01. Value Proposition

Estimated Time

• Reading: ~10 minutes
• Video: ~52 minutes
• Activity

Activity

Insights

• Every startup and product idea is unique
• There are no cookie-cutter templates that you can simply apply and expect success
• The Lean Startup Method offers principles to improve the success rate amongst the uncertainty of building a startup
• Validate your idea by talking to potential users and running tests
• Use the Build-Measure-Learn feedback loop as soon as possible
• Incremental improvements are the key to success - get a little bit better every day
• 5 markers of a great product

• In the Qualities of a Winning Founder section, you analyzed why YOU are the one to solve the problem in front of you
• Another key component is to understand why NOW is the time that users need your solution
• Eric Ries author of The Lean Startup has an approach to building startups that highlight where founders can potentially prevent common failures
• Ries defines a startup as "an organization dedicated to creating something new under conditions of extreme uncertainty"
• He does not sugar coat the risk of creating a startup, but rather points to ways to work through the uncertainty
• Revisit your idea that you are about to build and ask yourself:
• Does my idea solve a problem?
• Do my skills and experience align to solve it?
• Is there a need?
• Who are the customers?
• How do you know the answers to these questions?
• Simply assuming the answers based on your assumptions is not enough
• You need to talk to users, test your ideas, and collect feedback
• Jason validated the impact Eric Ries was having on companies who implemented his method

It seems like The Lean Startup really was about product-market fit and getting people to build the product that consumers actually want and getting there quicker. That is my personal experience over the last couple of years. And I think you played a good role in this — people are actually making better and better products that are connecting with audiences. - Jason to Eric Ries

• Why does The Lean Startup resonate with so many people?
• We can't predict the future, but that is what people are often expected to do with startups
• What feature is going to be the most important to add long term?
• How many customers will you add month over month?
• What will your revenue be in 3 years?
• Trying to guess the answer to these questions early on is part of the uncertainty that Eric Ries hoped to address
• So how do we make forecasts and plans when we can't predict the future?
• There is value in staying focused on the truths and the facts
• Build-Measure-Learn
• Take your idea and build a product
• Measure the data
• Learn from the data
• What good is building a product on time and within your anticipated budget if the data shows users don't want to use it?
• When possible base your decision making on little facts in the near term over best guesses in the long term
• There are efficient ways to test ideas, features, and products early to determine what users want - and if they are willing to pay for it
• Set up a basic landing page that gathers emails and gauges interest
• Talk to potential users and show what you are building
• Gather feedback and learn from the results
• Founders ask all the time... do I really need to test my ideas?
• Why wouldn't you?
• Even if you are confident that you know what customers want
• Why not double-check?
• If your idea is perfect you'll be able to validate it quickly and move on
• Eric makes a great point:
• If "everyone will love/want the product" that means 10 people will love/want your product
• Since you stated everyone will love/want it - that means the first 10 will love/want it
• So all you need to do to prove you are right is verify with the first 10 people you talk to about it
• This way of thinking about who will buy your product offers great perspective and lends itself to the need to interview customers and gather feedback
• Steve Jobs regularly gathered user feedback when demoing products
• And as Eric and Jason point out - you are not Steve Jobs - you are not above gathering user feedback
• Asking potential users does not need to be overly complicated
• Ask someone next to you at the coffee shop if they'd take a look at what you are building
• Strike up a conversation on the bus or train on your way to the office
• Present and ask for feedback at a local meetup
• If you can't talk to a stranger about your product in a coffee shop or on a train this probably is not the right career for you
• There are going to be a lot harder conversations in your future than asking a stranger for their opinion
• It will be harder to pivot your company and explain the reason to your team
• Especially if some will no longer have a role based on the new direction
• It will be harder to fire someone because you aren't going to make payroll
• Talk to people early and gather their feedback throughout the entire process
• Conduct usability tests and listening labs early and often
• You can not be afraid of the feedback you'll get
• A paper prototype is an okay place to start
• It is valuable to understand the initial user experience (UX)
• As a few people about the design you created in No Code intro
• Feel free to start a discussion in the Conversations and work as a community to give and receive feedback
• Know that most people are hesitant to give critical feedback
• Generate questions that they can't simply answer with a yes or no
• Asking the user "would you use this product" will not get you the insights you are looking for
• Instead of asking "Do you like what I'm building?" ask "How do the main features abc solve your problem xyz and what are we missing?"
• Instead of asking "Would you pay for this product?" ask "How much would you pay to use this product each month?"
• Make them take an action with your questions
• When the user says "Wow, this product is great!" - don't be satisfied and leave it at that...
• Follow up by saying something like "Oh you love this, can I sign you up for our first trial when it goes live? Can I put you down for our $5/month plan when it launches? Would you be interested in paying in advance at a discount to have access?"
• Notice that these questions are being asked before the product is even live; before the product even launches
• Gather feedback early!
• Create your own 'action' questions to ask users
• The insights you gain from these conversations are going to help paint a picture for the demand of your solution
• It is important to remember that each startup is fundamentally unique
• No template that guarantees success because one founder did it that way
• There is no mandatory step-by-step guide to create the next Uber, Calm, or Robinhood
• Even a course like Founder.University is about providing guidance not cut in stone steps
• We provide tools, resources, and best practices to help you make informed decisions
• Ultimately, as a founder, you have to consider all these learnings and be willing to think for yourself
• Then make the decisions in the best interest of your vision
• What role does delusion play in creating a startup?
• Based on how few companies succeed, how hard the work is, and the uncertainty associated with creating a startup it is safe to say that a certain level of crazy is required
• However, that delusion can become a liability as you build if you don't keep it in check
• Often you'll see companies with co-founders who supplement each other in this regard
• Incremental improvements are key to success
• When building a product you won't go from zero to perfect
• Jason often says that done is better than perfect
• And Reid Hoffman has a great quote on this line of thinking:
• "If you're not embarrassed by the first version of your product, you've launched too late!"
• Build the initial version and then improve
• Then always make progress... just 1-5% better each day will compound into huge gains
• Thinking about growth as a lean startup
• Value hypothesis vs Growth hypothesis
• Value hypothesis being the assumptions about why someone will use your product
• Growth hypothesis being the assumptions about how you can get more people using your product
• Both of these are equally important and the same effort should be put into both
• Often founders spend a lot of time understanding whether a customer actually wants the product
• It is just as important that once you have a customer to figure out how do you get another
• One key way to do this is to make sure everything you do is creating value for users
• Sustainable growth
• Sustainable growth is when new customers come from the actions of past customers
• This doesn't mean you found an SEO trick that provides a big influx
• It is not a big PR spike or viral tweet that brings in an unexpected number of customers
• Sustainable growth is when you make $1 from gaining a new customer and it only cost $0.50 to acquire them
• You can then reinvest that money to get new customers
• In this example, every customer you get will get you two more
• Once you get this flywheel growing you have sustainable growth
• Viral Growth
• Viral growth is commonly mistaken for word of mouth
• Anyone can ignore word of mouth
• Eric uses TiVo as an example
• No matter how great he tells everyone that TiVo is — it is still ultimately up to them if they will give it a try
• Viral growth is when one person using a product almost forces others to use it
• Eric uses PayPal as an example here - if he owes you $10 and pays you on PayPal you have no choice but to get an account if you want your money
• Viral growth was a powerful player when people would tag each other in photos on Facebook - the only way to see the photos was to sign up
• Sticky Growth
• Sticky growth is more about increasing how much a user interacts with the product
• These products tend to be higher in retention, lower in churn, and something the user feels like they can't live without for the long-term
• A product like Dropbox is a great example of sticky growth
• The longer you stay on Dropbox the more storage you'll need to use, but you are unlikely to go anywhere else because all your content is already there
• It is important to become an entrepreneur for the right reasons
• To solve an important and burning problem that you are passionate about
• Solving a problem for a specific group of people that would benefit from your product existing
• It is common to ask why anyone would buy from an unknown startup?
• One of the first responses is that they are desperate to have their problem solved
• Find someone desperate for your solution and you have identified your ideal customer
• It is important to keep perspective and not try to get too big too fast
• Every big thing started out small
• Don't over-focus on market size
• You are better off with a relatively small number of people who love your product
• Better off with people who need it, crave it, and desire it
• Then you are with a large number of people who feel relatively indifferent about it

Additional Conversation

• There is a Q&A session at the end of this episode that covers the following
• We don't have a lot of time left to do a lot of iterating. How do you manage something like that?
• We are a young startup, and we've had more demand overseas than domestically in the US would you launch, would you spend more time overseas?
• Why raise a round of funding? Do you find an inherent contradiction between the concepts that you have to incrementally build?
• How would you think about an MVP that needs a certain scale to be usable?
• What is the impact of network effect?
• What 2-3 things would you change about your book, Lean Startups?
• Find Eric's full interview here E600 on This Week in Startups

• You joined Founder.University to create a great product
• So let's take a minute and ask ourselves what makes a great product?
• First, you need to define great because that word can be a bit subjective
• Jason and Jeff Weiner dive into what are five markers of great products
• Feel free to add to this list when thinking about what great means to you
• Five Markers of Great, World-Class Products:
1. Great products have a single value proposition
• They stay laser-focused on one thing and doing it extremely well
• Google is the ultimate example
• Initially, Google was only a search box and that was it
• They focused all their energy on being the absolute best search engine
• Calm is another great example of being locked in on one proposition
• Meditation and mindfulness is their single focus and they do it better than anyone
2. Great products are simple, intuitive, and anticipate customers needs
• This sends a signal to the user that the product understands them
• It builds a strong impression over time and builds trust
• Waze is a great example
• The app is super easy to use
• Simply tell it where you want to go
• It is intuitive by the nature of its function
• It tells me how to get to where I want to go in the fastest way based on the other info it has
• It anticipates where I want to go when I travel to the places in a pattern
• When I'm ready to go home at 5 o'clock it asks if I want the fastest route there
3. Great products exceed user expectations
• It does not matter where a user's expectations are at... great products exceed them
• You never forget a product that is better than you thought it would be
• There are additional advantages to exceeding expectations
• If a bad experience happens in the future users tend to give the product the benefit of the doubt
• Exceeding exceptions can go beyond an exceptional product
• It could also be exceptional customer support that sounds out
4. Great products resonate emotionally with the users
• It is more than a utility
• It is more than creating value
• Resonating emotionally is how it makes you feel when using the product
5. Great products change your life in a positive way
• Big or small great products ultimately impact your life in a meaningful way

Additional Conversation

• Jason and Jeff touched on several other topics during this discussion such as:
• Rearchitecting a platform
• The role of technical debt and how to address it
• How a CEO thinks about adding product features
• The role of APIs and skill ranking at LinkedIn
• The importance of engagement in a social media app
• Tracking the right metrics

Activity Details

Additional Resources

• Lean Startup Methodology
• What is a value proposition? With examples
• Startup Value Proposition: How to Write One in Five Simple Steps
• How to Create a Value Proposition for Your Startup
• Lean Market Validation: 10 Ways to Rapidly Test Your Startup Idea
• Examples of 7 of the Best Value Proposition Examples We’ve Ever Seen