Defeating confirmation bias in the idea stage of a start-up is crucial, and these 4 questions can help you achieve this.
Whilst no entrepreneur likes it, their business idea must be challenged before it becomes a living breathing company.
We’re all prone to confirmation bias, whether we like it or not. Instinctively, we cling onto the first piece of evidence we can find — valid or not — to back up our beliefs. It is the greatest risk facing any lone entrepreneur. To be consumed by their mental limitations.
The excuses are well known when a business idea fails to take off. ‘I didn’t have the cash-flow’ or ‘The team wasn’t right’.
Although they could all be right, peel back the layers as you would in a game of pass the parcel and the real reason will tumble out at the end of the game. Confirmation bias beat you. Thoughts such as ‘If I was a customer, I’d buy one’ or ‘I know I can do it better as the service I received was rubbish’ all stem from our mental biases.
How does an entrepreneur guard against human fallacies like confirmation bias?
It starts with questioning. The simple fact is any business idea must be challenged before it becomes a start-up. But what questions should you be asking? How do ensure as much as you can the business idea you’ve got will work?
To get this process moving I’m going to share with you 4 questions to challenge the very heart of your business idea. Each one offering you the capacity to defeat the evils of confirmation bias.
4 Questions to Challenge the Quality of your Business idea
It’s clear then, isn’t it? An entrepreneur’s business idea needs to be challenged. To do this there is a need to question and dig into the core of the idea.
Each question is designed to work as a pause in the music during the pass the parcel game. To strip away the fluff and glory which often accompanies a business idea, we need to get beyond the grandiose statements of how many signups and revenue the idea will generate. No, we need to understand how the business idea will work for customers.
I would advise you to think of these questions as presentation guidelines for your pitch.
Whether you’re looking for investors to support your business idea or not — ask these questions — they will want to know the answers. If you’re not pitching for investors, still answer them. Pitch them to your partner — or a friend instead.
Here are the four questions for you to get into.
1. What makes your business idea unique?
Tell me, what makes your business idea unique?
It seems a straightforward question, but it will leave many entrepreneurs stumped. Some budding entrepreneurs develop their business idea by utilizing a skill they learned as an employee. Others look to seize upon their desire to work for themselves and exploit an opportunity.
In the former situation, redundancy offers a chance of self-employment freedom.
And it is this, rather than the motivation of offering a unique service which propels the business idea forward. When this type of business idea is met with the inevitable objection ‘It’s not unique’, then the response quickly becomes a subject of cost. ‘I can be cheaper.’
This is confirmation bias looking for and finding a piece of evidence or a reason to satisfy an objection.
The downside is a cost-saving for the customer normally invites competition.
For a business idea to be successful competition must be avoided. Reducing prices and squeezing margins makes it harder for a business idea to flourish. Lowered prices might bring volume, but with it will come increased costs as demand needs to be met. The inevitable outcome is one where prices must go up.
Then the competitive advantage has been lost.
Being unique can mean many things. It could be the business idea offers a solution not currently available.
This isn’t limited to the idea itself; it doesn’t mean creating another Google. Your business idea can be unique in your town or city. But remember if you can do it, it means someone else can. More on this later.
2. How does this help others?
Being a business owner might help you, but how does it help others? For a business idea to be successful it has to offer benefits to the people who are going to buy it. Otherwise, why would they buy it?
Whatever it does, it needs to add value to the user. Either by saving time, saving money or making life easier. The more benefits your business idea can bring a potential user the more successful it will be.
Take Elon Musk’s car company, Tesla. Consider the value which can come from buying a Tesla electric car. Status, a happy conscience and good for the environment. Your business idea must go beyond the practical aspects of living to help others.
3. Do your potential customers think this is a good idea?
Entrepreneurs worry themselves silly over not being the first to market. Especially if they’re convinced, they have the perfect business idea. The last thing they want to do is to discuss the idea with other people.
This needs to happen. Customer feedback, market research, and intelligence will find out bad business ideas all day long.
They will also tell you when you’re onto a winner.
If you’re not, well, you can ask questions such as what if we did this instead?
In the challenging phase of proving your business idea, these are painless questions to deal with and learn from. If you allow confirmation bias to win and you commence trading with a flawed business idea, then the recovery costs are huge or often fatal.
Do market research. Demonstrate the business case which can support your business idea with customer feedback.
4. How easy would it be for someone else to copy your business idea and undercut you?
I touched on this earlier because it’s the inverse of how many entrepreneurs get started. They take a business skill they’ve learned in another business and set up doing the same type of work.
If you can do it, so can another person. It could be your first employee. It happens a lot and prompting this question should force you to consider the risks of competition. Copycats will enter the market with the same mindset as you.
How do negate this from happening? What proprietary qualities does your business idea have?
Being risk aware can make a big difference in validating your business idea. It can prevent a competitor from stealing your customers and protect your start-up in its early days.
A great business idea doesn’t become a great idea until it happens. Avoiding the pitfalls by challenging what confirmation bias can lead you towards — disaster.
Instead, challenge the quality of your business idea but asking these 4 questions.
Each question is designed to challenge the preconceptions an entrepreneur is likely to have. I talk about confirmation bias a bit in this article, but it is a lethal mental model. It will catch us all out at some point.
Therefore, as an entrepreneur, you must have the self-discipline or a process to help you overcome this mental bias. This is where these four questions come into their own.
I have no doubt, your business idea will end up quite different at the end of answering these questions. It should do.
Entrepreneurs like to believe they’re perfect, but they’re not.
Having the humility to be open to feedback — to an objective feedback process — is key to getting the business idea right.
Then, your business idea can become a successful start-up.