In this month's Inc Magazine (June 2009), there is an article on Paul Graham, the founder of Y Combinator "The Soul of a New Startup Machine" [p. 60 - no hyperlink yet on Inc website].
Y Combinator gives startups a very small bit of capital to prospective software startups, then pushes them to release a product quickly - see if it catches on, then build from there. The Y Combinator mantra is "make something people want" - they even give you a tshirt that says that when you come on board. And if you sell your startup, you get another that says "I made something people want".
The claim to make something people want caught my eye as I during my reading of Paul Hawken's book, "Growing a Business", he remarks, "the American consumer is inherently dissatisfied".
Contrast this with the common marketing view that consumers don't know what they want. The example often used is a Sony Walkman - no one was sitting around saying they wanted a cassette player with headphones [What's a Walkman?]
The lesson from these three views is that people know what they don't like - or know that they have a point of pain about a product, service or situation. If we can create something that alleviates or meliorates that point of pain, people will be interested in our solution. Of course, you have to have the right price for the solution and the right type of answer, but at the most basic, you have to solve a problem people want solved.
Furthermore, you have to solve it in a way that they 'get it'? It has to be, if not elegant, than something the prospective user can understand, e.g., the way the iPod took mp3 players to another level, even though there had been others previous to it.
Too often prospective startups come in to discuss their business idea with me and it is all about their needs, their intentions, their desires. But when pressed as to what problem they are solving for the prospective customers - they almost always say either "Huh?" or "I will be cheaper than the rest". Neither is a good answer.
Whether software or service, product or restaurant - ask yourself: "am I making something people want?" and "is it something they can understand?"