You have done your brainstorming and come up with a few ideas, whittled it down to the most innovative and most exciting one, you have taken the initial steps to find potential investors, and you are well on the way to being a successful entrepreneur, but there is one more step before your journey towards success begins: Validating your Idea.
Validation: An Introduction
Product validation (or market validation) is the process you have to follow to determine if there is an actual market for your product. You may come up with the most innovative idea, but if your target market – be it the target geographical area, demographic subgroup, or economic sector – has no need for your product at present, you will find success evading you.
Validating a business idea enables one to predict if their product or service will sell, how many units or clients they may get, and most importantly, how quickly they will be able to turn a profit. Market validation is also an important part of the funding process, as investors will be more confident to go ahead on a product that has a ready-made market. Whether you get startup funding might even depend on a successful validation exercise.
You need to understand your customers’ pain points and product validation goes a long way towards you gaining this knowledge. Any insights gained will help you transform your original idea to a product that will sell.
Five Steps to Business Validation
Validation of your idea or product can be done in many ways, but let us attempt to provide a formal structure to the process.
Step 1 – Articulate your ideas
Before the validation process is begun, you have to have a real and practical understanding of your idea and your goals, any assumptions that you have made, and any hypotheses that you might have that need to be tested. The most simple and effective method to gather this information is to write it all down. Never underestimate the power of the written word. Once you see your idea articulated on paper, on a whiteboard or on-screen, it will be easier for you to flesh it out. You can begin to ask questions about your idea, its value to your customers or clients, the target audience – whether you have a wide or narrow market, the price points, etc. – and what your product’s USPs are (Unique Selling Propositions) are. Spend some time thinking and discussing what you have hypothesised about your product, including your business model. Once you answer the questions about all of these, you will have a better idea than when you started.
Step 2 – Assess the Target Market
One of the most important activities that you have to do before you start your venture in earnest is to assess the market in which you will be operating. You have to think about things such as market share, the overall size of the target market, and your potential to capture that market share, including timelines (e.g. 30% of the market share in 5 years). Do your research on overall sales numbers, the number of current providers and their share, and make a judgement on where your product will fit into the current market. The general rule is that the more competition you have, the more difficult it would be to enter the market. To overcome this barrier, it is recommended that you differentiate yourself from the competition in order to provide a unique product or service.
Step 3 – Research Search Volumes
The Internet provides a great way to gauge the validity of your business idea, as there are web services that provide information on search volumes. Using these services, you can enter terms related to your product or service and get a range of information that will give you useful insights to validate your business idea. If there are a lot of searches related to your terms, you are most likely in an in-demand market. If the number is very small or non-existent, you may find it difficult to market your product as they are. You might need to tweak your ideas or change your marketing strategy in order to adapt to the most important player in the market – the customers. It is also recommended that you use specific search terms for your business rather than general terms that tend to give larger results, a majority of which will be irrelevant to your business.
Step 4 – Conduct Customer Interviews
Brainstorming, writing down your own ideas, doing aggregate market research, and doing research on search volumes are all great first steps, but if you really need to know the ground realities of the marketplace, the best source is the customer base. Doing interviews is a labour-intensive process and might take a lot of time and effort, but the results will ultimately be worth it. The more interviews you conduct and the more segments of the population you conduct, the better your understanding of the validity of your product will be.
Ask your potential customers about their preferences, motivations, needs, and products that they currently use. Use the hypotheses and assumptions you wrote down in Step 1 above and make that the basis of your questions. You may use one-on-one man-on-the-street sort of interviews where the respondents will be randomly selected, or it can be an invitation to discuss your potential product in an open forum on the Internet or in a physical setting such as a focus group.
How you frame your questions will have an impact on the answers you will receive from your respondents. Be careful not to lead the respondents on in the questions and be mindful of the tone you use, especially if you are conducting an in-person verbal interview. The structure and overall tone of a written question as well as the overall structure of any questionnaire used are also important.
If the feedback you receive reflects that your product does not get validated where the market is concerned, you can make the changes to your approach and try again. You may need to adjust your idea several times, but getting it right will lead to better chances of success.
Step 5 – Testing
Once you have validated your product using the steps above, it is best to test it so that you can release the best and most useful version of it to the market. An effective methodology is to use alpha testing and beta testing.
Alpha testing is where the employees of a company test a product in a staged setting. This helps identify bugs or issues with the product and helps you understand how to tweak it before it gets released to the outside world.
Beta testing is when you release a product to a limited group of real external users who are given instructions to identify problems and report them, or to the public with a notice that the product is still in the beta testing phase. Because the number of users will be arguably higher than for alpha testing and because the users will be classified as real-world users rather than users in a staged environment, there is a higher possibility of finding issues that relate to real-world scenarios. The very fact that a larger number of individuals test the product also means that there are more chances of finding issues.
Testing is the best way to get your product fault-free and user-friendly, as a faulty and cumbersome product will end up in your product being overlooked in favour of your competitor’s product, no matter the potential of your product.
Remember – Time is NOT your Friend
In today’s competitive environment, being the first in everything. Your whole product validation phase can be done in a matter of months, but if you get bogged down in the details, you will never get your product out in time and will release your product too late, no matter how well it solves the problem it’s supposed to. In any market, getting the early adopters (i.e. The individuals who will jump at the opportunity to get their hands on a new and untested product for the sake of their novelty) to buy your products and hopefully endorse them, is key. Your strategy at this stage is to build a Minimum Viable Product (MVP) and enter the market. Any additional features can be added later.
Utilise Early Adopters and MVPs to your Advantage
Early adopters, as mentioned above, are those who have some extra disposable income and are willing to buy products before it becomes mainstream or common. This is the age of social media, and social media influencers (especially the most popular ones) are a subset of early adopters that might review your product for you. Any positive reviews – paid or unpaid – can affect your numbers positively. On the flip-side, a negative review on a social media site can cause your product to fall flat before it even makes it to the market. The burden of creating a quality MVP that the early adopters will like is solely on you, and the validation steps detailed above can help you get there.
Building on the MVP
You may have had ideas for your product to have a range of value-added features or you may have got requests for new features from your early users. You have to consider feature requests in several categories:
Must Haves: These are the features you must include in your product in the next version. They include features that are heavily requested, are relatively easy to implement, and are cost-effective for you. This category will most often include major functionalities.
Good-to-Haves: These are features you might include in your product in the next few versions. These will also be heavily requested but might be more difficult to implement and be less cost-effective for you. These can include visual aspects such as colours and designs as well as functionalities
Might-Haves: These features are requested less often, but they might add a bit of value to your product. Consider these only if you can implement them at a lower cost and at a lower level of difficulty.
Never-Haves: These are the features you will never have on your product even though you might be requested to have them. This might be due to technical limitations such as incompatibility with existing tech and low cost-effectiveness. A hypothetical example would be requested to include adding an older connectivity port (e.g. Serial) to a product that uses a newer technology (e.g. USB-C)
Adding new features may add a premium to the price of your product, so you might have to create several variants of your product to be more attractive to a wider market, but within the confines of the feature categories above.
The Validation Cycle
Just because you got your MVP released, got feedback, and produced an improved product does not mean your validation processes are over. Every iteration of your product, from the MVP to a more advanced version with more features, has to undergo a validation process such as the one you took above and the feedback you receive should be used to continuously improve your product at all possible opportunities.
Get Funded through Great Validation
One of the most important first steps for any startup is securing funding. Investors will want to know whether their money will be returned to them with a good profit margin before they put down the funds for your startup or project. Your ability to effectively demonstrate the validity of your product or idea through the validation processes you went through in the five steps above will take you a long way towards finding the ideal source or sources of funding for you.