The Mistake Every Entrepreneur Makes When Creating Their Product or ServiceInnovation starts with a problem, not a solution.

Entrepreneurs love to gush about how they identified a problem, created a solution and then disrupted a market.

In my experience, innovation doesn't necessarily work like that. Often,creatingthe solution uncovers the problem. In industries with a long, that's-the-way-it's-been-done attitude, this realization can make the difference between innovation flops and multimillion dollar successes.

People usually recognize a problem retroactively, when an invention makes legacy technology seem insufficient. Horses were fine until Henry Ford made the Model T. Few people realized that CDs and the Walkman wereclumsy solutions until iPods. Taxis were good enough until Uber.

The more that people take something for granted, they less they can verbalize its problems. No one told the guys at YETI, "Hey, could you engineer a $350, bear-proof cooler that keeps ice solid for seven days?" Until YETI made their cooler, no one realized how bad other coolers were.

Asking people to describe their problems with a product or market rarely works. Instead, you must build narratives of what peoplecurrentlydo. By analyzing those narratives, you can discover patterns of behavior, preference and mindset that signal unmet needs, which are the kernels of great problems.

Let's walk through the process.

Related:How to Start a Business With (Almost) No Money

1. Observe your customers in a natural setting.

It's tempting to believe we can discover everything about customers from our computer screen. Data, we're told, reveals all. Unfortunately, charts and graphs can'tpick up the information you absorb visually. When you watch people use your product -- or a competitor's product -- in their normal environment, you notice meaningful patterns. At Trager Grills, we call this "in-habitat observation."

Observations reveal the workarounds people develop to make a deficient product perform better. Last year, when my colleagues visited our customers' homes to watch them grill, they noticed that many Traeger users had built makeshift extenders to their hopper, the container that holds wood pellets (fuel for their grill). They built those to avoid running out of pellets during eight- to ten-hour smoke sessions. Had we only observed people using our grills at Traeger headquarters, we never would have identified that problem.

Rather than creating an artificial environment for observations, do it in your customer's natural habitat. Go to people's homes, offices and neighborhoods, or wherever they use your product.

Related:5 Habits of the Wealthy That Helped Them Get Rich

2. Humanize your surveys.

Thanks to the world's data obsession, we tend to use survey questions that produce quantifiable answers. The results are clean but misleading. We don't ask these sorts of questions in real life.

For instance, how often do you ask your closest friends to rate something on a one to 10 scale? How often do you ask anyone to answer on a scale from "Most Likely" to "Least Likely," "Very Good" to "Very Poor" or "Most Important" to "Least Important?" Those are unnatural ways to think about the world.

Instead, ask open-ended questions. One of my favorites is, "When people ask you about your [insert product], what do you brag about?" That's a powerful question, because the aspects that attract appreciation and disappointment tend to be related. If you love the way your car drives, anything that diminishes the driving experience will be that much more noticeable to you.

Related:22 Qualities That Make a Great Leader

3. Ask people to prioritize.

It's hard to rate a single feature or idea independent of alternatives. But, if you ask people to ranka list of features-- and do this with multiple consumer segments -- you see what customers value.

Let's use your smartphone to illustrate how this works. It's hard to assign a value to screen size independent of other factors. But, how would you rank screen size, camera quality, voice control, speaker quality and data storage in order of importance? The question forces you to consider what you use most often, how it affects your experience with the smartphone and what needs improvement.

Ranking features bears a strong resemblance to how we differentiate between products. For example, when buying a mountain bike (common here in Utah), you might test and compare three to five bikes. The thicker tires on the Santa Cruz bike are nice. The dropper seat post on this Trek would be useful. The Specialized is more expensive, but comes with lighter components.

What matters most to me? Alternatives sharpen our ability to distinguish priorities. The more we understand our customers' priorities, the better we can craft solutions.

So, conduct in-habitat observations, ask open-ended questions and get some quantifiable data by asking survey respondents to rank options. Your future customersstilldon't have a problem, and they won't until you build their feedback into a new product that provides a solution to all the deficiencies they experience now.

Some companies mistake refinement for innovation. Others look for a grand problem and never find it. But, if you lead customers to the solution, then they'll realize they have a problem.