Features, Benefits, and Impact

In the mind of an entrepreneur, which is the most important to focus on—features, benefits, or impact—when describing a new product or service offering? In the mind of a customer or user, what determines perceived value?

These are critically important questions that entrepreneurial teams must grapple with, not just before they start a new project, but as an on-going, persistent challenge. Diversity among team members will be helpful in these discussions, as their contrasting insights will enrich their collective understanding of how to design a desirable product or service and market it effectively.

In my experience as a venture capitalist, entrepreneur and educator, I have seen a lot of confusion about each of these terms, and a surprising lack of clarity about the meaning of “value.” Actually, when we think deeply about how value is perceived, we realize that each person’s perception is slightly different, reflecting habits, cultural background, education, work, personality, and preferences (“taste”). Value, like beauty, is in the eye of the beholder. You and I might agree that a painting by Picasso is a great work of art, but you might be willing to pay $1 million for it, while I might not even be interested in buying it. It would have high value to you and much less to me.

The conventional academic approach, especially in training engineers, emphasizes mastery of known knowledge as the key to future success. The implicit promise to students is that mastery confers the ability to create value. Unfortunately, you only get to create whatever you create. Who determines the value of your creation in the marketplace? Not you, not your intellectual or artistic brilliance, not the number of resources—money, blood, sweat, and tears—you invested. Your creation will only be deemed to have (monetary) value to someone who is willing to acquire it and pay for it. Ironically, this insight also explains why most of us tend not to value things we can get for free. Our sense of value typically reflects our need to give up something we value for another thing we desire or need. Desire doesn’t translate directly to value. Need doesn’t translate to value.

When entrepreneurs who are trained as engineers invent a new product, they proudly love to tell anyone who will listen all about the amazing technical features they’ve designed and created. To them, the technical specifications are proof of the superiority and, hence, the desirability of their product. These metrics are described by numbers that allow easy, direct comparison with those of competitive products. The logical assumption in this thinking is that customers and users should value their product more highly than those of competitors because the numbers validate technical superiority. But how much do customers really care about these metrics? What other aspects of the product or even customer service might entice some customers to want to buy it (or not)?

People who are trained in marketing and sales love to talk about the benefits customers and users will obtain when they use the new product. Again, any comparisons with competitive products or services that can be quantified are presumed to justify greater perceived value. For example, a manufacturer of an electric car might advertise a driving range that is longer by 20%, as compared to a competitor. To a non-technical customer, that might be more meaningful than an engineer pointing to the new battery technology that utilizes a novel, patented materials to enable greater electrical storage capacity. But what is the value of the extended range? Why might a customer care about this benefit?

When we think about the impact on our lives, what matters?

Why has Amazon’s e-commerce platform made it the largest and most feared retailer in the US, if not the world? Amazon typically offers to customers the quickest and most convenient way to find a product at the lowest price, and complete the purchase with a single click of a mouse (a capability they patented). The impact is the ease of purchasing and also returning it, when necessary. Saving not only time, but, even more importantly, effort, removing as much friction from the entire process as possible, does require amazing technology infrastructure (features) that confer superior attributes (benefits), but, most of all, appeals to our human nature. That’s an impact. That changes our lives.

Startups that can articulate the impact of their mission and vision powerfully (and have the underlying capabilities to deliver on their promises) will find investors and customers lining up, clamoring for their products and services. That’s the story they need to develop to guide their work.

Another less-noted but even more significant aspect of impact is the effect of innovation on the entire ecosystem. The impact of Amazon’s operations is not limited to the customers it serves. Amazon has set new expectations that all competitors, suppliers, regulators, even companies in totally different industries around the world, must now live up to. Think about the ripple effects of the ride-sharing businesses of Uber and Lyft. Regulations and policies regarding safety, taxation, labor, privacy (use of data), are continuing to be examined and debated for their relevance in this new type of service. Along with Airbnb, they have demonstrated the viability of the so-called gig economy, which is nothing less than a re-definition of how physical and human assets can be deployed, in different models of ownership and employment. Every industry is feeling challenged. Many participants feel threatened by their inability to compete, while others celebrate new possibilities.

These businesses that have such profound impact on their industries and on society as a whole are valued by investors as multi-billion dollar enterprises, as “unicorns”, even while they can be losing up to $1 billion a year! None of this makes sense from the traditional perspective of how businesses are supposed to be built and succeed.

Welcome to the brave new world and the impact of technology-driven change.