Tuesday, January 27, 2015

The 5 Questions Every Entrepreneur Needs To Ask

By Brian Moelich

Business Designer
Citrix Systems

The success of your new business opportunity depends on your answers to 5 seemingly simple, yet deep questions.

When pursuing a new opportunity, whether in an enterprise or startup, there is a set of common assumptions that you make, whether you know it or not. I want to make these explicit and help you prove or disprove them.

My colleague Diana Joseph originally pointed me towards recognizing these questions and we use them as guiding principles for enabling innovation at Citrix Systems.

1) Do you know who your customer is?
Do you know your customer’s needs? Pains? What a day in their life looks like?
As an entrepreneur, your resources are scarce, and if you cannot definitively answer these questions, you are not focusing your resources as well as you should. Knowing this information paints a picture of exactly who your customer is and who it is not. You want to deliver an amazing experience to the few. Not a mediocre experience to the masses.

The first step to know your customer is go talk to who you think it is. Ask them about the challenges they face in their daily lives related to your opportunity. Try to elicit a story, because this is where the unseen meat of who the customer really is will come from. As your interviews increase, so to will your understanding and definition of your customer.

2) Do you have a solution that creates value for your customer?
Can you point to every feature and design element of your solution and match it to a corresponding customer need, pain or job to be done?

Value for your customer is created when your offering provides gains for their needs, relieves their pains or completes a job to be done.

Much like narrowing in on who your customer is, you can’t develop everything, and need to focus your resources. Look at everything you plan to develop and check-off those that match a need, pain or job to done. Prioritize the matches based on what matters most to the customer and put aside what doesn’t for possible pursuit later.

Validation here is mainly verbal, by way of a very simple explanation of a specific feature or design element to the customer and asking if it resonates. You will get the most information if you show a VERY simple prototype. Simple means under $100 and here is a good example from IDEO. As you get feedback, make changes until you create nothing but value without the nice-to-haves.

3) Do you know your customer wants your solution?
Up to this point, you’ve mainly gathered soft evidence (verbal validation). Now you want start collecting hard evidence (data).

Think about data as a currency your customer gives you. Currency can be showing a willingness-to-pay, giving an email address or simply opening an email and clicking on a link.

Landing pages are great tests, because you can look at how much traffic you get and then how many take action once visiting the site. Simply showing a simple prototype and then asking about interest levels works too. The key is to know what you’re going to measure and assign a point when the assumption is proven valid. For example, of the 100 page views we got, 20 signed up for the beta.

4) Does your solution create value for the market and you?
What alternatives does your customer have? Does the value you receive for delivering your solution outweigh the costs of delivering it?

No matter how special you think your solution is, your customer will always have another option to get the same or similar value. Ask yourself, where else can my customer get similar value, whether it is through a direct competitor or a substitute. Compare your value to the alternative’s value and ask why will the customer choose you over the alternative? Your answer should be something that the alternatives can’t readily imitate and that you can sustainably deliver, which is the subject of the next assumption.

I’m not going to get into the finances, but you naturally want to know that the value you receive in return for delivering your solution outweighs the cost of delivering that solution. Here is a resource for calculating costs and expected revenue.

5) Can you build and sustainably deliver your solution?
Do you have the expertise and capabilities to deliver your solution or do you need to partner with other organizations? Are your stakeholders on board with your strategy?

Ask yourself, what are the core activities that I need to deliver my solution. For example, Starbucks focuses on creating relaxed and welcoming atmospheres that keep customers in the store. This core activity, along with others, is essential to their overall strategy. To deliver on these core activities there are a number of supporting tactical activities. Starbucks needs comfortable furniture, wi-fi, well-trained approachable staff, d├ęcor to emphasizes comfort, etc.

The resulting activity system (see figure 1) tells you what is needed to deliver your solution. Look at this again with an eye to delivering what your alternatives cannot. Looking at the activities, think about what to keep in-house and what should be outsourced to a partner who can do it better, faster, cheaper than you. If you’re in an enterprise, can you leverage your existing core activities?

Ask the tough questions going forward
I hope you’re walking with a more questioning personality and knowledge of what are the tough questions that need to be asked when pursuing a new opportunity.

I’m interested to get your feedback on what your assumptions are and if I missed something. There is a lot of depth in each question that I couldn’t explain completely, so please reach out if you’d like to know more.

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