“What’s it good for?” “So?” “And?…” Get used to hearing those questions. In venturing off on your own, there’s a chance you are going to be creating a new product or service that the world has never seen. As with anything, there are varying degrees to which there is newness to what you have created. There’s the product which is an improvement over an existing idea, but is novel or new enough that you could make claims that it is new. There is also the product which is so completely new as to require an explanation as to what it is or what its use is.

Marginal improvements over existing products can be very useful in the marketplace. They can help solve an old problem in a more efficient way. They can also add needless complexity to an already sublime product, yielding a new product which falls short of its predecessor. That’s the risk associated with a marginal improvement over an existing product. What exactly is the improvement, and is the product space ultimately better for it? The litmus test for that question is whether or not your competitors will immediately copy what you have done.

Completely new products are a mixed bag. Paul Graham is attributed with the following statement: “make something people want.” It’s a terribly simple, and terribly powerful concept which, unfortunately, is overlooked far more often that it is yielded. This is the burden you will bear should you endeavor to build a completely never been seen before product. Not only will you have to spend a bunch of time explaining it to people who don’t get it (and there will be plenty of those), but you will have all of the insecurity associated with thinking that you are perpetrating some terrible act of hubris to believe that you could come up with this idea when no one else has done so before you.

Whenever someone asks me about what it’s like to pitch a new idea and how to ensure that you get your point across, I always use the zipper as my example. Why you ask? Great question. Think about it this way. If you think about having to start from a world in which the zipper didn’t exist, and you came up with this new product, how would you explain it to people? The story about the product and its usefulness becomes that much more important. Up to that point, people had little to no problem keeping their pants up, so what was the real problem being solved by the zipper?

Put a different way, what if I told you that I wanted you to give me money to fund my zipper product. Let’s start with what it is. I would be asking you to give me money so that I could create an interlocking set of metal teeth which was going to be situated in the pubic region of men’s pants to help keep them up. What would you guess would be the reaction by someone to that story? No way, right? Instead, what if I told you about how you would never risk being caught with your pants down, or have the security which is afforded to a man who knows that his trousers will always appear to fit like a gentlemen’s? The story changes the perception of what could be scary or useful to me.

When considering the depth to which you are solving a real problem, you need to ask yourself whether you are selling a vitamin or a pain killer? This question helps to get you thinking about the user experience in acquiring your product. What is their mind set, and are they going to actively seek out your product? How much marketing are you going to have to do, and how expensive will your user acquisition campaign have to be?

I don’t know about you, but when I was growing up I had to take vitamins every day. When I was a kid (man do I feel old even saying that) we had these vitamins which purported to taste like orange or some such nonsense, but that couldn’t be further from the truth. The vitamins tasted terrible, and left to our own devices, my brothers and I would ensure that those very tablets found their way into the garbage can. Sure, you know you need these things, and they are supposed to be good for you, but what problem were they solving for me at that very moment.

Pain killers, on the other hand, are a completely different beast. No one wants to take a pain killer. The reason is that you generally have to be feeling rotten in order to require the services which a pain killer provides. However, when you have a headache, what do you do? You seek out a pain killer. It solves a real problem for you, and thus you seek it out. I’m not suggesting that you need to come up with a pain killer in order to sell product. I’m merely trying to illustrate that when you think about the product that you are going to build, you have to consider whether someone is going to actively seek out your product, because it’s solving a real problem for them for which you are the only solution, or are they going to discover your product through some other serendipitous mechanism and decide that you are solving a problem that they guess they have and why not take care of it.

Reverting back to my MBA days, I present you with yet another 2×2 matrix to consider when you vet your product ideas.

In the lower left of the matrix is where you don’t want to be. Why would you want to invest your time and energy into solving a problem about which no one cares, and doing so with only a marginal improvement over an existing product in the marketplace? There’s a strong chance that the product upon which you are improving isn’t doing very well in the market in the first place. If by some miracle you discover a product which is jumping off the shelves, but is solving a problem about which no one cares, you have probably found a faddish product, in which case, a marginal improvement isn’t going to yield much.

If you have found yourself designing a completely new product in a space about which no one cares, there’s a pretty good chance that you are going to be spending more time on the product than money you will make. There are exceptions to this rule. Using Twitter as an example, I’m not really sure there was a real problem being solved when Twitter went live. In my opinion, this is a case of problems finding a solution, and that’s great. It’s not a hard and fast rule that if you build something completely novel solving a problem no one cares about that you will fail. However, it’s better odds that you will.

An interesting example of this is RLX, the blade company which my private equity firm funded and subsequently was sold to HP. When we put in the first investment into RLX, they were making a product which should have been the perfect product. We were able to fit 24 servers into the space which would have normally been occupied by 3 servers. This was an 8x increase in the server density for datacenters. This was at a time when Internet build-out was exploding and data centers were expanding at a rapid clip. You would think that these datacenters would have been snapping these things up. Here’s the problem. Well, there were a couple of problems, but here are the big ones.

First, the datacenters were predicating their hosting pricing on the amount of space taken up by their tenants. Since the “pizza box” server (the 1u server) was a standard size, this was how people were used to paying for servers. For a datacenter, the notion of all of the sudden having to change the way they were doing pricing was a non-starter, especially when there was so much business to be had, they were closing deals at such a rapid clip, they didn’t have time to slow down. Further, it seemed that these datacenters were competing on the size of the floor space which they had allocated to customers. They all wanted to say that they had one million square feet of tenancy. Bragging rights. The 8x reduction in the footprint didn’t make sense to their world view. Only the people who were going to purchase their own equipment cared about this sort of thing (either to co-locate or run in their own datacenters).

Second, when you solve one problem, make sure you understand the entire problem space before you rush to claim victory. For those of you who don’t know what a 1u server is, it’s like any computer you would buy, except that it’s kept in a rack, and generally is managed remotely – meaning that there is no keyboard or mouse attached to it. This new and novel product which we had created went against the rules for management, and required completely new methods for maintaining the servers. It was not a simple matter to connect a keyboard and mouse to this new RLX chassis. So the potential buyers would have to retrain their personnel to work with the equipment.

Third, the problem space included not understanding who the buyers were, and therefore not knowing what they would want to purchase. In general, at the time we launched the first RLX blade server, the only people who would be interested were people who were buying their own equipment. Those people weren’t looking to buy many cheap servers to serve up web pages. They wanted to buy servers to place in their own datacenters – i.e. enterprise customers. Enterprise customers had absolutely no interest in buying low end web servers. They were only interested in buying the most powerful servers they could get. This ensured longevity of the product, and the ability to re-provision that equipment should the need arise.

So there we were with a completely new product and not a fine understanding for the problems that we were or were not solving for customers. We ended up spending a ton of time, and quite a bit of money, trying to solve that problem, only to have to start completely over building a product specific for enterprises.

The other two categories are a little easier to discuss. If you have discovered a novel improvement over a product in a space that many people care about, you might have a winner, but you might also have some challenges. If this is a space that many people care about, there is likely to be a high amount of competition. That competition is likely to be better financed and better connected than you are, meaning that not only will they have the financial wherewithal to copy whatever you have done, but they will have a much easier time getting it on the shelves than you will. In a case like this, you should consider the possibility of licensing your work to those competitors to reduce the risk associated with your new product. You can always take it to market, but you need to understand how protectable your intellectual property is, as well as your ability to execute quickly and capture mindshare of customers in the market place.

Lastly, if you have solved a problem about which a great many people care, and it is a completely new solution, you are in the best of positions. You have found a colony of people with massive migraines, and you have the pain killer. It’s a wonderful position in which to find yourself, but one that is likely to engender competition, and quickly (making the assumption you can do so at a price the market will bear). As always, protect your intellectual property as best you can, and get to market as quickly as you can.

The moral? Solving a problem in a new way is great, but you have to evaluate if you have marginally improved on an existing solution or come up with a completely novel way of solving a problem. Second, you must evaluate if you have solved a problem about which people care. Have you created a vitamin or pain killer? One will lead people to your door, begging you to let them give you money. The other will require a lot of heavy lifting to acquire customers and convincing the marketplace that they you’re your product.