A Lean Approach to Market & Concept Research

The Entrepreneurship Learning Channel

March 10, 2015

Agenda

• Research first, then build prototype

• Secondary Research

– Map out the Competitive Playing Field

• Primary Research

– Talking to Customers

• Summary

Research first, then build prototype

Where do I start?

Learn from Competitors

How?

• ID and study Competitors

• What’s working for them?

• What really matters to customers?

• Map out the competitive playing field

• How can you tilt the field in your favour?

The second mouse gets the cheese

Ice Cream MarketDimensions of Value

Competitors

Price Preser-vatives

Shelf Life

Crafted Locally

MouthFeel

All NaturalGeorgian Ice

Store Brand

ImportedPremium Brand

Ice Cream Market

Dimensions of Value

Competitors

Price Preser-vatives

Shelf Life

Crafted Locally

MouthFeel

All NaturalGeorgian Ice

$9 None1 month

YesRich & creamy

Store Brand $5 lots12 months

No A bit granular

ImportedPremium Brand

$10 some6 months

No Rich & creamy

“No” Competition?

Are you too early? Is there a market yet?

Include adjacent competitors; substitutes

Where to find this info?

“Secondary” Research Sources

• Google search & set up Google Alerts

• Industry associations & journals

• Blogs; field research

• Government Stats

• MaRS Market Intelligence – ask your Mentor

“Primary” Research:

The fastest way to learn is by talking to Customers

No Surveys or Focus Groups, Please

–Customer interviews are about exploring what you don’t know you don’t know.

Open ended 1:1 conversations

vs. Multiple Choice

Primary Research

Three Interview Stages

1. Problem

2. Solution

3. Validation

1. Problem Interviews

Discover a problem worth solving

Gaping neck wound vs.

mosquito bite

… and Customers worth serving.

The bigger the problem,

the more a customer will likely pay you to help

them …

Problem Interviews

• Every business solves a problem

• A problem well stated is half-solved

• Understand your customer’s problem

Here’s how

• Generate three to five Hypotheses

• 15-20 minute conversation (by phone or; F2F coffee is best)

• Start with friends; ask for referrals –30 interviews – aka ‘Cluster Sampling’

• Develop a script

• Don’t suggest solutions

What you Need to Learn

• What problem are you solving?

• How to customers rank the top three problems?

• How do custmers solve this problem today (your Competition)?

• Who has the pain? Is it a viable customer segment?

Example Hypotheses

1. Consumers are searching for products that have no additives.

2. Mouth feel is a critical measure of ice cream quality.

3. Premium mouth feel is only available from the imported premium brand.

4. Gen X urban moms are willing to pay a premium price for ‘crafted locally’ ice cream.

Problem Interview Script1 Welcome – set the stage 2 min

2 Collect demographics 2 min

3 Set the problem Context 2 min

4 Problem Ranking 4 min

5 Explore Customer’s World View 15 min

6 Wrap up – ask for referrals 2 min

7 Document Results 5 min

The Interview Steps• Always confirm meeting

• You are not selling anything, just feedback on some ideas.

• “Recruit” them into your interesting idea

• It’s a conversation

• Ask questions, listen.

• Talk less than 50%

• Document results Immediately

• Send thank you note

What have you learned?

Analyze

• Patterns

• Hypotheses get crispier

• New Hypotheses; insights

• Deeper understanding of problems

Problem 1

Severity & Impact

Problem 2

Severity & Impact

Problem 3

Severity & Impact

How is problem solved today?

Who has the pain?

Interview1

Interview2

Interview3

Interview4

Interview5

When are you done this step?

You have interviewed at least ten people and you can:

• Can identify the demographics of an early adopter

• Have a must-have problem

• Can describe how customers solve this problem today

2. Solution Interviews

Solution Interviews

• Same approach as Problem Interviews

• Same interviewees

• This time show some ‘ideas’ that you generated from the first interview

What you Need to Learn

• Who are the early Adopters?

• What is the minimum feature set needed to launch?

• Will customers pay for the solution?

• What price will they bear?

Solution Interview Script1 Welcome – set the stage 2 min

2 Collect demographics 2 min

3 Set the problem Context 2 min

4 Show concept / demo 15 min

5 Test Pricing 3 min

6 Wrap up – ask for referrals 2 min

7 Document Results 5 min

What have you learned?

Analyze

• Patterns

• Hypotheses get crispier

• New Hypotheses; insights

• Deeper understanding of problem / solution fit

When are you done this step?

You are confident you:

• Can identify the demographics of an early adopter

• Have a must-have problem

• Can define the minimum features needed to solve this problem

• Have a price the customer is willing to pay

• Can build a business around it (back of the envelope)

3. Validation Interviews

Validation Interviews

• Same approach as Problem & Solution Interviews

• Same interviewees

• This time ask them if they would buy

Finally … the Ask:“Would You Buy?”

Trial closing technique:“… What would it take for you

to buy?”

There’s no better validation …

than a customer paying for your product

What have you learned?

Reflect your insights in a revised business model canvas.

Why this Approach?

• Save time and money on premature prototyping

• Gets you comfortable talking to customers

• Learn a key CEO skill – discerning the ‘truth’ and learning to test hypotheses

• Quickly pivot your idea into a sustainable business strategy before you run out of cash

• Rapid learning – time is not your friend

Summary

• Research first, then build prototype

• Secondary Research

– Can you tilt the Competitive Playing Field?

• Primary Research

– Talk to Customers

– Discern a problem worth solving

– A valuable Solution approach

– Ask for the order to test your solution

Attributions and References

• Running Lean, 2nd Edition, (O’Reilly). Copyright 2012 Ash Maurya, 978-1-449-30517-8.

• Business Model Canvas, Alexander Osterwalder

• Secondary Research Sources– MaRS http://www.marsdd.com/venture-

services/#research