You want to start a business. You love the thought of being your own boss, working your own hours and doing all of it your way. You’ve got the entrepreneurial spirit and the will to make big things happen.
There’s just one problem, you don’t have an idea. You see billion dollar tech companies spring out of garages and 20 something’s brains and you wonder “why didn’t I think of that?” You start to doubt yourself; you start to question if you really have what it takes.
Stop thinking this way because if you continue, you’ll be at the same roadblock forever. Many will simply think in circles while their businesses never make it out of the starting blocks. Why do you get stuck here? Why doesn’t just ‘thinking of an idea’ work?
The truth is that your thought patterns aren’t following the right process. You’re skipping too many steps. You’re not creating the right environment and system to allow great ideas to come to the surface and grow.
The ‘Problem’ Approach to Idea Generation:
The ultimate question that we’re trying to answer is: ‘what is a good idea?’ Let’s take it back to the basics. A good idea is an idea that’s profitable. What does it take to be profitable? In the simplest sense you’ve got to create demand from customers; they have to want what you’re selling. But how can you generate this demand?
Whenever people spend their money, they’re hoping to solve a problem. They’re hungry, they need to impress their friends, they need a new fridge, they need a way to organise their lives, they need an escape. Every dollar spent has a problem-solving purpose. When you adopt this way of thinking, you start to realise that it’s a lot easier to find problems than it is to find ideas. Problems are all around us, we come up against them every day, sometimes they slap us in the face just the way that you would want a great idea to. The only issue is that we don’t see them for what they are, opportunities.
What’s a good problem?
A good problem is one that customers will pay you to fix. Why would they do this? There are two reasons:
- You can solve a problem that customers are paying for better than your competitors
- You can solve a problem that customers will pay for that no one else is currently solving
That’s the foundation of a great idea. The only other ingredient you need is the ability to solve these problems at a lower cost than customers are willing to pay. If you can achieve this, you’ll have a profitable business.
Now we know what our idea-destination looks like: do something better or do something new, and do it in a way where customers are willing to pay more than it cost you. The best part is that by deconstructing these criteria, we can create a roadmap to a profitable business.
Step 1.) Play to Your Strengths:
Remember, if we want to be profitable in an existing market- we have to do something better than our competitors. That might be by creating a superior product that solves a consumer problem better. Or it might by providing a customer with a product that solves the problem equally well, but at a lower price. You can also enter new markets by solving problems that no one else has. In any case, it often helps if you’re able to leverage your skills and interests.
Depending on the type of market you’re planning on entering and the level of competition you’re facing, being highly skilled in an area may be a prerequisite. For example, if you want to sell you services as an NBA player you’ll need to be tremendously skilled at basketball. If you want to open a medical practice, you’ll need years of education.
Not all businesses require such specialised skillsets. Companies worth billions have been founded by those who played to more general strengths like being a good leader, evaluating investment decisions, general business management and having an eye for talent. The list of potential skills goes on forever and most of them are being leveraged by people in some way to make profit.
Everyone has skills and almost everyone has the potential to leverage these skills into a successful business. Understand that depending on your business, skills can be a great edge; however they’re not always essential. You don’t always need skills to do something better than your competitors. Some amazing businesses simply have hard-work and perseverance to thank for their success.
Don’t be afraid to explore your passions and interests even if you don’t think you’re particularly skilled at them. Willpower and perseverance are highly underrated but often critical elements to starting a successful business. If you’re interested in what you’re doing you’re far more likely to develop both willpower and perserverance. Skills can always be developed during the process. Einstein said: “I have no special talents. I am only passionately curious.” Starting a business around something you don’t like, even if you’re good at it, is often a waste of time as our perseverance will wain long before a successful business has been realised. Vincent Van Gogh once said: “I would rather die of passion than of boredom”.
- What you can do better than other people?
- What are you skilled at?
- What are you passionate about?
- What do you spend your time doing?
Keep these skills in that back of your mind and think about how you might be able to leverage them as we move on to the next step.
Step 2.) Find a Problem
The next step is to find a problem. This shouldn’t be difficult; humans have long since proved that our needs and wants are unlimited. Give us more wealth and we’ll simply increase our standard of living. Soaring credit card debt suggests we’ll increase it anyway.
The best way to find problems that consumers are facing is to draw from our own experience. It’s far more likely that we’ll be able to find a real problem and truly appreciate it well enough to come up with a solution if we’ve experienced it first-hand.
Caught in the Paris snow in 2008, Travis Kalanick and Garret Camp were stuck without a cab. They realised that traditional cabs weren’t convenient and they weren’t always available at peak time. Travis and Garret recognised that they had a problem and months later, Uber was born. Uber allowed for one touch pick-up and created a network of flexible drivers where a workforce could be tapped into when demand surged. A few years later and Uber has a network of over one billion drivers and customers. Uber has continued to demonstrate their knowledge of their particular consumer problem: investing in technology to make the service even more convenient. They’ve also begun using a dynamic pricing system in order to change prices in real time based on demand.
In 2013 Stanford student Evan Spiegel and some of his classmates were sending pictures to girls and stating that they wished the photos would disappear afterwards. The problem was that traditional social media was permanent, but in some situations people wanted to put things online only temporarily. Snapchat was born and spread like wildfire. Facebook recently offered $3 billion for Snapchat however the company’s founders turned it down. Snapchat is evidence that new technology can give rise to new problems and market opportunities. It’s easy to think that all the big problems have already been solved, however we often forget that new technology gives rise to new problems. Spiegel recognised that the rise of social media had a problem- once something was online it was out there forever. This problem didn’t even exist a few years ago.
Step 3.) Find Out if Customers Will Pay For You to Fix the Problem
Finding a problem is easy, however finding one that customers will pay you to fix is another story. If you’re trying to compete in an existing market, than the answer is easy- people are already paying to have this problem taken care of so you can be sure that it exists. All you have to do in this situation is take some of the market share by either solving the problem better, or less expensively.
Perhaps you’re trying to solve a new problem, something that consumers are facing but currently don’t have a good solution to. In this case, how do you know that a market even exists? You don’t. You need to test the market first.
How to test the market is a whole different topic. Historically businesses have done things like surveys and focus groups to get a feel for what products consumers will spend their money on. More recently platforms like KickStarter have allowed people to ‘test’ their product ideas. These are typically low risk strategies as they typically don’t involve a lot of investment in actually making a product that a market might not exist for.
A new school of thought to testing the market is to simply build and ship your product as quickly as possible in its most basic form. Eric Ries advocates this method towards market research in his best seller The Lean Startup. In the book, Eric explains that often customers don’t really know what they want until they have it. By developing a prototype or a ‘version one’ and shipping it to customers you can incorporate customer feedback on what works and what doesn’t, using this information to drive future versions of the product. A lot of videogame companies have adopted this approach; shipping the beta or even alpha versions to early adopters and incorporating their feedback to develop the final game. While this is typically (but not always) more expensive than trying to test the market without developing a product, Eric advocates that it’s a lot cheaper than building a product just to find that customers don’t actually want it.
Your particular product will drive whether or not you conduct market testing before product development or as part of the development process. The important part is that you prove that:
1.) There is a problem; and
2.) Customers are willing to pay you to fix it
So many business ventures will fail because they either didn’t ask these questions, or they only thought they knew the answer. We’ve probably all had a friend who has been excited about a business idea or venture. They seem so sure that it’s destined to succeed without having tested the market. Entering a business like this is reckless and really no different from gambling. All businesses carry risk, but good entrepreneurs will limit this by using techniques to understand the market. This is absolutely no different from any investor researching an investment before pulling the trigger.
Step 4.) Solve the Problem
You’ve found a problem that customers are willing to pay for, Job done right? Not at all. If solving a consumer problem costs you more money than customers are willing to pay, then you have a charity, not a business. A business must make profit and if you’re going to make profit you need to be able to provide the solution at a lower cost than consumers are willing to pay.
If this is not a problem, great, you’ve got the makings of a successful product and business. If it is, you’ll need to consider how to lower the cost of your product. Perhaps there’s a more cost-effective way to solve your customers problems? Maybe there’s a way you could make customers pay more? Could you use this product as a loss-leader to drive sales of more profitable products? I can’t tell you specifics here, it depends completely on your problem and how you intend to solve it. Think critically about every cost element associated with your product and contemplate ways to lower or eliminate them.
If you’ve satisfied the above four steps, you should have the good business idea you were looking for; one that solves a problem that customers are willing to pay for. If you’ve managed to achieve the last ingredient of being able to sell your product at a profit, you’ve got a product that can be used to launch a successful business.