Idea Identification Will Your Business Idea Fly?
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“There is nothing more powerful than an IDEA whose time has come.”
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We all know this phrase in respect to politics and social change, but have you ever thought about it from the business point of view?
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Ideas are the basis of the new digital and knowledge based economies.
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For decades, business ideas required huge capital investment to setup factories, distribution and sales engines.
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Now, the best ideas can be implemented with 3 – 4 driven individuals.
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But the idea must be the right idea…
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Three Types of Ideas Useless, Workable and Quick Hit
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Useless Ideas
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A Useless Idea is something that is dreamed up but the entrepreneur has no personal understanding or experience in the business they are proposing.
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When you don’t have the experience to back up the idea, you are dependent on other people to make it successful and personally have no buy-‐in with the venture http://emagine-‐group.com
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That makes you – replaceable – and that is not a viable idea for a venture capitalist, angel investor or bank.
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VCs, Angels and banks only invest into ideas where the person sitting in front of them has a personal buy-‐in with the venture
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They are either the vision that drives the organization, the force that runs it or the intelligence that builds it
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The world is full of idea men, very few of them can deliver on their ideas.
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Examples of a Useless Idea
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A farmer starting a manufacturing plant that produces auto parts
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An MBA starting a game development house
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A plumber starting an electrical business.
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I think you get the idea – if you don’t have any real, measurable experience in the industry that you want to start – you have the wrong idea.
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Workable Ideas
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A Workable Idea is something that will take time and effort to develop but will be profitable once stable.
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These ideas are the basis of the knowledge economy because they will continue to grow and develop as the venture grows – in other words, they don’t stagnate
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VCs, Angels and banks love these types of ventures because they are able to invest into the initial start-‐ up and reap their returns during the growth stage
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Allowing them to cash out – or capitalize – when the venture is mature with very high returns on their investments.
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Software Development Companies
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Consulting Firms
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Research Houses
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Technology Planners
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These are all ventures that take time to build and become successful, but will continue to expand and develop over time increasing their product/service offering with each expansion. http://emagine-‐group.com
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Quick Hit Ideas
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A Quick Hit Idea is one that will generate revenue from day 1 of operations.
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These ventures are typically called quick hit ideas because they return the investment immediately but the returns are minimal at best.
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Experience doesn’t matter because you are only looking to capitalize on a temporary need in the market and know that you will be “out of business” once the need disappears. http://emagine-‐group.com
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Quick hit ventures are also low-‐ experience, low intelligence businesses – and I don’t mean that to be rude.
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Take for example, your local general store – what does he offer that the general store next door or down the street doesn’t?
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In other words, the revenue generation of this idea is limited until someone opens another store in the area that cuts into their limited customer base.
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So now that we have identified the different idea types – how do we judge our own ideas?
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Idea Proofing Determining If Your Idea Will Last
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People will give you a lot of ways to judge your idea, but most of them are not useful from the point of view of “idea proofing.”
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What is Idea Proofing?
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Idea Proofing is something we do at emagine to determine whether an idea is viable and feasible or not.
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It is not difficult, but it requires removing the emotion, excitement and passion of the entrepreneur from the equation.
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Ideas can not be judged based on what the entrepreneur says, but how it looks on paper
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So what are we looking for?
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Does it solve compelling unserved need?
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Every entrepreneur thinks they have the million dollar idea, but deciding if it really is starts with this question – what need does it solve?
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Ask people if the need you see is really a need. Society is the best judge of the idea because they are your future customers.
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But here’s the trick, you can’t explain the business idea to them – only the end result product/service you will provide them.
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If they can’t see it from that, your idea is not going to work without a lot of work, education and marketing – all of which means the need is not really there.
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How much money will you need and how will you use it?
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This is a big question because capital is what makes businesses run and grow.
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If you need too much capital or can’t explain how the capital will be used to build the business, attract the customer or grow it, your idea may not be the right one.
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What are you offering and how does it work?
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Exactly what product/service are you offering and how will it work?
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You must be clear with this definition because if you are not clear, how do you expect anyone else to understand it?
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We have talked to people with great ideas and what could be outstanding products, but they are unable to explain their product/ solution in simple
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Our test – if you can’t explain the product/service in 15 words or less, you are not clear.
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More importantly, if it takes more than 2 minutes to explain how to use it – it’s game over.
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Customers don’t read manuals, instruction booklets or websites – they either understand how to use it or call you.
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Who exactly is your customer?
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The answer to this question is not everyone – no product or service has ever been designed for everyone’s use.
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You need to be able to define who will buy your product/service.
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B2B, B2C, B2G, Fortune 500, SME, NGO, Men, Women, Housewives, Bachelors, Students, Athletes…. And the list goes on and on….
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Another question you have to answer with this question is –
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Is there a specific situation that will drive the purchase or use of my product/service?
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The more precise you are, the better you idea proof your idea.
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How will you provide your product/service?
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One of the biggest questions is HOW you plan to win customers – what is your strategy for product/ service delivery?
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Do they need to come to your office or shop to buy? Will you go to them? Can it be bought and installed online? What hours will you keep?
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Who is involved in your venture’s success? Who are the stakeholders?
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Every entrepreneur would like to believe that they can do everything – we are all Superman when it comes to our ideas, but that is not possible.
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Of course, the entrepreneur must have a strong foundation of experience and stability in their professional life, but who are the other key resources?
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The first way to destroy your business is to hire friends because they are friends and you like to hang out together – hanging out is very different than working together. http://emagine-‐group.com
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Business relationships are very stressful and can destroy friendships, especially if you have to fire a friend…
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But does that mean you don’t hire friends?
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Of course not – it just means that you must be very clear about the skill set and abilities of your friend before hiring them – this is business.
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Who will be your competition?
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Ideas are great things, but you have to look at the whole environment before deciding if the idea is viable or not.
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Competitors go a long way to helping you understand if your idea can succeed or not.
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There are no businesses that have no competition – that idea only exists inside an entrepreneur’s head.
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If there are a great deal of companies, you will only get a limited share of the existing pie. If there are few competitors, you need to understand why.
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Talk about your competitors, understand them, figure out how your business will be better and how you will beat them – otherwise get ready to fail.
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What makes your venture special? What makes you different?
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Startups are risky for investors, so they want to know what will make you successful compared to everyone else.
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Does your business have a unique skill set or knowledge? Proprietary methods? Unique brands that aren’t available anywhere else? Innovative technologies?
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The thing that makes you different will usually make you successful because it changes the way the consumer does something – or what we call revolutionizes service delivery. http://emagine-‐group.com
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These are all questions that we ask when we idea proof a venture before investing
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Anywhere, we have hesitation will cause us, and any other VC, to stop and think – even if it is days before the check is written.
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VCs have to be sure before they release the money to the entrepreneur because getting it back is very difficult.
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We also use a Buyer Utility Map
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This 6 x 6 table is one of the best tools we have for determining if an idea will be successful or not.
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Why is this a great tool?
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The Buyer Utility Table forces you to look at your business idea from the view of the consumer to determine whether the idea will work or not.
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So let’s look at both sides of the table
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The Six Stages of Buyer Experience Purchase
How & where do they get it?
Delivery
Can it be delivered to their home or office?
Use
How do they use it?
Supplements
Does it require any special or addi@onal items to use?
Maintenance
How oBen will it need to be serviced or checked?
Disposal
What does the consumer do with it when they are done?
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The Six U7lity Levers Environmental Friendliness
In today’s world, everyone is environment friendly – is your product?
Fun & Image
Does it improve the consumer’s image or give them more enjoyment?
Risk
Is there any risk involved with product/service usage?
Convenience
How easy is it to carry and store?
Simplicity
How easy is it to use?
Customer Produc@vity
Does it improve their produc@vity in any part of their lives?
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You now have a basis for understanding how to idea proof your venture.
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Next Lecture: The Business Model
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Readings for Next Week:
Knowing a Winning Business Idea When You See One Launching a World Class Venture The Questions Every Entrepreneur Must Answer
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