Customer vs. Idea Driven Approaches
Is it better to start your business by solving a problem for a customer or building upon an amazing idea you have? Ideally, you are doing both. A novel solution that addresses a customer need is extremely valuable. But let’s say momentarily, for the sake of argument, this is a binary choice. It is very tempting to do the latter. We all have ideas. A good number of them seem like brilliant ideas. Most people don’t act on their ideas, however. They remain conceptual entities that perhaps at most see the light of day in a conversation with a friend about a business they should start. I would be able to retire after this one, the conversation would go.
Why don’t the majority of these brilliant ideas go anywhere? Because each idea requires commitment, time, and investment. You need to believe in the idea strongly. You need to be so convinced that if you spend the time building that idea into a business, it will be fruitful because as Benjamin Franklin said, time is money. Thus, the bar is extremely high for choosing something which you will invest your time and resources to build into something real. But then what if customers don’t want it or won’t pay for it?
When Jeff Bezos started selling books out of his garage, which of the two approaches was he taking? I don’t know for sure but I imagine it was the idea he believed in and the overall vision. It could be that neighbors or friends were asking him to sell them books online so they didn’t have to drive to a bookstore, but since that didn’t really exist at the time, I doubt it. Amazon was solving a customer problem that customers didn’t know they had or at least weren’t consciously thinking about much at the time.
There is no single right answer here to our question, as the answer depends on your particular situation. Your risk tolerance and funding source have a lot to do with it. More on that later, but first I want to share an experience I had in graduate school that may shed some light on my perspective.
I was taking Computer Science graduate classes in the evenings after work. In one class, we were studying combinatorial game theory. Now, you likely have heard of game theory which can provide insights on how people behave in certain strategic situations. The Prisoner’s Dilemma is a classic example. The games we were studying were different though.
Impartial Games are those where the same moves are available to each player. The difference is that you alternate turns making the moves. A canonical example is Nim where there are rows of matchsticks, typically in a configuration where the bottom row has 7, the one above 5, continuing upwards with 3 matches and then a single match on the top row. On a given turn, a player takes one or more matches from a single row. The game is typically played as a misere game, where the player to take the last matchstick loses.
It’s pretty interesting actually when you dig into it, or at least it was for me. You can use computers to play the game, simulate scenarios, and prove theorems regarding gameplay. One day talking with my professor, I asked “So why do we study these games?” Seemed like a reasonable question. The reply was they have interesting properties that can be studied. This was a puzzling answer to me. I couldn’t let it go. “Ok, but how do we use what we learn here? How can we apply it?” Still no satisfying answer, but I was just a student and no one was paying me to study it although I did enjoy it.
This was an idea-driven approach. Academia is a great place to do this, as there is typically no immediate pressure to make something commercially viable. This sub-category of combinatorial games could hold the secret to the universe. I’m not holding my breath, but who knows where it might lead. I prefer a bit more practical approach though. I want to know where I am headed when I begin, and why I am headed there, even if I end up somewhere slightly different.
The delineation between idea and customer often manifests as a product vs. services distinction. Ideas become products that can be reliably produced and sold. Solving particular customer problems often involves providing services tailored to that customer. You might come up with a product idea during the process, but the goal at hand is simply to provide excellent service to that customer.
As you start (or expand) your business, these two models or some combination thereof are part of the formula you need to figure out. The romanticized notion of the startup is idea-driven, and this requires resources upfront to build. You are either independently wealthy, or you go and pitch your idea to investors who decide whether they want to invest or not. Alternatively, you make money out-of-the-gate and that helps fund your strategic initiatives.
So what then is the danger of falling in love with an idea? As we discussed earlier, almost by definition you need to be convicted of the belief in your idea enough to risk your time and resources in it. You subject yourself to the opportunity cost of other cool ideas that won’t have time to do right now.
The danger is not knowing who your customers are. This is a common mistake I have seen. In any enterprise, focus on your customers is crucial. At the end of the day, what will convince people to pay you for goods or services? Because you are solving some problem they have, making things easier or better, or somehow improving their life.
As I started my own company, I had way more ideas about what I wanted to do than there were hours in the day. There were endless possibilities, but you can’t do everything at once. As I have learned more and tried different things, writing and communications became a focal point. That alone though is only an interest, not a customer-oriented approach. “People who like to read cool stuff” might be a description of a target customer for some businesses, but not for me starting out as a one-man show.
After a few months, my customer definition is becoming more targeted. People interested in business ideas, insights, and freelancing. That is better. I’m still figuring it out but that what drove me to start this newsletter and build an accompanying website I will be launching soon. I am ending up doing something slightly different than I first planned, but that’s fine. To borrow the phrase, “No plan survives first contact with the enemy.”
So should you start with your ideas first or your customers? Whichever approach you decide on, always consider the data you encounter and adjust as needed. Don’t be afraid to change your mind. Often times, it is the journey that is more valuable than the destination. Your next big product idea might be right around the corner.