Platt Perspective on Business and Technology

Startups and creating a unique value proposition with a focus on addressing chokepoints

Posted in startups by Timothy Platt on December 9, 2009

I wrote in an earlier posting: Creating a unique value proposition – looking past the cliché and the hype about the need for focus and clarity, and the ability to compellingly articulate the startup’s proposed product or service. I have continued to think a lot about this core issue of the unique value proposition and decided to pick up on it again today with this posting.

When people start planning out a new business they almost always have a particular basic customer or end-user oriented need in mind that they would help potential clients more easily manage. The process, or end result they would improve upon with their offering generally starts out as a relatively undifferentiated whole and even perhaps as a gestalt – an generalized outline conceptualization.

The earlier posting, cited above, draws attention to the need to bring this starting point into clearer and even compelling focus. But doing that to a level of clarity and directness that can be presented in an effective elevator pitch is just half of what is needed for this stage of a startup’s initial development.

So the founders set out to “help clients graphically visualize their computer networks with all the key network components highlighted and in ways that emphasize both information flow process and its secure management.” Or they set out to “create a new organizing capability for collecting and managing RFID data streams for developing both business intelligence and monetizable value.” Or it might be just about any potential general problem-oriented area where entrepreneurs could see potential in developing and offering new solution possibilities. Good elevator pitches present at this broad-perspective level. Now it is necessary to look deeper into what the startup would do to frame this as a compelling monetizable product or service, and that is where this posting comes in. And I start this discussion by outlining a commonly observed phenomenon.

Most startup founders begin, as mentioned above, with a general understanding of the overall issue and area of opportunity they would develop a business to address. They start out with a general idea as to where their potential market for this is too. And some funny things happen when turning that initial vision and understanding into a working business. Considering just successful and even just very successful startups it is surprising how often the market and market demographics these startups end up primarily selling to, are different than the ones they initially planned in terms of. Their final product or service frequently evolves a great deal too, as their actual realizable market comes into clearer focus. This has interesting causes and implications.

When entrepreneurs are setting out to offer a truly innovative and even disruptive new technology, it is not surprising that they are going to break into new and unexpected market space and find themselves selling to new and unexpected types of customers. But whether their product or service is truly a disruptive innovation or simply a significant evolutionary development along a more linear development progression, success hinges on some same key points. And this brings me to two basic questions that I see as crucial to identifying the right specific product or service to offer, and the right specific market demographics to offer it to.

• Analytically, what are all the steps and components in the general problem area that I would develop my new products or services to address? This is a very end-user oriented question and it involves seeing the world through their eyes as to how they would most effectively identify and meet their needs and priorities.
• What are the potential chokepoints in this? So for example in the RFID case briefly touched upon above, this might mean identifying the chokepoint of processing all that flow of new raw data into manageable form, for automated analysis and parsing into usable knowledge, with that further divided down into still smaller components, some of which are more pressing as chokepoints than others.

It is in clearly identifying and articulating those chokepoints and in meeting them with effective resolutions where significant unique value propositions arise. And the more pressing and seemingly intractable the chokepoints that are effectively addressed, the more likely it is that the startup’s unique value proposition will offer disruptive technology value.

So the startup founders have to ask two more very specific types of question:

• What are the most compelling chokepoint components of this overall problem that we can effectively both identify and meet with our available resources?
• What new resources do we need to bring onboard to assemble a significantly comprehensive approach for dealing with our target end-user needs to be able to develop a compelling marketable product or service, or combination thereof?

I will add a third question that is useful to keep in mind here as well, and that is where this general topic connects into exit strategies.

• Would due diligence in developing the basic product and service plan for the startup dictate a need for outside funding to create a viable business able to consistently, and with production quality meet our business goals?

This is when consideration of potential outside backing comes into the discussion – in the context of specifically conceived, analytically planned-out product and service offerings and how best to develop a business around them.

I will add that this is also where the potential viability of a number of other possible exit strategies should be grounded as well, besides just consideration of potential need for angel and/or venture capital backing. So if you want to build a business with an objective of being bought out by a larger, more established business, you plan that in terms of what you offer and in terms of the marketplace you can develop for it, with both analyzed in terms of your potential for marketing solutions that address significant chokepoints. The more uniquely and effectively you address the most significant chokepoints available, the stronger your position facing basically any exit strategy and this is where you find yourself with real options you can proactively select from.

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2 Responses

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  1. roulettetrick said, on December 31, 2009 at 6:35 pm

    Sometimes it’s really that simple, isn’t it? I feel a little stupid for not thinking of this myself/earlier, though.

  2. Timothy Platt said, on December 31, 2009 at 9:10 pm

    Thank you for your comment suggesting that my writing might make some of this appear simple. I have to add, however, that implementing it with real business ventures and all the personalities and perspectives, and all the priorities they bring to the table is not always so easy. A lot of what I do with startups is to help them keep perspective so they find and connect all those dots, and do so with effective communication. Good luck with your startup if you have one or if you are contemplating one, and happy New Years – this note written New Year’s Eve. Tim

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