If you’re an early stage company – or introducing a new product from an established enterprise – you will invariably require a series of funding (through external or internal investment). And first and foremost, you’ll have to convince investors that you have a validated opportunity – which a recent IOI Partners article characterized as an attractive value proposition driving a revenue plan into a target market large enough to sustain growth.
Investor pitches – at their core – have four essential elements: (i) Problem, (ii) Market, (iii) Solution, and (iv) Opportunity. Opportunity is the crowbar that pries open an otherwise closed market that is usually content with “good enough.” We propose that unique knowledge of the problem (i.e., the customer’s struggles to achieve desired job outcomes) – rather than the presence of unique science/technologies/products/services – uncovers hidden opportunities for new companies and new products to enter markets or for existing products to be reimagined.
It’s no accident that elevator pitches, investor pitch decks, and business plans always start with “The Problem.” Investors’ appreciation of the Market (size and depth of its pain), the Solution (its fit with the problem), and the Opportunity (product-market fit in context of the technological, regulatory, and competitive landscape) all follow from how well you understand the underlying problems faced by customers in your target market.
Just as precision medicine seeks to precisely characterize a target population before drugs are developed, tested, or prescribed on the basis of genomics, IOI Partners seeks to precisely characterize a target market problem space before investor pitches and new product initiatives are launched on the basis of desired outcomes around your customers’ core job-to-be-done.
In a world where investors are bombarded by hyper-accelerated changes in scientific breakthroughs, technologies, regulations, and competitive landscapes, the IOI Partners “whole genome” characterization of the problem space allows you to de-risk your potential investors’ decisions using a stable framework that doesn’t change with technologies, geography, or time using the Voice of Customer [1,2] and Jobs-to-be Done Platform [3], as we share in our recent article. Because your investor pitch needs to show how your company could credibly win a large market in the future, advantages that are stable over time render your pitch more fundable [4].
It’s a rule of thumb that investors fund businesses they understand – but most pitches emphasize esoteric solutions that are inherently difficult for investors to evaluate relative to other similarly esoteric solutions. In stark contrast, pitches emphasizing a unique understanding of the “Problem” are almost universally accessible and evaluable, which increases by an order of magnitude the number of investors who can properly assess your Opportunity.
“If I had an hour to solve a problem I’d spend 55 minutes thinking about the problem and 5 minutes thinking about solutions.”
— Albert Einstein
Why New Companies and New Products Miss Their Mark in the Eyes of Investors
Here’s a sobering – but accurate – appraisal: “The market doesn’t care about your product.” However, markets are defined by the results or outcomes obtained from using a product or service. When potential customers express interest in hearing a presentation or seeing a demo, it’s always about their problem – not your solution. That’s why the product (solution) usually ranks a distant fifth in investor weighting behind the team, problem, market, and opportunity.
More generally, people hire products to get a job done better and/or cheaper to make progress in their lives. So the proper unit of analysis for innovation and marketing is the job-to-be-done. From this foundation, you can define your market and gather underlying needs, which then informs all other value creating activities in your company.
“People don’t want to buy a quarter-inch drill. They want a quarter-inch hole.”
— Theodore Levitt
Consciously or not, the vast majority of companies adopt a product-centric, ideas-first approach to defining markets, understanding needs, and segmenting target markets. That’s natural – since they’ve often invested a large chunk of their professional lives to bringing a technology to market through the auspices of a product/service. It’s also because they struggle even to define what a customer need actually is. Very often, a need (problem) is conflated with a product requirement or feature preference (solution).
But introducing a product idea to customers too early in the market/opportunity validation process is analogous to providing an answer (solution) before asking a question (problem). The inherent (anchoring and confirmation) biases in responses obtained from asking prospective customers questions such as “Do you see value in this product/service for your organization?” are all too well known and documented.
Taken to an extreme, market validation devolves into a full-blown “solution in search of a problem” exercise. In such cases, problems are “conjured up” for the express purpose of being perfectly solved by the solution at hand.
Companies often fall into the trap of defining markets and segments by the core technologies underlying their solutions (e.g., liquid biopsies, health analytics, single cell NGS, etc.) – instead of a core job that customers are trying to accomplish (i.e., the Problem).
For example, a virtual screening company defined their market along the lines of their computationally based drug-protein docking and scoring technology. But biopharma customers engaged in early drug discovery viewed their core job-to-be-done as finding novel compounds that could be turned into lead compounds. Viewed from that perspective, the competition and partnership opportunities for this virtual screening company included a wide variety of technologies such as:
- experimental high throughput screening (HTS),
- cell-based phenotypic screening,
- natural language processing algorithms farming the scientific literature, and
- machine learning scoring based on similarity to known drug-target interactions.
While the virtual screening company was preoccupied with endless iterations of feature-by-feature contests with other virtual screening companies, they missed the opportunity to participate in a market that was 100 times larger in revenue potential.
These inherent flaws in the way target markets are defined and needs are gathered collectively sow seeds of fear, uncertainty, and doubt among investors about your knowledge of the “Problem.” Because this ubiquitous defect sets the tone for most pitches, investors skip ahead and increasingly look to fund companies that have already demonstrated sufficient market traction, which is difficult for most emerging companies or new products to achieve prior to an investment (i.e., a classic Catch-22 situation).
Why Perform Voice of Customer and Jobs-to-be-Done
The necessary insights buried inside individual customer experiences in the context of actual jobs-to-be-done provide ground truth to pressure test your value proposition and business models at much less cost and time than traditional opportunity validation methods. It provides a stable framework against which to formulate value propositions, strategy, product ideas, marketing messages, and – of course – investor pitches.
It creates use cases and buyer personas that can be effectively targeted based upon segmentation that is relevant (i.e., those struggling with similar unmet needs) [5]. Finally, focusing on a core job-to-be-done, you avoid solving a “nice-to-have-fixed” problem, where people use your product – but never pay for it. Collectively this demonstrates to investors that you’re able to solve a real-world problem that can translate into sales beyond just early adopters.
As an emerging company, your “why” should be defined by a core job-to-be-done by your customers. Doing an entire job … perfectly. Instead, most companies start with “what” they offer (product or service) and “how” they do what they do better than their competitors. Investors place a premium on companies that “start with why” because they realize that customers often don’t buy “what” you do; they buy “why” you do it [6].
IOI Partners makes the job-to-be-done the basic unit of analysis. Defining a market by the job-to-be-done – instead of the technology used in the solution – will almost always increase the estimate of the market size as well as the accuracy of that estimate [5]. More importantly, while new products based on new technologies come and go, needs associated with a job-to-be done (e.g., finding novel compounds) remain stable over time, which furnishes a more predictable framework for de-risking investment decisions.
For example, if a core job-to-be-done is to “test for influenza,” then a company would consider offering MDx influenza testing in both molecular and immunoassay formats. Then segmentation can be done by clustering unique segments that are struggling in the same way to get the job done (e.g., patient-driven versus sample-driven workflows). If, on the other hand, the core job-to-be-done is to “test for multiple infectious diseases in a low technology environment,” then a molecular assay would likely not satisfy their desired outcomes.
What Our Process Looks Like
The Opportunity Validation Process has four basic steps that combine qualitative observation with quantitative statistical analyses that reframe the investor pitch in the following way:
- Problem (partially or wholly unmet desired outcomes around a core job-to-be-done)
- Market (segmented according to users struggling in the same way to get their job done)
- Solution (product benefits and capabilities specifically targeted at unmet needs in chosen segments(s))
- Opportunity (fundable go-to-market strategies targeted at specific underserved or overserved market segments that you uniquely have identified)
1) We jointly define your customer (i.e., those who hold the insights into true needs) and their core jobs-to-be-done by observing them in the natural flow of their work environment. It’s axiomatic that the value of a solution is related to the value of overcoming the problem, so we take care not to define the job too broadly or narrowly. We then gather the entire range desired outcomes associated with a core job (and all its associated jobs) from a functional, emotional, and social perspective.
2) We then use a quantitative lens to rank desired outcomes (needs) by importance and performance to segment the market according clusters of unmet needs. The depth of the problem provides a guide to price; the scope of the problem provides an indication of potential sales volume.
3) Armed with comprehensive insights from the Problem space, we then enter the Solution space, where we provide qualitative narratives to inspire product development teams and semi-quantitative scores to estimate the value of any product or product idea. You can clearly demonstrate to investors that your lean/agile development will require fewer cycles and less time/cost per cycle. Put slightly differently, you can turn the hypothesis crank more swiftly.
4) Looking at segments of underserved or overserved needs, you can identify an opportunity based upon differentiation or disruption. This same analysis can be applied to existing products, where it will often reveal that no new product development is required at all – your existing product already did the job well. Our outcomes-based framework will allow you to create better marketing messages around an existing product – based upon the hidden opportunity to showcase unmet needs that it already satisfied that neither you nor the customer were aware of.
Why Use IOI Partners?
The Hubble telescope enabled scientists to visualize information heretofore unimagined. Similarly, IOI Partners’ opportunity validation platform leverages our domain-specific experience in diagnostics and life sciences to provide clarity and validate that you’re in alignment with your customers’ needs in the context of the core job they are trying to accomplish.
With a well-honed Voice of Customer/Jobs-to-be-Done process providing ground truth (bottom up analysis of a statistically relevant segment of target market) to your business plan and strategy, investors will perceive the true source of differentiation.
We have perfected a one-day format to assess whether our Voice of Customer/Jobs-to-be-Done framework will be successful for your unique circumstances. This assessment in and of itself provides a tremendous amount of insight.
[1] Griffin, A. & Hauser, J. (Winter 1993). The Voice of the Customer, Marketing Science 12(1), 1-27.
[2] Katz, Gerald M. (2004). Chapter 7, The Voice of the Customer. The PDMA Toolbook for New Product Development (p. 170). John Wiley & Sons.
[3] Christensen, C. M., and Raynor, M. E. (2003). The Innovator’s Solution: Creating and Sustaining Successful Growth. Harvard Business School Press.
[4] Dunford, A. (2017, April). Your Investor Pitch is Ruining Your Sales Pitch [Web log post]. Retrieved Feb. 1, 2018 from https://hackernoon.com/why-your-investor-pitch-is-ruining-your-sales-pitch-5ad769c4d3c6.
[5] Ulwick, T. (2016). Jobs to be Done. Idea Bite Press.
[6] Sinek, S. (2009). Start With Why: How Great Leaders Inspire Everyone to Take Action. Portfolio.
