This is Step 2 of “4 Steps to Develop a Strategy”, focused on identifying the root causes of a buyer’s pain point, determining why it hasn’t been solved already, and outlining our approach/technology to do so.
(2a) List out all the root causes of the high $ value pool
This step typically follows Step 1 (the process of identifying a buyer and value pool).
This step should not be super difficult. Ideally there are many publications on the top drivers of the pain point we can reference and by citing them, everyone will nod their heads in agreement. Be concerned if it’s too difficult; while we should do our own research into the root causes of the value pool we identify, we don’t want to have to spend time in a sales meeting educating our potential customers about this.
Interviews again are a valuable tool
At one point in my career, I investigated building a product that would help reduce patient falls in a hospital. I decided not to pursue it and partly for that reason, it makes a good case study.
For Step 1, I talked to buyers about how they measure the cost of falls and how much value they see in a further reduction. I also asked them the mechanisms they have seen effective for fall reduction and which ones they use, or are considering using, today.
I talked to the prospective users of such a solution—in this example, physicians, nurses, and nurse assistants. In my experience, offering people a gift card for thirty minutes of their time for an expert interview will allow you to hear the voice from the front lines—and it is always well worth it. In any case, I asked nurses what the root cause of patient falls were.
At this point, our team began to imagine solutions based on what we learned about the main cause of falls (e.g. elderly people getting up to go to the bathroom) and how they were currently prevented (e.g. checking in on patients regularly). One solution the team came up with was an alert for the nurse when the patients’ weight is no longer present on their bed.
Note we’re not looking to invent a product here, but rather to identify a solution approach (also known as a product strategy or value proposition) that a product could be built around. In this example, a scale under the bed could be a solution, but not a “product” yet. We don’t know what the users’ needs are and so we don’t know yet what product features would be needed to have them use it.
I’ve also done surveys. In this case, surveying 300 nurses to find out the root causes they see in patient falls would tell us a lot. The result of that work would be something we can deploy as part of our marketing materials later on. All you need are an email list and the ability to offer a $15 Amazon gift card for a few minutes of their time. You may find it best to do your research first so you can ask meaningful, informed, and hypothesis-driven questions in a survey.
(2b) Determine why the value pool isn’t being solved today: Are there major root causes not being addressed? Or are current approaches just not effective?
The value of finding unaddressed root causes
This is where you look for Blue Ocean—value pool solution approaches that don’t exist today. Other companies may know the value pools (as discussed in Step #1), but the current competitors are likely focusing in on solving one or two of the root causes and solutions to the value pool. Are there any root causes that are being overlooked today? If so, coupled with a unique product approach, this is where you can do something different and impact your customers’ value pools in a way that’s complementary to what they’re already doing.
Strategy at its core is carving out divergent solutions and approaches. Ivan M. Arreguín-Toft’s analysis in “How the Weak Win Wars” shows that taking a divergent strategy allows the smaller player to win two-thirds of the time. But taking a strategy similar to an incumbent’s wins only one-fifth of the time.
There are three ways to be different: choosing an over-looked buyer, choosing a value pool / pain point for that customer that no one else has noticed, and, finally, choosing a novel approach to solve that pain point.
What root causes have others overlooked so far? They are often in plain sight
(2c) Choose a method of unlocking the value pool—ideally one that’s based on a unique technology or insight
If there are many competitors already providing solutions to the buyer’s need/value pool similar to the one you are considering, you have to have a strong belief you can build yours uniquely enough to win a certain customer segment. Don’t immediately worry about competitors: having competitors is validation of the need you identified. Instead focus on differentiating against those competitors.
Where there are existing players, opportunities can still be attractive if you can avoid becoming a commodity. In the chart below, you can see the relative attractiveness of a strategy based on the differentiation to incumbents in (1) choosing a buyer/value pool and (2) a method of unlocking that value pool.
For (2), if there are many competitors or in-house solutions addressing a value pool, but doing so in dissimilar ways as your solution, you can still be successful. I’ll warn you that potential buyers may react with “well, we’re already doing so much in this area, let’s see how those initiatives do before we start up a new one.”
What is the unique technology or analytics/data that you are bringing to the solution? If you don’t have a clear answer, why wasn’t your solution already built years ago by someone else? The unique technology or analytical core should become a source of advantage that will deter copycats and enable you to find a unique voice in a crowded field of competitors. More on that in the next section.
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This article is an abridged chapter from a book of mine, 4 Steps to Develop a Strategy