▶ Watch the original lecture

Value props is one of the most important things we could possibly spend time on, because the number one reason companies fail is that they are not solving a valuable enough problem. If you are not solving a valuable enough problem, you do not create value that is worth investing in, and you fail at the most basic level: meeting a need.

Hi, I’m Michael Skok, and we’re here at the Harvard i-lab in the Startup Secrets series to talk about value propositions. One of the first challenges of starting a company is figuring out whether you actually have an idea worth building a business around. So over this session we do three things: we help you define the problem you’re addressing (or the opportunity you see), we help you evaluate it, and finally we help you build it. What I think you’ll enjoy most is that we move from qualitative to quantitative, so you can really assess whether you’ve got something that’s going to make it.

Let me tell you the premise behind all of this, because it’s extremely simple. When I started life as a young entrepreneur in my teens, I didn’t have anybody telling me all the things I was about to screw up, and I screwed a lot of things up. I’ve got a lot of scar tissue. I wish somebody had sat down with me and said: here are some of the things you should think about before you plow into building your product, taking it to market, and figuring out how to sell it. So this series is really about giving you some unfair competitive advantage, having that advice before you crash into the wall and discover all the turns you could have avoided.

This is one of the few workshops where I’ll tell you we actually do have an answer. Usually you hear me say there are no answers, and I ask a whole bunch of questions of you. The only answer I’m giving you here is a framework, and it’s a framework for where we’re going.

Startup Secret: get rid of the idea of ideas. Most people come to me and say, “I’ve got an incredible idea for X, Y and Z.” Ideas are two a penny, sorry, two a cent. They’re free-floating. They don’t actually have meaning until you can attach them to some kind of problem or opportunity. The worst thing you can do is get carried away with an idea before you define the problem it’s going to solve. So take your idea and park it. Think first about the problem space in which the idea really applies, and then get to work. When you go back to all those free-floating ideas, you can ask, “Does this apply to the problem I found?” and it becomes much easier to filter and focus.

Once you’ve defined a problem and started building a value proposition, you want to be able to evaluate it, so that you yourself (not me or anybody else) can judge whether you’ve got something compelling enough to cause people to buy. And if you have, then of course you want to build it into a form that’s really crisp: everything from an elevator pitch all the way to a full pitch to get a customer over the line or raise money. In every instance, this set of frameworks should help you get there.

A brief note on how value propositions evolve in the real world: you rarely arrive at the final one on day one. Take Apperian, a company we invested in. If you put the founder under truth serum, he’d probably admit that three years earlier he was building a lifestyle company, writing mobile apps for enterprises and having fun making money doing it. But as those enterprise customers spent hundreds of thousands of dollars on custom apps, they kept asking, “We don’t want to put this in the iTunes App Store, so how do we actually get these apps to our employees?” That question forced Apperian to design what became its real product, an Enterprise App Services Environment (EASE), and to make the transition from an app-development shop to a subscription business. A lot of you will go through exactly that journey: you iterate a lot to refine your value prop. So as we go through the frameworks, I’m going to help you take that journey deliberately, and define your value prop as tightly and as early as possible.