At this stage in my life, I am sick and tired of people coming up to me to tell me how great a product they are building. I’m not trying to demean their efforts, I believe they might improve if they want to, but let me address you.
Two years ago, I met Mugumya Junior to discuss my startup idea with him and all I talked about was how awesome my product was. His simple question was how it would bring money and I thought I knew how it would bring money.
The product is nice, it is interesting and it solves a problem.
WRONG!!!! VERY WRONG!!!!
Look here, if you are starting out as an entrepreneur and you’re building a product, I’m here to tell you that solving a problem is not what determines the success of a product, nor is it how great the product is.
It is simply the ability of the product to sell itself and make its own money. A product doesn’t necessarily have to be great to make profits neither does it really need to solve a problem. It just needs to be structured to make money from people.
I have not discarded the fact that solving a problem could be the way it would make its money. If that is the way it would make its money, then it’s all good.
Collecting money from people is one of the hardest things to do. You can either manipulate them or convince them to part with their money. But it gets more difficult when it’s not you but your products doing the work. So when you come to me to discuss with me on how your product is great, i really want to see how it will bring in money on a short and long term.
This itself requires a different skill. It’s a complex skill really because you’re combining product building skills with sales at the same time.
When we talk about products not solving a problem, I will give three good examples
Condom: What problem does Condom really solve? Prevention from unwanted pregnancy or diseases right? The real question is that is Condom really really safe to use? 100% or even 99%. People don’t use condoms because it is safe but because they are told it’s safe.
Luckily for them, they haven’t contacted any disease and even if they do, they will still go use condom not because they care if it is or not but because they have been told it is.
Cigarettes: Despite the fact that people are aware that cigarettes are harmful to their health, they still take it. They consume so much in a day because they believe it gives them energy or strength which it does actually.
A poor man will keep taking cigarettes because he is addicted to it not because it is really solving a problem for him. That’s the point. Your product must be able to get people not want to refuse bringing out their money to pay for it.
Tertiary education: While it’s very evident that we are in a skill economy, and that it’s possible to survive without a degree, people cannot help but still pay a huge amount of money to obtain one and that’s because of uncertainty and fear of the future.
They are not paying because it is solving a problem for them but because they hope so they are left at the mercy of the threat of not becoming successful in their minds. Is there a problem being solved exactly? Nope!!
You can create a problem through your content structure, your sales channel, your story telling, your product structure and solve it yet charge people for it.
But it’s not easy. This is the right way however to think when building products and thinking of scaling.
Remember, i didn’t discard the idea of solving a problem. I had to lay all these facts to convince you that solving a problem may not be the right way to scale in business. Perhaps solving 100 problems embedded in each other may be the right way.
But who would go through that long process (although I did but it took a hell of a time) to work on that when by focusing on the structures to put in place to make people give you their money can be implemented.
A recent research by me shows that people invest their money with crypto traders either because they want their money to double their money which they don’t care how the miracle happens or because of the fear of future catastrophe which may make them financially damaged.
If you want to build a product in this line, these two alone will make your product great but it still doesn’t guarantee its success to making profits.
The word product is generally used to refer to products or services; whatever your company does to make a profit.
I had an interesting conversation with a friend two days ago and he really wanted me to explain why I said you can create a good product, solve a problem, yet not make profit as a company.
In business, lots of Entrepreneurs focus on value creation, which is the start. However, I have discovered that value creation is not directly proportional to revenue generation. I find it to be true.
I’ve got some good examples…
However, before that, I have also realized that a businessman can make profits without value creation. So this proves furthermore that it’s not directly proportional. Some illustrations:
Example #1. Cigarettes: People who are addicted to cigarettes return daily to buy it even though they know they would die or may die or get terminal illnesses.
They return to it because of the stimulant, nicotine. Nicotine really is not a value creation for the people in particular.
Perhaps, let me define value creation because it has two different meanings based on its application
- Value creation can be the value you offer people they pay for which they’d pay for. That’s the general one we know. More like solving a problem and people pay for the solution.
- Value creation could be anything you do as a company to bring out money from people’s purses.
On the cigarette issue, the stimulant that causes addiction doesn’t solve any problem to people. So it’s not a value creation as regard no 1… It makes them feel good?
Well yeah, but it makes them addicted. We can say it falls under no 2 which is what you do as a business to get people to pay you value or not.
So people keep smoking because cigarette has nicotine that gives them a happy feeling even though it’s really of no benefit to them. This just means the cigarette itself is a value creation to make money not basics to solve a problem.
Example #2: University degree: People pay for their children to get into universities because of HOPE. Hope that my son or daughter would get a job. I mean that’s what our parents had in mind when they sent us to school.
Let’s x-ray this…
In a family of 5, four are graduates, no jobs or underpaid. The last child is about to get into the university, the parents wouldn’t mind and would be considered not sending the last child to school because the rest are unemployed. Why?
They’re paying not because the degree is a guarantee to jobs but because they HOPE it is. Studying in school with the hope that you’d get a job is different from the guarantee that you’d get a job once you have a degree. They are two different realities.
The guarantee that you’d get a job falls under no 1 of value creation. That is, you’re paying for a service because of the value it offers you. While the HOPE falls under no 2, the university is not really solving a problem but making people believe they are which is they give you a degree with the HOPE that you’d get a job.
That’s why school keeps making more money. It sells Hope which is a value creation for its own self.
While building digital products or putting processes in place or structures, it is one thing to completely solve people’s problems, it is another thing to make them pay.
Now, your selling point which is what you expect them to pay on may not be on the problem you solve .
Of course, you have solved the problem but these people either cannot afford it or don’t care or love something else.
How do you convince them to pay for something they feel should be free?
Now that’s profit thinking not value creation (no 1 point) thinking because you must introduce some new structures in place to make them part with their money without them giving a thought about it.
It may or may not be a new value creation (problem solving perspective) but an income generation perspective.
I’ve discovered that most people who build products or create services solve the real problems but don’t make profits because they did not figure out what will make people part with their money
Whether it’s to lie, tell a story, manipulate, hallucinate, put some processes.
You just need to know what to put in place or pull to make your customers pay you. Sadly, it’s not as easy as anyone may think.
It requires carefully understanding the customer, their behavior, psychology, the world trend, and a lot of other factors.