Most Startups initiate with what their founders believe is a great product or service idea. Yet, 90% of them fail. In 2014 CBInsights published a study of 50 founder’s “post-mortem” essays - write-ups where founders narrate why their startup failed. The results shown in the following table are truly interesting:
Most identified more than one cause, though. But the chart is still enlightening. Remember, these are letters founders wrote to explain why they failed. 42% admitted their idea had no market need. 17% admitted that they did not pivot – modified their original idea - or the pivot went wrong. 19% couldn’t be better than their competition, and 30% had a poor or mistimed products. Those are a lot of product problems!
Although only 14% admitted ignoring their customers, if we dig deeper, most product problems also come from not knowing your customers well enough. Entrepreneurs commonly believe that they represent their customer so they tell themselves “if it is good for me, it is good for my customers”. That is not necessarily true. Others suffer from what I call “the Henry Ford or Steve Jobs syndromes” … you know: customers will have come up with faster horses or people don’t know what they need until you show them. In their cases it happened to be true, but they never ignored their customers, they actually knew them better than they knew themselves.
One of my favorite quotes in the CBInsights report came from Treehouse Logic post-mortem: “Startups fail when they are not solving a market problem”. The question is how do you know if you are solving a market problem? Without knowing your customers, you can’t. Fortunately, there are many tools you can utilize to document who your customers are. At LLAMAX we like creating personas that represent the market we are addressing using a 3 step process:
- Create a user profile: A description of the user including all relevant attributes such as job, hobbies, skills, lifestyle, etc. This is to identify who you are creating your product for.
- Create a persona: A fictional individual created to describe your typical end user. We like to include a picture or avatar, name, age, goals, and how/when they will use your product. This makes it personal and adds empathy as well as provides designers and engineers with specificity of usage.
- Create relevant stories: Unique stories that describe how the persona completes the job using your product in a specific
situation. Explain why it’s better than the competition, and what environmental conditions are necessary to succeed. This helps bring users to life and identify features or functions that you can design for.
Identify more than one persona, don’t focus on the expert or the novice. And by all means, don’t do this alone. Preferably talk to your target users if you can. But at the very list consult with friends, family, associates, investors, or partners. Be as detailed as you can and spend as much time as you need to. This exercise will help you identify what you don’t know and market problems you can solve.
We’ve worked with many customers that have gotten tremendous insights by doing this exercise. Most lead to a modification (or many) of the original idea as they identified specific use cases that needed a particular spin on technology that other products had not been able to solve. Addressing them gave them a competitive advantage, patents in some cases, and a clear market problem they solved with their products. One customer even said it was the most valuable thing they did since they started.
We also like the Value Proposition Canvas, discussed in detail on the book Business Model Generation, a great tool to identify what your customers need and how you are addressing those needs. And a great book for anybody involved in a business in any form or fashion.
Do your customers a favor; assume you are not the next Henry Ford, Steve Jobs, or your favorite innovator. Spend the time analyzing, understanding, and documenting your customers. It will be tremendous value to you, your customers, your products, and your startup.