Greyscale: Unit of Value with Jerry Chen | Summary and Q&A

TL;DR

This content discusses the concept of unit value and its importance in building a successful go-to-market strategy for startups. It explains how unit value determines pricing, packaging, and scaling of products, and offers insights on how to effectively navigate the challenges associated with different unit values.

Key Insights

• 🐕‍🦺 The success of a startup's go-to-market strategy relies on understanding and defining the unit value of their product or service.
• 🇦🇪 Unit value determines pricing, packaging, channel development, customer acquisition costs, and overall profitability.
• 💀 Startups need to be aware of the challenges associated with different unit value sizes, such as the dead zone, and find cost-effective ways to acquire and serve customers.
• 🐕‍🦺 Nonlinear value creation, through additional products or services, can increase customer stickiness and drive long-term growth.
• 🪈 Platform strategies, system of record ownership, and glue layer technology can help startups become dominant players in their respective industries.
• 🍉 App stores can be effective for distribution and discovery, but startups should not rely solely on them as long-term channels.

Transcript

great so um thank you guys hopefully the morning was productive I think we structured the morning was focused on kind of overview of a blitzscaling or gray scaling well we'll figure out the right terminology eventually and we'll apply the right trademarks and t-shirts and then Dan and Jeff obviously it's I I feel blessed and lucky work for this guy... Read More

Questions & Answers

Q: How does unit value affect a startup's go-to-market strategy?

Unit value plays a crucial role in determining how startups acquire and serve customers. It affects the cost-effectiveness of different go-to-market channels, the development of self-service methods, and the scalability of customer sizes.

Q: What challenges can startups face in terms of unit value?

Startups can find themselves in a "dead zone" where their unit value is too small to justify a direct sales force but still too large for self-service methods. This situation requires careful consideration of how to either grow average deal sizes or simplify the product to fit a self-service model.

Q: How can startups create nonlinear value as they grow?

Startups can create nonlinear value by offering additional products or services that build upon their core unit value. This could include management, monitoring, security, or integration features. Nonlinear value increases customer stickiness and can lead to long-term success.

Q: Is it possible to change the unit value of a product or service after it has been established?

While it is possible to change the unit value, it becomes more challenging as the company scales. Therefore, it is important for startups to iterate early and be flexible in finding the right unit value that aligns with their target customers and business goals.

Summary

In this video, the speaker discusses the concept of unit value and its importance in go-to-market strategy. He explains that unit value is the smallest measurable unit that delivers value to the user or customer of a product or service. He explores different examples of small, medium, and large units of value and how they can impact pricing, distribution, and scaling. The speaker also emphasizes the need for startups to be thoughtful about their unit value and to iterate and adapt as needed. He provides insights on how to change unit value, the challenges of being stuck in the "dead zone," and the potential of creating nonlinear value and leveraging network effects, standards, and platforms. Finally, he addresses the considerations of unit value in the SMB and enterprise markets and gives suggestions on how to navigate the shift in unit value.

Questions & Answers

Q: What is unit value and why is it important in go-to-market strategy?

Unit value is the smallest measurable unit that delivers value to the user or customer and determines the price, distribution, and scaling of a product or service. It is important in go-to-market strategy because it informs decisions on customer acquisition, pricing, packaging, margins, and profits.

Q: How does company size, specifically startups versus incumbents, affect unit value?

Startups typically have smaller units of value, such as innovative technologies, while incumbents have the advantage of distribution and larger customer bases. Startups need to focus on building cost-effective distribution to reach their customers before incumbents can buy or build competing technologies.

Q: Can unit value be changed and if so, what is the process for making that decision?

Unit value can be changed, but it becomes harder the longer a company waits to change it. Companies should experiment early and be open to iterative changes. They can test different unit values with specific customer groups or release new versions of their products to adapt and find the right fit.

Q: How do app stores, such as the Amazon App Store or Google Play Store, impact unit value and pricing?

App stores can be a tactical distribution channel for acquiring users, but they should not be relied upon as a long-term channel for a business model. Early adoption and promotion through app stores can be beneficial, but once competitors crowd in, the value of an app store diminishes. It is essential for companies to have a direct relationship with their users and customers rather than being dependent solely on app stores.

Q: How does unit value apply to SMB versus enterprise markets?

Unit value is not determined by whether a company targets SMB or enterprise markets, but rather by the scalability of the units. In SMB markets, the number of units that can be scaled is smaller, whereas in enterprise markets, there is potential for larger-scale implementations. The challenge in SMB markets is to acquire and service customers cost-effectively, while in enterprise markets, the challenge lies in creating longer sales cycles and building effective distribution channels.

Q: How can companies navigate the shift in unit value, especially when dealing with consumer users?

Shifting unit value can have side effects, and companies need to be transparent and honest with their customers. The relationship with customers and the value created for them are critical. Companies can leverage their position as a powerful platform, own important data, or adjust pricing tiers and add new products. Providing different pricing options, creating different products for different customer segments, or building multiple brands can be effective strategies.

Q: How can companies create nonlinear value as they grow?

Nonlinear value can be created by increasing the value customers get from consuming more of the product or service. This can be achieved through features like management, monitoring, and security, or by capitalizing on network effects, standards, and platforms. By becoming a de facto standard, owning system records, or providing a glue layer between different technologies, companies can increase the value they offer to customers.

Q: How can startups avoid getting stuck in the "dead zone"?

Startups should avoid relying on their customers to determine pricing and packaging too early. They need to be proactive and thoughtful about their go-to-market strategy and unit value. If they find themselves in the dead zone, where the cost of serving customers becomes too high, they can consider raising money to grow average deal size or simplifying their products to decrease costs.

Q: What are the challenges and opportunities when it comes to changing unit value?

The challenges of changing unit value include the risk of customer resistance or negative repercussions. However, it is important to adapt and iterate as needed, especially during the early stages of a company. Opportunities lie in being able to pivot early, experiment with different unit values, or introduce new products to better align with customer needs and market dynamics.

Q: Are unit value and pricing the same thing?

Unit value and pricing are closely related but not the same thing. Unit value refers to the smallest unit that delivers value to the customer, while pricing determines how much customers are charged for that value. Pricing can be influenced by various factors, including the size of the unit value, the market, the customer's willingness to pay, and the company's profit margins.

Takeaways

When it comes to go-to-market strategy, understanding unit value is crucial. Startups need to be thoughtful about their unit value and not rely solely on their technology or product. They should focus on building cost-effective distribution and scaling their go-to-market strategy. Iteration and adaptation are key, as unit value can be changed but becomes harder the longer a company waits. Startups should aim to find a balance between customer acquisition, pricing, packaging, and scaling. Platforms, network effects, standards, and nonlinear value creation are important considerations for long-term growth. The SMB and enterprise markets present different challenges, but unit value is not determined by the market segment. Startups should avoid being trapped in the "dead zone" and be proactive in their approach. Lastly, being transparent and honest with customers is essential when making changes to unit value and pricing.

Summary & Key Takeaways

• The content introduces the concept of unit value, which refers to the smallest measurable unit of value that a product or service delivers to customers.

• It highlights the significance of unit value in determining pricing, packaging, margins, and profits at scale, and emphasizes the need for startups to understand their go-to-market strategy.

• The content explores various unit value sizes, including small units of value like Dropbox for individual users, medium units of value like Salesforce for small teams, and large units of value like enterprise-level ERP systems.