2018 is sizing up as a banner year for entrepreneurs. As reported by David Pridham of Forbes.com, “venture capital investment in startups has surged to its highest level ever–$148 billion last year alone.” He goes on to note that “with solid expansion of the economy, steady job growth, adjustment of the business tax code, and a booming stock market…you’ve got the most fertile soil for entrepreneurial companies…that we’ve seen in years.”
Despite an unprecedented number of new ventures emerging this year, a sobering statistic hangs as a backdrop for budding entrepreneurs: nearly 90% of startups fail! While there are no guarantees that will ensure that a new venture will be successful, author Warren Berger in his book, A More Beautiful Question, suggests that there are questions that, if answered, can improve the odds.
- The first, and most fundamental, question is simply WHY?
Why are you considering this startup? Do you have a compelling reason for launching this product or service? The answer you give should identify a significant group of potential buyers who are characterized by an ongoing problem or pain that your emerging business will solve.
By identifying the problem you will solve and why people will pay for that solution, you will begin to define the purpose for your venture. Often this emerges from other Why questions such as: Why isn’t such-and-such being done? Or, Why do things have to be this way?
When such fundamental questions are asked, they can lead to new breakthrough technologies. Consider San Francisco residents, Joe Gebbia and Brian Chesky, who in 2007 asked Why can’t we find a place for people to crash for a night or two in times when hotel accommodations are virtually non-existent? That question was the seed for a global business today.
By asking why things have to be as they are, we identify the problems and pain points of prospective customers—and begin to form the purpose and vision for the venture. Entrepreneurs should not assume that they have a marketable product or service until they have a clear answer to fundamental Why questions.
- Armed with the answer to Why questions, the next question is WHAT IF we did such-and-such?
This question initiates the creative process. It essentially challenges the prospective entrepreneur to come up with alternative ways to solve the problem or overcome the pain identified in answer to the first question.
When this question is asked, it stimulates brainstorming—and is best done with a group of participants who are interested in solving the problem. This brainstorming should be of the “no holds barred” nature in order to generate out-of-the-box ideas. It will likely consider how people are dealing with the problem or pain now, often identifying work-arounds where the problem is not being solved, but is being “put up with.” It may also involve competitor efforts that are expensive or fall short of the mark.
Gebbia and Chesky ultimately asked the question, What if we rented out our place? That led to What if we created a business that brokered the rental of private homes and apartments throughout the world? These initially outrageous, outside-the-box ideas became the unique business that is Airbnb today!
The goal with WHAT IF questions is to zero in on a unique, valuable solution that the marketplace will strongly desire and pay for: your Value Proposition. This is essential for creating a successful entrepreneurial venture.
- The next critical question is HOW will we operationalize this Value Proposition?
This is the first stage of actually trying—or trystorming—your ideas. Trystorming is important for the budding entrepreneur because it is not a full-market launch. Instead, it is a combination of brainstorming and rapid prototyping to determine if an idea will work or not. The key is to prototype quickly, and then to observe what happens in the laboratory of reality. Trystorming encourages you to err early and often so that you learn HOW to put your Value Proposition into action without the risk of a full launch.
Gebbia and Chesky did this by quickly acquiring three inflatable air mattresses, running a cheap classified ad, and renting out their apartment along with the air mattresses for a modest fee during a San Francisco conference. They were able to observe and learn at minimal cost, as they formed the basic operational plan for Airbnb.
Answering these three questions obviously does not constitute a full strategy or business plan. However, they do provide the foundation for the development of viable, fundable—and ultimately successful startups.
Richard Tyson is the founder, principal owner
and president of CEObuilder, which provides forums for consulting and coaching to executives in small businesses.