Jean Redfield: You got your energy technology, but how do you take that innovation from laboratory to the market? Well, welcome to the Online Learning Course—Creating Market Pathways for Technology: Exploration of Value Propositions.

Hello. I'm Jean Redfield—one of the DOE Energy I-Corps instructors—and I'll be your guide through this course. My day job is CFO and co-owner of a precision machining manufacturing firm near Detroit. My tech commercialization and startup experience was built through several roles with a regional utility, and then, as CEO of NextEnergy, a Detroit-based incubator and accelerator for energy and transportation technologies.

We will providing an introduction to DOE Energy I-Corps with a deep dive into value propositions—the concept that is at the center of successful businesses.

Energy I-Corps is dedicated to developing market pathways for promising technologies.

Our instructors are industry leaders, sharing experiences and insights to empower our teams to chart the course to commercialization. Throughout this online course, you will be hearing from a variety of Energy I-Corps instructors, captured in real-time presentations and workshops, and you'll be asked to complete workshop assignments. The objective of this course is for you to come away with a working knowledge of The Business Model Canvas and have some concrete experiences crafting and critiquing value propositions. If you'd like to learn more, reach out to your lab's tech transfer office and, of course, watch for Energy I-Corps lab calls.

So, what exactly is DOE Energy I-Corps? It's an eight-week course designed for national lab scientists to explore whether their specific technology has potential commercial or business value. It is, essentially, a search for a scalable business model. In Energy I-Corps, national lab teams use the customer discovery process to test whether their technology forms the basis for a viable, scalable, business.

In Energy I-Corps, we use a simple framework—The Business Model Canvas—to explore the various elements of a business. Teams use customer discovery, the process of developing hypotheses, and then, testing them through interviews in the real-world customer ecosystem to flesh out The Business Model Canvas to better understand specific next steps and milestones in moving forward with their technology to market potential.

The Business Model Canvas is a framework of nine key components that collectively add up to a successful business. It helps answer the question about how a company creates value for itself by delivering products and services—something of value—to customers. The right side of the canvas are all the external market elements of the business—the specific customer segment—or segments—you're focusing on; the channels and relationships you need to build or use to reach those customers in order to secure revenue over time. The left-hand side of the canvas are the internal aspects of the business you need in order to deliver the value to your customers—the key activities you need to accomplish and the key resources you need directly—or through partnerships—in order to deliver the product/service offering of value to your target customer segment. The left side adds up to your cost structure.

And comparing the two elements at the base of The Business Model Canvas—your cost structure versus potential revenue streams—helps answer the question, "Is this a business worth doing? Is there a viable, scalable, business model that adds up to a business worth doing?"

You'll notice that the value proposition is at the center of The Business Model Canvas, and it is the crossover between the right-side market facing aspects of the business and the left side internal capabilities you offer. It's where your capabilities, your product/service offering—the what you do meets the market—what customers need or want.

No, so far, everything has been expressed in terms of exploring whether your technology forms the basis for a viable business, but we think it's important to stress that The Business Model Canvas, with its focus on value proposition, can be useful for any research team, even if there's not a near-term startup business opportunity. It's important to remember—and for us to remind you—that success for national lab research teams is not just about spinning out startups. And while the methodology we advocate—using customer discovery to build out The Business Model Canvas with a well-developed value proposition at the center—was honed for startups, it's extremely useful for national lab teams across the whole spectrum of potential pathways, including identifying and exploring potential joint venture opportunities or potential partners for joint R&D agreements or sponsored CRADAs, or candidates for licensing agreements. At a bare minimum, you are more likely to be able to develop targeted research proposals that are more successful in competing for funding if you understand and use this methodology.

The bottom-line definition of "success" for national labs is "To find the path that enables your innovation, the value of your technology to have maximum impact on the world." And we believe that this methodology is very useful in finding that path.

And, at the very center of The Business Model Canvas is the value proposition—our focus for today. What is a value proposition?

It's a statement that describes the specific and quantitative benefits your customer will derive by adapting your product and service.

Let's hear more about this from a recent Energy I-Corps workshop that Steve Albers and I led. Steve is an Energy I-Corps instructor, founder of Living Ink—an algae-based pigments company—and Associate Director of LAUNCHPAD at CSU Ventures.

Steve Albers: So, what is the value proposition? It describes the benefit that your customer will get from adopting your technology. What do they get? Do they get the attributes of your technology? It's algae.

That does not describe the benefits they'll derive by adopting my product. Will they get five percent increase market share?

Jean Redfield: So, an example—the team that has the drying technology that's five times more energy efficient and two times faster—those are attributes of the technology. The benefits of five times less energy might be two percent more margin. The benefits of 2 times faster might be 22 percent more throughput through their plant or 30 percent reduction in their labor bill because they can operate it with fewer shifts. You see the distinction? It's subtle.

'Cause five times more energy efficient and two times faster sounds really sexy, but only for the scientist. If the operations manager thinks in terms of throughput and cost or margin, there's a disconnect. So, part of what you're doing is doing the work to listen for the benefits from their perspective and translating your attributes into those benefits. And it's not just semantics. It's not just about the language.

It's about the understanding. You get where we're going at for here?

Steve Albers: So, a great example that I think is really interesting and compelling is this story about an ink company that sold color-changing ink to Coors. You guys know the Coors Light cans where the mountains change colors, right?

Jean Redfield: When it's cold. When your beer's ready.

Steve Albers: When it's cold. And it's such a marketing—it actually got them six percent increase in market share, which is gigantic.

Jean Redfield: Especially in the commodity beer [Inaudible due to crosstalk].

Steve Albers: Unbelievable. They have ridden that forever. And they keep riding it, right? I mean, you can see ads. They released that, I think, probably six years ago and they still have ads for it. Six percent market share is huge for that company, right?

So, it's not a color-changing ink. It's a six percent increase in market share. Right? And so, do you guys see the differences, right? It's an attribute list versus a value proposition. And so, the value proposition says the benefits they will derive from adopting your product.

Jean Redfield: The value proposition doesn't exist without a customer segment. It's all about the fit between what you offer and what the customer wants or needs. Let's listen to Peter Fiske, an Energy I-Corps instructor, and the Director of Water Energy Resilience Research Institute at Lawrence Berkley national lab, as he describes key attributes of well-constructed value propositions.

Peter Fiske: One of the key things we notice in early stages of this program is people don't quite grasp this idea that customers are people, and it's very easy for people—when you put together your Business Model Canvas—to say, "Oh, my customer is the PV manufacturers" or this category. And one of the things you'll learn very quickly is customers are people. And the reason that's important is that people behave in a certain way. They are Homo sapiens, and you are Homo sapiens, and therefore, there are a lot of aspects of how people will accept, embrace, or reject new technology that you, as technologists, need to appreciate.

So, as we said, you sat inside the lab thinking about this great idea, this thing that'll work, and now, it's time to go out and actually explore it, but you have to kind of come back to this question of like, "Okay. So, what is this thing that we've developed?" Because everyone one of your projects was funded by somebody, right? It was originally started with an original value proposition in mind.

So, for starters, let's make sure we understand, for ourselves, how we got here. What was the idea? What problems were observed? How bad were those problems? Who said they were problems? Do we know how much this problem is?

Do you know that any of this is true? And so, the reason most new businesses fail is not because of a lack of customers, not because of a failure of the technology. Most of the time, what they did is they invented something that turns out people didn't really need. And this is—by the way, don't feel bad. This isn't just for us on the tech side.

Most startups fail for the same reason. So, very experienced entrepreneurs do the same mistake. Value proposition and customer segment are paired together.

These are two sides of an equation. You can't have one without a reciprocal on the other side. And so, you will find, as you go through, that you may identify several customer segments and each customer segment is distinguished, often, by the fact that they have somewhat different value propositions.

When you talk about end customers for an HVAC system, they might be concerned about cost primarily or aesthetics like noise or functionality. When you talk to the independent sales rep who's a marketing agent for HVAC equipment, they might be concerned about the serviceability of this system and how they can generate extra revenue. Different customer segments for the same product.

As we've said, people don't care about your technology. They're trying to solve a problem.

I worked with a group that had a much more efficient fan for refrigerators and it could cut the energy efficiency of the refrigeration—or improve the energy efficiency—by about seven percent. And they walked into the refrigerator market and discovered that the refrigerator manufacturers could increase the R-value of the door of the insulation by three percent and achieve the same aggregate savings. They didn't care if it was a fan or if was insulation. They're trying to achieve a certain end state.

We talked on this side about customers and customer segments, and this diagram of customer profile is something you'll return to again and again. A customer has a set of jobs. They have a set of gains or things that would improve their lives and would make them happier, and they have pains—a certain set of things that are awful and that they would like to reduce or remove.

Similarly, you have your thing—your product or service. It has a set of things it can do to help a customer's gains and achieve more gains, and it has a set of things it could potentially do to relieve their pains. See how the reciprocal thing works here?

Okay. So, we were talking just now about who is the customer and what is their job.

We are looking for fit between the value map and the customer profile. What defines a customer—and when we say "a customer segment"—it's, as I said, they tend to have the similar behaviors, and you can group them in much the same way that atoms in a periodic table. All sodium atoms tend to behave chemically the same way and customer profiles dictate a set of customers who all behave similarly. All right. So, let's go through this model here.

We'll start with the products and services. This is a list of all the products and services a value proposition is built around, okay? And so, this is potentially all the features and benefits that you could offer, a list of all the products and services your value proposition's built on, including what helps your customer complete their functional, social, or emotional jobs or basic needs. And you're like, "What? Emotional jobs?"

Yeah. Let me give you an example.

Do you know what it's like as a consulting engineer in the housing industry to have a developer call up and say, "I'm gonna sue you because you gave me a design that's leaking in 40 percent of these structures. Your business is ruined"? Do you know how, emotionally, that feels? Do you know what that would be like and why people would want to avoid that at all costs? That's emotion.

So, their types—they're physical products and services some of you are working on. They're intangible products and services. They're digital and even financial. Many of you will discover that, in fact, even if you were selling this, you may also need to provide that, because some of your customers can't simply open their wallets and buy what you're offering.

Pain relievers. These are ways in which your product or service solves somebody's pain, and these are kind of obvious ones. Great value propositions, however, focus on pains that matter most—absolutely acute pains. Often times, people are surprised to learn that cost is not an acute pain. It's not an acute pain.

However, most people realize that other soft issues, such as—as I said, regulatory compliance or differentiation in the market are very important pains. What we see is often time, the most compelling value propositions don't like, offer a whole portfolio, but offer a few specific pain reliefs extremely well. "This will solve your one problem here." That makes for a very clarifying discussion with customers.

Could your products or services produce savings? Can it reduce frustration? Can it improve performance? Can it reduce risk? Those are all things that you should ask yourself.

How could your product reduce risk? Hmm. I don't know. Let's quiet our minds and just think about that for various customer segments. And then, as we do before, rank these in what you discern in your interviews your customers are saying.

Similar with gains. So, all sorts of gains could be offered through a value proposition. And ask yourself—could you create savings? Can you outperform current options? Apparently, by a factor of four, Resilacode. A factor of four.

Can you make your customer's life easier? Well, maybe you're not talking to battery manufacturers. Maybe you're talking to the end users. Maybe there's a subset of battery for whom battery life and cycle life is absolutely valuable. Yeah.

If I built a batter and couldn't extract it easily, if I can't replace it easily. Those batteries would be more valuable to have longer cycle life. And again, rank these by the relevance to the customer. Okay. So, what we are trying to achieve here is you're trying to simultaneously learning about these customer segments and understand their pains, gains, and work/job functions. At the same time, you are trying to distill what you have and its potential to answer the pains and gains.

So, I made this little table to kind of show you what I think kind of common mistakes and best practices are for value proposition mapping.

A common mistake is to kind of list all your products and services—kind of the feature blast. And you have to understand that those features are only relevant with respect to specific customer segments. Adding products and services to pain and gain fields. Products and services are specific things; pain and gains are how they work or what they do. Offering pain and gain creators that do not relate to the customer profile.

It's very easy—especially if you're in the early stages of, "Oh, well, of course they'd be concerned about saving money." Guess what? Independent sales reps don't care about saving their customers money. They care about the profit margin for themselves and the potential to add business. So, you've gotta be—again, sometimes challenge your beliefs.

Try to address all customer pains. Again, in most cases, the strongest value propositions do something very specific and do it extremely well.

Jean Redfield: So, after listening to Steve, Peter, and myself talk about value propositions, it's time for you to give it a try. Pick a customer segment, define a specific customer or role, describe their jobs—including their pains and gains—then, write a value proposition.

Here's an example of a value proposition statement using Geoff Moore's template. For non-technical marketers—the customer—who struggle to find return on investment for social media—their problem. "Our product is a web-based analytic software"—our product—"that translates engagement metrics into actionable revenue metrics"—the benefit to the customer.

Our second example is what we call the Force Brevity Example, and it comes from Steve Blank. "We help X do Y by doing Z." We help who—the specific description of your customer—do what—what problem are you offering to solve—by doing Z—our unique value. Using the same example in Steve Blank's template—"We help non-technical marketers discover return on investment in social media by turning engagement metrics into revenue metrics."

To help you get started, here's a clip from a recent Energy I-Corps course with instructor Max Green. Max is a seasoned entrepreneur, active in the Austin ecosystem, and is currently a principal at Ratio Flux, an innovation management consulting firm.

Max Green: Customer discovery starts on the right-hand side of the canvas, right? Customer segments, value propositions. I want you to pay attention to this map. What we're looking for—you'll hear some phrases over the day called "problem solution fit" and "product market fit", right? With regard to this, problem solution fit—we're really looking more for do you actually understand the problem, right?

Does the problem manifest itself in a way—can you characterize it in a way—that helps us understand what the motivations of those customers are? And then, can we calibrate value for them? Do we believe our solution that we can design will fit that? Product market fit extends that a little bit further into understanding more aspects of the business model into can we actually build something to serve that need or are there other barriers that will challenge us from getting into that ecosystem.

So, as mentioned, you're looking at the most important customers. I want you to rank order them. You have this list. How did you come up with that prioritization? How did you decide how to rank order those?

Because, ultimately, we want you to focus in. And by focusing in, you're going to be able to collect enough data to help us make assessments and look for patterns within that data set that help us better understand those customers. If you do 20 interviews across 10 different customer segments, you end up having 10 data sets of 2. And we can't make any interpretations off of that. So, you can't learn from that information.

I mean, it can help us—we might find some really great information, by all means, but it doesn't necessarily substantiate itself.

It's the same thing you would see in your labs. If you see a data set once, you're not gonna suggest that that's necessarily publishable. You want to go verify those things.

So, I'm going down a rabbit hole. So, here's what we're gonna do. This is the process. Ultimately, I want you to recognize—these are all guesses. When you fill out your canvas, that's all you're doing. Don't be afraid to take a guess.

I would love it to be an educated guess, but take a guess. It's okay to take the risk and just put it out there. Ultimately, what you're gonna do is go try to describe the values.

We're gonna describe the benefits that your customers derive from your products or services, and then, second, we're gonna go talk about the customer ecosystem. Who are these different people—the buyers, the users, the manufacturers? Has anyone in here ever dealt with a saboteur on a project? Yeah? Not very many? Maybe? Closet saboteurs.

So, ultimately, in regulation and policy setting—this is really important in the energy space as well. So, ultimately, we're trying to look for all of the different people that participate and effect the decision-making process. So, we're gonna go into detail about this, but ultimately, what I want you to take away from this, is recognizing that when we say, "Go talk to a customer", it's not just the end user. There is an ecosystem that exists that you have to explore and understand.

And—going back to number one—you've gotta understand the differences between the value you create for them—for those different groups.

Jean Redfield: Now, go ahead and write your value proposition. Start by using the value proposition framework to define your customer's needs and wants in terms of the jobs they're trying to perform and their pains and gains. Then, describe your technology you're offering in terms of the benefits—not features—that are a value to the customer you've chosen. Lastly, use one of the fill-in-the-blank formats to generate the value prop.

So, stop the video, and give it a try.

How'd you do? Welcome back. How did your value prop stack up against what makes a good value prop?

Is it built for a specific customer? And remember—customers are people. Is your customer described as a person or a company—or worse—industry? Remember—companies and industries are not people so, they're not customers. Is your customer definition built around a specific role or job?

And is that customer the actual customer—they actually buy it—or are they and end user or maybe an influencer? Second item on what makes a good vale prop is would a customer actually say it? Is it in their language or your language? Would customers understand it immediately—not just intellectually understand it, but viscerally understand it as something really valuable to them? Does it describe benefits to the customers rather than features or attributes of your technology?

And are those benefits unique or is this just an also-ran? Is your value prop specific and quantitative or is it still too general? Motherhood and apple pie. And, of course, is it concise? It's typically harder to say it in a simple sentence than it is to describe it in a white paper.

So, were you able to be concise? Let's take a look at a recent value proposition workshop. These teams were asked to do essentially the same exercise you just completed—pick a customer, define the role, describe their jobs—including their pains and gains—then, write a value proposition.

Okay. Who's your customer?

Male 1: Our customer is a boiler operation's engineer.

Jean Redfield: Okay.

Male 1: Their hypothetical job is to keep the boiler boiling, and in order to do that, they need to minimize their downtime and have low cleaning costs. This will remove scale from the boiler. And we figured that their role, as the user of our product—to remove the salt from the water. They're also influence—or maybe the decision-maker—for water treatment technology _____. So, in order to address this customer, our value proposition is, "We will minimize maintenance costs and downtime by providing low TDS water for boiler operators."

Jean Redfield: Okay. What do you guys think? Oh. We don't have our reds and greens. Quick. Grab your reds and greens. What do you think about customer segment specificity, the description of the job they're trying to get done, and the value prop alignment? What do you think? Pretty green actually. Surprisingly green.

[Laughter and crosstalk]

Usually, stuff is pretty sucky at this point. Okay. Elena, you had a red. What is missing? What would you like to have seen more of? What suggestions do you have for improvement?

Elena: I think, the only proposition of minimized maintenance was downtime. It's very like, big words. It's not—

Jean Redfield: It's not quantitative and specific. Yep.

Male 2: Yeah. Like, what's their goals, right? What are their requirements? What are they expected to do? I'm curious like, why do they want to minimize downtime? Any thoughts around that?

Male 1: I mean, if it's a factory that needs to be running 24/7 and they shut down, they lose money.

Male 2: So, it's a cost thing.

Male 1: Yeah. So, it's cost.

Jean Redfield: But it could be—a lot of boilers are seasonal, and I'd have planned downtime based on my whole out of season.

Male 1: If your heating your building, then you don't care.

Jean Redfield: You don't care if it's a month long. But anyway—

Elena: Or you get overtime pay when it's down so, actually, you're a saboteur.

Jean Redfield: We shut the boiler down four times a year to clean out clankers and you tell _____ shut it down twice a year, my maintenance guys are gonna be getting their overtime cut in half. They're not gonna be happy about that. Okay. Good.

What did you see or hear either in the value props or in the feedback given to these teams that you could use to improve your value proposition? So, stop the video and give it another try.

How did you do this time?

Were you more specific in defining your customer and your value?

Were you able to be more concise?

Maybe there are just things you don't yet know about who your customer might be and what they actually need in order to address their pains or create gains for them in their jobs.

How might you learn more about your potential customers in order to continue to hone your value proposition?

What if your DOE program manager or your lab management is your customer? Is this approach even relevant?

We've come to the end of our time together and it may feel like we've raised more questions than you've been able to answer. But that's pretty normal after just an introduction. Customer discovery's an ongoing approach built around developing hypotheses or guesses, then, designing interview strategies to validate or invalidate those guesses. And The Business Model Canvas is a framework to help you organize and keep track of what you learn as you go. We hope this course has helped you better understand the basics and has given you a jump start with creating value propositions.

Please, send your draft value proposition and any questions you may have about the course content to your technology transfer office.

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