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Problem assumptions

Written by Filip Stipancic and Miro Hegedic

 

Defining the problem to work with

1. Idea VS Problem

In spring 2017 one of our mentors on Startup Drill event in Oslo was giving a keynote speech. Being a startup veteran who went through dotcom boom at the beginning of the century,  he had many stories to tell. He got the attention of everyone in the room when he started waving a white paper napkin with a million dollars on it. An episode from the peak of dotcom era, a story known to many, but unbelievably to most. Paper napkin that was a sketch of someone’s business idea served as a tool to buyin investors and raise capital. No customers, no product, no market, even no slide deck. Only the paper napkin with lines of ink. Is it possible that an idea can be worth so much? Depends. Depends, by whom and to whom. It ’s a matter of perspective.

The idea is a wicked thing, explained as “A thought or suggestion as to a possible course of action.” by linguists at Oxford Dictionary.

What can an idea do? Historically, ideas have written books, explained nature around us, started businesses, created music, built cities, moved the masses and many, many more. What is so special about the idea is that it engages people. Engages them emotionally because it aligns with beliefs, sets the challenge and pictures a better world. It makes people chase goals, move the borders of their ability and think irrationally.

What is in common to many successful ideas is that they are the answer to a challenge or an issue – a solution to a problem, fulfillment of a desire or need.  The same resource has defined the problem as “a matter or situation regarded as unwelcome or harmful and needing to be dealt with and overcome”. What is the difference between an idea and a problem?  It’s in its existence. The idea is a product of our imagination and problem is there. We hope it’s there and that we are able to solve it.

Looking at it from that perspective, an idea is just one version of your solution, a  response to a problem that needs to be solved. Considering a viable business, you know it must include customers who will pay for your product at some point. A product they will pay for must solve a problem they have. So for the business to have solid grounds, you should make sure there is an actual problem worth solving, and that you understand it. That is why we at Startup Drill always put problems first.

There are three reasons behind it:

  • validation loop
  • focus
  • sustainability

Validation loop is a process of validating your assumptions. That means testing if what you think is true actually is true. In this scientific approach, founders dismantle problems into assumptions, which is explained a few paragraphs below, and test them considering priority set by their risk. In this process starting from a problem is mandatory as problem existence is a key thing to validate.    

What about focus? When a founder defines what problem she is solving and understands its properties, although many attempts will go wrong, there is always a starting point to get back to. Passion about solving a particular problem makes founders motivated to keep on going and prevents them to wonder in their ideas without a map.

Sustainability is regarded to an ability of a startup to survive. Teams that solve customer problems are able to sell their solutions, which means that they have revenue. Cash is king – if you have revenue you have freedom. Freedom to think and freedom to decide. Although you might be moving in a much larger space than the problem you are solving currently, it is extremely important to be able to generate revenue as early as possible. It is the ultimate proof you did some things right – solved a problem and found a market. It will remove some worry out of your team and will make partners interested in working with you.  

A good idea is important, but knowing to distinct a good one from the majority of bad ones, is a skill. There are myriad of ideas to a solution that solves a problem.  If you stick to only one out of a myriad, the probability it is the right one is pretty low.  

To make it more cheesy here is a famous quote from Albert Einstein who said:

“If I were given one hour to save the planet, I would spend 59 minutes defining the problem and one minute resolving it.” 

2. Transforming ideas into problems

Most of Startup Drill participants appear with an idea.

Which is natural and culturally acceptable that any new thought of building a business is called ‘a business idea’ or just ‘an idea’.

For us to work with, it needs to be transformed into a form of problem.  

And that is not as easy as it sounds. It’s a challenge because:

  • People have a distinct cultural norm of what ‘an idea’ is
  • We all have an emotional attitude towards ‘your own idea’
  • Most of us are not used to think the other way around.

Majority of startup pitches these days already include the ‘the problem’ in their beginning.

Probably following a template they found online. Very often the problem statement is unclear, general and not understood by the team.

The reason is that most teams start from the idea to which they adapt the problem. Instead of actually spending the effort to discover the true problem and its attributes.

In order to make this problem statement clear, specific and to sound savvy, you need to work with the problem first.  

To get around your idea and start describing the problem, you can answer the following questions:

  • What is the value this idea is providing?
  • How will it make someone benefit from it?
  • Why is that important?

Important to mention is that any claim of your problem statement you make is only an assumption until validated. Well, that’s why we are doing it after all.

Let’s try with an example:

Our idea:

My team has an idea of building an AI-driven app that will alarm and recommend users with a sedentary lifestyle to perform a specific back exercise using data about the movement from their mobile device.    

What is the value this idea is providing?

It will give users tailored exercise for their back based on their activity habits.  

How will it benefit someone?

By performing the recommended tailor-made exercise user will heal pain and strengthen their back.

Why is that important?

Because users have a lack of physical exercise which causes their back problem. 

Problem statement:

People with a sedentary lifestyle have back pain caused by the lack of physical exercise.

Here is why this is a good problem statement:

  • a short one-sentence statement, clear and non-ambiguous
  • states what is the assumed problem
  • states what is the assumed cause of the problem
  • states who is assumed to have this problem

Within this one sentence, there are three assumptions to validate already – problem, cause and ‘the victim’. Could we be so clear about it when reading our idea statement? …I don’t think so.  

Besides that, we have a clear focus of our efforts on back-pain. In times of struggle and invalidation, there will always be a place to start over again – your one sentence problem statement. From it, you find motivation and inspiration. You figure out ways to solve it, you test it, fail and do it all over again.

The final result of transforming ideas into problems is a problem pitch. Guidelines on how to write and deliver good problem pitch is the topic of our next chapter.

3. Problem pitch

At this point, although we all are aware of the importance of “the problem vs idea” we still tend to speak about the idea and product when asked to deliver problem pitch. Therefore we have developed a short guideline for startups to help them structure their problem pitch. This problem pitch guideline, together with the problem pitch template will be useful to everyone who is planning to start their own business because it will bring clarity on how they are helping their customers.

When giving a problem pitch at Startup Drill event we ask participants to think of it as an answer to three main questions:

What is the problem?

Who has the problem?

And why are you or your team the one that will solve it?

Every question has its importance,

What is the problem?

When thinking about the first question, “What is the problem?”, think how do your customers describe the problem. Which particular words do they use to describe and in which particular situations or environment they encounter it.

Who has the problem?

Here, be more focused on the customer, think about what is specific about this customer and consider once again why did you chose that particular customer and not some other? You don’t need to go in details about your customer segment, only mention the most important characteristics.

Why am I the one to solve it?

The third question that will help you start is connected to your personal motivation and connection to the problem and customer segment that you are working with.

We find this very important because it tells you if you are the right fit for this business and if there is a higher purpose behind your venture.

Think here of the things that motivate you to solve this particular problem as well about what qualifies you to solve it.

 

Although you did your best to forget about the solution and focused on the customer and the problem that you are trying to solve, you could still make mistakes.

Typical mistakes that you want to avoid during the problem pitch and example situations:

Typical mistake What do you say…
Pitching a solution not the problem! Normally it starts with: “Our mobile app…”
Problem described as a lack of solution You would say something like: “The problem is that there is no such an app on the market that will allow users to …”
Inadequate customer description Includes sentences as:

“Everyone will be our …”

“Every person with the smartphone …”

Not mentioning why am I the one to solve this problem You don’t have to be an expert, but you should be able to express why you are the one to solve it …
No good explanation of your motivation for specific problem There should be something that motivates you to work on this…

You might think now that this will be hard to make, but you should not worry, we have prepared a short template that you could use to prepare your problem pitch.

Send us your problem pitch, we will be happy to take a look at it and give you feedback.

4. Problem assumptions

Now when you have prepared your problem pitch it will help you in further steps in which you should define the riskiest assumptions regarding the problem that you are trying to solve. When you will think about all the assumptions regarding the problem, there will be many of them.

The question is if all of those are equally important and should we devote the same attention to every one of them?

The answer is straightforward. Sure we don’t. Some of the assumptions are riskier than others and some are the riskiest. But, how do you then find the riskiest assumption?

First of all, we suggest that you brainstorm all the possible assumptions that you might have regarding the problem.

To make it easier we suggest that you think of the assumptions in three categories:

  • cause of the problem
  • consequences or problem effects
  • why this problem is not yet solved.

Did you realize that we were mentioning one particular word very often? This word is “assumption”.

In general, an assumption is a statement that we believe is true! When put in business context, an assumption would be designed as a general, subjective sense of some business problem.

This sense of the business problem can be a result of one’s experience and existing models, which is good, but what normally happens with startups is that their assumptions are results of hopes and desires. Which normally doesn’t prove to be right.

Also, when defining the assumptions, try to write them as a statement rather than just one word. This will help you bring clarity and it will make further steps easier.

Therefore, instead of just writing a word such as “pain” you can write a full statement such as “as a result of the prolonged sitting, desk job workers will experience back pain”.

The best way to write your assumptions is to write them on the small post-it, this will also limit the size of the assumption statement so you always have clear assumptions. Write one statement per post-it so they will be more transparent and easy to work within the next steps.

Now take your time and write all the assumptions that come to your mind regarding the problem you are solving for your customer.

When you defined all the assumptions regarding the causes and effect of the problem as well as why it isn’t yet solved it is time to define which is the riskiest assumption.

To define the riskiest assumption we will use the framework that we have developed inspired by Dan Toma’s workshop on Lean startup for corporates.

There are two criteria one should consider while defining the riskiest assumption.

  1. Uncertainty and
  2. Impact

Uncertainty means that you have a limited knowledge to be able to exactly describe the existing state, a future outcome or more than one possible outcome.  Basically, it means that it is hard to decide how good you know if one particular problem assumption is true or not true.

Impact means that you have to estimate how a certain assumption impacts your business. Here you will decide if it has big or low impact.

Estimating the uncertainty of the problem assumptions

First of all, start with uncertainty.

If you are doing this as a team exercise, use Painter’s tape and put it horizontally on the wall in length of an arm span at the shoulder height.  On the left end of the line write “Low Uncertainty” and on the right end of the line write “High Uncertainty”.

4

Now, take all the assumptions that you came up with in the previous step and put them on the line in relation with how sure (certain) you are that it is true.

Don’t skip the previous step.

If you have done the previous step correctly, you should have all the assumptions ranked according to their uncertainty level. Great, now you are ready for the next step.

In this step, you will assess the impact that particular assumption might have on your business.

Start by creating one vertical line in the middle of the Uncertainty line. If you are using Painter’s tape make it in the length of the arm span as well.

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Now move all the assumptions vertically in accordance with the impact that they might have on your business. Make sure you don’t change the assumptions’ relative position to the horizontal line.

Here you are. The problem assumptions that are placed in the right upper quadrant of the assumption prioritization chart are your riskiest assumptions and those are the ones that should be tested first through well-defined experiments.

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