Why Should Startups Dive Deep into Problem Space Before Starting Developing MVP?

Table of Contents

Introduction to Startup Dilemmas

Startups often face a multitude of challenges during their initiation phase, with two significant hurdles being the creation of a viable business model and the development of a Minimum Viable Product (MVP). According to statistics from CB Insights, 42% of startups fail due to lack of market need—an aspect directly tied to a well-thought-out business model. In fact, Forbes claims that having a strong business model is essential for any startup’s success. This requires careful market study, thorough financial planning, and the formulation of unique value propositions. Moreover, the MVP, a preliminary product with enough features to satisfy early adopters, is another key challenge. The concept of the MVP, promoted by Lean Startup methodology, emphasizes the importance of quick market testing and receiving customer feedback, as it can reduce product development costs by up to 60%. However, achieving the right balance between functionality, cost, and customer satisfaction in an MVP proves a daunting task for many startups.

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Understanding the Problem Space

Establishing a grasp of the ‘problem space’ is a key ingredient in navigating the complexities of startup initiation. In essence, the problem space refers to the backdrop of issues, needs, and potentials associated with a specific user group or market that a startup aims to serve. Mastery of this domain is critical in defining a startup’s business model and developing its Minimum Viable Product (MVP). A study by CB-Insights revealed that a staggering 42% of startups folded due to a stark absence of market need—a stark reminder of the high stakes involved in accurately understanding and configuring the problem space in the formation of a business model. Forbes argued in favor of rigorous market research, comprehensive financial planning, and crafting potent value propositions as cornerstones of a robust business model, which are likely to flourish upon a solid comprehension of the problem space. In the same vein, the concept of a MVP, espoused by the Lean Startup Methodology, underscores the value of releasing an initial product outfitted with essential features to appease early users, which would subsequently undergo modifications based on the customer feedback. Such an approach can curtail the product development costs by a whopping 60%. However, the journey to an optimized MVP that simultaneously delivers on functionality, cost, and user satisfaction is a herculean chore, underscoring the pivotal role of the problem space in the schema of startup progression.

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The Implications of Ignoring Problem Space

It is important for startups to have a strong understanding of their problem space, especially prior to MVP (Minimum Viable Product) development. This is due to the staggering statistic from a CB-Insights study that found 42% of startups fail due to a lack of market need. If the problem space, which refers to the issues, needs, and potentials of a proposed user group or market, is not well understood, startups may develop a product that doesn’t cater to any significant market need. This could potentially lead to the downfall of the startup. Furthermore, a robust business model – built on meticulous market research, comprehensive financial planning, and a strong value proposition – could be pivotal in the success of the startup. As argued by Forbes, these elements are likely to thrive when there’s a solid understanding of the problem space. From this point of view, adopting the Lean Startup Methodology – which emphasizes the value of releasing a MVP equipped with essential features for early users – can significantly reduce the product development costs. However, striking a balance between functionality, cost, and user satisfaction in the MVP is a tremendous task – further highlighting the essential nature of adequate understanding of the problem space in the startup journey.

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Real-world Examples & Case Studies

Every aspiring entrepreneur dreams of launching a successful startup. Tracking the trajectory of successful startups, one can quickly recognize a pattern where a deep understanding of the problem space has often been the determinant factor for their initial success. One of the most fitting case studies here is undoubtedly Airbnb, a startup that started from scratch and is now valued over $100 billion. The team behind Airbnb did not merely create an MVP and hoped it would work. Instead, they spent significant time in the problem space, identifying the issues, needs, and potentials of their target users before they began developing their MVP. Their focus was not just on identifying potential customers but also on comprehending their pain points. They worked hard to understand why existing solutions were failing in order to offer something truly revolutionary.

This approach towards understanding the problem space proved useful for Airbnb in designing a user-friendly solution that catered to a unmet market need and also in creating a robust business model to support it, thereby increasing the probability of success. According to a Harvard Business Review study, this methodology is proven to significantly increase the success rate of startups. Furthermore, Uber, a company now worth over $80 billion, provides another compelling example of how diving deep into the problem space before developing an MVP can be positively instrumental. Much like Airbnb, Uber too spent a considerable amount of time in the problem space identifying loopholes and shortcomings in existing solutions before they ventured into MVP development. These two examples serve as strong evidence that a deep understanding of the problem space before MVP development can lead to startup success.

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How to Effectively Dive into Problem Space

Seeing that data and numbers play a crucial role in understanding problem spaces, it comes as no surprise that the most successful startups have embraced data analysis and problem space identification. Case in point, a McKinsey Global Institute report estimates that businesses utilizing big data and analytics can increase their profitability by up to 60%. In the same vein, the successful vacation rental platform, Airbnb, made significant use of data analysis in expanding their portfolio from single rooms to entire units and houses, thereby having access to up to 4.4 million listings as of 2021. Similarly, Uber, a mobile ride-hailing service, used data to identify a huge gap in the transportation market, which led to its meteoric rise. These examples underscore the importance of startups immersing themselves in the problem space through data analysis prior to the MVP development. It invites startups to shift from a “build it and hope” mentality to “understand, create, validate and iterate” approach, which, ultimately leads to a more successful product-market fit, thereby increasing the likelihood of startup survival and success.

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      +38 163332268
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      Lea sp. z o.o. z siedzibą w Toruniu, ul. Włocławska 167, 87-100 Toruń, wpisana do rejestru przedsiębiorców prowadzonego przez Sąd Rejonowy w Toruniu, VII Wydział Gospodarczy Krajowego
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