Dr Jana Matthews | 5 min read | Is your business idea good, bad or ugly?
Not all business ideas are created equal. Growth is hard enough with a good business idea. So it’s important not to begin your journey with an idea that’s bad – let alone ugly. If it’s not good enough, then start looking for another one!
But what makes a good business idea? A good idea doesn’t need to be unique. In fact, a brand new idea can be ugly, if you don’t have the time or money to develop it for market. Not being able to make the product, deliver the service, or to create a market and educate people on a new idea are not easy tasks, and can quickly turn good ideas into ugly ones.
With that in mind, here are five questions to ask in order to determine how great your business idea is:
1. Is it something customers would want and value?
Very few of us asked for any of the products that Apple created. But Steve Jobs figured out what his customers wanted before they did. How can we do that? First, recognise that it is a science (analyse data on your target market ) – and an art (listening hard for what people really want). Many people told Henry Ford they wanted to travel faster, and he figured out how to address their needs/wants with something they valued enough to pay a lot more for than a horse!
Before you start building a product or service, begin with some old-fashioned applied research. Identify and map ideas similar to yours that competitors are selling. Note their strategies and tactics for marketing, pricing, and selling. Figure out which customers, demographics and psychographics, are buying — and identify their pain points. Talk with them. Identify what it would take to attract those customers to your idea. What do customers really value that you must build into your idea in order to win. Is it low cost, speed, safety, ease of use, or prestige? If you don’t do the basic research, and spend enough time on Google, you could end up with a copy-cat business idea that no one will buy – that makes for an ugly idea.
2. What’s your competitive advantage?
Will your idea be better, faster or cheaper than similar concepts already in the market? Is it an enhancement to another product, or is it a total replacement? In other words, what’s your competitive advantage? An idea needs to be more than a copy of some other idea, to be beautiful. Regardless of whether you are proposing a brand-new invention or an enhancement to an existing product, figure out your competitive advantage and why customers would want to buy from you.
3. How quickly can the business idea scale, and how much time do you have?
Assuming you figure out what customers would value your competitive position, you’ll need to fly under the radar, scale quickly, and get established before your competitors figure out that you’re a threat. “Competitive advantage” can rapidly disappear when larger, well-funded competitors begin to mimic features and benefits intrinsic to your idea. Good business ideas can be turned into bad ones if they aren’t marketed properly. And when competitors lower their price to maintain market share, it can get ugly, fast!
Here are some strategies that can help you “buy time” to protect your good idea:
- Intellectual property protection (patents and trademarks)
- Know-how or show-how
- Personal relationships with customers
- Revenue sharing and customer stickiness
- Deep pockets or access to funding
4. The WIIFM factor
Every purchase decision is predicated on the assumption that spending money (now) will make life better (in the future). Purchasers think about the WIIFM factor: “What’s In It For Me?”. Then justify spending on the basis of the “return” they believe they’ll get on that “investment”. The return doesn’t need to be monetary – it can be time saved, or productivity-boosted. And sometimes the WIIFM is that your idea enables your customers to provide better products or services to their customers. Once you establish what’s important to your customers (and their customers), you’ll be able to figure out the value of your idea to them, and price accordingly.
5. Can you afford to develop your business idea?
Think of your business idea like a set of Russian nested dolls. Is that first, tiny doll something you can afford to develop and sell? Over time you would expect to add more features and benefits, i.e., create bigger and more elaborate dolls. But, in the beginning, it’s all about designing the concept and figuring out the market.
If you cannot fund the time required to get the product/market fit right, then you either need to scale back, set the idea aside and look for another one, or flesh it out and look for funding from angels or people who invest in big, disruptive ideas.
Assuming the business idea is one that you can execute, the important thing to remember is that the idea, per se, is only worth 10 cents of a magic dollar – maybe 20 cents if you have a patent or intellectual property protection. The other 80-90 per cent of that dollar is dependent on how well the idea is executed. And the strength of the team of people hired to take the idea to market. A good idea is necessary, but not sufficient for a growth company to be successful. Figuring out the right market, having a compelling proposition, developing a growth strategy and plan, hiring the right people, building an organisation that can deliver on its promises, and building the muscle of execution is required for companies to grow.
Don’t be seduced by business ideas that you think are great. Take the time and rigor to research the feasibility of production, profile the ideal customers, map the competition, and identify your competitive advantage. It’s very hard to turn bad ideas into good ones. But poor planning and bad execution can quickly turn good ideas into ugly ones.