5 Why Example
Startups (pretend to) lack the time to implement in-place processes and procedures. As cash-deprived entities, early-stage companies need to maintain a disciplined approach in coming up with ideas, defining hypotheses, testing, and collecting data. Such agility is critical and defining for a startup.
There are multiple attempts to translate whatever works in manufacturing to creative business environments and technology processes. We will use the 5 Why method and try to show how it can be applied to justify the existence of a startup.
When talking to an investor, these questions arise in one form or another. I also use the 5 Why method in my interviews with founders to make sure I cover the minimum of topics an investor would be interested in to hear in a conversation with a founder.
The 5 Why method is said to have its origins in the Toyota Production System and the extended version is seen as asking these 5 Whys to make a root cause analysis: Who.,What, When, Where, and Why. This, as you can see, differs from the original method, but is widely accepted in practice and is adapted to answer our goal – to justify the existence of a startup.
Why you? (Who)
This usually means – who is on your team? Why did you, as a founder, pick these people to be part of your team?
A good answer usually is having experience in the industry, sales in the industry, marketing experience, familiarity with the demographics, and industry needs. A good alternative would be having previous success in building startups or even exits, or that you have built a complex project together before.
A bad answer would be “because we both came up with the idea while having lunch or at the company party”. The idea is good, but why you should be the one who can make it a profitable business?
Why is the team so important? Because the idea is probably not (that) unique, funding can be found, technology can be built by other teams too. The question is: is your current team capable of putting all things together and push it out, support it, and tweak it to make it a reality? If this idea is worth it, most likely somebody somewhere else is creating another team to address it, so you need to be really good and work well together, to be able to win.
Why your idea/product/service? (What)
You found a problem that needs a solution. Why is your solution the right for the problem? Can it be solved differently, faster, cheaper, with a less-complex approach? What are your price point and go-to-market strategy?
Your solution needs to offer a short time-to-market process, to minimize the investment risks. The key here is to meet customers as early as possible and start selling your solution early in the process. This doesn’t mean to use this as an excuse and build a half-baked product, mistakenly called MVP.
Quick-to-market usually minimizes the investment risk. This includes the risk that there is no product-market fit, no product need, market doesn’t exist, too early, too late, customers can’t pay, customers won’t pay or would pay not enough, etc.
Fast iterations are as important as quick-to-market capabilities. Iterations will help adjust the product, marketing strategy, pricing, service needs while testing new hypotheses and collecting more data in the MVP building process.
Why now? (When)
What makes it that “now” is the best time to introduce your solutions?
We all tend to think of new ways to do things, but there are multiple forces that will get into our way to introduce this new solution.
Is the infrastructure available? Is the customer educated to use this new solution? Or you will need to educate users first, build infrastructure, and train to use your new product?
There are many examples of services that were built too early for the customers to use it – like WebVan for example. Customers were not comfortable with online purchases and delivery. But in 2016 InstaCart succeeded by doing exactly what WebVan failed to introduce in 2000.
There is always the question – if your idea is so great and the need is so high, why is it not built yet? It sounds off and concerning. Is the idea too early to be adopted?
Using root cause analysis may be applicable just to understand why this idea hasn’t been made available yet. It is an interesting exercise and may reveal unexpected reasons to kill your enthusiasm.
Being timely in the market is extremely important. This by itself is probably the single most important factor for a startup to succeed (watch this Ted Talk).
Why here? (Where)
Timing may be of very high importance, but the location where you will introduce your startup is coming right after it. Why did you as a founder decide to establish our company here and introduce your idea to this location?
The answer to this question should not be “because I live here”. Markets are different and demographics cannot be ignored.
San Francisco offers an amazing test ground for many tech companies and ideas. If you are offering a technology-based solution or a product that targets technology providers, it is probably the best place to be.
But if you are offering agricultural solutions, it may make no sense to focus on and look for funding and talent in an area more favorable to tech startups. Unless, of course, your solution involves AI, blockchain, etc. and it just happens that agriculture is one of the applicable solutions you can provide.
Why do you do this? (Why)
This Why is for each founder to answer for him/herself. There is no single right answer and you will have to find the right motivation that will keep you honest and able to finish what you started.
The more fundamental the reason is, the bigger the chances to make it through the grinder called ‘startup’.
Many people start with no clear understanding of what the path in front of them will offer and if this journey is just drifting, with no well-defined goals and reasons, the probability for failure is really high.
One interesting aspect of this question is that the company culture you going to build needs to offer an answer to this same question to your future employees. If it doesn’t, they may join for the idea, project, or just for the job, but will never be committed and provide the quality and dedication you need in a new company to make it a reality.
Building a mission-driven business is the latest discovery and innovation in business. Salaries and benefits are very much the same across the industry. Marketing goals and sale target are similar. The real difference is when you build the company to address bigger and more important needs to the world, that makes everybody feel good about the work they do.
The importance of the 5 Whys
The original 5 Why method is seen as a root cause analysis method and is applied in many industries with the intention to find the root of a problem.
Here I tried to use the concept of it, but change it a little bit and use it to understand what would an investor want to know and understand. In a way, this is the way an investor performs a root cause analysis to understand what is the core of your idea and is your team capable to deliver.
Understanding the need and the reasons to have answers to these questions will make a conversation with an investor and potential partners much easier and productive. It will help in the future to build a good culture and keep great talent in your company.