Lesson 8: Problem Definition & Hypothesis

Problem Definition & Hypotheses

An important step you need to take in the ideation phase of your start-up is to develop a clear problem definition and hypothesis. What this means is that you need to be able to write down exactly what the problem is that your idea would solve and what is the hypothesis – a proposed explanation based on limited evidence as a starting point for more investigation – that will guide you forward in developing your start-up company.

This module will give you practical guidance and a template to follow in order to do this task.

Step 1 – Formulate your initial explanation – or hypothesis – of the unmet needs or problems of a specific market (large group of people) you want to target.

Step 2 – Conduct customer discovery research in order to refine your hypothesis with in-depth insights about the problem area.

Step 3 – Validate your findings with additional research, such as surveys and interviews of target customers.

Step 4 – Prioritize the unmet need (or needs) you believe should be addressed first and evaluate how you can form or evolve a team to develop differentiated solutions to solve the problem(s).

Step 5 – Develop a “persona” (compilation of common characteristics of the target customer) to guide solution development.

This 5-step approach may sound difficult, but it’s not when you take it one step at a time. To help you, the following is a template you can use to write down your problem statement with hypothesis:

When [a target customer is doing something],

 we believe that [the target customer with primary characteristics, such as age, title, interest, ability/lack of ability or other defining characteristics]

 who want [a specific function or to meet a psychological need]

 are dissatisfied by [whatever exists today]

because of [the shortcomings of what exists today]

 and/or because of [constraints facing customers].

Problem Definition & Hypothesis

In the context of a start-up, the problem definition and hypothesis play crucial roles in shaping the direction and success of the business. They are foundational steps in the process of developing a product or service that addresses a specific need in the market. Let's break down both concepts:

Problem Definition:

The problem definition is the clear and concise articulation of the issue or challenge that your start-up aims to solve. It identifies the pain points, difficulties, or gaps in the current market or industry that your product or service intends to address. Defining the problem effectively is essential because it lays the groundwork for everything else your start-up will do, from designing the product to developing the marketing strategy.

A well-defined problem should:

·       Be Specific: Clearly state what the problem is without ambiguity.

·       Be Relevant: Address a real and significant issue faced by your target audience.

·       Be Measurable: Ideally, the impact of solving the problem should be quantifiable.

·       Have Context: Explain why the problem exists and its implications.

Hypothesis:

A hypothesis, in the context of a start-up, is an educated guess or proposition about how your product or solution will solve the problem you've defined. It's a statement that outlines the expected outcome of your efforts. The hypothesis serves as a guiding principle for your start-up’s activities, helping you validate your assumptions and make informed decisions.

A good hypothesis typically follows this structure:

"If we [take this action or build this product/service], we believe that [this will be the outcome] because [this is the underlying reason or assumption]."

For example, consider a hypothetical start-up working on a food delivery service:

Hypothesis: "If we create a food delivery app that offers a wide variety of cuisines and faster delivery times, we believe that people will choose our service over traditional dine-in or cooking at home, because convenience and choice are top priorities for urban consumers."

Key Components of a Strong Hypothesis:

1.     Action: What you're going to do or create.

2.     Outcome: The expected result or impact.

3.     Reason: The underlying assumption or logic for why the outcome will occur.

4.     Relationship Between Problem Definition and Hypothesis:

The problem definition is the starting point that informs the hypothesis. It outlines the challenge you're trying to overcome, and the hypothesis suggests a potential solution and its expected outcome. As your start-up progresses, you'll use various methods such as market research, customer feedback, and testing to validate or refine your hypothesis. This iterative process ensures that your solution aligns with the problem you're aiming to solve and that you're on the right track to creating a successful product or service.

The following are real examples of a problem hypothesis:

·       “When purchasing a new records management system, we believe that the head of IT for a big city police department is dissatisfied with offerings from incumbent vendors such as Microsoft or Motorola because such offerings: 1) have a confusing user interfaces requiring lots of end user training and leading to input errors; 2) suffer from long lags in responding to user input, frustrating end users; 3) are not configurable by department IT staff, requiring expensive customization by software vendors; and 4) lack APIs that make it easy to link to third-party applications, requiring time-consuming and expensive system integration work by software vendors.” (For Mark43)

·       “When buying a used car, we believe that consumers who are unable to gauge a car’s mechanical quality and who lack an acquaintance who can assess quality on their behalf are dissatisfied with private purchase transactions (e.g., via Craigslist), because they: 1) are worried about purchasing a lemon; 2) dislike hassles with scheduling a test drive; 3) have concerns about their personal safety when meeting the seller, who is a stranger; and 4) hate haggling over price.” (For Shift Technologies)

·       The main takeaway of this module is that you need to define the problem that you plan to solve with your idea for a start-up.  You need to do research and continually refine your hypothesis. It will then lead you to having a clearer picture of the “persona” of your target customer (who you want to sell to) and the problems you want to solve for them.