Chapter 5: Create Your Value Hypothesis
Bridging the gap between pain and product using the "Fit" model and Blue Ocean Strategy.
Step 4: What's Your Unique Promise?
You know your customer. You've quantified their pain. Now comes the question every investor will ask: "Why you? Why now? Why is your solution better than what already exists?"
This isn't about listing features. It's about crafting a Value Hypothesis—a clear statement of why your solution is the best answer to your customer's problem.
The "Me Too" Trap
Here's where most founders go wrong: They build something that's marginally better than existing solutions. 10% faster. Slightly cheaper. A nicer UI.
The Bug
"Our project management tool is like Asana but with better reporting."
Problem: Customers don't switch for "slightly better." The switching cost is too high. You're asking them to migrate data, retrain their team, rebuild workflows—all for marginally better reports?
The Fix
"Our tool is project management for agencies that bill hourly, with time tracking built into every task, so you never lose billable minutes to 'admin work' again."
Better: This isn't "Asana but better." It's a different product for a specific customer with a specific pain point Asana doesn't address.
The Value Hypothesis Formula
A good Value Hypothesis connects all the pieces you've built so far. Here's the template:
The Formula
"We help [Persona] achieve [Measurable Outcome] by [Unique Approach], unlike [Current Alternative] which [Current Alternative's Limitation]."
Notice the last part: you explicitly name your competition. And in early-stage startups, the biggest competitor is often Excel or doing nothing (apathy). Don't forget these.
Exercise: Write Your Value Hypothesis
Fill in the blanks:
"We help _______________ [your persona]
achieve _______________ [measurable outcome from Job Story]
by _______________ [your unique approach]
unlike _______________ [current alternative]
which _______________ [why current alternative fails them]."
Test: Show this to someone who doesn't know your product. Can they immediately understand who it's for and why it's different?
Gain Creators and Pain Relievers
Your Value Hypothesis should directly address two things from your earlier work:
Gain Creators
How does your solution produce the outcomes your customer wants?
From Job Story: "I want to identify overspending departments..."
Gain Creator: "Automated cost allocation shows department-by-department breakdown in real-time."
Pain Relievers
How does your solution eliminate the friction in their current process?
From Problem Statement: "...struggles because invoices sit unpaid for 30-60 days..."
Pain Reliever: "One-click invoice reminders with payment tracking so nothing falls through the cracks."
Better vs. Different: The Blue Ocean Question
There are two kinds of competitive strategies:
| Red Ocean | Blue Ocean | |
|---|---|---|
| Strategy | Compete in existing market space | Create uncontested market space |
| Goal | Beat the competition | Make the competition irrelevant |
| Demand | Fight over existing demand | Create and capture new demand |
| Trade-off | Value vs. cost (pick one) | Value AND cost (break the trade-off) |
| Outcome | Thin margins, brutal competition | Growth and profit without direct competition |
The Red Ocean Warning Sign
If your pitch includes the words "like X but better," you're in a Red Ocean. You're competing on the same dimensions as incumbents—and they have more resources, brand recognition, and customer relationships than you do. You'll lose.
The ERRC Grid: Finding Your Blue Ocean
To escape the Red Ocean, you need to change the competitive dimensions entirely. The ERRC grid helps you think through this:
Eliminate
What factors can you completely remove that the industry takes for granted?
Example: Robinhood eliminated trading commissions. Notion eliminated separate tools for docs/wikis/tasks.
Reduce
What factors can you reduce well below industry standard?
Example: Basecamp reduced features drastically. Linear reduced the complexity of Jira.
Raise
What factors can you raise well above industry standard?
Example: Apple raised design quality. Superhuman raised email speed to obsessive levels.
Create
What factors can you create that the industry has never offered?
Example: Figma created real-time multiplayer design. ChatGPT created conversational AI for everyone.
Exercise: Your ERRC Grid
For your solution, fill in at least one item for each:
| Eliminate: | ________________ |
| Reduce: | ________________ |
| Raise: | ________________ |
| Create: | ________________ |
Test: If you can't fill in at least one "Eliminate" or "Create," you're probably still in a Red Ocean.
The "Different, Not Better" Test
Here's a quick way to know if you've found your Blue Ocean:
The Test
Imagine a table comparing your product to the market leader. If your column looks like their column with slightly higher numbers, you're in Red Ocean territory.
Blue Ocean sign: Your column has checkmarks where theirs has X's, and X's where theirs has checkmarks. The shape is different, not just higher.
What You Walk Away With
By the end of this step, you should have:
- A Value Hypothesis: The complete "We help... achieve... by... unlike..." statement.
- Gain Creators & Pain Relievers: Specific ways your solution maps to customer outcomes and friction points.
- An ERRC Grid: What you're eliminating, reducing, raising, and creating compared to alternatives.
- A Blue Ocean Test: Confidence that you're different, not just marginally better.
You now have a clear value proposition. Next step: Put it all together in a Lean Canvas and identify the assumptions that could kill your startup.
Build Your Business Model
Capture your Value Hypothesis in a Lean Canvas and see how all the pieces fit together.
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Start Free TodayWorks Cited & Recommended Reading
Lean Startup & Validation
- 1. Features - Lean Startup Tools from Ideation to Investment. LeanPivot.ai
- 2. Ries, E. (2011). The Lean Startup: How Today's Entrepreneurs Use Continuous Innovation. Crown Business
- 3. Maurya, A. (2012). Running Lean: Iterate from Plan A to a Plan That Works. O'Reilly Media
- 4. Blank, S. (2013). The Four Steps to the Epiphany. K&S Ranch
- 5. An introduction to assumptions mapping. Mural
Jobs-to-Be-Done Framework
- 6. Christensen, C.M. et al. (2016). Competing Against Luck: The Story of Innovation and Customer Choice. Harper Business
- 7. Ulwick, A. (2016). Jobs to Be Done: Theory to Practice. Idea Bite Press
- 8. Klement, A. (2018). When Coffee and Kale Compete: Become great at making products people will buy. NYC Press
- 9. Jobs-to-be-Done: A Framework for Customer Needs. Harvard Business Review
Problem Discovery & Validation
- 10. Torres, T. (2021). Continuous Discovery Habits. Product Talk LLC
- 11. Fitzpatrick, R. (2013). The Mom Test: How to talk to customers. Robfitz Ltd
- 12. What Opportunities May Lead to Someone Becoming an Entrepreneur. MBA Disrupted
Blue Ocean & Differentiation
- 13. Kim, W.C. & Mauborgne, R. (2015). Blue Ocean Strategy, Expanded Edition. Harvard Business Review Press
- 14. The Four Actions Framework (ERRC Grid). Blue Ocean Strategy
- 15. Strategy Canvas: A Visual Tool for Differentiation. Blue Ocean Strategy
Market Analysis & Signals
- 16. How to Validate Your Startup Idea. Y Combinator
- 17. Market Sizing for Startups: TAM, SAM, SOM. Forbes
- 18. Maholic, J. (2019). IT Strategy: Issues and Practices. Scribd
Cognitive Biases & Decision Making
- 19. Kahneman, D. (2011). Thinking, Fast and Slow. Farrar, Straus and Giroux
Lean Canvas & Business Modeling
- 20. The Lean Canvas Explained. Lean Stack
- 21. Osterwalder, A. & Pigneur, Y. (2010). Business Model Generation. John Wiley & Sons
This playbook synthesizes research from lean startup methodology, Jobs-to-Be-Done theory, and behavioral economics. Some book links may be affiliate links.
