Coming up with startup or business ideas is hard enough. Paul Graham of Y Combinator covers this topic quite well in his essay “How To Get Startup Ideas”. People generally try to think of an idea that could potentially solve a problem for a target industry and then build an app/product/service and try to sell it. This type of approach can prove to be problematic.
The following is one of my favourite excerpts from Paul’s essay:
“Why do so many founders build things no one wants? Because they begin by trying to think of startup ideas. That m.o. is doubly dangerous: it doesn’t merely yield few good ideas; it yields bad ideas that sound plausible enough to fool you into working on them.”
It’s a profound warning and one that many entrepreneurs tend to forget, or worse – ignore.
Developing a potential solution based on something that seems like an industry wide issue to you is a serious misstep. What you classify as an issue may not be an issue at all for others in the industry. The significance of the issue is also a key point. How pressing is this issue? Is this issue experienced by a significant portion of the industry? If so, are they willing to pay for a solution? These are the questions that you must ask before you even begin to think about building your product.
The validation method helps you answer these questions by taking steps to ensure that the solution you end up offering is not only wanted but needed by those in your target industry.
The are various ways in which one can go about validating their idea. Before I outline some of the methods of validation, I want to highlight two important points.
Surveys are a fairly simple way to validate your idea. You will want to structure your survey in such a way that you’re asking pertinent questions about issues currently being faced by the respondent in their industry.
Your product idea might direct the questioning a little but try not to lead the respondents to an answer that you want to hear. At this stage your idea is not concrete. It is an evolving entity that needs to be shaped by your research. A consensus on a particular question could result in you having to drop a feature that you thought was going to be game changing. Don’t fall into the trap of being in love with the original idea. More often than not, by the time you’re done with the validation process your idea will be quite different.
To make life easier for yourself, try and use services like Survey Monkey which let you build a survey and then send it out using an email list or via social media. It’s easy to use and provides a great interface in which to view and analyze the survey results.
Be warned though, surveys do tend to have a low response rate so you might find yourself sending hundreds of them out with very few coming back with informative answers. Surveys are a good place to start with validating your idea but you can’t rely on them completely. This is where interviews come into play…
One of the best ways to validate and conduct research is via interviews. This will require you to either sit down with your potential client or use a service like Skype so it’s best to be prepared in advance with an agenda. Share the agenda with your interviewee to give them notice about what kinds of things you will be asking them about so that they can be prepared too.
Listen attentively and make notes. A fifteen to twenty-minute discussion can sometimes convey much more useful information than other validation methods mentioned here. Try and avoid using jargon (especially if your idea is quite technical and you’re dealing with non-technical people) and try and address your questions and discussion points with the interviewee’s perspective in mind. Keep it simple and ask questions that maximize your learning.
Also remember, you’re not trying to sell anything at this stage – you’re just looking for feedback and information about the customer and their industry. You should mention to the interviewee that their feedback is highly valued and will influence your decision making with your business idea. Informing the interviewee that you really value their opinion will put them at ease and help bring forth a positive mindset to the interview.
Interviews can sometimes end up having mixed results as the quality of the interview depends fairly heavily on the interviewee. No matter how well prepared you are, you will inevitably run into someone who just doesn’t have much insight to offer on their industry. There’s not much you can do about this unfortunately. Chalk it up as a loss and move on. There will be many more people to interview so just keep going. The key to this process is to speak to as many different people as possible. Soon you should hopefully start to notice problem areas and inefficiencies that are experienced by a wide range of people across the industry you have chosen.
Landing pages can be a very effective validation tool. The purpose of a landing page is to inform your audience about your product and to get “conversions.” A conversion occurs when a potential customer signs-up to know more about your upcoming product or even pre-pays for it on your landing page.
The great thing with landing pages is that the product you are advertising might not even exist in any form yet. The key here is to present your idea in a clear, concise and elegant manner. You want people to think that the final product is already available (even if it isn’t) or that it is going to be released in the very near future.
Include a pricing page and allow potential customers to select a pricing plan if applicable. Simulate the checkout order process but before the transaction is completed, notify the user that the product is not quite ready yet but will be in the near future. At this stage, try and have them sign-up for updates to keep them informed about the product’s development.
By tracking things like button clicks and page views, you can conduct a lot of validated learning about your idea and whether people are willing to pay for it (and how much).
If you’re wondering what sort of internet voodoo lets you track these sorts of metrics, take a look at Google Analytics. It’s a great tool that let’s you track various things on your website and presents the information in a dashboard view. It’s a very important tool to use and will help inform your marketing and business decisions.
The sign-up form on your landing page should be integrated with a service like MailChimp. MailChimp allows you to build email lists based on sign-ups and then send out automated emails based on templates and automation criteria you specify. It’s a handy tool to keep your potential customers informed and saves you from having to build lists and send out emails manually.
A useful Landing Page approach to consider is A/B testing. With A/B testing, you set up two different landing pages for the same product. The purpose of this is to see which page performs or converts best, based on small changes to things like layout, content, sign-up button location and even product pricing. A/B testing can provide very useful insight into what your audience likes.
A common mistake people tend to make with landing pages is that they set them up and then forget about them. This is a grave error. You need to try and do your best to drive traffic to your landing page. This can be done via social media, online ads (through Facebook or Google AdWords) or even word of mouth. A landing page that no one knows about is not worth having. Do your best to get the word out about your landing page!
Services like Kickstarter have popularized the crowdfunding concept. If you haven’t heard of crowdfunding before, the concept is quite simple. Get people to pre-pay for a product/service based on a promise to deliver at a future date.
Sites like Kickstarter and Indiegogo allow budding entrepreneurs to put up a video and other relevant content that advertises what their final product/service might be like. Interested customers are then given the chance to contribute to the project by donating funds. Once the funding target has been hit, the entrepreneur can use the funding to develop the product/service, with the eventual goal of selling it on the market.
People have used crowdfunding to not only launch products and services but movies and video games as well! Some successful examples include the Pebble smart watch, the Veronica Mars film project and Pillars of Eternity (a video game).
Crowdfunding can be a good way to gauge interest and raise funds but it carries risks. If you go over your promised delivery date, considerable damage can be done to your business’ reputation. Also, if what you are developing is a fairly novel concept, you risk theft of intellectual property and releasing too much about your R&D. Lastly, your potential target audience may not even be on the crowdfunding platform. Crowdfunding tends to attract a particular type of “early adopters” and this group may not be relevant to your product/service.
Other issues include:
Once you have completed the above steps, you should have a much better understanding of the industry you are targeting as well as your potential customers. Speaking from personal experience, the difference was like night and day.
You should now have enough knowledge to know whether or not to proceed onwards and build a Minimum Viable Product (MVP)*. An MVP is essentially a bare bones, trimmed down version of your final product. It should contain key features that are selling points for your product and nothing else.
It may be difficult but you’ll have to resist throwing in extra features to make the product seem more “complete.” Often, some (and sometimes all) of the functionality of an MVP can be accomplished manually, without the need for an app, web application or something more formal.
Again, the idea here it to test the waters with initial customers and get iterative feedback that can be used to further progress development.
*To learn more about building an MVP, check out my article here.
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