PROBLEM-SOLUTION FIT: THE FIRST MILESTONE FOR YOUR STARTUP

From the website : foundersfoundation. de
The story is written by BY GRAHAM HORTON AND JANA GÖRS

The most common mistake first-time founders make is to develop a product for which there is no market demand. Problem-Solution Fit is the component of the Lean Startup approach that helps founders to avoid building a “solution for which there is no problem”.

STARTUP IDEAS ARE BASED ON ASSUMPTIONS

The most basic requirement for any product is that somebody needs it; if there is no demand for a product, then it is guaranteed to fail. This is not an issue if you are founding an existing type of company like a software studio or a dentist’s surgery, because both the customer need and the corresponding product or service are already well-understood and sometimes even standardized.

However, if you are founding a startup, the situation is very different; you have an innovative product which solves a customer problem in an unusual way, or you might even be solving a completely new customer problem. It is therefore not at all clear who your future customers will be and whether or not they will accept your solution. There may also be unseen obstacles that prevent them from adopting your solution.

Imagine it is the year 2008, and you have just had the idea for Airbnb. Three fundamental questions you need to find answers for are:

  • Will business travelers be willing to stay in private accommodations?
  • Will people with unused bedrooms be willing to rent them out to strangers?
  • Will travelers and hosts be prepared to use an online marketplace?

Of course, 12 years later on, we know that the answer to all three questions is yes, and Airbnb has become very successful. But back in 2008 this was not obvious at all, and if any of the answers had been no, then Airbnb would not have been possible.

To a greater or lesser extent, every startup is like Airbnb, so it makes sense for the founders to test their basic assumptions before they start to develop and market their products.

AN UNNECESSARY RISK

20 years ago, startups received financing based solely on their founders’ ideas. The founders would then spend their investors’ money developing and marketing precisely that idea. In doing so, they were gambling on whether the market would adopt their product or not.

This led to some spectacular flops. Two well-known examples are the startups Segway and Webvan, who spent around 100M$ and 1Bn$ respectively to bring products to market that hardly anyone wanted to buy.

And then in 2011/2012 everything changed. Eric Ries wrote The Lean Startup and Steve Blank wrote The Startup Owner’s Manual. These two books proposed a new approach which emphasized the importance of validating the assumptions on which the business was going to depend before entering into any major commitments.

Lean Startup proved to be very effective, and it spread quickly. Nowadays, many respected university Entrepreneurship programs, startup accelerators and venture capital companies all favor the new approach. And yet, even today, startup founders continue to be convinced that they understand what their customers need and then devote all their energies towards developing untested product concepts. In most cases, this is little different to them going into a casino and gambling all their money on the roulette table.

Problem-Solution Fit is the first major milestone in the Lean Startup approach, and its objective is to prevent you from making this mistake.

WHAT IS PROBLEM-SOLUTION FIT?

In its simplest form, Problem-Solution Fit (PSF) asks three questions:

  • Does the customer problem you want to solve actually exist?
  • Does your planned solution solve that problem better? (in the eyes of your customers!)
  • Would your future customers prefer a solution like the one you are planning to the alternatives?

Since all of these questions refer to your future customers, Problem-Solution Fit automatically implies a fourth question, namely,

  • Who will your customers be?

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