October 5, 2012 by startupengineering.

[NB: Merrick and Matt have collaborated on all the posts in this blog up till now. We don't agree on everything, though, and this piece is a case in point. From now on, any piece where there's significant breathing room between our opinions will be signed, so that the other person can disagree in print without creating confusion. If you smell blood in the water, feel free to jump in too.]

At dinner recently, a guy I hadn’t met before was talking about his girlfriend. He said something like “she’s got the trifecta – smart, beautiful, and kind.” The guy was pretty open for a new acquaintance, clearly an introspective and insightful person, and obviously in love. So it got me thinking: why was he talking such bullshit?

Whether in business or in love, the key is emotional connection. His problem was that he was talking about features. What’s a value proposition? How do you distinguish between a value proposition and a feature list? More to the point, how do you discover the value proposition that enables a product/market fit that makes a successful startup possible?

I have no doubt that the guy’s girlfriend is in fact smart, beautiful, and kind. But that’s just her feature set. Any number of women who fit that description pass through his life every day, and he probably doesn’t give them a glance. Conversely, he could easily fall in love with someone with none of those features.

Personally, I’m in love with my wife. Why? Because I need someone who sees through my bullshit and punctures it, to keep me grounded. At the same time, it has to be someone who appreciates my intellect, because I need my ego stroked in that department. I can’t do without a partner who likes my jokes and tells me good ones, because the pleasure of someone you can laugh with takes a lot of pressure off. Volatility is also important to me, and someone who withholds approval, but will offer it if I’m being true to myself. I also need someone who’s judgment I respect so much that I can force myself to go along with her decisions, even when I disagree with them, without feeling like I’m just caving in.

Here are four salient points about the last paragraph:

• It’s nowhere near the whole story, but at least it is part of the real story.  It’s the beginning of a description of the value proposition I need from a life partner; not just a set of features that sound reasonable but don’t really impact on my behavior.
  

• It was difficult to share. I forced myself to try to be honest (thank you, James Altucher, for the example of your blogging courage). The analog is, you can’t easily discover your customers’ value proposition by asking them stuff, because they too will find it difficult to share. They’ll be happy to talk to you about features; but most people, most of the time, avoid revealing genuine needs and vulnerabilities. And a vulnerability is the shape of the hole that a value proposition has to fit into, to offer true value.

• Like I said, it’s nowhere near the whole story, and not just because I refuse to tell it. Customers are not only reluctant, but to a great extent unable to reveal their vulnerabilities even to themselves, which makes it hard for you to get at them.
  

• I’ll bet you found the paragraph a bit uncomfortable to read.  Too much information (TMI) at work.  Real vulnerabilities are painful, and if you’re interviewing someone in a customer discovery process and you’re empathetic enough to feel their pain, you’re likely to move away from it, instead of trying to discover what’s going on.
  

So in typical customer discovery interviews, it’s easy to dig up fool’s gold – features instead of value propositions. And for startups, features just aren’t useful. In a well-known study by Richard Nisbett and Timothy Wilson, 128 people were asked to look at different variations of a fictional portfolio, of someone applying for a job, and to assess the person’s qualifications.[1] The portfolios included a mix of supposedly relevant information, like the person’s college record, and irrelevant information, like a comment that they had spilled a cup of coffee on the director’s desk. By correlating the different variations of the portfolio with the subject’s assessments, Nisbett and Wilson gained insight into what actually influenced the assessments. By asking questions afterward, they gained insight into what the subjects thought had influenced them. As you can guess, there was virtually no correlation between the two. The subjects were not influenced by many of the features they said had influenced them, and were heavily influenced by features they swore made no difference.

If you tell a prospective customer about a feature set, their response, positive or negative, is unlikely to predict their buying behavior. Your only chance is to expose a prospective customer to a value proposition. They may move toward it, or be repelled, or be indifferent to it. But in each of these cases, it is possible to gather information that will be useful in your search for value proposition that really provides value.

This is just as true if your startup is in the enterprise software space as it is for personal care items. Buyers of enterprise software have real jobs to do that matter to them. They are as likely to have hidden guilt and frustration and fears of inadequacy about their enterprise software needs, as drugstore customers in the incontinence aisle, and understanding their genuine needs makes it possible to sell to them.

The real distinction isn’t between enterprise and consumer customers, it is between established companies and products, on the one hand, and startups on the other. Established products, by definition, have found a product/market fit. Their products have authentic value propositions. So for them, features matter a lot. Cheaper, more pleasing, smaller, more convenient, more luxurious, UIs that “pop” and doors that close with a solid “thud.” These sorts of things are almost always features – crucial for existing products in established markets, distractions for startups that need to discover new value propositions.

The marketplace is a weird phenomenon. Looked at one way, it’s complete and impenetrable. Companies provide every imaginable product or service; people buy according to their needs, preferences, and resources. To make room for itself, your startup has to push and shove and make a space in the established web of commerce. But look at it another way, and you can see an infinite variety of unmet human need, frustration, yearning, and fear. Much of it has little to do with commerce, but the part that does is plenty big enough for your startup to discover a real problem to solve.

-Matt