CORE

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We are going to cheat before we even get to the value proposition workshop and tell you the most important thing in it: what I call the CORE. Everything has an acronym because I was a terrible student and needed mnemonics. CORE stands for your Capability Of Really Exceptional value. It is the thing that when somebody describes you, they say “because X,” and ideally it is one word: incredible experience, better taste, the recommendations, exploration. It should be so easy to test with customers that whenever they think of you, they say “yep, that is what you guys do.” Nine times out of ten, when I sit with an entrepreneur and really press, they have not defined the core. They have defined a bunch of stuff, and when we press hard we get even more focused. Often a small piece of what they are building is really the core innovation.

Startup Secret: cut to the core. Do not give up as a founding group until you have debated to the nth degree what the one thing is that is so exceptional you could defend it against everything else, and everything else around it you would be willing to give away. Once you know that, everything else gets easier.

Some examples, in one word:

• Harvard University: prestige, education, access. Harvard has lots of words and you are all here for a reason, so no challenge needed there.
• Reddit: even from someone who “doesn’t really like it,” the core is the people and the community. It might have been the content instead; it does not matter what it is, as long as you get to the core. (The user interface actually sucks, in my opinion, but that is a whole other story.)
• Patagonia: people said supply chain, style, and culture. A lot of people buy Patagonia because of the social mission or the culture or what it represents, even though you can buy the same clothing elsewhere, sometimes cheaper (you could go to REI for alternatives). The Patagonia vest became part of a look, the finance bro or VC bro culture. Everybody has their own reasons, but you get the point about core.
• Facebook: the real innovation is the user network, but if you go to the core, it is the data and what they do with it (advertising). Imagine if Facebook had charged a subscription to get online; you would not have used it. They did not care, because they knew the real value was the network. Today you could recreate Facebook’s technology fairly simply (photo sharing, connections, much of it in open source), but if you go onto a brand-new network with better features and cannot find anybody else on it, it is useless. The value is the network.
• Yelp: not new (there was Epinions before it), so it is a service, but the essence is the content. Yelp would be useless without the content of local merchants and the ratings and reviews. So focus on that: if it is content, monetize the content, and do not get distracted trying to sell the product or the service.
• Siri: really not a software company, it is a data company. The more data it collects from you, the more effective it becomes.

When customers give you many different cores (Maria’s question). If your market is all around you and customers are telling you all sorts of different things, does it matter? It can be fine. A brand can have more than one core because you are appealing to different desires for different people, and on purpose you design something that appeals to different people at different levels. But you also want to understand your brand positioning through market research, know your position, and portray it, because although customers initially say different things, at the core there is often one particular reason they buy in. Like Apple: it is not just the phone, it is the feeling. Others might be noise. But recognize the limit: you still cannot monetize everything. If Netflix tried to monetize recommendations and data and advertising and content all at once, it would be a very messy business. You have to pick something that is at the core of what you will monetize. Apple has brand attributes like privacy and usability (you probably can monetize usability), but what Apple actually monetizes is a complete integrated stack from top to bottom that you can rely on.

Startup Secret: the minimum viable segment (MVS). When you are a startup of one person with thousands or millions of potential customers all pulling you in different directions, your energy gets diluted and dissipated. You have to pick something. We call it a minimum viable segment: a set of customers who all have the same need. If everyone has the need for a faster supply chain for their coffee, or a culture as the basis on which they buy, or a better means for a consumer to get access to healthcare, that single shared need is where you focus. It is the basis on which you get focus (so you make impetus) while your brand can still be recognized broadly.

Cutting to the core in action: TetraScience. TetraScience was started right here in the iLab by students in this very room at one of the Startup Secrets sessions. Their insight was obvious: scientific instruments all over the world lack connectivity. People in labs still take readings by hand into notebooks, even though tens and hundreds of thousands of instruments are not connected. They were addressing an emerging pain. The first thing they did, back six or seven years ago when everything was IoT, was build a hardware device, a box. Fast forward: that was not the right thing to monetize. It nearly killed the company. The whole first round they raised was flushed, it caused the founders huge challenges, and one founder fell out. That is how badly business models can mess you up. The good news is they lived to tell the tale.

Other customer pains: they still needed hardware to detect when instruments failed, and they struggled to get the data into a usable form. DNA data records are tens to hundreds of gigabytes, and they need it in temporal form (checked over time), so thousands of records that you cannot possibly write down and must store somewhere: the cloud. So what is the right core?

In the room, one team said hardware: you need to connect the instrument to the cloud, and with so many instrument providers you need a standardized solution, so standardize that part. Four other teams said software: a standardized cloud solution or a marketplace connecting data producers and users. In a show of hands, the room overwhelmingly believed software. But where the company actually went was neither exactly. They describe their connectivity diagram as “spaghetti,” and at the core of that bowl of spaghetti is the ultimate customer need: to get at the data. The customer does not care how it gets there. If TetraScience kept producing the hardware, they would end up competing with all the instrument manufacturers who themselves need to create connectivity. So instead they made an ecosystem, and those manufacturers became partners. On the other side, they picked biopharma as their MVS, and those customers do not care how the data gets there either. All they care about is a data pipeline that delivers it normalized and usable. TetraScience became “Switzerland” in the middle, an envied leader that connects all the data to all the places it might be used, provided in normalized form. The business skyrocketed, triple-triple then double-double, probably one of the fastest companies to reach $100 million in less than five years after being nearly dead. One reason: the business model made sense once they cut to the core, which was the data, not the hardware.

And once you start from the customer, cutting to the core is not that hard. Ask your table for one thing your customer needs. One founder said “personalization,” and why it is valuable: “health is a personal journey.” Another said “representation”: the customer is students, and the service is teachers who actually look like them, especially in US public schools, so the teacher understands what the student needs. Another (Cold Press AI) said the customer’s biggest problem is faster evaluation time for their data set, the turnaround from wanting the data to getting their hands on it. If you get it from the customer’s standpoint, the core reveals itself.