Foolproof: How to find and test great business opportunties
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Have you ever launched a new product or service and it flopped? Foolproof is a practical book that will help bridge the sometimes huge gap between innovation and successful commercialisation. Foolproof contains thirteen true stories of failure and success from entrepreneurs and investors from organisations including as Xero, Phil & Teds and Movac, along with many fictional examples. The foreword is by Sir Ray Avery. There are few books available on market validation, and none are dedicated to the unique New Zealand market.
From: Foolproof: How to find and test great business opportunties, by Jenny Douché
So you’ve got a new idea for a product or service. I expect that you can think of little else and feel bristling with energy, you just want to get out there and do it. I know and love that feeling.
Stars may be in your eyes, but you obviously know that so much can go terribly wrong – and that’s why you’re reading this book.
Market validation is one of the most enlightening, and probably also the hardest, phases of business development. You get to find out what people really want – and that may be something radically different from what you originally thought.
Imagine that your business is planning to develop a software tool that will help the users learn English as a second language. You believe that the most viable market is language schools throughout the English- speaking world.
You start the market validation process by closely investigating your industry, which includes analysing your competitors. You quickly come to realise that the market is already quite saturated; there are dozens of online ESOL tools available. You feel totally deflated.
During the interview stage of your market validation process you meet with an immigration consultant to talk about how immigrants go about learning English. She makes a casual comment about the upcoming 2016 Olympics in Rio de Janeiro in Brazil and about the sudden influx that the region will have of English-speaking people. You quickly surmise that local people who are in service industries in Brazil will need to learn to speak basic English. How will they do this?
Following this rather magical insight you get quite excited. What if you created a language tool specifically designed to help Brazilian service industry providers to learn basic English-speaking visitor-appropriate phrases? Your product could be aimed at just one service sector too – further differentiating it.
A few people in your team have experience in hospitality – that could be your niche, surely there are no competitors there. Staff in the hospitality sector do not need to learn all the nuances of the English language either, they just need to learn enough to get by for the key two-week period when they will be deluged with hundreds of thousands of English-speaking people. This means the product would be simpler to create.
The benefits to the hotels would be enormous as customers would surely favour their particular hotels over those of the competitors. The excitement grows as you think about the immense size of some of the hotel chains and the opportunities beyond the Olympics. New products, new markets, and big budgets. But it all seems so obvious, so why has no one done it yet? Need to do some more market validation.
As a result of a seemingly unimportant meeting, lucrative opportunities appeared. It’s not magic, you just need to be inside the minds of your proposed target market, channels, influencers and enablers – but more on that later.
So why write this book when there are already lots of books out there on market validation? It’s because in all my reading and observations I’ve found that few entrepreneurs properly test the assumptions that they make right at the start of the product creation journey.
In many cases where market validation is undertaken, entrepreneurs assume they know the general solution that the target market wants. They then set about testing just the proposed product or service features. The new product or service is created, with glossier features, and it’s sold at a cheaper price than what’s currently on the market. Few people actually get off their backside and buy it.
What has gone wrong?
The problem is that entrepreneurs don’t look closely enough at the current environment in which the target market operates. That is, what are the existing behaviours of the market, how are people currently satisfying their needs, and what barriers are there to changing these behaviours?
Think about how you get to work, how you arrange coffee dates with other people, what software programmes you use at work, what you eat for lunch, what you wear to the gym, and how your business or employer manages its account and payroll systems. Imagine now that someone came along with a new product or service and wanted you to switch to using it. Would you jump at the chance? I doubt it.
Most people do most things in their life automatically, they don’t consciously think about everything they buy, it’s much easier that way. Buying a new product or service means that both conscious thought and conscious action are needed. Change is hard and often risky.
How do you make it easy for your target market to switch to using your product or service?
The answers to all your questions about how to plan every detail for your new product or service are not in this book. They are not in any book. However, what is in this book is insightful guidance on how to ask questions in order to get your own critical and magical insights.
The target market for this book includes new and established businesses that are looking to launch or boost the performance of a product or service. The market validation techniques suggested are designed for those with perhaps limited funds but with an abundance of passion and commitment.
Foolproof will help you answer the question, should we pursue this opportunity? It does not attempt to address the question, do we have the capacity to pursue this opportunity?
You will notice that the book is quite compact and practical. I’ve read many business books and am often frustrated at how long and tedious they are – all to get a few basic points across. As an entrepreneur I’m an impatient soul and just want to get on and do it, but have many times felt pressured to read whatever business book is the fashion of the day. True the books are perceptive, but they could be reduced by three quarters. To top it off they are not usually very practical, leaving me wondering how on earth I should go about applying what I have learnt.
I sound bitter, don’t I! I’ve actually got a short attention span and am somewhat single-minded so perhaps it’s just my personality that is the problem.
I encourage you to read this book all the way through first, and then re-read back to the relevant sections to help you plan out what you need to do. I have used the word ‘product’ to mean the thing that you have created, or are looking to create, and that you want to introduce to the market. It could be a tangible thing such as a bar of soap, it could be a cyberspace offering such as an online market place, it could be a personal service offering such as a medical practice, or it could be a business service such as a payroll system.
Secondly, I use the word ‘pain’ a lot. It’s not because I’m a masochist, rather it refers to the need that your target market has which is so strong that they have to do something about it. If your need cannot be classified as being so strong as to call it a ‘pain’ then people are unlikely to change their behaviours in order to do anything about it. It is deliberately harsh- sounding, as it needs to be.
The first chapter of Foolproof encourages you to do some delving into your existing plans and assumptions. Why are you creating this product? Who is it for? What is their pain? What is your point of difference? All this should come to you fairly easily, but the trick with market validation is to keep an open mind and so you shouldn’t get too attached to your initial answers.
The second chapter looks at information that you need to research, without leaving your desk. How does your industry work? What need does it meet? Who influences it? How is the pain currently solved? What potential exists? Competitor and comparative industry analyses are also crucial. You will end up understanding the critical success factors that are needed in your industry.
The third chapter explores insights to be uncovered using more in-depth research. You will discover why it is important to understand people’s current behaviours and the barriers to changing those behaviours. You will also find out how to uncover magical opportunities. This chapter is full of questions from which you can choose the ones that are most relevant.
The fourth, fifth and sixth chapters show you practical ways to use observational, interview and survey techniques to obtain the information that you need. You will learn why you need to do it, how to do it and what to do with the results.
The seventh and last chapter explores how to put it all to good use – what to do next, be it give up entirely or go full steam ahead.
Hopefully that all sounds fairly straightforward, albeit a lot of work. However, in reality, it won’t be straightforward at all – it’s hard, but the insights you get will make it worthwhile.
While you are doing market validation you will have lots of conflicting demands on your time and on the time of others in your team. You won’t be able to interview people when you want and sometimes people will cancel on you. You may get an opportunity to attend a trade show that would make an ideal surveying ground – before you have even started interviewing people. Given this, flexibility is required. Make the most of unexpected opportunities and recognise that market validation is not always a linear process. The results are not linear either, that’s what makes it so magical.
If you’ve been put off by what you’ve read and don’t think you’ve got the energy to commit to the market validation process, remember that even doing just a wee bit is better than doing nothing at all. Those who do thorough market validation increase their chances to such an extent that at least moderate success is almost foolproof. They’re the ones who get the investment from other people and organisations of their time, money and reputation.
Market validation is one of many factors that will help you create a successful business. Its role is to determine where the best opportunity lies, what your product should and should not do, and how to best market it.
Be aware though that market validation will not directly determine if you and your business should be creating a product, it is not about validating you. However, you will definitely learn a lot about yourself and your team, and your capabilities, along the way.
The work you do on market validation will make writing and refining your product plan much easier – you will have almost all the answers already. Writing the plan will then be a breeze. That’s why you should write your product plan after you do market validation and not before. I know how hard that is, especially as you have been thinking about this product with great intensity and just want to get on with it. But if you write your product plan now you are in danger of getting too fixed on it and, as a result, reluctant to test it and change it as new opportunities come to light.
The last chapter has ideas on how to put your product plan together including common pitfalls of financial forecasting and how to incorporate market validation into your long term plans.