also it's got to be an internal check for the company,
for the entrepreneur are we really making
a difference in a concrete way?
It's one thing to say it without numbers,
and then how much do I improve your productivity?
A lot.
Well what is that?
Is that 20%?
To some people 5% is a lot.
To some people, 20%.
So we really need numbers here if we're going to be effective.
You teach entrepreneurs now, but there had to be a point in time
when you learned the importance of value proposition,
of quantifying it.
Tell us about that.
As you know, I started my career at IBM.
They understood their customer intimately.
And we were trained from the get go.
And there was a phrase, you never
got fired for buying from IBM.
And the reason why that was relevant
is because the data center manager wanted reliability.
And that's what IBM would deliver
for them in their product.
It wasn't necessarily the best technology,
but it was the most reliable that you could count on.
And it was not just the product, it
was all the ancillary services and everything else about
the company, that we'll do whatever
to make you successful.
If your computer goes down, we'll
break into the parts store on Christmas
and bring the parts back to you to make
sure your computer stays up.
And that was an excellent alignment
of the customer's value and the company's products
and services.
Your step on the quantified value proposition
follows high-level product specification.
I want to understand is there a reason
for this particular sequence?
Before we're going to be able to really start digging into this,
we need to understand what the product is
because the possible state is now
an incorporation of the product into it.
And we don't want to start talking
about the possible state without having
an internal understanding, as well
as an understanding with the customer what the product is.
So now when we start to have that internal discussion
about what the value proposition is, we're all in agreement.
And then when we have the external one,
the customer knows what we're talking about.