Problems, problems, problems.
We all have them, but why do entrepreneurs LOVE them? And why are they always talking about "the problem"?
Let’s say you have an idea for a new business, or a new product or service. If you try to tackle the whole "business plan" all at once it can be overwhelming. But if you’re going to focus on one thing at a time, where do you start?
Well, the problem is a great place to start, as great businesses solve real problems.
Focusing on the solution (aka your business’ overall idea) can be exciting, but it is worth going back to the problem. "Why?" you may ask. A problem usually stays the same, whereas the solution can change over time. Focusing on the problem helps to understand who the real customer is and exactly how annoying the problem is for them (and hopefully how much they would be willing to pay for the solution).
Let’s talk about Netflix. Some of you may remember that Netflix started in 1997 by renting out DVDs via mail. They understood the problem — people hated standing in the aisles of the video store looking at the "reserved" stickers on the boxes of the movies they wanted to rent; and they hated paying late fees when they forgot to return a weekly rental. So Netflix created a subscription DVD rental service where people set up a queue of things they wanted to watch and got them posted to their door, and never had to pay late fees.
This is a great example of a company that understood the problem before they tried to solve it. Spending time in the problem space told them exactly what their solution needed to offer to their customers, in order to be better than the video stores they competed with. Their understanding of the problem, rather than their solution, was what enabled them to change their offerings over time and gave their business the legacy and longevity it has today.
Entrepreneurs often talk about falling in love with the problem. We encourage entrepreneurs to take time to really understand the problem space before exploring a solution. There are lots of ways to do this, but a great place to start is writing a problem statement and then experimenting to check that the assumptions are correct.
A problem statement is written from the point of view of your customer. When we talk about the customer, we want to target one type of person, i.e. your key customer. These key customers are people who regularly experience the problem and are frustrated by it. We focus on these customers as they want the problem to be solved and are more likely to pay for the solution.
Even if you think you already know this, it is helpful to make it explicit by writing it down. Spending 20 minutes doing this can help you clarify your thinking and identify your assumptions. If you have already raced ahead to what the solution will be, this is a good opportunity to pause and ask yourself: who would pay money for it, and why?
The problem statement talks about what the customer is trying to accomplish and is broken down into three parts: who has the problem, what is their need, and why is it a problem for them?
Step 1 is writing your problem statement:
Who: Has the need?
Need: What are they trying to accomplish?
Because: Why are they trying to accomplish this?
An example of a problem statement for a pot plant hire company may be:
"Medium to large office spaces in central Dunedin (who) need office plants (need) because they want to promote clean green healthy spaces for their employees (because)."
Of course, you may have more than one type of customer, but focus on one initially; although if you’re working on a marketplace you might want to complete a problem statement for each side, both the stakeholder and the customer.
The next step is to start testing your problem statement. A great way to do this is to find people affected by the problem and ask them about their experiences with it. Ask open questions; i.e. questions that do not lead them to a certain answer.
These questions help you to understand more about the problem. Generally it’s best to ask them in person, so when you hear something that sparks your interest you can pull at that thread a bit more. You might learn something that completely changes how you view your solution.
Understanding the problem space helps you understand what is needed to solve the issue in a meaningful way, and that means they are more likely to pay for the solution. Score!
By the way, If you’re looking to start up a business, a side hustle, or looking to solve a problem, reach out to Startup Dunedin for a free 15-minute session to help you find your next steps. Or, better yet, let’s refine your problem statement and help you find a way to test it!
• Grace Esterman is programme facilitator at Startup Dunedin.
