• Innovative Strategies That Create More Profits

Month: October 2019

Why Customers Not Products Drive Successful Companies

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Before getting into the details of Value Proposition, we need to take a more general look and value proposition and customers first.

Do you know why customers will buy your products or services? Most entrepreneurs think it’s because of their product or service and its features, functions, and benefits. That is what entrepreneurs ask potential customers about, and that is what established, competitive
companies fight over. This attitude is a short-term, transactional mindset.

Successful companies know what their potential customers want. They are customer-focused rather than product or company focused. They know that customers want to buy products and services from companies whose products and services were created for them. When that happens, they become long-term, loyal customers.

For example, Apple said they wanted to design computers that would empower individuals and be easy to use. That purpose drove the company to make computers that a segment of customers wanted and was willing to pay a premium to get it. Customers believed what Apple
believed. This outward, customer-focused approach led to long-term, loyal customers.

Here is an example of the opposite inward product looking approach. Honeywell started a computer division in the 1960s and claimed they were “The Other Computer Company,” taking the assumptive position that they were second only to IBM. But customers didn’t see it that way.
They didn’t believe it. Honeywell’s computer features, functions, and benefits were not broad enough to displace IBM. They only had short-term, transactional customers and were forced to sell the computer division after several years of losses.

Startups need to start with what the customers want, not what the founders want. You still need to ask critical questions about your value proposition and determine the importance of each feature, function, and benefit. And you have to ask about every aspect of your product offering, including quality, functionality, packaging, service features, ease of use, reliability, and more.

It would be best if you also had a lot more than demographic information. You need to get into the market and talk with prospects so you can get into the minds of buyers, users, influencers, decision-makers, and even people who could kill the sale. And you need to classify these potential customers by
the reasons they buy.

 

How Do You Get Product-Market Fit 

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Product-market fit is when your product/service benefits match your customer’s profile. Marc Andreessen, entrepreneur, and venture capitalist stated that it is when you get organic growth. We are going to discuss both of these, but we have to understand the customer first. The first question to ask does my product/service create the ability for the customer to do things they can’t do now). Or does it relieve the customer of current pains? This question applies to their work and home life.

Make sure you see the “job to be done” from their point of view, not yours. Also, distinguish between the types of jobs customers are trying to get done.

stated that We are going to start by putting some context around customer pains and gains’ First, the way we need to look at jobs, the pains and then gains.

Types of Jobs

Functional Jobs. When a customer performs a specific task or tries to solve a particular problem, Social Jobs.Situations where the customer wants to look good or gain status. Personal/emotional Jobs. When the job makes, the customer wants to feel good or secure.

Supporting Jobs is when the customer is playing a supporting role. For example, comparing product offers or when they are co-creators such as offering feedback or terminating value such as disposing of a product or service.

It is vital to take note of the context in which the job takes place because the framework can impose certain limitations or open up liberties. Also, not all jobs have the same importance.

Now Let’s Look at Customer Pains. Pains are anything that annoys the customer when he/she is trying to get the job done. Pains can also be potential risks the customer faces in trying to get the job done. There are three types of pains.

Functional Pains. The solution doesn’t work well, has adverse side effects, emotionally frustrating, or the job is tedious. Obstacles. Things that prevent getting the job started or completed Risks. Undesirable outcomes.

When examining these jobs and their pains, be as specific as you can. Are there any metrics you can use to clarify these pains (time, dollars, satisfaction, etc.)

Now Let’s Look At Customer Gains. Gains are outcomes and benefits that customers expect and are desired. These include performance, emotional, and cost savings. There are four types of gains:

Required Gains. It provides the basic or minimum positive gains expected.

Expected Gains. These are some additional gains we expect from the basic gains.

Desired Gains. These are gains we expect that go beyond what we expected.

Unexpected Gains. These are exceptional gains never imagined.

Again, when evaluating gains be as specific as possible. Can you use metrics to measure these gains rather than terms that could be misinterpreted? When you know precisely how to measure gains, you will be able to design a better value proposition.

 

 

Ranking Jobs, Pains and Gains

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Before beginning, consider the following three modifiers:

First, by ranking groups (segments), you still have to remember that individual preferences will vary substantially. Second, determine and rank which jobs are important and worth spending time investigating. Third, find out which pains are the most extreme (the must-have vs. the nice to have). Once you get in the field and begin talking to your prospects, you will modify your ranking,s and keep modifying them until you get a clear picture of your prospect’s priorities.

Begin by selecting a specific segment and ranking their pains and gains. Don’t mix segments or groups, including job types (see the previous article). Also, in your analysis, remember that these potential customers may have other ways of getting their job done in addition to your solution.

Also, your analysis should result in many pains and gains, which you will have to prioritize and be as specific in describing these pains and gains as possible. Even use metrics if possible. If the customer needs to get the job done faster, how much quicker, why that pain exists, and what would be the gains if it completed more quickly. Cover both sides of the coin. It would help if you also asked why this pain or gain is significant versus a different benefit or pain. That may help you understand the intensity ( a 1 or a 10) of this specific pain or gain. This article was quite short, but it will take your time and attention to get this information, and the information is critical.

 

Examine All Your Products and Services

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The first thing you will want to make is a list of all the items you offer. Altogether, they help your customers complete either functional, social, or emotional jobs. Also, remember that products alone don’t create value — they only do it in relation to a specific customer segment and their jobs, pain, and gains.

 Ask yourself, how to do (all) your products and services alleviate customer pains. Also, do you have any supporting services or ways to help customers compare offers, help them decide which products or services to buy?

Your value proposition will include various types of products and services:

  • Physical or tangible products (manufactured products)

  • Intangible (copyrights, after-purchase services, etc.)

  • Digital (downloadable products and services)

  • Financial (financing of the purchase)

But not all products and services have the same relevance to the buyer. Look at each one, is it a must-have or a nice to have? The following are some suggestions from Alexander Osterwalder’s Business Canvas.

Pain Relievers

How do your products and services alleviate specific customer pains? Focus only on a few and on those that matter most. Which one solves problems quickly or entirely?

Ask these questions. Can your product or service:

  • Does product or service produce savings (time, money, effort)?

  • Make your customers feel better (get rid of annoyances, headaches, etc.)?

  • Fix underperforming solutions (new features, better performance, better quality)?

  • Eliminate negative social consequences your customer might face (lost of trust, stature, etc.)?

  • Eliminate risks customer fear (financial, social, technical)?

  • Help your customers sleep at night (eliminate worries)?

  • Limit or eliminate common mistakes and help them use your solution in the right way?

  • Eliminate barriers that keep customers from adopting your value proposition (lower-cost financing, shorter learning time, etc.)?

Again, make sure you are talking about those that are relevant and relieve pain.

Gain Creators

Here you want to describe how your products and services create customer gains. How you will produce outcomes and benefits, your customer expects or would be surprised to see.

As with pain relievers, gain creators don’t need to address every gain identified in the customer profile. Focus on the ones that are relevant and where you can make a difference. Ask if your product and services can:

  • Create saving that will matter to your customers (time, money and effort)

  • Produce outcomes that exceed expectations (e.g., quality)

  • Outperform current value propositions

  • Make customers work life easier

  • Create positive social consequences

  • Do something customer did not expect

  • Help make adaption easier

  • Help customers get better performance

Again, make sure each one is relevant. Great value propositions focus on jobs, pains, and gains that matter to customers and exceed their expectations.

 

Get 10x More Done In Less Time

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Most everyone agrees that execution is critical to the development of a company. In fact, many investors in Silicon Valley, believe that execution is the number one risk when it comes to startups and early developing companies. We will have many articles on this topic because it is so important. But, I want to start with how to get more done in less time.

There are so many things that need to be accomplished and often not enough time or people to do all of these jobs. So the question is: If everyone has the same number of hours in a day, how is it that some people get exceptional results and others get very little done?

Here is one way to do it. I am sure you have heard of the Pareto Rule or the 80/20 rule. That rule works for most things and you can use it to become more efficient and more effective and in fact, do bigger things. Gary Keiler, in this book, “The Surprisingly Simple Truth Behind Extraordinary Results” tells how he accomplished more by doing less.

He says things were not working out with his job and his life. Too many demands, too little time and he had to do something. He went to a consultant and was told to do less. He was told to narrow his focus to one thing. In fact, the more narrow your focus the more successful you will be. “To achieve an extraordinary result you must choose what matters most and give it all the time it demands”

He was told to answer this question: “What’s the one thing I can do such that by doing it everything else will be easier or unnecessary?”

It all boils down to this very simple thing but something you have to practice at to become good at. In other words, you need to get out a calendar and make an appointment with yourself, four hours at a time, every day, to focus and work on that one thing that must get done. No distractions such as email, phone, chit chat with other workers or friends. Tell people you are busy. Four (or more) uninterrupted hours to focus on what is important. That is how you master your craft and that is how you get things done.

Here is a couple of examples. Harry Browne, America’s most successful salesman, worked four hours a day selling different things including cars and in the afternoon did other personal things including writing. He says selling is easy and we will be discussing his methods and ideas in
other articles.

Michael Phelps practiced six hours a day, 365 days a year, a 52-day practice advantage over
his competitors, which resulted in 22 gold medals, the most ever by an Olympian.

Focusing a minimum of 4-hours a day on being the best rather than doing your best is the answer.

As you knock down one goal, the next one gets easier. But, you have to protect your time blocks. Don’t let those time blocks get moved or interrupted Until that one thing gets done, everything else is a distraction.

Try it. You will be amazed at what you will accomplish and how good it feels to complete difficult tasks quickly and how many tasks you will get done and the progress you will make because each completed task moves you closer to your goal.

How to stay focused on your key objectives

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This article will cover a brief overview of the OKR (Objective and Key Result). All companies, including nonprofit organizations, are goal-oriented, purpose-driven, and yearning for accomplishments. Regardless of size and industry, however, they all operate with a limited amount of resources.

It doesn’t matter whether you run a startup or a company worth billions of dollars; you always need an effective goal-setting and measurement process. This is where OKR comes in.

What is OKR?

In simple words, OKR (Objective Key Result) is a framework used for setting strategies and defining goals to be achieved within a specified amount of time. At the end of the specified period, OKR provides a reference on how well the individual or company has performed in executing strategies and achieving the goals. As the name suggests, there are only two significant points:

Objectives: these are the goals you hope to accomplish within a specified time. At Google, for example, the results (goal plus where you are in completing the process) are on a dashboard for the entire company to see. OKRs help the whole company stay on schedule and give the company time to adapt if they are not on the schedule.

Key Results: think of key results as indicators of or pathways to achievement. Commonly the indicators are written in numbers, for example, percentage, time, reference, or monetary value. Numerically-based objectives or expectations are often easier to measure, as well. For example, the Objective is to (specific goal)  by (date).

Not every key result is quantitative or indicated in numbers. Instead of using numbers to track progress, you can use a qualitative (milestone) method. Every milestone represents a specific challenge or a portion of the larger initiative. Each milestone met means a step closer to the objective. For example, step one (25% of tasks required) completed (date) as scheduled and currently on track to achieve the overall goal as expected.

The maximum a person should have is four to five significant objectives. Four meaningful goals and four tasks to each means focusing on sixteen tasks.

Why use OKR?

To make sure that every individual and team in a company is on the same page, OKR must be widely distributed and easily understood. OKR is crucial because it acts as a management and communications framework.

Key results, ether quantitative or milestone-based, are measurable values used as the foundation to determine overall performance. Key results are indicators that mark both the easiest and hardest parts of an initiative. This way, the company can define the right strategy to focus on and the most immediate challenges by diverting or allocating more resources accordingly without compromising workflow in progress.

Main benefits of OKR

In addition to measuring success, OKR opens the door to better utilization of resources. As simple as it may sound, this is a complicated process; yet when done correctly,  it promises a wide range of benefits including but not limited to:

Effective employees: well-communicated objectives and key results allow the companies to focus on the most important task at any given time. The sense of achievement with every milestone met is also a strong motivation to keep on moving forward as employees realize that they are closer toward project completion.

Better planning: based on current achievements and remaining resources available, a company can craft strategies and execute all elements in more efficient ways. OKR gives a good understanding of the company’s situation and performance.

Manageable execution of strategies: the key idea here is prioritization. OKR helps a company to recognize any weak points in the planning or performance that will hinder progress and the completion of the objective itself. The company can then prioritize resources to address the identified shortcomings.

The idea behind OKR is to manage and measure success. Because some objectives can be too difficult to achieve, given a limited amount of time and resources, a generalized statement of success or failure is not good enough. OKR gives a clear overview of how far or close you are to achieving goals and foretells possible difficulties to come.

Here is an example of how to use OKR. T.J.Rogers, CEO of Cypress Semiconductor, who, through a dashboard, reviewed each person’s status daily. If an employee were behind in reaching his goals, he would call the person and ask,” how can I help.” He assumed they would have completed the task unless there was an obstacle holding him/her up. That’s a positive management tool and a positive approach to team members.

How To Get The Key Metrics You Need To Achieve Desired Results

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This article will cover an introduction to KPI (Key Performance Indicators) if OKR (Objective Key Results) is all about defining goals and tracking actual progress towards achievement at any given time. Key Performance Indicators (KPI)  measure the contributing factors through which achievements are attained. In other words, KPI includes the key; leading factors deemed necessary to achieve a specific goal. Although the scope of KPI is not as broad as OKR as far as measuring success is concerned, the KPI gives more detailed information about each specific factor measured.

For example, if the objective is to increase product output by 20% and one of the key results is an improvement of resource utilization (efficiency). Then KPI may include labor costs incurred in the manufacturing process, energy usage, production time quality, rejection rate, equipment downtime, maintenance cost, and all variables that relate to achieving the desired objective. KPI creates a rational basis to help the company shift focus strategically while avoiding operational disruption. The results of the analysis will be used in the decision-making process.

There are two types of KPIs:

Lagging Indicators: the inductors that measure results of any particular company activity, such as revenue growth and quarterly profit. They are called “lagging indicators” because they track results that have already occurred.

Leading Indicators: the indicators or variables to predict and influence future results. These are often more difficult to set up due to changes in external factors (that the company cannot control), such as consumer trends, investments, and competitors. However, unexpected changes do not always bring negative impacts; for example, additional investment in manufacturing equipment can increase output.

Although each industry has different KPIs to measure, the indicators or variables have the same purpose of providing practical guides to adapt and change under internal and exter\nal circumstances. Also, in most companies, proper business strategies are often based on creating the right balance between lagging and leading indicators.

Why use KPI?

Once the goals are defined, the company also needs to determine all variables that contribute to achievements. Without key performance indicators, it would be challenging for a company to evaluate performance in a meaningful way and make operational changes to address issues. KPI also helps employees stay focused on the most critical tasks leading to the competition of the objective.  

KPI gives a comprehensive understanding of the company’s performance at any moment and identifies possible changes in operations. Without knowing which parts of a strategy are not working, there is no way to design a good action plan to overcome the problem. By examining the analytical data of the KPI, managers can tell whether company performance is improving or declining. Then determine a practical approach to either to sustain improvements or deal with the decline in performance.

Benefits of using KPI

A company with well-thought-out KPIs has the advantage of performance visibility across business operations. The data-driven information acquired from analysis allows for a practical management approach to keep the company moving forward despite difficult challenges. More benefits of using KPIs are as follows:

Proactive business management: armed with fact-based information with KPIs, a company becomes more active in managing operations and discovering opportunities in the market.

Efficiency: KPI provides a tool for the company to identify any inefficiency within the business operation. Addressing the problem will eliminate the waste of resources.

Accountability: KPIs will show whether specific processes, individuals, or teams in charge of the operations are under or over performing. Allocating more resources or reinforcing the workforce may help improve the indicator and, therefore, overall performance.

Motivational values: even if the company is struggling, one positive metric shown in KPI can be a great motivation for everyone to keep improving and overcome difficulties.

In general, KPIs tell whether your company is moving forward, backward, or not moving toward progress at all. Proper implementation of KPIs is important in every decision-making process because they help identify issues and set the foundations to plan for sustainable growth in a more efficient way.

Do You Know If You Are Ready To Move Forward?

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In nearly all aspects of life, being ready has more or less the same meaning as being well-prepared. When it comes to running a business, however, it refers to several specific points as follows:

  • Having a good understanding of the business’ current position. It allows you to gauge how far or close the company is to achieving all objectives outlined in the strategy.
  • Recognizing all possible restraints and challenges. Armed with the knowledge of potential difficulties, a company can utilize resources more effectively to address issues.
  • Figuring out the company’s elements that are still under-utilized. Performance analysis gathered from such review opens the door to company optimization.
  • You are pinpointing business areas yet-to-be-explored. Sometimes the exploration does not come to fruition, but the knowledge gained from the process is always useful in decision-making.
  • Are you making sure that all factors related to the operational plan have been thoroughly examined and taken into consideration when crafting the strategy?
  • Are you aware of the company’s limitations in terms of resources?

Assuming all those points are covered, a company is “most-likely” deemed ready to execute its business strategy. Those are the bare minimum requirements to devise an effective strategic plan. If there is one thing missing, it is the pressure of external factors, including competitors and market situation – the elements you cannot control. That’s why a contingency plan should also or be prepared.

 

Crowdfunding, The New Alternative For Fund Raising

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You are probably aware crowdfunding through platforms like Kickstarter where backers of the company pledge small amounts of money so the company can get their product completed. For their contributions, they get a promise of being one of the first people to get the new product or maybe a T-shirt for small amounts of money.

Now, there is a new alternative. As a small business owner, you can sell shares of your business via an exclusive website called a portal to a crowd of investors. Investment crowdfunding is similar to Kickstarter, but the backers get real stock instead of items like T-shirts.

We asked the crowdfunding firm of Silicon Prairie Platform & Portal (sppx.io) to explain the latest information on crowdfunding.

Here how investment crowd funding came to be, how businesses are using it to raise capital, and some of its benefits. For example, instead of seeking significant investments from angel investors or venture capitalists, you can collect smaller investments from many people.

While not “new” as you or I would perceive it, in the financial world, it is. The JOBS Act of 2012 paved the way for State Legislation like MNvest in Minnesota to function as an exemption from Federal SEC regulations. Mnvest allows Minnesota companies to raise money from the public, by issuing stock or selling debt, to any investor in Minnesota. The issuer can also promote the offer publicly via an approved website called a portal. Mnvest came into law in 2016. Not all states have adopted portals yet. Of those that do, they also have their own rules and exemptions.

Raising funds through crowdfunding means small businesses can issue shares using this format instead of the traditional IPO that you would see on wall street.  The JOBS Act moved the regulations from the SEC to the State’s Department of Commerce.

One of the very early examples of crowdfunding was by Joseph Pulitzer for the Statue of Liberty. He needed to raise $100,000 to continue construction. In an article published in New York’s World newspaper, he promised to post anyone’s name in the paper no matter what amount they contributed. This crowdfunding method was a huge success and allowed for construction to resume.

Everything changed with the stock market crash in 1929. Because of the market crash, new regulations were born, such as the Securities Act of 1933. This Securities Act put an end to investment crowdfunding. The Securities Act also required that securities be registered with the SEC rather than with the states.  This SEC registration also added burdensome requirements for extensive information to be provided if a business wanted to sell securities. This securities act also puts an end to average people being able to invest in companies not registered with the SEC.

The JOBS Act was created to jump-start small businesses and encourage investing that had not been allowed in the past. Now that we know how investment crowdfunding came to be, we can talk about how it is becoming an essential tool for fundraising.

Crowdfunding Requires Marketing and Financing Efforts

One of the most critical aspects of crowdfunding that separates it from traditional methods of raising capital is that it involves as much of a marketing effort as a financing effort. Many people tend to underestimate the need for an active marketing campaign when pursuing the path of crowdfunding. When using crowdfunding, it is essential to ensure your team is 100% on board.

Investment Crowdfunding is not a quick fix for your cash-flow. Instead, it is a sustained effort over time to convert your social capital into financial capital. Therefore, your team must all agree to sustain their energy until you reach your goals!

When running a crowdfunding campaign, it is essential to know that it will not manage itself. You must assign a project manager and delegate tasks appropriately. After completing the business plan and legal documents, expect to budget about 80+ hours for marketing your offering over about three months.  Most of this work is done in the planning stage and includes setting goals, performing research, creating a compelling story, developing a brand such as logos and diagrams, and more.

Your responsibility when seeking investment is to explain to investors why their money will grow with you. They do not want to pay off your bad-debts or hire you to chase your dreams. You must show them you have an investable business and that you are the right one to succeed.

Investors care about when they will break even. They do not care how perfect your product is because some investors may never use it. Investors have many places they can “put their money to work.”  It is essential to show them why their money has a bright future with you but also protect your reputation by having a plausible plan to fulfill those promises.

A significant advantage to crowdfunding is that you can assemble a crowd of regular people who can invest for a multitude of reasons, not just good-looking financials. However, it is much easier if your investors believe in your financials.

For your campaign to be successful, you will need to ask a lot of people if they are interested in participating. Most campaign companies are surprised by the mix of supporters they get to fund their campaign. Many targets you think are an “easy-yes” will never show up, and paradoxically random supporters can “come out of the woodwork” with money. Therefore, it is essential to socialize your offering very broadly and often. Let go of the bias that you “know” who will participate. Instead, handle your campaign scientifically by inviting all the people.

What Investors Will Want To See

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Investors get many investment opportunities each month, so before meeting with you, they want to know something about your startup or company. At the same time, you need to know something about them before you approach them with your investment idea. Learn what their profile is, what they invest in, the average amount of investment they make, what industries and products interest them.  This familiarity will save you and them a lot of time. They are all risk-takers but at the same time, risk-averse to investments outside their area of expertise. Think about sending your potential investors a one page summary of your investment opportunity.

If there is interest in your opportunity, investors would like to learn about the following things.

  1. An Executive Summary: an overview of the material in the package
  2. The Opportunity: the problem you are solving and the resulting opportunity
  3. The Context or Background: the product(s) and the services you offer
  4. The Value Proposition: Why your product/service outperforms what’s available now
  5. Current status: the progress you have made and present position
  6. The Market: description and characteristics (archetype) of your customers
  7. Sales Plan: how you will reach, sell and keep potential customers
  8. Competition: current competitors, indirect competitors, any potential new competitors
  9. Management: Leadership, experience, and knowledge of product and industry
  10. Business Model: The critical elements of your business model, including value proposition, revenue streams, costs, resources needed, partnerships, etc.
  11.  Financials: Current and future sales, costs, and profits
  12. Investment: The amount of money required to get to the next milestone
  13. Exit: How and when investors will get their money back
  14. Conclusion: Summary, benefits, and Call To Action

Once you get an in-person meeting, you will be able to give your pitch and be able to discuss all aspects of the offer in great detail. We go into the presentation in-depth in the presentation module.

Then, as part of the investor’s due diligence, there will be many additional meetings and requests for specific information.