Research Methods for Market Validation

There are as many ways to start a business as there are new business ideas. And I suppose, since failing to build a successful business is costly, many entrepreneurs have come forward with philosophical models, proprietary timelines, and methodologies designed to improve one's chances of success in launching a business.

A popular branch of such models that has become popular in the last decade or so tout the iterative start-up model, a process that utilizes market research, in-market iteration, and "lean" organizational discipline. Eric Riess' "Lean Start-Up" book is perhaps of the most referenced iterative models. Others include "If You Build it Will They Come" by our very own Rob Adams, Director of Texas Venture Labs, and Naeem Zafar's "Market Research on a Shoestring." Back to these books in a minute...

From my experience as a (yet unproven) entrepreneur it seems that the goal for any budding business is to first identify a significant market pain. It would seem that this would be the goal for any new product or service at any level, and that may be true. However, this has particular importance for start-ups because they must not only sell a solution to eventual customers, but also they must prove right to exist in the market to financiers, channel partners, and themselves.

It is essential to for new businesses to understand a market pain, especially for the purposes of raising money from VCs, angels, or friends. Yes, the business must also have compelling IP, a sound model for generation cash, advisors, etc... But in the theatre of financing, the first five minutes, where the direness of the market problem is described, is often said to make or break the investment opportunity.

When our Customer Insights class began, I started thinking about how valuable it would have been to understand our customer on a deeper level. I even brought up to Walls that I was kicking around ideas on how we could have incorporated some of the insight process into the research that we had done.

I'm curious about non-traditional, ethnographic or human-centric research methodologies that have, or could be used for the purposes of opportunity identification and market validation. Most of the manuals on start-up research still focus on traditional methods like surveys and interviews. In many ways, these methods make a lot of sense for start-ups: They are relatively easy for a lay-person to put together, consumers are familiar with them, and they can be done quickly (which might be the biggest incentive for a nimble start-up). However, I wonder if the selective use of human-centric methodologies could help to make the disclosure of market pains more compelling and more holistic.

There may be secondary benefits to the entrepreneur in using some of these methods. For instance, new business are most compelling when presenting themselves as a company, rather than a single product or service. A more complete understanding of the target market or markets, could help to position a start-up as a market expert, equipped to evolve with the changing, demanding needs of their customers.

Here's what an outline of a paper on this subject might look like:

I. Why is defining and understanding market pain so important for entrepreneurs?
II. Describe some of the traditional market-research strategies described in iterative start-up methodologies
II. Talk about the potential value of human-centric research additions to these models, and some of the potential drawbacks
III. Recommend specific research methods that might fit entrepreneurs' needs during the opportunity identification and/or market validation stages
IV. Provide 1 or 2 market examples of these methods being implemented by start-up companies and how they were successful

I'll probably want to scope this out a bit further, but I think some preliminary research will provide a nice direction for what can be expanded upon. The aforementioned books all have specific chapters on market-research, so that seems a reasonable place to start. It's more than possible that the choice of non-traditional research method depends more on the industry and scope of the business rather than the size of the firm. I think that's ok. I still believe there may be fast, easily consumable, and affordable research tools that can be identified as positive additions for start-ups.

Generative Research Examples (continued)

I don't think I'm a particularly good consumer of news. But I, and many others, have good reason for not being the first to know: In today's 24 hour news cycle, the first report is rarely any good. A lot of it is speculation. A lot of it inaccurate. The biggest problem with conventional news for a long time, was that it lacked authentic reaction/perspective. That's why, in my opinion, social media started to be integrated so heavily into conventional television news.

Reactions from Joe Blogpost present another, more serious problem: Most of the time, Joe's is an idiot. I find that for these reasons it's best to let the dust settle on "NEWS ALERT!" stories, and my consumption of information is skewed towards "just-in-time" tidbits like weather, sports scores, financial headlines, etc... The only real-time media that I allow myself to consume is music related. I'll occasionally read a review of an album, track down a leaked single, and so forth. That's one area where I do want to be closer to the front of the wave. Maybe I feel like I've earned the right to have opinions on such things and share them. Me and Blogpost.

I assume that typically most "news" is consumed before and after "work" hours, and that is certainly true for my media timeline. However, do the nature of our funemployment and the proliferation of mobile devices, I'm guessing that MBAs consume a lot of news "on the fly" and as things come up throughout the day. This is most likely the overall trend, as a new generation of media consumers are now accustomed to having their news on-demand. It's not a consumption model that EVER will cooperate with daily newspapers, and I was on the observation deck to watch that Hindenburg crash. Here are a couple (ambitious) thoughts on the news of tomorrow:

1. News will get crappier. Annoying, but the consumer will take the trade off if it's on-demand. This is an economic phenomenon, and only very, very few journalists will be paid what they deserve (or what they thought they deserved) to be paid.

2. Social news is news. Same channels, more interesting players... Just like the kids of yesterday, nobody will know who the Vice President is, but at least we'll know which friend just passed the CPA.

3. Muckraker has new meaning. The social, communications, and electronic movement has made news more transparent. It's much more difficult to get away with something and I don' think anyone would argue against that. The problem now is weighing and evaluating each source to get to the real truth. Soapbox: it is our number one priority as digital-age educators to teach young people how to evaluate and critically assess information.

Generative Research Examples

My Favorite Things are Few




Man. I know that I have always hated "stuff." But I guess now everyone will know. I had so much difficulty in settling on things that I could not live without. I mean, I just barely have any things. Maybe it's because I could never keep track of my things as a little kid, and this was just my way of not becoming attached to things. I keep my distance from stuff and that says a lot about me as a consumer - I'm a pretty tough nut to crack. Makes me a good marketer or a terrible one.

Sure, there is air, water, shelter...But beyond that, the most important things in the world that make oxygen worth breathing aren't even "things." They are my family, music, and physical activity. By family I mean both the one that I inherited and the extended family that I have chosen in my life. Without them, would I have anyone to work for? Anyone to play for? They are my inspiration everyday. Without inspiration, motivation, something to play the game for - there is nothing.

I wouldn't want to live without music. I mean, I just can't imagine a world without it. Music has been my hobby/pasion/obsession ever since I knew what those things were. If you know what you're doing, there isn't a single thing in life that can't be made better by the right music at the right time. Right now music consists of a bunch of individual things that bring music to me in either convenient or meaningful ways...It's Spotify, my lapper, and my phone. It's living in Austin, live shows, traveling to Chicago, LA, NY, or wherever necessary, to see my music family and my favorite bands. It's (someday) being able to finally pick up the piano or the guitar. Which Will Happen.

Losing a leg would be bad. Losing two legs would I think be unlivable. I just NEED physical activity. Things happen to my body and to my mind if I don't get it. I walk around like a stroke patient. Doesn't matter what it is - sports, running, walking, climbing. It's almost as if my body is continually making poison and exercise is the only way to get it out. I think a lot of people, because they force themselves to exercise for various reasons, forget the simple joy of running around. It's sad, and I've certainly felt that way before. But take that away from someone and I think they quickly realize just how important it is.

As for the stuff stuff that it would suck to live without: A credit card, a mobile, plumbing, my floor fan, Advil, my scooter, a refrigerator. How awful is it that I love my credit card? Very. But how hard would life be without them? Cash is nearly the stupidest, most inconvenient anachronistic concept since we were all trading shells in Africa. I don't know anyone who doesn't scowl and affix their hands on their hips when someone tells them "cash only." I should note that it doesn't matter to me what kind of card it is. It just needs to symbolize that I'm credit worthy, and that you should sell me that cheesesteak poste haste so that I can enjoy it.

Advil is the only branded good that I have on the map. The reason? I used to get migraine headaches when I was younger, and I still suffer from some sinus issues as an adult. My body has actually trained itself (through the magic of psychology) not to respond to other kinds of pain medication.

Ok, so what's the deal with my refrigerator. Again, I have no brand or feature affiliation, here. I just love having a box that holds delicious things. You get to choose what you put inside, and you can replenish it whenever it's empty. It requires no code to open. It makes a wonderful hum. I love forgetting what's in there and then discovering some amazing leftover. Awesome machine.

Booze is an honorable mention. I just can't put a vice so high up on the stuff list. Gotta believe that I could stop drinking if I needed too. Believe.

An Internet Footprint that is Weaksauce

I would guess that 90% of my internet traffic is fewer than 10 websites. This actually might not be that surprising these days, as sophisticated search, social networks and larger domains have meant a return to a mostly walled internet.

The majority of my internet "outings" start with the following five platforms: ESPN (for sports news), Facebook (for social news - if you can all it that) HBOGO (my replacement for cable TV) or my inboxes (Gmail and Outlook). I'm in my email inboxes frequently and on Facebook frequently - these are the portals that I commonly use that lead me to the longer tail of internet destination. I have very little affiliation to any particular news, social, or entertainment sites beyond the ones I have provided. An outing on Facebook might land me anywhere - Deadspin, StereoGum, WSJ, Blackhoard...

Google (Gchat) and Facebook (news feed) are my preferred methods for online communication. I have used Skype with relatives in the past, but Hangouts have begun to replace that, and we have started to use it for work (BeatBox) quite a bit. Hangouts are pretty bad-ass, and the features that allows you to edit documents, share your screen, and chat are commonly useful.

I should note that Dropbox and Spotify are desktop apps that use the internet, but are always running no matter what, and I use them both offline quite a bit.

One thing that I think is interesting, looking at my search history, is the insane number of times per day that I Google something (web, image, news, maps) just to background on something, get directions, a phone number, or settle a bet. I can imagine the world before Google where the loudest or biggest kid in the group was "right" about the number of stars in the Milky Way because nobody had any good way of actually finding out the real answer.

A Typical Day Would Be Atypical

Forthcoming...