How to formulate a secret sauce for your business, and keep it a mystery

secret sauce

Source: That Startup Show.

Most successful businesses have a secret sauce that gives them a competitive edge and increases their chances of success.

This might be an insight based on data, or it might be a process, a system or a team of people that is difficult for competitors to replicate.

It gives a company its unique value proposition.

Secret sauce has three key ingredients.

Firstly, it delivers specific benefits to a target audience.

Secondly, it demonstrates a mastery of the market.

And finally, it describes what only that business can offer, in the process distinguishing it from the competition.

Sometimes, at least initially, the secret sauce is a secret to even the founder of a new business. It takes time to create, test and refine a winning secret sauce that captures the attention of potential customers in a target market.

The secret sauce for startups typically comes in three distinct flavours: unique technology, an insight that’s applied to the solution, or a strong founding team with a unique composition.

Unique technology

If technology gives a founder their competitive edge, the technology will need to be better than anything else available, on the basis of either speed or accuracy. Ideally both.

This might be an algorithm or a search function, or it might be vast lines of code designed to automate an industry.

Regardless of the complexity, it needs to be unique and offer real advantages to users.

Unique insight

If a startup is able to use an insight to develop technology, then this too could be the basis of a secret sauce.

For example, a marketing automation tool may be built using insights based on customer behaviour, making it more effective, customer-driven and resulting in better conversion.

Unique set of team skills

In the very early days of startup life, often the secret sauce is the team itself and the expertise they bring to solving a customer problem.

It may be that a team has a rare combination of technical expertise and commercial capability, and this unique combination allows a special solution to be developed for a customer problem.

In the early stages when there little or no product, the value of the team is often the differentiator to prospective customers.

Just how secret should your secret sauce be?

The secret sauce must win with at least one market segment. There is no point having a secret sauce that is unappetising to the target audience.

To win, the secret sauce provides something of value to the target market and shows the audience that the business understands their needs and is best positioned to meet their needs well into the future.

And consistency is key. KFC’s 11 herbs and spices and the secret formula of Coca Cola would not be successful if the execution was inconsistent.

The business must know and understand their secret sauce intimately. If a founder doesn’t know which factors are responsible for its success, they may sabotage their own success when they change their products and processes.

Founders often ask just how secret the sauce should be.

The secret sauce is what differentiates a business from the competition and what creates added value for customers — but the ‘how’ should remain a mystery.

This means the actual technology used, the process or the insights should be kept secret to preserve the competitive advantage.

Some companies might be so eager to share their powerful formula that they give away the secret sauce behind the differentiation.  

Successfully marketing the secret sauce shows the value without revealing the secret. Being able to summarise this in a sentence will ensure the unique value proposition is well understood.

The Founder Institute suggests a structure that follows this format: ‘My company [insert name of company] is developing [a defined offering] to help [a defined audience] [solve a problem] with [secret sauce].’

Most markets are competitive so being unique matters immensely, and being able to articulate this point of difference matters even more.

If a founder can define the elements that the startup performs better, faster or more accurately than others in the field, this allows prospective customers to realise the potential benefits.

That definition and the way it is conveyed shapes the way a startup is viewed and how the secret sauce is served and digested by target customers.

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