Charity doesn’t scale. Business scales.

Published 26 Jul 2019

By EIT Climate-KIC

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This article first appeared on the ClimateLaunchpad global site. To read the original, click here.
An interview with Hans Westerhof, ClimateLaunchpad Trainer and Project Lead.

Hans Westerhof has been part of ClimateLaunchpad ever since the early days back in 2014 as Project Lead and Trainers, including training the ClimateLaunchpad Australia cohorts since 2018. We interviewed him on his preferred module in our infamous Boot Camps: Customer Value Proposition.

Tell us a bit about your favourite subject to teach our participants.
“I like teaching the Customer Value Proposition, because there are a few things that come together in that module. We teach it after the Market Segmentation where you learn about your beachhead market, the customer or group of customers you will target first. As a start-up you don’t have a lot of resources, so you need to focus your efforts. But you also need clients.

The Market Segmentation and the Customer Value Proposition combined help you figure out why someone would do business with you. People might do business with a start-up if you offer a tremendous improvement over their status quo. Marginal improvements don’t cut it, because people can buy those from established companies. To offset the risk of doing business with a start-up, you must offer the potential of a huge improvement in the current state of affairs.”

To offset the risk of doing business with a start-up, you must offer the potential of a huge improvement in the current state of affairs.

“It is completely normal to be focused on your own idea and creation, but what you actually need to do is understand the perspective of your potential customer. In the eyes of that customer, your proposition should offer a big improvement. The next step is: what is that benefit or improvement you offer? That’s the customer value proposition. You compare the current state of affairs, how they do business now, what is their current solution – to what you offer. Your solution might not necessarily have much to do with the functionalities of the product you’re offering.”

Can you illustrate this with an example?
“I sometimes use the example of a business that produces windows that generate electricity. What is the customer value proposition there? Those windows will generate an x-amount of watts per square meter, which of course is lovely. But when you get to the client’s side and you try to understand their business, it might mean that the true value for that customer is not necessarily the generated electricity. Perhaps the real value lies in the fact that the infrastructure of buildings with these windows becomes much more efficient, much more lean and much cheaper.

Another example: Maybe you have a solution for efficient utility installation in city apartments. Your customer might see an opportunity to sell more square metres.

So the value proposition for a customer can be something different from what you think it is. During Boot Camp we try to get our participants out of their own tunnel and get them to crawl in the skin of their customer.

Then the final step is: why is this important? You want to know how much value you create for your customer. That can be hard to figure out, but it helps you to set a fair price for your solution.

To stick with the windows example, your calculation could be based on how much it costs you to make and sell them plus a 20 or 25 per cent margin on top. That could be your way of pricing. A much better – and often more profitable – way is to understand what value your solution creates for your customer, so you can price accordingly. This concept of value pricing comes into play in the Customer Value Proposition.”

Why is this your favourite part of the training?
“Business scales, that’s the wonderful thing about business. If you help your clients be successful, you will be successful, which makes your business grow. What I enjoy is to help people see their idea as a business. To help them understand their ambition is helpful and that the real benefit of approaching their idea like a business is that they get to create real impact. The risk with ideas within the cleantech scope is that people tend to think that they should not make money with their efforts to help the planet. But if that is your mind-set, you will limit your impact on climate change.”

“You will create the biggest impact if you create the largest business.”

“The reason I am excited to work on climate positive entrepreneurship, is that the two go hand in hand: you create the biggest impact if you create the largest business. The opposite of that is a very simple thing: charity doesn’t scale. Business scales. If you use business for a good cause, you should want to make it as big as possible. That way you will have the most beneficial impact. If you do it in a more non-profit way, you’re holding back on your potential impact. So you need to aim for business success when you create your climate positive start-up. ClimateLaunchpad prepares you for that.”

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