A few weeks ago I boldly stated that I was going to test a number of business ideas quickly with a budget of $2,500 (see post). So, how has testing a new product gone? The premise was to avoid spending a big wedge of cash (and time) on building / launching something that nobody really wants – or more importantly, nobody wants to pay for. Side note – having something that people want but don’t want to pay for is more dangerous than having something that they don’t want at all; the former you should call a ‘hobby’. When ‘I want’ meets ‘I’ll pay’ you have permission to call it a business.

First thing to report back is that this stuff is harder than I thought. It’s become a frustrating sinkhole of time working out whether the idea is a good or not. On the positive side I’ve only spent $169 in cash and I have avoided any emotional attachment to an idea, which has been a killer in the past.  To get things back on track my first task is to get in front of customers and discover want they want.

In this post I want to focus on testing a new product by qualifying my hypothesis (I’ve set up a list of hypothesis it doesn’t matter what mine are you should have your own). The goal behind this part of discovering what my customers want to validate my assumptions.

I’m currently testing a new product around mobile publishing. Some of my key assumptions are:

1. Entrepreneurs struggle to find good ways to have basic business concepts explained to them quickly and simply e.g. how does raising money for a business work?, what is a balance sheet?, why are early adopters important?
2. A good way to explain these would be using short-form video and voice i.e. replicate how a buddy would explain something to me drawing on a back of a napkin while I’m having a beer at the bar.
3. A good time to learn about these things is when I’m on the go and have a spare 5 or 10 minutes. i.e. people would want these packages up as mini video pocket guides they could watch on their phone or tablet.

Step 1: Friendly 1^st Contacts

Your goal to TALK to customers face-to-face

• List 50 prospective customers that loosely fit your profile
  • It doesn’t matter where in the food chain they live or whether they are the big buyer, this is just a starting point
  • You probably know or someone you know knows them
• Direct customers and indirect influencers are both good
• Make 50 calls and you’ll get 10 people to meet with. Don’t hide behind email, pick up the phone as old fashioned as it might be.
• THIS IS NOT SALES you are in research mode. People are very open to helping.
• Let me say it again, do not get drawn into selling your product, no matter how tempting. Your ego may get fluffed that you have a killer idea but you’ll miss gems of information.

Step 2: Problem Presentation

• Get something ready to show people when you visit them
• Draw up a sheet like the one below and use it in your visits

• Goal is NOT to convince them of your idea, it’s to illicit information
• Avoid any product features.
• Focus on understanding problems
• Get in “detective” mode (do not sell your product)

Step 3: Customer Understanding

• Have the customer state their problems in their words
• YOU CAN NOW TELL THEM SOMETHING OF YOUR PRODUCT IDEA (STILL AVOID FEATURES)
• Understand how the customer day flows by answering the following 10 questions:
  • If they are in a company how do they interface with other departments
  • What other products to they use?
  • Is their problem limited to them or do others share it?
  • Can the problem be quantified (dollars, time, costs etc.)?
  • Will they use the product themselves?
  • Does it depend on other workers / friends using the product before they would?
  • What percentage of their time could they save by using your product?
  • How mission critical is this problem
  • Would the product solve the problem they mention
  • What barriers would there be to adopting a product like this?

Step 4: Market Knowledge

• Go broader with your discovery
• Interview / research
  • Analysts
  • Competitors
  • Key influencers
  • Press / bloggers
• Friendly customers (again, this time about broad market)
• Do it face-to-face, online / reading and at trade shows

Once this is complete you can now go back to your broader team and overlay the findings onto your product hypothesis. Remember your goal is to come up with the broadest and least features in a product that will allow you to test your hypothesis. NOW YOU HAVE PERMISSION TO TAKE A PRODUCT PROTOTYPE OR DEMO TO YOUR CUSTOMERS (BUT STILL STAY OUT OF SALES MODE).

The big challenge with this when you’re all fired up and excited about your idea is to try and sell it or convince people of it’s merits. This is not the time. If you do this you’ve already rang the death knell for your product. Avoid it like the plague. I try and put myself in the mindset of trying to find reasons why people WOULD hate my product. It’s like when I used to do cold calling in my first sales job; the only way I could deal with the rejection was to set myself a goal of being rejected 20 times a day. I would celebrate when somebody said no  to an appointment and act indifferently to myself when they said yes. I knew however that by celebrating 20 rejections I would guarantee 5 appointments. I’m not trying to get all Tony Robbins on you but the it shaped my mindset and the same thing applies as a tactic to avoid destructive emotional attachment to ideas. What you want is unimportant: what a customer wants is important.

Here’s a slightly messy mimdmap I drew when summarizes the concepts around all this (click to enlarge):

And finally…Credit Crisis Explained in South Park

Authors note: I give much credit to these ideas to Steve Blank and his book, The Four Steps to the Epiphany. Here’s a related post and link to his book.