It’s a question every new business or venture is asked at some point or another, and figuring out what that is and how to judge your answer can be difficult.
That’s why I’m here to help!
When an investor asks, “what is your secret sauce or unfair advantage,” they are really asking “what is it that you uniquely do so that customers come to you over the competition?” In simpler terms, how are you different from everyone else in your market and will therefore be able to outperform your competition.
As a co-manager of Citrix’s internal new venture incubator, I hear a lot of pitches and the vast majority of them focus on features without telling me the value of those features and why customers should care. A strong pitch starts with a meaningful customer problem and then goes into how their business solves that problem. Better still, the pitch continues to explain why they deliver better value than the competition and eventually how they are going to out execute everyone else.
When I work with internal and external startups, and in blog posts, I use the Blue Ocean Strategy Canvas to identify their secret sauce and judge the strength of it.
Who is your customer and what is your value proposition?
The first step is to identify who your customer is, and identify what their needs, pains and jobs to be done are. Then, define what value you’re providing to your customer. These are all the pain relievers, gain creators and specific products and services you offer.
Finally, match elements of your customer to the appropriate components of your value proposition. This helps you focus your resources on delivering what is creating value.
Who are my competitors?
Now, ask yourself, who else is targeting a similar customer and providing comparable value. More specifically, what alternatives does your customer have to receive the same value?
These are your competitors. You can take it a step further and look outside your specific market and determine who may potentially enter your market with an alternative.
What are my customer’s value drivers?
The next step is to determine what the value drivers your customer uses to select your offering versus the alternatives. In other words, what criteria does your customer judge one product or service over another?
Think of it like this, when you want a coffee and are considering Starbucks v. Dunkin Donuts, what makes you choose one over the other? Is it the ambiance? Is it the variety of beverages? Is it the customer service? Is it the quality of the ingredients? Is it the speed of service?
Make a list of 5-10 value drivers and avoid referencing specific product or service features, as those are vehicles for delivering value, not the value driver itself.
How do my competitor’s and I rank?
Begin by giving you and your competitors a score out of 10 on each of the value drivers based on how well each delivers on that value. Use as much real data as possible, but you can also assign scores based on intuition. For example from the Starbucks v. Dunkin Donuts example, looking at ambiance, Starbucks has leather chairs, music playing, art on the walls, relaxing colors, so I would give them a 10. While Dunkin Donuts has bland colors, no art, and hard uncomfortable chairs, so I’d give them a 1.
You will get something that looks like this:
Where are the big differences, if any?
Look carefully at your graph, identify the value drivers that you are above, below and matching the competition. This is where choices and trade-offs come into play, because you don’t want to be hovering around the competition on every value driver expelling resources everywhere and not putting yourself above the alternatives in your customer’s eyes.
There will be some value drivers that you want to match the alternatives as they are important to your customer, but ideally, you want to be head and shoulders above the competition on at least 1 value driver. There needs to be a reason for the customer to come to you over the alternatives.
It’s okay to be below the alternatives, as those are value drivers you choose not to compete on, and thus don’t waste resources on.
Is that my secret sauce?
The next question is whether the value driver (s) you want to rank highly on is something the customer truly cares about and is a reason to choose you. The only way to find out is by testing that assumption with customers. Get your offering in the hands of your customer and push on what you identified and determine if it is something customers are jumping up and down about.
Once you do identify something that differentiates you, make it the focus of everything you put in front of the customer or they see with your name on it, i.e. webpage or marketing materials.
That / those value drivers, and the need, pain or job to be done they are providing for, become the story you tell investors when explaining why they should care about your offering.
If you find that you are just playing in your market and not able to win on any value drivers, there is salvation! By way of bringing in analogous industry value drivers, but I’ll leave you hanging and save that for another post😉