From idea to business
Pedro Neves
PART I But does it work?
Identifying good ideas and turning them into opportunities
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• READINGS: (1) Pet Rock & (2) Agylix Corporation
http://www.thinkgeek.com/product/c208/
It is so hard to have a good idea… or is it?
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• Simple ways to have ideas
• Things you like / dislike
• Hobbies
• Prior experience
• The news
• Friends
• Analyze trends
Ideas are a dime a dozen
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• Green trend
• Clean-Energy trend
• Organic-Orientation trend
• Economic trend
• Social trend
• Health trend
• Web trend
Follow the trends
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• What is the Pain / Problem? • Who suffers because of it? • How do you propose to solve it? • What’s the best existing solution? • What makes the current solution inadequate? • Why is your solution better?
• How much will it cost you to solve it? • Whose help will you need? • Who will pay for it (an how much)? • Will more customers join over time?
What you want to know about the idea
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• How many customers are there? • Who are they? • Where are they? • How will you find them? • How will you convince them?
• Who else is trying to solve the same problem? • Why can’t they do what you are doing? • Who will pay for it (an how much)? • Will more customers join over time?
• How much money do you need and how quickly will it go? • On what? How many years?
What you want to know about the idea
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• The idea for the business IS important (even if it is bound to change over time)
• Personal drive is not enough
• Can get there through technological push or market pull
• Each option moves towards the other
• Let the ideas flow NOW – don’t get blocked right away by the “how great my idea is” factor
• Consider if you have some special advantages
• Brainstorm with a heterogeneous group
A few things you should keep in mind
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1 . Does it create or add significant value to a customer or end user?
2. Does it solve a significant problem, removing a serious pain point, or meeting a significant want or need (for which someone is willing to pay a premium)?
3. Does it have a robust market, margin, and money-making characteristics that allow you to estimate and communicate sustainable value to potential stakeholders?
4. Is there a good fit between the founder(s) and the management team at the time and marketplace?
Is your idea a superior business opportunity?
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• High margins (if you are able to estimate costs accurately)
• Relatively low capital (at least to start and prove it works)
• Time to break even should be short
• Understandable (fashionable helps as well)
• Identifiable market
• Applies to a big enough market segment (that is identifiable)
• Difficult to copy (patents, trade secret, etc.)
• Initial critical mass should not be too big
Some characteristics of a good business idea
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And now what???
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1. At first, don’t worry if an idea is viable
• Going through the process separates good from bad
2. Getting the right idea may come from wrong ideas
• e.g., Viagra or Post-it notes
3. Look for ideas that require as little capital as possible
4. Look for ideas that will generate some sales quickly
• e.g., Create a family of products, the first of which can come early
Do’s and Don'ts
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5. Look for ideas where the volume does not have to be extraordinary for the company to break even
6. Look for products/services where perfect execution is not a requirement
• The first attempts will come with flaws and problems
7. Look for products/services where the management team does NOT have to be excellent
• The best team is expensive, best players may not be available, you can always upgrade
Do’s and Don'ts
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8. Look for products/services where you can identify some quantifiable number of customers
• e.g., Create a family of products, the first of which can come early
9. Look for products/services where the sales and promotion costs are reasonable
10. Look for products/services that will be attractive to the more intelligent customers
Do’s and Don'ts
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11. Avoid products/services that appear to be just fads
• e.g., Pet Rock vs. Agylix
12. Avoid products/services that require a global market
• Minimize costs by focusing on one market first
13. Avoid products/services where a big company has total control over you • You do not want to be in somebody else’s hands
14. Avoid products/services that require changes in government policies
Do’s and Don'ts
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15. Avoid products/services that are simply extensions of a competitor • Competition will get there… and fast!
16. Avoid products/services where the buying decision is too diffuse or a lot of players need to cooperate • e.g., Hospital information system
17. Avoid products/services that are “swiss army knives”
• Too many functions - usually not the best at anything
Do’s and Don'ts