# Problem Lab Methodology

## How to find and understand commercially important problems

### Introduction

#### Why should you look for important problems, instead of ordinary ones?

There are two reasons to look for important problems.

First, if you want a great career as an employee in a commercial organization, you will be promoted faster and farther by solving important problems, rather than problems of lesser significance. Ordinary problems are addressed by ordinary workers.

Second, if you want to create a great venture, it is easier to find customers, investors, allies and collaborators by solving important problems. When you solve an important problem for a customer, you eliminate much of the marketing risk. If the problem is important then by definition the customer will want to buy it little if no persuasion. [Of course, you will have to demonstrate to them that it actually works.] Moreover, if the problem is important enough, you can usually charge a premium price.

This means from the investor’s point of view, the reward is greater; therefore, the risk/reward ratio is much improved. And therefore so is the investor’s willingness to invest.

#### But aren’t all problems important to someone, making the determination of importance no more than a matter of judgment, open to debate. In the real world, don’t we just “discover” what is important to our customers?

These beliefs are incorrect. As you will see below, you can find evidence that allows you to judge importance objectively and dependably.

Of course, any attempt to solve an important problem is always an experiment, and any experiment can fail. But it is always better to proceed with more information, rather than less; always better to create a well-considered experiment, rather than one doomed to fail.

Customer discovery can be used to find less important problems. However, if you already know the problem is important, discovery might be used to refine precisely the particular features that the customer may find most useful.

### The basic steps for problem identification and analysis [in brief]

#### Start looking for important problems in domains you find personally interesting.

It is much easier to bring the intensity of focus that facilitates success.

#### Within your domain of interest, document as many examples of important problems as you can find.

Important problems are usually:

• Repeatedly and urgently discussed
• Systemic, affecting many different outcomes
• Long-standing
• Mission-critical

Do not reject a problem because you cannot immediately or easily think of a solution.

#### Select several problems for further investigation.

By examining more than one important problem, you increase the likelihood that you will find a problem you really want to solve, and one you feel you thoroughly understand.

### For each chosen problem, conduct the following analysis.

#### Scale of the problem

• Document the number and characteristics of those affected.
• Determine how relatively important the problem is to those affected.
• Solving the problem should produce global sales of at least one billion dollars in the near to medium term.

#### Context of the Problem

• What are the causes and effects of the problem?
• Is your problem a primary problem, one that causes other problems?
• Or is your problem a secondary problem, one that is caused by other problems? [Solving a primary problem would solve other problems, thus amplifying its effect.]
• What circumstances or conditions affect the problem?

#### Research the history of the problem

The history of the problem provides the insight necessary for an excellent solution.

• How long has the problem been recognized?
• Does the problem appear to be growing in importance?
• Has the scale of the problem changed?
• Has there been a change in those affected by the problem?
• Have the causes or effects of the problem changed?
• Have the circumstances and conditions affecting the problem changed over time?
• Has the primacy of the problem changed over time?
• Have there been previous attempts to solve the problem?

#### Failure Analysis

Describe previous attempts to solve the problem. You need to know why they failed. You are looking for a specific mistake, one that you can take action to correct.

Identifying an actionable mistake is essential since it tells you where to start your own research for a solution.

Please complete the problem analysis before you attempt to develop a solution. There is a natural tendency to leap into action prematurely.

A more detailed description of the problem methodology follows below.

### The basic steps for problem identification and analysis [in detail]

#### Start looking for important problems in domains you find personally interesting.

The domain can be any topic [a technology, marketplace, activity, intellectual pursuit, or any area you can define]. But you need to find the topic inherently interesting; otherwise, you will not bring the intensity of focus or commitment of purpose that is necessary for success.

NOTE: The most common mistake in problem analysis is the common human tendency to leap into action, to try to solve the first problem they encounter whether important or not.

#### Within your domain of interest, document as many examples of important problems as you can find.

An important problem is one that is mission critical to those affected. In other words, the problem is seriously and adversely affecting a primary goal of an individual or organization.

You will find it relatively easy to identify important problems since they are almost always actively and repeatedly discussed in the curated media relevant to your domain. You should look at both the business and specialized media. For reliable information, it is essential that you use curated media. [The social media can be used as a starting point, but does not substitute for the use of curated media.] This content will almost always explain why the problem is so important.

#### Select several problems for further investigation.

By examining more than one important problem, you increase the likelihood that you will find a problem you really want to solve, and one you feel you thoroughly understand.

### For each chosen problem, conduct the following analysis.

#### Scale of the problem

You need to confirm the importance of the problem by documenting exactly who it is important to. Who has already complained about this problem and how many times did they complain? Did they complain loudly? See Note 1.

• Are they individuals or organizations? Are they many or few?
• What characteristics do those affected have in common?
• Do those affected [people or organizations] have the resources to pay generously for a solution?

How relatively important is the problem to those affected. Is it their most important problem? Second most important? If it is the thirty-third most important problem, those affected should fix it themselves. See Note 2.

Generally speaking, commercial organizations are better customers than individuals. See Note 3 below.

Solving the problem should produce global sales of at least one billion dollars in the near to medium term.

#### Context of the Problem

What are the causes and effects of the problem?

Is your problem being caused by other problems? This makes your problem a secondary one. Or is your problem causing other problems? This means your problem might be a primary problem. A primary problem is the source or root of other problems.

If you solved a primary problem, you would then contribute to solving other problems. The effect of the solution is therefore amplified. See Note 4.

What circumstances or conditions affect your problem?

Are there a few competitors, or many? Does the aging of the population greatly affect your problem, or not? Does the legal structure impede or facilitate the problem? Is changing technology relevant or not?

#### Research the history of the problems that particularly interest you.

By researching the history of the problem, you will begin to understand it in the depth necessary to solve. You would answer the following questions:

See Note 5.

• How long has the problem been recognized?
• Does the problem appear to be growing in importance?
• Has the scale of the problem changed?
• Has there been a change in those affected by the problem?
• Have the causes or effects of the problem changed?
• Have the circumstances and conditions affecting the problem changed over time?
• Has the primacy of the problem changed over time?
• What are the previous attempts to solve the problem?

#### Failure Analysis

An essential part of the historical research is the documentation of past failures to solve the problem. You need to fully describe as many attempts to solve the problem as you can find. You need to know who made them, and why they failed. Otherwise, you may repeat mistakes others have already made. And you are not learning from the mistakes of others.

You are looking for a specific mistake, one that you can take action to correct.

Identifying an actionable mistake is essential since it tells you where to start your own research for a solution.

See Note 5.

### Notes

#### Note 1. Scale: Who is the problem important to?

Who finds a problem important is not always immediately clear. It may be possible the importance lies with a less obvious customer. For example, a problem might be more important to the government, and its regulators, than to a consumer who may be forced to buy the solution. Mandated air bags are such an example.

#### Note 2. Scale: Relative Importance

To say that someone finds an issue important does not tell you enough about a problem to take action with confidence. Most people and organizations have more than one important challenge and you need to know how relatively important that issue is in context of their other problems. Is it your customers’ most or least important challenge? Is this the issue they want solved above all others or is it a high priority, with other considerations? Is it important, but not pressingly urgent? The higher the relative importance, the greater the commercial opportunity.

#### Note 3. Scale: Individuals or Organization

There are two categories of problems: Business and Consumer. Determining the importance is different for each category. Solutions that solve business problems are more likely to achieve faster and greater success than solutions that solve consumer problems.

A problem is important to commercial customers for one of two reasons - either the problem has a substantial effect on the organization’s current profitability, or its future profitability. There are two ways to substantially increase profit: lower cost or increase sales.

For many organizations, a small increase in profitability is not worth the effort of implementing a solution. What constitutes a substantial profit increase varies according to the scale of the enterprise in question. For large enterprises, a substantial increase might need to be at least $100 million, while a substantial increase might be$100,000 for a smaller enterprise. It will depend on the view of the owner(s)/shareholder(s).

Additionally, a problem becomes important for commercial customers if it can threaten future profitability. Examples of this include anticipated increase in costs or competition, or changes in technology and the marketplace that change business dynamics.

A problem may also be important if it prevents a company from using existing or new technology fully, thereby limiting its future profitability.

##### Consumer Problems

It is more difficult to identify an important problem for consumers than for businesses because the problems that are important to consumers arise from many different reasons. For example, consumers often find it important to save money or time, to communicate effortlessly, or to avoid boredom. For example, smartphones drive demand for the entertainment and gaming industry by allowing consumers to communicate and avoid boredom. Ridesharing services allow consumers to save time and money.

A consumer business by definition sells a product to the consumer. [If you receive a good or service without paying, you are a user, but not a customer.]

#### Note 4. Context: Primary or Secondary Problems

Rarely is the key problem immediately obvious and frequently the obvious problem is not the root cause nor the source of urgency. Ventures and innovations failed when the wrong problem was identified, even though a real and important problem existed.

#### Note 5. History and Failure

There are only two ways to change the future, only two ways to solve socially and economically important problems. You can proceed either by luck or design. Without delay or hesitation or careful research, you can generate multiple potential solutions, calling it brainstorming or customer discovery or pivoting. But it is essentially taking pot shots at the future, hoping something will stick.

Or you can proceed with logic and evidence, making sure that you fully understand the problem before you begin to solve it. While success cannot be guaranteed, you are dramatically improving the likelihood of success. Where is the evidence that you need to increase the likelihood that your imagined solution will actually work? Where is the evidence for future effect? Of course, the evidence for the future lies in the past, where all evidence ultimately presides. Abstain from historical analysis, and you are doomed to repeat the mistakes of the past; abstain from historical analysis, and you embrace the goddess of luck.

Unless you understand the history of the problem, you do not understand it. And what you do not understand you cannot solve, except by luck. The more difficult the problem, the greater its importance, the more rigorous and comprehensive the analysis must be. The longer the problem has been outstanding, the farther back you must look.

Your historical analysis must document how long the problem has been outstanding, how long it has been recognized [it could be outstanding but not recognized], how its scale may have changed, how its causes and effects may have changed, how its environment may have changed and whether it has evolved from a primary to a secondary problem or the reverse. Moreover, you must document all previous attempts to solve the problem. You must probe for the mistakes that others have made. You must ask who is mistaken about what, and why were they mistaken. You are learning from the mistakes of others. You are using their experiences to improve your world. This is no more or less than aggressive historical analysis.

It is a mistake to merely assume that an important problem is unsolved because we just “do not yet know enough”. While we always need to learn more, failure analysis directs us to those areas most in need of learning, where the fruits of the learning are magnified. And all too often we already “know” how to solve the problem, but multiple layers of mistakes interfere with the application of that knowledge. Effective innovators become students of error to avoid their own mistakes and to realize solutions of power and consequence.

Here are some of the most common mistakes.

• Failing to use all the information that is available because you have neither the skill nor patience to search for it.
• Disregarding information from another discipline because you fail to respect it or do not understand its vocabulary.
• Disregarding information because you disapprove of the person or organization that generated it.
• Failing to recognize that previously unavailable information has now been created.
• Leaping to conclusions because you do not have the patience to be thoughtful.
• Overvaluing certain categories of information because it is the kind of information with which you are most comfortable. For example, the mathematician who loves numbers above all else.
• Undervaluing certain categories of information with which you are uncomfortable. For example, the visionary generalist who shrinks from rigour or detail.
• Failing to understand the scientific method, that all attempts at innovation are experiments. And all experiments can fail.
• Failing to recognize that an experiment failed because it was so poorly designed that was doomed to fail.
• Failing to recognize that an experiment apparently succeeded only because it was poorly designed, lacking proper controls.
• Failing to recognize that an experiment succeeded only once, and has never been replicated.
• Examining the most recent failure, instead of all of them.
• Failing to view a problem comprehensively, from all angles and aspects.
• Believing an important piece of information to be true without checking.
• Using a new tool without carefully considering whether it is applicable to your problem or not.
•  Using an old new tool without carefully considering whether it is applicable to your problem or not, only because you are familiar and comfortable with it.
• Failing to consider an approach because it is not consistent with the approaches that bought you previous success [the prisoner of success syndrome].
• Failing to recognize the assumptions of your mind and failing to challenge them.
• Failing to explore a logical avenue of potential solution because of one or more of the above mistakes.
• Failing to be both imaginative and rigorous at the same time.

The goal of this historical review of mistakes is to find an actionable mistake. This is a mistake [or set of mistakes] that shows the first step you need to take to move to a solution. This is the launch point into your own research and development. This may be to explore a gap in previous attempts to solve the problem, a gap that was missed because of the mistakes. Or it might be an avenue of exploration that results from a correct understanding of true information. It may be a cross disciplinary approach that professional bias previously aborted. The launch points are as varied as the mistakes themselves. But mistakes first tell you what not to do, and then tells you what you should do.