New Venture Lab: Equipping Christian Entrepreneurs

Question

I liked your answer on how to generate ideas for a new venture, but I would like to understand better how to discover a customer's unmet needs.  Can you please elaborate on that?

Answer

I will assume that you have clear criteria already on what constitutes a really good business idea so that once you do come up with a scenario for a new venture you will know how to evaluate it.  If not see our Venture Analysis for a suggested framework.

Given your evaluation criteria, I would suggest focusing on an industry (or two or several) and do a deep dive on each industry of focus.  This deep dive will be thorough research into each industry to find out if there is an attractive opportunity for you.

For example, when I was researching the HOA management industry, I talked to as many of the constituents of the industry as I could get in front of to try to determine what was going on in the industry, what the macro trends were, what the issues were, etc.  I talked to land developers, builders, homeowners, board members, vendors, community managers (both owners of companies and the individuals doing the managing), software providers that served the industry, investors that were investing in the space, investment bankers and potential buyers of the management companies (in case I built one, I would want to know who I would be able to sell it to.)

I took copious notes during my "interviews" and ended up with hundreds of pages of notes.  I then combed through the notes periodically during my due diligence and distilled the major themes down to bullet points that helped guide my next set of interviews and ended up being my strategic imperatives - the key steps I would need to take to build a company and create value in the industry.  These strategic imperatives included the kinds of problems that I was going to try to solve and how my "solutions" to those problems would be unique.  It was an industry after all of 2,000 management companies, so for me to build a company that could grow quickly into one of the largest in the nation, I would need a "unique value proposition," that was "differentiated" enough from my competitors that I could stand out in a crowded field.

What emerged from the research was an interesting collection of unmet needs by constituent:

• Homeowners wanted as much value as possible for their assessments paid in terms of amenities and their complaints included not knowing where their money went and not getting a responsive answer from the management company when then had questions.  One strategic imperative for us was to build a sophisticated IT platform that would allow the homeowners to "manage" their account 24X7 through a resident portal and have sufficient visibility into association affairs that they would feel informed.
• Board members wanted to know how the community's money was being spent and they wanted more "visibility" into the community's affairs, but without the hassle of waiting for the property manager to call them back.  One strategic imperative for us to meet this need was to leverage the same IT platform to allow the board members to log onto a board portal and access all of the communities financial information in real time, see all invoices, drill into all financial reports to see the underlying details, see the detailed contact log of all homeowner contacts, and other information on all aspects of how we were managing the community.
  The list goes on for each constituent, but hopefully you get the point.  Get in front of as many potential customers, partners, providers, etc. of your target industry, do your research and see if there is enough opportunity there for you to build a company around.

Another thing that emerged from my research was a good sense for the industry, its makeup and segmentation, and major trends - both favorable and unfavorable.  From that, I was able to list all major risks and create my plan to mitigate those risks.

So, if you have a target customer set or industry that you are willing to serve, get out there and mingle with them to do your discovery.  Good ways to do this is to attend industry trade shows, read the industry's trade press and websites, read the annual reports of any of the industry's public companies, buy a list of the industry's customers, etc. and begin your research.  Once you do get onto an idea, be sure to calibrate its potential by verifying the need and market size through additional research.