October 4, 2022
Building on his recent article on idea management, in this article Adam Valerio explores how startup studios can improve their ability to identify the right problem to solve and the right people to help them do it. So you don’t miss out on future articles, follow StudioHub on LinkedIn and join StudioHub’s Startup Studios LinkedIn group.In my last article, I laid out the case for startup studios to improve their idea management programs. That is, I want studios to develop the practices, processes, and teams necessary to identify the right problems, generate the right solutions, communicate their solutions effectively, and rigorously evaluate those solutions to ensure that they pursue only the most worthwhile ones.My next few articles will explore the most critical areas of idea management, informed by my interviews with startup studio insiders and my expertise as a PhD-trained UX researcher and former startup CPO.Today, I want to take a deep dive into problems: the challenges studios face in identifying the right problems to solve, common ways studios approach the challenge of identifying problems, my recommendations for improvement, and the kinds of people who can help studios implement those improvements.
If I were given one hour to save the planet, I would spend 59 minutes defining the problem and one minute resolving it.— Albert Einstein
“We are in the itch finding and scratching business.” This is how Lydia Timlin-Broussard describes what they do at BCG Digital Ventures (BCGDV), one of the largest venture consultancies in the world. As Lead Strategic Designer at BCGDV, Timlin-Broussard helps BCGDV’s corporate partners identify problems to solve and ways to use that partner’s strategic assets to solve them. Consultancies like BCGDV usually start out with a general direction, as their corporate partners may have already identified a group of people, an ecosystem, and resources to work with.Yet, most startups don’t begin that way. Often, startups are created because a person has a problem and a drive to solve it. This is the founder story that investors eat up, because the personal connection is seen as a source of knowledge and commitment.However, startup studios are organizations, not people. So, while team members surely have challenges in their lives that they’d love solutions for, the journey of a studio creating a startup from scratch is likely to differ from that of most founders.Like BCGDV, studios begin their ventures from a different starting point. They begin from a set of priorities. Studios need to create startups that are consistent with their mission, match the resources of the studio (or the resources they can obtain), and deliver significant profit to the studio and its investors. In essence, a studio is likely to think in terms of business opportunities.A business opportunity can take at least three forms:
For BCGDV, opportunity tends to lie in the intersection of an asset and a problem. Studios are more likely to start with just one type of opportunity.Even if you already have an asset or a cool idea, conventional wisdom is that every startup should eventually identify the problem they are trying to solve. I agree with this, but only if we modify the meaning of “problem.” For example, if we define “problem” as “something that causes difficulties,” would Pokémon GO, which has made over $6B in player spending, qualify as solving a problem? We can ask Pokémon GO users to tell us about their lives before and after using the product and surely would hear that some “difficulties” were reduced from pre-Pokémon GO levels, but this definition still doesn’t feel right.I prefer to think of a problem as “something that can be improved.” In this context, problem identification is the search for an opportunity to improve some aspect of the world and problem validation is the search for sufficient evidence that this opportunity truly exists.
Problem identification is the search for an opportunity to improve some aspect of the world and problem validation is the search for sufficient evidence that this opportunity truly exists.— Adam Valerio
Luckily, despite some evidence that the startups that reduce difficulties (known as “pain killers”) have the highest likelihood of becoming billion-dollar companies, the startups that make life better (known as “vitamin pills”) are also prominent among unicorns.
Credit: Ali Tamaseb via MediumDefinition and typology aside, it’s worth taking a look at how studios commonly identify problems to solve and what can be done to improve this process.
When you ask creative people how they did something, they feel a little guilty because they didn’t really do it, they just saw something. It seemed obvious to them after a while. That’s because they were able to connect experiences they’ve had and synthesize new things.— Steve Jobs
At the longest-tenured studios, ideas tend to be generated by the CEO and managing partners, as these leaders are sometimes considered geniuses for their ability to see untapped potential or predict what’s next in an industry. Looking at these thought leaders as innately more gifted than the rest of us is one perspective, but let’s explore an alternative. Inside the minds of these “geniuses” is a vaguely scientific process being carried out (usually subconsciously):Data + Analysis + Synthesis = Solution
How Geniuses Identify Opportunities (this is how we all do it, actually)
Credit: Adam Valerio
Data: If you have decades of experience in an industry, you’ve collected a hell of a lot of data through reading, conversation, observation, and doing things.Analysis:Analysis, scientifically speaking, means to break a whole into parts. People who are highly experienced in a given area have directly observed a high volume of individual cases, cognitively filtered out irrelevant details, and stored mental records of what’s worked and what hasn’t. Some of these data can be buried in the subconscious, but our minds can dig them out. We’ve already mined the gold and sorted it. We just need to access the storage facility.
Synthesis:Intuition is the ability to observe patterns.This includes:
This skill enables “studio geniuses” to predict what’s next in an industry. Idealab’s Bill Gross is a prime example of someone who has used his pattern recognition skills and vast storage of self-filtered data to generate a plethora of high-quality opportunities. In 1996, Gross founded the first startup studio in the world. With his decades of anecdotal data—and surely some hard data, too—it should be no surprise that he has a knack for identifying opportunities and determining which to pursue.Jake Hurwitz, Chief Marketing Officer at Day One, a support community for new founders, has consulted for 150+ startup studios, thanks in part to being one of the cofounders of GSSN and coauthor of the first white paper on startup studios. In Hurwitz’s view, the track record of top-tier studio leaders is the number one factor in studio success. The reputations of leaders like Expa’s Garrett Camp and AlleyCorp’s Kevin Ryan may be a major reason why top studios rarely have job openings. “Everyone wants to work with Jack Abraham,” Hurwitz tells me. If you’re at Atomic, why would you leave?
Startups are so weird that if you follow your instincts they will lead you astray.— Paul Graham
Relying on your thought leaders to magically whip up problems and solutions is far from ideal. According to Timlin-Broussard, “Startup studios need some internal way to solve methodological problems. If not, you feel like you’re on an island and need to take the easy way out…. It’s not intuition, actually. It’s just bias.” Studios need to get their thought leaders off of the island. Even if a studio’s thought leaders identify important problems with ease, it’s worthwhile to take steps to move the rationales for their ideas from a private mental space into a space that’s accessible to the team.Besides, the same processes for making the intuitions and rationales of your thought leaders public can also be used to help team members contribute to the cause. Proceeding in a structured way, utilizing the tools at our disposal, aids us in:
There are loads of formal frameworks, activities, and tools a studio can use to better identify potential problems to solve. These fall into 3 categories, one for each stage in the problem identification process:
Generating problem ideas:
The component of entrepreneurship that really matters is domain expertise. — Paul Graham
If your studio specializes in just a few industries—like High Alpha and Mandala Space Ventures—you can start by choosing one ecosystem and then doing a focused idea generation activity like the nominal group technique (NGT). NGT allows each ideation team member to speculate in a semi-structured way on what areas of the industry may be worthy of future inquiry and then ranks all ideas through a post-discussion vote.Studios with a narrow industry focus are likely to know their industries well, allowing them to more effectively use techniques such as customer value chain analysis, SWOT and TOWS, and (an updated) Porter’s 5 Forces to identify where competitors are falling short—a job that may in the future be done with machine learning.If your studio is broadly focused or industry agnostic, an activity like lean coffee may be helpful. Lean coffee enables the group to collaboratively explore a high volume of areas using timed intervals and a democratic process that allows the team to either continue with a promising topic or move on to the next one.A market analyst—occasionally synonymous with “principal”—can help a startup studio avoid some of the common errors in problem identification and evaluation, like relying on a “feel” for what’s buzzing or using superficial market numbers to calculate their total addressable market (TAM). Any semi-savvy person can improve a studio’s problem targeting by utilizing helpful market data repositories (eg, Pew’s LivingFacts, Think with Google) and basic internet tracking and analysis tools (eg, Google Alerts, Google Trends, Feedly, BuzzSumo). However, a true market analyst can track, interpret, and visualize industry trends at a level that far surpasses that of non-specialists. This is because strong market analysts are experts at using the aforementioned resources in conjunction with machine learning (eg, TensorFlow, Apache-Mahout), automated web scraping (eg, Scraper, Web Scraper) and data visualization software (eg, Tableau, Microsoft Power BI), and have the coding skills (eg, Python, R, SQL, Scala), and experience with statistical techniques (eg, regression analysis, stratification) to do things with data that most others can’t. The right type of market analyst should also be able to support the team’s analysis of ecosystem viability and potential business models. Many of the people best equipped for this role have experience working at a brokerage, VC, or market research firm, though it’s possible to find the necessary skill set among a variety of data scientists and some technical marketers, growth hackers, UX researchers, and SEO specialists.
Clarifying problem ideas: Once you’ve identified a general problem area, you will want to do a few things:
Ideally, you will go to industry experts and interview them about challenges and trends in the industry. “Push beyond the Google search. You need to find out what’s really going on in that industry,” says Timlin-Broussard. Intuition has its limitations, but combining the intuitions of 10-20 people who have massive amounts of highly relevant anecdotal data can be powerful. If your team has a UX researcher (a great idea!), they can design scientifically-sound interview protocols, utilize ethnographic interviewing techniques, and carefully evaluate your qualitative and quantitative data to maximize studio learning.Using the analytical hierarchy process (AHP) will help your team identify problem clusters and identify the core. More complex than the average framework, AHP is an excellent choice for breaking a problem down into its components, quantitatively determining its most relevant aspects, and comparing it to other problems.You can also better understand a problem by capturing cause-effect relationships between components. The five whys approach has its limitations as a root cause analysis tool, but can be done in just a few minutes, is often super helpful, and can be hilarious (as demonstrated by Louis CK). Love bug diagrams, which combine two fishbone diagrams, are often one of the better choices out of a plethora of mapping and tree diagramming activities you can do and are far simpler than AHP.
Credit: World Animal Net
Credit: Nikunj Bhoraniya via Pinterest
Evaluating problem ideas against each other:Ideally, a studio will be able to choose between several problems worth solving. Ultimately, it may come down to which problem they can best solve, but when several problems are closely related and you need to choose one, you’ll require a framework for doing that. AHP is certainly an option. Later this year, you can read my article on idea evaluation, which will include several idea scoring frameworks used by studios. These frameworks can also be used to determine which problem to solve.In all three stages of problem identification, having an expert facilitator is crucial. There’s a growing body of research on collaborative ideation, the pros and cons of various ideation environments and activities, and how to get the best out of a group. UX researchers are often excellent choices for ideation facilitators, as they’re familiar with the research on biases inherent to group dynamics and may have deep experience facilitating focus groups. Product leads and tech leads may be good choices as well, based on their experience facilitating product development sessions.
To improve your studio’s problem identification capabilities, consider hiring a:
Next up: how to generate better startup ideas! Are you ready to find better problems to solve? Have questions or comments? I want to hear from you! Feel free to reach out to me anytime!