Entrepreneur and educator Steve Blank is producing a series of “2 Minute Lessons:” short videos explaining key aspects of the “lean startup” approach. In this installment, he talks about how to figure out what problems your customers really have.

Products are sold because they solve a problem or fill a need. Understanding problems and needs involves understanding customers and what makes them tick.

Smart entrepreneurs know they must get out of the building to discover every detail about their customers, especially how they experience a particular problem and why (and how much) it matters to them.

When your product solves a problem that costs customers sleep, revenue or profits, things are definitely looking up.

Use a simple “problem recognition scale” for each important type of customer:

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  • a latent problem: they have a problem but don’t know it
  • a passive problem: they know of the problem but aren’t motivated or aware of the opportunity to change
  • an active (or urgent) problem: they recognize a problem or passion and are searching for a solution but haven’t done any serious work to solve the problem
  • a vision: they have an idea for solving the problem and even have cobbled together a home-grown solution, but are prepared to pay for a better one

If they fall into the last two categories all you need to do is convince them that if they built it themselves, they’re detouring into a different, usually non-core business — your new business!