A few weeks ago I wrote about experience versus wisdom and mentioned different types of solutions. What I was really talking about was solutions from the entrepreneur’s point of view. I have found myself discussing this a bit lately, in fact last night I had a meeting with a couple of senior members of a community who were trying to fund activity to meet their communities objectives. What they pointed out was their people were highly passionate about their area of interest and we should be cashing in on this as the source of funding. What I pointed out is that this passion, is not necessarily the basis of a business. From my (entrepreneur’s) point of view there are only three types of solutions.
Solutions without problems
Research organisations tend to come up with really fantastic solutions, funded by you and I, that don’t know what problem they are solving, or perhaps can’t communicate it clearly.
Most solutions (without a problem) tend to be described in terms of their features, rather than their benefits. For instance if you look at the product set of Melbourne University spin off Quantam Communications Victoria, it’s easy to understand what they are doing as clever, but almost impossible to understand what problem their solution solves.
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It’s also worthwhile remembering though that just because the problem doesn’t exist today, doesn’t mean it won’t tomorrow, or a slight tweak may help it solve a problem, eg. while looking for medical uses of wheat fungus’s, Albert Hoffman invented the drug LSD; while looking for refrigeration gases, Roy Plunkett invented Teflon. The list of these kinds of discoveries found accidentally while looking for something else is endless.
Solutions solving a problem
Charities, clubs, associations and community groups all solve problems, some of them very serious problems. However, this doesn’t mean these are problems that people are prepared to pay for. The large majority of Government services deal in problems that are important, but users are not prepared or able, to pay for.
Communities way wish to save a species from becoming extinct, or preserve a natural habitat, or prevent illegal immigrants, or have our streets policed. All important, but not able to survive on a user pays model. Commercially it might be a new feature on a product, which although desirable, might not allow you to charge a premium. But don’t forget though that these type of solutions this can be tweaked. For instance many markets are “two-sided” meaning that they satisfy more than one distinct group of customers. Perhaps only one of these groups is prepared to pay for a product or service. Talk back radio is a great example of this, consumers love it but won’t pay, advertisers will though.
Solutions solving problems that people will pay real money to fix
Successful businesses not only solve problems but solve problems that can be quantified and that people are prepared to pay for. The ways this can be done are legion and include reducing costs, mitigating risks, improving quality, satisfying status or brand needs, or simply solving a problem such as hunger. The quickest way of figuring out whether people will pay for your solution is to uncover whether they are already paying to solve the problem in another way. If no one is already paying to solve the problem your solution addresses, your idea might be great but it may not be a business.
So back to my meeting last night, my position was that unless they can find the problem the members of their community are actually prepared to pay to solve, they will have to depend on grants to get things done.
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Brendan Lewis is a serial technology entrepreneur having founded: Ideas Lighting, Carradale Media, Edion, Verve IT, The Churchill Club, Flinders Pacific and L2i Technology Advisory. He has set up businesses for others in Romania, Indonesia and Vietnam. Qualified in IT and Accounting, he has also spent time running an Advertising agency and as a Cavalry Officer with the Australian Army Reserve.