Understanding the value of a big problem can go a long way when embarking on an entrepreneurial venture; much moreso than simply figuring out a solution to a problem. The best entrepreneurs hyperfocus on the root causes of a problem and the magnitude of the pain it causes. After figuring out the value of a problem, the best entrepreneurs can then evaluate how valuable their solution truly is.
Don’t know what problem your company solves? It may be time for some deep reflection; after all, the most successful companies don’t need more Powerpoint slides explaining what their product does. Instead, they need more slides explaining just how big and painful the problem they’re solving is. The better you become at articulating the problem, the easier it will be for customers and investors to appreciate the value of your solution.
Identifying and articulating the problem is an art form, and it starts by creating a detailed understanding of the severity of the problem, the size of the problem, and the potential alternatives (or lack thereof).
Start with the severity
Video rental stores like Blockbuster used to make a huge chunk of their revenue through charging late fees. How many times did you or someone you know rack up a huge bill when you forgot to return a movie or game?
In fact, the video rental industry’s “largest profit generator is actually late fees,” according to Larry Gerbrandt, a senior analyst at Paul Kagan Associates.
Size up the problem
Illustrating the severity of the problem only illuminates part of the picture — the fact that a potential customer would be interested in our solution. You still need to demonstrate that the problem is bigger than just one person.
Research your industry to find out the potential market size. For instance, video and game rentals bring in $6 billion annually; a market size that large could catch an investor’s attention.
Consider the alternatives to your solution
In many cases, the solution will present itself after you’ve discovered the severity and size of your problem. In the case of video rentals, the solution is clear: create a video rental system in which the main profit does not consist of late fees.
The last step is comparing your solution to the alternatives. All things being equal, if your solution is more accessible, cheaper, better, or just better marketed, people will buy from you. All that’s left is to explain why your solution is better than all of the alternatives.
The value of the solution isn’t about the details of the solution, it’s about the details of the problem. When positioned correctly, the problem should define the solution.
Go back to the problem
Take a second look at the premise of your company. Can you explain the problem in enough detail to make the value of the solution intuitive? If so, you’re on the right track. If not, spend some more time with your focus on the problem.
Presenting your problem with as much detail as possible will allow your final act – presenting the solution – to seem like a showstopper. So forget about spending time talking about your wondrous solution and start talking about the size and severity of the problem instead. The solution will sell itself.