The most successful startups have one thing in common; they’ve identified a significant problem for a large enough customer segment. This is the most important puzzle piece when starting a new business. But what do we mean by “significant” and what is “large enough”?<\/p>\n\n\n\n
Not all problems are equal. Your job as a startup entrepreneur is to dig deeply into a customer segment to learn the problem that is meaningful and impactful \u2014 enough so that they are motivated to solve it. And not all customer segments are equal. You want a user base that is small enough to be easily reached, but big enough to gain financial traction with.<\/p>\n\n\n\n
One of the great startup entrepreneurs and early stage investors, Peter Thiel, co-founder of PayPal, often talks about being ultra niche with your first customer. He says startups should try to get a large share of a small market rather than a small share of a large one because it\u2019s easier.<\/p>\n\n\n\n
You can always expand later.<\/p>\n\n\n\n
\u201cEvery startup is small at the start. Every monopoly dominates a large share of its market. Therefore, every startup should start with a very small market\u2026 The perfect target market for a startup is a small group of particular people concentrated together and served by few or no competitors.\u201d – Peter Thiel<\/strong><\/p><\/blockquote>\n\n\n\n
The key to finding a significant problem for a particular group of people is doing extensive customer development<\/a><\/strong>. This is the process of getting out of the building and talking to potential customers before you launch a your product.<\/p>\n\n\n\n
And when you start talking to customers, you’ll want to listen for the “why” not the “how”. Problems are found in the \u201cWHY\u201d. When you learn why something is important or frustrating or exciting or fun or overwhelming, you learn what the real need is.<\/p>\n\n\n\n
It\u2019s important to note that success is not driven by the number of problems you solve, but rather how well you solve the biggest single problem. Your business may in fact be addressing multiple problems or provide multiple benefits, but it\u2019s likely going to be just one thing that hits the mark. So as you work on your user story and problem hypothesis<\/a><\/strong>, try to distill your problem and benefit to just one thing, for now at least.<\/p>\n\n\n\n
Finding the “Why” in Customer Development<\/h2>\n\n\n\n
To emphasize this point about the \u201cwhy\u201d, let\u2019s take a cue from an unlikely source, the Toyota Motor Company. Starting in the late 1940\u2019s through the mid 1970\u2019s, Toyota pioneered a new philosophy in automotive manufacturing called The Toyota Production System (TPS)<\/a>.<\/em> The system was created by Taiichi Ohno, a Japanese industrial engineer, and it transformed modern manufacturing globally.<\/p>\n\n\n\n