Your business idea action plan: How to validate your idea (Part 1)

IT industry is the fastest growing business sector for over a decade now. There are literally millions of different stand-alone digital products and SaaS solutions, covering every segment of our lives. One might get the feeling that it is simply too crowded, without any room for new, innovative solutions.

That would be an entirely wrong perception.

Every problem that you can think of right now is already partially solved. The job of every startup, and the sole reason for their existence, is solving hat remaining, missing part.

What allows such a high number of business entities in one narrow segment of the market is one simple rule of thumb:

Even after you figure out that missing part of the problem, that still does not solve the problem entirely. Your startup idea will just restart the entire process and open door for another upgrade.

When we wanted to move faster, we tamed the horse. Then, we built a car. In no time, we were moving at the ultrasonic speeds.

And while these are good news for you, there are few caveats. Those who chose to disregard them, for any number of reasons, end up filing for Chapter 11 in less than a year. In fact, as yet another rule of thumb, 50% of all startups shut down their operations within a year just because they fail to properly test and validate their product before launching the mass production process.

All failed startups have one thing in common: they all seriously underestimated the Law of Diffusion of Innovation.

The Law of Diffusion of Innovation

For your product to live over an extended period, you want to breach the 18% of market share. That’s the tipping point that transforms yet another most likely short-lasting innovative idea into an evergreen brand such as Apple, Microsoft, Google, Salesforce and alike.

The good example is once widely popular TIVO.

TIVO was just too expensive and too complicated to use; two features that are in total opposition to what people expect from the product (solution). As the result, the brand ceased to exist. They never moved beyond Early Adopters.

The thing about this particular demographic is that they rely on and respond to positive cues coming from Innovators.

Innovators, that make only 2.5% of the entire market share, are the people who don’t require previous feedback from the independent third party, like the Early Adopters do. But, on the other side of that medal, Innovators alone cannot keep the product alive for any longer time nor generate any substantial profit. They are just the messengers.

If their message is weak, the brand will never reach the tipping point and every chance to breach into the segment of Early Majority is lost.

Just so you know, the final segment, the Laggards, are the people who don’t have a choice. Probably the best example is the transition from the old cellular phones with buttons to smartphones with touchscreens. They had no choice but to purchase the device with the touchscreen, that’s all. Other than that, they are least interested in innovative idea.

What’s important to know is that The Law of Diffusion of Innovation is completely resistant to money. You can’t “buy your way” into the market.

Couple of years ago, the IT giant Dell learnt this the hard way.

Dell’s management had decided to push their way into a lucrative smartphone industry. To do that, they invested tens of millions of dollars into R&D and marketing of a single model. Unfortunately, Dell’s smartphone didn’t even pass the Innovators (2.5% of the market share). The entire project died before public even realized that it exists. Market simply couldn’t associate PC manufacturer Dell with mobile phones.

Since then, practice has changed. Instead of the old and obsolete “plan and plan” doctrine, brands these days are “poking and probing.” The difference is simply mind-blowing.

Only two decades ago, it was a certain must to invest millions and build a fully featured prototype BEFORE testing the market. That practice was not only notoriously expensive but also proved itself inefficient because it lacked one significant advantage available for the startups and already established brand these days.

New age entrepreneurs have this unique opportunity to invest only a quantum and “feel the pulse” and then, if required, add or change some specific feature of the product. They use MVP’s to poke and probe the market and validate their idea BEFORE entering in a final production.

The Most Commonly Used Product Validation Methods and Their Root Processes

What you think about your product’s underlying purpose doesn’t necessary reflect the market’s perception.

Had Dell did the marketing and analyses job right, they would know how market simply ignores their attempt to enter the smartphone industry.

That’s just another reason why you simply must test your product and see how those Innovators respond to it. Based on their feedback, you can re-adjust market position or even make some last minute upgrades/changes on your product.

The question is: how do you reach the Innovators?

As you will see, there is a specific sequence of steps that you have to undertake before even considering entering in the final stage of the production.

And it starts with the appropriate and optimal market positioning.

Appropriate Market Positioning to Target the Most Optimal Demographic

What makes one brand to become widely popular while the other, which is almost the exact replica of the first one, ends as yet another major failure?

Apple Watch didn’t just pop up on the market and made Millennials crazy about its features. It wasn’t even Apple’s idea. It was actually a brilliant social study conducted back in 2002 by Eric Paulos.

Paulos, a researcher at Berkeley’s Intel Research Laboratory was eager to learn more about how people, who are more closely connected with each other, communicate when they are co-located. In other words, he wanted to understand those non-verbal cues between two or more persons who have a previously established relationship.

The idea came as a need to fill in the void present in communication tools at the time. Paulos was concerned about the fact that these vital communication cues were not included in any of the channels such as emails, SMS or visual messaging. Not a single device was designed to transfer the emotion and Paulos was set to change that.

Together with his team of engineers and scientists, Paulos designed Connexus, a hand-wearing wristwatch-like device, capable of transmitting those essential non-verbal, emotional cues.

Couple of years later, IT giant, Apple, announced the launch of now famous Apple Watch. It was the instant hit because they knew exactly what market segment to target with their marketing.

What allowed Apple to identify the most optimal market position for their watch was a simple observation of the most common usage and feedback provided for the Paulos’ Connexus, which, in some way, can be considered as an indirect MVP.

How do you reach that stage with your product?

As we said, every problem is already partially solved. That means that, same as Apple had Connexus to rely on, there is a product on the market closely similar to yours. So the first step is to do a proper due diligence and pick a narrow segment of your assumed market. Then, you just send samples.

After a month or two, you collect the extensive feedback. Thorough analyses will clearly show you the most optimal market positioning of your product and thus, the most optimal demographic to engage.

When Viorel Cretu, the founder and CEO of the Texas-based wearable technology startup, Wallor, was deciding about the market positioning, he initially manufactured just 50 leather wallets without any originally intended tech components. Still, it was the first slim wallet with the interchangeable interior and every test subject received the most basic application that will connect the smartphone with the wallet in the near future.

Cretu’s problem was unique. He couldn’t be sure who is more likely to buy his product: a young Millennial, or a 40+ Gen X married man. Additionally, he wanted to see which segment responds better: the high-end executives or the middle-class, fashion-oriented men.

After only a month, he fired emails with extensive surveys. A week later, Cretu knew exactly among which demographics to seek for the Innovators to further validate his product.

But before he engaged them, Wallor’s CEO made an effort to compare his vision of the final product against the few already established brands in the smart wallet industry.

Сonclusion

If you have an idea of an excellent service or application that solves the problem of users, don’t rush to invest in the development of a full-featured product and prepare for months of painstaking work behind closed doors. According to the concept of Eric Rice’s lean startup it will be much more effective to find the answer to the question: “Is this product necessary for users?”. MVP will help you to do this.

If you want to know the next steps, read our next part.