Differentiated Value, Pixie Dust, Creativity and Bootstrap Startup Success
I recently noticed how one company managed to create Differentiated Value (DV) in their product—the unglamorous bagel.
First a couple of questions:
1. Can you really create pixie dust (i.e., DV) in an industry like bagels, which is highly competitive and mature?
2. What is the NUMBER 1 cause of household injuries?
To answer the second question first, the number 1 cause of injury in the home is slicing bagels. I kid you not. People are constantly slicing themselves trying to hold awkward and round and slippery bagels.
So one company thought they could create DV and solve problem number 2 by selling PRE-SLICED BAGELS.
The results have been fantastic for their sales. For parents with kids, the value proposition (i.e., how to prevent your kids from injuring themselves while slicing bagels) is overwhelming.
In the equation, DV x Q = $ (Differentiated Value times Quantity equals $uccess), you need first to create some differentiated value so you can have a discussion with potential clients that is interesting to them. (Selling is telling.) In this case, imagine a salesperson for this bagel company telling the store manager or buyer that she is rep’ing a product that is safer, will result in fewer lawsuits and more sales. She is a heck of a lot more likely to get a F2F sales meeting than simply cold calling someone and saying: “Hi, I represent Acme Bakery and can I sell you some bagels?”
So having some DV to talk about is great but it’s only the first part of our equation. In order to differentiate yourself from a hobby business, you need to sell mass quantities of the product or service so that it is truly an entrepreneurial business (where the value you create is significantly more than the value you can create in a hobby business or by just getting a J.O.B.).
Remember, Q is made up of Mass and velocity (Q = M x v) so you need to be able to either: a) sell a huge amount per sale event (Mass, like, say, selling 100 Airbus or Boeing airliners to a carrier) or b) sell a lot (i.e., turn over inventory very quickly like a Wal-Mart does) or c) do both in order to achieve your goal (of being a successful entrepreneur.)
There are, of course, a couple of other basic requirements before you can be a successful BOOTSTRAP entrepreneur—you need to be able to source bootstrap capital to fund your startup and you need to have a good GM (Guerrilla Marketing) plan to connect cheaply and efficiently with customers or clients.
Unfortunately, if you had come up with the idea of a pre-sliced bagel before these folks did, the DV you would have created would not be enough to launch a successful consumer products business because almost no bootstrap startups work in that area (because they can't get distribution, can't use bootstrap capital (because it is too expensive a startup to fund that way in consumer products) and can't (for the most part) use GM either since they are trying to reach a mass market.)
In other words, creativity is a necessary condition for bootstrap success but not a sufficient condition.
Dr. Bruce M. Firestone, B.Eng.(Civil), M.Eng.-Sci., PhD.
http://www.dramatispersonae.org/DifferentiatedValueAnotherLook.htm
http://www.dramatispersonae.org/ShortFormResumeParsed.htm
http://www.dramatispersonae.org/EntrepreneurialistCultureFrontPage.htm
http://www.dramatispersonae.org/