What Makes a Great Value Proposition in B2B Customer Development

A great value proposition is compelling, quantifiable, provable, referencable and easily explainable. Although your value proposition might not be all of this when you start, it’s one thing you should always be refining.

There are two types of benefits that can usually be attributed to a value proposition:

  1. Soft benefits can’t be quantified. They’re harder to sell because customers must have experienced the pain before to realize how important it really is. Examples of soft benefits are ‘increasing employee happiness,’ ‘improving the user experience’ or ‘providing better service.’ If an entrepreneur can quantify a soft benefit, it can be turned into a hard benefit.
  2. Hard benefits can be quantified and lead to a clear ROI. They are the easiest to sell because there’s a built-in way to calculate the value (it’s predictable). Examples of hard benefits are ‘increased conversion,’ ‘increased sales’ and ‘cost reduction.’ Hard benefits are the most attractive to B2B buyers.

In B2B customer development, you want to start with a broad definition of the problem, a problem widespread enough to attract several early adopters. It has to be a problem prospects are already passionate about, something on their radar (You can use value proposition hypotheses to explore opportunities).

A broadly defined problem has a higher likelihood of getting people excited. Prospects will build their own perceptions of the problem and invent the product in their minds.

Your value proposition should tell them: “We’re obsessed with this problem too,” and communicate the urgency of the problem.

You can use the elevator pitch format from Crossing the Chasm to get started:

For (target customers) who are dissatisfied with (the current market alternative). Our product is a (new product category) that provides (key problem-solving capability). Unlike (the product alternative), our product (describe the key product features).

To get a great value proposition, you need to test it out into the wild. Making revisions as you contact prospects is the only way to make it truly connect with prospects.

What The Best Startup Founders Have in Common

Don’t worry about failure; you only have to be right once.Drew Houston, Dropbox Co-Founder and CEO

Many of the world’s most successful B2B entrepreneurs didn’t initially set out to do what you now know them for.

Hiten Shah, Co-Founder of KISSmetrics famously spent a million dollars on a web hosting company that never launched, and Bill Gates failed to build a computer business that automatically read paper tapes from traffic counters for local governments.

One of the big reasons why these entrepreneurs became successful is that they were able to move on when their businesses didn’t work out.

Most of the entrepreneurs I’ve interviewed for Lean B2B did not use a formal Product-Market validation process; they developed their own system. Sometimes that system was inspired by the available literature and other times it was wholly made up.

The consistent theme among successful B2B entrepreneurs is that they understood the importance of customer insights. They never stopped listening, testing and adapting. The market changes and so should they.

You do this enough times and you learn that even the most seasoned of us really don’t know. You’re constantly learning. You can sit down with any entrepreneur in the Valley and, no matter how successful they are, they will tell you about the failures. They will tell you about the 90% of the things that they did that didn’t work at all. – Ranjith Kumaran, PunchTab Co-Founder

Deep customer understanding is an incredible barrier to entry. As a startup founder, your ability to understand the market gaps and react accordingly will be one of your strongest competitive advantages.

How well do you know your customers?

The Most Popular Lean B2B Customer Development Content of 2016

It was another busy year for the Lean B2B community. Lots of innovation, learnings and a new game. The community grew significantly and will soon expand into Vietnam and South Korea with the release of Korean and Vietnamese-language versions of the book.

Here are the top Lean B2B posts of 2016. It’s an opportunity to re-read favourites and catch up on some reading. Thanks for being part of the community.

Happy reading!

How Strong Are Your Startup’s Competitive Advantages?

The only real competitive advantage is that which cannot be copied and cannot be bought.Jason Cohen, WP Engine Founder and CTO

Since the market is global, competitors are quick to copy features, ideas and products.

Nowadays, the only competitive advantages that still stand a chance are, as Jason Cohen mentioned, that which cannot be copied and cannot be bought.

This might mean:

Even the most complicated features will eventually get copied. Unfair advantages are not essential to a startup’s success, but if your team has one, you might as well use it.

So, how strong are your business’s competitive advantages?

The 18 Best Quotes from Lean B2B: Build Products Businesses Want

One of the best things about writing a book like Lean B2B is getting to speak with dozens of entrepreneurs trying to understand what challenges they had to overcome and what made them successful.

Writing Lean B2B was life-changing. The research and writing process taught me so much about entrepreneurship, success, failure, B2B customer development, venture capital and startups. It’s unfortunate that some of the great lessons had to be left out.

There’s a lot more in the book, but these are some of the quotes I feel should be circulating a bit more broadly:

On what constitutes a startup:

When you stop failing you stop being a startup.Fred Lalonde, Hopper Co-Founder and CEO

On the importance of Product-Market Fit:

The life of any startup can be divided into two parts – before product/market fit and after product/market fit.Marc Andreessen, Andreessen Horowitz General Partner and Serial Entrepreneur

On why building a startup is difficult:

New products are inherently hard to launch because both the problem and solution are unknown.Eric Ries, The Lean Startup Author

On why entrepreneurs should consider B2B:

I’m a fan of B2B startups because the paths through success are clearer. They’re not easier, but they’re clearer: solve a very painful problem and charge people money to do so. In B2B, if you’re not solving a significant problem, you tend to know pretty quickly.Ben Yoskovitz, Highline Beta Founding Partner

On B2B customer development:

Start a business where you can get access to customers easily.Max Cameron, Kera Co-Founder and CEO

Customers don’t care about your solution. They care about their problems.Dave McClure, 500 Startups Founding Partner and Investor

On finding early adopters:

If you can’t find early adopters, you can’t build a business.Trevor Owens, Lean Startup Machine CEO

On finding customers in B2B:

Businesses are easier to find (than consumers); they’re in the phonebook. – Ben Yoskovitz and Alistair Croll, Lean Analytics authors

Find companies targeting your market, get close to them.Steve Blank, The Four Steps to the Epiphany Author

On figuring out who to sell to:

The person you want to sell to is the person with the pain and/or the money.Ken Morse, MIT Entrepreneurship Center Founding Managing Director, 1996-2009

On building credibility:

If you’re small, admit that you’re small. You look small by acting big. People can see straight through that.Chris Savage, Wistia Co-Founder and CEO

On the importance of mitigating risk:

Consumers love novelty; businesses just call it risk. – Ben Yoskovitz and Alistair Croll, Lean Analytics authors

On the importance of estimating the return on investment of your solution:

There’s no luxury in B2B; there’s only profitability. It’s essential to know your ROI. Cost justification is a critical part of selling in B2B. – Martin Huard, Admetric Co-Founder and CEO

On why customers buy:

B2B buyers are not buying your product, they’re buying into your approach to solving their problem. They’re not just buying from the best feature provider, they’re buying from the company that is most aligned with their view of the world. – Jeff Ernst, ‎SlapFive Co-founder and CEO

On customer relationships:

Clients should be perceived as coworkers and not just customers. They should have the same goals as your business.Don Charlton, The Resumator Founder and CEO

On real customer validation:

You don’t know until someone actually swipes a credit card.Mehdi Ait Oufkir, Co-Founder of PunchTab

On competition:

… though rarely perceived as a competitor, Microsoft Excel is almost always an actual competitor for software startups. – Joshua Porter, HubSpot Ex-Director of User Experience

On the first 18 months of your business:

The only thing that matters in the first 12-18 months of a company is figuring out how to get your product in the hands of the right people. A lot of people can build a product, but really figuring out what your market is and how to reach them is the biggest obstacle to getting a business off the ground.Ranjith Kumaran, PunchTab Co-Founder

Bonus – On disruption:

Entrepreneurs are told all the time to go find advisors that are in that domain. Now, it’s great to have advisors that are in order to get connections – to figure out who to sell to, but if you’re actually taking advices about whether your disruption is gonna work then the person with 20-30 years in the industry is the last person you want to ask.Brant Cooper, Lean Entrepreneur Author and Entrepreneur

This is Why I Wrote Lean B2B: Build Products Businesses Want

At the time my ex-business partner and I started working on the company that would eventually become HireVoice, I had already been through the ups and downs of a startup with Flagback and two other companies.

Flagback Demo

I had experienced business success and failure, and had a wide network of talent and mentors. My professional background in user experience made validating with real customers from day one a given.

With HireVoice, we were building a platform to help businesses understand how the market perceives them as employers (employer brand monitoring). We started with the right mindset and the newly released Lean Startup was going to give us an edge.

We started validating solutions with prospects in the first few weeks of business startup.

For the first few months, we were only getting positive feedback. This feedback gave us the nod to start building the first (of six) module of our solution.

We released our first version to pilot customers. It was high commitment from the start. It took months for any of our pilot customers to run surveys. Nevertheless, people were excited about the potential of HireVoice.

After our first few modules failed to capture engagement with prospects, we realized that we had been fooling ourselves into thinking that employer brand perception was an important problem (or that it was a valid starting premise). It was a problem, but it didn’t hurt enough for companies to pay for our solutions

We had a clear picture of our target end user and target customer (not the same in this case), we were following the right process and we did a lot of good things. Yet, we failed. We were able to experience first-hand the limitations of the Lean Startup in B2B.

Although the book was on everyone’s lips, we were already familiar with serial entrepreneur Steve Blank’s The Four Steps to the Epiphany — the book that started the Lean Startup movement and created the customer development process at the heart of this book.

Customer development was born out of B2B enterprise selling; yet the body of knowledge available outside of The Four Steps to the Epiphany was small to non-existent.

We struggled to answer any questions that fell beyond the scope of Blank’s book. The small everyday questions were killing us. We burned contacts, lost face in meetings, got stuck in political dead ends and had prospects mistrust us for withholding key information — all mistakes that could have easily been avoided.

We got better around the time that we joined the MIT Entrepreneurship mentorship program, which gave us a structured way to look at validation. However, what really helped us was receiving the mentorship of Claude Guay, a sales veteran and a two-time startup CEO (iPerceptions and Accovia).

Claude didn’t change our validation process, but he was there to answer all of the small questions we had:

  • Should you show prices in a pitch deck?
  • At what point should you start asking for money?
  • How should you re-engage prospects after the first meeting?
  • How can you get businesses to honestly tell you about their spend?
  • How can you reward interview candidates?

In the end, we failed to build a sustainable business, but succeeded in in-validating a startup. It was a successful validation with a negative outcome.

It took us six months to in-validate our first two products, but only three months to in-validate the last three. Inappropriate B2B customer development cost us four months of runway.

I wrote Lean B2B to help entrepreneurs save those four months.

After interviewing more than 30 successful entrepreneurs for the book, I can tell you that others have already made a lot of the mistakes you might be making.

Time to Product-Market Fit (TTPMF) is key when you’re a small startup. This is why you need books like Lean B2B: Build Products Businesses Want.

Can a Game Help Entrepreneurs Build Better Businesses?

Earlier this week, I launched the Control Alt Deceit game on Indiegogo.

It all started with this game on Tesla and Edison. It got me thinking about luck in entrepreneurship, how the best companies don’t always win the market and how cruel competition can be.

Working in a tech startup, I kept thinking that everything we do (raise money, expand markets, build new products, outdo competitors, etc) feels like game dynamics.

The ups and downs of startups would make for a great game.

Come January, I had the urge to build something new.

Creating a game was not the least risky project (think Lean Startup!) I could have taken on, but it was the funnest.

Introducing Control Alt Deceit

The game really took shape in March when I started working with a game designer friend based in Hong Kong. In just a few weeks, we were able to get a prototype ready for testing.

Early card designs

The art wasn’t there. The game had no rhythm. But we had something to work with.

10 play tests and 6 versions later, the game started to take shape. Enough to get designers involved. Suddenly, simple black and white cards…

Early card designs

Turned into something else…

Designed Control Alt Deceit cards

I had become fascinated with the tech wars of the ’80s (Beta vs VHS, Apple vs Microsoft, Sega vs Nintendo), the early days of Silicon Valley and the sometimes questionable strategies employed by early tech businesses to carve our market space.

Everything was possible in the ’80s. It was also an era of strong aesthetics.

Nintendo ad

Setting the game story in the ’80s created a strong visual signature.

All that was missing was an equally strong name to communicate the tech/business theme of the game. After 2 weeks of brainstorms and mounting pressure from designers wanting to finalize the design, we selected Control Alt Deceit, a name that probably has two, three or four meanings.

Putting it all together

The Indiegogo campaign and video came together in the last few weeks. It was a lot of work, but the results are quite impressive:

The game is currently funding on Indiegogo. I would love your support.

Thanks for helping make Control Alt Deceit a reality.