The “So-What” Factor
There's a famous quote by Harvard Business School marketing professor Theodore Levitt that "People don't want to buy a quarter-inch drill. They want a quarter-inch hole!" The drill is the solution to their hole problem. When explaining your business to potential investors or customers, the first barrier you'll have to get over is the 'So-What' factor. Your customer or investor often doesn't know the problem you're solving. Once they know that problem – their answer may be 'So What? Why are people going to try something new that you've invented?'
Author and Investor Pip Coburn* described this barrier as the 'Change Function' where the likelihood of getting a customer to try something new can be calculated by 'perceived crisis over total pain of adoption.' People like the way they're doing something already, say, listening to music on CDs in 2001. They don't perceive a music-listening crisis. If you offer them something that makes it easier for them to do a new action (listening to music via a small electronic device in your pocket) you have to reduce the pain of doing this new thing (knowing how to copy CDs and how to copy those files to a device.) iTunes and a device with a simple interface, the iPod, made it a lot easier to manage music on a portable device than copying files via the computer interface.
Recently I have been advising a start-up who showed me a 'one-sheet' that explained their business to potential investors. Most of the top of the sheet was taken up by a graphic, which showed a picture of their new product under a headline that didn't explain the problem being solved. After discussion we moved the graphic to the bottom, and we first explain the problem. This brings the investor down the road of 'oh, I see the problem, I see the market, and now I see you have a solution.'
Let's take a recent case that got a lot of publicity - Diaspora, a potential future alternative to Facebook (see Inc's coverage of Diaspora.) The pitch from this company of 4 NYU students is a very technical idea on how they might replace the infrastructure of one of the most popular online services of all time, Facebook. Their solution includes a personal web server, peer-to-peer communications and open source software that uses GPG to securely share your information you're your friends. At this point, I suspect most Facebook users are hearing 'privacy, blah blah run my own server blah. ' However, the technical explanation has not kept over 5000 people from pledging to donate* over $170,000 to this project via Kickstarter. The original 'ask' the team put forth was for $10,000 for ramen and mac and cheese money so they could code all summer. Instead, they got an angel round from the technical users who understand the tech and privacy challenges Diaspora is trying to solve, and put their money where their mouths are.
Diaspora are creating a peer-to-peer social network, much like Skype is a peer-to-peer communications system. The 'So-What' is 'so, you can directly control how much information goes out about you if you personally control your own version of your information.' Most people didn't know this was a problem they could even have, until the recent reporting about Facebook and Privacy. If Diaspora wants to convince more people to join their 'the privacy aware, personally controlled, do-it-all distributed open source social network' they'll have to continue to explain the 'So-What' to more people in more ways. There's going to be a pain of adopting a new network – since many, many people are used to Facebook, privacy policies or not.
Now that they've surmounted that first 'So-What', they still have to get over the 'So, now you have to run your own server for this Facebook of the future to work.' Noted tech investor Fred Wilson told me the Diaspora team won't get their adoption in that way. 'It has to be a hosted service…wordpress.com not wordpress.org.' There's a lot more to this Diaspora story, and I'll be watching to see how they explain themselves for examples you can use.
What's the 'So-What' proposition for your business? How do you explain it to people? Let us know below.
*Disclosures: In order to be up on this Diaspora project, I have donated $10 to the cause and am now on the mailing list. Also, I have served in the past as a Research Fellow for Pip Coburn's Coburn Ventures.