A Problem-First Mentality

A few weeks ago, I spoke to a class of university students who are graduating from an honours computing science program at the University of Alberta.  I was excited to be asked as the U of A is ranked number three in the world over the last 20 years in terms of research output related to artificial intelligence and machine learning.  As an angel investor, these are the areas I focus on and these students represent future talent in future startups.

We talked about the opportunities in front of them after they graduate (many), when is the best time to take a risk in their career (now); where they should locate (no longer need to go to the Valley or its equivalent to be successful; and Edmonton and Alberta are increasingly viable options for a successful career) and what technologies should they focus on (AI/ML is like the Internet in 1993).

We also ran a rough poll asking what sort of career the students wanted to pursue.  About 20% said working in academia or doing research; 40% working at a large well-established company; 20% working with a startup or scaleup; and 20% wanting to start a company.

For that last 40%, I was pleased to see that such a large portion were interested in the taking an entrepreneurial journey.

Related to this, several questions came up regarding what sort of industry they should target and what technologies they should develop.  These are logical things to consider but given my past experience with the academic community over the past 30+ years, I let them know that these may be the wrong questions to ask.

For four or more years, these students have been exposed to an incentive structure in academia that is generally biased towards undertaking research to generate novel outcomes.  Creating new intellectual property is foundational to the advancement of science and in academia and publishing it leads to promotion and tenure.   However, this same approach may not be conducive for successful entrepreneurship. 

It is only natural for students who have been exposed to an academic-centric approach to apply it to a startup after graduation.  It is exciting and intellectually challenging to create something that is new (“better, faster or cheaper”) but this can lead to my biggest fear for an entrepreneur: creating a technology that is looking for a problem to solve or a technology that nobody wants.

This brought back early memories dealing with university professors who had created truly novel and powerful technologies but didn’t realize they were destined for failure when they tried to commercialize them.

One memorable case in point many years ago was a fascinating technology developed for the forestry sector that could be used to grade timber in a novel way but when pressed on how many companies could use such technology globally, the professor counted the number on one hand.

In another case, a scientist-entrepreneur I met created a technology to identify certain types of diseases and to illustrate the power of the technology, they demonstrated the ability to identify disease states so rare that there were only a few cases diagnosed every year in North America.  It was certainly impressive but when I lined up a demo with a US VC, the potential investor asked while scratching their head: how are you going to make any money if you focus on diagnosing diseases that rarely happen? 

In both cases, they were unfortunately blinded by the awesomeness of their technology (which were indeed awesome) and forgot to check if the market they wanted to target was big enough to justify an investment.

This was a central point of my presentation to the students and I made a recommendation (actually insisted) that if they want to become an entrepreneur, they need to have a “problem-first mentality”.  This translates to first finding an important problem to solve and then creating the solution or technology to solve it.

To emphasize the point, I talked about my definition of “innovation”.  Everyone seems to think about innovation differently but my definition is that innovation is an outcome and only happens when two other precursor factors happen first.  In a formula it would be:

Novelty x Value = Innovation

The Novelty variable is creating or building something that is better, faster or cheaper.  This is a foundational piece but many people incorrectly conflate this to being equal to innovation. 

The second variable – Value – means solving a problem to create a benefit for the user.  If something is new but customers don’t see enough value to care or use it, is that innovation?  In my view, no.  As well, if you create something that has value but is not new, it is highly likely that someone has already done it or it can’t be protected from competition.

The nuance of this is that it’s not black or white. For most new innovations, a few customers can always be found but are there enough of them to make your venture profitable let alone generate the return needed to justify the risks associated with doing a startup?  This is summed up with the corollary question of: Is the problem worth solving?

Having a problem-first mentality is a foundational piece of the Product Opportunity Mapping framework I have developed which helps companies identify, evaluate and select new product opportunities. 

What problem are you solving? is the first of four questions at the foundation of building a successful new product – the other three are:

• Who are your customers and where do they exist?

• Who and what are your direct and indirect competitors?

• How and why will you win?  Why you and why now?  (in other words, what is your “secret sauce”?)

Asking and answering these questions will not guarantee product success but it will reduce the risk of failure and increase your product development ROI. This is equally true if you are a fresh out-of-school entrepreneur or a billion-dollar multinational company.

Based on the post-session feedback from my talk, it appears the message got across to the students and if they act on building a problem-first mentality, we can expect and hope to see a whole new tranche of incredibly bright students becoming successful entrepreneurs in the months and years to come.