Monday, August 13, 2012

Defining the "Smallest Unit of Value"

In my last post, I talked about "the smallest unit of value" as an approach to defining an initial (or new) product offering that will lead to early success.  I defined it as,
"...the smallest unit of value you can deliver to a segment of users/customers that is consistent with the broader vision you are trying to execute."
I espouse this approach because it enables startups to focus their development resources and their marketing messages, both critical elements when trying to gain initial market traction.  But how does an organization find their smallest unit of value?  This post will lay out a framework to answer that question.

Start with your vision.  When a startup is initially formed, its founders usually have an understanding of the technology they want to build and how it will change the world.  This can be considered the vision of the company.

Develop a list of "must have" needs your vision addresses.  When developing this list, it is important to be critical and just include "must have" needs, not "nice to have" ones.  Developing this list typically involves performing some market research; ideally, a mixture of qualitative interviews and quantitative surveys.

Develop at least one positioning statement for each of the "must have" needs.  When developing positioning statements, I like to use the template presented in Geoffrey Moore's landmark marketing book, Crossing the Chasm:

  • 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).

This step in the process requires some creativity because it is being done, ideally, before the product is designed or built.  It might make sense to develop more than one positioning statement for a particular need since there may be different approaches, from a product perspective, that can be taken to address a need.

Developing these positioning statements early in the process is important because it forces an organization to think about how they are going to talk about their offering, at a time when they have very few constraints.  Most often, positioning statements are developed after a product is designed and built, and they end up being less-than-ideal since they are constrained by the product that was built.

Eliminate positioning statements from the list.  Review the list of positioning statements critically, with the goal of reducing the number of statements.  Questions to ask as you review the statements include:

  • How easy/difficult is it to reach the target customer?
  • Is the product description easy to communicate in a few words?
  • Does the product category leverage any hot industry trends?
  • How noisy is the market for the product category?
  • How significant is the competitive differentiation?

Pick one positioning statement.  It can be very difficult to get the list of positioning statements to just one.  Sometimes, one statement will feel right and will jump out from the list.  More times than not, however, coming up with the final statement involves a "gut feel".  No matter the process, the important thing is to come up with just one statement.  As Joe Kraus says in his blog post, Your Product: Describe vs. Discover...

...you need to divide your product into one (maximum two) features/benefits you describe and let the user discover the remaining beauty and scope and breadth of your product. 
The describe/discover framework, I’ve found, helps founders through the knothole of reductionism. They aren’t limiting the product in their minds, they’re limiting and staging how it’s presented. 
Before you launch your product, ideally before you even start developing your product, ask yourself the question, “what’s the one benefit we’re going to describe?” If you can’t answer that question, you’re not ready for launch. Once you answer it, orient your UI, marketing, PR and sales around that.

Start designing and building the product.  Now that you have your one positioning statement and have an understanding for critical elements, like the target customer, the "must have" need you are addressing, and how you want to describe your product, you will be amazed at how easy it is to design and build your product.  And later on, when you are ready to launch the product, much of the difficult positioning work has already been done and hopefully, you will just have to fine-tune your messages.