How to Vet New Product Ideas

8/3/2019 How to Vet New Product Ideas

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How To Vet New Product Ideas and Save Time,Money, and Effort

ByAsh Maurya 3 Comments

Hello my friends and happy Monday to you. Last weekin our Monday guest post , we heard from my f riend

Mark Newman of HireVue. He shared with us his unique

fundraising experience. I received several emails af ter

that post. Some people didnt like all the details he

shared, but most people loved it. I, f or o ne, admired his

candor and thought it was very insightful. Give it a read

if you missed it and decide fo r yourself.

This week, we are in fo r a real treat! One of my favorite

Lean Startup entrepreneurs,Ash Maurya, is joining us

on the blog today.Ash is a leader in entrepreneurship

and the Lean Startup movement. His book, Running Lean, is one of my f avorites . Id highly

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recommend you read it if you are thinking about a start up or are in one (which should be most , if

not all, of the readers here). In the meantime, he has favored us with one of the best guest

posts Ive read on this blog. It re ally is that good.

Read it, bookmark it, and read it again! Great st uf f , Ash. Great s tuf f . So, without f urther delay,

Ash Maurya and How To Vet New Product Ideas and Save Time, Money and Effort.

Everyone gets hit by ideas when they least expect them (in the shower, while driving, etc.). Most

people ignore them entrepreneurs choose to act o n them. But acting on ideas is not without a

cost.

I am not just t alking about the physical cost of building and marketing a product but also t he

more intangible, but in my view, even more important opportunity cost.

Committ ing yourself f ully to a product idea or vision can easily consume months and more

realistically years of your life. Af ter years o f building products that had varying levels of market

success, my own mantra has become: Lifes too short to build stuff nobody wants.

We need a better, fast er way to vet product ideas so we dont waste time, money, and eff ort. Of

all these resources, there is no resource more valuable than time. Time is more valuable than

money. While money can f luctuate up o r down, t ime only moves in one direction.

This is exact ly what the Lean Start up metho dology, codif ied by Eric Ries, is all about . Under this

model, a st artup (or product) is built iteratively through a series o f small experiments designed

to quickly inform and guide us on the validity of our assumptions.

Ive been rigorously applying and testing Lean Startup techniques to my own products and have

distilled the essence of the methodo logy down to 3 steps:

1. Document your Plan A.

2. Identify the riskiest parts of the plan based on the st age and type of your product.

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3. Select the right tactics t hat maximize f or speed, learning, and fo cus.

While these s teps are applicable during any stage o f the s tartup, Id like to illustrate how to apply

them during the initial ideation stage.

3 Steps To Vett ing New Product Ideas

As ent repreneurs we tend to be more pass ionate about the so lutio n and o f ten rush into buildinga product . But building the product always takes much longer t han we think. More importantly, all

that ef f ort is predicated on the assumption that we know who the customers are, what the y

want, and how we will monetize the product. We dont. The real kicker is t hat we can learn all

these things without actually building the product.

Step 1: Document Your Plan A

The f irst st ep is documenting your business model assumptions. There is no subst itute to

writing this st uff down. Too many founders carry these assumptions in their heads alone which,

while the fast est way to iterate, creates a self- f ulfilling reality distort ion f ield:

Reasonably smart people can rationalize anything but entrepreneurs are especially

gifted at this.

There are several techniques for capturing your initial plan. Business Plans have traditionally

been used for t his purpose. While the intent o f business plan writing is so und, taking severalweeks o r months t o write a 60- page business plan largely built o n untested assumptions

(guesses) is a form of waste.

The Business Plan is a document investors make you write that they dont read.

- Steve Blank

Shot 83 g olfing a t Bountiful Ridge Golf

Course. http://bit.ly/jA5g7Vabout 2 days

ag o

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More import antly, since mos t o f these assumptions are likely to be proven wrong anyway, you

need something less static and rigid than a business plan.

My tool o f choice fo r documenting my assumptions is creating a one-page business model using

the Lean Canvas f ormat. Lean Canvas is my adaptation of Alex Osterwalders Business Model

Canvas as is shown below:

It captures t he essence of your business model on a s ingle page and serves as a powerful tool

f or pinpoint ing what you dont yet know i.e. the riskiest part o f your model. You can learn more

about it here.

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Step 2: Identify the Riskiest Part of the Model

While what you consider risky may vary by product , one of the risks you always need to tackle

f irst is problem risk i.e. determining whether your problem is worth solving in the f irst place. If

the problem isnt worth so lving, spending any amount of ef f ort overcoming other risks like

technology risk through great f eats o f engineering are all fo rms o f waste.

A pro blem worth solving boils do wn to three ques tio ns:

1. Is it something customers want? (must-have)

2. Can it be so lved? (feas ible)

3. Will they pay fo r it? If not , who will? (viable)

Step 3: Maximize for Speed, Learning, and Focus

The f astest way to learn is not by building the product, or running a survey/f ocus group, but

conducting pro blem interviews with pot ential custo mers. A problem interview is a special kind of

interview where you decouple the problem from your solution and f ocus o n truly understanding

just the problem f irst .

You are specifically looking to answer the f ollowing questions:

1. Who has the pain? (Customer Segment)

While we would all like to build mainstream products, s tart ing there is a mistake. Read/re-read

Geof f rey Moores book: Crossing the Chasm where he describes the customer adoption curve

and makes a compelling case f or f ocusing your initial eff orts on es tablishing a beach-head with

early adopters. It is f ar more ef f ective to f ocus all your ef f ort s on a smaller, more passionate,

sub-segment of customers f irst.

During the interviews you are loo king to f ind early adopt ers and eventually be able to art iculate

the qualif ying attributes that def ine them.

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2. How do customers rank your problems? (Problem)

During the interview, you need to gauge the cust omer pain level towards your set o f problems:

must- have, nice-t o-have, or dont-need. You are ideally looking f or a stro ng must- have

resonance but beware that people inadvertently lie with this question. You still need to ask them

the question but verif y their answers by way of probing deeper in the next section.

3. How do customers solve these problems today? (Alternatives)

A lot of entrepreneurs /invest ors misplace at tentio n on competit ion early on.

Your competition is driven by your customers Its not who you think they are, but

who your custo mers think they are.

Your true competition is best revealed by exploring how customers solve your problems today.

Of ten, they are not who we think. As an example, the most common alternat ive to an online

collaboration t oo l is not another collaboration to ol, but email. Doing nothing could also be aviable alternative fo r a custo mer if the pain is not acute enough.

Understanding your customers existing alternatives not only reveals your competition but is also

how you verif y their problem rankings f rom earlier. For instance, if a custo mer ranked your

problem as a must-have earlier but then later tell you they arent actively doing anything to solve

this problem, there is a disconnect.

Af ter a number o f problem interviews , you sho uld be in a much bet ter posit ion to gauge whether

you have a problem worth s olving or no t. Its perf ectly okay and expected of you to refine the

problems along the way. Armed with a prioritized pro blem list and ref ined early adopt er def inition,

you are then much better equipped to f ormulate a solution.

Preemptive Strikes and Other Objections

Some obvious concerns of ten raised with this methodology is t he qualitative nature of this

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learning. People of ten cite the lack of stat istical significance, or t hat custo mers dont know what

they want.

Lets visit each:

Lack of Statist ical Significance

Your initial goal is getting a strong signal (positive or negative) which typically doesnt require alarge sample size.

A st rong negative s ignal indicates that yo ur assumpt ions most likely wont work and let s yo u

quickly abandon or ref ine it. If 5 o ut 5 customers tell you they dont a problem, thats prett y

signficant!

On the other hand, a strong positive signal also doesnt necessarily mean it will scale up to

statist ical signif icance either. But it gives you permission to move f orward until it can be verif ied

later through quantitative data.

Customers Dont Know What They Want

Your job is not asking your customers f or a list of f eatures. Rather its understanding how

customers perceive and solve your articulated problems today. Your real job as the entrepreneur

is to turn that understanding into a compelling product.

There Are No Silver BulletsNo methodology can guarantee success. But a good methodology provides a f eedback loop f or

continuous improvement and learning that helps raise your o dds f or s uccess.

The key point to drive home is t hat f inding a problem worth so lving is the f irst st ep f or vett ing

new product ideas and you can almost always do this without building the product which saves

you time, eff ort, and money.

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Comments

Mary Beth Izard says:

June 14, 2011 at 5:32 pm

I think you have some excellent points on vet ting business ideas. Id particularly liked your

Lean Canvas f ormat f or s creening ideas as o pposed to writing a f ull blown business plan to

do so. The Lean Canvas approach is a good way to analyze the market f easibility of the idea.

In addition, nascent entrepreneurs need to analyze their idea from several other perspectives

it s f inancial, management, personal, and t echnical f easibility. Financial f easibility is

somewhat obviousdo they have the funds or access to the f unds to launch the business.

Management f easibility relates t o having the management skills, either individually or as part

of the management team, to launch and grow the business . Personal f easibility is particularly

importantWill the business meet the entrepreneurs personal and professional goals? Will it

provide the lif estyle they desire. And finally, technical feas ibility relates to having the technical

know how and resources needed. All of these are necessary, in addition to market f easibility.

Mary Beth Izard, author of BoomerPreneurs: How Baby Boomers Can Start a Business, Make

Money and Enjoy Lif e.

REPLY

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Ash Maurya says:

June 15, 2011 at 2:18 pm

thanks f or t he comment!

REPLY

Ste ven Goldbaum says:

June 17, 2011 at 12:30 pm

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Innovation Competition is the worlds largest business competition. Entrepreneurs world-wide

are eligible to participate. The competition targets mid-to- late-stage business start- ups.

Grand prize is $500,000 plus in-kind amenities. Applications for business and student

competito rs are available now, via http://www.acceleratemichigan.org .

REPLY

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