by Bill Aulet
Lessons Learned from Identifying the Next 10 Potential Customers
How did you source people to talk to in this step?
How many did you speak to?
How did you filter them to make sure they fit your End User Profile?
What was your yield rate to get to the final list (how many did you try to contact, and how many did you get useful info out of)?
Step Hypotheses you tested through talking with the Next 10 Customers (you can test more or fewer hypotheses for each category than what are listed here) What conclusions did you reach about the hypothesis? (Validated/Invalidated/Still Unclear – Needs More Work) What is your next action related to this hypothesis?
2 – Beachhead Market 1.
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3 – End User Profile 1.
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4 – Beachhead TAM 1.
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5 – Persona 1.
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6 – Full Life Cycle Use Case 1.
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7 – High-Level Product Spec 1.
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8 – Value Prop 1.
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Other Key Assumptions 1.
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This may seem like a simple step, but as you can see, it starts to inject a huge dose of reality into the process in a very constructive way, if you are open to it. Make sure your team is open to it as this will prove to be an invaluable course correction for your team and get you headed in the right direction with a tremendous amount of momentum and confidence if you do it properly. Remember, listening is the willingness to change your mind. Do so intelligently and based on data and real evidence as well as logic.
STEP 10
Define Your Core
WHAT IS STEP 10, DEFINE YOUR CORE?
Determine the single thing that you will do better than anyone else that will be very difficult for others to copy.
WHY DO WE DO THIS STEP, AND WHY DO WE DO IT NOW?
Having a clear definition of your Core will allow you to focus your limited resources to build and reinforce it. You do this analysis now because you now have sufficient context to understand the real driver of your value creation, so at this point you want to make sure you are situated to dominate the market you create, instead of doing all this work and investment to develop a market only to let other companies quickly reap the rewards.
By the Book: See pages 121–127 of Disciplined Entrepreneurship for basic knowledge on this step.
See pages 127–128 of Disciplined Entrepreneurship for an example of how a company addressed this step.
It is wise to build moats, but ultimately the Core is the inner sanctum that no one can get to. If they do, all can be lost.
PROCESS GUIDE
Defining, understanding, protecting, and growing your competitive advantage is essential to being a high-growth, innovation-driven company. I have worked with many companies who aspire for greatness but will fail to reach their goals without a strong Core.
The Core is that “special sauce” that would be extremely difficult for someone else to replicate if they tried to recreate your product. It is what allows your venture to deliver the benefits your customer values with greater effectiveness that any other competitor—today or in the future.
There are three fundamental elements to a strong Core:
Unique: This asset will be difficult for anyone else to replicate.
Important: This asset ties directly to your ability to produce something your target customer values very highly—specifically the Quantified Value Proposition in Step 8. You’ll validate and further refine it in Step 11, Chart Your Competitive Position.
Grows: To be a strong Core, it should increase in strength over time relative to competitors.
That third element is often forgotten, and it is very important. If your advantage is that your competition does not understand what you are doing today but once they figure it out they can catch up quickly to you, that is not a Core, but instead a moat. A moat is a competitive advantage that slows down competitors but can be overcome. Moats are good, but a Core is better. A Core is an advantage that continues to put you ahead of your competitors. As such, changing it midstream can be detrimental to your company, so make sure you focus on identifying a good definition.
Defining your Core is unlike most of the other steps in the 24 Steps in that you don’t have a lot of additional primary market research involved. Instead, your team looks inward and analyzes the assets and potential assets that the company has.
Use the Defining Your Core worksheet to list your assets and rank them by their relative strength. Then, identify potential moats for your business. If you have a good plan for a Core, moats can be extremely helpful to buy you time to strengthen your Core before your competitors are in a position to really put you to the test.
As you review the worksheet and start to translate your assets into a potential Core, look at Disciplined Entrepreneurship for several examples of good Cores—and what is not a Core, but a moat at best. Some common answers given for Core, from intellectual property to locking up suppliers, may not be a solid Core depending on your industry, and other answers, such as first-mover advantage, are almost never a Core by themselves.
It is important to keep in mind that a Core is not a benefit. It is an asset or a capability. Your customer does not really care about your internal assets or capabilities; they just want benefits (i.e., value that matters to them). For instance, lowering time to market for their own products is a benefit. If that is the desired customer benefit, the Core will be an enabling technology (a function) that creates this benefit.
Once you have selected a Core, make sure you can explain why you chose it over other options. Your Core, unlike most of the information you develop throughout the 24 Steps, cannot easily be changed without losing significant advantage in the marketplace.
Even if you are at par with your competitors today, if you feel you can gain an advantage and grow it over time compared to others, then that asset could be a great Core. That is why it is very costly to change your Core, because it is something you build over time.
In this chapter, I will provide some guidance on how to develop a game plan for a strong Core that will make your company much more valuable.
Determining your Core is a riddle that you must solve. While many other steps are dominated by primary market research and viewing the world through your customer’s eyes, this step is primarily focused inward.
Moats are very valuable but do not replace the Core. I suggest you identify weak and strong moats as you think of your Core and competitive strategy.
Moats, however, can be overcome while a strong Core will be much more difficult to overcome. Your Core is your last stand to prevent others from beginning to commoditize your product or simply steal significant, if not all, market share.
To determine the Core, you will start by inventorying your asset and potential assets. You will then start to identify weak moats, strong moats, and Core candidates, ultimately choosing one. You choose only one because you do not want to diffuse your focus. One great Core is sufficient and you have limited resources. If it is strong, the value of the second is relatively unimportant. You would rather have one very strong Core than two of medium strength.
GENERAL EXERCISE TO UNDERSTAND CONCEPT
See the back of the book for answers to this question.
For the following companies and value propositions, identify their Core.
Exercise for Step 10: Identify the Core for Each Company
Company Value Proposition Core
1 Walmart Low cost
2 Honda Reliable power products
3 eBay Best marketplace to buy and sell
4 Gillette Availability with sufficient quality
5 Oracle Safe choice
6 Zappos Customer service
7 Apple Instant productivity
8 Your Personal Example: _________________
WORKSHEET
&n
bsp; Think long, hard, and creatively about what assets your team and new venture have. They can include capabilities, connections, branding opportunities, personal attributes, personal wealth, intellectual property, unique insights, key customer commitments, or something else.
Defining Your Core Worksheet
The decision on the Core can take a while and may seem a bit frustrating as you want to move ahead and continue to make progress. I completely understand. Isn’t getting sales a great thing?
But you must understand that making sales without a Core is not sustainable if you want to be a high-growth company, because your success will only draw attention to the opportunity you have identified, and then competitors will rush in. At that point, your beautiful new venture will turn out to have been built on a foundation of sand and it will come sliding down when the first big wave hits it.
So even if you aren’t sure what is the best selection for Core, pick a few candidates for the Core and realize you have to solve this riddle soon. Some of your potential Cores may end up as strong moats, but the most important thing is that you are thinking ahead and protecting yourself, and it is also highly relevant as you proceed to Step 11, Chart Your Competitive Position.
STEP 11
Chart Your Competitive Position
WHAT IS STEP 11, CHART YOUR COMPETITIVE POSITION?
Look at your product, versus your Persona’s alternative options, through the lens of the Persona’s top two priorities.
WHY DO WE DO THIS STEP, AND WHY DO WE DO IT NOW?
Customers don’t really care about your Core. What they care about are the unique benefits to them in the areas they are most concerned about. Now that you have identified your Core, you can leverage it and your value proposition to demonstrate whether your product truly represents a breakthrough in the customer’s mind.
By the Book: See pages 131–135 of Disciplined Entrepreneurship for basic knowledge on this step.
See pages 135–137 of Disciplined Entrepreneurship for examples of how different companies and teams have addressed this step.
The Competitive Position shows your customer how you differentiate from the other options over the long term and shows your team why you will be a long-term success.
PROCESS GUIDE
This step spends some time thinking about your competition, but not too much. Often, entrepreneurs spend far too much time on competitors at the expense of focusing on their target customer—especially when they start doing feature-by-feature comparisons with their competitors. Remember, customers don’t care about features; they care about benefits!
You must know the major competitors, especially that incredibly persistent one known as the “do nothing” option, and at some point later on you’ll want to do a more robust analysis of your competition, asking holistic questions like what is the competitor’s strategy, who funds them, who are their key customers, and what are the strengths and weaknesses of the leadership team.
But you’re not there yet! You’re still too early, and there’s a lot that you need to define for your own company first. The Competitive Position is designed to quickly make sure you have fundamentally differentiated yourself from your competition and that your customer sees you are uniquely positioned to create sustainable, superior value for them. If you have properly defined a strong Core, this exercise turns out to be relatively easy.
You’ll use the Competitive Positioning worksheet in conjunction with your primary market research on your Persona’s top priorities. Take the Persona’s top two priorities and put them on the worksheet’s grid, as shown in the diagram below.
Then plot all the major alternatives the customer has, including the “do nothing” option. Options that are plotted closer to the lower-left corner are bad in all dimensions, whereas options plotted toward the upper-right corner are very attractive.
Finally, plot your position. Strengthened by your Core and your primary market research-backed work throughout the 24 Steps, you should naturally find yourself in the upper-right corner. If you are not in the upper-right corner, then you should be concerned.
If you are not in the upper right hand corner, you need to go back and revisit your Core and your market selection. Don’t enter into a long battle you don’t have a game plan to win.
This exercise is really quite simple, which is the benefit and the weakness of this approach as well. It gives you valuable insights to spot problems and gives you a strong general competitive plan, but there is a lot more detail you’ll need once you enter the market. At that point, you will need a much more detailed competitive tactical plan to stay abreast of the competition and win.
GENERAL EXERCISE TO UNDERSTAND CONCEPT
Competitive Positioning for Well-Known Companies: Choose two well-known companies and map their Competitive Positioning on the two worksheets provided below. Suggested candidates for this exercise: Uber, Apple, Airbnb, Zappos, IBM, Nordstrom, Starbucks, McDonalds, Volvo.
WORKSHEET
Now apply the same framework to your new venture and tie back to Step 10, Define Your Core, in the final question.
STEP 12
Determine the Customer’s Decision-Making Unit (DMU)
WHAT IS STEP 12, DETERMINE THE CUSTOMER’S DECISION-MAKING UNIT (DMU)?
Figure out who all the people are who are involved in making the decision to purchase your product—including influencers.
WHY DO WE DO THIS STEP, AND WHY DO WE DO IT NOW?
This analysis starts the process of getting the fundamental knowledge you need to estimate your unit economics and ascertain if yours is going to be an economically viable and sufficiently attractive business.
By the Book: See pages 139–143 of Disciplined Entrepreneurship for basic knowledge on this step.
See pages 143–147 of Disciplined Entrepreneurship for examples of how different companies and teams have addressed this step.
There are various important roles that must be considered in every decision to acquire a new product.
PROCESS GUIDE
Having the best product or even a great one is not enough to win in business. It will generate no value and be of no consequence at all unless the end user actually gets the product and uses it. For this to happen, the customer needs to acquire the product.
“Customer” is a general term that you are now going to make much more specific. To understand the customer acquisition process, first you need to clearly identify the key people and sources of information involved. The customer is not a monolithic entity but consists of multiple roles, whether embodied in one person, or several, that constitute a Decision-Making Unit (DMU).
Once you understand who is involved in the DMU, then you can look at how to acquire a paying customer in Step 13.
The three primary roles in the DMU are:
End user: The person whose use of the product creates value for the customer.
Primary economic buyer: The person who will pay for your product and will determine whether the value the customer gets from the product is worth the cost.
Champion: The person who advocates for your product. This is the person who gets the process going and hopefully keeps it going until it is concluded.
These roles reside in actual real people and not general, unspecific organizations. Many of these roles may exist in the same person, which is common in consumer product sales. The roles may be split across three (or sometimes even more) different people in business-to-business (B2B) products.
The roles in the DMU are represented by people for the most part, but especially when it comes to influencers, they can be sources of information like Consumer Reports or Oprah Winfrey’s television shows. In another recent development, today in some places, like the financial services, the decision is being taken out of human hands and instead made by algorithms and computers. I will consider these “robo-decision makers” not to be the norm, and as such you will not be dealing with those types of situations in this workbook.
To complete this
step, use the Determine the Decision-Making Unit worksheet to copy over a summary of the most up-to-date version of the end user Persona profile, and to build Persona profiles for the economic buyer and the champion. Even if the economic buyer and the champion are the same person as the end user, prepare a customized profile for each role because the person will likely have different priorities when acting in a different role. This would also be true for any person playing more than one role in the DMU, so multiple Personas are not only allowed but recommended in such situations.
For each Persona, you should identify primary (i.e., strongest) and secondary (i.e., strong but weaker than the primary) influencers. For each Persona you should also identify who, if anyone, has veto power over the purchasing decision. Veto power can include governmental and company regulations. Remember, the purchasing department of a company is rarely an end user, an economic buyer, or a champion (although, if you are a low-cost solution, it is possible they might be a champion) and is usually only really holding veto power, despite what they might want to have you believe. Most important decisions are made by people with responsibility for the profit and loss, or at least the revenue, of a business or household, so seek them out first.
