Not sure about you, but at school, I liked science class.
But I didn't like English.
Science had a degree of... exactness to it. You go through a process and figure something out, with a high degree of certainty. English was much more wishy-washy and opinion based.
When I was taught about the concept of entrepreneurship and the early stages of starting a business, I found that most approached were either too wishy-washy or too rigid. The beauty of entrepreneurship is that it’s a science and an art, and we believe the key to building truly unique and high impact businesses is by teaching both.
In this blog, we’re going to share what we consider to be the science behind early-stage idea development, which is a process called market validation.
What is Market Validation?
Marketing validation is a process to turn an idea into something that people actually want and will pay for.
This is done through a process of collecting information to test assumptions about the variables that will drive the success of your business before you invest significant resources into building the product.
Wait- testing the assumptions about *what*?
A variable. A variable is anything in your business that you have the ability to change. And there’s more than many business owners would like to think. Here are some quick examples of the key variables in a business:
- You and your co-founder (if you have one)
- Your customers
- The problem you’re solving
- The solution you provide (your product)
- Your product features
- Your employees, (if you need any)
- Your company vision & mission
There are a whole lot of variables that make up a business. And a successful business is one that has a combination of variables that work together to produce the final result: a sustainable business model.
The quicker you can organise your variables, the better.
The number of variables that are involved with a business can be quite overwhelming. If you feel this way, you don’t need to worry, because of all the variables that operate in your business, for now, you only need to focus on a few. After all, there’s no point thinking about all the employees you’ll need or what your company culture will be, when it’s just you in your blue jeans with barely any cash.
For now, here are the variables you need to focus on:
- The problem you’re solving
- Who you’re solving it for (your early customers)
- What this customer group cares about in a solution.
If you cast your mind back to school science, you’ll probably remember the concept of a hypothesis. A hypothesis is a proposed explanation made on the basis of limited evidence, which acts as a starting point for further investigation.
A hypothesis is also the starting point for any experiment.
Similar to this, the thoughts you have about your idea are also mostly assumptions. They’re based on your experiences and views. So your assumptions are really the starting point for further investigation.
So what is the “further investigation”? Figure out the actual truths behind your idea by collecting data. This will help you to determine which variables will enable you to turn your idea into a business that is viable.
The next half of this blog will focus on how to approach the “further investigation” that we call market validation.
3 Steps to Market Validation.
Step 1: Identify the problem you’re solving.
People invent things to solve problems. The wheel was invented to solve the problem of moving goods. 5,500 years later, Airbnb was invented to help solve the problem of an accommodation shortage during a design conference in San Francisco where the co-founders couldn’t pay their rent.
People find solutions to their problems in products or services. And the bigger the problem, the easier it is to get someone to buy the thing that solves their problem.
So, before you start building a product, it’s important to have a good understanding of the problem you’re solving. Figure out how to solve a problem, and it’s easy for the product to define itself.
Take a minute to reaffirm the question: what problem do you think you’re solving?
Note: this is an assumption, or hypothesis
Step 2: Identify your early adopters (customers)
When I ask most startups what kind of customers they’re targeting, they often give a wide field, for example, women aged 25.
This is a case of pigeonholing. They assume everyone in that audience has the same problem. Sure, maybe plenty of them do, but do they all behave in the same way? Do they all care about the same things; or have the same level of that problem? In the early stage, it’s important to focus the customers who have the problem the most and so would most likely use your product early on.
These types of potential customers are called your early adopters. They are a subset of customers who have the problem you identified in step 1 but are also most likely to take an active interest in your startup from an early phase.
Who do you think has the problem that you’re solving the most, and will be most willing to pay for a solution?
Note: this is an assumption or hypothesis
Step 3: Talk to your early adopters.
Identifying your early adopters is one thing, but understanding them is another. Most people spend a lot of time THINKING about their potential customers, hypothesising about their motives and beliefs.
But not enough people actually take action and do the work that is required to validate the actual reality.
Which is unfortunate, because it’s fundamentally an easy and effective process:
Talk to them!
Before the internet, business required face-to-face interaction with customers. It’s easy to understand your customer when they’re talking, right in front of you. But now, more and more businesses are potentially separated miles away from their customers. The downside of this is that it’s become perceivably harder to really understand the customer’s perspective.
The relationships you have with your first customers will be fundamental to your ability to build a great product. If there’s one single thing you can do to quickly validate your idea, giving you confidence and assurance you need to take it out into the world, it’s this. Get to know your potential customers.
So now you know what you should be doing to take the next steps towards turning your hypothesis into a set of fundamental variables, or truths.
You can learn more about how to do market validation using our resource 'How to do Market Validation'.