Startups: Process of Idea Validation

Business can learn a lot from science. Scientists come up with hypotheses, and in order to prove them they perform experiments. The same goes for your business idea. Before investing large amounts of time or capital, you can test your idea to see if it has a good chance of being successful. This is the process of idea validation.

Photo by anieto2k  via Flickr

Photo by anieto2k via Flickr

Finding and Idea

Maybe you don’t have an idea yet. Or maybe, even worse, you have a bad idea. Justin Kan, the founder of Justin.tv, warns about the “divine inspiration fallacy”. Kan says on his blog:

For many first time entrepreneurs, it is easy to think that you uniquely have had a one-of-a-kind product idea. You wake up one night with a crystal clear vision for a product and exactly how your future customers will use it. You think that the product spec comes from the mouth of God directly to your mind, and from there directly to the web. Write it out, build it, ship it, done.

One of the best ways to avoid this pitfall is idea testing which we will discuss later in this article.

If you have no idea, or just some vague leads, then the best place to look might be for “low hanging fruit”. According to Wade Foster these are the ideas that are the easiest to reach. These are the problems that people are talking about in a very open manner. They are tweeting, posting on Facebook and in forums and searching. Just open your eyes and ears and you will find them.

Foster’s methods to finding the low hanging fruit can be adapted to mine for new ideas. For example, you can:

  • Follow vendor forums where people are looking for solutions
  • Follow Tweets of people asking for advice or answers
  • Analyze low competition, long tail keywords

These places then become the natural place for you to pitch your solution. Wade Foster cites various examples where placing a strategic link in forums has generated business for him. Or you can Tweet back at the people looking for solutions. Finally, the low competition, long tail keywords can be serviced by a webpage directed at capturing potential customer search.

Fundamental Questions

The first step to idea validation is that your concept must answer the fundamental question: Does it solve a problem?

There are also variations to this question such as:

  • Does it replace an existing solution?
  • Does it improve upon an existing solution?
  • Are people looking for a solution?

Let’s look at each of these in detail.

Problem Solving

Even in the world of science, creativity is essential. You have to be the one that comes up with the idea. It may be something completely new, or something that improves upon another idea. No matter what though, you have to ask this essential question: What problem is solved by your idea?

This first stage of idea validation is critical. On Wade Foster’s blog, he says:

If you look at the history of companies, you aren’t going to be able to find a sustainable company that managed to exist without solving a problem.

Your answer should not be too complex. Warren Buffet has been quoted as saying that any business idea should be simple and understandable. You should be able to draw it on a paper napkin or it should be easy enough for a grade-schooler to understand. For example:

  • McDonald’s solved the problem of having a place where you could get a fast, consistent and cooked meal.
  • Google solved the problem of having a place where all you do is search.
  • Ford solved the problem of building cars quickly and on a large scale.

As you can see in these examples, a problem was solved with a simple and understandable answer. These companies have endured and continue to outlast their competition. Even though Google has diversified, its primary function is still providing Internet search. Now let’s look at variations of the problem solving concept.

Replace Existing Ideas or Products

Maybe your idea does not solve a problem uniquely, but it replaces something already out there. For example, the vacuum cleaner replaced the broom. The vacuum cleaner was simple, understandable, met a need and was, therefore, valid.

Des Traynor from Intercom illustrates on his blog in the following way. You might think that Facebook would be difficult to explain, but really it’s just replacing the photo album or picture frame with the same thing on a computer screen. So we have:

  • Problem: Need a way to show pictures to many people on the Internet (or: How do we make a better picture frame?)
  • Solution: Facebook

The Amazon Kindle is another great replacement success story. The reason is that they aimed the Kindle at replacing books, not marketing it as another type of computer.

Improvement Ideas or Products

Another idea validation method is testing if it improves upon an already existing idea. One great example is Travelocity. The idea of arranging a trip has existed for centuries, but online travel arrangement improved upon the process greatly. According to Dres Traynor, one of the keys to improvement is to take out steps. In the Travelocity example we can easily see the steps removed since you don’t have to go to an airline ticket office, you don’t have to write a check, you don’t have to use regular mail, etc…

Next, says Traynor, is that you have to increase access. Travelocity did this by completely taking out the travel agent middle man. Now anyone with Internet access can book a plane flight.

Traynor also highlights the importance of making things possible in more situations. Again, Travelocity does this by including car rental and hotel booking in their services.

The Amazon Kindle also cashed in on the improvement model since it provided way to store thousands of books in one simple carry all package. Also it allows for people to interact online with reading communities thus enhancing (i.e. improving) the book reading experience.

Are People Looking for a Solution?

Now, you might have already addressed this question if you followed the “low hanging fruit” model for idea generation. Again, you can look to social media, forums and search analysis to find out if your idea already has people looking for the solution you offer. If there is no activity, you will find it hard to generate interest from nothing.

Most needs are very old. Even the model T Ford merely replaced the horse-drawn carriage. Facebook satisfies the need to tell stories. McDonald’s satisfies the need for food. Sometimes the key is to look at old needs and come up with new, faster, simpler and more useful solutions.

Summary

There are millions of ideas out there, and some of them are good. What you want though is an idea that will sell. If you validate your idea before you hit the market, your chances for success are increased greatly. This saves you time and money.

So ask the fundamental questions regarding problem solving, replacement, improvement and existing interest. In many ways, answering these questions also helps you begin to develop a marketing strategy.

In upcoming articles we will discuss specific ways in which to gather hard data on idea validation.

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