In this short text, I would like to introduce to you one of the famous “Startup Trials and Tribulations”: Why doesn’t anybody buy my product?
Introduce to you? Yes, introduce. I know, of course, that literally everybody is already familiar with all the things that can go wrong when starting a new business, or with a startup as we say fashionably nowadays.
It is therefor amazing how consistently the same things go wrong over and over again, even though everybody knows what’s wrong. Most notably, the non-entrepreneurs, I might add a bit sarcastically.
Let’s start at the beginning: Starting a business is, contrary to popular believe, not that easy. In fact, it is a numbers game from the very start. Only a very tiny portion of startups really make it. Why doesn’t the rest make it?
Because nobody buys their product!
There is literally tons of research out there, minutely dissecting reasons for startup failure. Usually this leads to a top 20 of reasons why the startups fail. I, on the other hand, tend to believe that the majority of these top 20 reasons can be collapsed to one single item: Lack of customers.
Lack of customers automatically leads -or at the very least, should lead- to the question: Why doesn’t anybody buy my product?
Of course there are various possibilities, of which we will discuss today only the most important one, in my opinion.
The simple answer is, because you made a product that is useless. Or more friendly, has no use. This happens most often when you build a product and introduce it in the marketplace without ever before having verified if someone would need it. Or at least would benefit from it.
Of course there is always a possibility your product or service is extremely useful and you just messed things up. All you would need to do is un-mess things and you’re back in business. This is called technology risk: basically your idea and/or product is brilliant, you only made a few mistakes while executing. Unfortunately this is rarely the case. The mishap is often more fundamental. There is simply no market for your product. Unsurprisingly, we call this the market risk.
And here is the bottom line: in the realm of startups, the market risk is much higher than the technology risk. I would even dear to argue that for most startups, the technology risk is almost negligible (biotech and pharma being an obvious exception). About how this came to be we’ll talk some other time maybe. So, not only is market risk much higher, it is also much more difficult to recover from, because it tends to manifest itself when you are launching your product and trying to ship it. Major expenses related to “building” your product have already been incurred.
So far, we have established that market risk is what kills you. Now let us have a closer look what it is that causes this risk, largely.
Most often, as I said, founders who design their product bottom up, expose themselves to a huge market risk. Bottom up means here that the founder takes a technology he or she fell in love with and then sets out to find a problem it might solve. This might even work, if, and only if, the founders would “test” their hypothesis (just a fancy word for guess) in an early stage and verify that there is somebody out there who wants to buy their product. And then a few more!
Sadly, the founders who operate bottom up, are the same ones who are often not predisposed to verifying any hypothesis. I say often because there are of course exceptions, but my guess is that that is not the majority. It is in the entrepreneurs nature to believe in their idea, and the bottom up entrepreneur is even firmer in his believe.
The top down approach, you already guessed it, is the way to go: find a problem worth solving and figure out how to do it (select your technology). Then still, get out of your office and verify until you drop. Once you have verified, then it is a good time to fall in love with your idea!
Top down entrepreneurs, in my believe, are more inclined to go out and verify. They choose to do so because they don’t get carried away by a nice technology but by solving a problem. They will, therefore, be more open to verifying their hypotheses, talk to potential customers and if necessary: adapt their hypothesis about the market. When the change to the hypothesis is substantial, it is called a pivot.
So what’s today’s takeaway?: They don’t buy your product because you didn’t ask them if they need it first! By doing so, you have exposed yourself to market risk and most likely that will be the reason why you join the masses who’s startup fails.
And you thought: “what could possibly go wrong?”.