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So, you want to start a new venture, but how do you get started? The starting point is a question that gets asked and thought about often, but most startup-oriented articles do not specifically focus on this initial stage of the startup process. In a word, it starts with ideation. Denotatively, ideation is the process of forming a new idea or concept. Concerning ideating for a new venture, one can take two typical paths. The first stems from encountering a nagging problem that presents enough trouble that one actively wants to find a solution as no current solutions are sufficient or existent. The other typical path involves a deep dive into a specific market, seeking to uncover a market inefficiency or market gap that proves significant enough that a solution could disrupt that market or represent a so-called “blue ocean” amidst a sea of bloody, competition-filled waters. There is a third path, and it involves innovating something for the future – developing something you know consumers will want even if they, themselves don’t know it yet. This article will focus on the first two paths, as the third requires true genius and a forward-looking lens that most people (myself included) lack.
Ideas are a dime a dozen to use a cliché. Beyond merely coming up with ideas, one has to couple such ideation with two other fundamental principles, the first is understanding the opportunity, and the second is intrinsic motivation usually derived from passion. An idea must represent a promising opportunity. A promising opportunity in business means that there is true potential to build a sustainable business model. In other words, enough people must want to buy your solutionso that it is economically favorable. Moreover, the idea must ignite some sense of passion within the ideator to ensure that, if viable, the motivation exists to develop the idea into a product/service that can sustain a business. The holy trinity of an idea that an entrepreneur is motivated about, coupled with an enticing market opportunity, amounts to the first stage in developing a new venture or product/service line.
Along with motivation, an entrepreneur must possess the knowledge, skills, and abilities required to turn an idea into a product or service. If an entrepreneur lacks in any or multiple business areas, a prudent first step is to start reading voraciously and learn as much as possible. The second way forward is to consider your gaps and find co-founders to fill them. All that said, we are getting ahead of ourselves. First, we must qualify or validate an idea to see if an opportunity exists and presents a ripe prospect to build a sustainable business model. Once qualified, we must determine if the ideator has the motivation for undergoing the arduous process of bringing the idea to fruition.
Ideation: Solving a Problem that negatively affects you
Oftentimes entrepreneurs and people in general ideate based on a challenge they or someone they know encounters. It may start along the lines of, “this is really annoying that product/service X can’t do this one thing I need it to.” Or, “I wish there was something that could do this thing for me; it would make my life so much easier.” Another common scenario, more innovative perhaps, is, “wouldn’t it be cool if there was something that could do this thing?!”
Ideas like these often pop into one’s head, sometimes consciously, while others without much intentional thought. One piece of advice for these fleeting ideas is to write them down on physical paper quickly or type them into a word document or a note on a mobile device. With this approach, you can feel confident you won’t forget your potentially amazing idea and can come back to it to start the vetting process when you are ready.
Ideation: Solving a Market Inefficiency or Uncovering a Gap
The other approach to ideation is to come at it from a market perspective by first seeking to uncover a market gap or market inefficiency. When taking this approach, it is first necessary to have a solid understanding of the market encompassing the competition (both incumbents and new entrants), the level of competition in terms of how fragmented or not the market is, and an understanding of the current market size versus its unrealized potential. The final consideration is understanding the different market segments and their current level of satisfaction with existing solutions. Though this list excludes many critical market forces, again, this is merely a starting point for ideation. A deeper understanding of a market’s micro and macro forces is required once the feasibility analysis of an idea ensues.
Focusing on the ideation component itself, when approaching it from a market perspective, ideas often start with the realization that something could be better, faster (fill in the superlative), than current offerings. Or the corollary, in which current offerings fail in one or more ways. This process closely resembles the approach from above but is more targeted to a specific market, as opposed to a specific problem in general. The challenge with this strategy is to understand if your idea is something consumers desperately need. If so, is it something you can do those other competitors can’t easily copy? If the answers to both are yes, you may be onto something. If not, you may be best suited to ideate some more.
Alternatively, one can seek to uncover whether a market’s unrealized potential is being wasted. Is a segment that is underrepresented, being overlooked, or completely forgotten? Or is there an opportunity to create a new market? This alternative path seeks to reveal a blue ocean.
The premise behind a blue ocean is to find a market devoid of competition and let other competitors duke it out in blood-filled water for market scraps. Intriguing, I know! In their pivotal book, Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant (2005), professors Chan Kim and Renee Mauborgne explain the allure of a blue ocean comprising an uncontested or unexploited market that provides those seeking to exploit it, numerous advantages such as fortifying barriers to entry, cost advantages and more.
Though there are many examples of blue ocean strategy, the most resonant one is the story of Yellow Tail wine. At the time, the wine market had two primary segments that competitors fought for – the high-end, mainly comprising expensive French and Italian wine consumers, and the low-end cheap, box-wine consumers. There was no middle ground. In the wine market, the high-end segment focused on offerings with high price points and intense notes that the average consumer may not be able to discern, or like much for that matter. Meanwhile, the low-end consumers had few cheap wine offerings to select from, which were low in price and even lower in taste and drinkability.
The genius entrepreneurs at Yellow Tail realized that a tangential market, the one for beer, offered its consumers an affordable and highly drinkable smattering of beer options. Drawing from the tangential market revealed a potentially pristine blue ocean worth pursuing. The Yellow Tail team understood that if they could make an affordable, easy-to-drink wine that was well-branded and didn’t come in a box, they may have found a blue ocean to exploit. Yellow Tail created a new market while the high-end competitors fought for the oenophile market share, and the box wine competitors fought for the low-end segment. The new market, wedged in between the two existing segments within the overall wine market, was devoid of competition. Yellow Tail created a new market and established a foothold without competing directly with incumbents. Brilliant, right?! Yellow Tail’s offering created a highly drinkable wine that had the look of finer, more expensive wines (in a nicely branded bottle) without the high price point.
Several important considerations are worth noting. One, Yellow Tail did not disrupt the wine market through innovation. They did not develop new wine technology or breed a novel, super wine grape. They instead uncovered a market gap, one without competition, and created an offering to solve it. In so doing, Yellow Tail afforded themselves a first mover advantage and the opportunity to establish themselves as a market leader for the newly created segment, and the ability to dictate pricing while fortifying barriers to entry. From the consumer side, many new wine drinkers were elated to discover an easy-to-drink wine that looked and tasted great without breaking the bank.
You have an idea; now what?
Once you have an idea, it is time to look at how feasible the idea is to bring to market, what type of market opportunities exist, and if you truly have the motivation to carry it through to the end. Everyone would do it if it were easy to bring an idea to life; however, bringing an idea to fruition is far easier said than done.
Validate your idea with hypothesis testing
Step 1 – The first step in validating an idea is to define the problem you aim to solve.
[Problem X is …]
Drawing on the Yellow Tail example, your problem definition could be –
The problem is that there are no decent-tasting wines in a bottle that are affordable.
Step 2 – Second, define a hypothesis relating your idea to those that may want it. Since you do not know who may want your idea, it is important to cast a wide net.
For example, here are two related hypotheses that will let you know if your idea may be worth pursuing.
Hypothesis 1a– If a product/service could provide benefit X, then people would want it.
Hypothesis 1b – If people want a product that offers benefit X, then people would be willing to pay for it.
Step 3 – Create a survey and test your hypotheses
With your problem and hypotheses defined, you now have to go out and test them. Doing so entails speaking with people and asking them a standard set of questions. Make your question set consist of five simple questions to give you the information necessary to validate your idea.
- Is problem X (define your problem or pain point) worth solving?
- If yes, go to question 2.
- If no, ask why and then find another respondent to query.
- If there was a product/service that provided benefit X, would you want it?
- If yes, go to question 3
- If no, go to question (2b)
(2b) – Since you would not want a product/service that offered benefit X, can you think of a product/service that you would want instead that solved the challenge of (state your pain point you are trying to solve)?
- If the respondent answers, thank them and find another person to ask, starting from the top.
- On a scale of 1-10 (with 10 being the best idea you’ve ever heard), how good of an idea is the product/service in question? [Now, go to question 4]
- Since you would want a product/service that offered benefit X, would you be willing to pay for it?
- If yes, go to question 5
- if no, ask why not and thank the respondent before finding another to start with from the top
- Since you would be willing to pay for a product/service that provided benefit X, how much do you think such a product/service would be worth?Or, how much would you be willing to pay for it?
How many people is enough?
While you test your hypotheses, remember that the more people you speak with, the better. Since this is a preliminary feasibility study, you should aim to talk with between 30 and 100 individuals or businesses (depending on the type of market you aim to serve).
It can be quite daunting to get out in public and ask strangers about your idea. This process starts to expose the difficulty that entrepreneurship encompasses. Getting out there illustrates that you may have the motivation necessary to carry this through. However, if you find yourself struggling with this initial step, it may signal that entrepreneurship is not for you – as it only gets more difficult moving forward.
Analyze the data and make a decision
Once you collect your data from respondents, it is time to analyze it. If you get a lot of yes answers and some high scores of 8 or better on question 3, this could be an indicator that your idea may be worth pursuing. Use the pricing information to calculate whether or not the idea can provide the economic benefit necessary to sustain a business.
If, however, you get a lot of no responses, you may need to pivot this idea before conducting another feasibility study to determine its potential efficacy. The follow-up questions may help you better understand what people are looking for in terms of solving the problem or pain point and give you an even better idea to pursue. If all seems promising, it is recommended you complete a more in-depth feasibility analysis and conduct extensive market research.
Once you complete your preliminary feasibility study, pat yourself on the back. Entrepreneurship is difficult, and coming up with a “good” idea worth pursuing and motivating you to bring it to market is no easy feat.