When I work with entrepreneurs on developing their ideas and starting their new ventures, I always start off with three main questions (and several other follow-on questions).
Question 1: What problem or need are you trying to solve?
First, a good idea must address a real problem or a need that people (or businesses) have. In fact, Steve Blank writes that most startups fail not because they don’t manage to develop and deliver a product to the market; they fail because they develop and deliver a product that no customers want or need.
Therefore, before you start developing anything, make sure that you have a good answer to the above question, as well as these supporting questions: Who would want to buy your product/service? Why? What is their jobs-to-be-done?
Question 2: What’s your unique value proposition?
If you successfully passed the first test, this is the next immediate challenge. In other words, does your idea offer a good (ideally the best) solution to this need/problem?
In addition, some important questions to address at this stage are: Is our idea/solution unique, patentable? What are our core competencies? How unique are they?
Furthermore, how does our idea affect the end-users’ life, experience, use-cases, behavior? Also, how does it affect your customers’ products (improve, lower cost, new benefits)? Does it have exceptional utility/value? Does it have the potential to be something huge/game-changing (Blue Ocean)?
To have a unique value proposition, your proposed solution, to the problem or need that you’ve identified, must address it better than any competing or alternative solution. To verify that you should meet and talk with your target customers and users. Also, you should observe what “their world” looks like, and be able to describe a day in their life.
I subscribe to Steve Blank’s approach of Customer Development, in which the first phase in the process is Customer Validation. The primary objective of this phase is to validate questions 1 and 2 above. Those are the two most critical hypotheses for any start-up or new venture.
Question 3: What is your business model?
A good idea with a strong value proposition is a must. And yet, it’s not enough to build a successful company. You also need a good business model.
When developing your business model you should address the following questions: What is our long-term goal (business goal, company goal)? What are our primary target markets? Can we develop new markets/applications? Who are our customers? Who are the end-users’? What are the value-chains? Are there any impediments to discourage the market from accepting our product?
At this stage, you don’t necessarily need to have a detailed product definition or development plan. However, you should consider these questions: What is our product? What is it not? What are the most important features to our customers/end-users? Which features, product attributes, or customer preferences should we focus on? What should we develop ourselves? What should we outsource/partner?
I personally found the work of Alexander Osterwalder and Yves Pigneur, called Business Model Generation to be very useful.
Beyond Profit & Loss
I believe that you need to address the above questions prior to raising money or starting significant product development efforts.
And yet, there are other equally important, if not more important questions that entrepreneurs (and any business leaders) should address. These questions touch on the purpose, vision, and core values of the company.
- What is our purpose? What do we stand for?
- Our vision for this company in 5, 10, and 20 years from now
- What are our core values?
- What will we be the best in the world in? And what will we be known for?
Finally, I firmly believe that if you are driven by a meaningful purpose, have a compelling vision for your company, with strong values at its foundation; you will be able to inspire and recruit talented people, investors, and loyal customers/fans to your venture.