Value Proposition

From Idea to Value Creation

In the late 1800s, Ralph Waldo Emerson made a statement that evolved into the well-known adage: “Build a better mousetrap, and the world will beat a path to your door.”

Turns out, it’s a lie.

Far too many entrepreneurs have holed away in their garages perfecting mousetraps, thinking that the world would indeed beat a path to their doors, only to discover that the current mousetraps were good enough. VCs have seen many “better” mousetraps that went nowhere. They know how hard it is to get the world’s attention.

For an idea, like a better mousetrap, to become a startup opportunity, we need to translate that idea or innovation into “value creation,” which we articulate in a statement we call the “value proposition.” It is not good enough to be clever or novel. An idea must somehow make the world a better place. It must change the world for the better. However, this needs to occur in the context of a world that hates change.

Special note to college students: I need you to take a leap of faith with me here. Your world is so full of profound changes, you may find it difficult to fully comprehend the rest of the world’s aversion to anything that rocks the boat. Every few months, you are changing schedules, housing, cities, friends, activities, jobs… But you will soon find permanent employment and begin falling into comfortable routines like the rest of us. Despite your current ability to adapt quickly, be aware that most people are doing everything they can to keep an even keel.

And groups of people are worse! Organizations are notoriously resistant to change, even in the face of obvious need. Institutional inertia is perhaps a stronger force than gravity (I’ll check with Newton on this one). As a small example, students, have you ever been a leader in a student club? How many of the things your club did were the result of “that’s how they did it last year”?

Understanding this resistance to change is a first step toward articulating value. Build a better mousetrap, and the world will not beat a path to your door! The world is busy, and the old mousetrap has been working fine. How then can we make the world a better place in a world that is unwilling to change?

The key is to identify something that is making the world uncomfortable, so much so that the world is already looking for a change. VCs have a handy metaphor for this phenomenon: customer pain.

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Covered in this chapter:

  • Customer Pain
  • Segmentation
  • Better/Faster/Cheaper
  • (Early) Competition
  • Incremental vs. Disruptive
  • Platform vs. Focus
  • Push vs. Pull
  • B2B Value Creation
  • High Concept Pitch
  • Getting Granular