Today I’d like to expound upon the great words of one of business’ great thinkers, Roger Martin — famous, among other things, for asking the question, “What needs to be true?” And by that, he means “what needs to be true for your company (or product) to succeed?”
Recently, I had a conversation with an early stage founder. I think the world of him, and I’m fairly certain his product is doomed. We’ve had some tough conversations over the last few months, and last week he told me he’s thinking about giving up and moving on to something else.
He’s struggling with that familiar feeling of doubt that he didn’t do everything he could, and that maybe he should go back and try one more thing, take one last swing. It’s a common background hum for entrepreneurs who can’t find product/market fit — we’re convinced there’s a pony in there somewhere and it makes us do stupid things, like throw good money and time after bad.
Luckily, there’s a way past the madness. It’s a simple question that every entrepreneur should ask themselves when starting a company, not just when they are contemplating throwing in the towel. They have to ask, “what needs to be true for this company to succeed?”
We’ve already established that all companies are built on a sea of assumptions. Customers will do x, the value of our product is y, the cost of development is z. It’s the job of every founder to de-risk those assumptions by proving them true or false, and obviously, some of those assumptions are far more important than others.
The only way to truly prove that a business idea is sound is to launch it and make it successful. You can have all the data in the world that says you’ve got a great product idea, and then you build it and it tanks because you don’t know how to acquire customers. Hypothesis vs reality. The mark of a great business is product/market fit — successfully selling to the market is far easier said than done.
What *is* much, much easier is proving that a business idea is a bad one. You start with the question “what needs to absolutely be true?” and see if you can quickly prove one or more of them false. If your product relies on companies getting excited by a 5% increase in engagement, you should go talk to them right now and ask them if that increase would grab their attention. Prove the assumption wrong and the whole business may unravel. On to the next thing.
For instance, I am working with an entrepreneur who is building an anti-shoplifting product. His software tracks people over multiple visits to a location and hones in on suspicious behavior. When I asked how often people shoplift multiple times at the same store, he responded, “I spoke with a loss prevention manager and they said that people do it all the time. Dozens of times even.”
How would the loss prevention manager know that? Think about it, if you see someone shoplifting at your store, are you going to let him go and see if he comes back again? No. You’re going to apprehend him. And how many people who get caught shoplifting go back to the scene of the crime and try again? I’m sure that number isn’t zero, but is it really “all the time”?
The entrepreneur took the loss prevention manager at his word, because he desperately wanted validation. For his company to work, he needs people to come back and shoplift over and over again. Let me repeat that — if people don’t shoplift multiple times at the same place, his company doesn’t work. It’s an existential assumption.
When someone validated that idea, however speciously, our founder gladly believed him. Meanwhile, Constant Reader, you and I have no vested interest in this company’s success and we reasonably respond with “like hell, dude!” We’d be asking the loss prevention manager all sorts of followup questions.
Being fearless means questioning customer validation. It’s not enough to have someone say “that idea sounds neat” or “I’d totally buy that product when you launch it.” It means asking that person why they aren’t using another product that’s already on the market or what would happen if they didn’t buy your product. We’re not looking for hollow affirmations; we’re looking for people who grab us by the shoulders and threaten to kick the shit out of us if we don’t launch that product.
And props to my entrepreneur. He took the advice to heart and is out there right now fearlessly trying to prove that people don’t shoplift time after time at the same place. If that idea proves impossible to kill, he might have a business! Of course, he has a stack of other existential assumptions that could kill his business and I sincerely hope he’ll attack every one before he finally decides to start the company.
In most cases, it’s pretty straightforward to figure out what assumptions underpin your company’s success. In fact, if you can’t figure those assumptions out, you don’t understand business well enough to launch it anyway. If you can’t determine what needs to be true for your company to succeed, and how to test those assumptions, stop right there. Return to go, do not collect $200.
Now let’s assume you find that one of your core assumptions are flawed. That doesn’t mean your company won’t be successful, but it does mean your current approach isn’t going to work. Come up with a different angle on what pain your solving or who’s buying. Talk to different potential customers. See if another angle might work better. And with all options exhausted, you should be able to comfortably put it to bed and move on to your next thing.
If you’re like a lot of founders I know right now you might be thinking something along the lines of, “Ok, but what if someday my assumptions become true?” I’ve been there.
A few years ago, I spent some time working on a virtual companion for elderly people, to reduce the consequences of isolation and loneliness. While the technology to create a VR character was there, we realized that perfecting conversational AI just wasn’t something four engineers in a room in Orlando would be able to do faster than the thousands of engineers working on it at IBM, Amazon, Google and Apple. Someday, those companies will get conversational AI working, and when they make it available as an API, we can spin our idea back up. But I’m sure as hell not going to spend the next five years waiting around trying to make the idea work. I’m doing something else.
So what needs to be true for your company to succeed? Only you can answer that, but you absolutely must answer it. If you can’t answer the question, or the answers fly in the face of reality, let it go. Maybe it will never work, maybe someday it will. Saying no doesn’t mean saying no forever, but it does mean saying no for now. And, importantly, feeling good about it.
— Eric Marcoullier
Trying to prove you have a shitty business idea takes a certain degree of fearlessness along with a lack of ego. I’ve got clients who have zero issues with this process and say “of course I want to know if I’d be wasting my time on this project.” I also have clients who base their self worth in no small part on whether their startup idea is successful. And it’s those founders who desperately need a sounding board who won’t blow smoke up their ass.
As a friend recently said, “when you’ve got an inkling that something might kill your company, it’s usually that thing that kills your company.” If you’ve got an inkling and need an independent viewpoint, send me an email or hit my coaching site.
Hey Eric, this is a fascinating point. I’ve been reading many articles around this topic, but I actually think this is revolutionary. Could you please give another example (or two) that would help me get my head around exactly where I should look to find “what needs to be right”? You surely have some other examples. 🙂 Much appreciated. M