6 - Deciding What To Start: Choosing The Problem Space
My last post covered how I applied my framework of minimum and ideal criteria to select a shortlist of three problem spaces for my next startup: professional services, reading and careers.
Here’s how I went from that shortlist to landing on my chosen problem space.
Decision Efficiency
The most important thing was to make the right choice. But I was very conscious of not delaying the process unnecessarily.
I talked previously about the importance of widening my frame in choosing a problem space and not viewing myself narrowly as an accounting tech entrepreneur. I was also conscious of optimising for expected value. Expected value being:
It’s easy to fall into the trap of focusing solely on the latter. The vast uncertainty in starting a startup can make any increased prospect of success alluring. But that is to miss the point that all startups are high risk. Most are unlikely to be successful. It’s essential that the upside of the potential successful outcome is worth it. Expected value enables a greater likelihood of success to rightfully have a bearing on the choice of problem space, but not be its sole determinant.
In assessing my shortlist of three problem spaces, it was clear that my likelihood of success was highest for professional services. I had 15 years’ worth of experience working in, and partnering with, professional service firms. If there was a huge opportunity there, one that I was exhilarated by, the reading and careers problem spaces wouldn’t be able to compete. Having been conscious not to narrowly frame and very conscious of expected value in choosing my shortlist, the most expedient next step was for me to deep dive into professional services. In doing so, I used this checklist for assessing the level of opportunity:
How big is the market and how quickly will it grow?
How big is the gap between the problem and how it’s being met at the moment?
How much competition is there?
Why now? There is compelling evidence that timing is the most important factor in startup success
What I Did
My primary activity was speaking to people with experience working in accounting, tax, law, consulting, as well as accounting and legal tech. Between the middle of April and middle of June, I spoke to 43 different people who shared their time and insights. These were not the customer discovery calls that startups will undertake to validate core business assumptions. At this stage, I had no business assumptions! The purpose of these calls was to understand the shape of the space and form my own assessment of how different it could and should be; how big the opportunity was.
The discussions naturally varied with the background of the person. But I always asked the following two questions (the second evolved over time to its final form below based on feedback):
How well does the current way of delivering expert knowledge through professional services firms meet client needs?
An asteroid has hit the earth and wiped out the entire infrastructure of the professional services industry (accounting, tax, law, consulting etc). All existing firms, their property and ways of doing things are irrevocably gone. All people and their personal expertise remain, as do all current laws and regulations. The means of disseminating expert knowledge needs to be rebuilt from a complete blank canvas. What would you build and why?
I was trying to get as close to first principles as possible. How well do professional services firms do the jobs that their customers (clients) need them to do? And, freed from inertia and the status quo, what would you do differently? With hindsight and a completely clean slate, there’s always something we’d do differently in life. But how different?
At the end of each conversation, I asked for recommendations of things to watch/read/listen to, any other businesses I might find interesting as analogues, and anyone else they’d recommend I speak to. Some of my most valuable conversations came off the back of these recommendations and subsequent introductions. I’m also hugely grateful to Gary Turner for his recommendation of The Professions by Richard & Daniel Susskind, which had an immense impact on my thinking.
As I went through this process, I had the following heuristics in mind:
Am I getting more or less excited about this problem space?
Am I thinking about it in the shower?
Am I having to check myself from prematurely getting started on thinking about what the business idea will be (which, tellingly, proved to be the biggest challenge!)?
I am eternally grateful to all of the 43 people who spared their time. I met some fantastic new people. I got the opportunity to reconnect with former Deloitte colleagues, many of whom I’d not spoken to for 10 years. I was reminded of the wonderful, bright, diligent people that inhabit the professional services industry. It was a fantastic field trip. I learnt so much. Then one day I abruptly noticed heavily diminishing returns. This wasn’t about the quality of the conversations. But rather an internal message. I’d got what I needed.
In my next post, I’ll detail exactly how I came to see the professional services problem space. Before moving on in subsequent posts to how I went about choosing the initial customer pain to address and conceiving of the initial product offering. Thanks for reading and stay tuned!