First Steps To Validate Your Business Idea

 

Think of the problem, not Solution

Do you have a million-dollar business Idea in mind and don’t know HOW to proceed? Whether it is worth, investing time, money and effort?

This is the question that haunts many entrepreneurs and demotivates them from working on their business Idea. The best way to start when you have a business idea in your mind is to think of the problem it is trying to solve.

In this blog, you will figure out the WHAT of problem, WHO of problem, HOW of identifying and validating the problem. I will be explaining this with the help of interesting examples and correlations.

This blog gives an in-depth view of the first step mentioned in my previous article: Came up with a great Business Idea? What Next?—Which is about 6 steps to validate a Business Idea. Here we will go through 3 steps to identify and validate the problem.

The “WHAT” of your Problem

So, you have a new business idea in mind. The first step is to figure out the problem that it is trying to solve. There are many ways in which one can look at the problem.

I will come up with a simple and unique approach of looking at it. This approach will help you in identifying and figuring out problems in a logical way.

So WHAT is a problem? A Problem is any deviation from Standard/Ideal. This definition will solve our purpose for now.

To explain it, I will be viewing our life proceedings from a process point of view. Let us call it Life Process. Every activity we do is part of it and helps shape it. With every event or activity, we try/want to achieve something. We will name the result of activity as Resultant. Problem occurs when we cannot achieve it.

I will be defining two states here. The State defines our condition, status, experience, and standing. One is the state which we are experiencing currently. Let us call this Current State. The other state is the one which we expect/prefer to experience, will name it as Ideal State (Standard).

With states defined, you can always calculate the difference between them at any particular Event or Happening. The difference is the problem which we need to figure out and solve. It can be positive, negative or zero. We need to focus our attention on those Negative deviations.

Kindly have a look at the graph below to have a better understanding of what I am trying to convey here.

I am assuming the behavior of both the states to be linear to make things simpler. The behavior shown here is just for the sake of explanation. Kindly don’t go into its technicalities. The activities that we perform or events that take place in our life, forms the X axis, while their result forms the Y axis.

This graph will vary from person to person. At the first event, we can see that the person experienced the unexpected (positive deviation from Ideal State), while at the 3rd event we can see that he experienced some type of problem (negative deviation from Ideal State).

For example, UBER was established to solve the problem faced by people in hiring a cab in San Francisco. People had to wave their hand until they can hail a taxi in snow, rain, wind and even after boarding the taxi they had to negotiate with driver for change and tip. The overall experience of Taxi hailing was frustrating. We will call this state of people as their Current State. People wanted something better, they wanted a better experience. Their expectations or wants define the Ideal State. UBER just narrowed the gap between the two states and thus solved the problem.

The above explanations demand us to look at the problem from a different perspective. Following things define the WHAT of problem:

1. Ideal State (preferred condition)
2. Current State (existing condition)
3. Event that triggers the states

We should not only look at the Problem, but also the Event that triggered it and Expectation of the audience from the result of that event (Ideal State).

For UBER the problem is the pain experienced by people in Taxi hailing, the Ideal state is on-demand and cheap Taxi-hailing service and the Event is the act of person looking for Taxi.

To Do: Write the Problem down, State the assumption of Ideal State and note down the Event that triggers the problem. These assumptions will be validated in the last stage i.e. WHO of problem.

 

Categorizing the “WHAT”

We have defined the WHAT above, It’s time we dig into it and break it down further.

WHAT is divided into categories based on the Intensity of the problem (extent of deviation from Ideal State) and Frequency (number of occurrences of Event):

1. Common problems:

From the process point of view, these problems are the usual, historical, quantifiable variation in a system. All problems which come within X deviation from the Ideal State. We will call this X, Tolerance limit.

Though we experience them, they don’t affect us psychologically. These are the problems that we don’t mind, don’t think about.

2. Key problems:

From the process point of view, these are problems which occur outside X deviation from the Ideal State.

We experience these problems, they affect us psychologically. These are the problems that we mind, we think about, we hope that a solution existed for solving them.

3. Routine problems:

From the process point of view, these are problems which occur routinely. The frequency of its occurrence is more than Y.

These are the problems which we experience frequently in our day to day life. The Event that triggers their occurrence happen at least daily. These form part of our habit.

4. Non-routine problems:

From the process point of view, these are problems which occur rarely. The frequency of its occurrence is less than Y.

These are the problems which we experience rarely. The Event that triggers their occurrence happen rarely. These don’t form part of our Habit.

Take a look at the below graph to gain a better understanding of the theory explained above:

This chart is a day’s picture of Male, White, 25–30 years of age, Bachelor, living in San Francisco, working as Manager, earning $40,000 per year and who loves to party.

The Ideal state, Current state, and Tolerance limit is of the profile described above. This data comes after doing in-depth research on your target audience, which will be done in the next stage.

Here we can notice that the Event of going anywhere be it office, home, or for the party is giving rise to key and routine problems. While in other cases like Getting ready or Working in office, problems experienced are common and non-routine problems. UBER just identified and solved the key and routine problems.

To Do: Categorize the identified problem in categories defined above.

 

The “WHO” of your problem:

We have defined and categorized the WHAT of problem. It’s time we validate things we have defined, let’s define the WHO.

States defined above namely Current and Ideal depends upon a lot of parameters such as WHO of the person, WHAT of his/her ability, beliefs etc.

For simplicity, these parameters have been grouped under the below mentioned Standard Customer Market Segmentation Categories:

1. Geography: Based on regional variables such as region, climate, population density and population growth rate.
2. Demography: Based on variables such as age gender, ethnicity, education, occupation, income, and family status.
3. Psychography: Based on values, attitudes, interests and lifestyle.
4. Behavior: Based on variables such as usage rate and patterns, price sensitivity, brand loyalty, and benefits sought.

To Do: Define the WHO of your problem with the help of the resources mentioned above.

---

We have defined the WHAT and WHO of the problem, it’s time we validate them. Kindly follow the following steps for market segmentation and problem validation:

1. The WHO can be you, me, anyone. Do profiling of the identified WHO based on the above-mentioned categories.
2. Do profiling as precisely and focussed as possible, as this is the first step where you define the target audience.
3. Make a list of known people who qualify your defined profile. If you cannot make up a list of minimum 70–80 names, find the remaining people via LinkedIn or referrals from the existing people.
4. After figuring out 70–80 names, it’s time we contact them. You can contact them over mail, phone or any other social networking platform, whichever is feasible.
5. Try to arrange a short meeting. Be prepared with the set of questions you need to ask. You can use free online services like Survey Monkey or Google Forms for creating surveys.

Extract the following information while contacting your target audience:

1. Try to extract as much information about the person as possible. This will help you in getting more insights about your target audience. Fill in as much segmentation fields as you can.
2. Their daily schedule.
3. WHAT are the problems s/he faces, HOW key are those (Intensity), WHY and WHEN do they arise (Event), HOW often do they arise (Frequency).
4. Also ask HOW s/he solves them, WHAT s/he expects the solution to achieve (Ideal State). It will be better if you can make a sheet with problems forming the rows and validations columns.
5. Put your identified problem in front of him and ask the above questions.

After the above exercise, you have at least 30–40 responses with you. It’s time we analyze them. The following steps will help you analyze them:

1. Write the responses down with problems as rows, validations and profile of the person as columns.
2. Just have a look at the all the responses. You will more or less figure out whether your identified problem is a key problem or not.
3. Group the same problems together, Write the number of people for whom it is a key problem, take the average of frequency, write the other things as it is.
4. Analyze the responses of your problem. See whether it is a key problem for at least 20 people out of the interviewed. If not, figure out what went wrong. Either the problem that you are solving is not a key problem or the target audience that you selected is wrong. But don’t be disheartened, you have learned a lot on your way to validating the problem. You still have a list of other problems to solve. Make the required changes in your approach and proceed to the next step.
5. Check the frequency of your identified key problems. Key problems that arise routinely are the ones you need to solve.
6. Also, check the expectations of your target audience from the result of the event (Ideal State).

After performing the above exercise, the relationship between Event, Problem, Target audience and Ideal State will be pretty much figured out. You can always iterate to refine your results and understanding. All of your assumptions are validated now.

To Do: Note down the Event that triggers the Problem, Expectations from the result of the event, the problem and Target audience.

Now you have enough data to make the graphs explained above. The graph will help you visualize things in a better way as it will give you a unified view of every parameter figured out till now. It will help you in analyzing the existing data and predicting trends for similar market segments.

The Art of Making Graphs: Select the profile. Draw the series of events that takes place in a day of the defined profile, on the X axis. Draw a horizontal line at some distance from X axis for each event, to signify his/her Ideal State. Draw a horizontal at Y distance from Ideal State line. Y depends upon the intensity of difference between the two states. See whether it should fall beneath, above or at same level w.r.t Ideal State line. This line will be your Current State line.

The next steps that you’ll need to take will involve searching for existing solutions for the problem that you have identified in this step. For a quick look on the remaining 5 steps, check out Came up with a great Business Idea? What Next?.

Came up with a great Business Idea? What Next?

Do you have a million-dollar business idea in your mind and don’t know HOW to proceed? Whether it is worth, investing time, money and effort?

This is the question that haunts many entrepreneurs and stops them from working on their business idea. The reason behind this is lack of insightful data available online to guide one through the steps. That’s where my motivation comes from when writing this article.

Hopefully, by the end, you’ll understand WHAT to do, HOW to do, WHEN to do and WHY to do things if you have a great new business idea.

Stop being a wantrepreneur. Think of a new business idea, do a set of exercises or validations before taking a decision on whether to move forward with the business idea or not and make a business out of it. Here are 6 early steps you can take if you have a great business idea in mind:

1. Explore the WHY and Define the WHO:

The first step is to think about the reason behind the business idea. Why did the business idea pop up into your head? What is the problem it is trying to solve? Deep dive into finding the actual problem and stating it.

Does the problem exist for everyone—Or, is it just you? Define the market segment for which it exists. Those people are your target customers. Validate the existence of the problem by talking with them. Whether they have experienced it or not? If yes HOW often? If you can’t clearly think of the problem it tries to solve, or your target customers don’t consider it as a real problem, either change your target customers or Think of a new problem to solve.

For example: I am writing this blog to solve the problems faced by entrepreneurs (WHO) in validating their business ideas (WHY). I asked my buddies, whether they have faced this problem or not? Is it actually a problem? (problem validation)

2. Search for Existing Solutions:

Search for existing solutions. Search the internet, discuss with friends, colleagues etc. Check how effectively the solutions have been implemented, whether they solve the problem or not, if yes then how efficiently? If you can’t find any implemented solutions, explore the WHY behind it. Don’t proceed to the next step until you have discovered the WHY.

For example: I searched for solutions online, but couldn’t find any of the available solutions solving the problem effectively. I went through many blogs, articles, websites but each one of them lacked the very basic thing i.e. structured, user-friendly and comprehensive framework (ineffective implementation).

3. Define the WHAT:

This is the step in which you come up with a solution. Framing your solution depends on the result of the above step. Think about what form your solution will take, Will it be a product? Service? What will be the key features of the product? At this stage just think of features necessary to solve the problem at hand. Note down the features with the WHY defined for each one of them. Create a basic layout of HOW your product will look, with key features embedded. Be ready for changes, as the next step involves going out and exploring the market.

For example: I figured out that I will write a blog for a start. I have defined my product here. With time, as I get more and more feedback, I will shape the journey of my product.

4. Do Market Research:

After you have the WHAT figured out, get out of your comfort zone, go out and explore the market out there. This is the most important step in the whole process as it defines the practicality of your product’s success.

Talk with your potential customers, pitch them your business idea, show them the wireframes, ask how much they would pay for it? Whether they would recommend it to their friends/relatives or not?

Check out your competitors, their market share, market hold, products and compare it with yours. Talk with start-up founders, investors, take their advice and feedback.

Also analyze the present and future trends of technology, government rules and regulations, investments and other limitations in your play-field.

After this step, you will have a clearer idea about WHAT your product should be. Incorporate all the feedbacks captured in this step to shape the WHAT.

5. Figure out the HOW:

After passing through all the above phases, you have pretty much everything figured out. One thing that remains is figuring out the HOW.

You have the requirements from above phases, state them all down in this step. Figure out the HOW much and HOW of the initial funds, HOW and WHO of building product, HOW of making money, WHAT of product timeline. (Basically figuring out the ability and time required)

6. Build and Test:

We haven’t built anything until now. This is the step where we start to build the product. We build the MVP here. Build, test it on real customers, derive learnings and iterate. There are many ways in which you can build and test an MVP. You can find many articles online on it, choose the technique that best suits your case. This step marks the end of validation phases, of the business idea—But, remember:

“Build in Phases, Release early, Learn early”.