The Lean Startup Methodology changed the way we go about starting businesses. Instead of creating a business plan worthy of a Harvard Business School case study, we go out into the market space that we know and find a real problem. Then, we validate the pain point and see how the market is dealing with, compensating for, or otherwise working around that specific problem. Next, we determine if the market participants are willing to pay for a solution to the problem. If they see value, then we solve the problem.
Of course, it’s never that simple, but that’s the basic process in a nutshell. Atlanta entrepreneur David Cummings recently wrote that this process, from discovering the problem to getting to product market fit, generally takes about two years. Finding a problem is usually fairly clear. Validating the problem takes longer. Finding customers who are willing to pay takes a little longer, and building a product that fits the market takes a long time and usually includes several pivots or small deviations from the original product idea.
At the core of everything involved in creating a startup is the customer pain point. But many times, the best product for solving that problem doesn’t win. Why? Because the makers of that solution are really good at solving said problem, but not good at all at explaining what exactly the problem is or what its root cause consists of. In other words, the entrepreneur who can communicate better usually wins. That is why it is so vitally important to be able to explain the problem you are solving to anyone so that they understand it completely. But how do you do that?
Here’s an example from a startup that is growing out of the campus of Georgia Tech in Atlanta:
Cloud computing drives the use of data centers by global players like Amazon, Google, and Apple. The data center market is growing 40% annually and can’t keep up with demand, but each data center wastes millions of dollars in energy each year using “set it and forget it” cooling practices completely unrelated to the actual temperatures of the individual devices in the data center.
Let’s break this problem statement for startup businesses down:
1. Be absolutely as specific as possible.
The problem itself is very specific: “each data center wastes millions of dollars in energy each year.”
2. Clearly identify your target market.
The market segment is very clear: data centers.
3. Define the size of the market and the specific problem.
“Cloud computing drives the use of data centers by global players like Amazon, Google, and Apple. The data center market is growing 40% annually and can’t keep up with demand.” This is clearly a growth market, and anyone with a mobile device can understand “cloud computing” as the basis of this market segment’s growth.
4. Define the current (bad) solution.
“Set it and forget it cooling practices completely unrelated to the actual temperatures of the individual devices in the data center.”
5. Remove all instances of the words “we” or “I.”
This final point is probably the most important. The problem statement has nothing whatsoever to do with you. You are creating a solution to this problem, but the problem lies in the market space, and the current players in the market are experiencing the pain that results from this problem. In this case, the “pain” is millions of dollars of wasted energy annually from each individual data center.
Your main target audience is your potential customer, and your problem statement is all about their pain! The goal of the problem statement is to very clearly demonstrate empathy with the pain that your target customer experiences every day. Once you’ve clearly articulated the problem, where it exists, how big it is, and how bad the current solution is, you’ve set the stage to explain in equally simple terms why you are best qualified to solve the problem and how you intend to do so.