How to Identify the Best Entry Point for Problem Solving in Business
Written on
Chapter 1: Understanding Value Creation Opportunities
The digital age has granted entrepreneurs unprecedented access to markets, yet the harsh reality remains: one in eleven startups fails. While effective execution is crucial for success, a primary reason for many startups' rapid demise is selecting the wrong problem to address. This article outlines a practical approach for pinpointing the best entry points into user problems where value creation can be maximized.
Whether you're an entrepreneur or a product manager, recognizing a problem or user pain point signifies an opportunity for value creation, which is essential for a sustainable business. However, not all problems are ideal candidates for startups, particularly those categorized as "hard to solve."
What constitutes "hard-to-solve" problems?
In general, these problems exhibit characteristics such as:
- Vague definitions, e.g., assisting the elderly
- High complexity, e.g., curing cancer
- Broad scope, e.g., combating global warming
- Psychological aspects, e.g., managing stress, addiction, and biases
- Numerous dependencies, e.g., ensuring online trust and safety
- Unpredictability, e.g., forecasting volcanic eruptions
- High testing costs, e.g., assessing drug effects on humans
- Lengthy timelines for results, e.g., developing a spaceship
Challenges associated with "hard-to-solve" problems include:
- Stakeholders may grow impatient waiting for outcomes.
- Prolonged periods are required to grasp the problem's domain and discover value-creation opportunities, which may lead to unproductive efforts.
- High costs can lead to sunk cost bias, resulting in escalating investments without guaranteed returns.
Despite these challenges, entrepreneurs should not shy away from tackling complex problems, as the label "hard-to-solve" can be subjective.
How can startups and entrepreneurs systematically navigate these challenging problems to uncover the best entry points for value creation?
Method 1: Root Cause Analysis
Toyota's "5 Whys" method is a problem-solving technique that digs into the underlying causes and effects of specific issues. The goal is to identify the root cause of a problem by continuously asking "Why?"
For instance, consider an entrepreneur interested in addressing the lack of caregiving services for seniors. By applying the "5 Whys" technique with relevant agencies, the following insights emerge:
- Family members struggle to locate these services online.
- Agencies do not list their services on the internet.
- They lack knowledge on how to create online listings.
- Their employees are not adequately trained in technology.
- Caregiving businesses primarily rely on word-of-mouth for advertising.
With these findings, the entrepreneur could explore various strategies, such as developing a comprehensive platform for caregiving services to establish an online presence or offering IT training for agency staff.
Without this analytical approach, the entrepreneur might enter the market with yet another caregiving business, unaware of the actual reasons for the perceived scarcity of services.
Method 2: Value-Chain Gaps
Certain "hard-to-solve" problems exist within a broader value creation ecosystem. For example, maintaining seafood freshness within a cold chain that cannot rely on air transport represents both a significant challenge and a lucrative opportunity.
By employing value-chain gap analysis, we can identify multiple entry points to tackle other "hard-to-solve" issues. The expansion of the ride-sharing market has led to new value-creation opportunities in previously daunting areas, such as last-mile delivery for e-commerce, hot food delivery, and gig worker insurance.
Method 3: Sustained Trends
Sustained trends are persistent phenomena that endure over time. Examples include the aging population in developed countries, productivity improvements from digitalization, and the depletion of energy resources.
So, how do these trends help in recognizing entry points for "hard-to-solve" problems? Sustained trends provide a degree of predictability, allowing businesses to concentrate their efforts on addressing significant issues. For example, the aging population trend is difficult to reverse, making it a crucial area for businesses to focus on for an extended period.
Additionally, a trend may exacerbate problems over time, heightening the demand for solutions and amplifying the potential for value creation. Consider the aging population: while this is a challenging issue for governments, its persistence leads to various societal challenges, including healthcare, insurance, and legacy planning. This scenario opens multiple avenues for value creation, unlike problems related to ephemeral issues such as online advertising efficiency.
Putting It All Together
Imagine a startup eager to tackle the challenge of fostering a sustainable environment (an unclear, broad, and complex issue). Research indicates that clean energy jobs have been rapidly increasing over the past two decades, with positive and exponential growth projected. This surge indicates robust market demand for solar products.
The startup could conduct research to identify gaps within the existing value creation chain. By focusing on specific areas, such as the shortage of personnel for solar panel installation, the business could leverage automation or robotics to fill this need.
In summary, the methods outlined in this article can serve as a framework for discovering entry points for business opportunities within various industries. For further insights into the fastest growing and declining sectors, refer to Visual Capitalist's resources for mapping identified user problems.
I write to clarify my thoughts and maintain cognitive health. If you enjoyed this article and wish to receive my reflections directly, consider signing up or following me on Medium.