To build successful businesses, entrepreneurs must fall in love with solving customer problems more than their own ideas.
Entrepreneurs often rush to build and test their ideas using the lean startup methodology. They are taught and believe that they should “fail fast.” Unfortunately, most entrepreneurs do a great job failing. Harvard reports that 95% of new products fail. McKinsey reports that when companies try to change, they fail 70% of the time.
What separates successful entrepreneurs from the failing masses is the use of innovation to reduce risk and decrease the odds of failure.
Innovation is how new ideas, solutions, methods and products make it into the world; and innovation is most successful when it solves existing customer problems. As such, successful innovators are committed to solving customer problems rather than simply proving their own ideas.
Therefore, entrepreneurs should start with developing a deep understanding of the customer’s problem and launch only when they are sure they can deliver the customer a solution to their problem.
Bonobos: An example of a customer-centric approach
Bonobos was co-founded by Andy Dunn and Brian Spaly when they noticed how hard it was for men to find a pair of pants that fit. The brand began as an online retailer that was later bought by Walmart in 2017 for $310 million.
According to Casey Drake of Endear:
“From day 1, Bonobos vowed to take a different approach to their business model. Instead of investing money in traditional marketing methods, they instead invested in their customer experience and success teams. What resulted was a cult following willing to buy in to whatever new interesting concepts the brand would try.”
Dunn has described the company’s approach as “maniacally focused on the customer experience and interacting, transacting, and story-telling to consumers.”
Bonobos found the white space in the market and developed a niche product. Their success is based on identifying a specific need and building a story around the customer experience. The company framed the product in a way that appeals to the consumer and managed to build a defensive wall around itself protecting it from competitors, so much so that one of its competitors bought it.
A plan for success
To emulate this type of success, entrepreneurs should obsess over the customer and work outward to build a plan.
There is a minimum amount of customer and competitor due diligence that every entrepreneur should do before approaching the market with a solution. Talking to customers is never enough. You must choose a specific target customer that you will orient your product around. Then, you must also conduct a thorough competitive analysis, market analysis and technical analysis.
Once you have this information, you need to validate your business to see if it’s in fact, a business. That starts with figuring out if your lifetime value to customer acquisition cost (or whatever KPI is critical to your company’s P&L) is going to be viable by using market comps.
My advice on building a plan, taken directly from my course, is as follows:
- Identify the customer’s problem(s)
- Learn who is currently solving your customer’s problem(s); these are your competitors
- Learn the market surrounding your customer; this is the context in which your business will operate
- Using your knowledge of the customer, their problems, your competition and the market; design value proposition(s) that uniquely and defensibly solves the customer’s problem(s)
- Develop a plan on how you will test the value proposition(s) with the customer
- Test the value proposition(s) with your customer with lo-fi prototypes, not MVP
- Iterate the value proposition(s) to ensure it solves the customer’s problem
- Repeat testing and iteration until you’re confident your solution solves the customer’s problem(s) = product/market fit
- Build a team to support your iteration and scaling
- If necessary, raise capital to support scaling the team, iterating the solution and expanding to solve new problems for the same customer, or new problems for new customers
The odds are against entrepreneurial success
The odds are against entrepreneurs: the average college graduate spent 16 years of education (12 years in primary school and four years in university) to get to the point where they have access to jobs that have a small chance of providing financial freedom and the ability to make an impact with their time on this Earth.
Approximately 34.5% of the country, roughly 100 million people, have around the same level of education. Currently in America, 25 million people are starting or already running their own business, and there are approximately 582 million entrepreneurs in the world. In this increasingly digital world, entrepreneurs are competing with somewhere between 25 million and half a billion other entrepreneurs for the customer’s attention.
Entrepreneurs creating B2C customers are competing for customer attention that is controlled by a small number of highly customer-focused and successful companies: Alibaba, Amazon, Apple, Facebook, Google and Microsoft; the most powerful and most valuable companies in the world. B2B companies face a similar battle against multibillion-dollar incumbents and unicorn startups. Successful entrepreneurs are able to navigate between these behemoths with relentless customer focus, not a rush to market with an MVP product.
Learning to succeed
Successful entrepreneurs build businesses that:
- Grow revenue
- Reduce operating costs
- Mitigate risk
- Empower employees
- Delight customers
Entrepreneurs cannot hope to figure all of this out once they get their product or service to market. Principally, because once a product or service is in market, keeping that product or service aligned with a customer’s needs while trying to efficiently and effectively scale the team, technology, operations and marketing is all-consuming.
Successful entrepreneurs have a relentless sense of urgency to acquire this knowledge in advance of launching in order to mitigate the risks inherent in starting their new venture. They know that this knowledge will become their edge, their primary competitive advantage, against incumbent and nascent competitors.
Successful entrepreneurs think and learn for themselves. They dedicate themselves to just one thing: solving customer problems for profit. To be successful at this, entrepreneurs work through the frustration, fear and resilience that is required to be great at problem solving.
Those entrepreneurs who become great at solving customer problems for profit consistently outperform their entrepreneurial peers.
Customer obsession maximizes entrepreneurial success
With early customer obsession and relentless learning early and often, entrepreneurs do all they can to minimize their risk and maximize their chances of success in a highly competitive and failure-rich environment.
In the earliest stages of a venture, entrepreneurs must be relentlessly focused on understanding the customer through data. This is how entrepreneurs ensure they grow their new venture in accordance with existing customer needs. This alignment maximizes the ventures’ potential for success while mitigating risk (e.g. the 70% to 95% failure rate experienced by most entrepreneurs) and maximizing finite resources: time, money and credibility.