Kevin O’Connor gave a lecture at an Alpha Kappa Psi event last week, and he asked a fundamental question: “What is the purpose of business?” Now, if you do not know, Alpha Kappa Psi is the oldest and most prestigious business fraternity in the world. Its alumni range from Ronald Reagan to J. Willard Marriott. So, in a room full of bright, business-minded university students, why did it take three tries to reach the correct one?
We often lose sight of the one important factor that answers both the question of what the purpose of business is and whether a business should exist at all. The purpose of a business is not to make money but rather to solve a problem. Money and revenue come second to helping people ease certain pains. Just take a look at Pinterest: zero revenue, and yet investors still throw money at it because it solves a problem for customers, thereby generating a huge user base.
Steve Blank, serial-entrepreneur and leading founder of the Customer Development methodology, teaches that most startups do not fail because the founders fight or because the market is overdeveloped and there are too many competitors (although those certainly account for some of all failures). Rather, it is because there are no customers.
Often times, founders will get so excited about their idea that they forget about the fact that for a business or product to succeed, customers need to feel that whatever they offer is a “must have” solution instead of just a “nice to have” one. Instead of solving a problem and creating a product, an idea that sounds great in your head may very well turn out to just be a feature for someone else’s product. Blank describes something called the Minimum Viable Product (MVP), which is essentially a calculated launch strategy that gets product to market as efficiently as possible. When first launched, an MVP should only function simply and without too many or any features. That comes later with product development.
So before you start comparing venture capital firms, and applying to business incubators, it may be worthwhile to do some customer development and make sure that your customers actually exist. If you don’t know how or where to get started, you should check out Steve Blank’s free course on Udacity, How to Build a Startup. Though it will not give you the same experience as learning it from himself (he teaches at Stanford, Berkeley, Columbia, and CalTech), it certainly has valuable lesson to offer.
by Conrad Yu http://www.findthebest.com/ an unbiased and data-driven comparisons engine for anything from business to electronics, to travel & lifestyle.