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What makes a good business problem?
Entrepreneurship / 2 April 2024

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Francesca Palomo-Picache
FS Entrepreneurship Centre Analyst
Cheska is a venture builder with 6 years of work experience in corporate and startups. She ideated, managed and grew B2B, B2C, e-commerce, healthtech, real estate and edutech startups. She specialises in early-stage startup strategy, marketing and operations and is currently studying in the Master of Management programme at Frankfurt School.

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Many startups fail because they focus too much on creating a product that seems profitable instead of first identifying whether a real problem exists. We’ve seen this happen a lot: founders build an app, promote it with fancy keywords like “AI-powered” and “revolutionary”, and then ultimately fail because people don’t need the app in the first place.

To ensure your startup’s success, you must prioritise identifying a significant problem to solve. Here are some concepts that could help you with this.

Problem-focused vs. solution-focused thinking

Solution-focused thinking is when one first thinks of an idea of a product or service they want to implement and then seeks out a problem that fits with it. This leads people to fixate on features, designs and functionalities that are often not even related to the real problem to be solved.

Unfortunately, this makes you build your business on assumptions about market demand and needs without any evidence, leading to poor product-market fit and little traction.

A better approach is to employ problem-focused thinking. With this, ideation begins by obsessing about the pain points of a particular target group. You would spend more time doing market research and conducting customer interviews to gain insights into how the problem is experienced, leading you to a tailored solution that is both appropriate and in customer demand.

Criteria of a good problem

A good business problem also has at least three of these characteristics:

  1. Urgent: The problem is pressing and needs immediate attention from the target market.
  2. Frequent: It occurs regularly and has been a persistent pain point for the target market for a long time.
  3. Popular: A large portion of the target market is affected by this problem, ensuring widespread relevance.
  4. Costly: The current experience of the target market is costly, whether in a financial, time-related, or emotional sense.
  5. Mandatory: The problem to be addressed pertains to a fundamental necessity of the target market, such as those related to regulatory compliance.

If the problem you have in mind does not meet these criteria, then it would be best to do further research and dig deeper into what needs to be solved.

Refining the problem

You can refine your problem further using consumer insights to see whether it is big and painful enough to demand a business solution.

How big is the market? How does this specific problem impact their daily lives? Exact figures to show these would make an even more compelling problem statement.

Here are some examples of good business problems from startups in Frankfurt School Entrepreneurship Centre’s Incubator and Accelerator programs:

  • “40 billion tons of CO2 have been emitted in 2023, which is the combined weight of all cars on the planet.” – ZeroEx; emission calculator focusing on active CO2 sequestration through hyperlocal Enhanced Rock Weathering (ERW) techniques.
  • “61% of Germans are interested, but not invested, in crypto because it is volatile, time-consuming and complex.” – Rudy; crypto robo-advisor that creates expert-level investment strategies accessible, personal and straightforward.
  • “Intermediate language learners are underserved – they lack the sufficient vocabulary for immersion in a language without guidance, current language learning content is boring and generic, and many words in textbooks and app sessions are irrelevant for daily use.” – mylingua; aggregates web content, personalised to one’s interest and vocabulary, to immerse intermediate language learners in the language they are learning.

Conclusion

Defining a real, validated problem is a crucial first step for startup success. By identifying and addressing real issues, entrepreneurs can avoid the pitfalls of developing irrelevant products and wasting their time and resources. While doing this, it is essential to employ problem-focused thinking rather than solution-focused thinking and ensure that the problem is urgent, frequent, popular, costly, or mandatory. Finally, the problem statement should be refined based on actual insights and research that come from the target market to be served.

If you have a business problem in mind that you’re itching to solve, book an Idea Talk with Frankfurt School Entrepreneurship Centre so we can help you turn that problem into a startup opportunity!

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