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Guest Post by Andreea Chiriloiu. Passionate about the social media environment and has discovered in herself a pathologic tendency to love smartphones. Her time is devoted to mobile web apps. She is the Social Media Manager@ Webcrumbz.net
Part one touched on the question regarding whether an entrepreneur is born or made and what is needed to start a business.
Statistically, most startups fail miserably not because of the product or the product features, but because of the lack of customers and a proven financial model. The essential key in this matter is to understand that startups are different from any other form of business you may know (for example, a big company releasing a new product) and therefore they conduct themselves through a different set of objectives and milestones. The focus in a startup shouldn’t be on the development of the product (since you can basically “build” anything these days), instead it should be on the customer.
Before starting coding (or building, or baking, or cutting) please answer these simple (yet tricky) questions:
1. What are the problems that your product is solving?
Inventors usually understand this one pretty easy: does human kind have a problem with hand washing dishes? Is this stated and commonly known? Then your automatic dishwasher idea of a product already has its customers.
2. Do customers perceive these problems as important?
Since everybody is washing dishes by hand and everybody is complaining then it means you have a global problem. If everybody complains constantly about this and the complaints become bigger and louder, then this means that the problem that you have found is important.
3. If you’re selling to businesses, who in the company has a problem that your product can solve?
Let’s leave the washing machine for now and concentrate on something more contemporary. Say you are producing industrial sheets of white paper and you want to have a business-to-business selling channel. Who do you contact in a company that offers IT support? No one (or maybe just the secretary if you want to sell 8 boxes of paper per month). Who do you contact in a company that is selling notebooks?The Acquisitions Manager, because you can offer him a financial solution to his raw-material issue, that will improve the financial outcome of the entire company. My point is: identify and address your product to the person who has the problem, instead of his boss or subordinate, who don’t see a problem there.
4. How do you reach your consumers?
There is no proper way to reach to your customers (although there are some wrong ones). You can go door-to-door, you can attract their attention with a huge billboard in the middle of the road and you can even let the word-of-mouth do its job. What you have to keep in mind always is: proper reaching methods + well-targeted customer = sale.
5. How many customers do you need in order to be profitable?
This is a simple calculation you must make in order to find out when you will start to sell products and actually win money from their selling; it will also help you a lot in your investor pitch.
6. How well do you understand your customers’ problem? Do your product features solve this problem?
Let’s go back to the washing machine again. Are you sure you understood correctly the complaints? Aren’t people complaining about the water that wrinkles their hands every day? Or are they complaining about the fact that they have to wash dishes everyday? How about the detergent that harms their skin? Take a good look and see if your product solves every problem they stated. If not, can you adapt your product so that it does?
7. What do you do if your model turns out to be wrong?
I know you don’t want to answer this question, but it’s a must. What do you do if people aren’t interested in the washing machine that you are selling them and are interested in the plastic tableware that doesn’t need to be washed? What is the next step to take? Do you have a back-up plan? Do you start over and hope that you will succeed next time? Do you start over, realize what you have done wrong, learn from your mistakes and then succeed?
All right, to the untrained eye of the first-time reader, this may seem like questions to be asked when talking about the consumer strategy. And you know what? Those eyes are right! Because in startups there mustn’t be any product development strategy; it would only lead to disaster. You should concentrate on the consumer and the consumer alone, since he is the key to success. Why go to hell and back trying to create a non-functional spaceship, when all he wants is a functional bike?
You should always keep in mind that by answering the questions stated above, you are in fact finding various indicators that will help you outline your business model , which will help you have in clear sight the big picture and that will keep you on the correct path when you start overflowing with joy or disintegrate in sorrow.
But the catch here is the following: this is only a small piece of what there is to come. In fact, this is merely the Consumer Discovery segment from the entire Consumer Development road. You will find out in the end that even though each of the four steps that outline this road has its distinctive objective, the entire process has the only goal of proving that what you have in front of you is a profitable and scalable business.
About the Customer Validation, the Customer Creation and the Company Building (the other three parts of the Consumer Discovery model), about their importance, the small steps they contain and the objects you achieve by following them, you will find out on the next article from this series.