Assess commercial potential

A tool used by many successful start-up founders is the Value Proposition Canvas from Strategyzer. There is also a video explaining how to complete the canvas. This tool and others like it help you see your proposed product or service from the viewpoint of your potential customers.

The Value Proposition Canvas helps you answer questions like:

A successful product or service relieves the target customer's pain and creates gain. There is a close fit between:

Completing an exercise like this often leads to a change in thinking about exactly who your target customers are and what you’re offering them:

When you’ve identified potential customers for your product or service, other tools can help you consider how to build a commercially sustainable business.

One example is the Business Model Canvas from Strategyzer. There is also a short video explaining how to complete the canvas.

Completing a Business Model Canvas will help you consider questions like:

Completing a first pass at the Value Proposition Canvas and Business Model Canvas will probably take less than an hour. Remember that both processes are iterative and will probably lead to you revising your plans. For example, you may re-think your target customers and your proposed product or service.

The Value Proposition Canvas from Strategyzer and the Business Model Canvas from Strategyzer help clarify your ideas about what your start-up’s business might be. They don’t, however, generate any objective evidence that these ideas will succeed.

While a start-up inherently involves risk, you want strong evidence that these ideas will succeed before you commit your time, energy, reputation and potentially your family’s savings to it. The University will also want confidence in your business ideas before we support you.

The most valuable way to find this evidence is the customer interview. Approaches like those used in the scientific method, familiar to many researchers, can be used here.

Your goal is to identify the most important hypotheses (used here to mean untested business ideas) inherent in the canvases and validate them with data that’s as objective as possible, coming from discussions or interviews with potential customers.

In this context, the word ‘customer’ includes end users, suppliers and industry experts as well as paying customers.

In the early stages of developing your value proposition and business model, your goals in customer interviews are simply to learn:

As you revise your value proposition and business model based on what you learn from interviews, your goals in later customer interviews will be to validate your key hypotheses:

Customer interviews are a different type of conversation from those you may have had before:

For this reason, many pre-incubator programs for early-stage start-ups focus on customer interviews. This includes the University of Melbourne’s Translating Research at Melbourne (TRaM).

Another similar program, CSIRO’s ON Prime, has participants conduct at least 100 customer interviews to validate their Value Proposition Canvas.

This is a lot of work. It involves 100 interviews averaging 90 minutes each, including time to prepare, interview and synthesise. This is four weeks of full-time work. But the insight you’ll get from conducting these interviews is priceless, so this is work you and your co-founders must do yourselves – don’t delegate or outsource it.

The customer interview philosophy described here is consistent with the Lean start-up methodology, pioneered in Silicon Valley, which aims to reduce the risk of new ventures failing through an iterative development process involving prospective customers.

Customer interviews will not only give you a deep understanding of the problems that need to be solved, but also allow you to focus your resources on solving them.

When conducting customer interviews, it’s important to:

Many successful technology companies have one thing in common: their leaders articulate a clear, simple and ambitious vision of the company’s impact and the way it will change the world.

One example is the vision of Dr Elaine Saunders. She is the co-founder of Melbourne-based hearing health disruptor Blamey Saunders hears. Her vision is:

The value proposition and business model canvases show some of the strategy your start-up will use to achieve your vision.

As the start-up develops, this strategy may change as you learn more about your target customers. But your vision, once it’s established, is less likely to change.

Simon Sinek is a leadership expert. As he explained in a TEDx talk, when a company leader articulates a clear and consistent vision, this fosters commitment from stakeholders. Stakeholders can be a start-up’s customers, end users, partners, team and investors. This commitment is needed to achieve major impact.

We encourage you to invest time in developing a statement of your vision for your start-up. The challenge for most researchers is being ambitious enough. You need to step back from the details of the research to see how much it could change the world.

One way to do this is to ask yourself a series of ‘what if ...?’ questions. Complete the Massive Canvas exercise in the StartUp Science® Toolkit.

Even if you’re motivated to achieve impact with your research, you may realise after completing the value proposition and business model exercises that founding a start-up isn’t the right decision for you and your research. What now? Here are some options: