“If we build it, they will come” Not necessarily!

I recently analyzed something that has intrigued me for some time.  I knew that in the early years of IBEC, we made plenty of mistakes, and so I wondered how I could save others from some of those same mistakes.  One result was included in a speech I gave at the B4T conference in the Seattle area entitled “Five Mistakes we Failed to Avoid”.

As it turns out, one of those mistakes was that we thought “If we build it, they will come,” and it is still a common mistake in the startup world.  Studies at well-respected business schools such as Stanford and Harvard as well as well-informed writers have suggested that as many as 42% of startups fail to first determine market need by asking the question, “What product will really meet the needs of the market?”

  • CB Insights reported in August 2021 that tackling problems that are interesting to solve rather than those that serve a market need was cited as the No. 2 reason for failure, noted in 35% of cases. I think I must be a slow learner because it took many reminders by my mentor, Ken in trips to multiple businesses in Asia.  I still hear it ringing in my ears, “Larry, you have to remember, if you don’t have a customer, you don’t have a business.”
  • A similar adage by marketing expert, Seth Godin, suggests, “Don’t find customers for your product; find products for your customer.”  Peter Drucker regularly challenged entrepreneurs with five questions, one of which was “Who is our customer?”
  • So, how do you find those customers? How do you solve their problem?  How do you know their pain point?

One way is to follow the lean startup canvas approach which is at the heart of IBEC’s coaching model.  It starts with determining with clarity what the customer needs or wants; that which is a benefit to the customer becomes the value proposition (UVP).  It is mandatory that you clearly understand who that customer is and what he wants.  Successful entrepreneur Derek Sivers, founder of CD Baby, claims it is not rocket science, “I was just trying to help musicians with whatever they need.”

What did Sivers do? What must you do?  Ask questions – over and over. And then Test – Test – Test!

Think of it in terms of a junior high science class.  What did they teach us?  A scientist defines a problem – makes a hypothesis (with a tentative testable answer) – proposes a solution – tests the solution – pivots towards another testable iteration.  We do it similarly in business; all the while respecting your innovation by iterating toward the customer needs.  Eric Ries built on the work of W. Edwards Deming when he developed the lean startup.  In short, Ries called it the “build – measure – learn” concept.  Eventually as a prototype is tested and retested, a final product emerges which is a proof of concept which ideally results in customer sales.

When teaching on this concept, sometimes I ask who the customer is for a grocery product such as cheerios. Students answer with – the shopper, the breakfast child, the grocery store, the wholesaler and on and on.  Similarly for hospital equipment – is it the patient, the doctor, or the hospital administrator?  The answer to this latter example is the administrators who make the purchasing decisions.  The company marketing hospital equipment is trying to sell the product.  Whoever buys the product is the customer.  Customers are important to a business. These are important discussions when starting a business.

One comes to the right answer by clearly answering three questions (and this becomes the essence of a “pitch”.

  1. What is the problem you are solving and how do you do it?
  2. Who cares about it? Why is it a compelling idea?
  3. How will you win and take a competitive advantage?

A good friend was an expert in the language and culture of a southeast Asia country.  He was also a pretty good photographer and he desperately wanted to share the Good News in his country.  He registered his photography company in the country, set up a website and tried to drum up business, despite no proof of concept.  It turned out that the market was saturated with outdoor photographers, all trying to impress the modest number of tourists in the area.  He worked hard, and we tried to help him, until we realized the mistake that if there is little or no capacity to purchase a product, a business has no likelihood of success.  This one did not. Danae Ringlemann, one of the founders of Indiegogo said, “Think about building something someone really wants.”

Larry W. Sharp, BAM Support Specialist, IBEC Ventures
Larry.Sharp@ibecventures.com

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