What makes a business successful
“The journey of a thousand miles begins with one step. “
I’ve faced the problem many times that startups develop a product that is not welcome on the market or people are just not willing to pay for it. Jack of all trades kind of people often advise to “ let’s just sit down for a brainstorming meeting or organize a conference around it (actually happened in Hungary) where we can discuss how to decrease the risk of starting a huge project and realizing too late that you’re completely on the wrong path with your product.”
I’d like to guide you through this rocky road from having the idea to entering the market. I’m going to show you the typical mistakes and the necessary steps with which you can prevent them and decrease the risk of failing. There is no such thing as a magic pill, this is just a life situation like everything else where the stake is your improvement and your excellence in the challenges of human relations.
From idea to launch
What happens when an idea is in a phase where you start to think about launching a business around it? After you pass through the first euphoria seeing how much of a cool thing you just invented you check if this solution exists already. If there is something similar it will reassure you that your idea is not half bad or you become crushed that what you came up with is actually an existing product.
At first, our egos are our biggest enemies. We think our idea is so genius that it is just right the way it is, the way we first dreamed it. We are not willing to take in any information that perhaps questions the whole idea or just the way we imagined it. In this case, just like any other time a member of a group encounters an opponent groups argument our first reaction is a complete rejection of the alternative solution. In lots of cases we give up the whole thing if it’s not viable the way we dreamt it for the first time.
This is the first obstacle, this is the entry level and this is the part where most of the “soon to be entrepreneurs” fail either because they don’t have enough faith in themselves or because this was just a wild idea and they are not persistent enough. For these kinds of people,of it is a better decision to stop at this point because from here it’s only gonna be harder.
The other thing is when you ask your friends opinion about your idea. Either they say it’s the stupidest idea they’d ever heard or they say it’s great. Both answers are completely irrelevant since the idea is worth about 1% of the whole success of your business which is determined by several other factors as well. However, you should pay attention to comments and even critics since all of them contains valuable information for you and for your future business. Just make sure to don’t overreact.
The key to successful startups
It’s important to know what kind of factors will influence the future and the success of your business. You would think that the idea is very important since that is what you identify with yourself. At this point, nobody can really tell if your idea is good or not since you haven’t done the necessary validation yet where you get feedback from people who you will target with your idea. You also think that funding is very important for it is the key to grow your business. I’m sorry to break it to you but this factor is the least likely to determine the success of your business. As a beginner entrepreneur you don’t know but probably think that people will be the true power of your business. You have to find those people who will help move your business forward and bring it to success.This is key to a successful company however, this is still not the most important factor.
What is the most important then? The most crucial factor of your success is the timing of entering the market. If you enter too soon then you either won’t have the requirements or your target group won’t be ready. If you enter too late then the competition will be too hard or so strong players have emerged that the entry threshold is so high that it’s not worth it to try.
Bill Gross (founded Idealab) talks about this topic further in this video:
So when is the right time to enter the market?
The following factors can determine the right timing:
- The market you’d like to enter is disorganized. I mean that there are several different solutions and different business models.
- There are just a few players who can provide solutions like yours
- Requirements to enter the market are given. For eg., if Netflix would want to start selling 3D movies it’s a strong requirement that their target group owns a 3D TV.
- Your target audience is willing to pay for your solution in some way. RIght now it’s not important how they are going to pay (transactional, subscription etc.).
Besides these factors, it’s also very important that you try to build up a business that is scalable. If you came up with an idea that’s not scalable then you will quickly set the boundaries of your ideas’ success. Either your business will be suitable for just a few customers or you won’t be able to produce more of your product. This can be very expensive and at the same time, it sets a maximum limit to your income.
Last but not least for me one of the most important factors that can influence success is to build a business that makes people’s lives easier, that helps them accomplish their own jobs. If you do so then you act according to the point of our very existence on earth. This way you will all the help you need from life to succeed.
Before discovering the big unknown try using methods that can decrease the risk of being unsuccessful.
In order to not to realize that after finalizing the product or service that it’s actually not needed on your market you should focus on giving value to your customers. Value Proposition Design will help you with this which leads you through organizing the needs of your market, entering the market, and validating your solution.
You can read more about this method here: https://strategyzer.com/books/value-proposition-design
How can you provide value to your future customers?
First of all, you have to identify your target audiences. You can do that by thinking through who can be your potential customers.If you say your solution can be good for everyone and there is no need to narrow it down to a segment then later you can be in quite big trouble because you won’t understand why people don’t buy from you.
Once you have a general idea about your target audiences try to break them down into smaller units and segments. This is important because the more you specify your target groups the more punctual solution can you provide for their pains. You can define a segment by recognizing that they behave differently or have different requirements, challenges. To discover different segments try to recognize differences between your target groups in behavior, challenges they face or in their requirements. For eg. in case of my coaching business my target groups are SMBs and startups. Startups struggle with building up their businesses from scratch so in the beginning they just want to achieve at least the product market fit. While SMBs are already done with this and they want to scale their businesses to the next level. As you see both segments have completely different pains, jobs, and goals.
Don’t be afraid to ask!
After identifying your target audiences you have nothing else to do but to listen to them. Ask them questions! Yes, I’m talking about a market research. If you accept my advice don’t hire an agency to do the research for you, do it yourself! There are several easy ways to conduct a market research:
- Online survey: compose a list of questions that help you identify your buyer personas, their pains, challenges they might face or requirements they might have regarding your solution. Make sure to ask them to prioritize their answers. For eg. “on a scale 1–10 how big of a problem is to…”
- Focus group: This means that you sit down 15 people to a table and guide them through your customer journey. You are not part of the discussion only the moderator. At each step, they will reveal several pains and challenges they face which you have to collect and prioritize according to their answers.
- In-depth interview: just like in the previous methods during an in-depth interview your goal is to understand a member of your target audience. Guide him/her through an imaginary journey and listen how he/she sees the situation of the market. Pay attention, and don’t talk! Just moderate the conversation and let your partner do most of the talking!
- Go out to the street: you get the best insights of you just simply go out to the street knock on the door of your potential customers or just stop them on the street and ask a couple of questions about their challenges and requirements.
After you gathered all the information create a profile for each segment. This profile should contain the jobs, pains, and gains of your target audiences.
Those jobs that your target audiences have to accomplish in order to reach their goals. For eg. for every CEO one of the most important jobs is to achieve sustainable growth. For a private person, on the other hand, the most important job is to fulfill his/her life purpose.
Spoiler alert: the more you can support someone to achieve their job and the more pains your solution relieves so they can focus on their jobs the more value you’ll give.
You have to know though that your target group won’t be able to identify their own jobs, you have to do it for them. To make it a bit easier and more organized use the following job categories: functional, emotional, and social.
The easiest thing is to collect your potential customers’ pains, challenges that prevent them from accomplishing their jobs. They feel these obstacles every day on their own skin. You have to pay attention to 2 things when collecting pains:
Guide them through an imaginary customer journey regarding your product. Generally, this is the following process:
- Emerging demand
- Comparing offers
- After purchase
The other important thing is to know the weight of the pains as well. You can ask your target audience to rate them on a scale 1–10 to decide which pain is the heaviest and which pains are not so important.
The last element of your customer profile where you discover their requirements. It’s important that you are not looking for requirements regarding your product but the following:
What do they expect to happen when accomplishing their jobs. For eg., if my job as a CEO is to find a talented employee then my expectation is to find him/her in two weeks with the least possible number of interviews. So if I have a headhunter business I have to live up to those expectations by providing the most relevant applicants in a short time.
What do they expect when relieving a problem or overcoming a barrier. In case of the previous example if the biggest problem of a company that they have to read a lot of irrelevant CVs then their expectation is to get the 5–10 most relevant CVs and to be able to find among those the best applicant he/she is looking for.
Finalizing the profile
Now that you collected the most important pieces of information it’s time to organize them. The inventors of this method advise using sticky notes when you divide a circle into three sections and put jobs, pains and gains into separate sections. The only problem with this method is that it won’t show you the most important pains, gains, and jobs.
Because of that, in my opinion, it’s easier to create a matrix where for eg. in the first column you put pains and in the first row, you put jobs. In the intersection, you put a weighted value to see how strong is the given pain that blocks the given job. So basically you put pains next to each other then put jobs under each other and then go through each pain and see if it has an effect on accomplishing that job. If yes put in a weighted number indicating how strongly that pain can affect that job. You have to create this matrix separately for each segment then merge them into one big matrix and as a result, you’ll see what requirements does your product have meet.
After seeing your market more clearly put the elements of your idea into the matrix to see which pain can they relieve and which gain can they support.
As a result, you’ll see how much you can cover from the requirements of the market. If you don’t have a solution to important pains, or you can’t meet the requirements it’s time to think about how can you add more elements to your idea to solve more problems.
Make sure to work out the details of your solution. If you have to explain why is your product a solution to a problem then you’re on the wrong path for which you’ll pay a high price later.
Those features that give a solution to a job, that are the most painful, and that relieves the most pains are your value proposition.
Now that you know your value proposition you’re way ahead of most of the starting businesses.
You’ve reached yet again another milestone where you can decide if you still think that you created something revolutionary or your idea is not so great after all.
If you decide to proceed then these will be the next steps:
- Problem solution fit
- Competitor analysis, defining USPs
- Supporting product development
- Defining high-level marketing communication
- Defining high-level sales communication
Problem solution fit
After mapping out your market and its challenges, requirements and your solution the next step is to go back to your target audience and tell them what you discovered on the market and how your product can be a solution for its problems. Make sure to mention every part of your solution point by point so your target group will get a full understanding of it. Collect feedback from them to see if what you discovered during your research was correct. If necessary finetune your idea or some parts of your solution and redo the customer profiles and value map.
Competitor analysis, defining USPs
Just as you’ve done a value map for your own business now you have to do it for your competitors’ businesses as well. Put all of them on one sheet where you can compare and evaluate them with each other and with your solution.
If you find a challenge or problem that none of your competitors have a solution to that your USP.
Supporting product development
Since you’ve done the value map based on the features of your solution that can serve as a high-level product specification. Using Lean framework you have to find the minimum viable product (MVP) that solves enough problems and is presentable. As a next step, you have to work out the high-level specification of the MVP so a product owner or a project manager can start to work with it.
Defining high-level marketing communication
Mainly you should communicate the USPs you discovered during the competition analysis and value map. Since you mapped out your market you know exactly what are the biggest pains so you can educate your market on those topics.
Defining high-level sales communication
In a sales communication, USPs are not the most important elements. It’s much more effective if you emphasize the strongest pains and more importantly how your solution can relieve them. Besides that based on your research, you also know your target audiences exact expectations regarding your product so you can point out how it will meet their requirements. Since you also know your potential customer’s profiles and the buyer personas when talking to a potential customer you have to be able to tell to which segment he/she belongs.
Of course, if you’ve done all this you’re still not ready. The next step is product market fit when you enter the market with your solution and can work on giving the highest possible value to your potential customers. Later as a step of business model fit, you have to work out a business model that works best in your market but this is not part of this topic now.