How to de-risk and value before you start on new product idea
You have this awesome idea about a product and decide to start a company. or perhaps you are in a big company and want to build new product offering.
Where do you start? What are the first steps?
Frequently, startups will jump right into product building and hope that it will sell. We tend to bias our own experiences. If I am having this problem, then others surely are. As a hypothesis, that’s actually a great starting point. However, It’s not quite clear at this stage how this will translate into a company that makes revenue. There is a long bridge to cross and requires following a framework and some discipline.
In the old days, we would build the product and then build a sales and marketing machine and hope that the customers will come. But that’s a shotgun approach. You may succeed. You may not.
The startup land is riddled with failures of products that never succeed. Webvan infamously spent $ 800Mn to build something no one wanted – online grocery shopping. Had they done some homework, they could have avoided the failure.
Of course this is an extreme example. But there are numerous examples of startups building products that struggled to get traction.
Why does this happen?
There can be number of reasons.
There is no demand from the market
This is not a high priority issue
Solution is underwhelming
Difficult to use
Competition
So what do we do and not fall into this trap?
Before you build any product, ask 3 questions.
Is this is a problem worth solving?
Who is the beneficiary?
Will the solution offer value?
Lets deep dive.
1. Is this is a problem worth solving?
Before you dive headfirst into building a new product, it’s essential to pinpoint the exact problem you’re aiming to solve. This isn’t just about identifying a general issue; it’s about understanding the specific pain points that your target audience experiences.
In B2B, customers have many pain points but at any given time they are only working on a few. So the problem you are trying to solve really has to be a “house on fire” problem. Otherwise the customers will not be eager to adopt your solution. Sometimes they can live with some pain.
You also need to pinpoint what exactly will your solution help with in reducing the pain point. Will it help them make more money or reduce costs or time. You want to quantify the pain as much as possible such that the ROI of a new solution is higher than the COI (cost of inaction) of the status quo.
And if this is a significant problem for your target, then how are they handling it today? Are there alternatives, or competing solutions. You need to identify the shortcomings of these. But more importantly, the shortcomings need to matter to them. If the competition does not have say AI and you want to offer AI, then you can only stand out if AI actually makes a big difference in terms of value proposition. Otherwise they will not care.
It’s like buying a car. One model has Anti skid traction. But it will only be important to me if anti skid is a pain point e.g if I stay in a place where it snows.
The bottom line you are trying to establish is that this is a big enough pain point for which some customers will be willing to pay.
2. Who is the beneficiary?
The second thing you need to ask is exactly who is this for. When I work with early stage startups this is actually the first question I ask. Who is your target audience. Both in terms of customer segment and the persona who has the specific pain point described above.
You need to pinpoint the segments who have an underserved need. You also need to know who your likely users will be.
For example, say you are building some financial solutions for business analyst, then it’s too broad. A BA in health care has different needs than a BA in say retail or manufacturing. One BA might be solving for sales operations but another maybe solving for pricing or inventory. These are completely different problems.
If you say I want to help channel marketing teams to amplify marketing content, that becomes a bit more specific. I can now focus on customers who sell thought channels and work with the partners marketing person to understand the pain points.
Be as specific as possible. Without your intended beneficiary, it is almost impossible to build a targeted solution that attracts customers.
The bottom line is to find out if you can target your solution to a segment and user type or persona.
3. Will the solution offer value?
Now you have identified the pain point and the target prospect, will it work? Actually, at this stage you are not so much worried if the product will work. It is more important to determine if your solutions offers the desired value and that customers will actually make this a part of their habit.
It’s one thing to say we feel the product will add value and quite another to actually demonstrate that it will. Think of a sales person visiting your home selling a new vacuum cleaner. They can lay claim to all the benefits but does it actually help me with a cleaner house.
You may argue we have not yet build any product. Fair point. You can do some manual experiments or create a rudimentary “pretotype” (not prototype). Find the lowest cost experiment to determine if the solution will offer value. Once you have that evidence, then you can proceed to build the right product. The product will of course work after your initial research because you would have designed it as per the desired value.
Building a product that actually offers value and ensuring that users will actually use the product are two different things. You want to ensure that your product becomes a habit for your user. See around your house on how many gadgets are lying unused. You don’t want that for your product.
Check out the book “The Right It” for some interesting experiments.
Do a google search on Zappos MVP. It’s brilliant. And Dropbox MVP video.
How to do research?
Talk to customers, Get out of the building.
Nothing will help you besides talking to your target prospects. Have an open ended conversation. Undertand the market and the other players. What are the alternatives and what are some gaps that still need to be addressed.
If you are in B2B, talk to at least 5 prospective customers or more. You don’t need to do 100 interviews. But enough that start seeing some patterns.
When to do the upfront research?
You should do this primary research before you write a line of code. If you are working full time, and considering a startup, then do this exercise while you are still working. It will give you the necessary conviction and confidence to get started. If you are in mature company building a new product, this research will help convince your executives and get the necessary approvals and budgets.
Conclusion
The fundamental question we want answered is if this solution worth going after. Does the idea have the legs to stand on. If you do not have the right evidence or conviction to these questions, it becomes harder after you build the product.
With this approach you de risk and increase your probability of success. At the very least, you will learn a lot about your market and customers, and build a solution they can actually use.
