During a recent interview at the Air Force’s inaugural “Space Pitch Day”, Elon Musk stood before space entrepreneurs and over 75 startups. They gathered, eager to absorb business advice from the SpaceX CEO.
One of the things Musk said that day was that doing market research is not ever a part of his schedule (which is planned down to five-minute intervals.) While Musk is known for his fresh take on traditional approaches to business, his aversion to the hard cold facts of market research still came as a big surprise.
“I do zero market research whatsoever,” Musk said. “If you don’t love the product, you should not expect that others will.”
I am going to tell you why he is wrong.
Beware of your own egocentric biases
When developing a new product or service, a majority of your market research should be focused on consumers and their wants and needs.
Elon Musk thinks otherwise, stating that “If you don’t love the product, you should not expect that others will.” Hinting at the fact that your own opinion and beliefs should replace market research.
This statement reveals a problem that new business owners often fall victim to; the egocentric bias. This bias causes people to rely heavily on their own point of view, and underestimate other viewpoints, essentially making you believe that your idea will be as special to others, as it is to you.
It is important to keep in mind that while you should be passionate about your project, you are creating it for the consumption and enjoyment of consumers—your target market. Therefore, conducting research on their opinions, habits, and trends is crucial. And unless you’re a billionaire, you’re going to waste a lot of money on unproven assumptions—you might not even figure out how to be profitable before you run out of cash.
Looking at their spending habits will help you develop your perfect price point and studying behaviors of different demographics will tell you who your ideal customer is, and how to market them most effectively.
The important thing to remember is that consumer research alone will not give you the best answers. For example, analyzing consumer trends is essential to creating a product that feels fresh and exciting, but the newest trends are not your answer, for most entrepreneurs. Instead, trend research should be used to give you a general picture of where things are headed. It is up to your expertise and creativity to predict the future of your product.
Monitor your competitors
Analyzing your competitors will give you the upper hand in future decision making. By understanding where they failed and succeeded, you can make educated decisions, and consistently outperform them.
Elon Musk’s company, SpaceX has established itself in the Aerospace industry by launching increasingly more low-cost and reusable rockets. The company is currently enjoying its view from the top, but in an industry where new technology and scientific advancements are constantly being integrated, it won’t be long until competitors catch up.
Without market research, Elon Musk is turning a blind eye to one of the biggest threats to his multi-billion dollar company. Business Insider reports that SpaceX’s list of competitors is growing—and quickly. The only way for Musk to stay ahead of the companies who are eager to surpass him, is to become an expert at their own game.
Discover new opportunities in the market
Using market research as an ongoing process allows you to take advantage of new opportunities as they present themselves in the industry. By analyzing trends and keeping up with recent data you will be able to foresee future industry changes, such as shifting demographics, and plan accordingly.
A SWOT analysis can help on this front—an exercise where you look at your business’s strength’s weaknesses, opportunities and threats. It’s a great way to assess risks and catch positive trends quickly so you can take advantage of them.
Your growth as a small business is heavily determined by how you are able to quickly adjust your business model to address problems and opportunities. The truth is that no business can stay the same over time. Adapting your existing products or offering new distribution channels are characteristics of a healthy business, as long as these decisions are backed up by relevant market research.
What Elon Musk Should Have Said
I believe that Elon Musk was trying to convey a very important point with his statement, which is that you can not look towards the market for your next big idea.
Conducting all the best research in the world is worthless if you are simply copying trends that already exist. Elon Musk’s cutting edge ideas do not come from following others, and neither should yours.
So, I believe what Elon Musk should have said is that, “Following market research is pointless, but using it to guide your creativity is the greatest weapon a business can have.”