Every new business starts (and often dies) with one simple question: what is it you’re going to charge people money for? It’s easy to get lost in cutting edge features, slick packaging, and the security of solid financing. But your business boils down to what people will pay for.
Define this very specifically, and you have the groundwork to build a startup. Skip this step at your own peril. At Deep Fork we have defined a testing process for narrowing down your Minimum Viable Product (or MVP) through working with dozens of startups over the years. We have seen many successful startups launch, and we’re quite confident in our process. We’ll outline the process we follow to uncover your MVP and plan for success.
Successful startup founders are experts on their product market fit. Let’s use an example of a fictional entrepreneur. We’ll call him Doug. Doug has a great idea for an app that teaches dog owners how to train their dog. Doug the Dog owner noticed that he was inconsistent with taking his dog for play time and teaching her new tricks, and some structure and reinforcement for him would make it easier to train Stella, his 3 year old chocolate lab. So Doug set to work researching what makes dog trainers so good at their jobs, and sketched out wire frames on what the different sections of the app look like. After months of research and planning, Doug nervously starts asking around about mobile app developers.
Doug just missed a key step. He forgot to ask his potential customers what they wanted in a dog training tool. You don’t want to end up like Doug developing a product that no one wants to pay for.
Formulate your Business Hypotheses
Approach your business like a scientist would test a new formulation. Make an educated guess based on your experiences, then collect data to prove or disprove your hypothesis. After data is gathered, you have increased understanding to form a better, more informed hypothesis.
Your product will have to solve a customer problem, need, or passion. It’s important to define where your product fits in with your customer’s priorities. Let’s go back to Doug the Dog owner to imagine how this might play out.
Let’s say Doug’s dog, Stella, is jumping the fence, and he wants to train her to stay inside the boundaries he sets. This is an active problem for Doug. Stella on the loose poses multiple risks to the dog and others. Doug is motivated to solve this problem quickly, and his use of an app to solve this problem should communicate the same urgency. Active problems are a great business opportunity, because your customer will be highly motivated to pay you to solve their problem.
For another example, let’s say that Doug wants to teach Stella table manners, and maybe some new tricks. These are more passive problems, and might not be problems at all. Instead, these are goals that Doug pursues because he is passionate about them. Stella is a chocolate charmer, and he wants visitors to be delighted by her playful antics and docile demeanor. Making a solution for this is a perfectly workable business idea, but it means you need to define and understand what emotional need it is that your product is catering to. Are you empowering owners to train more polite pets? Are you building trust between dog owners and their companions? Think about the emotional goal of your customer and how you can facilitate that goal.
Go through this process of brainstorming and defining your predictions for each section of the business model canvas. You should come up with:
A prediction of your business model
A plan to test that prediction
For example, Doug believes that 4 out of 10 dog owners would be interested enough in training their pet that they would pay for some form of training aid. Doug doesn’t have any data to support this theory, which makes it the perfect opportunity to test his assumption.
In this case testing the problem is finding out how urgent the need is for dog owners to better instruct their canine companions. Is training a latent need in 40% of the dog-owning population? Does another need supercede that? Setting up the test would need to garner enough results that a reasonable conclusion can be gathered. Sometimes you can get such strong initial results that is quickly obvious there is a real market opportunity. If you reach out to 10 strangers and 4 of them want to buy your product, you can be confident in moving forward with your plan.
Doug’s case did not make him feel confident. Instead of 4 out of 10 dog owners willing to buy a training app, he found customers to be generally disinterested in owning an app, and instead were more interested in someone else training the dog for them. All told out of 30 people interviewed, only 1 person was ready to put money down and download an app. It was a resounding failure.
Your initial tests can just be simple conversations with people you can trust to be objective. Start with friends, family, colleagues, personal networks, and move beyond to gather enough interviews about your problem/solution combo. The final question in your interview will be about whether or not they would be willing to pay for your product right now. These will be hard conversations where you will hear feedback you do not agree with, or want to hear. Fortunately, that is exactly the point of this step!
The idea of the lean startup model can be summarized into two words: fail fast. You need to identify your weaknesses as quickly as possible and pivot away or turn your weaknesses into strengths. Feedback is precious data you need to find out what your customers are thinking. Ask questions about what the subject buys and wishes they could buy. You might set up your questions because you think they’ll lead your prospect towards your intended product/solution, and then be surprised by the unexpected direction your interviewees go.
“Have you considered an app for training your dog to fetch things around the house?” Doug asked, staring pointedly at his attorney’s sister Merideth.
“No, I don’t really want to bother with it to be honest. What I have thought about would be great it would be to have an app that I could monitor and contain Fido in the yard and alert me if he gets out. These Huskies are beautiful, but they are infuriatingly good at escaping.”
Meredith’s reply casually trods upon Doug’s idea that people will be as excited as he is by an AI-powered personalized virtual dog trainer. Though spurned, her reply sparks an idea at the back of his mind. Stella was a well-known escapee, a regular Dogshank Redemption. Doug understood the pain and frustration of your intelligent and capable animal being set free on the neighborhood. Perhaps his idea of virtual boundaries synced to the person’s location could be applied in an outdoor setting…
The overwhelmingly indifferent reaction to Doug’s idea gave him the data he needed to make 2 adjustments:
Give up the training app plan
Pivot to a new direction with a more immediate need
This is the goal of the testing process, to spot the areas where you will not succeed and double-down on any area of opportunity identified by your customer. Your initial assumptions are usually wrong, but that does not mean your idea is bad. Take failure as an inevitable step that will bring you one step closer to your ultimate goal, and you will be developing a better business model and problem/solution that you can take to the next step, getting feedback on your product.