Not solving a “tier 1 problem” is a recipe for (startup) disaster: Or maybe not?

“Timing, perseverance, and ten years of trying will eventually make you look like an overnight success.”

– Biz Stone

Tier 1 Or Nothing

2 weeks or so ago while scrolling down my Facebook’s newsfeed I stumbled upon this eye-catching (business) quote:

If your startup failed, it’s because it didn’t solve a tier 1 problem for a large enough audience.”

Which was a post intro from a guy named Mitchell Harper, a big shot ‘exited entrepreneur’.

His point in a nutshell?

Unless you solve one of the top 3 problems your target customer is experiencing you’re scre*ed!

Yep, irrespective how good your product is if you don’t abide by that ‘market reality’ you will fight an uphill battle.

And that made me thinking…

Is that claim any true?

Or maybe another classic business BS as usual?

Since it’s not an easy one we have to do a bit of digging.

Painkillers, Vitamins, Oxygen Or Vaccines: Which One Is Your Product?

First things first.

Why does Harper think that way?

In his own words…

…“[it’s because], they’ll be so focused on solving their first 3 problems that you’ll never get a look in… They simply won’t have time (or budget) for you if you’re not solving a problem that’s top of mind for them — a tier 1 problem”.

And that brings us to the old-age business dilemma:

Vitamins vs painkillers!

In fact, over the last couple of years, some additional elements got blended into the mix (and yes, I am of course referring to oxygen and vaccines).

Just in case I lost you, let me explain these analogy-driven terms really quick:

1. “Painkiller products”:

Two words…

“MUST HAVES”

Yep, these type of products fall under the essentials category.

And another common characteristic of them is that they provide an almost immediate relief.

Some classic examples?

Gasoline, electricity, internet, telephone, just to name a few.

2. “Vitamin products”:

The main alternative to painkiller-products?

You guessed it…

Vitamins (aka “as nice to haves”).

Said differently,

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Business Idea Validation: Still Popular For a Reason or Simply Overrated?

“Money talks, bullshit walks”

– Stephen King

The (Classic) Fear

If I were to ask you, “What’s the number one fear of new entrepreneurs right before the launch” what would you say?

Ok, I am not a mind reader but if I had to guess, I’d probably think you will go with the classic:

Putting something out there that nobody wants!

But you know what; in case that you missed it, 21st-century entrepreneurs seem to have figured this out…

Whaaaat?

3 words: Business. Idea. Validation.

Yep, just do a simple Google search for: ‘How to test demand before building a product’ and you’ll come across 1000s of articles, books, podcasts preaching the importance of battle-testing your idea before jumping in.

And if you’re someone like me your first reaction, chances are, would be to say: that’s a good thing.

Why?

It prevents you spending a ton of time (and money) on the wrong ideas

– It forces you to make your target customers part of the product creation process

It gives you a chance to collect feedback early on before to start getting emotionally attached to “your baby”

– It enables you to have a MUCH smoother course correction should you find that you’re heading in the wrong direction

But if it’s such a good idea why to waste our time debating this concept in the first place?

Simple. Because is not as straightforward as it sounds!

Let’s get straight in…

Testing Demand Before You Get Started

But before jumping on the other camp, I think it worth opening a parenthesis and exploring how today’s entrepreneur (try to) test the market’s water before diving in.

So, what’s the answer?

Here you go…

Method #1: Targeted Surveys

You know the drill…

Go and find your people, either online or offline, present the business proposition (what the problem is & how you intend to solve it), ask a bunch of “relevant questions” and close with the BIG question: if this product was available would you buy it?

Method #2: Do the ‘landing page thing’

The story usually goes like this:

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Trying to fail fast to succeed sooner? STOP!

“If hard work is the key to success, most people would rather pick the lock.”

– Claude McDonald

The Stepping Stone…

Ever heard of the ‘fail fast to succeed sooner’ motto?

If you’re into startups I bet you do.

Originating in Silicon Valley, this phrase has not only become a standard business advice, but over the last couple of years, it has even evolved into an international movement.

Yep, I am not even kidding…

Events, TED talks, festivals, best-selling books, you name it.

The common denominator?

Of course – celebrating failure!

You did read that correctly. Founders get out there and share their… success FAILURE stories for reinforcing the idea that is not something you need to be ashamed of, but an essential part of being an entrepreneur.

As they say, failure it’s a key stepping-stone for success and you should embrace it even…

… if you’re a high-achiever, Type A’ personality, Alfa-male/female or whatever you like calling yourself.

And yes as an add-on bonus, failure also, wait for it… builds character!

But are all these any true?

Well, that’s what would be exploring today…

The (Business) Case for Failing Fast

So, why do many startup “experts”… urge entrepreneurs to fail fast?

Well, in their opinion, it boils down to three words:

Little Bets Theory!

What’s that about?

Mic to Peter Sims, creator of this theory

In these fast-moving times, it’s next to impossible to predict what’s around the corner, and harder still to formulate a foolproof plan to deal with it. Truly innovative companies,… don’t get caught up in projections and predictions. Instead, they embrace uncertainty, take a chance, fail quickly and learn fast.”

Not crazy different from what Eric Ries advocates in his classic book, right?

Anyhow, the idea here is that no matter how much research (and thought) you put into your plan, you always start with a set of unproven hypotheses.

And more often than not, will end-up being miles away from reality…

Hence, rather than wasting months on planning (and developing) a product in ‘stealth mode’ hoping that somehow you’ll beat the odds, go and ship something out there, fast, (by rapid prototyping) find the truth early on and learn as much as you can from the experience.

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Product vs Services Startups: 6 key factors you should consider before making up your mind

“Every choice you make has an end result”

 ~ Zig Ziglar

 The dilemma

Most new entrepreneurs have fallen victim to it…

“Landing” on a seemingly perfect business opportunity only to find out a few months later that the business they got into is not working for them.

Of course, that’s not the end of the world and pivoting may well ‘do the trick,’ but sometimes such accidents are preventable.

How?

By seriously considering ALL the options before deciding which type of startup business to get in.

And today I’d like to talk about the product vs service company dilemma.

Whaaat?

I know. For many that’s not really a dilemma at all because these days it has almost became ‘common knowledge’ that “selling a product is always better”, or at least that’s what the experts’ narrative appears to be…

But is that any true?

Well, not really – as you’ll see just in a bit, depending on your life goals, business aspirations and risk profile the right answer would be different.

Yep, each option comes with set of different side-effects (and benefits I may add) because as Mark Birch rightly reminds us here: “Running a service company versus running a product startup are vastly different creatures.”

So, shall we jump into the meat of today’s post and explore those differences?

Good, let’s get straight in…

6 Key Differences Between a Product and a Service Startup

Difference #1: Time to market

Can you guess why?

That’s right, the amount of time it takes to convert an idea into something sellable differs dramatically depending on the route you take.

– For the first scenario (having a product-based startup), you have a ‘model’ that requires investing time and resources upfront for conceptualising, creating, and testing the product.

– On the flip side (having a service-based startup), you can get a business off the ground and start billing for your services much, much sooner. You only have to define the service, find a customer, listen to his/her requirements, and then start delivering the pre-defined service.

Pretty straightforward isn’t it?

Difference #2: Scalability

Even though you probably heard that term a thousand times let’s make sure we’re all on the same page.

According to Martin Zwilling,

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Listening to customers: An absolute no-brainer or maybe just unnecessary?

 “If you don’t listen to your customers you will fail. But if you only listen to your customers you will also fail.”

 – Amazon slogan

Should we listen to them?

I know. You’d probably be thinking that’s a silly question…

After all, not listening to the people that would ultimately decide whether ‘our thing’ is worth their hard-earned cash or not sounds rather counter-intuitive.

However, here is the thing: at least when it comes to creating a new product (especially, if it’s your first one) it seems that things are not as straightforward as you would imagine.

“Why?” I hear you ask.

Well, here are 3 reasons to get you started:

Consumers are pretty bad predicting their own future behaviour

That’s right – (most) people suck at predicting what they’re going to do tomorrow, let alone what they are going to do months down the road.

So, by putting them in a situation where they need to predict how they will act in a hypothetical future cenario, you risk getting unreliable input.

People don’t know what they want until you show it to them

Does this phrase sound familiar?

That’s right – it’s a famous quote from Steve Jobs in a 1998 interview with Business Week!

Why did he say that?

Well, Jobs himself never really explained what made him think this way but nonetheless many others tend to adopt this line of thinking.

Take for example Lior Arussy a supporter of this worldview. In a post of him on this topic he’s asking: “Was the IPod, IPad or IPhone developed from customer surveys? Did the Wii come about because of customer feedback cards? Were scooters the idea of a bunch of kids needing more exercise? Your answers should be a resounding NO! Customers cannot do your thinking for you; they like what they see, when they see it.

What is the moral of the story, according to the supporters of this argument?

It’s not customers’ job to know what they want!

– It can act as a stumbling block to getting/staying ahead of the curve

The logic behind that statement?

Here you go: by listening to customers, you risk falling into the sameness trap.

Why is that?

Gregory Ciotti thinks that’s the case because “when you rely on consumer input,

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