by ex-scientist, advisory board member, multi-award-winning entrepreneur and Launchpad Entrepreneur in Residence Dr Salman Malik.
Idea validation is never a ‘text-book’, straightforward process and this piece on the subject will cover my experiences from a personal perspective, rather than using your more traditional ‘business books or tools’. However, there is almost certainly an overlap!
When I started my first business, I had engaged with MBA students from a leading global business school that attracts incredibly talented students, but it was only when I started to put those learnings into practice that I began to truly develop entrepreneurial and founder/CEO skills whilst running my start-up. My first business was a pharmaceutical start-up; I understood the technology, I created the IP, I believed there was some sort of market opportunity and demand, but I had never really spoken to companies and experts about the problem my business/ idea was attempting to solve. Although I wasn’t actively doing market research, I was indirectly understanding the problem better during my PhD by realising that it wasn’t only me that faced the problem of fine-particle production scalability but every other academic and industry professional that I engaged with at academic conferences and presentations. What made me scratch my head was, ‘why wasn’t anyone doing anything about it?’
When I convinced myself that I was going to be the one to make a move and focus on developing a scalable (particle) manufacturing system, I started taking steps to seek validation (broken down into some useful steps below for you), some of which are not always your traditional routes, but they most definitely formed part of my ‘hustle’ in understanding the market better…
1. Speaking to (who I thought were) my customer – As an entrepreneur, you will always hypothesise your end user although your customer is only that which is willing to pay for your product, process, or service, not those who simply ‘like’ your idea but in reality, will never need to purchase from you. Customers don’t necessarily have to be your end user (B2C model) but also another business (B2B) that distributes and resells your products to the end user. As soon as you make an assumption of an end user/consumer, you should take steps to engage with that group i.e., via market surveys, focus groups, analysing market reports, news updates, and recently written articles in the industry. There is nothing worse than using old data in a dynamic market where trends and customer spending is always changing. You must truly understand your customer needs at the time and listen to their requirements. It is easy to fall in love with your ideas, but your customers may require something else to what you originally assumed they needed.
This step is critical and will save you money and time down the road. Before you spend all your money building an app or stocking up on inventory, make sure a significant number of customers will pay for your product or service. You will have wasted money, time and effort if enthusiasm expressed by family, friends and focus groups does not correlate into true market potential. The dictum, “If you build it, they will come” does not hold true in the entrepreneurial world. It’s worth reading books such as The Lean Start-up (by Eric Ries) and The Mom Test (by Rob Fitzpatrick) which covers areas on customer discovery, customer development and how to speak to your end users. This will help you build a foundation to iterate your ideas, tweak your business and validate whether your idea is worth taking forward and commercialising.
2. Review the market, look at competition and determine if your idea already exists – You may have an amazing idea, only to realise that there is another company doing exactly what you propose. The easiest way to see if your idea exists is via an online search. Let’s say your idea is for a subscription gift box service for new baby toys. You would Google “subscription gift box service for new baby toys” and look at who else offers the same service. That’s not to say you can’t start a subscription tackle box service, too, but my advice is to pursue an idea that doesn’t have any competition yet, unless you think the competition is doing a poor job e.g. they have a bad website, horrible customer service, or awful reviews. After you search for each of your ideas online, delete any ideas that already have robust competition unless you can truly differentiate yourself against them and offer greater value to the customer than is already being provided and preferably at a better rate to them, too.
3. Perform some basic unit economic tests – I’ve always told young entrepreneurs that when you have an idea, even before you speak to customers and perform lengthy market analysis studies, you can quickly test whether the margins and profit durability exist within your business idea. Sometimes it is possible to have a great idea only to realise that it is far from financially feasible and is likely to generate significant losses. Make some basic assumptions, calculate your margins, and determine if the business makes financial sense for you to become a sustainable entity in the long-term. It is unlikely a business will attract funding, especially from investors, if the margins are poor and the profit potential is unappealing. Use effective business tools like the Business Model Canvas which will encourage you to explore these areas of validation when testing your idea.
4. Get immediate feedback from friends and family – Pitch your ideas and see which ones they like the best. You can set up a free survey using Google Forms to send to your contacts. Since your friends and family might be biased, you also want to pitch to people you don’t know. You should talk to real potential customers about their needs, wants and expectations. However, friends and family can also offer immediate feedback on your ideas. If none of them show interest or are willing to buy your product or service, it is unlikely anyone else will. Or, in other cases, it isn’t always about the quality of the idea but about how you communicate your idea to them so make sure you pitch your business with a clear message.
5. Build an MVP – If your idea has support then consider developing a minimum viable product (MVP) to determine if it is a product you and others would really use. Build a basic working prototype or be resourceful to get a basic concept ready where a customer can truly appreciate the features and recognise the benefits (and value) it will bring to them. Once you have the MVP, use and test it and have others test it as well. If it turns out to be a product that you and your friends would never really use, scrap the idea.
6. Start building your identity – If your testing goes well and you feel that you might have a winning idea, start building a brand around it immediately. In today’s fast-moving, dynamic, and responsive business environment, an idea that is validated today may be knocked off or even obsolete tomorrow, so do not linger. More importantly, unless your idea is founded in a ground-breaking and proprietary new technology, more than likely it is already being conceived by someone else already. At this point, some fear that “exposing” their idea may lead to someone stealing it. This is a completely valid concern, but these days you should go on the assumption that someone will steal it or develop a newer and better iteration eventually, so the key to success will be to be first-to-market (i.e. speed-to-market) or first-mover advantage. Furthermore, speak to a professional legal advisor (an IP lawyer) to determine areas of Intellectual Property (IP) protection in your business early on. You can effectively use IP as a barrier against your competition and as an asset to grow value in your business.