How to check startup ideas and validate them
Thinking over the development of a new idea? Please read this detailed guide first.
“I have an idea for X, what should I do next?”
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The first step in launching a successful startup is to create a minimally viable product (Minimum Viable Product, MVP). In essence, this means confirmation of the fact that there is a market that your company can call “home” (main) and find solvent customers on it. That is, the first thing you need to find the first customers and understand what they are willing to pay for.
However, most entrepreneurs are not particularly thinking about the process of creating MVP and confirming that their idea solves such problems that are important to people, and they will want to pay for it. So an entrepreneur may ultimately stay on the idea, the viability of which is confirmed by inaccurate user comments or biased opinions of the creators.
People fool themselves to give you the opportunity to hear what you want to hear. We are all humans. This is much more common than one would imagine. Google the “cognitive biases list” to get more information.
But in the process of determining whether an idea would be profitable, I discovered several frankly wrong approaches to this issue: some of them are marked by excessive self-confidence, while others are almost always perfect with skills and resources. In spite of everything, one tendency can be traced everywhere: dialogue with one's market.
MVP life cycle
Ways of validating ideas in accordance with the concept of MVP (and other strategies) can be hierarchically divided into categories: imperfect, situational and perfect methods. Below are a few examples for each of them:
1. IMPROVED TESTING METHODS
When you conduct surveys and ask your friends about what they think about your idea, this usually leads to the creation of something like a template and a number of leading questions or inadequate feedback due to bias during the survey. You might think, "Who will deliberately mislead you?" But such people are much more than you can imagine. Often people are simply afraid to share their true opinions, as well as to receive sincere feedback. This happens because a lot of start-up entrepreneurs fall in love with an idea that they have concocted and are looking for any excuses to continue developing it. If you ask your friends for advice, then most likely they will approve any of your ideas. And most likely you yourself will try to interpret any data obtained so that they confirm your beliefs.
Implementing ideas at an early stage of a startup may seem like a wonderful method of action, if you are a talented engineer and are able to create something very quickly. But in this way you are developing a product without confidence in the validation of the idea. This is a dangerous method that caused the mass death of start-ups based on new technologies in the 90s of the last century and at the dawn of our century.
Now we know that the philosophy of "we will create a product, and buyers will descend" is not a good helper - rather, on the contrary. The idea of "creating what people need" deserves to be followed. Engineers who are alien to the wrong approach of startups often turn to this method and can tell you: “you just don’t understand what you are doing.”
2. SITUATIONAL TESTING METHODS
Attracting an audience through a blog or email service is a great method if you are planning to build a company that belongs to a specific industry or niche, or want to build a reputation, or better understand the market. There is also a powerful tool from Klout if you need to get data for analyzing social networks, or you do not have a technical education and would like to make sure that the concept is of interest to the audience.
It also gives you a wonderful opportunity to try to interact with the market and find out about the problems and frustrations of potential customers, what is the best indicator of what product they are willing to pay for.
Regardless of your approach, you need to communicate with customers. But carrying out a thorough market research and then creating a product can lead to ambiguous results if you do not do it correctly (many will not even come close to creating a full-fledged MVP).
If you consider yourself to be a natural leader, it may also happen that you will constantly try to pursue "another major goal," which as a result will lead you to 3-4 attempts to create something, but never develop into something serious. as you will again be distracted by the next major problem you found.
It is also important to focus on what people will pay for, rather than looking for new problems. If you are going to conduct a lot of interviews with clients as part of your MVP strategy, then use this opportunity to consult with them by the end of the conversation. There is a chance that you will learn about the problems that really annoy them, and for which they are willing to pay.
Creating a prototype as quickly as possible, is not such a terrible idea, if you already understand your market well and have conducted a thorough study of it. Nevertheless, many people (especially start-up entrepreneurs) come to the conclusion that they know what people want.
This means that you create a product that solves any problem you find (without “ideas”), based on your experience and professionalism. The problem is that usually in a person his ego speaks, and he creates the solution that he would like to see, and not the one that is needed by thousands of clients. In general, this is a rather dangerous approach in the sense that it encourages the founders to continue to create something without a constant feedback. However, if you can quickly ensure customer interaction with your product and make changes based on the feedback received, then you are on the right track.
Kickstarter and other crowdfunding platforms allow users to purchase a product in advance and provide the company with funds received from orders. The problem with MVP may be the following: since the interaction cycle is rather long, this means that you are tied to the same prototype for a month or more. MVP must be constantly updated, and most crowdfunding platforms interfere with this.
There are several categories of products for which crowdsourcing works well. Pebble watches are perhaps the best result of this approach to date, and all other successful examples are also related to hardware. This approach works great for developing similar gadgets - it helps to get enough funding to create a physical product that you will not get elsewhere.
3. IDEAL TESTING METHODS
These pages are ideal if you are looking for funding. And although you cannot raise money if you are not going to deliver the product to someone, you can still ask for funding. How? Simply: put all the items as “sold” when a person tries to buy them, but at the same time, make a list of those who were ready to buy them. If you are able to start delivering a product to this audience in a short period of time (it’s best to meet two weeks), then you are in business. This is a powerful and better proof of the concept than anything else.
Such a product seems to be a complete product, but with an “exaggerated” backend solution. This approach is good for founders who are not “techies” and are looking for reliable evidence of the viability of their ideas. Here are some great examples:
ZeroCater, which received funding at Y Combinator, initially limited itself to a large table, trying to ensure contact between companies and restaurants that are engaged in catering. Groupon started with a WordPress blog and manually sent PDFs with the first vouchers. Grouper, another company that came out with Y Combinator, also started with banal tables, trying to find the most suitable pair for people.
If you are the founder of a technology startup, then this is exactly what you should do (most likely). The main thing in this approach is a deep understanding of the problems of people who are your potential audience, and the creation of such a product, whose main task is to ensure profits from the first customers. Finding a balance between the desired product and a profitable one is not easy (but important).
Starting with a product as a service - this is where Netfix started its business.
Netflix was born in California, its founders were two men: Reed Hastings and Mark Randolph. Hastings had to pay a huge penalty for the late return of the film he was renting. It was then that the idea came to him to create a service that would allow ordering e-mail movies without penalties for being late with their return.
Immediately after that, they began renting a collection of their films to friends - this is how Netfix was born. This may seem obvious, but if you ask most entrepreneurs how they would start their own Netflix today, you will receive very detailed technological answers. Start doing something with your hands until you can scale up your business. Do things that don't scale and then expand the business.
This approach draws on the knowledge and experience gained from selling something that has already been created earlier and for which a strong market is already available. Thanks to this method, an entrepreneur is gaining an audience and, provided the product is properly promoted, he can quite easily test his idea of X. After that, you can change the strategy and start selling X, regardless of what the company sold before.
My latest articles / translations:
The unexpected truth about success, or How to become its happy victim
Five ways to earn money for bread and butter digital nomad
Myths about multitasking, or How our brain reacts to it
Doing business in Sweden and the USA: 6 differences
“I have an idea for X, what should I do next?”
')
The first step in launching a successful startup is to create a minimally viable product (Minimum Viable Product, MVP). In essence, this means confirmation of the fact that there is a market that your company can call “home” (main) and find solvent customers on it. That is, the first thing you need to find the first customers and understand what they are willing to pay for.
So, a minimally viable product is a product that has only those characteristics (and no more) that allow you to deliver a product that meets the needs of the first potential customers. And some of them will pay for the product or give their comments about it. - Eric Ries
However, most entrepreneurs are not particularly thinking about the process of creating MVP and confirming that their idea solves such problems that are important to people, and they will want to pay for it. So an entrepreneur may ultimately stay on the idea, the viability of which is confirmed by inaccurate user comments or biased opinions of the creators.
People fool themselves to give you the opportunity to hear what you want to hear. We are all humans. This is much more common than one would imagine. Google the “cognitive biases list” to get more information.
But in the process of determining whether an idea would be profitable, I discovered several frankly wrong approaches to this issue: some of them are marked by excessive self-confidence, while others are almost always perfect with skills and resources. In spite of everything, one tendency can be traced everywhere: dialogue with one's market.
MVP life cycle
Ways of validating ideas in accordance with the concept of MVP (and other strategies) can be hierarchically divided into categories: imperfect, situational and perfect methods. Below are a few examples for each of them:
1. IMPROVED TESTING METHODS
Polls
When you conduct surveys and ask your friends about what they think about your idea, this usually leads to the creation of something like a template and a number of leading questions or inadequate feedback due to bias during the survey. You might think, "Who will deliberately mislead you?" But such people are much more than you can imagine. Often people are simply afraid to share their true opinions, as well as to receive sincere feedback. This happens because a lot of start-up entrepreneurs fall in love with an idea that they have concocted and are looking for any excuses to continue developing it. If you ask your friends for advice, then most likely they will approve any of your ideas. And most likely you yourself will try to interpret any data obtained so that they confirm your beliefs.
Product creation
Implementing ideas at an early stage of a startup may seem like a wonderful method of action, if you are a talented engineer and are able to create something very quickly. But in this way you are developing a product without confidence in the validation of the idea. This is a dangerous method that caused the mass death of start-ups based on new technologies in the 90s of the last century and at the dawn of our century.
Now we know that the philosophy of "we will create a product, and buyers will descend" is not a good helper - rather, on the contrary. The idea of "creating what people need" deserves to be followed. Engineers who are alien to the wrong approach of startups often turn to this method and can tell you: “you just don’t understand what you are doing.”
2. SITUATIONAL TESTING METHODS
User engagement
Attracting an audience through a blog or email service is a great method if you are planning to build a company that belongs to a specific industry or niche, or want to build a reputation, or better understand the market. There is also a powerful tool from Klout if you need to get data for analyzing social networks, or you do not have a technical education and would like to make sure that the concept is of interest to the audience.
It also gives you a wonderful opportunity to try to interact with the market and find out about the problems and frustrations of potential customers, what is the best indicator of what product they are willing to pay for.
Communicating with many potential customers
Regardless of your approach, you need to communicate with customers. But carrying out a thorough market research and then creating a product can lead to ambiguous results if you do not do it correctly (many will not even come close to creating a full-fledged MVP).
If you consider yourself to be a natural leader, it may also happen that you will constantly try to pursue "another major goal," which as a result will lead you to 3-4 attempts to create something, but never develop into something serious. as you will again be distracted by the next major problem you found.
It is also important to focus on what people will pay for, rather than looking for new problems. If you are going to conduct a lot of interviews with clients as part of your MVP strategy, then use this opportunity to consult with them by the end of the conversation. There is a chance that you will learn about the problems that really annoy them, and for which they are willing to pay.
Fast creation of a simple product
Creating a prototype as quickly as possible, is not such a terrible idea, if you already understand your market well and have conducted a thorough study of it. Nevertheless, many people (especially start-up entrepreneurs) come to the conclusion that they know what people want.
This means that you create a product that solves any problem you find (without “ideas”), based on your experience and professionalism. The problem is that usually in a person his ego speaks, and he creates the solution that he would like to see, and not the one that is needed by thousands of clients. In general, this is a rather dangerous approach in the sense that it encourages the founders to continue to create something without a constant feedback. However, if you can quickly ensure customer interaction with your product and make changes based on the feedback received, then you are on the right track.
Crowdsourcing
Kickstarter and other crowdfunding platforms allow users to purchase a product in advance and provide the company with funds received from orders. The problem with MVP may be the following: since the interaction cycle is rather long, this means that you are tied to the same prototype for a month or more. MVP must be constantly updated, and most crowdfunding platforms interfere with this.
There are several categories of products for which crowdsourcing works well. Pebble watches are perhaps the best result of this approach to date, and all other successful examples are also related to hardware. This approach works great for developing similar gadgets - it helps to get enough funding to create a physical product that you will not get elsewhere.
3. IDEAL TESTING METHODS
Landing pages (landing pages)
These pages are ideal if you are looking for funding. And although you cannot raise money if you are not going to deliver the product to someone, you can still ask for funding. How? Simply: put all the items as “sold” when a person tries to buy them, but at the same time, make a list of those who were ready to buy them. If you are able to start delivering a product to this audience in a short period of time (it’s best to meet two weeks), then you are in business. This is a powerful and better proof of the concept than anything else.
MVP-Dummy
Be prepared to listen when people give you subtle signals. Read between the lines. Ask for money not because you want money, but because it is the best way to get useful information. - Dan Shipper
Such a product seems to be a complete product, but with an “exaggerated” backend solution. This approach is good for founders who are not “techies” and are looking for reliable evidence of the viability of their ideas. Here are some great examples:
ZeroCater, which received funding at Y Combinator, initially limited itself to a large table, trying to ensure contact between companies and restaurants that are engaged in catering. Groupon started with a WordPress blog and manually sent PDFs with the first vouchers. Grouper, another company that came out with Y Combinator, also started with banal tables, trying to find the most suitable pair for people.
Fast feedback / development
If you are the founder of a technology startup, then this is exactly what you should do (most likely). The main thing in this approach is a deep understanding of the problems of people who are your potential audience, and the creation of such a product, whose main task is to ensure profits from the first customers. Finding a balance between the desired product and a profitable one is not easy (but important).
Minimally desirable product (English: Minimum Desirable Product) is the simplest that can provide a product that will create a valuable and satisfying customer needs user experience. - Andrew Chen
MVP as a service
Starting with a product as a service - this is where Netfix started its business.
Netflix was born in California, its founders were two men: Reed Hastings and Mark Randolph. Hastings had to pay a huge penalty for the late return of the film he was renting. It was then that the idea came to him to create a service that would allow ordering e-mail movies without penalties for being late with their return.
Immediately after that, they began renting a collection of their films to friends - this is how Netfix was born. This may seem obvious, but if you ask most entrepreneurs how they would start their own Netflix today, you will receive very detailed technological answers. Start doing something with your hands until you can scale up your business. Do things that don't scale and then expand the business.
Profit and Fulcrum
This approach draws on the knowledge and experience gained from selling something that has already been created earlier and for which a strong market is already available. Thanks to this method, an entrepreneur is gaining an audience and, provided the product is properly promoted, he can quite easily test his idea of X. After that, you can change the strategy and start selling X, regardless of what the company sold before.
My latest articles / translations:
The unexpected truth about success, or How to become its happy victim
Five ways to earn money for bread and butter digital nomad
Myths about multitasking, or How our brain reacts to it
Doing business in Sweden and the USA: 6 differences
Source: https://habr.com/ru/post/294896/
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