By Jon Rohr
Problem solving is the beginning of everything. Everyone says they should do it, everyone tells others to do it. “Make sure you’re solving a problem with your business.” Entrepreneurial instructors tell future entrepreneurs that very message, every day.

“I take issue with that,” says University of Waterloo Adjunct Associate Professor and Director of the Problem Lab, Larry Smith. “So when I present this topic, I will tell students that they have been misinformed.”



Smith specializes in economics, particularly when it comes to entrepreneurship, Innovation and forecasting. He holds a BA and MA from the University of Waterloo, and an honorary degree from Conestoga College.

Smith is not playing with words when he says you are not supposed to be finding problems and solving them. He states directly, “that’s a mistake. You’re suppose to be finding and solving ‘important’ problems - period. A one word difference, that makes all the world of a difference.”

Smith believes that entrepreneurs shouldn’t be trying to start a business based on solving an unimportant problem or “less important problem”. Let the big companies do the less important problems, “they’re quite good at it,” he says, highlighting their expertise – “for instance, in brand extension”. The evolutionary changes that are made up of all the less important problems are perfect for the IBMs and General Motors of the world.

Entrepreneurs, especially entrepreneurs in the start-up phase, “should be doing something dramatically better than what is out there. And the only way you can do that is by solving an important problem. Identify it, and then understand it before you leap into action and then fail to solve it.”

Entrepreneural in the start-up phase, “should be doing something dramatically better than what is out there. And the only way you can do that is by solving an important problem. Identify it, and then understand it before you leap into action and then fail to solve it.”

The University of Waterloo’s Problem Lab is the only research facility in North America, associated with a university, dedicated to solving “really important problems”. In the least, its mandate “if not unique, is highly distinctive”.

Smith works with a suite of University of Waterloo entities, including Velocity, Co-op, Engineering, and Computer Science to name a few. Given the fact that real world, important problems traverse all forms of societal disciplines, the broad mandate makes the university environment an ideal setting for such a lab. Teams of students will be guided towards solving important problems that are “outside the experience of most young people.”

All the great innovations are almost always interdisciplinary, and UW on principal is trying to support cross interdisciplinary learning, as too is the Problem Lab, because “things won’t get solved if you don’t cross boundaries”. The solving of most problems deal with one of either social or economic issues, but “really big problems hit both issues”. There is great economic benefit, there is great social benefit, “most of the time”, argues Smith.

It’s never a problem to find a important problem; the bulk of the Problem Lab’s work is to “understand the problem, not in finding it”. Smith states an important point, “when you solve an important problem, you remove half the risk of the enterprise”.

Smith is referring to the two basic risks of solving problems; the first risk is not been able to succeed in delivering the solution, because of execution trouble or other logistic issues, and the second, the marketing risk – that you’re working on a problem nobody cares about, no one wants that solution, and “starts-ups don’t have a lot of money to educate consumers into wanting” as there is no pent-up demand.

Smith’s realization is that if you solve an “important problem”, the market risk is gone. “You just have the risk to make it work,” he says, so “half the risk is gone”. Marketing risk is a major reason why businesses fail. “You need not engage in an elaborate charade, persuading investors that there is a market. You will just say what the market is, and the investor will say, ‘ah, yes, bet you can’t solve it’, where you will say, ‘I already have’.”

It is easier to finance a new company solving a very important problem, than less important ones, because the investors’ risk-reward-ratio will change dramatically. With half the risk gone, the reward can be enormous.



“This is classic,” Smith says. “We’re not inventing anything new here, this is root logic, I think it is why it’s got  a lot of traction, and then people recognized, for all of its obvious importance, it’s been ignored.” 

Why are important problems ignored? Smith gives two reasons; 1) young adults don’t have the depth of knowledge that years of life experience bring and 2) they have a tendency to be overwhelmed by the “hype machine, from large companies, that seem to suggest that all the big problems belong to the big powerful companies and they are left, if they are going to do a start-up, with all the other lesser-problems that others care not to solve.”

The Problem Lab will “draw attention to billion dollar problems,” says Smith. “They are legitimate, and we will help students recognize them, we will help the students understand them, and to the student teams that will best understand it, we have R&D money for them to draw on”.

Mike Lazaridis and Doug Fregin are the founders of Research In Motion, which later became BlackBerry, and currently both are principals of Quantum Valley Investments. Through a Quantum Valley donation of $300,000, the two area philanthropist focus their support on higher education, in particular scientific innovation. The money given will primarily be used to support the Quantum Valley Investments’ Problem Pitch Competition. Competitions will become regular events on the UW campus, much like the Velocity Fund Finals pitch competitions. Winners of the Quantum Valley Investments Problem Pitch Competitions will share a prize pool of between $10,000 and $20,000 to invest in research and development related to their chosen problem.



Quantum Valley Investments P3 Model is supporting initiatives like the University of Waterloo's Problem Lab

Some of the important problems that the Problem Lab will be drawing students’ attention to include the huge opportunity in non-lethal force weapons.  “It’s a huge market, multi-billion dollars, with extreme limitations to the solutions which barely work.” Another is “fake news, and incorrect information”. Fake news, says Smith, “is only a small part of a bigger problem. It’s another multi-billion dollar endeavour.” To be able to stop people from been lied to or misled, confused by incorrect bogus or made up information, “has a huge social consequence.”

Smith asks the poignant question, “what does a history of problems tell you?” His answer is not surprising, that “not to much is new, as it just comes back and you cycle forward.” He notes that on the return trip, “sometimes the problem comes back more viciously... I watched how social media has been used around the world by authoritarian governments to control their populations … going back to high school, I read George Orwell’s 1984”

“Oh, my,” he says. “Orwell, just got the date wrong.”


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Copyright, 2018.