How To Identify The Right Problem To Solve?

The Classical school of Economics chanted, "Supply, creates its own demand!” Fast forward to the modern era, the “supply first'' days are long gone. We live in an age of abundance, and new age entrepreneurs must find the customer demand before creating supply. In modern entrepreneurship, this saying has reversed: "Demand, create its own supply." 

Where do you think demand originates from? 

The answer is simple: From a problem waiting to be solved!

If you closely look at any long-lasting business, you'll realise that their core idea germinated from a core customer problem. A significant and market-relevant problem. No surprise that Uri Levine, the founder of Waze, suggests, "Fall in love with the problem, not the solution." 

In this article, we dig deep into the mechanics of how you can identify the right problem to solve. 

Great companies focus on solving heart-felt problems 

A study conducted by the Harvard Business Review confirmed that 85% of executives believe that their organisations diagnose problems poorly. Most of them agree that this results in poor time and cost management and lost opportunity costs. 

Problem-solving involves finding innovative and creative solutions to address societal, technological, or business-related problems. 

Take, for example, WhatsApp's story. When its founders started the company, their main focus was on solving heart-felt problems concerning the high cost of international communication. This societal problem has existed for centuries since empires started to take over the world.

WhatsApp wasn’t the only player in this space—Viber, Google Allo, KiK, Skype, and even FB messenger were competing in the market. 

The team at WhatsApp recognised that mobile carriers and other apps were going against the customer problem. Competitors like Viber and Skype limited the experience by charging for international VOIP calls, and mobile carriers were charging an exorbitant price for international SMS’s. 

WhatsApp doubled down on the customer problem and created features like free calls, free instant messaging, and only 99 cents for the app. 

The bet paid off, and they grew by 100M users every month. The exit? A whopping $19 billion from Meta with only a team of 32 people. 

What does this tell us? Customer problems are the North Star for all great companies. WhatsApp was able to focus relentlessly on the need for cheaper and faster international communication. Every decision they made focused on making communication more affordable and quicker for their users. 

Customer problems don’t change; it’s only technology and customer behaviour that does.

WhatsApp wasn’t the first app to democratise communication, and Amazon wasn’t the first e-commerce company. If it’s a valuable problem, someone is already solving it. So don’t jump into solutions too quickly for fear of losing market share. 

Competing on a solution is a zero-sum game that eventually leads to a feature war, then a price war, and all value is eventually destroyed.

In the startup world, the onus lies on founders to fall in love with the customer problem. When the customer problem is clear, founders can create solutions from new customer behaviours and emerging technology trends to create innovative businesses. 

So how do you identify a heart-felt problem for your customers? Let’s take a look. 

What defines a heart-felt problem? 

Customer problems exist across multiple layers. There’s a surface layer where they tell you a solution they have in mind—like I want to save money making international calls. But at its core, all problems distill down to one or a few of these emotions: 

• Security
• Attention
• Control 
• Meaning & purpose
• Privacy 
• Community
• Intimacy
• Status 
• Achievement
  

How many of these emotional problems do you think WhatsApp solves for?

Great entrepreneurs look beyond the customer-suggested problems. They ask “5 why’s” until they get to the emotional reason that causes a customer to seek out a product.

Take the case of Slack, a workplace communication tool that has revolutionised how offices communicate. 

Before Slack existed, office communication relied on email. Email was designed to be formal and disposable. However, Slack channels allowed teams with a shared interest to create more inclusive communication for everyone. 

Suddenly, people working on the same project can create a project channel with a “searchable log of all communication and knowledge” (which is what SLACK stands for). What used to be an email thread now has a permanent space to foster a discussion around a common goal. 

People can create project channels, shared interest channels, to company announcements. Giving internal teams shared meaning and purpose for the company they work in. 

Companies are not buying Slack to replace emails but are buying slack for the sense of community, meaning and shared purpose.

The five characteristics of heart-felt problems 

Here are the five characteristics of heart-felt problems. The deeper the pain, the more value you can get from your customers: 

1. Emotional — the problem must have an emotion attached to it
2. Functional — the problem must fulfil the basic functional need of the problem
3. Frequent — the problem must happen frequent enough for the user to justify the value
4. Urgent — the problem must have an impending deadline
5. Unavoidable — the problem must not have an easier way to get around the problem

It’s the entrepreneur's job to identify these five characteristics of a heart-felt problem and provide a solution to solve it well.

So, how do you identify if a heart-felt problem is worth solving?

"In a great market—a market with lots of real potential customers, the market pulls product out of the startup. Conversely, in a terrible market, you can have the best product in the world, and it doesn’t matter—you’re going to fail." - Marc Andreessen

You’ll need to generate product ideas from market research and then identify customers' problems in that market to solve.

The first step is to research the market you want to be a part of. The opportunity size is based on how much your customer is spending to solve the problem right now. This information can come from industry research, government websites, and annual reports of key competitors, or you may even need to commission research if it’s too niche. 

Useful tools to gather information about your market:

• Ibisword
• Gartner
• Statistica
• SEMRush
• AnswerThePublic

Once you’ve gathered the market size of your product, you can start to identify the heart-felt problems for your customers. 

You need to get out of your comfort zone and speak with your target customers. Put yourself in their shoes, and think about the problem you’re trying to solve. 

Ask yourself: If this customer problem exists, where would your customers go to solve it?

Chances are there are existing communities or media channels that connect your potential customers. Go there. 

And don’t be afraid to speak with your competitor’s customers to understand why they purchased the product and what problem it was solving for them. It’s a free market. 

The goal is to find your small set of early adopter customers—people that will tell their friends about your product. Look for the most profitable customer segment to start there. 

Don’t fall into the trap of trying to target “everyone” (it’s a trap). You’ll spread yourself too thin and lose sight of the core customer problem.

There is no magic number of how many customer interviews you speak with. I like to start with five customers first, then adjust my questions every five customers until I’ve honed in on a deep enough problem with a large enough market size. 

For B2B products, you’ll need to be more creative and treat customer interviews as a networking opportunity. You need to rely on introductions, conferences, meetups, host events, or even work in the industry to build a network. You need to pay it forward long before you can draw on the favours for customer insights.

Using the Jobs-To-Be-Done interview popularised by Clayton Christensen is an excellent method to speak with customers. Using the Jobs To Be Done framework is a blog post on its own. 

Feel free to learn more here: A Practical Guide to Jobs To Be Done 

The trick is to find a deep customer problem in a market that is large enough to sustain your vision. 99% of the worlds problems are not worth solving but if you persist, you’ll eventually find one.

Reframing the identified customer problem 

Once you’ve found a heart-felt problem in a large enough market—the next step is to reframe the problem to look at it from varied perspectives. Doing so will help you make better decisions and arrive at radically better solutions. 

Let's take the classic example of a slow elevator in a building. A heart-felt problem for tenants is “I feel like I’m wasting time” (an emotional problem that’s related to status, purpose and meaning).

The solution seems obvious 👉 find a way to upgrade the elevator motor to make it go faster or change the algorithm to prioritise floors.

While these are straightforward solutions, there are significant costs (time & money) associated with installing a new motor or a new algorithm. However, if we remove the problem from the solution, we can find more ways to solve the problem. Perhaps providing hand sanitisers, playing music or even the daily news might be a cheaper option to make the wait time “more meaningful”.

When we have product ideas, the problem and solution are often stuck together, like Playdough. 

Great product people can instinctively separate the problem from the solution whilst focusing on business goals.

These customer problems and solutions are hypotheses that need to be validated using further customer and market research. 

Step 1: Write down the problem:

To reframe the right problem to solve, first write down the problem using a tool like the elevator pitch. The elevator pitch goes like this: 

For [ Target Customer ], Who has [ Customer Needs/Problems ] 

[ Product Name ] 

is a [ market category ]

That [ does these kinds of benefits ] 

Unlike [ Competition ] 

My Product is [ Unique because of these reasons ]

We know it’s true when [Theses objectives are met ]

I’ve slightly modified the elevator pitch to combine the problem, solutions and objectives on one page. 

But feel free to use any other tools like the Lean Canvas, Business Model Canvas or any other tools of your choice. It's the writing down part that’s important, the tool just makes it easier. 

You can download my version of the elevator pitch from Product Academy here. 

Step 2: Call out assumptions:

Once you’ve written down your idea, highlight all the risky assumptions in the page. Think deeper and scrutinise any assumptions you may have about this idea. It’s much cheaper to change direction now, than when you built the wrong product.

Step 3: Evaluate & Validate the Problems:

Once you’ve highlighted the assumptions, you can start validating the assumptions.

First, try to figure out if the customer's problem is:

1. Desirable: Is this a valuable problem in a big enough market?
2. Feasible: Is the problem solved by your competitors? If yes, can you solve it based on new customer behaviours and new technology trends? If the problem is unsolved, why is this unsolved? Is there a possibility today that didn't exist earlier?
3. Viable: What impact do you think the solution to the problem will have on the market once solved? How much effort is required to solve it? Is the ROI worth the cost of delivering it to the market? What is the ongoing cost to maintain it in the market? 

These three questions will be answered in Product Discovery. You can read more about Product Discover here.

Step 4: Capture early demand once you have 70% confidence

Once you have validated that there is a need for your product, the next step is to capture the market demand and test “what people say vs what they’ll do”. Startups in the Pre-seed stage that can demonstrate demand give them massive leverage on the negotiating table. 

There are two ways to do this:

1. Create a non-functional Prototype like a landing page to capture leads
2. Build a sticky tape MVP to demonstrate the experience to capture leads

Every startup is different, and there is no ‘best’ method. Choose the method that gives you the fastest “Time-to-value”. 

For example, don’t spend weeks building your MVP if it’s quicker to make a landing page so you can get into a sales meeting. On the other hand, if it’s faster for you to create a demo product to test with consumers, do that first.

Whichever method you choose, focus on the strategy that gives you the fastest ‘time-to-value”. Time is the ultimate commodity when building a startup. Capture the demand, and the investors will come.

First, identify. Then solve.

When you are building a technology startup, the product is the heart-beat of your business. 

The source of any great product is solving a deep, heart-felt problem for your customers. The deeper the problems you solve for them, the higher the prices and the more challenging for your competitors to come in. 

PRO TIP

Remember, customer problems don’t always change. It’s the customer behaviour and technology that does. We are in a time of unrepentant change, and there’s an abundance of new customer trends and technology innovation for new entrepreneurs.

Spend the time to identify a problem worth solving first before building any meaningful solutions. Compete in the arena of customer problems, and you’ll always be one step ahead of your competitors. 

Additional References:

https://hbswk.hbs.edu/item/how-entrepreneurs-can-find-the-right-problem-to-solve

https://www.ycombinator.com/library/8g-how-to-get-startup-ideas

https://www.ycombinator.com/library/6e-how-to-evaluate-startup-ideas

https://news.ycombinator.com/item?id=3633369

https://news.ycombinator.com/item?id=206716

https://medium.datadriveninvestor.com/finding-the-right-problem-not-the-right-solution-a6cfc66dc4cb

https://www.entrepreneur.com/article/303407