Author: Simona Nikolova, Endeavor Bulgaria
The startup boom in recent years leads to the failure of 90% of all startups. Running out of cash and not having the right team are among the most common reasons for this cold statistics. The biggest reason still, according to founders is lack of product-market fit. Entrepreneurs often get distracted with operational and execution issues and forget about the heart of their business. No matter what a company does, at the core is creating the right product that delivers value to its target market.
One of the first steps to avoid such failure is to create a purpose-driven brand. Answering the following questions will help you define your purpose statement:
1. Why do we exist?
A value proposition tells your customers why they should choose you rather than your competitors. Although widely criticized, Uber is a great example for creating a unique value prop:
“The Smartest Way to Get Around. One tap and a car comes directly to you. Your driver knows exactly where to go. Payment is completely cashless.”
Without explicitly saying so, Uber highlights everything that is bothering the clients with the traditional taxi ordering. The advantages are tangible and specific and the value for the buyer is clearly illustrated. Remember that your product can change, your target market can change, but why you exist will not. Creating brand equity and building trust is based on your purpose and why your company exists. It is also something that makes potential employees want to become a part of your company.
2. What do we do?
To easily understand the value your product delivers is extremely important for both customers and investors. What are you doing currently to satisfy the needs and wants of your customers? A simple test for your purpose statement is that it should not prompt anyone to ask further “why?”. In the case of Uber it is – “to bring transportation—for everyone, everywhere.” Answering both what they actually do and for whom it is designed for. Your purpose statement should refer to the clear and undeniable value of the product for the buyer, not the profit or demand for your company.
3. Who do we do it for?
The key to building a successful product is to understand the consumer. A company should know the beliefs and the needs of its audience, in order to know how to effectively serve it. Starting from analyzing the customer journey (purchase/delivery/use/maintenance/post-sales), to focusing on the related consumer conveniences (friendliness of the website/simplicity of transaction/customer service responsiveness). То further create relevancy on the market, you should consider how the product or service fits into the lifestyle and culture of the target market.
Having the right value prop is important for investors, because the majority of them invest in the people behind the company; they care about your motivation and the value you are bringing to your customers. The purpose also underlines the bigger picture – how your company’s vision is more than a single product at a single point in time.
The questions above will have an impact on most of the strategic approaches and processes within your company – from allocation of resources to marketing strategies and hiring criteria. Success is not achieved without stumbling on a few rocks along the road, but often answering the simplest questions can lead you in the right direction.
The article was inspired by the WEST Venture Studio workshop, specially created for the Endeavor Investor Network event in London, Sept 2018.