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How do you build the next billion-dollar company? Easy. Think of a basic human need and put it online.

“I had this stupidly simple observation that maybe everyone else under 30 has already had,“ says Steve Blank. “And the big observation is that we talk about social networking and we talk about Facebook and Twitter but we never talk about the big picture. And the big picture is that these billion-dollar companies are doing nothing more than mediating basic human needs and putting them online.”

Blank is a true startup veteran. He’s the author of “Four Steps to the Epiphany” and “The Startup Owner’s Manual.” He’s been around Silicon Valley since it was mostly fruit orchards and has founded or worked with eight tech startups, four of which went public. He now teaches entrepreneurship at Berkeley, Stanford and Columbia. (He’s also been known to write for ReadWriteWeb, and we’ve quoted him before.) So even when he calls an idea simple, it’s worth paying attention to.

The Big Fundamental

If you’re creating a startup and you want it to go big, the first test to apply is: Does it address a fundamental human need? “Ask yourself, does this feel like something I would have done, or maybe better than I would have done, face-to-face or without a computer? Is it a basic human thing? That’s the filter. It can’t tell you how to write the next Twitter. But it is a very valuable test after you’ve come up with the idea and built the prototype.”

Think about it. Everything we used to do without computers, from chatting to sex to entertainment – things that people are hardwired to do – we used to do without computers. The very successful startups of past years have taken those human needs and made them easier to do with computers. And the hugely successful startups have gone a step further. They’ve identified human problems and turned them into needs.

“That’s how Apple approached the iPod and iPhone,” Blank says. “Jobs turned a problem – how to communicate and be entertained portably – into a need. Ask Nokia and RIM what the [heck] happened. They built the world’s best communication devices, but Jobs turned it into a need. That’s an experiment that every entrepreneur should run: What do you do yourself that is not yet done online? I think this idea of mediating basic human needs started even before the Internet. I think video games were the first example of this. And then porn.”

“But,” you say, “all of the good needs are taken.” Perhaps so. But there are ways to do Twitter or Facebook better. You just have to invent them. Or do what Jobs did – identify a problem and turn it into a need.

Is Accounts Payable a Basic Human Need?

Consider, for example, accounts payable. “If you’re a really great visionary, is there a way to turn accounts payable into a basic human need?” Blank asks. “Don’t laugh. Great visionaries have turned products and problems into basic human needs.”

It all starts with a stupidly simple question. “Can you predict that next billion-dollar idea with certainty? Maybe not,” Blank says. “But you can at least ask the question.”

The software venture that switched to a dog-walking service. The dating site that morphed to data storage. The e-commerce play that transformed itself to make board games. We’ve seen them all.

Actually, we’re lying. We just made them up. But you get the picture: There are times in the life of a startup – especially in its early life – when change is necessary.

“A startup is a temporary organization designed to search for a scalable and repeatable business model,” explains Steve Blank. “It’s the search for product-market fit. You don’t have a company until you can figure these things out.”

Blank is the author of “Four Steps to the Epiphany” and “The Startup Owner’s Manual.” He’s been around Silicon Valley since 1978 and has founded or worked with eight tech startups, four of which went public. He currently teaches entrepreneurship at Berkeley, Stanford and Columbia. (He’s also been known to write for ReadWriteWeb.)

In the wake of Instragram’s billion-dollar pivot, Blank talks about why the concept is crucial to the success of so many startups.

You can’t possibly be right

“A pivot is a substantive change to one or more business model components,” he says. “You start with all these guesses about your company: Who are the customers? What is the product? What is the channel? What is the revenue model? Etc. But there’s no way all your guesses are going to be right. Figuring out all these things on day one is computationally impossible. So if your guesses [cannot all be] right, how do startups succeed?”

By evolving. Guess, test and adjust. And the vast majority of entrepreneurs who are not Steve Jobs adhere to it. “In a few cases, you might be right to stick to your guns if you see something that others don’t,” Blank says. “In that case, you’re a visionary. But in most cases, you’re just hallucinating.”

For example, you build a Web app, you love it and assume other people will love it. But don’t go from there to production. First, find out if other people actually do love it.

“Translate your passion into hard numbers,” Blank says. Send emails to 100 friends and see how many like your product. If nobody likes it, the next question is, do you need to pivot?

“The answer for me is that a pivot is required when you’ve exhausted all your possibilities for minor changes. ‘We tried it in pink, we tried it in yellow… holy shit! They might just hate the product.’”

Pivot, but don’t flail

But keep in mind that a pivot takes a lot of thought and planning. “One thing young entrepreneurs do is confuse ‘I changed my mind today’ with the pivot,” Blank says. “If you’re doing a pivot a week, that just means you’re flailing.”

So follow these steps to startup success. Launch your company, pivot toward the mass market, get acquired and go shopping for a tropical island…Not so fast.

“When to pivot is still an art and will always be an art,” Blank says. “We can tell you the process and how to run tests. But it’s like teaching you how to paint. We can tell you about perspective, how to mix colors, but we can’t teach you how to paint The Last Supper.”

While the paywall experiment of the New York Times has received a lot of play in various online forums, one place where a working paywall – meaning that it is both making money for publishers and attracting traffic – is less well known, in the eastern European country of Slovakia. There an independent tech vendor called Piano Media has been successfully experimenting with its own paywall-based system of online publishing. Launched in Bratislava last spring, it gives subscribers online access to content from all nine of Slovakia’s leading news sites. What’s more, it does so for a single flat fee (less than US $4 per month, which is going up in March by 25%) that is paid after visitors have had a chance to sample a certain number of articles for free. Users can pay for their subscriptions by SMS messages, typical of what many can pay for in Europe.

Slovakia is a country with less than six million total population, and the paywall story is covered this week in the Columbia Journalism Review by William Baker here. It is a lesson that others should study carefully. Indeed, the model has worked so well that they have expanded into neighboring Slovenia (and often the two countries are confused by outsiders) earlier this year.

Here are some lessons learned from the experience:

• Be a small fish in an even smaller pond. “Slovakia’s biggest news publishers are much smaller than key players in other countries. They did not have billion dollar annual revenues to protect. This meant less institutional inertia keeping them from putting their trust in a small, untried company. It also meant that they did not have the time and spare cash necessary to create paywalls of their own,” writes Baker. Slovakia doesn’t have its own native language version of Google news, and there are few other news sources in the language either.
• Spend a lot of time hand-holding skittish publishers. “Apple or Microsoft or Google are not getting into the business of spending two months meeting with the publisher and advising them how to do business. That’s what we’re doing,” says Tomas Bella, the CEO of Piano.
• Limit the number of total monthly comments. Yes, you have to subscribe to comment, that isn’t all that special. But what is unusual is that your overall comments are capped each month. This has resulted in troll-free forums, and the publishers have thought that the level of Slovakia’s Internet discourse has risen since after the paywall.
• Challenge some long-held beliefs of publishers. Bella has had a chance to see that many assumptions about paywalls, or online publishing, weren’t accurate. Many of his content providers have changed the way they post articles based on his actual observations, which has helped to boost traffic too.

Whether Piano’s national model can work in countries with larger publishing ventures remains to be seen. But in eastern Europe, it appears to be working.