A corporation that employs an "outside-in" startup program needs to screen a large number of potential startups and assess each time: What is the value of the startup's offering to our business, and what resources and support will the startup need so we can actually obtain its offering? However, many startups are not very good at communicating their customer value proposition in a way that helps the customer firm making such assessments. This article recommends that startups construct two sequential value propositions. The Innovative Offering Value Proposition communicates how the startup's offering creates superior value for the customer. It answers the question: What is extraordinary about the startup's offering that will enable the customer to solve a significant problem it has or achieve a top priority it has? The Leveraging Assistance Value Proposition conveys what the customer firm will get in return for providing support and resources to the startup. It answers the question: What will make it worthwhile from the customer's perspective to support the startup to realize its innovative offering?
In early 2017, the chief executive officer of AgriSmart, a German start-up company within the Bosch start-up platform, was preparing for an important upcoming board meeting. She needed to explain why AgriSmart had deviated from its original financial plan, seek approval for its upcoming budget, and convince Bosch's board that the company deserved further funding. In preparing the company's forecasts to share with the board, the chief executive officer also needed to prepare for all possible questions from the directors regarding AgriSmart's past performance and the assumptions going forward.
In early 2017, the chief executive officer of AgriSmart, a German start-up company within the Bosch start-up platform, was preparing for an important upcoming board meeting. She needed to explain why AgriSmart had deviated from its original financial plan, seek approval for its upcoming budget, and convince Bosch's board that the company deserved further funding. In preparing the company's forecasts to share with the board, the chief executive officer also needed to prepare for all possible questions from the directors regarding AgriSmart's past performance and the assumptions going forward.
In B2B markets, suppliers of nonstrategic products and services tend to assume they have only two options for landing sales: stressing their offerings' unique characteristics and competing on price. The problem is, the features touted often don't matter to purchasing managers, and neither do price concessions. How, then, do you win their business? The authors' research with 46 companies points to a solution: After meeting the customer's basic specs within an acceptable price range, give the purchasing manager "a justifier"--an extra that provides obvious value to the business. A car-leasing company, for instance, might offer the option to cancel a number of contracts without penalty, or a delivery service might print customers' logos on their envelopes. The justifier provides a clear-cut reason to select one supplier over others and breaks the tie among the finalists on the short list. To uncover justifiers, you should explore how customers use your offerings, learn about their priorities and those of their customers, and look at ways to integrate your offerings with other suppliers'. The right justifier can win you more business--and even help you launch a new one.
Innovative companies fund internal research and development to gain an edge in the marketplace. They also work closely with their suppliers in an effort to offer greater functionality and performance for their customers. However, some critical new product insights don't come from suppliers and customers working together but from the customer's customers. When suppliers and customers cooperate, the authors write, they can "tweak"the technology to provide big gains in value for the customer's customers. In contrast to recent research on how suppliers and customers cooperate to save on costs, the authors examine the innovation process to understand how to achieve outcomes for the end user that otherwise would not occur. Drawing on numerous examples from technology companies, they look at how suppliers and customers become open to tweaking the supplier's offering to better serve the customer's customers; what makes for successful tweaking; and various ways parties can share the fruits of collaboration so that everyone benefits. Although some progressive suppliers and customers saw the potential benefits of working together, many of the businesses the authors examined regarded this kind of cooperation as a last resort. Small suppliers saw large prospective customers as slow to make decisions and overly aggressive about claiming intellectual property that came out of collaborations; large customers also tended to withhold information about how they used the suppliers'technologies and their customers'applications. However, the authors found that some technology businesses consciously seek opportunities to cooperate with their customers and customer's customers. This was particularly true with small and medium-sized companies. The authors explore two key issues: the extent to which contact between the supplier and the customer's customer needs to be direct; and how businesses bridge across different partial understandings to improve their chances of success.
This is an MIT Sloan Management Review article. Many suppliers serving business markets believe that practicing value-based pricing means finding out what the value of their offerings is relative to alternatives for their customers and then charging as high a price as they can. But the authors suggest that "charging what the market will bear" isn't always the right strategy. Instead, they argue that an organization should tailor its pricing to a more robust market strategy. "Unfortunately," the authors say, "when stripped of jargon and word-speak the ' 'market strategy' for many businesses is simply' 'Sell more!'" To counter this problem the authors suggest several questions that an organization should ask to improve its pricing strategy, including: What is the marketing strategy in this segment? What is the differential value that is transparent to target customers? What is the price of the next best alternative offering? What is the customer's expectation of a "fair" price? By asking these questions and others, an organization can choose a price point that provides the largest long-term value to the supplier. The benefits of this approach include improved relations with customers that often lead to longer-term, more profitable relationships. Using this approach, customers are also more willing to collaborate with suppliers, which can lead to shared data and improved products. According to the authors, suppliers that practice this kind of value-based pricing boost profits not only in the present, but they also set themselves up to profit over the long term.