You have a great idea…

You run it by R&D and they agree that they can build it…

You show your idea to a few of your customers and they love it…

So, now you invest time and money into making the product. You prepare a marketing and launch plan. Everything seems to point to the conclusion that you’ve got a major hit on your hands.

Then, something happens. Nobody’s buying. Even the customers that you talked to during your prototyping aren’t buying. Why?

This is a classic pattern that even big companies go through all the time. The trouble with this process starts at the very beginning. You get an idea. Now, you have what I call a solution in search of a problem.

This whole process is product based as opposed to market based. This an engineer’s or inventor’s approach. I can build it, now let’s figure out if I can sell it. I’m not saying that you can’t succeed this way. Big companies do it all the time. That’s because in many cases they can afford to do that. If you’re reading this, I’m assuming you don’t have money to burn on experiments.

You need to take the entrepreneur’s approach,

I see an opportunity to solve a problem for this market. How can we profitably solve that problem?

In other words, you have to start with the market in mind and work your way back to a solution, while all the while understanding the economics of the market and your potential solution to give you an idea of what your solution will have to cost to make as well as what your solution will have to cost to the consumer.

It’s like the difference between how GM and Toyota approach making cars. GM makes a car and then determines how much profit they want to make and marks up the cost of product by that much. Toyota on the other hand says…OK, we’re building a car for market X and they value A,B, and C and will pay Y for it. Now, how do we build it for that price? There’s quality and other issues involved too, but is it any wonder that GM and Ford continue to be thoroughly stomped by Toyota?

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