Antidote to the Passion Trap: Give Your Idea a Market Scrub
The best way to protect yourself from attachment to a nonviable business idea is to scrutinize your concept through a market lens. The five sets of questions below will force you to take a market-oriented look at your product or service and better understand your prospective customer base. (This is a simplified list taken from a more thorough set of market-oriented questions contained in the “Startup Readiness Tool” in Appendix A.)
Most likely, these questions will be hard to answer on your first pass. They are designed to provoke scrutiny and analysis of your idea, to lessen your danger of falling into the passion trap and, ultimately, to improve your odds of finding fertile ground for your business idea. Try to develop a well-thought-out perspective on each of the following questions, understanding that your answers will shift over time as you begin to grow your customer base.
1. What basic need or problem are you addressing? What is your valueproposition to the customer? Lynn Ivey personally experienced the confusion, worry, and frustration that families feel as they try to care for loved ones struggling with cognitive dementia. By providing a “home away from home,” during the daytime hours, The Ivey would give family caregivers much needed relief and peace of mind and provide ailing seniors with high-quality care and stimulation. Lynn’s clear identification of an acute need was a great starting point, but her challenge would lie in convincing her target audience
That her solution was superior to other alternatives and in catching families at the right time, when frustration and worry were great enough to merit The Ivey’s cost and a change from the status quo.
In thinking about the need you are addressing, ask yourself: Are you offering a “pain pill” or a “vitamin?” Pain pills are products or services that solve an acute user problem and alleviate anxiety, fear, or frustration. Plumbers, tow-trucks, and hospital emergency rooms are in the pain resolution business. Vitamins are products that customers view as nice to have, rather than absolutely essential. Upgrading your computer’s processing speed would function as a vitamin for most users, whereas rescuing a crashed hard drive is a pain pill.
The conventional wisdom among marketing professionals is that vitamins are harder to sell than pain pills, but this is not a hard and fast rule. Many successful products and services appeal to higher-level motivations, for excitement, pleasure, or self-improvement, for example. But the more clearly you understand the nature of the value you are attempting to provide, as seen and experienced by the customer, the more effectively you can position and sell your solution.
2. Who is your core customer? Starbucks Coffee’s impressive growth over the years has been driven, in part, by the company’s ability to segment and understand its customers. Starbucks knows that those customers it calls “Super Regulars” comprise 4 percent of all visitors, while generating 20 percent of total revenue. They know that “Coffee House Enthusiasts” are younger coffee drinkers, who are aligned with Starbucks’s core values and bring the greatest future spending potential. When Starbucks planners are evaluating a new idea or initiative, one basic litmus test is whether the change will appeal to Super Regulars and Coffee House Enthusiasts. If not, the discussion often moves on.13
As a startup, you can only aspire to Starbucks’s high level of customer understanding, but you can ask the right questions to identify your early market “sweet spot,” that market segment where customer demand for your offerings is likely to be greatest. Start at the simplest level and work from there. Who is most impacted by the problem you are solving? Who is already using your product or something like it? What’s motivating them to use it? How would you describe those who seem like the best fit for your offerings and why?
3. What is the nature of the overall market opportunity? This question gets at the longer-term viability and growth potential for your new business. You can solve acute problems for an initial set of buyers but fail to find enough of them to grow, or even sustain, your business over time. Markets have characteristics and personalities just as people do. They can be young or old; large or small; steady or volatile; wide or narrow. In evaluating your market opportunity, and the broader forces acting upon it, consider at least three dimensions: size, context, and timing.
With regard to size, ask yourself: How large is your target market? How fast is it growing (or declining)? Why is it growing (or declining)? Is it emerging or mature? Is it poised for boom or bust?
When founded, both Modality and The Ivey were entering growth industries with distinct profiles. Mark Williams’s decision to develop applications for the iPhone in 2007 put him on the cusp of an explosive wave of growth in the mobile learning markets worldwide. Lynn Ivey, when she launched her center in 2007, was also catering to a population on the rise, the aging baby boomer generation, although the growth curve for this “age wave” has followed a slower, steadier climb. In fact, Lynn Ivey’s vision for an upscale, full-service adult daycare facility may have been launched well ahead of its time, perhaps by five to ten years.
Concerning context, ask yourself: What’s happening in your industry? What larger forces and trends are drivingyour opportunity (economic, technological, demographic, social, regulatory, environmental, etc.)?
Modality was riding on the back of a technological sea - change, the irreversible movement of computing power onto mobile devices and a population of learners increasingly hungry for higher-quality content accessible at more times and in more places. As we will see in Chapter Six, this broader trend would lead to new categories of revenue opportunities for Modality, reaching beyond its initial direct- to-consumer product line.
As for timing, ask yourself: How long will your window of opportunity be open? Why is now the right time to enter the market?
Mark Williams and his team assumed that their early-to - market advantage would be brief—they referred to it as a “fifteen-second lead”—and they knew competitors would quickly attempt to duplicate their early success with healthcare education titles. But no one fully predicted the explosion of competitive products that filled Apple’s online channel soon after the release of its iPhone Software Developer Kit. By the end of 2009, 100,000 applications would be available to users of iPhone and iPod Touch. Modality’s window of opportunity had, indeed, been narrow. Had the company waited a few additional months to launch, its first products would never have stood out in the long, noisy line of competitors.
4. Who else is currently addressing (or attempting to address) the opportunity, and how? Why do you think the opportunity is not yet fully exploited? The tendency to underrate or dismiss the competition is one of the most common, and dangerous, characteristics of passionate entrepreneurs. The remedy is simple: Take inventory of the relevant players in your chosen market space, and do your homework to understand their strategies, strengths, and weaknesses. Tools for analyzing competitive forces abound, but your willingness to explore the competitive landscape with curiosity and objectivity is more critical than the particular tool used. Seek to understand what is happening in your target market space, being careful not to downplay the strengths of competitors in your market. Also, include in your evaluation any alternatives that serve to satisfy the customer problem you are targeting, even if those alternatives don’t appear to be direct competitors.
One of the effects of Lynn Ivey’s passion for her solution was underestimating the power of two competitive forces at play in her chosen market. The first was the home care industry, which had grown significantly over the prior decade as a result of the same aging trend spotlighted by Lynn. Several home care companies had been entrenched in the local market for years, providing in-home skilled nurses and companions for frail and declining seniors. Although these services were defined as “competition” in Lynn’s first business plan, she actually thought of them as important partners and referral sources, rather than competitors. She hoped they would send prospects to The Ivey who weren’t a good fit for in-home care or bring their own clients to the center for socially stimulating field trips. As she looks back at the sales challenges of her first two years of operation, it’s clear that in-home care was a favored solution for many of her “ideal” client prospects. A second competitive alternative to The Ivey was the simple, powerful force of inertia, the tendency for a family’s status quo situation to maintain itself. Even when family members saw The Ivey as a potential solution for their worries, the complications of switching their loved one into a new routine seemed to outweigh the perceived benefits.
5. What is your competitive advantage? What is unique about your offering (your “secret sauce”)? What differentiates you in the eyes of customers? When Professor Karl Ulrich of Wharton Business School opens his undergraduate product-design class each semester, he rolls into the classroom atop a Segway Personal Transporter. After fielding comical looks from students and offering each of them an opportunity to ride the device, he uses the Segway as a case of an inspired and creative product that has yet to find its ideal user. Beyond the
Obvious point that the brilliance of a product’s design doesn’t always translate into customers, he contends that the basic market challenge for the Segway is that, although it is potentially handy for a range of potential users (commuters, security guards, golfers, etc.) it’s not the best solution for any of them. In other words, each type of potential user has a more favorable alternative, one that out-competes the Segway as a solution. Golfers have golf carts. Commuters have bikes. And for many, good old-fashioned walking is preferred.14
In order to build a loyal customer base for your startup, you must provide something uniquely and consistently valuable to them. Honestly assess how your offering is compelling or advantageous in the customer’s eyes, whether through pilot projects, customer feedback, or, at a minimum, a thorough discussion and analysis of how your envisioned product will differentiate itself as experienced by the buying public.
All of these questions are intended to give you a taste of what it means to go beyond untested confidence in your idea and develop a more coherent understanding of market forces and opportunities related to your startup idea. For a more thorough set of questions, see the Market Readiness section of Appendix A. For all of these market questions, be sure to distinguish which of your answers are based on hopes or assumptions, versus verifiable facts, and find ways to test those.
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