Seven out of ten tech startups fail.
Let that number sink in.
No matter how great the idea, 70% of all new technology companies will not survive. The founders of these companies cite many reasons for their failure, including insufficient cash, bad team dynamics, and inability to compete with others in the market.
But the number one reason is that there is no demand for the product.
This doesn’t just happen to startups. Enterprises can fall victim to the same kind of attrition when they launch a new product or service.
How does that happen? How can an innovative, creative team sink so much money, time, and effort into a product no one wants?
In part, it’s because everyone wants to become the next unicorn. We all want to create a modern-day equivalent of the automobile, computer, or cell phone (all of which were dismissed as impractical or mere novelties when they first hit the market).
But on a more practical level, it’s because we need a different business model—one that includes both paradigm-shifting creativity and ruthless evaluation starting in the idea stage and carrying all the way through to the final product. There must be a simultaneous embracing of new ideas and scrapping of the ones that don’t work.
When we structure a business model around a liquid thought process that inspires creativity without enshrining faulty ideas, we can build businesses with the resilience needed for today’s marketplace.
Fortunately, that approach already exists. It’s called design thinking.
Combined with agile development and strategic prototyping, design thinking is the foundation for a sustainable software business model.
How Design Thinking Powers User-Centric Software Development
British economist John Maynard Keynes famously said, “The difficulty lies not so much in developing new ideas as in escaping from the old ones.”
That’s just as true for software development as it is for economics.
Sustainable software development must move quickly through a range of ideas while remaining empathetic to user needs (a design thinking mindset). It must uncover faulty assumptions and design flaws before the product gets too large to pivot (using MVPs). And it must create a culture that is comfortable with scrapping non-workable ideas and pivoting to better ones (agile development).
Before we go any farther, let’s take a brief look at each of those three stages:
Design Thinking (Ideation)
We explain design thinking in more detail here, but simply put, it is a systematic approach to problem solving that puts end-user experience first. It focuses on what your customers need and want, not on what product lines you hope to develop or what technologies you want to explore. These user pain points and needs will drive the ideation process.
Minimum Viable Product (MVP)
A MVP is a basic iteration of an idea with simplified functionality. The goal is to develop the first meaningful user experience to enter the market, without fully developing every feature. The MVP answers the “should we build this” question and gives you information about how you should prioritize future ideas. It is a cost-effective way to elicit user feedback and test the validity of your idea without sinking too much capital into its development prematurely.
Agile development works hand in hand with design thinking, because it uses an evolving, iterative process that isn’t married to old ways of thinking or rigid processes. Agile development and implementation can be used to validate individual features and focus on high-priority tasks while also staying connected to the needs of the end user.
5 Reasons Business Models Based on Design Thinking Work
Software development that begins with user needs has a higher likelihood of success because it generates and evaluates ideas based on customer feedback rather than on gut feelings or confirmation bias.
Shaping your business model around design thinking and agile development serves your customers by:
Empathizing with their pain points
Design thinking is fundamentally human-centric, and it is the foundation for human-centered digital design protocols. The goal is to understand what challenges people face with current technology, and to focus on how they feel when using a product. What are they trying to do, and what limitations do they currently face? What are their expectations and hopes? Engaging in this empathetic process for each set of key stakeholders is what sets design thinking apart from other business models.
Generating viable, customer-centric ideas
This is the ideation stage where creativity is king. Every idea is welcome and nothing is off the table. During this stage, you must accept that no idea will be present in its final form. You are simply exploring possibilities with the understanding that they will evolve. Some will end up on the scrap pile, and some will go on to form the core idea of a final product. Generating this quantity of ideas is the best way to ensure that you have the quality ideas you need to succeed.
Defining experiences and needs
The next step is to define specific user experiences. Who needs to do what, and what will be the “wow” that results from the experience? After documenting experiences, take a further step by documenting the user needs statements for each experience.
Evaluating experiences quickly and effectively
The value of the MVP is in determining whether a particular software use experience can indeed solve the customer’s problem. Ideas must be held loosely so that early, rough solutions can either be scrapped or further developed. Start with low-fidelity prototypes on paper or a white board, and then increase fidelity as you start to get agreement from users on what’s working and what’s not.
Iteratively developing the ideas that meet genuine market needs
The final product may look radically different from the initial idea, and that is acceptable. In fact, it is desirable. As you develop the product and receive user feedback, you will learn more about the feasibility of specific functions or features as well as the viability of the solution as a whole.
As IDEO CEO Tim Brown put it, design thinking integrates “the needs of people, the possibilities of technology, and the requirements for business success.” To create business value, you must keep the end user (aka sponsor user) in the equation so that you can be sure you are meeting a current market demand with a desirable solution.
If lack of market need is the number one reason startups fail, then you need a reliable method for identifying genuine needs and overcoming real customer problems. The design thinking way of thinking creates a software business model accomplishes that goal by bringing the end user into the equation and creating business value by emphasizing customer empathy.
Delight the end user. Create useful software. It’s a business model that works.