Discovering your startup's unique value proposition
One of the reasons that the startup ecosystem has such a high failure rate is due to founders creating solutions to problems that either don’t exist or that people don’t care enough about to pay for you to solve them.
The barriers to launching and even commercialising a startup have dramatically decreased over the last five years and finding out whether or not your product has product-market fit has never been an easier process; technology has allowed founders to be more efficient than ever when it comes to identifying whether or not they have created a meaningless product.
Veteran venture capitalist Michael Skok states that there are some questions a founder should ask themselves to identify whether or not the startup they are building will have a unique value proposition. He spoke at length about these key questions at a Harvard Innovation Lab event in early 2012.
Skok says that founders need to determine:
Is the problem unworkable?
The solution that you have created should fix a broken business process where there are real, measurable consequences if there is inaction.
Is fixing the problem unavoidable?
The problem you are solving should be driven by a mandate with implications associated with governance or regulatory control, for example, Xero solves a fundamental requirement for accounting compliance.
Is the problem urgent?
A startup should be solving one of the top three priorities that a particular market segment has, especially something selling to enterprise level customers. If it does not then, you will find it hard to command potential customer attention.
Is the problem underserved?
There should be an absence of valid solutions to the problem that you are trying to solve. Founders should focus more where there is real opportunity to make an impact, not create another me-too business in a crowded sector.
Most importantly, though, founders need to understand that what sets them apart from their competitors and is at the centre of their unique value proposition is them.
As the founder, you should understand your industry well and be able to deliver on your brand promises. This type of awareness around your strengths and weaknesses will mean that you have a unique value proposition that stands out from the crowd.