Are you building a startup company on the wrong assumption?
Many founders build their startups to solve customers’ problems. Tenvas’ Damien Chow believes that startups need to create demand insteadBy Damien Chow 29 Apr, 2014
Most entrepreneurs try to solve a problem. Current popular thinking is to focus on a customer problem and hypothesis. I argue that entrepreneurs should focus on finding demand instead.
In the case of a startup (which is defined as a temporary organisation in search of a sustainable business model), it is to find latent demand. Existing demand should already be satisfied by supply.
Well, the problem with finding a problem is that not everyone recognises they have a problem. It is obvious to the entrepreneur but not to the customer that has it. It is an irony.
To make matters worse, entrepreneurs often realise that some people just don’t want to solve the problem. Especially if they have to pay to solve it. They would rather avoid the problem or figure out an alternative or workaround that gets them by.
I’m not saying that entrepreneurs shouldn’t focus on customer problems at all. It’s just not the only part of the equation. Some problems are worth solving and if the solution happens to be free to the user, it can potentially generate huge traction. Think YouTube and Dropbox.
Now if we delve into neuroscience, you will know that human behaviour is primarily driven by a toward response (think pleasure) and an away response (think fear). Generally, if given a choice, most people would prefer experiencing a toward response (pleasure) verses an away response (fear).
I would speculate that most problems are typically associated with an away response. Problems are typically characterised as being painful and entrepreneurs are taught to look for the really painful problems.
However, if you really think about it, how many users (or potential customers) readily embrace problems, spend days solving them and jump at “eureka” solutions? Not many, most people just don’t care about problem nor their solutions. However, many startup entrepreneurs and engineers do. No wonder the failure rate of startups is 90%.
Returning to the idea of latent demand, it has been explored by other books such as the concept of non customers in the blue ocean strategy. I would define latent demand as a want or need of a customer that is just boiling under the surface, waiting for the right situation to appear.
The right mix of factors. This could be a new technology development. Something which was impossible yesterday but possible today. (Motorcars vs horses) It could be the development of new social norms which makes something unthinkable yesterday, acceptable today (Same sex marriages 20 years ago and now). Or it could be a new economic reality (Starting a billion dollar business in China 20 years ago and now).
Entrepreneurs need to understand and sometimes coax the latent demand out. Facebook did that by connecting the world onto a single social media platform. Before the advent of Facebook, was there a pressing, painful problem that plagued college students (the first users of Facebook) with regards to social media? I would argue that the answer is no.
Was there a latent demand to connect with your friends in school regardless of the time and place? I would say: Yes. Did the growing maturity of the internet, digital cameras, user’s online behaviour & norms unleash this latent demand? I leave it to you to hypothesise.
Now, the big question. How to spot latent demand? Unfortunately, I do not know the answer. However if I could guess, it would still be customer discovery. But not just to discover the customer’s pressing problem but what’s their passion. What drives the customer to take action? How can you make something that a group of users are already doing and enjoying easier, better and maybe more pleasurable?
Also Read: Can entrepreneurship be taught?
I’m applying this paradigm to my own startup, Tenvas. We see the recent technology developments in 3D printing as well as 3D and mobile visualisation as hints towards a new trend of mass personalisation. Changing social norms towards empowerment and unique products are also influencing our decision to build a startup based on 3D printed watches. We hope to tap on our customer’s passion to personalise their own unique watches that are special to them.
I hope I have provided some food for thought on the assumptions that you are using to build your business. Do leave your comments below if you’ve any views on the article.
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