From idea to business

Pedro Neves

PART I But does it work?

Identifying good ideas and turning them into opportunities

3

• 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?

4

• Simple ways to have ideas

• Things you like / dislike

• Hobbies

• Prior experience

• The news

• Friends

• Analyze trends

Ideas are a dime a dozen

5

• Green trend

• Clean-Energy trend

• Organic-Orientation trend

• Economic trend

• Social trend

• Health trend

• Web trend

Follow the trends

6

• 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

7

• 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

8

• 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

9

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?

10

• 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

11

And now what???

12

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

13

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

14

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

15

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

16

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

pneves@novasbe.pt