Be Worthy of Your Customers' Attention

Make sure that your product or service is worthy of receiving your customers' attention. Here's how to do it.

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The leadership team at Avondale has been discussing a potential new venture around private equity investing. We want to help investors dissatisfied with the traditional private equity model link up with businesses that want to grow but require capital and management transformation.

We set a goal of writing down this business model in 20 minutes, because we do not want to waste time on something that absorbs resources but creates no value. In his book Running Lean, Ash Maurya points out that our Plan A is likely to be proven wrong, so investing six months to capture Plan A is a waste. We would be better off to test and iterate Plans A, B, C, etc., until we get to a plan that works.

We've already summarized the key elements of the 20-minute business model and identified our target customers. We also defined our unique value proposition (the thing that makes us worth receiving our customers' attention):

We create compelling investment platforms, help you flexibly invest in them, and actively manage them on your behalf. We bring decades of experience building and growing businesses and a top-notch network to our platforms.

That is a strong value proposition in our eyes, but what is our solution? That is, how will we deliver the UVP to our target customer? So let's quickly articulate our solution; we are already nine minutes in, and the clock is ticking!

Lean Business Model: Solution

Maurya suggests we sketch the simplest thing we could build to address our problem. This is pretty straightforward and quick for us:

We develop platforms in which we are confident (on the basis of our experience in the space) that we can create value and build the talent network that increases our odds of success.

We bring specific deals to investors rather than raise a general fund.

We bring a value model that better aligns our incentives with the investor's; if they don't make money, we don't make money. Our deal and management fees are only enough to cover our costs in executing the deal and managing the company.

With this solution, we will go to investors and say, "Here is a compelling investment platform in which you should invest. If you like the platform, we will find companies that fit within it and bring them to you for investment."

We think this is a great solution, because the investor has two points of control and visibility: They can tell us whether they like the platform, and they can tell us whether they like the individual company we suggest they invest in. The investor also knows that we don't make money unless they make money, so our incentives are very well aligned. Indeed, a bad deal would be a waste of our time and their money; nobody wants that!

In the next article in this series, we will discuss the channels we will use to reach our customers with this solution.

Does this solution deliver on the unique value proposition? How can we improve it? Please let us know your thoughts at karlandbill@avondalestrategicpartners.com.

Karl Stark and Bill Stewart are managing directors and co-founders of Avondale, a strategic advisory firm focused on growing companies. Avondale, based in Chicago, is a high-growth company itself and is a two-time Inc. 500 honoree. @karlstark