September 28, 2015 at 23:06How to test startup ideas and validate them
Thinking of developing a new idea? Check out this detailed guide first.
“I have an idea X, what should I do next?”
The first step in launching a successful startup is to create a Minimum Viable Product (MVP). In fact, this means confirming the fact that there is a market that your company can call “home” (main) and find solvent customers on it. That is, the first thing you need to find the first buyers and understand what they are willing to pay for.
However, most entrepreneurs do not really think about the process of creating MVP and confirming that their idea solves such problems that are important for people, and they will want to pay for it. So the entrepreneur can ultimately settle on an idea whose viability is confirmed by inaccurate user comments or prejudiced opinions of the creators.
People are deceiving themselves to give you the opportunity to hear what you want to hear. We are all humans. This is much more common than one would imagine. Google the “cognitive bias list” for more information.
But in the process of determining whether the idea will be profitable, I discovered several openly incorrect approaches to this issue: some of them are marked by excessive self-confidence, while others are almost always ideal in the presence of skills and resources. Despite everything, there is one tendency everywhere: dialogue with its market.
MVP life cycle
Methods for validating ideas in accordance with the concept of MVP (and other strategies) can be hierarchically divided into categories: imperfect, situational, and perfect methods. Below are some examples for each of them:
1. PERFECT TESTING METHODS
Когда вы проводите опросы и спрашиваете своих друзей о том, что они думают насчет вашей идеи, то это обычно ведет к созданию чего-то вроде шаблона и ряда наводящих вопросов либо к неадекватному фидбеку в силу предвзятости во время опроса. Вы можете подумать: «Кто будет намеренно вводить вас в заблуждение?». Но таких людей куда больше, чем вы можете себе представить. Часто люди просто боятся делиться своим истинным мнением, как и получать искренний фидбек. Это случается потому, что множество начинающих предпринимателей влюбляются в идею, которую состряпали, и ищут какие угодно оправдания, чтобы продолжать ее развивать. Если вы спросите совета у своих друзей, то, скорее всего, они одобрят любую вашу идею. И скорее всего вы сами будете стараться интерпретировать любые полученные данные так, чтобы они подтверждали ваши убеждения.
Realizing an idea at an early stage of a startup can seem like a wonderful method of action if you are a talented engineer and able to create something very quickly. But in this way you develop a product without confidence in the validation of the idea. This is a dangerous method that caused the mass death of startups based on new technologies in the 90s of the last century and at the dawn of our century.
Now we know that the philosophy of “creating a product and customers come soon” is not a good helper - rather, on the contrary. The idea of “creating what people need” is worth following. Engineers who are alien to the wrong approach of startups often turn to this method and can tell you: “you just don’t understand what you are doing.”
2. SITUATIONAL TESTING METHODS
Attracting an audience through a blog or email newsletter service is a great method if you are planning to build a company that belongs to a specific industry or niche, or want to build a reputation, or better understand the market. There is also a powerful tool from Klout if you need to receive data for analysis of social networks, or if you do not have a technical education and would like to make sure that the concept is of interest to the audience.
It also gives you a wonderful opportunity to try to interact with the market and find out about the problems and frustrations of potential customers, which is the best indicator of what product they are willing to pay for.
Regardless of your approach, you need to communicate with customers. But conducting a thorough market research and then creating a product can lead to mixed results if you do not do it right (many will not even come close to creating a full-fledged MVP).
If you consider yourself a born leader, it may happen that you constantly try to pursue “another major goal”, which as a result will lead you to 3-4 attempts to create something, but it will never develop into something serious , since you will again be distracted by the next major problem you found.
It is also important to focus on what people will pay for rather than looking for new problems. If you intend to conduct a lot of interviews with clients as part of your MVP strategy, then use this opportunity to consult with them at the end of the conversation. There is a chance that you will find out about problems that really annoy them, and for which they are willing to pay.
Creating a prototype as quickly as possible is not such a terrible idea if you already understand your market well and have done a thorough research. However, many people (especially novice entrepreneurs) conclude that they know what people want.
This means that you are creating a product that solves any problem you have discovered (without "ideas"), based on your experience and professionalism. The problem is that usually in a person his ego speaks, and he creates the solution that he would like to see, and not the one that thousands of clients need. In general, this is a rather dangerous approach in the sense that it encourages the founders to continue to create something without a constant feedback. Nevertheless, if you can quickly ensure customer interaction with your product and make changes based on the feedback received, then you are on the right track.
Kickstarter and other crowdfunding platforms allow users to pre-purchase the product and provide the company with funds received from orders. The problem with MVP may be this: since the interaction cycle is quite long, it means that you are tied to the same prototype for a month or more. MVP must be constantly updated, and most crowdfunding platforms interfere with this.
There are several categories of products for which crowdsourcing works well. Pebble Watchesare probably the best result of this approach to date, and all other successful examples also apply to hardware. This approach works great for developing such gadgets - it helps to get enough funding to create a physical product that you won’t get elsewhere.
3. PERFECT TESTING METHODS
These pages are ideal if you are looking for financing. And although you cannot raise money if you are not going to deliver the product to anyone, you can still ask for funding. How? Simple: put all the items as “sold” when a person tries to buy them, but at the same time make a list of those who were ready to buy them. If you are able to start delivering a product to this audience in a short period of time (it is best to meet two weeks), then you are in business. This is a powerful and better proof of concept validity than anything else.
Such a product seems to be a complete product, but with a "blown" backend solution. This approach is good for founders who are not “techies” and seek reliable evidence of the viability of their ideas. Here are some great examples:
The ZeroCater company, which received funding from Y Combinator, initially limited itself to a large table, trying to provide contact between the companies and restaurants that are engaged in catering. Groupon started with a WordPress blog and manually sent PDFs with the first vouchers. Grouper, another company that came out with Y Combinator, also started with banal tables, trying to pick people the most suitable pair.
If you are the founder of a technology startup, then this is exactly what you should do (most likely). The main thing in this approach is a deep understanding of the problems of people who are your potential audience, and the creation of such a product, the main task of which is to ensure profit from the first buyers. Finding a balance between the desired product and the one that will be profitable is not easy (but important).
Starting with a product as a service - this is where Netfix began.
Netflix was born in California, its founders were two men: Reed Hastings and Mark Randolph. Hastings had to pay a huge forfeit for the late return of the movie he rented. It was then that he came up with the idea to create a service that will allow you to order movies by e-mail without penalties for delays with their return.
Immediately after that, they began to rent their friends a collection of their films - that was how Netfix was born. This may seem obvious, but if you ask most entrepreneurs how they would start their own Netflix today, you will get very detailed technological answers. Start doing something with your hands until you can scale up your business. Do things that don't scale, and then expand your business.
This approach is based on the knowledge and experience gained through the sale of something that has already been created earlier, and for which a strong market is already available. Thanks to this method, an entrepreneur gains an audience and, provided the product is properly promoted, can easily verify his idea of X. After that, you can change your strategy and start selling X, regardless of what the company sold earlier.
My latest articles / translations: The
unexpected truth about success, or How to become a happy victim
Five ways to make money for a digital nomad with bread and butter
Myths about multitasking, or How our brains react to it
Doing business in Sweden and the USA: 6 differences
“I have an idea X, what should I do next?”
The first step in launching a successful startup is to create a Minimum Viable Product (MVP). In fact, this means confirming the fact that there is a market that your company can call “home” (main) and find solvent customers on it. That is, the first thing you need to find the first buyers and understand what they are willing to pay for.
So, a minimally viable product is a product that has only those characteristics (and no more) that allow you to supply a product that meets the needs of the first potential customers. And some of them will pay for the product or give their comments about it. - Eric Ries
However, most entrepreneurs do not really think about the process of creating MVP and confirming that their idea solves such problems that are important for people, and they will want to pay for it. So the entrepreneur can ultimately settle on an idea whose viability is confirmed by inaccurate user comments or prejudiced opinions of the creators.
People are deceiving themselves to give you the opportunity to hear what you want to hear. We are all humans. This is much more common than one would imagine. Google the “cognitive bias list” for more information.
But in the process of determining whether the idea will be profitable, I discovered several openly incorrect approaches to this issue: some of them are marked by excessive self-confidence, while others are almost always ideal in the presence of skills and resources. Despite everything, there is one tendency everywhere: dialogue with its market.
MVP life cycle
Methods for validating ideas in accordance with the concept of MVP (and other strategies) can be hierarchically divided into categories: imperfect, situational, and perfect methods. Below are some examples for each of them:
1. PERFECT TESTING METHODS
Polls
Когда вы проводите опросы и спрашиваете своих друзей о том, что они думают насчет вашей идеи, то это обычно ведет к созданию чего-то вроде шаблона и ряда наводящих вопросов либо к неадекватному фидбеку в силу предвзятости во время опроса. Вы можете подумать: «Кто будет намеренно вводить вас в заблуждение?». Но таких людей куда больше, чем вы можете себе представить. Часто люди просто боятся делиться своим истинным мнением, как и получать искренний фидбек. Это случается потому, что множество начинающих предпринимателей влюбляются в идею, которую состряпали, и ищут какие угодно оправдания, чтобы продолжать ее развивать. Если вы спросите совета у своих друзей, то, скорее всего, они одобрят любую вашу идею. И скорее всего вы сами будете стараться интерпретировать любые полученные данные так, чтобы они подтверждали ваши убеждения.
Создание продукта
Realizing an idea at an early stage of a startup can seem like a wonderful method of action if you are a talented engineer and able to create something very quickly. But in this way you develop a product without confidence in the validation of the idea. This is a dangerous method that caused the mass death of startups based on new technologies in the 90s of the last century and at the dawn of our century.
Now we know that the philosophy of “creating a product and customers come soon” is not a good helper - rather, on the contrary. The idea of “creating what people need” is worth following. Engineers who are alien to the wrong approach of startups often turn to this method and can tell you: “you just don’t understand what you are doing.”
2. SITUATIONAL TESTING METHODS
User engagement
Attracting an audience through a blog or email newsletter service is a great method if you are planning to build a company that belongs to a specific industry or niche, or want to build a reputation, or better understand the market. There is also a powerful tool from Klout if you need to receive data for analysis of social networks, or if you do not have a technical education and would like to make sure that the concept is of interest to the audience.
It also gives you a wonderful opportunity to try to interact with the market and find out about the problems and frustrations of potential customers, which is the best indicator of what product they are willing to pay for.
Communication with many potential customers
Regardless of your approach, you need to communicate with customers. But conducting a thorough market research and then creating a product can lead to mixed results if you do not do it right (many will not even come close to creating a full-fledged MVP).
If you consider yourself a born leader, it may happen that you constantly try to pursue “another major goal”, which as a result will lead you to 3-4 attempts to create something, but it will never develop into something serious , since you will again be distracted by the next major problem you found.
It is also important to focus on what people will pay for rather than looking for new problems. If you intend to conduct a lot of interviews with clients as part of your MVP strategy, then use this opportunity to consult with them at the end of the conversation. There is a chance that you will find out about problems that really annoy them, and for which they are willing to pay.
Quickly create a simple product
Creating a prototype as quickly as possible is not such a terrible idea if you already understand your market well and have done a thorough research. However, many people (especially novice entrepreneurs) conclude that they know what people want.
This means that you are creating a product that solves any problem you have discovered (without "ideas"), based on your experience and professionalism. The problem is that usually in a person his ego speaks, and he creates the solution that he would like to see, and not the one that thousands of clients need. In general, this is a rather dangerous approach in the sense that it encourages the founders to continue to create something without a constant feedback. Nevertheless, if you can quickly ensure customer interaction with your product and make changes based on the feedback received, then you are on the right track.
Crowdsourcing
Kickstarter and other crowdfunding platforms allow users to pre-purchase the product and provide the company with funds received from orders. The problem with MVP may be this: since the interaction cycle is quite long, it means that you are tied to the same prototype for a month or more. MVP must be constantly updated, and most crowdfunding platforms interfere with this.
There are several categories of products for which crowdsourcing works well. Pebble Watchesare probably the best result of this approach to date, and all other successful examples also apply to hardware. This approach works great for developing such gadgets - it helps to get enough funding to create a physical product that you won’t get elsewhere.
3. PERFECT TESTING METHODS
Landing pages (landing pages)
These pages are ideal if you are looking for financing. And although you cannot raise money if you are not going to deliver the product to anyone, you can still ask for funding. How? Simple: put all the items as “sold” when a person tries to buy them, but at the same time make a list of those who were ready to buy them. If you are able to start delivering a product to this audience in a short period of time (it is best to meet two weeks), then you are in business. This is a powerful and better proof of concept validity than anything else.
MVP Dummy
Be prepared to listen when people give you subtle signals. Read between the lines. Ask for money not because you want money, but because it is the best way to get useful information. - Dan Shipper
Such a product seems to be a complete product, but with a "blown" backend solution. This approach is good for founders who are not “techies” and seek reliable evidence of the viability of their ideas. Here are some great examples:
The ZeroCater company, which received funding from Y Combinator, initially limited itself to a large table, trying to provide contact between the companies and restaurants that are engaged in catering. Groupon started with a WordPress blog and manually sent PDFs with the first vouchers. Grouper, another company that came out with Y Combinator, also started with banal tables, trying to pick people the most suitable pair.
Fast feedback / development
If you are the founder of a technology startup, then this is exactly what you should do (most likely). The main thing in this approach is a deep understanding of the problems of people who are your potential audience, and the creation of such a product, the main task of which is to ensure profit from the first buyers. Finding a balance between the desired product and the one that will be profitable is not easy (but important).
Minimum Desirable Product is the simplest thing that can provide a product that will create a valuable and satisfying customer experience. - Andrew Chen
MVP as a service
Starting with a product as a service - this is where Netfix began.
Netflix was born in California, its founders were two men: Reed Hastings and Mark Randolph. Hastings had to pay a huge forfeit for the late return of the movie he rented. It was then that he came up with the idea to create a service that will allow you to order movies by e-mail without penalties for delays with their return.
Immediately after that, they began to rent their friends a collection of their films - that was how Netfix was born. This may seem obvious, but if you ask most entrepreneurs how they would start their own Netflix today, you will get very detailed technological answers. Start doing something with your hands until you can scale up your business. Do things that don't scale, and then expand your business.
Profit and Pivot
This approach is based on the knowledge and experience gained through the sale of something that has already been created earlier, and for which a strong market is already available. Thanks to this method, an entrepreneur gains an audience and, provided the product is properly promoted, can easily verify his idea of X. After that, you can change your strategy and start selling X, regardless of what the company sold earlier.
My latest articles / translations: The
unexpected truth about success, or How to become a happy victim
Five ways to make money for a digital nomad with bread and butter
Myths about multitasking, or How our brains react to it
Doing business in Sweden and the USA: 6 differences