What is a Great Business Concept?
In the previous post I wrote that everyone has an idea, but you need a lot more to start a successful business.
While execution is more important than ideas any day of the week, there are certain concepts that are better then others. A good idea won’t build you a company, but it will make your task a little easier. So I thought it would be interesting to write a few lines on how I structure ideas to determine if they workable or not.
As soon as I think of an idea I try to pass it through a number of simple filter questions.
1 – Can I explain the essence of the concept in 10 seconds or less (not how it will work, but what it does)?
This question is critical, because if I can not say what I will be doing in less than 10 seconds, then I probably will not be able to communicate it to customers, investors, family, friends, or partners.
2 – Is there a need for the idea? What is the value will it add?
Some ideas are very exciting and cool, in that they make use of very innovative concepts or technology, but at the end of the day they don’t add any real value and thus are not great business ideas. One example is Sony’s dog robot, which was very cool, but did absolutely nothing and thus never worked as a business imitative.
3 – Do users have to change their behavior? If yes, do the benefits outweigh the current alternative by at least 10 times?
This is one of the central arguments in the book Pip Coburn’s The Change Function. Getting people to change their behavior is tantamount to moving mountains, and so even if the benefits to the customer are huge, I still try to stay away from these types of businesses. Only if the benefits are very clearly seen, quickly realized, and of a huge magnitude, will I even consider passing such ideas through the rest of the filters.
4 – Is there a revenue model?
It might be a great feature, a useful service, or a fantastic idea, but if there is no business model than I might consider it as an extracurricular activity, but it drops dead as a business idea.
5 – Who is the customer?
By this point in the filter system I should know very well who the customer is, but knowing isn’t the same as knowing. In order to take the idea further and start spending more time on it, I like to be able to identify exactly who will pay my bills, and seeing if they have the money to spend, whether they will spend the money, and finally, if they will actually end up buying this product/service.
6- How will I reach the customer?
This is I think the most overlooked filter. There is a general feeling that if you build it they will come, which couldn’t be further from the truth. More businesses fail because of a lack coherent marketing plan than anything else. That being said, this filter isn’t meant to require a marketing plan, but just a quick conceptual idea of how you might be able to reach your customer. Come up with a couple of general concepts at the least.
Bear in mind that these filters are just a starting point. There is still a lot of work that needs to be done. You need to talk to potential customers. You need to get feedback from people in the industry. You need to put together a financial model. You need a business plan. There are hundreds of steps that still need to be taken to get from idea to potential start-up, but before you waste your time, make sure the idea passes these few filters.
Entry filed under: Start-up.