By Osayi Alile
Business ideas are born everyday, but not every idea will be successful in the market place. So why do people keep coming up with ideas? One of the responses given by entrepreneurs is usually because they saw a gap they discovered by error, research, but mostly because they had a need that was not met. Although there is much evidence about successful businesses that start out of passion; however, throwing yourself head first, without examining the viability of the idea can have consequences.
This does not dispute that a business built out of passion will not succeed, but experts have suggested a process to weigh and measure the validity of an idea, that is, to vet the idea. Simple processes that would help new business owners evaluate their approach before they launch.
“The tipping point is that magic moment when an idea, trend, or social behavior crosses a threshold, tips, and spreads like wildfire.” – Malcolm Gladwell
Moreover, when new entrepreneurs, whose ideas have been vetted, launch them, they can be surrounded quickly by advisers and experienced business experts, who believe in the ideas, and help make them successful, for example the Google founders, Larry Page and Sergey Brin. Their idea was born out of their PH.d research, when they discovered it had potential. However, though they were the visionaries, Eric Schmidt served as CEO, and helped steer the ship that was Google, until it was grounded, and Larry Page, took over as CEO.
Vetting an idea is more than a scientific approach; a methodical way to analyse the potential of a market. Here are some ways that experts suggest that you vet your ideas before you launch a new business.
“Find out how your idea fits into the architecture of the world.”
The scope of the idea: When ideas are born, they naturally fit into an industry to meet the unfilled need, for example look at the creation of Spanx. However, if you are not a pioneer, then clearly there already exist systems and a value chain in that industry. The first step according to Seth Godin, innovator and author of The Bootstrapper’s Bible, is to “find out how your idea fits into the architecture of the world.” It would be unwise to assume that your idea would be embraced and game changing. Also, your business model plays an important role at this stage. To quote Ash Maurya, entrepreneur and author of Running Lean, “Your product is not your product; your business model is your product.”
...having a unique advantage is not a matter of producing a slightly improved version of a product.
Unique advantage: Another way of vetting if your idea is marketable is to determine what your unique advantage is. Business models can be disruptive such as Facebook et al., but in most cases, they are an improved version of an existing one. Again, Seth Godin lends his expertise on this point when he stated that having a unique advantage is not a matter of producing a slightly improved version of a product – in this case customers may likely stick with the familiar – rather the service or product has to be significantly different in terms of “being easier to use”, and “highly more effective”. I would add, “affordable” too. For instance in Nigeria, there are three ways to get a cab: you walk out to the streets and hail a local yellow taxi cab, or you call a stationary hired taxi to pick you up at your location, or you use your app to book an Über. You judge which is easier.
“The size of the market opportunity is usually the biggest hurdle to attracting resource for building your business.”
The size of the market: The next point is the size of the opportunity. It is important to size up the market. Does the idea have potential mass appeal? Knowing your customer is important at this stage. According to Jason Green, a venture capitalist, “The size of the market opportunity is usually the biggest hurdle to attracting resource for building your business.” The reason, he explains, is because if the business requires investment, then investors want to know how well it would make them money. And that relates to its ability to scale. Now that may be an unnecessary pressure if you wish to stay small, and not conquer the world; you may just be satisfied to serve your community where you wish to establish, but if you require other people’s money and resources to launch, then you must determine the size of the opportunity. Even the location is important. If you plant a business in a wrong location, it may have consequences.
You could also do a sample test of your potential market to see reactions and get feedback. One way is to start is with a gradual introduction.
Testing the idea: Just because an idea is important to you, it doesn’t mean that it is important to other people – the people you will attempt to convince to purchase your products and services. Again, Jason Green suggests, “one good metric is that a good idea should take six months to shape and refine before you should consider starting a business around it.” It isn’t just technology companies that can test; even non-technology businesses can too. As a business model is being defined, friends, family, mentors, or advisers’ opinions can be sought. You could also do a sample test of your potential market to see reactions and get feedback. One way is to start is with a gradual introduction. It may require educating that sample market about the general value chain, and the edge that your service or product is introducing. It may require getting people to use the product or service by offering free samples or demonstrations. It’s a good way to weigh and measure the market’s response and your offering. It’s also a good way to know how you are going to make money, and your price model.
Vetting a business idea is an important process in starting a business. It is a rigorous process that should be undertaken. It is worth the time and effort, so that you don’t grope in the dark and rely mostly on your gut instincts to make important decisions. New business owners should be driven by their passion, but more scientific in the approach to determine their business success.
Do you have suggestions on how to vet a business idea?