Are you missing the real meaning of ICP?

As you probably know, ICP (Ideal Customer Profile) is a term that is used to define the types of customers that you should be selling to today.

However, the real meaning of ICP goes much deeper than this.

A much more detailed definition of ICP is:

Let’s break that down:

Who are the companies, and people within those companies, who have a high-priority…

This is so critical, I cannot emphasise this enough. You have to be solving high-priority problems for your prospects. Ideally hair-on-fire problems.

To paraphrase Michael Siebel from Y-Combinator:

“If someone’s hair is on fire, and you offer them a hose, they’ll grab the hose and put out the fire. But if all you’ve got to offer is a brick, they’ll still grab the brick and hit themselves on the head with it to put out the fire.”

In this analogy, the hose is the perfect product. The brick is your MVP. Where your current product sits between these two doesn’t really matter.

What does matter, what is critical to your survival, is that you find people with their hair-on-fire. Because those people will pay to use whatever product you have if it’s the only way to put out that fire.

And when I talk about high-priority or hair-on-fire problems, I don’t mean what you think, what your team thinks or what your board or advisors have told you – I mean what your prospects believe is high-priority or hair-on-fire to them right now.

If you’re solving a problem which your prospects view as medium-priority, or even worse as a ‘nice-to-have’ (and I actually get a sickly taste in my mouth whenever I see that phrase), you’re dead. You’re done. You’ll never build repeatable revenue and will never build a big company.

If you find yourself in this situation, you either need to find a different ICP which does view the problem you solve as high-priority (ideally hair-on-fire priority) or you need to focus on solving a different problem (which is 90% the ultimate outcome in my experience).

…that they are willing to spend money today to solve…

Usually if you’re solving a high-priority or hair-on-fire priority problem, money will be made available to solve it.

However, it does not always follow that a high-priority problem for one person will translate into a high-priority problem for the person who holds the budget.

It’s critical that when you identify a high-priority problem, that it is high-priority for all of the key stakeholders in the buying chain, including and most importantly the Economic Buyer, who will likely have to divert money away from other projects to fund your solution.

This is particularly the case when you solve a problem for a User Buyer who will have very different problems and priorities to other people in the buying chain, especially the Economic Buyer, who is often several levels removed from the actual problem itself.

You can see in the diagram below how problems and priorities vary by stakeholder. You have to be able to translate lower level high-priority problems into a high-priority problem for your more senior stakeholders.

See our booklet Value Creation Explained for more details on how problems and priorities vary by stakeholders.

…and where your current solution can deliver significant value…

Winning a customer is only half the battle. You have to be able to deliver value and make sure that your customers are aware, understand and believe the value you are delivering.

If your solution does not deliver this value, your customers will churn and you will lose that hard won revenue. Bad for your ARR, bad for your NRR and potentially fatal for your business, particularly when (and it is always ‘when’ not ‘if’) other potential customers learn of this failure.

Some churn is inevitable, particularly with early customers as you’re still iterating your ICP. But one of the purposes of finding your ICP is to minimise this churn because you deliver such great value.

And pay attention to the ‘current solution’ part of this. Product development from customer feedback to add even more value is great. But if you keep having to do one-off custom development to win customers and deliver value, either your product is wrong, or your ICP is wrong.

…that their existing solutions cannot.

No one in your prospect’s buying chain wants to get fired. They don’t want to get a stain on their reputation. And they don’t want to have to deal with a product that doesn’t deliver what you said it would.

Buyers will always try to minimise these risks by buying from their incumbent, often larger and more established, vendors.

As a buyer once put it to me, ‘If I buy from a startup and it goes wrong, that’s on me. If I buy from AWS and it goes wrong, that’s on them.’

They could have said Google, Microsoft, Snowflake, OpenAPI, or any of the myriad large companies they already do business with and already have great relationships with.

And the higher the price of your solution, the higher the profile of that solution within their company, the greater the tendency will be to stick with what they already know.

Even if these companies don’t solve the problem as well as your solution does, it’s still much safer to buy from them rather than a completely unknown startup.

So whatever high-priority problem you solve, it needs to be a problem that their incumbent solution providers can’t solve.

Or at the very least, you need to convince everyone in the buying chain that the way you solve their problem is so radically different, it would actually be higher risk to go with one of their incumbents.

So that’s the real meaning of ICP. Where you’re solving hair-on-fire problems, for people who have the money to pay for solutions today, where you’re delivering insane value in a way that their existing suppliers simply can’t.

I wish you the best of luck in finding your deeper ICP!

Any questions or comments please DM me or email me at ben@crane.vc.