5.1-idea-discovery.md

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Idea Discovery

The Idea Discovery stage is the first (& perhaps least understood) stage in a startup. Entrepreneurs are always in a rush to build something so there's a huge tendency to skimp on this stage. Well, why shouldn't you? To understand this, let's examine two harsh realities in the life of any entrepreneur.

1. To make a viable business, you have to build a product that your customers want.

   Please read that sentence again. The corollary is that if you don't make a product that people want, your business will fail right from day one. The intent of the Idea Discovery stage is to hit upon a product idea that people do want.

2. On average, to make any business viable, an entrepreneur spends 4-8 years.

   Let that sink in. Even if your product idea is great, it'll take you up to eight years to succeed. If your idea isn't, however, you've lost a lot of time working on something people wouldn't want. If you are going to spend a significant chunk of your working life on a startup, why shouldn't you take some time and think about if you are working on the right idea?

The Right Idea

Let's get this straight from day one: there's no formula or checklist for what makes an idea great. Nobody predicted the success of Twitter, and even fewer predicted the rise of casual games such as Angry Birds. Sure, after the fact there were signs pointing to such products being ripe, but it's hard to predict the future. However, all is not lost: there are four tests entrepreneurs use to figure out a "possibly good" idea.

1. Am I solving a real genuine problem that people have?

   This test is the best of the three. Talk to people (or better yet, develop a habit of observing them) to figure out genuine problems that people have. Come up with great products to solve those problems.

2. Will you (& your friends) use it?

   This is another important test. It's a reasonable indication of whether people would want it, but more importantly, it's a good test of whether you will be committed to the product for the duration it's required to make it successful.

3. Has it been done before? And why is mine better?

   Although often ridiculed as copycat products, people forget that Facebook wasn't the first social network. Neither was Google the first search engine. They just had quantifiably better products. Improving upon an inefficient or unusable existing product is a good way to begin. Or adapting it to a different reality: take the example of Flipkart, often called the Amazon of India but which innovated and brought Cash-On-Delivery to the eCommerce product ecosystem.

4. Why is now the right time to build this?

   Many startups have failed because their ideas have been too forward-thinking. Maybe a new regulation has opened up opportunities right now. Or some new technology has brought about a change. You should be able to find a great answer to this question.

Typical Activities

Here are the typical activities that are found in the Idea Discovery stage:

• Founding team is formed.
• Prospective customers are interviewed.
• A Value Proposition is found.
• Team joins an accelerator or incubator (hint: SV.CO)
• Team raises small bit of funding from friends and family.
• First mentors & advisors come on board.

Average Duration

The average duration for an Idea Discovery stage is 3-5 months¹.

Objective

The Objective for the team at this Stage is to select an idea that the team believes users will want.

Key Result

The Key Result is a Product Deck that describes this idea. Because this result is what we use to evaluate startups during the application, we've made a special page describing our perfect deck.

Let's take a look now at individual roles and how that leads to the above Key Result:

Product Role

The Product role is the most important role at this stage. Generally, the person in the Product Role drives all discussions until the team agrees that a viable value proposition has been found.

Resources:

• This Startup Class lecture is a great video about How to Get Great Ideas.
• Lean Canvas is a mechanism to describe and think about your idea in detail. You needn't fill in all of the fields when you start first, but try to think exhaustively about all of them. Sign up for a training video here and you can download a blank Lean Canvas here. Print this out and fill it with your whole team. Or use an online tool like this. (You can also get a Google spreadsheet template here)
• Experiment Board is a technique to very quickly validate a product idea and solution even without prototyping. The focus on cheap validation and "getting out of the building" are amazing lessons to learn for a budding entrepreneur. Download a blank Experiment Board here and fill it with your whole team.
• GV.com has a great series of articles on Product Management. Do go through all of them.

Engineering Role

Because this stage is before you actually build anything, Engineers can do a lot of pre-work. Setting timeline expectations, deciding on a technology stack and thinking about sustainable programming are good activities to perform.

Resources:

• Are Your Lights On? - How to Figure Out What the Problem Really Is is one of the best books about problem solving. Engineers spend most of their time solving problems in code. Identifying what the business problem really is, and finding the best and most maintainable way to solve it is crucial.
• Good Programming is like Good Writing expounds on one of the best comparisons to programming possible: that of writing.
• SCRUM, the Wikipedia page has a series of pointers on this Agile development method and why it's useful. Great SCRUM practices are a good way to drive constant iterative development. Trello is a great tool for collaborative project management. You can add some scrum functionality and features using this extension for trello.
• Version Control is one of the basic hygiene activities that Software Engineers must adopt. Even if you are working in the Hardware space, finding a way to version your assets is crucial. Here's an interactive tutorial for Git, one very popular source control management tool.
• More startup tools

Marketing & Sales Role

Sales and Marketing is an exciting role that brings together creativity and analytical skills. There are two key tasks in this role.

1. Creating a Brand Identity (Company Website, Company Logo, Brand Philosophy)

   Every great company has a great story to say. As your startup goes through each stage, the nature of the stories change. Initially you are telling the story to your co-founders as to why you have come together to start this company. Then you would say a story to your early adopters/early customers and finally you have to craft a story for your investors. Remember that your stories have to be authentic and real for otherwise, it would come crashing down at some point in the future.

Pro Tip: Keep your company name and product name the same as you start. The legal company name doenst really matter, what matters is the brand you build through your story.

2. Estimating the Market size or total potential market your product.

   Estimating market size is a mix of actual numbers from market research reports and a guess estimate of how much share of the total market your company would get. This is a skill that you would learn through experience and multiple attempts.

Resources:

• The Secret Structure of Great Stories is one of the most scientific ways in which stories are structured
• Creating the Apple Brand Philosphy and Marketing Campaign is an internal video from Apple when Steve Jobs discusses the Brand Philosophy of Apple
• Estimating Market Size - How each person has his own view - The Uber example is a great example that shows you how even experts find it hard to come to the right market size.
• How to build a billion dollar business is a great post by Professor Steve Blank and gives you billion dollar ideas.
• Writing a Business Plan from Sequoia gives you the bare essentials of what a business plan has. At this stage you should have an idea about potential market size, a first marketing plan, and things you should do to scale up.

Governance Role

Teams which have good engineering, design and sales teams can build a good startup but any team which dreams to build a great startup will need to have an excellent person at governance.

There are two key tasks that are done in this role:

1. Handle all the Legal and Financial Matters of the startup.
2. Consciously build the team's culture and learning and development roadmap.

This might seem like very different functions clubbed together, and in fact, they are. Even from the early stages however, these are two critical functions that have to be deepy thought about by every startup founder. Almost all startups have to create a business outcomes and in the real world, this outcome is measured financially.

This is a great time to give a name to your startup and legally form your partnership between your founders by signing the partnership deed which sets out the how the founders will work together. The first key task is to get the partnership deed signed by all partners and complete the legal agreement with Startup Village. We offer support to open your first corporate bank account with our banking partners too.

Culture is what will make your company unique and stand out amongst the crowd and that would attract future employees to your startup as it grows. As the work that we are going to do from now on is using the mind, you will also learn how Self Awareness or knowing who you really are (including your emotions, strengths and weaknesses) is the most important leadership skill that your team has to build from which all other skills required can be learnt.

Resources:

• SV.CO Partnership Deed is a simple partnership deed that is custom made for first time founders.
• Netflix Culture Slides are praised by Facebook COO Sheryl Sandberg as one of the most important documents ever to come out of silicon valley.
• Five levels of leadership is a key leadership lesson for all founders.
• Leadership Skills start with self awareness and there are many ways to improve self awareness

Design Role

Design is not how it looks, it's how it works. A great startup team will have great design as one of its fundamental building blocks. What makes great design? Here's some material to help you out.

Resources:

• GV.com Design Sprint is a popular assimilation of many design techniques into a complete and coherent workflow. In the context of a product team, it provides an actionable series of steps to move from zero design to tested and usable designs.
• For visual and user-interface design, there's no better site to follow than Behance, especially the Graphic Design and UI/UX sections.
• The video Principles of Good Design brings together two of the most well-known designers in recent times: Dieter Rams & Jonathan Ive to describe what is considered the fundamental principles of great design.
• And to top it off, here's the original quote by Steve Jobs: Design is How it Works

Common Failures

• Typically, startups fail at this stage because they fail to find a value proposition for the product. Or in more simple terms, they fail to identify a first customer.
• Teams also fail if they are over-staffed and can't manage financial resources properly. Successful startups have lean teams and focus on quick iterations.

Proceeding to Prototyping

Once you've conceptualized an idea your team thinks is promising, it's time to proceed to Prototyping.

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Footnotes

1. However, you can even complete this in a week if you believe that the best way to learn swimming is to jump right into the pool and splashing about. It works at times, but be ready to complete a lot more iterations. ↩