Building your Value Proposition
Matthew Grimes, Professor of Entrepreneurship & Sustainable Futures, Academic Co-Director of the Cambridge Judge Entrepreneurship Centre discusses the benefits of building your value proposition.
08 December 2022 • 6 minute read

It goes without saying, entrepreneurs are passionate about their ideas. This entrepreneurial passion is what allows founders to persist through adversity. And yet despite this inspiring passion, many early-stage entrepreneurs struggle to find potential investors and customers who are equally inspired. This struggle can often be attributed to the lack of a clear and compelling value proposition—the summary statement of how a venture’s products and services will generate ongoing value for its customers. Entrepreneurs should not expect that their early “Eureka!” moments of discovery, their passion for the ideas, or even their charisma will seamlessly translate into market traction. Arriving at a compelling value proposition is a process, and in this article I will outline three steps in that process.
Step 1. Focus
Remember, if you are trying to solve everybody’s problems, you will probably end up solving nobody’s problems. Many entrepreneurs mistakenly assume that a compelling value proposition must start with a problem that everybody experiences. The assumption is that the larger the market size, the stronger the value proposition. In my experience, this mistaken assumption leads entrepreneurs to define their market in very abstract terms and to overlook the customer groups which are most likely to be inspired by their early solutions.
When I speak with entrepreneurs, I often ask them to tell me who their first 5 customers are likely to be. They look at me with puzzled expressions and ask, “So, you want names?” I respond, “Yes! If you are selling to businesses, I want the names of those companies. And if you are selling to individual consumers, I want the names of those individuals.” I’m asking these entrepreneurs to zoom in. To see the trees through the forest. And as they inevitably struggle to answer this first question, I offer the following set of additional questions to help them find their focus. While most entrepreneurs have already done the work to answer question 1 below, the remaining questions have been inauspiciously overlooked:
- Which customer groups experience the problem you are looking to solve?
- Of those groups, which of them are most likely to know they have this problem?
- Of those groups, which of them are actively searching for a solution to this problem?
- Of those groups, which of them have developed a workaround solution to this problem?
- Of those groups, which of them have (or can acquire) the budget to pay for your solution?
- Within those groups, which individuals/companies can you speak with further to better understand their problem and how to address it?
Working through this list of questions, you should now arrive at a much more focused set of potential customers and customer groups that are most likely to have equivalent levels of passion for the solutions you are proposing. And this focus is the first big step toward arriving at a clear and compelling value proposition.
Step 2. Simplify
In step one, we discussed the importance of focusing your market in order to build your value proposition. In step two, we will discuss the importance of simplifying that value proposition. As entrepreneurs enter into existing markets, they often assume that they need to do more than the competition. More features. More quality. More service. This is a mistake, and particularly so at the earliest stages of development, when you lack any efficiencies of scale that might help you lower the cost of those additional features. Even Amazon, for all of its present-day diversification, started off selling one kind of product—books. Perhaps the simplest of e-commerce products. Although Instagram initially started as an app for virtually “checking in” to locations, the founders stripped the functionality down to a couple simple features: filtering and sharing images. This simple functionality was clear and compelling in a world of complex social media applications, eventually leading to the record-setting $1 billion acquisition by Facebook after 18 months of exponential growth. In a world of information overload, you need a strong signal that cuts through the noise. In this world, effective differentiation for most startups will be achieved not by adding additional layers of features, but by stripping them away to what is most essential and most unique. There is a design principle that corresponds to the acronym KISS—“Keep it Simple, Stupid.” I prefer the alternative—"Keep it Super Simple.” So, as you work to build a clear and compelling value proposition, keep this acronym in mind as you continue to refine your products, services, and the corresponding statement of value that you hope to generate.
There is a design principle that corresponds to the acronym KISS—“Keep it Simple, Stupid.” I prefer the alternative—"Keep it Super Simple.”
Step 3. Analogize and Tell Stories
Readers may be familiar with the quote often attributed to Henry Ford in which the founder of one of the earliest automobile companies supposedly stated, “If I had asked people what they wanted, they would have said faster horses.” The point of Ford’s quote is that early potential customers are deeply familiar with their existing solutions and often are less inclined to imagine new possibilities. Because of this, they are also prone to overlook value propositions that propose ambitiously novel solutions. This goes for investors as well. Studies have shown for example that when investors have difficulty categorizing or “putting your ideas into a clear box,” they are more likely to discount the value of your ideas or overlook them altogether. So, in this final step we will consider the presentation of a clear and compelling value proposition, and how you can reduce the likelihood that your ideas will get overlooked.
As noted, entrepreneurs face a dilemma. On the one hand, entrepreneurs are prone to introduce new solutions into existing markets. On the other hand, customers on average value their existing solutions and tend to overlook novel ones. How can this dilemma be resolved? Recent studies suggest that one potential solution to this dilemma is to make use of analogies. The Cambridge Dictionary defines an analogy as “a comparison between things that have similar features, often used to help explain a principle or idea.” For instance, take Cambridge-based Bit.bio as an example. The company is pursuing path-breaking innovation within genomics. To help audiences make sense of their complex science, they use an analogy “Biology as software”. As the company explains:
At bit.bio we look at a cell as if it were a computer. The nucleus is the hard drive, storing genes in its DNA. Genes interact with one another, forming programs called gene regulatory networks. Together, these programs form LifeOS™, the Operating System of Life™…Our cell identity coding platform gives us the enter button of LifeOS.
By helping audiences quickly locate a hugely complicated scientific process within a set of well-established and widely accessible categories, these analogies increase the clarity of Bit Bio’s value proposition. They help audiences who might typically overlook or discount the proposed solutions to instead pay attention.
While analogies may prove useful for helping audiences quickly make sense of a new venture, alone they may be insufficient for ensuring that your value propositions resonate with audiences. We are a story-telling species. A recent study published in Nature Communications highlights evidence that as far back as the time of hunter-gatherers, storytelling increased cooperation and even reproductive success. The takeaway is clear. Stories are powerful at attracting stakeholders and resources. Facts are insufficient forms of communication. They often lack context and meaning. To capture people’s attention with your value proposition, you need to look to wrap those facts in a story. Not only will customers and investors be more attentive to the facts associated with your proposed solution, they will feel more connected with you.
And thus, we come full circle. Every compelling story needs a hero. And to understand the hero of your story, you must have done the hard work involved in focusing your market, identifying the struggles of your early adopters. Your early adopters become the heroes of your story. Their struggles become your story’s hook. Your solutions become the basis on which they find success.
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