→ Product strategy for startups

Minid the blog, July 30, 2019:

On building products for necessities instead for solving a problem


Solving people's problems may be a good deed, but if you are looking to create a good product, one that is used massively every single day, this may be not the best approach. In this article I analyze both product strategies and their possible output and impact on your company.

In my last participation in Google Launchpad in Romania as a leading mentor, I had the opportunity to make a presentation in front of all startups about what a good product is. Are those that solve a problem or those that solve the greatest necessity in the best possible way? This question came to me years ago after having created several services oriented companies and most of these have failed but not when it was need oriented. These companies were created based on trying to solve a problem and not a necessity, it was not a failure due to the lack of a technological solution, but a failure due to the fact that the market did not consider our hypothesis as an important problem. Funny thing about this story is, when you create a necessity and you provide a solution to that necessity, your company grows organically and stable, you have more chances to succeed.

When the startups pitch me their products in venues, they always tell me the same line: that they have embarked on the project because they want to, they do or they’re trying to solve a hypothetical problem. The startup in most cases considers that the problem is important or critical. Something that is big in comparison to other problems. But the dilema I see with these approaches is that almost in 100% of cases, startups have never been in direct communication with real customers to certify this hypothesis. When validation came, they realized the problem isn’t relevant anymore. When I tell them “I will never use a product like this” or “why would I use it?” the reaction is a mix of skepticism and confusion. I see this as a pattern that repeats every year in each startup I reviewed and after 5 years participating in Google Launchpad it has awakened my curiosity to understand why.

If your product was created to solve a problem, I repeat: that’s fine, but it does not have to be that way and as you’ll see it later on this article. Keep in mind that creating a company to solve a problem is not the best goal, if you want to have long-term financial sustainability: other companies will do the same as your product because the business is something obvious. Large companies, with many resources, will be able to copy your solution in a matter of weeks and use their advertising machinery power to take away all your possible customers in a matter of days or they will use other ways to break you down as Twitter did with Periscope. Out there, the competition is wild, ruthless and knows no boundaries. But it is difficult to take down a good built necessity, that sparkle is hard to shutdown, because who has created it first, it has already established a sentimental bond with the client, therefore, competition will be absurd and large companies have few options: create a similar product to yours expecting to have the same traction or buy your company for a lot of money. Remember Twitter and their 300 competitors. Remember Instagram vs the rest.

Not all products must solve a problem

This type of argument –all products must solve a problem– has always seemed weak to me although it was not easy to realize it. Over the years I have been biased with media, speakers, jobs and other cultural legends that contributed me to think the only way or better, the only thing worth doing is simply solve a problem. I realized that this was not true after reading economists like Hayek and Von Mises and being entrepreneur myself for a long time. I have found that the idea of solving a problem does not always ensure success nor does it ensure that the product is good. However, I have found that the best products I have worked with were those that actually generated a need instead of solving a problem. This led me to investigate the reasons why solving a problem is not a panacea.

The first reason why this argument fails, is that not everyone has a problem. It seems stupid to say it, but is that many entrepreneurs believe that you have to solve problems and these are irrelevant problems for most of customers once you get in touch with them. I have seen at least 100 pitches of startups, the vast majority believe that the problem they are attacking is real but after a round of analysis we can verify that their problem is too specific. Doing a business oriented to a problem already limits you in the consumer market. Not everyone has that problem and the more you analyze it, the more you realize the error of focusing your business on that problem. If the problem is chronic, so large and massive, it is already solved not by one company but by several.

The second reason is that not everyone is aware of having a problem. This is another fact that many entrepreneurs ignore. We are not aware of all the problems we have. We do not know if we have security, health or any other problems and we will usually find out about them when they show a clearer signal. The fact that there are people who do not know they have a problem, already contributes to lack of market you want to attack with your solution: not only by the fact that there are people who do not have that problem, but also because there is a second group of people who do not know they have it and there is no reason why in their minds they shoot the idea of finding out if they have that problem and also who could solve it. While this fact exists, your market will be reduced, your imperative to grow and win customers will be very complicated.

The third important reason is that people can coexist with problems. We are capable of it. And it seems that in the minds of many entrepreneurs, this possibility does not fit, can’t be posible. How is it possible that someone does not want to solve their problem? Absurd! But the reality is that people endure problems every day. I bet you have seen a family member who has a clear health problem but this person does little to solve it, prefers to watch television or buy the new iPhone to fix their teeth. How many times have you lived with a problem, even months or years because you simply do not have enough motivations, time, considerations, reasons, priorities to solve it. Many human beings coexist with their problem, they support their problem because within their mind there are other priorities or interests. Many people prefer to spend all their money on an iPhone to pay for a health treatment. The example of the health problem is the clearest and, probably, most extreme, but you can imagine the amount of technological problems that will become totally irrelevant for the vast majority of people: changing your browser, email client, improving your security, changing your internet company, etc.

Necessities above problems

Necessity is the mother of invention, they said. A necessity, not a problem. It is a huge difference. When we go to the definitions, a necessity something necessary or indispensable. A problem instead is any question or matter involving doubt, uncertainty, or difficulty. While solving a problem may be a vital necessity, as we can see, semantically they are different things. A necessity may be to watch a movie tonight in your house. That’s not a problem. Problem would be to not able to watch the movie. If you have to create a service, would you do a service that allows you to find the movies you want or one that generates the necessity to watch movies? They are two different things. One plays with uncertainty and the other plays with creating a habit. Creating habits, having the need to do something is much more powerful than solving a problem. It generates more profits, more recurring profits while the example of problem solving is less recurrent, more punctual and specific. You will not always have that problem but you can always have that need. How different is the argument now that we can differentiate between one thing and the other. Our suggestion on the subject may leave us with an inverse bias, where the problem is more vital than necessity, but reality dictates the opposite: people sell parts of their bodies to satisfy banal needs while ignoring serious problems.

Another one of the arguments in favor of the necessities is that these come in the vast majority of cases first than the problems. It is possible that a problem leads to a need, but implicitly, not in all cases –remember that not all people have problems. A necessity can not only come first in the list of occurrences but can also lead into a serious problem, one that takes priority in your list of things to solve. This results in the necessities always take priority in our lives. An example, eating is a necessity, that will come first and then the problem will come, when you realize that you do not have food in the refrigerator. When you analyze this topic, you realize that the best products were always located in creating a need to solve problems. Products you cannot live without it.

Another great point in favor of necessities is that necessities don’t have that short market cap. You can scale the need almost endlessly as new people joins the wagon. Problems are specific things, triggered by human action or situations, but needs are triggered by getting the attention of the consumer. Think it this way: the need to message better with your friends and more economically made WhatsApp the most popular messaging app over the dozens of messaging solutions that already were solving the problem of sending messages to your friends. If you didn’t have WhatsApp, you were already out of the loop with your friends. This is how some companies became unicorns: by creating a special need, one that is indispensable. A new one, or a well know one. They don’t focus on the problem, but more on how much you will desire to use the product. If WhatsApp would be focus only on solving the problem of sending messages to your friends, they would be dead by the minute they step into the market. Just think about how Instagram did it or how Nest make it also with their thermostats.

The last major argument is that you can create the necessity and make it legal. You cannot –legally speaking– create the problem and be the one offering the solution Italian mafia style. Necessities can be created and be perfectly legal, but the oposite is more likely to be illegal in most of countries and take you to prison. Some people did this in the past, and they cashed loads of money by creating the problems and at the same time offering the solution. This is also a powerful point because most startups can be focused on creating a better necessity instead of wasting the silver bullets on hypothetical problems by creating a nice business idea, one that spices up the business, instead of being the “another X solution”.

The Problem Solving bias

I think the main reason most of the companies crash into reality is because everyone has the Problem Solving bias. You see it everywhere: solve a problem and you will cash. But there is very little bias towards creating things that generate desire and reusability. Focus on the problem, and you will succeed they say in millions of articles in Internet, courses and conferences. The idea that the only way to make a good business is just solving a god damn problem. Well, no. It result that a good product is that one that fits the need of the client, in the most accessible and affordable way. Basically, you’re giving them the value in the best possible way. And why the best possible way? Because there’s no perfect way and you will realize things will be improved over time and some design features of your product will streamline after you dealt with dozens of customer reviews.

The idea is you must find out what is indispensable for your future customers. It is not an easy task, that’s why there aren’t that many awesome products out there, but you can start by talking them and hearing what they say. They will not tell you “make an iPhone”, but they will tell you a lot of the things they love. Maybe in those things you find a good fit for the technologies you’re currently working. Maybe its a good tip to marketing your product, maybe is a reason to pivot. Don’t ask them what’s your problem, always ask them what would you love to have.

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