Coming to stage 2 you have identified and quantified  customer and market need. Now is when things begin to get interesting. For any new venture to succeed it requires a value proposition. Without it you will find yourself lost. This has happened to me in the past and it still does sometimes. The typical situation is you identify and quantify a need,  then you assemble a team as fast as possible and execute the plan based solely on gut feelings. Further down the line, if you have not constructed a valid value proposition, you and your partners  have to restructure the business to make it work. So the key is “create greater customer value in comparison to the value being created by your competitors” and document it extensively before starting the venture.

Being able to quantify this value and bring it from being an abstract thought in your head to reality is not the easiest of things to do. I list down the following four factors when breaking an idea down.

Need: “What is the important customer and market Need?

Approach: “What is your unique Approach for addressing this need?”

Benefits: “What are the specific Benefits per cost that result from this approach?”

Competition: “How are these benefits per cost superior to the Competition?”

I realize that initially creating a value proposition based on these four factors is difficult. Sometimes you can’t identify a direct competitor, calculating benefit vs cost gets complicated or a host of other issues. The important aspect is that you have to start thinking about these factors and over the passage of time you will incorporate many permutations to come up with a winning value proposition. To go about this effectively here are a couple of helpful tips:

1. Talk with your prospective customers and clients about your new concept and get feedback. Remember your customers are out there in the real world and not your office. Get out there and get to know them a lot better.

2. If possible create a prototype for your service which will help your target audience to visualize what it is that you are selling or providing. Also let your customers take it for a spin and see how they interact with it.

3. Do a thorough competitor analysis to document what are the alternatives out there. This will also help you to understand where it is, that you have to create value for your target customer.

4. Study the market or the industry that you are wanting to operate in. Deep market knowledge and understanding the dynamics between the players, government and competitors is critical. There are a lot of great market research reports on the web. Get as much information as you can to make an educated decision on the future growth and scalability prospects for your business.

Your first draft for the value proposition will be far from perfect. However, remember that the journey to success is usually not a straight line. IDEO a leading design firm states, “Fail often to succeed early.” I think that should be the motto for all entrepreneurs. I have started businesses which were headed in one direction when we started and are operating in a completely different space now. The most important things needed to help make this journey worthwhile is a great team, get your NABC proposition pat down, be passionate and proactive and then……enjoy the ride!

p.s Stage 2 requires a lot of time and dedication to so make sure you do this step properly. Don’t be in a rush now because it will cost you dearly in the future.