Why Your Business Must Solve a Problem

Revenue is the lifeblood of business and customers the source of revenue. Many technology entrepreneurs start their journey “inventing” a product they perceive as unique and special. Step back.

Your product must solve a problem for your business to be successful. “Customers buy a product or service to do a job”. (Clayton Christensen) Customers challenge us to provide products and services that perform better, cost less and are easier to use than competitive solutions. They need to see your product or service as the best tool available. Understanding and validating the problem that motivates customers to buy your solution is fundamental to insights on:

• Market segmentation

• Market size

• Customer persona and buying behavior

• Competition

• Pricing

I work with entrepreneurship programs that engage several hundred seed stage startups. Every activity in this ecosystem concentrates on customer discovery as a key to successful new ventures. Yet the most commonly identified weakness of startups in this cohort remains failure to crisply identify and understand customer need.

Who has the problem?

So how do you find and evaluate customer needs? You ask the customer! While simple in concept, this task is complex with multiple layers. Effective customer discovery is a continuous process that never ends.

Begin with the value chain of your chosen market. Try to understand as much of your chosen industry as you can.

• Who are the players in various segments?

• What do they do and what problem are they addressing?

• How do materials move through the market?

• What key resources do they rely on to deliver their solution?

• What economic costs and values drive activity?

Talking with customers is the only way to validate your understanding of their business. Your learning creates specifications for new ways customers can do a job. Remember, they already perform that job and you must design a solution that is cheaper, faster, better than their existing “tools”.

Scoping the Problem

Is the problem “obvious” and widely shared? Resources and practices differ from segment to segment. Customers find different ways to address (or ignore) the problem you identified. Your product may have compelling appeal to one segment but not others.

Every industry has players big and small, boutique, general or otherwise differentiated from each other. Even the most complex industries structure themselves around segments grouping companies around successful business models.

All companies develop business processes around available resources. A large company may have resources and technology to collect and analyze customer data while a small or medium size organization must rely on anecdotal information. Current management practices focus on data driven decision processes and companies of different size approach the same problem differently. They use different tool sets!

To gain real insight requires you to separate your proposed product or service (the solution) from the problem in customer discovery. Remember, this is not a sales process. Leading with your “invention” encourages potential customers to “pat you on the back” and say, “that’s a great idea”. This response is emotionally validating but deceptive.

Know the Business

There is a language in every business. “Talk customer” to establish deep understanding about the minimum functionality you need to deliver. Find a corner of a large market where you can gain real market share and traction. Become an “industry expert” that understands a business well enough to discuss:

• Industry challenges

• Customer Pains

• Market trends

• Technology leaders

• Customers’ highest priorities

• Your biggest challenges in addressing the pains

• Your biggest challenges managing costs

Identify a customer persona as you begin to concentrate on a specific problem. “Make friends” with people with this profile and understand how they think about their business:

• What do they do?

• How do they make money?

• Who else makes money from their products?

• What are their problems?

• What solutions (tools) do they use?

• How much do they cost?

• Who makes decisions?

Remember, people use products and services to do a job. They are compelled to buy products that address fear/greed (pain/pleasure) motivations that drive human action. Your product becomes compelling when you identify and solve a widely shared problem. The appropriate specification for that product can only emerge when you understand the customer as well as you understand the technology.

It does not stop there. All parts of your business must focus on making and selling your products. As your design takes root, you will return to the customer again and again to validate, sell and deliver your solution.