In the early days of computing, a young and perhaps naïve founder, Allen Michels, showed up at the executive offices of Burroughs Computers. He was trying to promote computers based on a single board - a radical idea at the time, and securing orders was proving difficult for his fledgling startup, Convergent Technologies. In previous meetings with computer resellers he had sold a handful of computers where he had hoped to sell thousands. Frustrated and confused, Michels decided to take a new approach as the meeting started. After a few minutes presenting the basic idea, Michels asked the executive team how this matched what they needed in the new product. One executive asked if the computer could come in its own case, rather than as just a motherboard. Michels quickly responded that the computer in fact did have a case. Another executive asked if it had an operating system. Michels replied that it did. To the question “does it have a word processor,” Michels quickly responded, "yes." The conversation continued in this way, with Michels promising on a product that fit perfectly their specifications until he walked out the door with an order for 10,000 computers.
Michels hadn’t actually built anything yet! Although he had a technical prototype, he didn’t have a box, or operating system, or word processor, or anything else. Upon accidentally discovering his customer’s real needs, he laid the seeds for a company that was extremely successful and eventually sold for hundreds of millions of dollars a few years later. But unfortunately, it was a lesson soon forgotten.
In Michels's next company, Ardent Supercomputers, the team spent a good deal of time researching how customers used supercomputers. However, they didn’t spend much time exploring whether their customers had a real problem and how to best address that pain. As a result, Ardent developed an innovative but expensive supercomputer that was delivered late to market, and ultimately didn’t match the pain of any particular customers. Although the computer came close to meeting some criteria, it didn’t quite match the specific needs of any one customer. The company folded a few months later.
The difference between the two startups wasn’t the founder or the state of the market but the assumptions about market “pain” that customers would pay to solve. In his first company, the founder’s hunger drove him to successfully discover and validate what we call a "monetizable pain," whereas in the second company, flush with cash, the founder was distracted by building a better mousetrap and missed the customer pain by just a few degrees.