At Hack & Hustle we believe that genius is global & hate that opportunity isn’t. Despite the potential of the European Single Market, start-ups have difficulties in growing as fast as their American counterparts. The availability of capital is a key catalyst for a thriving start-up ecosystem. In this respect, Europe lags behind. The European venture capital industry is smaller, less attractive and barriers to cross-border investment persist.
As you can probably tell, the development of venture investing in Europe is one of our main passions. We are hustling to become leaders of tomorrow and play a strong role in fostering a borderless European venture-investing ecosystem. We want to push boundaries; but being a leader is also about giving the future a voice. It’s about empowering talent to grow and develop. It’s about collaborating to write the history of the future. It’s about challenging people to become the best version of themselves.
This is why we are constantly working and supporting young talents by letting them join us in the trenches and learn about this wonderful world of venture. If you are looking to break into venture, do reach out to us. The “Breaking Into Venture” series is the result of us challenging our interns and trainees to develop an article on some of the basics of the venture world they learned whilst working with us.
Guilherme is a new Venture Builder at Hack & Hustle. He holds a Master in Economics and a Bachelor in History from the University of Coimbra.
He defines himself as an extremely curious person that has a strong draw towards finding better solutions to efficiency problems. Currently, he’s focused at making the Hack & Hustle dream a reality: to bring funding opportunity to neglected founders in the VC ecosystem.
A common mistake
According to the Cambridge dictionary:
Product: “Something that is made to be sold, usually something that is produced by an industrial process or, less commonly, something that is grown or obtained through farming”
Solution: “The answer to a problem”
When I started working at Hack & Hustle, I thought that solution and product were basically synonyms. I guess this is quite normal as I’ve seen so many companies use these words interchangeably when describing their offering. As time went on, and working closely with startups, it dawned on me that there’s more to these words than their meaning in the dictionary.
What is the solution to get from point A to point B without getting inside a normal cab?
How can I stay in touch with my high school friends that I haven’t spoken to in years?
How do I get that new computer without having to go all the way to the store?
💡The answer is obvious, isn’t it?
For the first it’s the Uber app, for the second it’s Facebook and for the third it’s Amazon. They are the solution to the problems I just listed!
Oh wait, no. They are products, not solutions. It’s not the same, I swear to you, It’s not the same. I’ve come to realize that there is actually a mountain range as tall as the Swiss Alps in between solution and product. Read on to see how I discovered the difference whilst at Hack & Hustle and how understanding this can bring benefits to your own venture!
So, what is a solution? The dictionary definition states that a solution is “The answer to a problem”. The definition is correct, but it isn’t a perfect fit for businesses. A definition more accurate for businesses would be: A solution is intimately connected to the needs of the customer, it provides an alternative to the current reality and solves a problem. As it is a bit of an abstract concept, an example can help clear it up.
Problem: I need to separate my house from the outside and have privacy, but still be able to get in and out of the house easily.
Solution: A door
However, this is ONE solution, there are many ways of making doors and this problem will not be solved only by any door.
Swinging saloon doors don’t cut it. Neither do transparent ones, because having privacy was part of the problem. As the problem also didn’t mention budget constraint, price is not an issue, as cheap door with no bells and whistles will do the job.
Solving the customer’s problem is the only objective
As you can see, the solution to a problem is not attached to any specific product, it has no brand or trademarked name, it is a way to solve the problem whilst attacking the needs of the customer. And, remember, there is no single way of doing it.
If a door is the solution, what is the product? A product (or service) is defined by its features. It is from the features that it can differ from competing products.
Continuing with the door example, the solution to the underlying problem is a solid and soundproof door, but the product is “The amazing door 3000”. It is a door that comes in a beautiful white tone, it has elegant ornaments, is made entirely from hardwood and comes with a smart-lock system that works with an NFC card or your phone”.
This is undoubtebly a premium product, that would be perfect, for example, for luxury dorm rooms in universities. The user would benefit immensely from the smart-lock system and would appeal to their premium taste. However, this would also be the case for luxury retirement homes, as the elderly users most likely would not be able to get used to the smart-locking system, even though they like the aesthetics of it.
As you must have noticed, a product is something that builds upon the solution to offer something unique, something that sets it apart from the competition. A product has its focus on appealing to a target consumer, with a unique name and the reputability of the brand behind it.
Why is it important to differentiate between the two?
Giving out an accurate description of your solution signals that you have a refined knowledge about what you’re building, that you understand the problem and the customer, that you found a way to make them happy and solve their problem. Unfortunately, it is something that many founders find to be difficult to explain.
What I discovered, when working with startups trying to raise their first funding round, was that getting the description of your solution right is of upmost importance when talking to potential investors. However, when asked about their solution, some founders may start using the words “product” and “solution” interchangeably.
What usually happens is that they go on to list all the interesting features of their product. Often they don’t talk about how their solution has been constructed from detailed knowledge of the customer and their problems.
You can look at the question “what is your solution” from a potential investor as the subtle way of them asking “Do you understand your customer, their problems and their needs?”. So, from my experience, nailing the ability do distinct between a product and a solution will not only aid you in attacking the core of your customer’s problem, but it will also make potential investors more interested. Why? Because showing that your solution attacks directly the customer’s problem and needs is indicative of a promising company.
This is a way in which investors try to de-risk their investment. A well though off solution speaks to what investors see as a market risk. If a solution is half-baked, with not really solving the customer’s problem, or even worst, not being able to pinpoint the customer, then the investor will see the company with a risky product that probably will not do well.
Struggling to dial back and pinpoint your proposed solution?
We recently ran an exercise with a pre-seed company to help them distill their solution. It was super insightful and really helped them in better understanding their own business and vision. Early-stage companies with first time founders seem to struggle in getting the core of their own proposition. It’s common for these less experienced entrepreneurs to fail in understanding how exactly they are ending customers’ problems. This completely hinders their ability to define their unique value proposition: how they add value against existing alternatives. Don’t worry, it’s not going to require more than pen and paper. Draw the following board:
So how do you begin this exercise?
This is a simple and complex exercise at the same time, so I’ve separated it in 5 different parts so that it becomes easier for you to follow.
1. Get all the buy in you need
First of all, reach out to your founder team and convince them to go through this exercise with you. You can share this article to them to better explain the importance of this exercise. After you get them on board, schedule a dedicated session just for this. Allocate enough time for the session. It’s hard to say how much, but I can guarantee you that’s it isn’t going to be over in half an hour! Then, kill all possible distractions and make sure everybody has enough energy and that they don’t have their minds on something else.
2. Who’s the customer?
Now that we got the preparation stuff out of the way, sit down with your team and imagine the big picture of your company. Begin by asking who’s your target customer.
This is meant to be a one page document, but there can be exceptions and it’s all about the difference between customers and users. If your business is something like Facebook, where the user is the person browsing their newsfeed and the customer is the advertising individuals/agencies, make one canvas sheet. If it is something like a marketplace, where the multiple parties create value in the business, then its sometimes better to do a individual canvas for each party.
3. Feel their pains
Once knowing who they are, try to put yourself in their shoes. What is the problem that they are facing constantly, even if they don’t know it? But nobody has only one problem, it usually stems from some core situation/condition that generates a variety of problems (that sometimes may appear as completely disconnected). Elect three main problems and write them in their respective fields on the sheet above.
But, remember, you are not your customer! It may seem obvious that you and the customer are nothing alike, but when trying to see how they think, feel and react, we tend to project a lot of our own selves onto them. Stay focused on the customers. What are they doing, thinking and feeling throughout their own experience? Make sure that, if possible, you are using knowledge or data points you’ve gathered from the users.
If you have no data on them, or still haven’t even launched a MVP to validate your solution, this exercise is still very useful. I recommend you to do the exercise with your current assumptions. Then, after having put the solution in the hands of your customers, consider doing a Sponsor User Program. Having their direct feedback to compare against your assumptions is the most valuable kind of information you can have. But don’t settle for just that, one other source of valuable information are the seasoned experts your field. Reaching out to them and getting their perspective on the matter will give you a better understanding how things are really running in the field today.
4. Whose pain?
Now that you’ve identified the pain and general idea behind your solution, it’s time to look at the Ideal Customer Profile (ICP). The ICP is core in nailing the target for your product and sales efforts. First, a illustration for you to see where the ICP stands in the grand scheme of things:
As you can see here, knowing the customer and their pains is all about funnelling down to find to on who you should focus. I’ll give you an example for that. Imagine it’s 2007, Airbnb did’t exist yet, so people have a big problem in finding affordable accommodations and have a local experience. They get around this problem by couch surfing or looking for a listing on craigslist, but both are suboptimal solutions as they did not provide a platform optimised for the needs of the consumers, but showed that there was demand for the service. So, a dedicated platform aimed at letting hosts and guests match online was the solution for the problem. But they didn’t target everyone who was travelling at the same time, their scarce resources wouldn’t even make a dent in the travel market.
Ask who has the problem/pain I just described and can find imense value from your solution. Maybe backpackers, right? But, even though they have a good fit, not all backpackers are looking for a way to fix the problem in a better way, but people going to mega conventions are, they can’t find a room anywhere near the event and prices are absurd. They already bought the ticket to the convention and need to be there. Before going big, this was who Airbnb targeted in the early days.
In this example, guests going to mega conventions would be your Ideal Customer Profile! This is the main part of an ICP. Other important factors must be considered, such as geography and budget (if they don’t buy, it’s all for nothing, right?). The last step in nailing down your ICP is knowing how they behave, what are their attitudes, their beliefs and values.
In the end, this exercise is like sculpting. You’re Michelangelo starting with a blank marble, your targeted audience, chisel away some stone and get a rough finish, your potential customers, then you outline the exact shape of your sculpture, your Ideal Customer profile, then you finally polish it all up to get a shiny sculpture of David, your Persona, that very well may be a big evangelist for your solution and bring much more return to your company than if you just targeted everyone at the same time.
5. How are your customers dealing with this pain today?
Now, every problem has many different ways of being solved. Think how the customers are solving them today. This may range from just ignoring it all the way to using a suboptimal solutions. A thing to keep in mind is that people always find ways to solve real problems (if it remains unresolved, it’s probably not big enough). List at least 3 current solutions.
There’s one caveat to what I said above, of course. Category design. There are times that a completely new thing comes and creates a whole new market for itself. This much more rare and difficult than solving an existing pain recognised by people today. For these kind of ventures, in my opinion, this exercise is even more relevant. If you’re going to create a new market, product category and get in the minds of customers, you better lay out a very detailed strategy to do so.
6. Solve their problems better, but embrace the concept of an MVP
Finally, now it’s your time to shine! Write in the lower field how YOU solve this problem for the customer. But, don’t focus too much in explaining you perfect solution, embrace the concept of a Minimum Viable Product (MVP). An MVP is the simplest form of a solution that still delivers customer value.
I don’t want to sound repetitive but, in this exercise, you must always have the customer in your mind, how their problem is affecting their life. Remember, the starting point to find the solution is not from your product, but how does do the customers currently deal with the problem and how you will solve it differently. I believe that by putting things in paper like this you will be better equipped to compare your solution to what currently exists. This is the best way for you to identify what makes it unique.
What makes your solution unique is what’s going to allow you to succeed. So don’t ever give into feature creep and forget about your core. No investor invests in your features. They invest in your ability to solve a true problem in a unique manner, and make money from it.
Rinse and Repeat
On a final note, it is important to keep in mind that this exercise is not a one-off. You can’t set the results of doing this in stone. It must be done frequently (how frequently depends how long does the company takes to do reiterations to its products or services), because the best businesses are obsessed with their customers and go to great lengths to solve their problems. Once you gather more milage, perhaps you’re not going to need to draw the exercise all over again, but the thought process will remain and will be able to connect it to your Lean Canvas. If you’re interested in learning more about the latter, do check out this article.
In the end, this is what matters
Product and solution are definitely not the same thing. A product is mainly defined by its features and a solution is focused solely in solving a problem with the customer always in mind. The ability to differentiate one from the other, whilst still managing to understand your target customer in depth, will give you and your startup a great base from which an amazing product can arise!
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