Identifying early adopters for a new business idea is the key to achieve traction and validation.
Early adopters are the customers buying or using a product before others. Even if a new business idea is targeting a broad market, the best way to kick it off is to start selling it to early adopters, because they are customers that
- are feeling the problems your business idea is willing to solve the most
- have the budget to pay for a solution.
The more customers are in need of what you do, the easiest will be for you to sell it.
It’s as simple as that.
Moreover, by focusing on early adopters with any early activity for your venture, you will save tons of money and time, because you will proceed accordingly to a plan you have prepared with the best information available, instead of going at random.
Early adopters are so important that, in an initial phase, the Minimum Viable Product (or MVP) of a new business idea will crafted around them, so that the business can get enough traction and validation with them and then scale up to attract a broader customer base. Launching a business is like climbing a very high mountain, you’ve got to make a first step. That first step are your early adopters.
Identifying early adopters is not an easy feat – who said entrepreneurship was easy, by the way?, but luckily a proven process can be applied.
1. BRAINSTORM CUSTOMER SEGMENTS
First of all, let’s start by making assumptions about the problems you are willing to solve with your business idea. Compiling a Lean Canvas might be a good starting point, read more about how to do it here.
Problems always come first. The simple reason being: without problems, there is no business. Some problems are rational, some not, some are visible, some not, but behind any purchasing act there is ALWAYS a problem, a frustration or a need waiting to be solved and satisfied.
Once you have an understanding of the problems you are willing to solve, it’s time to make assumptions about the people affected the most by the problems you are addressing with your business idea.
I like to think of early adopters as nearly desperate people, who are on the verge of a personal or a professional disaster if they fail to complete a task because of the problems you are willing to solve.
- for a B2B business idea, who do you think are the people that, if they fail to solve the problems you are addressing with your business idea, will be fired by the end of the year? Or who are they people that have to solve those problems in order to get their annual bonus? And for which kind of companies do they work for? Thinking of extremes might be of help here: for example, who is going to get fired because of those problems? Where do they work?
- for a B2C business idea, who do you think are the people that, if they fail to complete a task because of the problems you are willing to solve, will face a personal, social or emotional disaster? Once more, thinking of extremes might be of help. Who is going to die if they fail? Who is going to face a divorce? Or bankruptcy? Or social exclusion and isolation?
The main reason behind thinking of extreme situations while brainstorming early adopter segments is simple: these people will be most in need of what you are doing. The worst the consequence of them failing a task because of the problems, the more they are in need.
And let’s be clear, this not to take benefit from them: in fact these people are really in need for help. They might be in distress, anxious, perhaps not sleeping at night. They need someone to jump in and do something. This is where entrepreneurship might become a force for good!
A way to make this exercise easier and maybe funnier is to get together with a few friends one night, perhaps some of them with business / startup expertise. It doesn’t really matter whether they are experts in your field or not, we just need their mindset.
Try to get together, and play this as a game: you explain the problems you are willing to solve, and distribute a block of sticky notes and a pen to each one.
Then do a roundtable for 10 times, and each one has to write a customer segment affected by these problems in turn.
2. RANK CUSTOMER SEGMENTS
Once you’ve got a list of customer segments, possibly even 50 of them, you’ll have to rank them and identify the top ones in order to define a plan of action.
As for brainstorming, also the ranking process is based on assumptions, things you know or you believe are true.
I encourage you to embrace this uncertainty, because no one has written the book of how to launch your business yet. This is an exercise of exploration, full of things to be discovered. Starting from what you know and you believe it’s true is everything you’ve got at this stage.
I normally use at least two criteria to rank customer segments: “level of pain” and “current expenditure“.
- Level of pain it’s about how big is the damage if they fail to complete a task because of the problems you are willing to solve.
- Current expenditure is how much they currently spend to solve those problems.
In terms of priority and plan of actions, you might want to consider starting from the customers with the highest level of pain and the highest level of expenditure.
And of course you can add more criteria if you want, depending on the business nature and specific conditions. Just try not to be repetitive by adding a criteria with is a nuance of an existing one.
3. MEET AND INTERVIEW TOP RANKED CUSTOMER SEGMENTS
At the end of the ranking exercise, you should have a few clear winners.
Great stuff, your business idea is beginning to take a shape!
Now it’s time to do business, get out of the building and meet with them doing customer discovery interviews.
Here are few tips on how to recruit customers to interview, how to conduct successful interviews, and what to ask customers during the interviews.
One important thing: I recommend NOT to take a shortcut here and solve this by “doing a survey”. Here are a few reasons why a survey at this stage is not a great idea.
4. VERIFY IF THEY ARE EARLY ADOPTERS OR NOT
After a few meetings, you should be able to review the notes, and see which features (age, sex, job, salary, etc) are common among the ones that match with all the four elements identifying an early adopter customer segment:
- Early adopters have the problem. Among the people interviewed, they are the ones that positively responded to a problem description, and offered detailed examples of the last time it has happened.
- Early adopters know they have the problem. This is crucial, as no startup will be able to educate their target customers about a problem they are not yet aware of. Early adopters are customers that during the interviews have demonstrated to be so much aware of a problem that they could tell the last time it has happened and how they solved it.
- Early adopter have the budget to solve the problem. If customers are not able to pay for the service, it’s pointless to target them. By investigating customers’ current behaviour in the face of a problem, it’s possible to understand how much energy, money and time they are investing to solve it and use it as an indication of their willingness to pay.
- Early adopters have already put together their makeshift solution. This is the most important indicator able to tell that a certain customer segment is the one that needs to be targeted first. These customers feel so much a problem that they have put together tactics, workarounds, operational processes, or use a combination of competitors’ services to solve it today. However, they are not fully satisfied, and you’ll do whatever it takes to make sure that your solution is doing a much better job. This is critical: you wouldn’t bother taking a train to work if your office was just around the corner. You might not be completely satisfied with it, sometimes you are even upset, but take a train because you’ve got a problem: your office is 10 km far from your house. The simple fact that you are using a solution (train), is showing that you feel the problem so much (office is far!) that you took action to solve it.
In case you realise after the interviews that the first customer segment in your priority list does not match the criteria, start interviewing the second in your list.
This might look painful, but… you know what? it’s great news. You’ve just saved lots of time and money by not targeting the wrong customers segment and desperately trying to sell them something they don’t need.
Hope you’ll appreciate that you haven’t spent a single penny yet.
A PRACTICAL EXAMPLE: UBER
So this is the theory. How does it work in practice?
Let’s have a look at how a successful startup identified their early adopter segment to get traction for a new business.
As in September 2017, the taxi app Uber was available in 84 countries and over 734 cities worldwide, fulfilling 5 billion of trips so far and scoring $20B revenue in 2016 (source here and here).
It’s fair to say that Uber is a very successful service today, but they must have started from somewhere back in 2008. Who were the early adopters that they targeted first?
Uber co-founder Garrett Camp posted the very first pitch deck of what was their new business idea back then, called UberCab.
According to the deck, they were addressing the following customer problems:
- cab pickup is not always guaranteed
- a cab ride might not be safe
- a private hire car service (e.g. limo) is an alternative, but requires 1-3 hours notice
- moreover, limos are far more expensive than a cab
So UberCab intended to use advanced technologies to match drivers with potential customers, and to guarantee them a pickup in a short time plus a safe and pleasant trip. All good for now.
But where to start first?
Let’s go back to the four elements identifying early adopters to review how they made their choice. Based on the above they needed to find:
- someone who often needs a taxi, very often last minute, but is frustrated either because the pickup is not guarantee and they have to wait for minutes hailing cars or because the trip is not always safe. These look a lot like professionals moving from meeting to meeting in busy cities, execs without a company car/driver, people going out at night and needing a lift back home
- someone who experiences this very often. All the above seem to fit in
- someone who has money to spend on taxi trips. These might be individuals with an above-the-average salary, professionals, or people paying cab trips through company expenses. You are certainly going to use cabs a lot if someone else is paying for the ride
- Someone who has tried alternatives options to solve the problem. Again these might be professionals, execs or wealthy individuals who tried private hire and limo services
By combining the options, professionals in American cities were their perfect early adopters as they clearly matched all the four elements.
In fact, as from their first deck, the value proposition of UberCab was “The convenience of a cab in NYC and the experience of a professional chauffeur: faster & cheaper than a limo, but nicer & safer than a taxicab”.
Back in 2008, Uber decided to target professionals and execs in San Francisco first.
And being San Francisco, they focused particularly on professionals in the tech community, who are continually looking for new tools and services that improve their quality of life.
Uber took aim at those people by sponsoring tech events, providing free rides, and in general driving awareness among this audience.
As these people, completely fed up with the taxi situation in the city, tried Uber, they took to blogs, social media and every other way possible to tell their friends about this new way to ride.
And Uber got traction and validation. Revenue started piling up, investors jumped in, and the rest is history.