Paul Higgins on Market Validation for Entrepreneurs in a Hurry

The biggest strategic error any entrepreneur can make is to chase after the wrong targets. Unfortunately this is a common issue, particularly for technology companies, which often suffer from the affliction of being able to solve too many problems.

It's rare that a technology is developed with only one specific issue in mind and rarer still that it could not subsequently also be applied elsewhere.

Having a narrow focus is a critical success factor for any business with a limited time period in which to prove itself. So how do you choose in which market to invest your limited resources? Or, in other words, how do you find out which market has the most immediate demand for your technology?

Here's a five-step guide to validating markets quickly.

• Step 1: Start by defining the 'ideal' customer. What is the perfect combination of circumstances and attributes that will lead to a company buying your solution over anyone else's?

• Step 2: Write down all the possible markets you could enter. Markets can be 'vertical' (described by an industry such as Financial Services or Construction), 'horizontal' (described by a function such as HR or Market Research), or 'customer sets' (described by a particular set of circumstances such as recently merged or losing market share).

• Step 3: Put the markets in order of how likely they are to contain your ideal customer.

• Step 4: Research the top 5 markets in your list and pick out some strategic target companies that will serve as a proxy for the rest of the market. Some markets will be dominated by a few very large organisations; others will be characterised by a large number of small ones. Pick the 3 target companies in each market that most closely resemble your ideal customer and commit to talking to them.

• Step 5: Write down your top 3 key assumptions about each market (such as what you understand the drivers to be for adopting your technology) and ask your 3 strategic target companies whether they agree with them. If all three of your best targets disagree with your most important assumptions then discard the market and move on to the next one. If not, commit as many resources to the rest of the market as you can.

Always aim to disprove your hypotheses rather than trying to maintain them. By disqualifying markets quickly - in other words, by failing fast - and adjusting the strategy accordingly you will find the best market faster.

About the author

Paul Higgins is a Consultant at Rapid Innovation Group, a UK-based strategy and execution firm that helps emerging tech companies accelerate their revenue growth and achieve market leadership.

Paul has been quoted by the Financial Times and GrowthBusiness UK as an expert on growth strategies for startups. He is a regular contributor to OpenView Venture Partners' popular Labs blog and podcast as well as the Rapid Innovation Group blog. Follow him on Twitter http://www.twitter.com/paulhigginz

Contact information

Email Paul Higgins at: paul@rapidinnovation.co.uk