The NABC method by the SRI.
The generic NABC method by the Stanford Research Institute stands for:
- N for Need. An idea without a practical need for it remains just what it is: a good idea and nothing more.
- A for Approach and is usually a point of departure for most activities, but with the NABC method.
- B for Benefit or the innovative elements of an idea. In other words, that which constitutes its uniqueness.
- C for associated costs that come with each alternative.
We make a case for an international software firm willing to build a business in Germany. They work in a fast-changing environment where companies need to move fast but smart, and failure is an option.
Sample Client: An US-based firm willing to build a business in Germany.
Client objective: Invest as little as necessary but as much as needed to remain independent.
Need in NABC
An attractive Customer Value Proposition must address compelling and critical customer pains for which the customer is prepared to allocate resources. Identifying needs involves industry and/or domain segmentation, understanding the purchasing process and buying center identification, where such needs are easily related to the value proposition. Because these needs differ significantly depending on customer characteristics, this framework element also assists with market segmentation. An important component of the needs definition is the identification of the “Ideal Customer Profile”
Definition of Need in our context: An international company seeks the most effective legal, technical and commercial setup to start their business within Europe.
The common challenges are due to different time zones plus the standard go to market barriers: Cognitive Hurdle, Resource Hurdle, Motivational Hurdle, and the Political Hurdle.
Approach in NABC
A Customer Value Proposition must define the solution components addressing the “whole product” challenge as well as two major parts of the value chain: the sales process and the delivery process. Thus the definition of the Value Chain is a part of the approach definition. When the value chain involves third parties participating in the sales or the implementation process we must also develop a distinct Value Proposition for these players
Definition of Approach in our context: Our approach is to be mandated by the international company to deliver the setup (support the planning and the understanding of the market structure) and execute the market entry (local bridgehead acquisition on customer, supplier and service partner level).
- Our cooperation with the international client is milestone-based and may last six months or longer.
- The client can decide to take over operations directly and maintain established relationships with customers and partners themselves.
Benefits in NABC
A Customer Value Proposition must explain how the benefits of the solution delivered exceed the total cost involved with migrating to and/or utilising the solution. The more tangible and specific the benefit/cost ratio is defined, the more impact it will have on the market. If you are bringing a new product to the market and/ or if you are a new player in the market, you must consider the risk mitigation issue. The customer will consider your “newness” an additional risk = additional cost, for which you must compensate if you are to win the deal.
Definition of Benefits in our context:
Benefits are faster sales, due to local sales, friendly channels, less cost, due to less travel, given infrastructure and lower risk, due to minimal financial and legal exposure.
These benefits have a different meaning, depending on the nature of our client´s business. E.g.: If you are selling Mobile Gaming Apps on the Apple AppStore, you have a clear framework, how to do business in a new country. The AppStore guidelines tell you, how to win users, and how to monetize them. You may charge for certain goods in the App´s gameplay. You may convert them from free gaming to gambling.
In both ways, the AppStore will tell you, what´s in line with applicable law. However, with connected services you typically run into the main cost drivers user-acquisition and user-retention. Here, things will become expensive very quickly, when your team screws the whole project by ignoring local law. Back to gaming – gambling: this is quite complicated in the European Union, as laws like the U.K. Gambling Bill give you rights in some regions only. If you are seriously building Apps and have been banned from the Apple AppStore before, you know that this kind of event can break your neck.
We can expect a significant learning curve with Mobile Health Apps and the Industrial Internet of Things (IIOT) Apps. It´s obvious that European user organizations will more and more force their local legislation to hold the developer accountable for any breach of privacy. Facebook is the most prominent company in this discussion and playing it´s political power and technical dominance very well.
Associated Cost in NABC
Definition of Associated Cost in our context:
Next step in our value-based approach is to compare the associated costs that come with each alternative.
In our gaming – gambling example we can name one alternative “doing nothing” (very popular alternative by the way). In this case, the associated costs would be the “missed business”.
But apart from the “doing nothing” alternative, we can compare the more serious alternatives for an US-based tech startup, that received additional funding for “international growth”. Their shareholders expect to look for aggressive growth opportunities and certainly have heard that the European Union in 2016 generated a nominal gross domestic product (GDP) of 16.477 trillion US dollars, constituting approximately 22.2% of global nominal GDP and as a whole is the largest economy in the world.
However, with all the uncertainty around UK Brexit, it´s hardly predictable, what´s the best go-to-market approach. Old school recommendation would tell you to do, what the others did and install a European bridgehead in London (where most come together). But that could become a massive strategic mistake.
Not only is the cost of living and cost of doing business in the U.K. much higher than in any other European country. There is a well the still open question, if and how the UK based firms will have access to the European Union.
Definition of alternatives in our example.
Our software firm, willing to build a business in Germany has three alternatives:
- Send your own team – if available
- Build a local team from scratch – find, hire & train
- Buy a local company – certainly the most expensive choice
You certainly have read about the term “unfair advantage” before. It´s used in the Business Model Canvas when the entrepreneur is asked, why the user should choose his service. Good answers would be: “we hold a patent”, or”, “we know this industry better than anyone else”.
We would answer, that we are designed to serve exactly this use case. The reasons for this are:
- we can start lean but scale fast
- we don´t have to feed overhead
- we are not exposed to hidden interest
- we align our business model with yours
Partner with us, if you are on a serious mission and allow us to put some serious numbers on this kind of benchmark. Our approach is Straight Forward Performance Driven and we embrace the NABC method to balance value creation and innovation. The NABC model is science driven and real-world proven. With the decent level of market insights we can target local niches with the perfect role model and business incentive for each stakeholder. The beauty of this model is, that we can act faster and setup streamlined operations.