Whenever I’m approached by someone with a “great startup idea”, I ask a deceivingly simple question:
“What problem are you solving?”
First time founders normally respond by launching into a 5 minutes diatribe about an amazing opportunity or disruptive technology — often they’ll miss answering the question all together. Veteran founders provide a problem statement.
What is a problem statement?
Problem statements have long been a secret weapon of six sigma black belts (the “Define” part of DMAIC) and customer-centric designers (Step 2 in IDEO’s Design Thinking process). For startups, it’s a concise description of the problem your startup is trying to solve. It should answer:
- What is the problem?
- Who has this problem?
- Why is this a problem?
Here’s an example of the problem-statement I constructed while commercializing Magnet Resonance Elastography (MRE) — a new type of MRI scanner developed at Ohio State.
“75% of the 1 million+ annual biopsies for prostate cancer produce inconclusive results. This results in a $4B loss to the healthcare system and ~8% of patients being hospitalized for complications.”
MRE was a technology that had been around for several years but was struggling to attract external resources despite the groundbreaking capability to non-invasively map the stiffness/material properties of an organ. The inventor made a mistake I see common among technical founders — he assumed that technology alone would attract investors. After working together for 6 months, we identified this huge problem in the oncology space that the technology could potentially solve — we won Ohio State’s Faculty Business Plan competition by pitching a solution to this defined problem. Frankly, I don’t think a single judge in that room fully understood the technology (I’ve been studying MRE for the last 3 years now, and I still struggle to wrap my head around it). But that didn’t matter — the judges recognized the magnitude of the problem and were willing to place a bet to help us solve it.
Nailing an effective problem-statement has cascading effects:
- It solidifies a hypothesis regarding product-market fit making testing/iteration cycles faster
- It simplifies the elevator pitch when explaining an idea to family, friends, investors, customers, uber drivers, baristas, etc.
- Most importantly, it provokes the question every founder should ask themselves: Why does this matter?
Ask yourself: Why, Why, Why, Why, Why?
The most effective tool I’ve used to build a problem-statement is a Root Cause Analysis method known as “The 5 Whys”. It’s something you’d expect from a 4-year-old — but was actually invented by Taiichi Ohno, the founder of the Toyota Production System (known in the US as the Lean Manufacturing). The genius behind this method is the combination of simplicity and efficacy. Here’s how it works:
- Create an initial statement defining what the problem is and who has it.
- Ask that statement — “Why does this problem occur for this population?”
- Your first Why (we’ll call this Y1) is the starting point — ask yourself “Why is Y1 happening?” — This will be your second Why (Y2)
- Repeat step 3 with Y2 — do this for 5 repetitions until you reach Y5
It’s that simple. We’ve all known kids that ask “Why?” repeatedly until a point of mutual exhaustion. This stems comes from the growing brain’s need to simplify and identify the root-cause. So, be childish, and find your startups core problem.
To illustrate the effectiveness of this technique, here’s how I used the 5 Why’s to define an EdTech SaaS startup’s problem-statement that was developing a new recruiting tool for universities.:
Our initial problem-statement:
“University admissions offices spend too much money on recruiting students.”
Why #1: Universities are unable to cost effectively identify potential applicants for their in their program, so they mass market (think fliers in the mail) achieving a >$2500 cost per applicant
Why #2: Admissions offices purchase low-quality leads (from organizations like the ACT) to generate mass mailing lists
Why #3: The leads are low quality because they provide minimal demographic data and no proof of interest
Why #4: There is no proof of interest because students are unable to demonstrate their interest to the university
Why #5: Students are unable to demonstrate their interest because that requires physically attending events (doesn’t scale and not accessible for most) or reaching out via cold intro (hard for a 17 year old senior)
Based on Why #5, the new problem statement:
“Universities cannot selectively target students who are interested in their programs”
This might appear to be a subtle change, but this fundamentally shifted the company’s approach from building a lead generation platform focused on tools for admissions officers to a student-focused platform that used an algorithm to identify the “right” schools for students and enabled them to let a school know they were interested in applying. This shift in product focus led to the company landing its first customer (and next 12!)
The last “Why”
A company’s problem-statement is its “true north” — I cannot stress this enough. The best startups have defined this so well that every employee — from CEO to summer intern — knows their problem-statement verbatim. It’s what attracts great talent. It’s what attracts high-profile investors. It’s what keeps you moving when things go wrong (and they always do).
Spend some time today and ask yourself “Why?” — Then do it again!