You came up with the idea of an IT product, what's next
Surely each of you came up with the ideas of interesting new useful products - services, applications or devices. Perhaps some of you even developed and published something, maybe even tried to make money on it.
In this article I will show several methods of working on a business idea - what you should think about right away, what indicators to calculate, what works to plan in the first place to test the idea in a short time and with minimal expenses.
Suppose you come up with some kind of new product or service (I will call it a product, regardless of whether it is a service, a device, or software). The first thing that, in my opinion, is worth thinking about is what the work on this product will give you, why do you personally work on this product?
The most popular answers to this question (the sequence does not matter):
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And so on. There are still many different answers. Those that I cited are more common. At this stage, it is important to be honest with yourself and not engage in self-deception. Of the 5 responses to the creation of a business, in fact, only one leads - № 3, the rest - about the interests, dreams and personal comfort. Creating your own business allows you to earn more than working for hire. However, it will have to be paid for by hard, sometimes uninteresting and routine work, discomfort and often a deterioration in the standard of living for the first time. Suppose you are going to make a business out of your idea, then move on.
For the success of your business, you need to want to create and develop a product, have the necessary skills to do this, or be ready to acquire them (like learning yourself, and attracting partners and hiring employees). But perhaps the most important thing is that you need to find a sufficiently capacious and solvent market for your product, to form the price of your product so that the business makes a profit, not a loss. And also get an accurate understanding of how and why consumers will choose and buy exactly your product. Businesses often die, not because they have a bad product, but because nobody needs this product for the price that will enable the business to operate at a loss.
Suppose you want to work on a product, you have the necessary knowledge and skills, you have the time and you are even willing to invest in the project a certain amount of your savings, which should be enough for the first time. What do you do next, what action plan?
It often happens that the idea is transformed into a more or less detailed technical task and the project team (consisting of the authors of the idea and sympathizers) starts the project implementation. In the course of work, they think over the details and after a few months, an alpha or even a beta version appears, which can be shown to potential users. Far from all are living up to this point, I would even say a small part, and this is normal. In the early 2000s, in software development, everyone did this, and so did I. In those days, any new software or service the public met mostly favorably and you could immediately make sales. Somewhere after 2007 something broke (the market was saturated) and this scheme stopped working. Then it became fashionable to make freemium - the client starts using it for free, and then we try to sell it additional functionality. There will be some users of the product, but it’s completely unclear how much and how much money can be earned on it.
At about the same time, Eric Reese's book Business from Scratch. Lean Startup Method. Lean - means "thrifty, economical." The main idea of this book is that management and planning methods adopted in large and long-running businesses are not suitable for new businesses. The new business does not have reliable data on the market and sales, which does not allow making right management decisions. Therefore, it is necessary to formulate quickly and with small budgets to test many hypotheses about the needs of consumers and the functionality of the product.
Lean Startup is far from the only methodology for working on new products.
Back in 1969, Herbert Simon published the book “Sciences of the Artificial”, in which he described the concept of the so-called “design thinking” - a new (at that time) approach to the search for new solutions to creative and scientific problems. Combining this concept with the Lean Startup methodology and several other methodologies, the team of the Russian Investment Fund and the IIDF accelerator created a start-up development concept - a “traction card”.
In the accelerator of the Southern IT-park (Rostov-on-Don), we used the methodology of the IIDF for 7 sets of accelerator (3.5 years), and then refined it taking into account the experience gained. The accelerator technique of the Southern IT-park is distinguished by the essence and content of the first, very early stages of work on a business project. The need to create your own methodology is explained by the fact that IIDF works with projects that already have MVP and first sales, since this is primarily an investment fund. The accelerator of the Southern IT-park works with projects of all stages and the largest number of projects comes to the accelerator with the idea and the desire to develop it. The IIDF technique is poorly developed for the early stages of project development.
Having summarized my own experience as an entrepreneur, as well as a start-up tracker and business consultant, I formed my own methodology, which also differs in the first stages from the methods of IIDF and Southern IT-Park. Next, I will talk about the initial stages of working on a business project, according to these methods.
The main task of all these methods is to push your idea as soon as possible with consumers and either confirm its usefulness or develop and change your idea as soon as possible towards the needs of the market. If at the same time you find that nobody needs your product at all or it has a lot of very cheap competitors, then this is also a good result. Because you find out as soon as possible, without spending a few months of your life on an unviable business idea. Sometimes it happens that during a market research for a single product, a startup team finds relevant needs from consumers and starts making a completely different product. If you find the “pain of the client”, you can give him a solution and you are interested in doing this - you may well get a good business.
It may seem that I am against working on projects that do not make money. This is not true. You can engage in any, including non-profit projects and I do not blame you. I only warn you against dangerous delusions. Do not deceive yourself and comrades, telling everyone about the future of commercial success, if you have not done basic research and calculations, which will be discussed further. If you do not count on the commercial success of your project and do it, because you are interested in it or you want to make the world better, this is good, so present your project. By the way, it is possible that over time you will find a way for you to do business on such a project.
According to this concept, for the development of a new product it is necessary to go through a series of stages. This is a common place for all the methods under consideration - we do everything in steps, it is impossible to jump over the stages forward, we have to go back.
First of all, after the idea of your product has taken shape, you should come up with several customer segments - consumer groups who may need your product. These are hypotheses, you invent them based on your life experience. Then you will check them. Do not be afraid to come up with many hypotheses, or try to immediately come up with hypotheses that will be true. Until you begin to check them - you can not determine which of them are correct.
Customer segments should be immediately described - assess their capacity in your region, country, world, highlight the distinguishing features of this segment (how do consumers of this segment differ from other consumers). It would be nice to immediately assume the solvency of the segments. It is not worth much to “blow up” on the accuracy of the segment assessment; here it is important to follow common sense and understand that, for example, there are more car drivers in Russia than heavy truck drivers every 100. If you make a mistake, the proportion will be different - 50 or 200 - then at this stage it does not matter. It is important that this is approximately 2 orders of magnitude.
After the client segments are described and evaluated, you need to select one of the segments and go to the next stage of the trash card - this is the formation and testing of hypotheses about the problems of the client segment. Previously, you decided that your product is needed by a group of consumers, and now you have to come up with hypotheses - why these people need your product, what problems and tasks they will solve with the help of your product, how important and valuable it is for them to solve these problems.
In order to come up with and evaluate the hypotheses of customer segments, as well as come up with hypotheses of consumer problems, you need literally several hours of reflection. Already at this stage, your faith in your product may collapse, and you will continue to live, burying your idea without regrets.
After the hypotheses of consumer problems are invented, you need to check them. There is an excellent tool for this - problem interviews. In my habr.com/ru/post/446448 article , I briefly described the basic rules for conducting problem interviews. Be sure to read Rob Fitzpatrick's book “Ask for Mom” - this is a very interesting, small and useful guide on how to ask questions, to clarify the facts and weed out judgments and assumptions.
It is strongly recommended to work simultaneously with only one segment for focusing efforts and greater reliability of results. If you talk with representatives of several client segments during the day, you can get confused about who told you what.
An alternative name for the first stages of generating and testing hypotheses is Customer Discovery.
If you are honest with yourself, ask the right questions and record the answers of the interlocutors (ideally on the voice recorder), then you will have factual material on the basis of which you confirm or deny your hypotheses, find (or will not find) the actual problems of consumers to solve You can offer a product. You also need to figure out the value of solving these problems — why solving these problems is important, what benefit the consumer is given by solving these problems or eliminating what suffering and losses. The value of solving a problem is related to the future pricing of the product. If the consumer is aware of his own benefit or savings from solving the problem, then it is quite possible to tie the price of your decision to this benefit.
When you know about the actual problems of consumers and the value of solving these problems for consumers, you can do the MVP. What just do not call this abbreviation. I will now try to explain the meaning of MVP, as I understand it. MVP is such a thing that allows you to convincingly demonstrate your solution to the problems you have found to consumers and to check whether such a solution is suitable and valuable to consumers. The consumer response to MVP gives you the opportunity to confirm or refute your hypotheses of consumer problems and the value of solving these problems for consumers.
Based on this idea of MVP, I argue that in many cases, the presentation (personal or landing page on the site - landing) can act as an MVP, which tells about the problem and your solution and implies the consumer performing the target action - call, message, order , entering into an agreement, making an advance payment, etc. In some cases, the solution can be implemented manually for several clients. And only in a small percentage of cases, in order to confirm the hypotheses of problems and values, is it really necessary to develop something. In this case, you need to implement the most basic function that solves one of the most common problems of consumers. The solution should be visual, convenient and attractive. If you have a choice - to work on the design of the product with one function or implement several functions, choose the development of an attractive design.
If a potential customer is ready to give you an advance and is looking forward to the appearance of your product, then this is the strongest confirmation of your hypothesis about his problem, your solution and the value of your solution. In most cases, no one will give you an advance immediately, but the presence of MVP allows you to discuss with consumers the solution you offer to their problem and the cost of your solution. Very often, when you tell someone about your product, you meet approval and participation. However, when you offer to buy a product, you will learn a lot of useful things. For example, that a problem is not a problem at all and it is not necessary to solve it. Or that your decision is bad for a number of reasons. Or that the price is very high, because there are more affordable competitors, etc.
The first sales or concluded contracts are considered confirmation of the hypotheses about the problem, your solution and value. After that, you can begin to make the first version of the product, taking into account all the information received, and develop sales. I will focus on this in the description of the IIDF methodology and show how other methods differ.
We proceeded from the following considerations - in addition to the recommended procedure, it would be nice to give the recommended work tools and a formalized description of the desired result. If the result is not received, then you need to continue working at this stage or return to the previous one. Thus, the technique acquires the features of the framework, as it contains quite strict prescriptions - what and how to do, what tools to use, what results should be obtained.
When you have an idea for a new product, first of all you need to find out what real, existing and actual consumer problems can be solved with the help of your idea. Therefore, we removed the stage of client segment hypotheses and immediately turned to problem hypotheses. To begin with, it is important to find any group of people who may benefit from your product, and then it will be possible to understand what they have in common and segment them.
Thus, the first stage of project development is the compilation of a set of hypotheses of problems. To draw up hypotheses, it is proposed to reflect on the problems of potential customers, as well as to delve into these problems. For each perceived problem, you need to list the steps (tasks) that need to be performed to solve this problem. And then for each step, assume problem solving tools. Do not strain yourself too much in inventing instruments, but if they are obvious to you, then you should fix them right away. Let me explain by example.
This work on the decomposition of possible problems of potential customers of your product is conveniently carried out with the help of mental maps (mind maps). In essence, these are trees into which you consistently reveal the levels of problem study. I have a separate article about this, where the methods of working with hypotheses using mental maps are discussed in more detail.
So, you spent several hours thinking about problems, tasks, tools (solutions) and their shortcomings. What does this give you?
First, you have reviewed and systematized the landscape of the “battlefield” - thinking about many things that you will have to deal with if you do continue to work on the project.
Secondly, you have a detailed plan for conducting a problem interview. You just have to come up with questions to find out how your assumptions correspond to the real world of your potential customers.
Thirdly, the hypotheses that you have invented are related to your future product as follows: existing solutions (tools) for consumer tasks are your competitors, disadvantages competitors can become your advantages if you find a way to overcome them, and basic tasks (core features) of your product.
Armed with hypotheses, you can proceed to the next stage - confirmation of hypotheses using problem interviews. This stage is similar to the stage of the IIDF traction card, but again there is a slight difference in the tools and fixation of the results. In the method of the accelerator of the Southern IT-Park, we insist on defining and fixing the level of awareness of problems, tasks and difficulties of the interviewed potential consumer according to the levels of Ben Hunt's ladder. It is important to understand how much a customer is worried about a particular problem, task, lack of an existing solution, is it ready to put up with it, or has it already done something to correct the situation. This is important because if the respondent confirmed to you that he has a problem, this does not mean that he is ready to buy a solution to this problem. If he told you about his attempts to solve the problem, the methods and tools that he tried, then he is probably ready to buy a solution. However, the question of price remains open and therefore it is important to find out in the course of the interview budgets that were previously spent on trying to solve problems, problems and difficulties. The budget in this case is not only money, but also the time that the consumer spent.
Analyzing the results of the interview, we single out groups of respondents who confirmed the same hypotheses. In fact, we are looking for patterns of consumer behavior - the same unmet needs. At this stage, we are trying to segment consumers around patterns of their consumer behavior. Consumer segmentation after the interview based on the obtained facts seems to us more reliable than the segmentation at the stage of hypotheses.
If you are satisfied with the results of problem interviews - you have found patterns of consumer behavior, common problems and were able to successfully segment potential clients, discovered their budgets for solving problems, then you can proceed to the next stage - product modeling and MVP. Before implementing anything, we suggest designing and modeling it. At the stage of product modeling, we strongly recommend that you describe the business processes of customers that you plan to change using your product. It is well to understand how your consumer lives and solves his problems now. And then integrate the business processes of your product into the business processes of the consumer. Having done this work, you will understand well what you are going to do; you will be able to explain the essence and place of your product in the client's processes to any interested person - a potential partner, investor, developer, and the potential client himself.
The presence of such project documentation allows you to estimate the cost of product development and highlight the most basic functionality that we can quickly and inexpensively implement in MVP. You can also decide on the essence of MVP - it will be a presentation or a “manual MVP” or you will have to develop something to demonstrate value to a potential client.
An important element of the product modeling stage is the evaluation of the project's economy. Suppose there are specialists in the project team who can develop the MVP themselves and need money for the development. It is important to understand that this is not enough. In order to sell your product, you need to attract consumers - use advertising channels that are not free. For the first sales, you can use channels that do not require large investments — you can make cold calls yourself or give out flyers in the parking lot, but the capacity of such channels is small, your time is also worth the money and sooner or later you will delegate this work to hired employees. Therefore, it is very important to choose several channels to attract customers and estimate the cost of attracting customers in these channels. To do this, you can use data from different sources, ask about the indicators from the experts or conduct your own experiments.
The cost of attracting a paying customer is one of the most important parameters determining the value of your product for a customer. Your product cannot cost less than this amount - since in this case you will definitely generate a loss from the very beginning. Your budget for the development and support of the product, as well as your profits as the founders of the business - is contained in the difference between the price of your product and the cost of attracting customers.
At this stage, many projects are tempted to say - we will attract customers through organic search traffic and virality - this is almost free. They are right about the cheapness of the attraction, but forget about the fact that these channels are slow, unwind for a long time and they have a small capacity. It is also important to keep in mind this circumstance - professional investors invest in projects for which there are clear and cost-effective scalable, capacious paid channels to attract customers. Under organic traffic only investments do not give.
If at this stage you have no problems - your product is modeled, the way of creating and MVP functionality is defined, the channels for attracting customers are defined and the project's economy seems to be profitable, then you can proceed to the next stage - the creation of MVP. This stage is simple and practically does not differ from the previously considered stage of the IIDF tracing card. After the MVP is created, you need to get the first sales, implementation. The process of making deals, sales, test use of your MVP can be delayed and will definitely bring feedback from customers - you will find out why your decision is bad, why it cannot be implemented, what are your shortcomings and what other competitors you have that you didn’t know about before . If all this does not kill your product and your faith in it, then you will be able to refine the MVP and go to the next stages - meaningful sales in the channels. At this point, I’ll stop and consider the most common pitfalls that await you in the development of a business project using the methodologies described above.
Let me remind you why the methods of work on startups were created. The main task is to learn to quickly check ideas, identify and “bury” non-viable, so as not to waste resources in vain (time and money). The use of these techniques does not change the statistics, according to which 90-95% of new businesses die in the first year of existence. Techniques for developing startups accelerate the death of unviable business ideas and reduce losses.
An idea that was tested and “buried” quickly is a good result. The idea for which a product was developed and put on the market, the sales of which did not go on, is a bad result.A product developed in accordance with the identified needs, for which pre-orders were collected, the profit from which sales covers the costs of advertising, production and development, and also allows returning investments within a reasonable time - this is a very good result. A product that was able to be redone and “deployed” at the first sales stage, making it relevant to customer needs and cost-effective given the cost of attracting customers is also a good result.
The most common problem is incorrectly conducted problem interviews. She has varieties:
The consequence of incorrectly conducted interviews is usually an erroneous decision about the need for further development of the project (objectively - unviable and unnecessary). This leads to a waste of time (often several months) to develop the MVP and then at the first sales stage it turns out that no one wants to buy the product. There is also a heavier form - when at the first sales the cost of attracting a customer is not taken into account and the product seems to be viable, but at the stage of meaningful sales, the business model and product are unprofitable. That is, with properly conducted interviews and a fair assessment of the project’s economy, one could save a few months of life and impressive amounts of money.
The next common problem is the misallocation of resources between MVP development and sales. Very often, projects that make MVP spend too much time and money on it and when it comes time for first sales they do not have a budget for testing sales channels. Repeatedly, we came across projects that “buried” hundreds of thousands and millions of rubles into development, did not just MVP, but a finished product and then could not (or did not want) spend at least 50-100 thousand rubles on testing channels and trying to quickly pay to attract customers.
Another common problem is that during the interview, the project team understands that their original idea is not viable, but reveals several actual problems on the solution of which you can build a business. However, the team refuses to make a pivot (turn) and generate new ideas based on the identified needs, arguing that "they are not interested in other topics." At the same time, they can continue to dig "dead topic" or even quit trying to make a startup.
There are 2 problems that I personally think are not well solved in the methods described above.
1. Too late assessment of the cost of attracting customers. The above techniques do not prescribe you to estimate the cost of attracting customers until you have confirmed the demand for your solution. However, conducting problem interviews and processing their results is a rather laborious task. It usually takes from one to several weeks. In order to reliably test hypotheses you need to have at least 10 conversations. On the other hand, it is possible to estimate the cost of attracting a paying client in literally 1-2 hours by searching the data on the network and averaging it. I will give an example.
Suppose we are talking about a tender platform where customers place bids for a product or service, and suppliers offer themselves and their prices. The site is going to earn commissions on transactions or subscription fees from users. Already at the stage of the idea we can assume several channels through which users will be involved. Suppose that we will attract customers with cold calls and advertising in search engines, and suppliers - advertising in search engines and social networks. Already at this stage it can be understood that the cost of attracting an active supplier will most likely be around 1,000 rubles. Suppose that attracting suppliers will cost 200 rubles. Then the first transaction will require approximately 2000 rubles. Further, we can conclude that for each transaction, it is desirable for us to earn at least 1000 rubles. Respectively,we need to relate this minimum acceptable commission to our idea. If we are talking about a tender site, where they order services up to 1000 rubles, then we will not be able to receive a commission of 1000 rubles. with each transaction. If we are talking about a site where services for 100,000 rubles are ordered, then such a business model can be profitable. So, even before working out hypotheses and conducting problem interviews, it is possible to reveal the unviable nature of an idea.
2. There is no attempt to test the solution through the sale to the MVP development stage. Techniques do not prescribe a mandatory test of the hypothesis about the acceptability of your solution for a client before developing an MVP. I believe that after analyzing problem interviews, it is appropriate to think over the concept of solving the identified problems. In the methodology of the Southern IT Park, this is reflected as a solution modeling. However, I believe that it is worth going further and making a presentation of the solution, with the help of which to get the opinion of consumers about your vision of solving their problems. In the literature, this is sometimes called an “interview of a decision.” You actually present your product model to potential customers and get their opinion on the future product and, possibly, pre-orders and first sales. This allows you to test the hypotheses of the value of your solution at very low cost,and at the same time clarify the assessment of the cost of attracting customers, even before the start of the development of MVP.
In the upper part of the diagram, the methods of FRIA and Southern IT-park are shown. Progress through the stages from left to right. The arrows show the shifted stages, and the bold outline outlines the new stages that were not in the IIDF method.
After analyzing my experience and the most common causes of death for startups, I propose a new technique, indicated in the diagram - Problem-solution fit framework.
I suggest starting with the stage “Hypotheses of client segments and choosing a segment for study”, because for the subsequent creation and testing of hypotheses of problems, you still need to understand who you are dealing with and take into account the capacity and solvency of the segment.
The next stage is a new one, it has not been met before. When we chose a segment to work through, we need to think about how we can contact these consumers and how much it will cost to try to sell them something. The availability of representatives of the segment for a conversation is important if only because it will be necessary to meet with similar people to conduct problem interviews. If you find contacts of such people, as well as calling and arranging a meeting, will be a problem for you, then why paint in detail hypotheses about their needs? Already at this stage a return to the choice of another segment may occur.
Then there are two stages like in the Southern IT-Park methodology - building a detailed map of hypotheses of problems, tasks, tools and difficulties of consumers, and further - problem interviews with consumers to test hypotheses. The difference of my methodology from those previously reviewed is that during problem interviews, more attention needs to be paid to understanding the problematic business processes of consumers who have confirmed the existence of problems. It is necessary to understand what they do, how, when and how often a problem arises, how they tried to solve it, what solutions are acceptable and unacceptable for them. By modeling clients' business processes, we then build our solution into them. At the same time, we are well aware of the conditions in which the existing restrictions will have to work.
Further, understanding the essence of our future product and the environment of potential customers, in which it will be, we can evaluate the economics of the project - calculate the investment, the cost of the product, think over the monetization model and the price of the product, and analyze competitors. After that, you can make a reasonable and balanced decision to continue the work on the project.
After that, you will have all the necessary information to present your product to potential customers - you know what customer problems you can solve, you come up with a way to solve these problems (product), you understand how good your solution will be, and you have decided on the price of your product . The collected information is enough to create a presentation about the product and try to sell your product to the most active part of the customer segment - early followers. Show the presentation to potential customers and get feedback from them. A good outcome are pre-orders with an advance. If you have been paid an advance, then your product is great for the client, and he is ready to buy it at any time. Crowdfunding sites (for example, Kickstarter) implement this principle on the Internet. Nothing prevents you from doing the same thing yourself.If customers are not ready to enter into a contract, then you have the opportunity to ask about the causes and conditions - what needs to be done so that they buy your product. The contracts entered into and the advances received best support your hypothesis about your customer problem solving (product).
After that, you can begin to produce the first version of the product, which corresponds to the description under which you received pre-orders. When the product is ready, you transfer it to the first customers. After a period of test use, you collect the opinions of the first customers about the product, determine directions for product development, and then build meaningful, serial sales.
The article was quite long. Thank you for reading to the end. If you go through all the stages using any of the described methods, this means that you have a product that someone needs. If you have not used any of the methods and your product has sales, it means that someone needs your product.
A business is obtained when you understand who buys your product and why, and how much you can pay to attract a customer. Then you can search for profitable promotion channels and scale sales, then you will have a business. If you do not know who buys your product and why, then you should understand this by talking to users. It’s impossible to build a sales system if you don’t know who to sell and what product benefits to customers bring.
In this article I will show several methods of working on a business idea - what you should think about right away, what indicators to calculate, what works to plan in the first place to test the idea in a short time and with minimal expenses.
Why do you need this?
Suppose you come up with some kind of new product or service (I will call it a product, regardless of whether it is a service, a device, or software). The first thing that, in my opinion, is worth thinking about is what the work on this product will give you, why do you personally work on this product?
The most popular answers to this question (the sequence does not matter):
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- I am interested in this idea and I want to develop it regardless of whether it is possible to earn money from it.
- I want to learn new tools and technologies, apply them to a new task.
- I want to create a popular product and make a lot of money, much more than you can earn by working for hire.
- I want to improve some processes, someone's work or life, to make the world a better place.
- I want to work for myself, on my ideas, and not “on my uncle”.
And so on. There are still many different answers. Those that I cited are more common. At this stage, it is important to be honest with yourself and not engage in self-deception. Of the 5 responses to the creation of a business, in fact, only one leads - № 3, the rest - about the interests, dreams and personal comfort. Creating your own business allows you to earn more than working for hire. However, it will have to be paid for by hard, sometimes uninteresting and routine work, discomfort and often a deterioration in the standard of living for the first time. Suppose you are going to make a business out of your idea, then move on.
Necessary conditions for creating a business
For the success of your business, you need to want to create and develop a product, have the necessary skills to do this, or be ready to acquire them (like learning yourself, and attracting partners and hiring employees). But perhaps the most important thing is that you need to find a sufficiently capacious and solvent market for your product, to form the price of your product so that the business makes a profit, not a loss. And also get an accurate understanding of how and why consumers will choose and buy exactly your product. Businesses often die, not because they have a bad product, but because nobody needs this product for the price that will enable the business to operate at a loss.
Suppose you want to work on a product, you have the necessary knowledge and skills, you have the time and you are even willing to invest in the project a certain amount of your savings, which should be enough for the first time. What do you do next, what action plan?
Action plan
It often happens that the idea is transformed into a more or less detailed technical task and the project team (consisting of the authors of the idea and sympathizers) starts the project implementation. In the course of work, they think over the details and after a few months, an alpha or even a beta version appears, which can be shown to potential users. Far from all are living up to this point, I would even say a small part, and this is normal. In the early 2000s, in software development, everyone did this, and so did I. In those days, any new software or service the public met mostly favorably and you could immediately make sales. Somewhere after 2007 something broke (the market was saturated) and this scheme stopped working. Then it became fashionable to make freemium - the client starts using it for free, and then we try to sell it additional functionality. There will be some users of the product, but it’s completely unclear how much and how much money can be earned on it.
At about the same time, Eric Reese's book Business from Scratch. Lean Startup Method. Lean - means "thrifty, economical." The main idea of this book is that management and planning methods adopted in large and long-running businesses are not suitable for new businesses. The new business does not have reliable data on the market and sales, which does not allow making right management decisions. Therefore, it is necessary to formulate quickly and with small budgets to test many hypotheses about the needs of consumers and the functionality of the product.
Lean Startup is far from the only methodology for working on new products.
Back in 1969, Herbert Simon published the book “Sciences of the Artificial”, in which he described the concept of the so-called “design thinking” - a new (at that time) approach to the search for new solutions to creative and scientific problems. Combining this concept with the Lean Startup methodology and several other methodologies, the team of the Russian Investment Fund and the IIDF accelerator created a start-up development concept - a “traction card”.
In the accelerator of the Southern IT-park (Rostov-on-Don), we used the methodology of the IIDF for 7 sets of accelerator (3.5 years), and then refined it taking into account the experience gained. The accelerator technique of the Southern IT-park is distinguished by the essence and content of the first, very early stages of work on a business project. The need to create your own methodology is explained by the fact that IIDF works with projects that already have MVP and first sales, since this is primarily an investment fund. The accelerator of the Southern IT-park works with projects of all stages and the largest number of projects comes to the accelerator with the idea and the desire to develop it. The IIDF technique is poorly developed for the early stages of project development.
Having summarized my own experience as an entrepreneur, as well as a start-up tracker and business consultant, I formed my own methodology, which also differs in the first stages from the methods of IIDF and Southern IT-Park. Next, I will talk about the initial stages of working on a business project, according to these methods.
The main task of all these methods is to push your idea as soon as possible with consumers and either confirm its usefulness or develop and change your idea as soon as possible towards the needs of the market. If at the same time you find that nobody needs your product at all or it has a lot of very cheap competitors, then this is also a good result. Because you find out as soon as possible, without spending a few months of your life on an unviable business idea. Sometimes it happens that during a market research for a single product, a startup team finds relevant needs from consumers and starts making a completely different product. If you find the “pain of the client”, you can give him a solution and you are interested in doing this - you may well get a good business.
It may seem that I am against working on projects that do not make money. This is not true. You can engage in any, including non-profit projects and I do not blame you. I only warn you against dangerous delusions. Do not deceive yourself and comrades, telling everyone about the future of commercial success, if you have not done basic research and calculations, which will be discussed further. If you do not count on the commercial success of your project and do it, because you are interested in it or you want to make the world better, this is good, so present your project. By the way, it is possible that over time you will find a way for you to do business on such a project.
FRIA Traction Card
According to this concept, for the development of a new product it is necessary to go through a series of stages. This is a common place for all the methods under consideration - we do everything in steps, it is impossible to jump over the stages forward, we have to go back.
First of all, after the idea of your product has taken shape, you should come up with several customer segments - consumer groups who may need your product. These are hypotheses, you invent them based on your life experience. Then you will check them. Do not be afraid to come up with many hypotheses, or try to immediately come up with hypotheses that will be true. Until you begin to check them - you can not determine which of them are correct.
Customer segments should be immediately described - assess their capacity in your region, country, world, highlight the distinguishing features of this segment (how do consumers of this segment differ from other consumers). It would be nice to immediately assume the solvency of the segments. It is not worth much to “blow up” on the accuracy of the segment assessment; here it is important to follow common sense and understand that, for example, there are more car drivers in Russia than heavy truck drivers every 100. If you make a mistake, the proportion will be different - 50 or 200 - then at this stage it does not matter. It is important that this is approximately 2 orders of magnitude.
After the client segments are described and evaluated, you need to select one of the segments and go to the next stage of the trash card - this is the formation and testing of hypotheses about the problems of the client segment. Previously, you decided that your product is needed by a group of consumers, and now you have to come up with hypotheses - why these people need your product, what problems and tasks they will solve with the help of your product, how important and valuable it is for them to solve these problems.
In order to come up with and evaluate the hypotheses of customer segments, as well as come up with hypotheses of consumer problems, you need literally several hours of reflection. Already at this stage, your faith in your product may collapse, and you will continue to live, burying your idea without regrets.
After the hypotheses of consumer problems are invented, you need to check them. There is an excellent tool for this - problem interviews. In my habr.com/ru/post/446448 article , I briefly described the basic rules for conducting problem interviews. Be sure to read Rob Fitzpatrick's book “Ask for Mom” - this is a very interesting, small and useful guide on how to ask questions, to clarify the facts and weed out judgments and assumptions.
It is strongly recommended to work simultaneously with only one segment for focusing efforts and greater reliability of results. If you talk with representatives of several client segments during the day, you can get confused about who told you what.
An alternative name for the first stages of generating and testing hypotheses is Customer Discovery.
If you are honest with yourself, ask the right questions and record the answers of the interlocutors (ideally on the voice recorder), then you will have factual material on the basis of which you confirm or deny your hypotheses, find (or will not find) the actual problems of consumers to solve You can offer a product. You also need to figure out the value of solving these problems — why solving these problems is important, what benefit the consumer is given by solving these problems or eliminating what suffering and losses. The value of solving a problem is related to the future pricing of the product. If the consumer is aware of his own benefit or savings from solving the problem, then it is quite possible to tie the price of your decision to this benefit.
When you know about the actual problems of consumers and the value of solving these problems for consumers, you can do the MVP. What just do not call this abbreviation. I will now try to explain the meaning of MVP, as I understand it. MVP is such a thing that allows you to convincingly demonstrate your solution to the problems you have found to consumers and to check whether such a solution is suitable and valuable to consumers. The consumer response to MVP gives you the opportunity to confirm or refute your hypotheses of consumer problems and the value of solving these problems for consumers.
Based on this idea of MVP, I argue that in many cases, the presentation (personal or landing page on the site - landing) can act as an MVP, which tells about the problem and your solution and implies the consumer performing the target action - call, message, order , entering into an agreement, making an advance payment, etc. In some cases, the solution can be implemented manually for several clients. And only in a small percentage of cases, in order to confirm the hypotheses of problems and values, is it really necessary to develop something. In this case, you need to implement the most basic function that solves one of the most common problems of consumers. The solution should be visual, convenient and attractive. If you have a choice - to work on the design of the product with one function or implement several functions, choose the development of an attractive design.
If a potential customer is ready to give you an advance and is looking forward to the appearance of your product, then this is the strongest confirmation of your hypothesis about his problem, your solution and the value of your solution. In most cases, no one will give you an advance immediately, but the presence of MVP allows you to discuss with consumers the solution you offer to their problem and the cost of your solution. Very often, when you tell someone about your product, you meet approval and participation. However, when you offer to buy a product, you will learn a lot of useful things. For example, that a problem is not a problem at all and it is not necessary to solve it. Or that your decision is bad for a number of reasons. Or that the price is very high, because there are more affordable competitors, etc.
The first sales or concluded contracts are considered confirmation of the hypotheses about the problem, your solution and value. After that, you can begin to make the first version of the product, taking into account all the information received, and develop sales. I will focus on this in the description of the IIDF methodology and show how other methods differ.
Accelerator Technique of the Southern IT Park
We proceeded from the following considerations - in addition to the recommended procedure, it would be nice to give the recommended work tools and a formalized description of the desired result. If the result is not received, then you need to continue working at this stage or return to the previous one. Thus, the technique acquires the features of the framework, as it contains quite strict prescriptions - what and how to do, what tools to use, what results should be obtained.
When you have an idea for a new product, first of all you need to find out what real, existing and actual consumer problems can be solved with the help of your idea. Therefore, we removed the stage of client segment hypotheses and immediately turned to problem hypotheses. To begin with, it is important to find any group of people who may benefit from your product, and then it will be possible to understand what they have in common and segment them.
Thus, the first stage of project development is the compilation of a set of hypotheses of problems. To draw up hypotheses, it is proposed to reflect on the problems of potential customers, as well as to delve into these problems. For each perceived problem, you need to list the steps (tasks) that need to be performed to solve this problem. And then for each step, assume problem solving tools. Do not strain yourself too much in inventing instruments, but if they are obvious to you, then you should fix them right away. Let me explain by example.
You have come up with a service that helps in choosing and buying a used car. The problem is - to choose and buy a used car without hidden flaws at an adequate market price in the shortest possible time.Note that at this stage we do not think about who our client is and what his features are - how qualified he is in self-selection of cars and what is his budget. We lay out the problem "for parts".
Steps (tasks) of a potential client:
To determine the model and modification, the years of release
Find options (instances)
Rate, test, compare instances
Select a specific instance
To carry out an examination of the technical condition
Discuss the details of the transaction and make a purchase
Put the car on the account
Each of these tasks can be solved in many ways, and surely there are tools that solve all these problems in a comprehensive manner. For example, car dealerships with used cars. They will be somewhat more expensive, but they give a guarantee.
Let's still try to pick up tools for each of the tasks. Determine the model will help more experienced acquaintances, viewing reviews on the network, a trip to car dealerships. Each of these solutions has flaws, it is desirable to fix the most obvious of them.
This work on the decomposition of possible problems of potential customers of your product is conveniently carried out with the help of mental maps (mind maps). In essence, these are trees into which you consistently reveal the levels of problem study. I have a separate article about this, where the methods of working with hypotheses using mental maps are discussed in more detail.
So, you spent several hours thinking about problems, tasks, tools (solutions) and their shortcomings. What does this give you?
First, you have reviewed and systematized the landscape of the “battlefield” - thinking about many things that you will have to deal with if you do continue to work on the project.
Secondly, you have a detailed plan for conducting a problem interview. You just have to come up with questions to find out how your assumptions correspond to the real world of your potential customers.
Thirdly, the hypotheses that you have invented are related to your future product as follows: existing solutions (tools) for consumer tasks are your competitors, disadvantages competitors can become your advantages if you find a way to overcome them, and basic tasks (core features) of your product.
Armed with hypotheses, you can proceed to the next stage - confirmation of hypotheses using problem interviews. This stage is similar to the stage of the IIDF traction card, but again there is a slight difference in the tools and fixation of the results. In the method of the accelerator of the Southern IT-Park, we insist on defining and fixing the level of awareness of problems, tasks and difficulties of the interviewed potential consumer according to the levels of Ben Hunt's ladder. It is important to understand how much a customer is worried about a particular problem, task, lack of an existing solution, is it ready to put up with it, or has it already done something to correct the situation. This is important because if the respondent confirmed to you that he has a problem, this does not mean that he is ready to buy a solution to this problem. If he told you about his attempts to solve the problem, the methods and tools that he tried, then he is probably ready to buy a solution. However, the question of price remains open and therefore it is important to find out in the course of the interview budgets that were previously spent on trying to solve problems, problems and difficulties. The budget in this case is not only money, but also the time that the consumer spent.
Analyzing the results of the interview, we single out groups of respondents who confirmed the same hypotheses. In fact, we are looking for patterns of consumer behavior - the same unmet needs. At this stage, we are trying to segment consumers around patterns of their consumer behavior. Consumer segmentation after the interview based on the obtained facts seems to us more reliable than the segmentation at the stage of hypotheses.
If you are satisfied with the results of problem interviews - you have found patterns of consumer behavior, common problems and were able to successfully segment potential clients, discovered their budgets for solving problems, then you can proceed to the next stage - product modeling and MVP. Before implementing anything, we suggest designing and modeling it. At the stage of product modeling, we strongly recommend that you describe the business processes of customers that you plan to change using your product. It is well to understand how your consumer lives and solves his problems now. And then integrate the business processes of your product into the business processes of the consumer. Having done this work, you will understand well what you are going to do; you will be able to explain the essence and place of your product in the client's processes to any interested person - a potential partner, investor, developer, and the potential client himself.
The presence of such project documentation allows you to estimate the cost of product development and highlight the most basic functionality that we can quickly and inexpensively implement in MVP. You can also decide on the essence of MVP - it will be a presentation or a “manual MVP” or you will have to develop something to demonstrate value to a potential client.
An important element of the product modeling stage is the evaluation of the project's economy. Suppose there are specialists in the project team who can develop the MVP themselves and need money for the development. It is important to understand that this is not enough. In order to sell your product, you need to attract consumers - use advertising channels that are not free. For the first sales, you can use channels that do not require large investments — you can make cold calls yourself or give out flyers in the parking lot, but the capacity of such channels is small, your time is also worth the money and sooner or later you will delegate this work to hired employees. Therefore, it is very important to choose several channels to attract customers and estimate the cost of attracting customers in these channels. To do this, you can use data from different sources, ask about the indicators from the experts or conduct your own experiments.
The cost of attracting a paying customer is one of the most important parameters determining the value of your product for a customer. Your product cannot cost less than this amount - since in this case you will definitely generate a loss from the very beginning. Your budget for the development and support of the product, as well as your profits as the founders of the business - is contained in the difference between the price of your product and the cost of attracting customers.
At this stage, many projects are tempted to say - we will attract customers through organic search traffic and virality - this is almost free. They are right about the cheapness of the attraction, but forget about the fact that these channels are slow, unwind for a long time and they have a small capacity. It is also important to keep in mind this circumstance - professional investors invest in projects for which there are clear and cost-effective scalable, capacious paid channels to attract customers. Under organic traffic only investments do not give.
If at this stage you have no problems - your product is modeled, the way of creating and MVP functionality is defined, the channels for attracting customers are defined and the project's economy seems to be profitable, then you can proceed to the next stage - the creation of MVP. This stage is simple and practically does not differ from the previously considered stage of the IIDF tracing card. After the MVP is created, you need to get the first sales, implementation. The process of making deals, sales, test use of your MVP can be delayed and will definitely bring feedback from customers - you will find out why your decision is bad, why it cannot be implemented, what are your shortcomings and what other competitors you have that you didn’t know about before . If all this does not kill your product and your faith in it, then you will be able to refine the MVP and go to the next stages - meaningful sales in the channels. At this point, I’ll stop and consider the most common pitfalls that await you in the development of a business project using the methodologies described above.
Pitfalls to which projects follow the methods described above.
Let me remind you why the methods of work on startups were created. The main task is to learn to quickly check ideas, identify and “bury” non-viable, so as not to waste resources in vain (time and money). The use of these techniques does not change the statistics, according to which 90-95% of new businesses die in the first year of existence. Techniques for developing startups accelerate the death of unviable business ideas and reduce losses.
An idea that was tested and “buried” quickly is a good result. The idea for which a product was developed and put on the market, the sales of which did not go on, is a bad result.A product developed in accordance with the identified needs, for which pre-orders were collected, the profit from which sales covers the costs of advertising, production and development, and also allows returning investments within a reasonable time - this is a very good result. A product that was able to be redone and “deployed” at the first sales stage, making it relevant to customer needs and cost-effective given the cost of attracting customers is also a good result.
The most common problem is incorrectly conducted problem interviews. She has varieties:
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The consequence of incorrectly conducted interviews is usually an erroneous decision about the need for further development of the project (objectively - unviable and unnecessary). This leads to a waste of time (often several months) to develop the MVP and then at the first sales stage it turns out that no one wants to buy the product. There is also a heavier form - when at the first sales the cost of attracting a customer is not taken into account and the product seems to be viable, but at the stage of meaningful sales, the business model and product are unprofitable. That is, with properly conducted interviews and a fair assessment of the project’s economy, one could save a few months of life and impressive amounts of money.
The next common problem is the misallocation of resources between MVP development and sales. Very often, projects that make MVP spend too much time and money on it and when it comes time for first sales they do not have a budget for testing sales channels. Repeatedly, we came across projects that “buried” hundreds of thousands and millions of rubles into development, did not just MVP, but a finished product and then could not (or did not want) spend at least 50-100 thousand rubles on testing channels and trying to quickly pay to attract customers.
Another common problem is that during the interview, the project team understands that their original idea is not viable, but reveals several actual problems on the solution of which you can build a business. However, the team refuses to make a pivot (turn) and generate new ideas based on the identified needs, arguing that "they are not interested in other topics." At the same time, they can continue to dig "dead topic" or even quit trying to make a startup.
There are 2 problems that I personally think are not well solved in the methods described above.
1. Too late assessment of the cost of attracting customers. The above techniques do not prescribe you to estimate the cost of attracting customers until you have confirmed the demand for your solution. However, conducting problem interviews and processing their results is a rather laborious task. It usually takes from one to several weeks. In order to reliably test hypotheses you need to have at least 10 conversations. On the other hand, it is possible to estimate the cost of attracting a paying client in literally 1-2 hours by searching the data on the network and averaging it. I will give an example.
Suppose we are talking about a tender platform where customers place bids for a product or service, and suppliers offer themselves and their prices. The site is going to earn commissions on transactions or subscription fees from users. Already at the stage of the idea we can assume several channels through which users will be involved. Suppose that we will attract customers with cold calls and advertising in search engines, and suppliers - advertising in search engines and social networks. Already at this stage it can be understood that the cost of attracting an active supplier will most likely be around 1,000 rubles. Suppose that attracting suppliers will cost 200 rubles. Then the first transaction will require approximately 2000 rubles. Further, we can conclude that for each transaction, it is desirable for us to earn at least 1000 rubles. Respectively,we need to relate this minimum acceptable commission to our idea. If we are talking about a tender site, where they order services up to 1000 rubles, then we will not be able to receive a commission of 1000 rubles. with each transaction. If we are talking about a site where services for 100,000 rubles are ordered, then such a business model can be profitable. So, even before working out hypotheses and conducting problem interviews, it is possible to reveal the unviable nature of an idea.
2. There is no attempt to test the solution through the sale to the MVP development stage. Techniques do not prescribe a mandatory test of the hypothesis about the acceptability of your solution for a client before developing an MVP. I believe that after analyzing problem interviews, it is appropriate to think over the concept of solving the identified problems. In the methodology of the Southern IT Park, this is reflected as a solution modeling. However, I believe that it is worth going further and making a presentation of the solution, with the help of which to get the opinion of consumers about your vision of solving their problems. In the literature, this is sometimes called an “interview of a decision.” You actually present your product model to potential customers and get their opinion on the future product and, possibly, pre-orders and first sales. This allows you to test the hypotheses of the value of your solution at very low cost,and at the same time clarify the assessment of the cost of attracting customers, even before the start of the development of MVP.
Comparison of techniques and description of my methodology - Problem-solution fit framework
In the upper part of the diagram, the methods of FRIA and Southern IT-park are shown. Progress through the stages from left to right. The arrows show the shifted stages, and the bold outline outlines the new stages that were not in the IIDF method.
After analyzing my experience and the most common causes of death for startups, I propose a new technique, indicated in the diagram - Problem-solution fit framework.
I suggest starting with the stage “Hypotheses of client segments and choosing a segment for study”, because for the subsequent creation and testing of hypotheses of problems, you still need to understand who you are dealing with and take into account the capacity and solvency of the segment.
The next stage is a new one, it has not been met before. When we chose a segment to work through, we need to think about how we can contact these consumers and how much it will cost to try to sell them something. The availability of representatives of the segment for a conversation is important if only because it will be necessary to meet with similar people to conduct problem interviews. If you find contacts of such people, as well as calling and arranging a meeting, will be a problem for you, then why paint in detail hypotheses about their needs? Already at this stage a return to the choice of another segment may occur.
Then there are two stages like in the Southern IT-Park methodology - building a detailed map of hypotheses of problems, tasks, tools and difficulties of consumers, and further - problem interviews with consumers to test hypotheses. The difference of my methodology from those previously reviewed is that during problem interviews, more attention needs to be paid to understanding the problematic business processes of consumers who have confirmed the existence of problems. It is necessary to understand what they do, how, when and how often a problem arises, how they tried to solve it, what solutions are acceptable and unacceptable for them. By modeling clients' business processes, we then build our solution into them. At the same time, we are well aware of the conditions in which the existing restrictions will have to work.
Further, understanding the essence of our future product and the environment of potential customers, in which it will be, we can evaluate the economics of the project - calculate the investment, the cost of the product, think over the monetization model and the price of the product, and analyze competitors. After that, you can make a reasonable and balanced decision to continue the work on the project.
After that, you will have all the necessary information to present your product to potential customers - you know what customer problems you can solve, you come up with a way to solve these problems (product), you understand how good your solution will be, and you have decided on the price of your product . The collected information is enough to create a presentation about the product and try to sell your product to the most active part of the customer segment - early followers. Show the presentation to potential customers and get feedback from them. A good outcome are pre-orders with an advance. If you have been paid an advance, then your product is great for the client, and he is ready to buy it at any time. Crowdfunding sites (for example, Kickstarter) implement this principle on the Internet. Nothing prevents you from doing the same thing yourself.If customers are not ready to enter into a contract, then you have the opportunity to ask about the causes and conditions - what needs to be done so that they buy your product. The contracts entered into and the advances received best support your hypothesis about your customer problem solving (product).
After that, you can begin to produce the first version of the product, which corresponds to the description under which you received pre-orders. When the product is ready, you transfer it to the first customers. After a period of test use, you collect the opinions of the first customers about the product, determine directions for product development, and then build meaningful, serial sales.
Conclusion
The article was quite long. Thank you for reading to the end. If you go through all the stages using any of the described methods, this means that you have a product that someone needs. If you have not used any of the methods and your product has sales, it means that someone needs your product.
A business is obtained when you understand who buys your product and why, and how much you can pay to attract a customer. Then you can search for profitable promotion channels and scale sales, then you will have a business. If you do not know who buys your product and why, then you should understand this by talking to users. It’s impossible to build a sales system if you don’t know who to sell and what product benefits to customers bring.
Source: https://habr.com/ru/post/460533/
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