Why Technology Projects Need Business Plans

Having worked with hundreds of early-stage companies as CFO of the first technology startup accelerator in Brazil, I’ve found that one of the most common reasons a business fails is because the founders build things that no one wants. 

A lot of this failure happens because founders — who often have engineering backgrounds — focus so heavily on the shiny, new technology they’ve developed that they overlook the fact that businesses exist to make money by satisfying human desires.

• A restaurant makes money by satisfying people’s need to eat food. 
• A software company makes money by satisfying people’s desire to get more things done in a shorter amount of time.
• A real estate firm makes money by satisfying people’s desire for shelter.
• A lemonade stand makes money by quenching people’s thirst.

Too many companies create solutions without properly identifying the problem. This happens all the time, especially in robotics.

Remember ASIMO, the cute humanoid robot that Honda spent decades developing? It’s a perfect example of engineers creating a solution without a problem. It wasn’t financially viable, and Honda ceased commercial development of it in 2018.

The market wants its problems solved, its needs met, and its desires satisfied. It doesn’t care about how much effort you put into building your technology, no matter how awesome it is. 

The best way to make money in the technology business is to take a human desire and use modern technology to make it faster and simpler to satisfy that desire. Start with the customer’s desire and work backwards to the technology.

Solve a big old problem with a unique solution.

Whether you plan to start a small robotics startup or you work for a Fortune 500 company as a machine learning engineer, it’s imperative that you keep the big picture in mind of why a business exists. You’re going to be spending countless hours working on some product, so make sure you:

• Build things others want. 
• Build something that has practical, real-world commercial value. 
• Generate a return on your time and money. 

Life is too short to waste on projects that aren’t worthwhile. 

Millions of dollars and developer hours are wasted each year on products that should never have been built. In order to survive, a company has to make sure it uses its limited time and financial resources efficiently and intelligently. This is especially true in startups where money and time are so often scarce.

Before you begin investing your time and money on developing a product, take a day or two to write up a business plan. As I’ll show you below, it doesn’t need to be anything elaborate. You can put everything on just a single page. 

For example, Sequoia Capital, the early investors of companies such as Apple, Google, LinkedIn, and WhatsApp, has a one-page business plan template that they recommend to founders interested in pitching them for millions of dollars in funding.

Below is the 12-point business plan template I recommend you fill in before you write the first line of code for your next project. Make sure you spend a lot of time on the two most important slides: the problem and the solution. If you get these two slides right, everything else will take care of itself.

Sample Business Plan: Autonomous Strawberry-Picking Robot

1. Purpose 

We developed [product] that makes it easier and faster for [target market] to [human desire…preferably one that has been around for a long time].

Example

• We developed a self-driving strawberry-picking robot that makes it easier and faster for California strawberry farmers to harvest strawberries.

2. Problem 

• Describe the pain of the customer. 
• How does the customer address this issue today?

Example

• California farmers have been unable to find enough workers to harvest their fruits and vegetables, resulting in millions of dollars’ worth of produce rotting in the fields. 
• Farmers have hired recruiters, raised wages, increased mechanization, and adjusted cultivation practices, yet they still face millions of dollars in crop losses each year (Source: California Farm Bureau Federation).

This video below shows several interviews with farmers who are having trouble finding workers to pick strawberries.

3. Solution 

What is the solution, and how does it make it easier and faster to satisfy the customer’s desire?

Example

• We developed an autonomous strawberry-picking robot for farmers that is 8x more efficient than humans and can work 24 hours a day, 7 days a week.

4. Product Demo 

• How does the product work? 
• Provide use cases.

Example

• Using the latest advances in computer vision and deep learning technology, the self-driving robot can pick strawberries without bruising them and detect ripeness better than humans.
• Farmer Joe lost 60% of his crop last year because he was unable to find enough workers. Using the strawberry-picking robot, he can harvest his crop 24/7, while requiring up to 70% fewer seasonal workers.

5. Why Now 

What recent trend makes this product feasible?

Example

• Computer vision and computer processing power have matured to the point where an autonomous strawberry detection and picking system is feasible.

6. Market Size 

Who does the product cater to, and how big is that market?

Example

• In 2018, farms received $2.34 billion in cash farm receipts from strawberries in California (Source: California Department of Food and Agriculture)

7. Competition and Alternatives 

• Who is the competition?
• What are the alternatives to using your product?

Examples

• ABC and XYZ are companies that are in this space.
• Farmers have tried a number of tactics, such as hiring recruiters, raising wages, increasing mechanization, and adjusting cultivation practices.

8. Competitive Advantage 

What about your solution can’t be easily copied or bought?

Example

• It’s hard to find someone with more integrated knowledge of both robotics and entrepreneurship to lead the design, development, and deployment of a financially viable robotics product.
• Existing customers and switching costs.

9. Business Model

• How will you make money? 
• Do you have any traction?

Example

• Subscription (i.e. robotics-as-a-service (RaaS))
• 15 existing customers, each paying a monthly fee of $2,000.

10. Marketing Plan

How will you acquire new customers?

Example

• Trade shows
• Door-to-door sales

11. Team

Who are you, and what are your qualifications?

Example

• Addison Sears-Collins: A roboticist with over 15 years of experience across a range of industries who has founded several successful technology startups.

12. Financials and Use of Funds

What are your financial projections?

Example

• Present Value of Cash Inflow = $20M
• Present Value of Cash Outflow = $5M
• Net Present Value = US$15M
• Return of Investment = 300%
• We will use the funds to hire robotics developers and researchers.

Remember Why You’re Doing What You’re Doing

Being able to clearly articulate why a particular product could contribute to business success is a rare skill among engineers. Having that entrepreneurial mindset will almost certainly separate you from the pack.

Below I present five strategies for how you can become a product and business idea generation machine. The fundamental idea is to make a giant list of problems or inefficiencies that you see out there in the world. Then brainstorm ways that you could use modern technology to create a product or service that can solve that problem in a way that is faster, cheaper and/or more efficient than the current solution.

By having a problem-first mentality when it comes to product development, the odds of success are much higher than starting with a solution-first mindset and then trying to force feed that solution to solve the customer’s problem. Always start with the PROBLEM.

Many products, startups, and businesses fail because they develop a fancy tool or solution first and then they go out to look for customers to sell to. This is backwards. Find the customers first. The customer could be yourself. Then find out their problems. Then get your creative juices flowing to develop a solution. 

In the words of the late Steve Jobs, “You‘ve got to start with the customer experience and work backwards to the technology” (Wikipedia, Steve Jobs).

I’ve received pitches from >1,000 startups over my career and will tell you that it is rare to find a startup that first identifies a real-world problem, then performs a rigorous analysis to fully understand how big the problem is and who the problem impacts, and then develops the technology and the solution to solve the problem.

Remember that human beings are creatures of HABIT. They do the same things everyday, read the same things everyday, eat the same things everyday, and go to most of the same places every day. In general, people resist changing their habits.  So when you are creating a product, make sure people could easily see how that product fits in with their current day-to-day life and habits. If you try to create a product that requires people to make a change in their habits, you will fail more often than not. When the going gets tough, humans will always follow the path of least resistance.

Winning products are winners because they offer people CONVENIENCE. People love speed and cognitive ease. As the old saying goes, “don’t make them think”, and “don’t make them wait.” You must observe the things people already do on a regular basis and what they already pay for (i.e. their current behavior). Make that thing they already do or already pay for faster, more efficient, cheaper, and/or easier to understand….and you’ve got a potential winner.

When you help people solve their problems in a way that is faster, more efficient, cheaper, and/or easier to understand, the odds of failure are much much lower.

Now let’s discuss the strategies. By using the strategies below and recording your ideas in an Excel spreadsheet or Google Doc for one year, you will be amazed at the different ideas that you come up with…ideas that could improve the lives of others.

Not all of the ideas will make great business ideas…i.e. people would be willing to pull out their credit card to have that problem solved (I’ll discuss how to decide if an idea is a good business idea or not in a future post), but they provide good starting points.

These strategies are listed in the order of effectiveness. Those listed first are the most effective source of product ideas in my experience.

1. Think About Something You Do Frequently and Find a Way to Remove as Many Steps as Possible from That Process

Think about one or two things that you do on a weekly or daily basis. Have you done that thing for a long time…like for many years? Even better.

Next, make a list of all the steps involved in that process. After you have done that, think about ways you could use modern technology to OMIT STEPS from that process. This, in my experience, is the best way to find potential business ideas.

Here are some examples:

Before my website VisaHunter.com existed, searching for a job overseas involved combing through 100+ different websites. Finding out the step-by-step process for getting a travel or work visa in a foreign country involved wading through dozens of online expat forms and deciphering poorly designed government websites. My website removed steps from the process of getting a visa or finding a job overseas (speed and cognitive ease).

Before sites like Glassdoor.com and Indeed.com existed, searching for a job involved multiple steps. I had to go to multiple job sites and company sites to search for jobs. These two sites created a business out of aggregating multiple job listings into one site, saving you a lot of time in the process (speed and cognitive ease).

Before Uber existed, if I wanted a taxi, I had to call ahead and hope that the taxi driver showed up. In other cases, I had to walk several blocks on a busy street in order to find a taxi. With Uber, I can order the taxi with a few swipes on my smartphone (speed and cognitive ease).

Before TurboTax existed, I had to call around to get a bunch of quotes from accountants and then send mountains of documents back and forth for months.  TurboTax removed innumerable steps from the human habit of filing taxes every year. It also helped you file taxes more cheaply than the alternative of hiring an accountant.

Before UpWork.com existed, I had to do a Google search and send 10-15 e-mails to find a freelancer to do some work on my website. It would then take 2-3 days in order to receive all the price quotes and proposals. Now, I can post a job, and within one hour receive 20-30 job proposals from freelancers around the world.

Before dishwashers existed, you had to wash each dish by hand and dry each dish by hand. Dishwashers removed steps from the dishwashing process, a habit that almost every one has and has had for a very long time.

2. Your Personal Frustrations and Pain Points

Every time you get frustrated with something or complain about something, write it down. Some of the best product ideas come about organically as a result of problems and frustrations that you experience in your day-to-day life. If you find yourself frustrated with something, write it down. If you don’t have a notepad, write it somewhere in your smartphone so that you don’t forget it. Later, once you have a list of problems, think of solutions. Once you have solutions to a big list of problems, you can then sit down again in front of your spreadsheet and identify which opportunities you would like to pursue.

As an example, I was sitting in a restaurant the other day trying to get the attention of my waiter. I must have waited 10 minutes to get his attention. Then, after I finished the meal, I had to wait another 10 minutes for the bill. In total, this adds up to 20 minutes wasted of my time. This whole restaurant ordering and paying process is inefficient and hasn’t changed much over the last several centuries.

I would love to have an app that can allow me to order food, ask for another drink, and pay my bill right at the table without me having to waste time searching for my waiter every time I need something.

3. Write down the Problems That Your Friends or Family Are Having

Have you heard your father, mother or best friend complain about something? Write it down. What do they wish they could have? What problems are they having in their social life or life at work?

4. Two and Three Star Amazon Product Reviews

Amazon product reviews can be a gold mine for finding good product ideas:

Step 1: Go to Amazon.com

Step 2: Find products that have a lot of reviews. This indicates that there are people willing to pay for that product. You want to make 100% sure there is a market for that product.

Step 3: Go to the 2 and 3 star reviews (1 star reviews often are full of nonconstructive criticism) and see what people are complaining about. Also take notes what people like about the product.

Step 4: Find a way to build a product that solves the pain points customers mentioned in the 2 and 3 star reviews.

5. Special Searches on Twitter and on Google
Both Twitter and Google can be a great for finding problems that people want solutions for. Go to either site, and enter in the search box the following phrases:

• “I would pay for”
• “I wish I had”
• “I just paid someone to”
• “Does anybody know how to”
• “is the worst service”
• “is the worst product”
• “is a horrible company”
• “has a terrible website”

After doing the searches, go to your Excel spreadsheet or Google Doc and record the problems that people are complaining about. Later, you can go back to this list and brainstorm solutions for these problems.

Maybe the problem could be solved by creating a software that charges users a subscription fee. Maybe the solution is something as simple as an e-book. No matter what the solution is, the fact that someone is expressing their dissatisfaction in a public forum such as Google or Twitter is a good signal that somebody out there will care if you develop a solution. At the end of the day, companies need to build things that people want.

Conclusion

After you have your list of ideas, take some time to select one. Don’t hurry. Starting a new product or business is a huge investment of time and money.

That’s it for now. Until next time!