Idea Validation for the New Tech Entrepreneur
So you've got an idea for an app...
Not long ago, I found a post in a tech-focused entrepreneurship forum that went something like this:
My business partner and I have been working on an engineering software tool since we were in grad school. After 10 years of work, it is now full-featured and ready for the market. However, we are having trouble selling it. We have had lots of meetings but no one is signing contracts. Does anyone have advice?
The comments all reflected deep sadness that this team of developer-entrepreneurs had wasted so much time and money only to find out that no one wanted the product they had made. Ten years is a long time but their strategy is actually a fairly common one, especially for technical entrepreneurs.
As developers and engineers, we are hypersensitive to inefficiencies and sometimes to a fault. Instead of asking ourselves “is someone willing to pay for this?”, we just get started building our ideas right away with the hope that if our product has enough fancy features someone will buy it and surely the price they pay and the volume of sales will compensate use appropriately for all of our hard work.
This article aims to help address this behavior of putting the cart before the horse by encouraging the validation of ideas before their implementation and encouraging experimentation as a means of validating ideas. This means putting your idea to the test to see if it is actually a viable product that can make real money.
The goal of idea validation is to prove that someone is willing to pay for your product and that there is a big enough audience of such people to make a profit.
What Constitutes a Validated Idea?
It is important to be honest with yourself and to disregard false-positives. For example:
Someone only telling you that your idea sounds great is not validation.
Your mother wanting to invest is also not validation.
Even someone using and liking a free prototype is not validation.
The goal of idea validation is to prove that someone is willing to pay for your product and that there is a big enough audience of such people to make a profit.
Disclaimer
I’m not a marketing expert. My expertise is in implementing dreamed-up software ideas and that is the point of view from which this article is written. I understand that creative marketing and clever business strategy can overcome some of the obstacles mentioned here but I feel the advice here is still relevant for the majority of startups and entrepreneurs.
Self Assessment
Here are some questions that it would be good to answer about your product before significant investment. I ask these types of questions to clients in our first meeting.
1. What Problem does my idea solve?
1a. Am I trying to solve a real pain point or is it just a mild inconvenience?
Real Pain Point:
My child’s school bus arrives at inconsistent times. This worries me because I don’t know if my child is missing or if the bus is just late. I wish there were a notification system to alert me to the status of the bus to give me piece of mind.
Just a mild inconvenience:
All my favorite apps have dark mode except MS Word. I want to create a word processer that has native dark mode.
2. How unique is my idea?
2a. Is there already a product on the market that solves the same problem?
I want a website where people can go to talk about motorcycles. I want to be able to create a post about motorcycles and people can comment on it and communicate with each other.
Why should customers use your platform instead of just making a Facebook group for motorcyclists or joining one of the many such Facebook groups already out there. If you intend to compete with the social media giants you’ll need to cater to the motorcycle community in a way they do not or cannot.
2b. What differentiates my product from others and incentivizes potential customers to choose my solution over what already exists?
Little Differentiation:
My idea is a calculator app that lets you change the background color.
More Differentiation:
My idea is a calculator app that has shortcuts for common equations used by surveyors doing field work. Instead of fiddling around with a regular calculator and punching in lots of numbers, they can quickly and easily get the data they need and get back to work.
2c. Could a competitor easily make an update to their existing product to solve the same problem?
MS Word doesn’t have dark mode so everyone that likes dark mode will want to use my word processor.
What happens if Microsoft decides to add dark mode tomorrow? Does that invalidate my entire business?
3. Who is my target audience?
3a. Is it a small, large, niche or broad audience?
Too Small an Audience:
My idea is an app for people with gen 1 android phones that allows them to blah blah blah.
Too Broad an Audience:
I want to make an app that does everything for everyone and we’ll market it to all humans.
Well Defined Niche:
My idea is a web app that focuses on helping the desert landscaping industry source climate compatible plants and products.
3b. Is the audience accustomed to paying for such products?
Studies have shown that iOS users spend more on apps and on in-app purchases than their Android counterparts. How do I account for this with my idea?
3c. Would this audience pay the price I want/need to charge?
My idea may provide a “better” experience than its competitors. Does this add to infrastructure or licensing costs that will put my product’s price out of range of what customers are willing to pay?
4. Does my idea solve a problem for a particular industry?
4a. Are there regulatory factors to consider for a product in this space?
There may be regulatory or legal factors based on the industry that could increase cost of development, legal matters, or require that I hire a security or compliance officer. I need to be aware of these cost to plan accordingly.
4b. What is the community like in this industry?
The community in this industry may be averse to change or use of certain technology. An industry that relies on precision of information and data may not welcome tools that use AI. Does my product threaten the jobs of members of this community? How does that affect my ability to market to this community?
4c. How do other successful companies market to the industry?
Can I take advantage of the findings of other companies to know how best to reach this community?
5. What are the legal considerations to implementing and selling my idea?
5a. In which locales can this product be sold and used?
Can I sell this product in all 50 states? Does California require additional legal considerations? Can I sell this product in other countries?
5b. Will I need to collect or store data that is sensitive in nature?
Depending on the industry my product serves, I could be legally compelled to comply with certain laws or standards to protect the data I store on behalf of users. For example if my product serves the medical industry, it will probably need to be HIPAA compliant. I will need to factor that into my budget for development, infrastructure, and maintenance.
6. On what types of devices will my product run? Am I targeting mobile, web, desktop, other?
Where do my customers expect to interact with products like mine? Will they be in an office where it will be more convenient to use on the desktop with a keyboard and a large monitor? Is lots of typing required? Do I need to design the user experience to require minimal typing because users will be on mobile devices?
And more…
I don’t mean to give an exhaustive list of self-assessment questions but rather an idea of the types of questions you should be thinking about. You want to identify potential problems that could hurt or inhibit viability. You may need to revisit some of these questions as you iterate upon your idea.
Lean on the wins and learn from the failures.
A Scientific Approach
What if you learn that part of my idea is not viable? That’s ok! Not only is it expected, it should be considered a win. You learned this valuable information now instead spending thousands of dollars and months of time working on something that would no one would buy. A core tenant of lean methodology is to fail fast. Find out what won’t work quickly so you know to go in another direction before wasting resources. Now you can pivot and adjust your plan to compensate. Lean on the wins and learn from the failures.
By completing an initial assessment of your idea, you’ve completed an experiment. You had an idea, put it through tests, and hopefully you have learned something. At this point you should have identified items that need to be changed to your product to make it more viable. This process of experimentation can be repeated throughout the life of your product, from idea to prototype to MVP to initial release to feature updates. The concept is to make informed decisions about the direction of your product based on real evidence.
Conclusion
What could our friends from the forum post have done differently and what could have been the outcome? Were they wrong to be passionate about an idea? No. What they lacked was proof that their product filled a real need. Now imagine what they could have accomplished in those 10 years if they had tested the viability of their product first, experimented and failed early, and iterated on their idea making changes based on real evidence.
Up Next…
Stay tuned for the next article, “The Infrastructure Iceberg” where we will build a hypothetical app and learn about the costs of supporting a fully-loaded SaaS product
Need help with your software product?
My day job is working as a software engineer for Trendsic where I help businesses large and small plan and develop software ideas using lean practices. Reach out to me at contact@zachnology.io to discuss how I can help bring your ideas to life.