How MSPs Can Write an Effective Value Proposition in 3 Steps
Have you been surfing the web, trying to find a compelling way to define your value proposition? It’s a tough market and Managed Service Providers (MSP) like you have to work pretty hard to stay ahead of the competition. I’m sure the topic of your added value comes up quite a lot in your discussions with customers.
Your value proposition might be one small sentence on one of your presentation slides. But that doesn’t mean you can’t improve it. Not only will a clearly defined value proposition help you answer your clients’ questions. It will also make a difference in your overall strategy.
Harvard i-Lab offers a conference called Startup Secrets: Value Proposition by Michael Skok.
Here’s the full 90-minute video. Enjoy!
If you don’t have 90 minutes to spare, we took the time to summarize it for you.
Here’s what Michael Skok talked about in this video:
- Define the Problem
- Define the Solution
- Evaluate the Solution
1) Define the Problem
Most people think that the obvious place to start building a value proposition is with ideas. Unfortunately, there are all kinds of ideas out there and some never even see the light of day.
This is often because these ideas don’t solve fundamental problems. Before you start brainstorming, decide which problems you have to solve.
One way to create a value proposition that works is by using the four “U”s. Take each of your problems and apply it to the four points below. For example, ask yourself “Is my solution solving a problem that is…”
Before we dive in, you should know that it’s nearly impossible to have a solution that can be applied to all 4 points. But the more solutions you have, the more likely you are to rise to the top and get your clients’ attention.
“If it’s broken, it needs fixing.” When you find a problem that makes a situation unworkable, it’s the beginning of an opportunity.
Take Apple Maps for example. It was a nightmare when it was first released, opening the door to many other applications. Many companies pitched in to take Apple Map’s place on the iPhone. Today, Apple Maps is back on track. But their initial app helped multiple companies create their own space in this market.
How can you exploit this? By asking yourself, “Who would get fired if [Blank] wasn’t working?” If it’s something costly or painful, sell to that person, because their job is on the line.
Tackling a problem that is not optional is always a good way to do business. Take cyber security for instance, The New York State Department of Financial Services (DFS) is working on a proposal that would require banks to establish a cybersecurity program. If this regulation passes, it’s going to create a problem that is very much unavoidable, making it a great potential opportunity.
If the problem is so fundamental it can’t be avoided, then it’s a winning scenario.
You have to be solving a problem that is in the top 3 priorities for your customers.
Let’s continue with the DFS proposal, if the regulation is set to pass in the next few months and you’re an expert in cyber security, you’re definitely at the top of their priorities. On the other hand, if this regulation is only set to pass in 2-3 years you might want to find another vertical to sell to.
Companies will never have an allocated budget for your solution. You need to prove them that they are saving money by having you on board.
The problem that you are solving is costing them money, by calculating for them how much they will save, you’ll get them on board.
2) Define the Solution
Once your problem is well defined, you need to have the right solution. You shouldn’t work on a solution that is faster or cheaper. Because there’s always going to be someone that will try to beat you on these criteria.
You should work on a breakthrough. Using the 3 stages of building a solution that can be summed in 3 “D”s.
- Discontinuous innovation: A new way of looking at a problem and finding a creative way to address a problem.
- Defensible technology: In other words, intellectual property (IP). You should offer something that is impossible to replicate to give you an advantage.
- Disruptive business model: Use a similar model as another company but find a new value to harvest.
A good example would be comparing MSPs to Value-Added Resellers (VARs).
- MSPs offer steady support to their customers instead of waiting for something to break (discontinuous).
- They offer their own specialized expertise in technology to their customers (defensible).
- They charge a monthly fee to their customers instead of one invoice for a service (disruptive).
3) Evaluate the Solution
It might not be enough to answer a profitable problem and to have a solution that has all the characteristics above. You also need to understand how your customers will evaluate your offer.
There’s two ways you can evaluate a solution, qualitative or quantitative. Depending on your type of market, you should work with one or the other.
Are you able to describe the situation before and after your solution? Identify how the problem would normally unfold and draw a clear picture of how painful it would be. Then, present the same situation with your solution.
Let’s use working with an MSP to solve downtime problems as an example.
Before working with an MSP: Server downtime could last for hours, preventing sales from finalizing a big contract. This could go as far as losing customers.
After working with an MSP: Server downtime was less than an hour and the sales team was able to finalize a big contract.
Quantitative Evaluation (The Gain/Pain ratio)
It’s a simple yet effective evaluation. How many gains will I make with this solution and how much pain is it going to inflict?
Gains can include revenue, cost saving, time, people, competitive advantage, reputation and many more.
Pain is including things like availability, testing time, buying cycle, implementation, deployment, ownership (TCO).
You should look at the type of gains that your customers care about. Then, look at the pain that is generated from having your solution. Be honest with yourself. Keeping elements out of your evaluation, will backfire eventually.
You should be able to have at least 10 gains for 1 pain. If you start with a ratio of 1 for 1, don’t stop there, keep improving your proposition, listen and understand your customers.
Build around you
The final lesson is: believe in yourself. Unlikely stories have turned into great companies because of the entrepreneur’s particular understanding of a problem. You are the reason this business exists, work with your strengths.
What’s the one thing that makes your value proposition unique? Let us know in the comments bellow!