Harvard i-lab | Startup Secrets: Value Proposition

[Music] hi I'm Michael scar we're here at the iLab tonight in the startup Secret Series to talk about value propositions and one of the challenges of starting a company is to figure out whether you've got an idea that's really worth building a business around so we talk about how to define a value proposition how to evaluate it and then how to build on it and I think what you'll enjoy most about This series is that we go from from qualitative to quantitative to really assess whether you've got something that's going to make it for those

of you who haven't attended any of these sessions before the big premise behind this was something extremely simple which is unfortunately when I started Life as a young entrepreneur in my teens I didn't have anybody telling me all the things that I was about to screw up and I screwed a Lot of things up and I've got a lot of scar tissue and I wish that somebody had been able to say to me hey here are some of the things you should think about before you start plowing into building your product and taking it to

Market and figuring out how you're going to sell it and so forth so this series is really about trying to give you some unfair competitive Advantage as I describe it some unfair advantage in having that advice before you crash into the wall And figure out all the turns that you could have avoided so before I go any further let me introduce some of the people who are going to be talking to you this evening we've got uh folks from airan here uh we've got akan here David mcfallen our CEO um we've got discuss in the

form of of Rick fips so discuss is a a an investment that's actually based on the west coast so Rick is the partner behind that investment He's going to bring that case study to life uh and then Alo has very kindly brought a not for-profit example uh Diagnostics R all into the mix because a lot of people last session told me that they'd like to hear about the not for-profit world and how would we relate it to that so uh thanks for that feedback and thanks for L for being so responsive my partner car Michael

also helped out there and last but not least uh in fact really sort of the feature For this evening is a company that's now uh number two in the Inc 500 fastest growing software companies and uh a great example of a local company utest so donon if you wouldn't mind standing up just to introduce yourself and your team briefly so nice to meet you andon I'm the CEO and co-founder uh we're four years old I have two members of the executive man one is Matt Johnston who's a CMO which manages position in our community when

We talk a little bit about our business and fi who is the CTO who manages all the technology and development ni nice to be here let's make sure we've given those up so you guys have got them great well welcome okay so our agenda for tonight is a really simple one we want to help you define a value prop we also want you to understand how you would evaluate it and then get into at the end some examples on how you build them but Throughout this in order to keep it live I'm actually going to

bring in some of the uh case studies from the various different companies that you've got here this evening so let's jump in and start right where you hopefully will end up in other words with what should a value proposition look like and you might say well why am I starting at the end and I think it's because you need to know where you're headed in this case otherwise this session is going to be Tough so the typical form of value prop is to Define what you do uniquely well for who that's a simple way of

putting it uh and this is going to be our template this evening we're going to talk about for what Target customers who are dissatisfied with what current solution or alternative that's out there your product is providing some differentiated uh problem solving capability that unlike everything else out there is doing something unique or Different uh don't worry about taking this template down I'll just tell you right now you can get all of the slides up at mj.com so they're all up there all the templates and everything else and you can download this so um don't feel

like you have to capture this but I'm putting this up here so you know what we're headed towards this is what the typical form of value proposition looks like and you might say well why does it look like this but as you come through The the course of this evening I think you'll get a pretty good sense of it so I'm going to start off by um making uh an example of one of the companies that we have this evening and that's airion um and uh Brian if if you want to jump in at any

point please do if I get this wrong but uh here's what was the uh background to appear in how many of you have mobile phones question is who doesn't actually now I think these days um well now uh if Any of you carry those into work you probably just expect them to work with your email at work and your calendars at work and so forth however you probably carry in there also photos and you know personal information Etc that you don't want to get confused with the corporate information turns out that's a big problem for

the Fortune 1,000 uh and for large Enterprises around the world and so appearing tackled that and that was the first part Of their focus was to go after mobile Enterprises and they found that people who were trying to deliver apps to their employees were struggling because they couldn't issue them with blackberries anymore uh people would walk in with iPhones or iPads or Android devices and they wanted to use the apps on those devices and so what they did was they built this thing called an Enterprise apps Services environment ease for short cute name um provided

a way for users to Securely access the apps and information that were in the Enterprise but without losing all their personal stuff or the device being taken over by the Enterprise and at the end of the day they figured out that the way they needed to do this was different to the way people had done it in the past and there was a a a way that was done in the past called mobile device management where basically the Enterprise would take over device they'd grab control of It they'd lock it down they had the ability

to wipe it if anything went wrong but the trouble is that meant wiping everything so you would lose your own personal information as well uh and also it was done in a very typical way which is by putting an expensive piece of Hardware or or capabilities behind the firewall in the Enterprise uh and that was a difficult thing to implement so what appearan did was unlike that that approach they built this in the Cloud and they made it really simple for people to just walk in without having to do anything special uh just effectively register

uh once and then immediately get access to the corporate information applications so did I miss anything Brian just if I can add two minutes of color to it uh L you think the company the found it was that smart that he said I'm going to do this when he started the company three years ago he actually kind of stumbled on to it so op perion is Actually kind of a company with two different lives um when it was started back three years ago if if you put the founder who's not here under truth J he'd

probably say he was building a lifestyle company he was going to build apps for Enterprises and and and kind of do that and make a lot of money and have a lot of fun doing it but the challenge became when these app these companies were spending hundreds of thousands of dollars on these apps they were saying To themselves well we don't want to put that in the iTunes app store what other way can we get these to our employees which really forced the company to design what what Michael talked about the the Enterprise app Services

environment which is what the company is selling today so since I've been with the company about a year and a half ago we've successfully made the transition from the app development company to a company that's actually selling the Subscription service that Michael's talking about here but I think the point there is is that it's it's not necessarily day one you don't you don't necessarily have that value prop in your mind and we kind of evolved into it and and and that's that's what the business is doing today great and I'm going to ask you for

more color as we go through this that's just a brief introduction to appearan so thank you Brian by the way let's you think Brian is our sales guy Or our marketing guy he's actually our CFO so all sales Guys these companies I was about to say that's the wonderful thing about startups is that everybody's a sales guy so one of the things that's interesting about the appearing example is exactly what Brian said is it's probably a good case study in that this wasn't where the company started they evolved from actually meeting a very different customer

need which was just to build the apps themselves to Ultimately meeting the need of how do you deploy and manage those apps and I think a lot of you will probably go through that Journey so as we go into this I'm now going to try to help you figure out how might you take that Journey how might you do it effectively and how might you define your value prop as tightly as possible as early as possible and then iterate it and in the real world by the way really what happens is you iterate a lot

to get the The value poop more refined so back to where might you start well um most people think in this you know diagram that the obvious place to start is with the ideas the the real challenge is that ideas are exactly as I've depicted them here they're free floating I mean unfortunately you know ideas are to a penny in our business I mean there are so many great ideas that never see the light of day and one of the reasons they never see the light of the day is is uh Because they're really not

oriented towards solving some fundamental problem so I would argue that the worst thing to do is to get carried away with an idea before you define what problem it is you're going to solve and so I would argue for any one of you taking your idea and parking it until you can think about what's the problem space in which this idea really applies and then get to work on what we're going to do now which is talking about the development of the Problem so so uh for those of you who've seen me talk before you'll

know that I'm a self-professed horrible student and so the way I Learned was by creating demonics for everything and so you'll find things like in this case four use it's not to say there are only four ways to describe problems but it's my way of getting these things uh into a simple form for you to remember so the four 's are I look for problems that are unworkable that are unavoidable that are Urgent and that are underserved and we'll take those in a bit more detail but if you can start to think about your idea

around that framework I think it'll really help to hone what it is you're going to do uniquely well so let's start with unworkable this is the most fun one if something's broken it needs fixing and so the best kinds of problems that you can find are broken business problems something like a broken business process So can anybody describe to me an experience they've been having as a consumer which you feel is broken you're getting a service from a custom company that is broken or that is not great anybody give me an example of one the

new Apple map the new Apple map it's a great example right that is clearly broken and it's not working and how much pain is that causing apple right now a lot who's Benefiting B map a lot of people are benefiting by fixing that problem and probably Apple's losing customers they're losing Revenue Etc and the beauty of these examples is I bet you can all think of them you know there's probably experiences in your everyday life in many regards that you're not happy with this is the Genesis of a potential opportunity when you find something like

that now obviously if it's a one-off thing it's Not as interesting as if you think it's being repeated but uh I'm going to give you a real world example now of one of our companies that actually has solved this problem for AT&T so it turned out I'm sure you all remember this for those of you who bought iPhones in the early days the onboarding process for the iPhone was so badly broken that people weren't activating their phones for days in some instances and they were losing customers and there was a tremendous Challenge about it it

turned out the back end of that was a whole series of workflows to provision the the phone through the carrier and get uh the billing worked out through apple and that was a workflow and it was a broken business process and one of our companies called active endpoints actually went in and solved that problem for AT&T and got paid millions of dollars for it and that's what I'm saying is the kind of opportunity you Should be looking for obviously if you're looking for Consumer examples I'll bring those up later but they even then you'll find

that there are similar opportunities and if you can sense them that's a great starting point that's what I mean by unworkable now the best way to measure it is if the consequence is genuinely costly or painful so the examples we've been giving here you you end up having your customers uh spending money they Don't want uh if they really get pissed off you lose them so losing customers or losing revenue is always the best example of something that's really broken if it's just marginal like some of somebody's sort of dissatisfied but they'll live with it

you probably haven't really hit on a very painful or difficult problem and and that's the Judgment I would try to use that ultimately the the phrase I have at the bottom of the slide is the one I like The best which is could you identify somebody who will get fired if this business problem doesn't get fixed because you know why that's good who will you go sell to that person I mean they are going to become your best champion because they're job is on the line unless they fix this so if you can identify that

person early on and work with them not only will they probably Champion you but they'll also educate you as to how to Fix the problem and they'll obviously shine a light on where all the pain is so it's just an obvious set of things to Think Through uh for this first way of defining a problem okay that's a first you any questions on that before I move on okay the second one is unavoidable this is also one of my favorite ones because there are a lot of things that unfortunately you can't avoid in life death

and taxes would be two good examples unfortunately we just have to Live with them taxes actually is a part of an opportunity because as a result of us all having to pay taxes we all have to account for things and to be in business you've got to account for all your activities and be able to close the books and obviously comply with basic audit standards so anybody in the accounting software business wasn't tackling a problem that was optional they were tackling a problem that was necessary and it's no accident that the First software companies that

were really successful were in the accounting business because people had to do basic things like meet payroll and comply with Audits and so forth well it turns out regulations are constantly evolving whether it's hipper or it's Basel 2 in in financial services or Healthcare you could probably find plenty of these examples or if you're in the drug Discovery business complying with FDA process uh to go through the process of Getting your drugs obviously approved that's a real process that people have to comply with if you can find smart ways to do that that help people

better collaboration over the Internet for example in the process or whatever it might be you know you've got a real problem there because it's unavoidable people can't get around it they can't just skip FDA approval and take a drug to Market it doesn't work that way so we look for those things and um when great Entrepreneurs come to us with uh opportunities that Define new um if you like solutions to these we almost invariably see those turn into great companies an example from our portfolio that might not be so obvious is a company called reval

rval if you went looked up reval you'd find they do something that was being done in the fortune 5000 um on spreadsheets and it was accounting for in this case derivatives what are derivatives you Might say we don't need to go there tonight except to say it's an instrument that people use to defer risk in their business and of course it turns out if you start taking instruments like derivatives and using them you need to account for them because they cost you money and it turned out they were complex uh actually derivatives are part of

what brought the first financial crisis on because people weren't accounting for the properly they are That complex so it was a complex problem it had a real need for accounting and it turns out it was also regulated so it it was like the perfect mix of issues and sure enough this company has gone you know very quickly from being a little startup to being a company that is now in registration to go public and why because it's unavoidable problem now the consequences for them which are really fun to to share with you are very real

if a company doesn't manage their Derivatives and doesn't account for them an example in their case would be GE GE had a $340 million uh adjustment in their valuation as a result of not doing the right accounting for their derivatives so they could measure in hundreds of millions of dollars the impact to some of their customers if they weren't in place that's what you're looking for you're looking for all those kinds of signals and if you can find them in those um early days of Investigating your problem you're probably on to something good so any

questions on unavoidable can anybody else think of any other unavoidable uh problems that that we have to deal with no yep getting old getting old yeah aging is very real what does that open up as opportunities I guess Medicare um what's the name determin yep yeah I think the Aging population Baby Boomers Etc huge huge opportunities as a result of that um you know I said there Were two unavoidable things death and taxes well on the way to death is aging and there's a lot of challenges with it speaking personally yeah lots of challenges okay

so thank you very much great example onto the the uh next to you this one is easy to skip over uh but important for startups so why is urgency important for a startup can anybody tell me why for a startup in particular it's important that you find an urgent need Go ahead you probably have a pretty urgent need for Revenue so you can match your urgent need with the customers are need exactly I mean thank you because what happens in a startup is you only have one way you're going to go out of business you

run out of cash and so unless you get Revenue in fast at some point you're out of business so you have an urgency so if you have that urgency and your customer doesn't you're in trouble and the the biggest thing I find With startups is that they have you know a great vision potentially for what might be in the future if these three things happen well guess what if they're in your control that those three things happen that's great but if they're not and an example might be you're hoping for some change in you know

the platform or the environment or whatever it might be it might never uh play out in a time scale that actually enables you to build a business so urgency is extremely Important and what I would say here is that this is not urgency in isolation it's relative to other needs that's the thing people miss so what I mean by that is if you walk into a company with a proposition and you say look we've got the best way of solving this particular pain point for you that may be true and they may agree with you

and say yep you're right that's the best thing I've ever seen for this problem but if it's number 42 on the list do you think You're going to get their attention no and honestly that's usually the challenge for a startup there's one other reason why it's important for a startup as an a large company with a brand and with perhaps a relationship with an existing customer you're going to have their attention from that existing relationship that allows you to if you like influence them as a startup you're the exact opposite you are a pure risk

to them so even taking time to Listen to your proposition is spending resource that they wouldn't otherwise intend to do so you've actually got to have something I would argue that's in the top three of their priorities to get their attention and if you hit on that then they'll probably make time to listen to your proposition and then obviously if it is the best solution they'll start paying attention to it so just pay attention to this when you're thinking about how to define your Problem the last one actually needs a little bit of thought and

that is you know is this problem underserved so let's talk about this in terms of dollars rather than marketplaces do you think that as a startup when you walk into a company and you ask for them to buy into your product that they have budget for you who thinks they do good they never do guess what you weren't even on the horizon probably When they did their budget a year before the reality is most large Enterprises for example budget 12 months in advance and they start planning three months before that so unless you were around

15 months before and had them thinking about you when you walk in the door and you start to try to get them to pay attention to you you're trying to take budget away from something else so it's back to that prioritization and what you really want to do therefore is find a Way to compete in what I call a zero sum game uh which means you're going to be taking money from something else and therefore you're going to have to be uh competing for what are finite resources in companies dollars time people and attention and

just as I said earlier attention alone for a startup can be a big deal so for all of those reasons what you want to look for is an opportunity that is underserved I e there aren't 10 other people trying to Meet that need if there are you're going to compete for those same resources with those 10 other people you want to try and find something that we'll talk about later as a whit space now at this point you'll probably notice that a lot of my talk here has being a very busino business sense and that's

because that's my experience but what about consumers do you think this applies to consumers or do you think everything I've said so far is is uh B2B anybody tell me why This might apply to Consumers go ahead consumers make a lot more purchasing decisions than individual businesses so and there's a lot more people competing for that Target than that's absolutely true but do can anybody else tell me do consumers have any of these traits too or do we all have infinite dollars I mean let's let's face it we we have a paycheck and a net

after the tax amount to spend on whatever it is we Live on you know our utilities and everything else are going to be the first things we we spend money on that's the subsistence we have where are you competing for uh dollars at consumer is important are you competing for nice to have things like their entertainment or are you competing for must have things like their subsistence think about that for a second it it actually applies exactly to Consumers so I do think it's helpful to Have a slightly different model though for consumers and uh

for those of you who've done any of these studies I mean there's many different models there's now um completely different ones the one I've put up here but it's a good framework this is the my Brig framework Social Security physical economic recognition responsibility Etc these are all basic human needs it turns out most of us have them in some form or another they may be different at different times Of our life but if you tap into these needs you will probably be addressing again uh a more definable problem and therefore a more addressable problem and

just to pick one of them like social think about this for a second do people have the need to connect with others do you have a need to communicate how many of you said you had self I guess we all need to communicate that's a need we have I mean we don't Like to exist in isolation so if you think about the problem you're solving in these terms and you work through it you'll find actually that even in the consumer sense there are some very real needs the the one that always amuses me that actually

has given rise to whole Industries is dating I mean you shouldn't avoid it we all have a need to connect and date and find our partner you know what however that evolves that's actually given rise to some Pretty fundamentally huge industry I would argue that um the same thing that uh caused Facebook to take off in college originally is what caused it to spread as a network for people to find and meet and connect and group and date and whatever else they wanted to do so I think every consumer play also can be identified in

the same way now the tougher thing in the consumer world is to figure out whether that need is as burning and obvious as we've just been Talking about so can anybody think of a need that is not obvious but when somebody actually uh met it you were thrilled anybody got an example of something that hey you bought a product you didn't know you need it but wow now you've got it you love it iPad did you define the need for an iPad before you had one but would you take if I took it away Now

would you be happy or sad very sad why what do you what do you like about it now uh I organize everything access the net on it there you go now that is a fantastic example of what we're about to talk about an unmet need that actually was probably not well it wasn't obvious to you you didn't go out looking for an iPad 5 years ago right you just but now that you've got one you're very happy with it so I'm going to help you with That framework too this is how to qualify uh consumer

needs it's in what I call black and white so the consumer need often is latent meaning it's it's sitting there it's not on the surface uh but when you tap it and you finally give somebody an iPad and they can organize their life on it and do their email on it as well as access the net and Shop on it and watch movies on it they suddenly realize wow I love this this is great I really want to continue to use this Device that's a latent need that when you tap into it becomes very real

other kinds of needs that that come up are aspirational so how how many people here spend time online um looking for uh fashionable either clothes or things for their home be honest one two okay we start counseling lots of you is that a real need or is that an aspirational need aspirational want my home to look beautiful I want you know aspire to have these things that Will in some way enhance my aesthetic experience great great answer uh and there's no right answer here we we all aspire to have something that either represents us or

makes us feel appropriately uh dressed or you know furnished or whatever it might be those are aspirational needs they're very real I mean last time I looked the fashion business was not down as much as it should be if you looked at the relative economic climate and that's because People continue to spend money on their aspirational needs these are very real needs people aspire to for example fit within certain domains and that causes them to say okay well you know if I want to work in this way or play in this way I'm gonna you

know uh buy these things and and uh you know enjoy my life by uh you know dressing this way so these are real needs they're just different and this is how consumer needs come up now the last two are the ones that I Typically look for uh because if you can find what I call blatant and critical needs it's really not a question of whether you obviously will or won't buy something and a blatant critical need is a lot different than a latent aspirational need it's not to say that one won't get balanced completely out

versus the other but it just helps so certainly in business we look for blatant critical needs now the white piece is what I was talking about Earlier what we really want to do is find a white space where those blatant critical needs are underserved and what we're saying there is can you find a white space where there's an open area of opportunity where somebody has not identified a way to solve that blatant critical need and if you can you're really on to something you're now in a place where I can tell you we're starting to

pay tremendous attention as investors and where I guess That you're going to get serious attention from potential customers too the other two pieces here are can you find it in a way that is uh easy for you to capture and then defend uh for the long term and will you be able to define a way of doing it uniquely so we'll move on to that but because we''ve had uh discussion at this point around consumers I wanted to bring up Rick uh to talk a little bit about discuss and uh this is an investment he

made which Is very much tapping a consumer need uh for interacting so Rick come on up and tell us a little bit if you want to grab a microphone about what does discuss do and uh why is it tapping a need discuss is the largest common platform on the internet how many people here read blog posts and how many people here have used this C to comment on something great so when you finish an article on any of these Publications that you see here from wire to CNN to Time Magazine you know almost two million

sites uh and and about 75% of the of the articles on the web they'll have this cost at the bottom uh sometimes you don't even know you're using this cost but but uh if you got the latest version embedded you'll see a real-time commenting widget like the one that you've got here where you know you've got a discussion and you can basically create a Community around the Site so it's a pretty large large community it what just before you go on so what need does that meet for us I mean why why do people comment

what need are we meeting there letters to the editor it's it's letters the Ed but communicate yeah we're we're we're trying to voice our opinion share exactly this is a funny thing I mean you know if if you look back at it there's always been thanks Rick for giving me The prompt letters to the editor now we moved online people still have that need they just need it in a different form yeah so now this this gives you real time commenting capability and and it allows you to build a community around a website so that

you can have interaction not just with the folks that wrote about it but also the the folks that are reading about it uh which is which is unique and you know Community Fosters engagement and it Fosters uh more time On the site which means better advertising dollars and and a number of other other things like that it turns out there was also a latent need in there as well and that is that people want to discover new content and so discuss you might want to just share how that it's tapping into that you know they'

now have 900 million uniques a month so almost two million sites 2 million SES that use this uh the discovery part which is the way that This company monetizes their their six billion pages of traffic uh is very interesting because it allows once you read the comments section it allows you to go to all articles that are similar and they know if you're at D preview reading a review of a digital camera and then you went to and Gadget to something else and then you were at CNN once you're at CNN you know they've cooking

they're cooking 900 million people over a very broad Network so they understand You know the what what people are interested in yep and they can provide relevant content that's very unique and so it allows you to discover new interesting stuff that that other folks would would find interesting and so thank you Rick so what's great about the discuss ecosystem is that actually there are multiple people benefiting from it so the users are benefiting because they're getting this they're scratching the itch of of being able to communicate And share uh the Publishers are benefiting from it

because they're actually getting better engagement and they're able to therefore you know uh attract better advertisers and therefore grow their revenue and the advertisers getting uh benefit from it because they're getting broader reach so everybody's winning it's a multifaceted value proposition which they're hard to find by the way but if you can find them are great so Rick um let's just put it In the template that we were putting up front uh so who's this for it's really for for uh uh Publishers and and for the bloggers and and the readers and who's the primary

audience like if you had to sell to just one of those audiences which which would be the one you'd go after first well the product I know we have it on the slide as Publishers but I think the pro the team would say that discuss is for the users the guy I mean we could do a lot of thing or Daniel and And Jason the founders could do a lot of things that wouldn't be user Centric but they are 100% user Centric and that's how they've been able to grow to to the large install base

and you bring up a great Point here by the way I would say that almost any consumer product that first of all satisfies the user has a chance of succeeding if by contrast they'd said okay we're just going to make this entirely publisher friendly but the users didn't have a good Experience of course it's not going to take off they wouldn't have built the network so I think it's totally appropriate you said that now what is it that the user cares about what do they care about that's that's driving this need we've covered it but

well they care about Community I mean with discuss you can actually uh understand who are the top commenters you can get profiles on the commenters it's real-time feedback you could have a Conversation and you know what the other person's thinking while while they're typing about about something and it's it's basically better engagement on that site and I would argue the key word in this value prop here is loyal uh because the challenge on the the internet is you're one click away from losing your customer like that and so how do you get them coming back

well obviously if they posted a comment now they're engaged and they're going to want to see what does That what does somebody else think about that or you know you very rarely find people just leave a comment and walk away and and forget about it so it's it's a part of the engagement it helps the Publishers build their loyalty and again that's very important for what builds probably as a business model so what do they Define the product as so they really are a network uh there are many comment commenting systems on the on the

web uh they have about 75% market Share but they really are a network uh whereas all the folks uh you know you've got guys that have a SAS business and they'll sell to a publisher kind of a white label solution you've got other folks that that uh offer it for free but it's is really uh all the engagement goes back to another social network for example the case of Facebook uh which also has a commenting system and discuss is really a network but it's a network built around the publisher sites so you Never have to

leave the publisher site to engage and learn more about the users that are commenting and things like that it's so it's really publisher Centric Network and and unlike other players what's its particular distinction I mean how are they standing out because other people could have potentially done this they yeah they actually are more publisher Centric and more user Centric than the other networks that are uh essentially trying to build their own Their own uh side architecture I mean one way of putting this would be imagine if you're cond Nast you could have easily built this

yourself because it's not that technically difficult I mean I'm sure Dan would say it's extremely difficult at scale but to build it for your sites however you'd be limited at that point to just people who commented on cond NAS that's not exactly interesting the whole cross-pollination of these comments across the many Different forms of media that people read is what really gets interesting and of course that's why I think they've ended up with a very distinct content Discovery part especially yeah very good great thank you very much Rick any questions for Rick on that before

we um we lose him so people starting to see how this framework now works yeah going back to the time when you were uh you were in the design phase of your product coming up with a value Proposition um this uh conversation we have had about like social media just for the sake of social media because we want a community uh experience online but creating uh sort of like another dimension and uh into that social existence is adding value like in this case a conversation about the Articles and and things like that so my my

question is like how did you foresee that at a time to take this social media Online concept into this uh this side so so I'm not the founder of discuss I'm a board member and discuss so it's really Daniel that foresaw it and Jason that foresaw it uh but um you know they they really believed that you know best in breed on the web would would not be done vertically integrated by by sites kind of on a cost structure basis there's a lot of Open Source little commenting widget systems but this is something that this

is the Largest uh python app on the entire web 900 million people use it every month so 300 million people comment actively every day so there's a lot of people using this this app it's socially distributed and it's it's a pretty large large complex um it it looks simple but it's so I think their bet is correct if you look at companies like bazaro and all sorts of other folks these embeds that are best in best in class with a lot More technology that go on larger uh you know companies like outbrain I mean there's

a lot of players that have that have grown their their online businesses that way and um they they started in 07 when when the web was younger and uh and uh it it allowed polishers which are usually cash strapped a way to put much better technology on their sites and they didn't charge better experience initially it was free so they got a Large Network and and today they they have a discovery option that actually makes money for Publishers so in in whereas the SAS vendors will go out and uh you know kind of charge to

do something more premium they actually have a revenue generating element they also have a a premium kind of super high-end system that's used by people like CNN Etc so they have both options but so I would I would say couple of things that you can generalize out of This thank you Rick sure um there are many cases where an entrepreneur has a vision for something like this but they start with for example a simple product that's free just like Daniel and his team did um but what they're they're working towards is the vision that they

clearly had which is they're going to end up with the best of breed solution and it's true on many occasions that if you can find a problem as I was talking about earlier that's generalizable like This is a generalizable problem for any content publisher there's probably an interest in commenting then you probably are going to be able to get it monetized at scale at some point and so the real trick here was that they found a way to get it to Market that was friction free you know made it free really easy as opposed to

you building itself you just put a tag in your website and boom you're done so really easy really you know quick uh so you know that simple And then once it gets scale you can do interesting things with it like obviously use the community to get recommendations find other ways to monetize it Etc and it's fair to say that you know I don't have to go back to Rick for this we're still early days in monetizing that property but the fact that it's now one of the largest if not the largest app on the web

uh is a great opportunity so these things do evolve and that's part of what I think we want To bring out in these case studies is this stuff doesn't just happen overnight which is why we're trying to get you to think about about this okay I want to just move on for time but every time I pause I do want to make sure I haven't lost anybody so we okay anybody not following so far okay good so let me summarize on this section the the answer to um every value prop is not that you're going

to find for use obviously some value props will have you know only One of these things but the more that it's unworkable unavoidable urgent and undeserved the more likely it is to rise the top and get get attention and as I said depending on whether it's consumer or it's uh B2B you might want to use the framework of whether it's blatant blatant aspirational critical to figure out whether you're really attacking something that again is going to get people's attention and whether there's a white space associated with it so Hopefully that's a simple framework for you

to use when you're defining a problem so now when you go back to all those ideas instead of them just being free floating you can think about okay does this apply to the problem I found and it's starts to become a lot easier to filter your ideas to start to focus in on them and that's why we always say when entrepreneurs come up with an idea that sounds great but what problem are you solving and the more you can start With the problem and Define the problem space the more likely your ideas are to gel

into something of a blatant critical for you need so hopefully that helps you get to to that stage so at this point what we've done is to at least Define uh the problem and uh we know you know some ideas hopefully that you have to go address it and it's it's time to define the solution and there are lots of questions that people always have around the solution you know who what where When why would all be the classic ones uh the thing that I would always try to do is to get you focusing very

quickly on the right way to think about your solution so one way to do that is to tell you what's the wrong way the wrong way is faster better cheaper there's a good chance that if your idea is just faster better cheaper it's incremental and what's wrong with it being incremental will it be easy for people to Catch yeah very good um so since I know uh some of the business you're in tell tell me about the search world uh what what faster better cheaper would mean uh you probably be my open source very quickly

very good so the problem with faster better cheaper is that it's a very definable way to beat somebody so you're basically laying out the road map for somebody to say look here are the axes on which you can come and beat me you Could be faster than me you could be better than me you could be cheaper than me what we're looking for is something that's a complete breakthrough that changes the game changes the rules that you know just literally moves the discussion from say 2D to 3D you know it's just a different perspective on

the world so using that exact same pneumonic uh technique there are in fact 3DS I look for when you're trying to come up with the Breakthrough opportunity number One is it really a discontinuous innovation in other words is the way in which somebody's doing something completely different the way it's been done before it's not linear it didn't happen you know one step at a time somebody suddenly made a breakthrough and it changed the game so you haven't heard yet uh from our guests that you test but in my opinion they came up with a discontinuous

Innovation around how to do testing as their name implies they do Testing so donon could you just give us an example of what's discontinuous about the way you do testing sure so before we started you know the way you used to do testing is basically hire people in house build a huge lab or go and you know use some kind of an Outsource testing provider you know in India in China somewhere offshore and what we came with is really a model where uh we built the global community of software testing professionals today we have 7

,000 professional testers from 190 countries across the globe and they the one that are actually testing software for the actual customers and that's really what is disruptive around you know this specific model one other thing that we also did and that actually addresses in number three is we actually also disrupted the business model that basically means that we took it from a pay per hour business model where where we people would pay per hour to actually Paying a fixed monthly fee so we actually took it to a complete SAS type of a business model thank

you so that's a great example and you're going to hear more from donon later on his point was look the way people have done testing before is in a very fixed cost way with fixed resources but by crowdsourcing it and also as you'll hear later on doing it in a way that meets customer needs better it's a completely different way to approach the testing Market that's a Discontinuous Innovation the last thing you already had a great example of I find very few entrepreneurs focus on and that is finding a disruptive business model well 20 years

ago this wouldn't have even been on this slide people didn't think about business models as being disruptive in fact there really weren't very many business models you know you basically sold things and got paid for them and we didn't have disruptive things like the internet to Disintermediate people but the world has moved on a lot and almost everything can be dis intermediated by the internet and almost everything can be digitized and because of that you've got tremendously varied opportunities to come up with new business models that are highly disruptive and in many instances they're hugely

defensible so if you were Microsoft back 10 years ago I just haven't meeting with some of their Executives about four hours ago uh you Weren't worried at all about your business because you had a network of developers who were building apps for your platform that was AB absolutely ubiquitous and everybody loved the fact that their PC booted up and they could run office and that was you know all Microsoft from top to bottom other than Intel I guess so that was known as the winel Monopoly it was a wonderful place to be unfortunately when open

source came along and people gave software Along away for free you had a real challenge worse still Google came out with a business model that said actually we don't value software we're going to give it away for free what we value is users and search and when we get those users we're actually going to be able to sell advertising to them completely disrupted Microsoft's model and if there's a reason why Microsoft's stock has been a dial tone for the last few years it's nothing to do with that Technology it was to do with that business

model disruption so those are very very powerful things for you to think about how you might make a breakthrough and I'm not saying it should be only that in fact the ideal is when you do all three of these things that's why I say remember 3DS now at this point you might be saying well jeez this high demand on to come up with you know all these unworkable unavoidable undeserved urgent Needs and come up with disruptive business models that's true the the more there is then the more this startup secret is true if you're going

to pick a fight pick a big fight why because guess what in many instances it's just as much work to go after a small opportunity as it is a big one so if you've done something really disruptive go after a big Market with it and I would almost invariably encourage you to find a problem that's big because big problems Generally offer big opportunities in fact our firm focuses on what we call Game Changers where we look for particularly hard problems to solve because that generally means defensible IP and obviously Great Value to customers when you

do solve it and therefore potentials for really interesting business models and growth in in a a significant business so pick a big fight would be my one takea away from this because of all the work that You've just done to get your problem really well defined and build a great solution is true then you might as well uh capitalize on it in a really large Marketplace okay well we've got through the piece that I think is actually the hardest which is you know how do you go about taking an initial thought or an idea and

defining a value problem the the next thing that I'm going to encourage you to do is a evaluate it so often times people will say to me well You know I've got this great idea I've defined my value prop Etc am I ready for funding no is the answer U you're ready for funding when you've actually gone and evaluated it and you've assessed whether when somebody actually takes note of your value proposition they're going to pay for it so how do you evaluate that there are two fundamental ways the first is a qualitative evaluation and

this is an easy one to put on paper and a harder One to prove out but I'd simplii simplify it and say you should be able to describe the before and the after state of your value proposition so before utest's way of doing uh business there were a finite number of testers who could do what Don's company does and people would hire them directly and he's going to talk about this a little bit later on after he could crowdsource from anywhere in the world and he could get a variety of skills engaged that's an Example

of what I'm looking for here David can you give me an example of the before and after with a Kean can you give me an example of a customer who was struggling using a database before you and after you what their benefit was um so um uh one example actually is a there's a local uh dating company called online buddies um and uh like most dating companies that that that the well I suppose you get the idea of what a dating what a dating application does But fundamentally you are searching through lots and lots of

data trying to find people on real in real time who fit a certain profile and that actually can take a very very long time in a database in fact the more kind of criteria you want to search on the longer it would take um and time is a killer in the world of database so um they were trying to uh rearchitecturing whole application to do that they literally had to rewrite everything it costs about $250,000 every time they would make one of these changes every year to re architect it what a keyan does is provide

a solution as Michael described that basically uh runs those kinds of queries incredibly fast hundreds of times faster uh but we do it in a way that's not disruptive so we just plug into an existing architecture and you redirect the query to a Kean and we'll run those 100 times faster so you're literally bringing this huge amount of Relief to the customer without them having to re architect or redesign or go through any of the pain that they went through traditionally thank you David so I'm going to now describe it in the two words that

I I want to contrast on this if you got your before and after statement really clean the before will be acute pain and the after will be absolute Joy so I asked David to give me this dating example because I think it's at least a little Fun you know the acute pain of being online trying to search for somebody who's close to you in geographic terms and he also has the same interests as you and that you also think might be a fit in terms of some of the other activities that you want to partake

in is very real and if you're sitting there for hours and you're sitting there thinking wow this thing is coming back with nobody how good does that feel not great right if it comes back in Nano seconds with 10 people how joyful is that going to feel you get my point there are lots of examples like this which you can bring to Life by just putting the before and after statement in this way and honestly that picture that you're painting there is what you're going to want your customer to experience from your solution so this

is what I would describe as the qualitative evaluation and the real test for you is have you got something that's nice to Have I.E it's like a vitamin you'd love to take vitamins that it's useful but if you Skip One for a day it's not a problem or if you got something that's penicillin which if you don't take it you're going to end up you know in a deadly ill situation and I mean there's lots of ways people talk about this but I'm trying to make the point here that your solution is much better uh

or much more likely to succeed if it's penicillin than if it's a vitamin in Other words if it's meeting a real painful need rather than just a nice to have so this is a great point to um give UT test the chance to talk a little bit about their value proposition so using the same framework I'm going to ask uh donon and Matt and fumi here to uh to take the mic for a second and talk a little bit about for what what is it that that UT test does so first of all just at

at a high level who are you serving as as your customers so we're Serving companies that have public facing web and mobile apps uh by the way I would not treat this as a good example I think that typically startups uh would do well to focus a lot more than that on startups or on smbs or on a specific industry it so happens that our solution solves a problem uh that isn't governed by a certain segment of the market a certain vertical within the market uh over the course of a lot of tiers and a

lot of Sweat Equity we've learned that It's it's really about if they have public facing web and mobile properties so you you make a great point there by the way so one of the workshops in go to market we'll talk about exactly what Mt just uh encapsulated which is you want as narrow a a first segment to to pick off and it turns out that you've been through a few iterations before you landed at this one we have indeed okay we'll leave the blood and sweat Tears by the way I would say that when we

did Start Focus was on Startup so we basically said you know we know it's a broad solution that fits everybody but we actually do want to start by focusing on Startup and use that as a way to kind of learn and see where the fit is and kind of uh evolve over time so how long did it take you just as a matter of interest to figure out who to focus on uh Don mentioned we were really focused on startups in the software vertical we weren't talking to retail or Media or gaming companies it was

you know it was a round B round type companies uh who were willing to put up with with the the of dealing with another startup um and and I would say we were really really tightly focused on that uh partially out of discipline and partially out of necessity that's who had the screaming paino back in 2008 so what was that screaming paino what were they unhappy with uh it's an interesting Evolution because uh I would Echo um What a perion experience this was not our value proposition in 2008 or 9 it's not what the market

knew it needed and it's not anything we had identified uh Don mentioned it earlier it was it was flexible testing so that you could go from three testers to 30 to 300 and back down to three in the matter of a week um and so it really was around uh the efficiency in the fluidity of testing okay and then what was it that was our Innovation um well what we discovered Actually over time and this was only by peeling the onion with customers and and asking them continually why do you keep giving us money why

do you keep giving us money why do you keep giving us money and not accepting any of their trit answers uh like oh well you know fumi is great and we'd say yeah fumi is not that great um and and not accepting that that we discovered that the real value proposition the real value that they saw In us that they couldn't see in any of the other 5,000 testing companies on the planet was that the testing that we do is in the wild it's outside the lab it's closer to where they're users work and live

and play that was a breakthrough for us and I would love to say that that was in the business plan or I walked in the first day and said oh You' got it all wrong and I know what you should be doing it was from talking to users and not accepting their first three answers Uh because just be polite to you so that was the the Breakthrough that led us to in the wild testing great and since I think fumi is great okay maybe fumi you could answer so why is this different to outsourced testing

what is it that we have That's Unique yeah so so part of it is the elasticity U part of it is that um without Source testing you do you you can't um uh change the size you can't get a team um working very quickly and Then um be able to move on to some other projects um also the other is that um in the in the wild testing is just not possible with um outsourced many of them say it's um it's crowdsourced or it's um on demand but the the reality is that they're not real

users they're um they're they're usually in a in a in an isolated location and um it's not it doesn't get the benefit of real users U uh being geographically um uh distributed for Example which are customers want when they're testing their their mobile apps that that work in in real life that's great so I mean you will know this I mean you you get an app from the App Store uh you download it and if you have a bad experience with it you probably just Chuck it uh so this is pretty fundamental this testing actually

makes a difference between you using something and becoming obviously a paying customer and you just switching it right off so They're solving a real problem and what's interesting about it is they've done it in a way that was never thought of before which is you know why not get the users the actual potential customers to be part of the solution and therefore get them doing it in the world it's very Innovative so the before R this is quite fun so D Ron do you want to just take us through that yeah so so basically you

know before the idea was uh you know in order To really test across different devices in configurations and environments you really had to build a big lab uh and in order to do that you know obviously startups couldn't do that and that's why we focused on them initially but in addition to that you know because of social because of local aware application because of the fact that you know every time the iPhone 5 gets released a market just grew bigger you couldn't really Keep up with the pace of innovation of different devices and different configurations

and this is where you know uh when we look at it today the fact that we have distributed testers which are profiled and rated and actually test the testing team actually fits the type of application that they're actually testing so let's take a very simple example I'm HBO and you know I'm using the HBO GO application in order to watch HBO online and I use it On my Android I use it on my iPhone I use it on my iPad I use it on my gaming device at home this specific application which works only in

the US and needs to be tested in the US needs to be tested across different carriers needs to be tested on Wi-Fi and non-wifi it needs to be tested on 200 300 different combinations of Android devic this cannot be done in the lab this cannot be done by an internal testing team this cannot be done in China this Cannot be done in India and that's that's really the only way for them to test there's no other way is by using a model like you test so fabulous example and after you know what's the experience yeah

so the you know the the Revelation for us was that uh as the device and and Os and carrier and location landscape got more and more diverse um that you should make your testing mimic or mirror your user base so if you have uh users that are Predominantly females between the ages of 25 and 39 and they're college educated and they live in the US uh and these are the devices and 's you care about your testing team should look like that as well uh you can ask either of these guys because they grew up

in a world of software the the the most common response from a QA manager uh when a bug gets reported from an end user that snuck through into production is well it worked for us um and forever QA managers have been getting beat up by CTO and CEOs and CFOs and saying why do we invest in all you people you know there's still stuff that's leaking through and we're getting blown up on Twitter and blowing up on Facebook and our customer service line is is you know red ringing off the hook why do we invest

so much in you um and fundamentally what we just what we've revealed is they weren't doing something wrong in the lab it's not that they have Bad people or bad processes are bad tools it's that they were missing a step in the process and that is the notion of testing outside the QA lab great so this whole after effect was very real testing in the wild meant you were representing your users for real you got Real Results real data and therefore really happy customers so thank you guys that's a absolute Joy yeah absolute Joy that's

what I was looking for yeah so on that subject the Willingness to pay for it is what we wanted to get on to so we've covered the qualitative evaluation and now let's talk about how do you evaluate whether somebody's going to pay for it the simple thing I'm going to introduce to you is something called the gain pain ratio and uh I came up with this simply because everybody has a uh gain that they get uh from a good product but what most people forget is what is the pain that the customer goes through to

adopt Your product and it's very real there is there are very few products that don't have some pain associated with being adopted so let's talk talk about each of these first of all the gain is usually measured very simply in terms of things like revenue or cost savings or time uh it may be for example people savings as in the case of of utest um or competitive Advantage which is something that comes up in early markets so not to be ignored here is some customers will Buy your product simply because they think it's enough of

a breakthrough it will make them LeapFrog their competition so there are good examples of this in our our industry all the time obviously when you can supply for example a carrier a piece of equipment that makes their Network 10 times faster and therefore their customers experience their service 10 times better and you do it at the same price they're going to acquire more customers and that's going To give them competitive Advantage versus everybody else they will pay for that that's something that even if it didn't save time or money for them it may have cost

them time or money they will pay for so competitive Advantage can be very key and then reputation for example could be another example um if you're going to enhance their reputation by helping them as for example you know discust does build a community where their competitor doesn't have that you Know that might be something that they aspire to do so that's the gain side that's probably the most obvious side the least the less obvious side is is pain what does it cost for your customer to implement this in the business World there are real costs

associated with any of these kinds of of products and solutions so uh in a Pan's case um if Brian as the CFO could give us an example of it what did it initially cost for a customer before we had our um Epiphany about going live and five what it initially cost for a customer to go through implementation of a appearan how long did it take how many people were involved what was typical cost the roll out process was probably at a minimum two to three weeks um because the you know the as most companies like

like ours we went to Market probably a little before the product was really done um so the one part we hadn't really finished was how are we going to roll this thing Out to customers so it worked when it was when it was installed but the installation was a little messy um so as Michael said we came up with a live and five program and and have since spent a lot of time fixing that but it was it was a very painful implementation and for the first six months of the subscription part of the business

it was difficult you know customers loved the love the concept but they said it's just it's really hard for us to get this Thing implemented call us back in 6 months when you're really ready to do it thank you very much so what happened there was very interesting the team was very responsive and they get you know 11 out of 10 in my book for what they did which is they took what used to take 2 or 3 weeks and they figured out an engineer a product that actually could get a customer up and running

in five minutes that was the live in five program and the net result of that was That customer conversion rates doubled so the number of customers that started to move through the funnel from evaluation trying the product to buying it doubled and that's what you really got to think about how easy is it for somebody to find you that's a real issue for startups even just being identified ifed correctly that's a marketing issue how is it for them to try you to buy you to implement to deploy you to roll out and even own you

so the last one people Often forget I'll just examplify U with the laser printer business so how many people use a laser printer here I would imagine everybody but does anybody um have one at home couple of people do you care about the cost of the laser printer now or do you care cost about the cost of the toner the toner right that's the cost of ownership of a laser printer it's not the printer you've probably spent more by a factor of some multiple I don't Know that's five or 10 depending on how long you've

had your printer on your toner and that's the total cost of ownership that when you think about your product or service your customer is going to evaluate so don't think about just what you charge them up front think about the experience of what it's going to cost them to run it in turns out that can be an opportunity by the way for you to change your business model too if you're really making money on the toner Which is by the way exactly what HP and many others do they price those printers well way below cost

in some instances to get you hooked on their product and that's why they make money is is the cost of the toner so I'm going to ask the UT test guys to again just give us a sense of this you guys obviously have a clear gain in fact we probably don't need to go through that in too much detail but can you highlight what the pain was for your customers to adopt This because you were very honest about this uh yeah it there is pain involved in the world of software testing when we're doing our

job well it's a bad news business uh and that means we are reporting 40 50 60 bugs on the latest version of your iPhone app or the latest version of your Kindle Fire app or your website um and it's not just a clean matter where you know we report the bugs and you say okay you know poof they're fixed uh we're actually creating work For the CTO organization there has to be somebody who has to actually go and review these and reproduce these bugs so there's increased overhead not just for the QA department but we're

actually creating work for the engineering department now they realize how many things are actually broken in the wild and that's great for users that's lousy for uh for the fies of the world um the second thing that happens is they might be good at managing uh their five-person QA team they might be good at managing one outsourced vendor in Bangalore um but in the original iteration of UT test you just inherited 35 testers from 14 different time zones and there was a lot of collaboration that was required between the in-house team uh and the the

crowd-based team and so I think we we've realized that early on and we've uh we've taken a lot of steps to decrease that pain um the original business plan correct me if I'm Wrong Don didn't include a a Professional Services layer uh now we actually have a 20 person team uh that can do work remotely for clients that can actually go on site um and is actually a revenue Center for us uh but their job is to make sure that the overhead is what you want it to be some clients actually want to be very

involved with the ters testers other clients don't want anything to do with it uh they want us to actually gift wrap It and say these are the 12 things that you should fix tomorrow and ultimately our goal uh that we've come to in the last 12 to 18 months is we need to maximize the in the wild testing that we can do and minimize the incremental overhead uh it was only when we realized that it wasn't just about maximizing gain it was about minimizing pain uh that things really started to fall into place for us

great perfect example and and thank you very much Matt for being So honest about it most companies won't fess up to the reality of how painful their product is I would encourage you as a startup to spend all your time when you're first getting your product to market asking your customers about why they don't like it not why they do like it why they don't like it what are all the experiences that are a struggle for them if you really get focused on that then you'll be able to figure out how to take that pain

down the way Matt's been Talking about and reduce the friction and if you come to one of the latest sessions I talk about actually the idea of creating what I call slippery products which really are friction free ways for customers to adopt your product so with that said the last piece that people very rarely even think of is the piece I call inertia so it turns out as a startup the biggest challenge you have is that you are a risk you're just a risk from the get-go because it's not Even sure nobody's ever sure that

you're even going to be around so you have a nurer to even get into a customer discussion and their default will be to do nothing do nothing might mean do nothing or it might mean as Rick was talking about they'll build their commenting system themselves because they'll consider that less of a risk than buying it from a startup even if you've got a great vision so you've got to factor this in and what you got to Figure out is what are those Alternatives and in particular is there something that's good enough because if there's a

good enough solution out there that will be the default that the customer will take rather than bet on a startup because you're a risk so with that in mind what we want to do is obviously you know ask this question what's the right ratio here anybody got a sense what should be your gain pain ratio for a customer to say I'm going to Write a check for you should it be one go ahead 10 to one 10 to one why 10 to one um it seems like the gain should be significant I mean absolutely to

you're a new company you're trying to get customers and to gain that momentum it's got to be significant over the pain and the risk that they they're going to have to go through the your product couldn't have said it better myself it's got to be significantly better than the pain uh and the risk associated with investing In you which is basically what they're doing and so 10 to one is exactly the number we always say it's got to be at least an order of magnitude better in your gain pain for a customer to consider your

value proposition really worth it so when you get to quantifying this it isn't easy to put it in numbers uh but again we're lucky enough to have UT test here and so I'm going to call on donon to to actually share how did they quantify their gain pain ratio so you Know basically what we did is we looked at you know what's the type of gain that we're providing to the customer so you know from what the customer really care about is basically you know time to Market it's the cost they're paying it's the fact

that the users are significantly more happy with the application so basically when they download it install it running they don't delete it immediately because it does something um and Basically by doing that we ensured that and by reducing the overhead of using our system we made sure that the value proposition of gain to pain is really significant very good and you actually were challenged I think to quantify it in the early days what what what were you first seeing so you know in the the first at the beginning I think it was a kind of

a one to one tou of ratio so you know we were kind of getting the gain of you Know it's nice to have we're getting good feedback but you know what you know we need to kind of communicate with those testers and we need to make sure that the you know uh we keep on Tab because they keep nagging us if they reported something and we didn't give them feedback so I think it took us uh it's it's really a cycle of you know iteration of improvement over time in order to make it sign significantly

better so you really need to listen to Your customer base you really need to understand the pain that they're feeling in implementing it now one of the thing that you know we did as of day one is we actually used our system ourselves so as of day one from the first release of the product so once we started doing the first cycles of actually developing we've used our testers in order to test our application so we're actually consum of ey users and we actually uh used it actually up until today so we're Continuously using our

product in order to test our product so our testers are testing from the tester perspective and from the customer perspective that gives our engineering team our product team our community team a real gauge of what's the experience for the customer so I think that's a very important point it's actually a great point I'm a huge believer in this it's you know eating your own cooking and uh in my case by the way that would be a horrible Experience but um it's really important to do that because your own internal team will have a whole different

appreciation and awareness of what the customer experience is before you expose the customer to it so there are lots of ways people do that um you know in the software world it's things like building on your own apis or it's using your own product or service so I really encourage that any other insights you'd want to share before we uh move on from this one Yeah I will mention one thing uh the early days of UT test we were focused mostly on how much money are we saving you um and what we saw were I

think the next slide will actually get into an Roi sample it was uh we were you know we were 10x uh more efficient uh and one of the things I I give um Don and Company a lot of credit for is they weren't satisfied with that they didn't want to actually be the cheap solution they wanted to build more of the value Proposition on value and so if you go forward one more that entire green section is about incremental value and so we actually look at the the gain as a composite uh based on cost

savings plus uh the incremental value you're actually adding to their lives and the bottom line on this was that the team actually did go the full distance and prove to the customer that there's an Roi of 10:1 here right so so I'll take this and give you an example so this is actually an Roi that we did not do I mean usually we don't get this level of accessibility to data this was actually done by the Google Chrome team out of Seattle and basically what they did is they uh compared us over a period of

time against their traditional onsite Outsourcing so this is vendors that actually come on site and are part of the team and basically what they did is if you look on the left hand side they had eight testers um basically working For 40 hours a week over a total full week or five days they tested 300 URLs that are being used by Google Chrome the most popular URLs around the world and they discovered 19 issues that are fix worthy so 19 issues that the dev team said you know what we're going to fix that and we're

going to fix it now for the next release of Google Chrome and basically the price that they paid is $115,000 but if you look at the price per issue meaning price per issue fixed Is $789 they run the same test with us at exactly the same week and we basically use 30 testers uh each tester spent 10 hours and we finished everything in two days so that that's value number one is time to Market we were able to cover more ground and cover it more quickly uh we tested the 300 URL and we discovered 129

issues that were fix worthy so not only we did it faster and we discovered by a 10x amount of time the number of Issues that they actually deem to be fixed and if you look at the price comparison it costs them $10,000 but if you look at the value per item fixed it's actually what $78 so the real ratio of cost is 10 to1 so it's time to Market it's quality and its cost so three things that we were significantly better over the old way of doing it that's excellent what I love about this example

um is that if you think about all the things that donon And his team work through there they weren't all just you know things that you would say were pure benefits in a dollar sense like time to Market is a really really big advantage to people but it may not be measurable in dollar terms but it's meaningful to a company like Google who's trying to compete in a very hot space so do think about ways that you can bring your gain pain ratio into focus and uh I would summarize by simply saying you need to

have at least An order of magnitude Improvement in this and the best thing you can do when you're evaluating your value prop is to ask all these questions up front long before you ask for the check uh and if you're getting the right answers and you're getting that sense that you have an order of magnitude Improvement you probably will get the check and that's the reason why I would put this you know long before the uh initial go to market exercise becomes a reality of you trying To hire salese and pay bills so uh one

more example just to sort of keep thus you know moving from case study to case study uh Aion actually solved a problem for Estee laer and I know Brian you weren't the person who actually sold them uh this particular deal but would you like to just briefly talk through uh hear what the benefits were to Estee lad and what their their gain was I was about to take credit for It um so actually Este La was one of the company's first customers and this goes back to the days when the company was actually doing app

development work and Este laud approached a peran because what they what they want to do is I I don't know if any of you have been to any Clinique counters or any other uh cosmetic counters that are owned by one of the Estee Lauder Companies um but they now have iPads there and and and they they have questionnaires on that IPad that are constant L being updated uh airion developed that that app for them and what happened with that St lot was they said okay that's great but now we need to roll it out to

to 40,000 kiosks around the world right now it's about it's it's there's 17,000 ultimately they want to have 40,000 of these kiosk iPads worldwide how are we going to do that we can't possibly have an IT person go to each one of these and upload a new app every week or every Season whenever a new product line or a new SKU comes out so we developed a system that enable enabled us to push these uh app updates out to uh these these kiosk iPad IP iPads that s Lauder has at their their various facilities um

the alternative obviously was to do it themselves which would have been a huge effort they estimated about $2 and5 million do is what would have cost them to do that and I I kept the punch line to last uh which is unfair because you Should get the benefit of it which is that the sales went up by how much the sales of of the the product yeah uh the the the initial test from at some of the stores in New York the I mean the sales went up like 400% uh right off the bat and

the reason if you think about it was is people walk into stores and they have you know do you want somebody walking up to you saying you need this product or this product you don't really want that but people Tended to trust the information coming out of the of the iPad so they would enter their skin type and you know it's programmed by by probably the same person that's spraying perfume in your face but uh what what would happen is people would enter in their skin type and what they plan on doing and and the

the iPad would spit out here's what you need and by the way here are the product numbers and you could just go grab them and buy them so that I mean that the Takeup was unbelievable and it has been to this day so thank you I mean it's a great example again of the gain pain obviously in order of magnitude but then the fact that the sales went up Forex no brainer so this is the reason why this stuff becomes so important for you to evaluate now my next startup secret is a little hard to

get your arms around so I'm going to use David to bring it up but I will uh first of all give you a sense of what I'm getting out here Almost everything I've told you um is going to in some way be a breakthrough if you do a great job of it breakthroughs by definition have the word break in them so they break stuff that is a challenge if you're breaking stuff it usually costs people to go break it and fix it and put it back together again even if what you come up with is

a much better solution so the really great Innovations or Great Value props are actually great breakthroughs In terms of their output but they are non-disruptive to actually adopt and so what we loved about a Kean was that we looked at many many different database companies uh you know literally in the sort of 40 or 50 companies but almost all of them had a simple basic premise which is you got to rewrite your application to take advantage of it it's just not going to happen I mean people have invested billions not an exaggeration In it systems

written around a standard called SQL and so they're just not going to rip that out even if you can come in with an order of magnitude Improvement as we were suggesting earlier so David what was your way of solving this problem um so um what we did at aan um again we had this incredibly disruptive innovation in that you could basically solve the performance issues for most databases running those queries hundreds of times faster and actually do things That you couldn't do before and that was great but the issue was is how do you adopt

it and so what we came up with is a concept of uh what's called replication uh instead of you having to rewrite your application we just plug in alongside your existing database and then you redirect the problem queries over to a keyan in doing that you don't have to re architect you don't have to rewrite any part of your application to do that it's literally a seamless Process there's another key element to it which is actually fitting into the operational environment these are 24/7 operations they can't go down uh they have very very rigorous rules

uh and and and the guys who run those the system admins and the dbas follow very very precise procedures so it's very important that we could just slot in alongside the ex existing operating environment to allow you to not just achieve this in the first place but then To run it seamlessly so there's a a beauty of this that falls out in David's value proposition which is you know as you can tell he has a way of talking about this that is you know a much improved proove 10 to 100x Performance but the unlike statement

at the bottom is unlike some uh Alternatives that are now called No SQL which literally don't use SQL would require a rewrite he can do all of this without you doing that rewrite so in his value prop statement That unlike was really the key it was the thing that enabled him to have a very disruptive innovation yet a non-disruptive adop adoption it took all the pain of adoption out and took all the risk out in that case too because actually you could just evaluate it on the fly alongside what you're doing today and see hey

is this making an impact or not and if it didn't guess what you wouldn't invest but the good news is we're seeing not just 10 but 100x performance increases in some customers and so David I'd love you to just give the name media example of of what's the impact being for them uh in in business terms um actually I'll give two real quick examples so one is name media so name media is another relatively local company they handle all of the domain name sales so when you go to to to one-on-one or GoDaddy to buy

a domain name they're actually buying that through this wholesale Service uh in N Media uh and they had big problems in terms of the performance of their website performance really means money what they've been able to show is that by eliminating the performance they've been able to drive up Revenue 200% on those applications so it's a big big Revenue impact another very quick example is uh Citrix uh Citrix has a collaboration platform that they're just bringing to Market um uh their problem was is that they they needed to be able To provide greater security for

that to allow it to go viral and they just simply couldn't get the performance so with a Kean again we've been running 42% of all of these queries now with the security uh uh queries 40 100 times faster and so we just eliminate the problem and so it means that you can take that entire platform out to Market as a viral product so it's a big go to market boom what's beautiful about the examples in in a kean's uh you know Customer base is there's no change to Applications there's no risk in deployment and yet

you're getting this you know gain pain ratio of 10 to 100 so we've really uh got through the two tough parts and at this point I'm going to finish by just describing to you a couple of uh examples of how you might go about building your value prop as you sit down now to do it so again um I think you've now seen this template enough to realize it's pretty Straightforward it's about who you target what you're currently uh competing with and what you do differently and how it is that you do that in a

way that ultimately makes it unique and valuable so uh when I was just putting this um together last time that I was here I had somebody come up and challenge me and say okay that all sounds great but what if I'm a not for profit um and so I promised to give an answer to that so this is an extension To uh the uh the case studies and I'd like Alo to come up who's going to talk to us about diagnostics for all so Alo can you tell us a little bit about what diagnostics for

all is all about using the value prop statement here yeah sure so uh just to give you quick background I'm a scientist over across the river in the chemistry Department in George Whitesides lab and so about I think about three years ago George uh and some scientists there developed a technology That enables you in a very lowc cost and simple and elegant manner to diagnose a variety of diseases for any from people to animals to testing the quality of milk using paper and so basically this uh approach was sort of uh being brought to Market

if you will through a nonprofit called diagnostics for all and it's essentially designed for people in the in the third world in the developing World essentially people who live in rural environments who don't have access To a conventional medical infrastructure and so generally you know I think this sort of juxtaposes with perhaps some of the other examples where there may be some solutions that are already out there that they might be expensive in this case there really are no opportunities for someone in the third world in a farm you know in in Ghana or Gambia

for example to get access to a diagnosis to understand you know what's wrong with them why they're ill and so Basically I guess it's for people in those sorts of environments who are dissatis dissatisfied with the fact that they don't have access to uh diagnos Diagnostics or diagnosis um and the technology that they're using essentially pattern paper that enables them to test a myriad of diseases all in within a few minutes and so this again is a low cost about cost about a penny at scale um easy to use uh that's also another important point

you know unlike The us where we have a lot of uh training and Physicians and nurses and staff behind testing diseases they don't have that and the alternative would have been what no diagnosis Bas exactly no diagnosis and so I think one of the real comparisons in the gain pain ratio for example is the fact that uh in this case unlike a big company that might have to pay more in this case pain is actually real pain where they're not able to get treatment or an understanding of their Illness so just give you one example

um DFA did a quick study or I guess the NIH in Rwanda did a study where about 53% of women in Rwanda could not afford healthare and about 26% of them live too far away from a hospital in order to get access to Diagnostics and treatments and so what DFA has been doing is on the right hand side you can see this really small piece of paper cost about a penny two pennies now if you include the reagents uh that's a point of care Device that enables them to test for a whole bunch of enzymes

and diseases uh right on that piece of paper so I think that one example is for uh liver failure so how many people here have ever gone out drinking really hard one night nobody's G to admit that no one's going to admit it yeah Sid admits it yeah thank you Sid but uh you know the reason you're still alive after doing that is because your liver removes all the impurities And all the uh tox toxic agents out of your blood now it turns out that for a lot of folks uh in the third world who

are taking medicines a lot of the medicines also can destroy the liver so we need to be able to constantly Monitor and assess the the health and the state of their liver and so this test looks for two uh enzymes alt and a to assess the quality and health of great it's a great story Al look and and I I hope you can all appreciate this is One where there's real pain you know medical pain and and also you know third world pain and it feels frankly like a cause that any of us could get

behind where there's really no current solution it's such a large problem uh and at a scale where you know existing infrastructure just wouldn't support it so the beauty of this is no infrastructure no training and really no time requirement to bring it sorry go ahead yeah can I ask a question on that I'm just curious what what I think is different is who the painting is experienced by versus who ends up paying for that Innovation or that product so part of the challenge I think is convincing someone who's not experiencing that difficulty of implementing it

uh that it's a worthwhile solution to the people who are feeling that pain so how do you address that disconnect between who pays for the service and who benefits from Yeah that's a really great point and I think one of the reasons is a sort of a whit space area is because you're right you know the people who experience the pain don't have the money to physically afford a lot of those Solutions so to address your point I'd say there's there's two elements to it one is that a lot of governments are getting very heavily

involved the Rwandan government uh the Indian government Chinese government are all trying to develop These lowcost Technologies because they can't afford you know a million dollar MRI so that's one reason I think there's a lot of uh incentive for them because um they want their people to be healthy and they want productivity and uh is also dependent on the health of their their citizens that's one thing uh DFA I think has been very fortunate I think a lot of this technology was developed here at Harvard through the generosity of Bill and Melinda Gates Foundation and

They've been a very strong uh proponent of this technology and are actually um working on a field test right now I think that might be the next slide there you go perfect tea up so DFA is actually right now uh for the same liver function that I mentioned before they're actually deploying that technology now as a field test in Vietnam and so this liver uh function issue affects approximately 8 million people uh according to the foundation uh globally uh in these sorts Of environments so they have a 700% test that they're doing uh at a

hospital in hoim men so thank you very much Alo I think was a great job of bringing something to life there that is very different to all the examples we talked about and hopefully uh responded to some of the feedback I got in the last uh session that we obviously wanted to address that so the last thing I want to do here is just to say that actually all of this is great on paper or on PowerPoint but it's really nothing to do with the technology at the end of the day it's to do with

you and what I mean by that is that the best value propositions get developed by people who are uniquely able from their background or their experience to come up with some insight that advantages them in addressing the problem and providing a solution which they are passionate about and that ultimately they believe in for their reasons they can deliver in a dis Um discontinuous Innovation or in some kind of a disruptive business model so what I want to do at this point is just appeal to you all and say look everyone one of you probably is

here for a reason and no matter what I've said tonight believe in yourself CU I've seen incredibly unlikely stories turn into great companies because of the entrepreneurs conviction in their own understanding of a problem if you have that and you have the belief and you Have the passion and persistence to go after it everything I've said tonight will just be a framework that will drop away into the distance as you succeed in building a business so thank you very much for your time tonight I really appreciate it I just wanted to end by thanking uh

the team from airion and akan and uh discuss in form of Rick from Alo from DFA and of course the Utes group so thank you very much you guys [Music]