The digital age offers new hope in communities across the world. A recent speech by Paul Graham and a well thought out book by Brad Feld describe some of the ways cities can build on this opportunity. These ideas are a great start. But more innovation is needed. Every community can find its own way to meet its own goals. This should be an ongoing and passion filled debate. This article shares my ideas and questions. What do you think?
Paul Graham gave a talk recently in his home town of Pittsburgh. His theme was how rust belt industrial city with a great heritage could nurture a startup ecosystem to rival Silicon Valley. I live in Glasgow. A city with a comparable past from its days as the second city of the empire. And the shipbuilding capital of the world. So Paul’s analysis got me thinking.
The focus was on demographic and cultural factors. This is in contrast to Brad Feld’s excellent book Startup Communities. A book allows for more depth of course. But the approach is different as well. Brad looks into the proactive things various stakeholders can do to make startups happen.
These are two smart guys who I admire. I must admit that Paul’s thinking sits a little more comfortably for me. That is a just a personal thing though. Both sets of ideas have merit. I suspect neither covers the whole story.
The Scottish startup example
Scotland is the example I know best. We are by definition small, peripheral, cold and Northern. Comparisons to Pittsburgh only go so far. Yet we are experiencing some success. We have two unicorns (Skyscanner and Fanduel). Not bad when the whole country only has 5 million people.
We also have a good number of strong businesses. Led by great entrepreneurs with fantastic teams. Many of these are somewhere between Product/ Market fit and the ability to scale. Supported by a diverse and well organised Angel community. Larger VC investors are also starting to take a growing interest.
Proactive Government (at EU, UK and Scottish levels) and Universities are also a feature of our scene. In a way which is not at all like either Paul or Brad’s models. And there are signs of successful startup communities from Trondheim to Nairobi. With an almost infinite range of circumstances and heritage.
Startups offer hope for all our futures
But this is not a review of startup Scotland. Or any other ecosystem.
At the same time, we live in a world where economic progress is fragile at best. Many, many millions live in abject poverty. And/ or in war zones and despotic failed states where the situation is desperate. The “better off” working and middle classes in the developed world are disaffected. And disillusioned with their rulers and their lives.
Mobile and digital technology are a beacon of hope in this landscape. Not the whole answer but a big part to play. Tech provides a potential outlet for restless, energetic and frustrated youth. Products and solutions that can the world for the better in many ways. And an accessible and available economic route to build or rebuild communities. Maybe even whole countries.
Paul identifies some inherent attributes that Pittsburgh enjoys. And I wish them every success in leveraging those factors to build a great startup ecosystem. I attended the celebration dinner for Scotland’s Digital Technology Awards this week. the event shows how this kind of heritage can work. Held in a refurbished Victorian Fruit Market but with cutting edge video and a fun atmosphere. Well done to everyone involved.
But it can’t just be about places like Pittsburgh and Glasgow. Nor is everyone striving to emulate Silicon Valley a realistic or desirable goal. I don’t have answer, only questions. Yet I believe that everyone should be able to grasp the opportunity. Otherwise why are we using mobile to spread across the globe? Communities need the chance to do things their own way. Build their own futures. And make a real difference to their own lives.
Some ideas and questions to get started
I think this should be a running debate. With far smarter people than me contributing and developing ideas for years to come. Let me kick off with some ideas and questions that I have been kicking around. Some of these might even work!
For Scotland, the first priority is to remember what is great here. We have wonderful people and a great social and cultural environment. Our country stretches from historic and vibrant cities. To some of the most beautiful true wilderness in Europe. The legal and financial systems are stable, clean and supportive. And our Universities have global academic standing and nurture a big pool of talent.
These are global advantages. Not all are unique but much is world leading. Our success depends on leveraging what we have. Not on dwelling on the things we lack.
How do we maximise this opportunity? What works for other, diverse communities around the world? They are endowed with their own talents and qualities. We can learn from leaders like Paul Graham and Brad Feld who are generous enough to share. But we also need to innovate on for success.
This should be a passionate and energising debate. I would love to hear what you think.
One of the most common mantras in the startup business is “solve a real world problem.” In other words base your business on something that people need or want. And are willing to pay for. Its kinda obvious to state that B2B SaaS needs to solve a real business problem.
Business problems can be a complex area. The collective challenge is for the organisation. The common good devolves into an intricate web of threats and opportunities. A different picture for all the units and individuals that make up the whole. This creates both enthusiasts and barriers in almost every situation.
For business to change, people must change
There is no easy formula to define a business problem. At heart it is always about change. This is true for consumers as well. Read Nir Eyal’s excellent book Hooked to understand how changing habits is the key to engaging users in any product.
People need to change to deliver any business change as well. But this must be orchestrated and coordinated. Everyone involved needs to change in the same direction. Yet that does not mean the same change for everyone.
A new automated purchasing ordering system will result in extensive changes. It demands different day to day habits for procurement staff. It will also offer front line sales staff a better way to manage inventory. But the new habits will be different in each case.
In a business of any size this complexity carries an almost automatic penalty. Every change will be unwelcome to someone. There will be different impacts on each role or division or business unit. Somewhere in the business there is a real threat posed by new systems or processes.
Change raises barriers every time
The benefit to the whole business may be huge. Yet there may be parts where change means extra cost. Or perhaps just a static outcome. Those who don’t feel the gain will feel the pain. Even if that is an illusion.
Those who obstruct change can influence the buying decision in large enterprises. Some blockers don’t wield influence before purchase. Yet they can destroy the value gained after implementation. Managing expectations and behaviours in a business customer is no simple task.
Your B2B SaaS pitch must ask the right questions
So your B2B SaaS pitch is about much more than functions and features and benefits. Sure your customer wants to know what you SaaS can do. They have plenty of other questions as well. Some explicit and some hidden through the process.
Engaging with and selling to a complex enterprise is a process. A process of recognising and asking the right questions. Not about providing perfect answers.
I would start with a question that is of paramount importance to you as the entrepreneur:
“Are you willing to change the way you do business?"
If the answer is No then qualify the opportunity out. No matter how great a fit the potential customer may seem. Answer Yes and the game is on. By the way I found this one in an interesting article from the BBC. It suggests any problem can be solved by this and two other questions….
Questions to probe the reality of business change
Now you need to look deeper. Beyond the functional benefits. To help your customer understand, prepare for and execute the change required to realise those gains. So the next question is:
“How will the business need to change to realise the benefits of your SaaS?"
Once you have a clear picture of how much needs to change, a more delicate question arises:
“Do you (the customer) need more help to execute the change?"
This can lead to some tricky answers. The chances are that if help is needed a SaaS Startup will not have the resources or skills to offer it. You may need some implementation partners. Or at least a cooperation with some business change experts.
The 2 biggest competitors to B2B SaaS
Too direct an approach could also pose a threat. The customer still has the option of not changing. Once they realise the work involved, will the benefits still stack up? Or the organisation you are talking to may feel they can manage the change themselves. They will appreciate you recognising the issue. But not the offer of help thank you very much.
Remember when you sell a business solution (and B2B SaaS is a solution not a product) the top two competitors are always: Do nothing and Do it yourself. Your always has at least one and usually both these options open.
The final important set of questions are about the barriers and the blockers:
“Who will be against the change required?”
“Will there be real losers in the organisation, maybe even redundancies?"
An upfront discussion about where the obstacles lie will be great for your reputation. Show some insight into how those challenges can be overcome and you will truly stand out. And this is an excellent approach to reveal the true extent of the change required. Think about both the timescale the value of the benefits your SaaS offers in this context. Your offer to a B2B customer will be much more credible.
Selling B2B SaaS has elements in common with any new product. Show people the sexy stuff. The cool user experience. The real time data opportunity. And the new mobile app. But also engage them in a discussion about how they can reach out and take the prize.
I spent a long and fascinating day this week talking about a string of early stage companies. I watched pitches from four interesting companies. I listened to reports from a portfolio of startup investments. Including one that has failed in the recent past. Then I had an intense meeting with two friends about the plans for a new business. All the lessons from the day would amount to a good snapshot of the whole Scottish startup ecosystem.
In this post I want to focus on just one. Many of the conversations turned on sales. How could these companies generate their first revenue? Or grow fast enough to reach scale? No surprise. At two separate moments this discussion went deeper. The real problem emerged. How to focus on and clarify the right value proposition?
Why is Startup value proposition so important?
Value proposition is one of those buzzword bingo phrases business people use. It appears on the business model canvas. And it used by McKinsey partners and Harvard Business School graduates. What do the fancy words mean?
Wikipedia says: A value proposition is a promise of value to be delivered and acknowledged and a belief from the customer that value will be delivered and experienced.
This seems a neat summary so lets work with it for a minute. At the stage of proposition value is a promise from the seller and belief by the buyer. It matters because without that promise, your business has nothing to sell. If belief is absent, no customer will ever buy.
That is why is precedes actual selling. There is no point in rushing out to hire sales people if you don’t have a clear statement of the value you will deliver.
In fact your value proposition is fundamental to the whole customer lifecycle:
Once you add up these three principles it is obvious that value proposition is about more than sales. It is about what you offer and deliver to your customer. To get it right you need to know what your product does. What benefits it offers? Which customer will gain those benefits? How the value of those benefits compares to the price? (i.e. can you make money!) Value proposition is the heart of your strategy. As well as your sales.
This value proposition stuff is simple?
All the above sounds obvious. Even without the theory any sensible founder would take this approach. Yet I meet many business that are struggling in this exact area. More often than not they don’t even realise. Some are head down convinced they are on track and confident of success. Others are finding it tough. But can find almost any other reason for their troubles. Not able to raise enough money to compete. Customers are not yet ready for their solution. Shortage of senior talent to do the selling. There is an endless list.
So what makes a good value proposition? Let me illustrate first with a negative example.
Digital health is a bit of a passion of mine. I am CEO of an early stage health startup called Triscribe. In the UK health is a common source of poor value propositions. Digital and more traditional life sciences alike. The usual story runs like this.
This all sounds great. Yet in practice it is no use to anyone. It has at least 4 fatal flaws:
What does great look like?
I could wallpaper the Forth Bridge with more examples. There is no single solution to what a great value proposition looks like. Nor is there a template or model which always works. Or even works some of the time. I love listening to Guy Kawasaki, chief evangelist of Canva and tech marketing legend. He gives some great examples like:
“Our business will take off when kids film the effect of putting a pack of Mentos into a bottle of Diet Coke.” - YouTube value proposition.
“The secret sauce is going to be photos of cats scratching themselves.” Twitter value proposition.
I guess some people are just visionary. I am not. And I still don’t have a formula. The answers I look for/ hope for/ cry over include:
The last question is often revealing. For example, think about the Kenyan mobile money system M-Pesa. One key to its success is ultra low rates for money transfer. Even with 20 million users it is far from obvious that Safaricom makes money from this product. However, the mobile operator has a dominant 60% share of the fast growing Kenyan market. Kenyan citizens get the value of low cost and extreme convenience. Safaricom has a loyal and valuable customer base.
Where does this fit in your business?
I hope its clear why value proposition is so important. Your whole business strategy depends on it. You need it for everything you sell. It will change with time and as your markets needs and expectations evolve. I don’t think there is a template or a method which answers the question. I am suspicious of anyone who says there is.
I would offer two pieces of advice. Always think and reflect on the two key questions: What promise of value are you offering? Do your customers recognise and believe in that value?
These are not easy questions. If you are not sure of the answers, get out and talk to people. Best talk to some customers and potential customers. Otherwise talk to advisors, mentors, non-execs or anyone who will listen. There is no more important question on which to seek advice. By all means avoid the business jargon of the words value proposition. But keep the concept at the heart of your strategy.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.