Many people want to start their first business, but struggle to think of an idea that motivates them enough to pursue it. The problem is that many are looking for the perfect idea, which in reality does not exist.
Sure there are a few examples of unicorns out there, like Spotify, Airbnb or Dropbox. Ideas turned into companies that were so ingenious that they brought billions to the inventors. But those are the exception. The reality is that far more successful businesses have been created by individuals that seized the opportunity with minor improvements. Think of Dyson, who didn’t invent the hoover or Google who didn’t invent internet search.
I wrote this post to help you understand how to think up a business idea or to improve an idea you are already mulling over.
There are three perspectives from which a business idea can be approached: the product, the customer and you. Each one offers many opportunities and possibilities for creating a business.
Starting with a product idea
Most people wanting to start a business begin with the wrong idea. They assume that to start a business you need a product which is revolutionary or disruptive. The reality is that big ideas are hard to implement, especially for first-time entrepreneurs. Disruptive ideas require originality, deep knowledge and enormous resources to bring them to fruition. The risks associated are huge. Unless you have previously started a business, raised millions and returned profits to investors you are unlikely to be in the position to start a company of this type.
The alternative is incremental improvements which are much more useful for entrepreneurs. Small improvements on currently existing products are easy to create, easy to understand for the customer, and easier to raise funding for. Just look at the seemingly endless stream of new software companies. None of them are offering world-changing inventions, but their ideas are simple enough to be brought into the world.
Often we look for trends to point us towards big opportunities. But trends have the ability to mislead us. We see mega-trends or industry trends and our minds tell us that the direction and speed of the development are permanent for all eternity. Of course, we know this isn’t so. Aviation progressed with bigger and faster planes until an event occurred which reversed the trend. Now passengers can no longer fly faster than the speed of sound and planes are no longer getting bigger, because airports cannot cope with the runway required.
For every major trend, there appears to be a smaller movement that runs in the opposite direction. These minor trends can offer great opportunities for entrepreneurs. Consider the mega-trend of mobile phones becoming increasingly complex and able to control more things in our lives. And the mini-trend that runs against it. The company that now owns the Nokia brand has announced that it will reintroduce the iconic Nokia 3310.
It is always useful to consider where ideas originated and where they are heading. Great ideas are never thought up in isolation. Entrepreneurs can often spot huge opportunities at the intersection of two seemingly unrelated inventions. Mark Ridley explained this very well in his Ted talk with the memorable title: “When ideas have sex”.
Importantly Ridley reminds us that recent innovations combine and build on the knowledge of many people. More than ever are we able to use the knowledge of others to create better solutions for the world.
And modern times allow us more than ever to understand other peoples’ needs and desires.
Focusing on the customer
New approaches for startup ideas show a shift in emphasis away from products towards customer focused thinking.
One of the biggest dangers in the old style product focused approach was for entrepreneurs to fall in love with their ideas too much. This often led to perfectly designed products with no market.
Eric Reis’ “The Lean Startup” offers an antidote to the “develop to perfection approach” by suggesting to start with a “minimum viable product” which gets improved and tested in a continuous cycle. However, its critics are pointing out that the strict approach comes at the expense of creativity. Ben Silbermann the founder of Pinterest famously said he was glad he hadn’t read the book at the beginning, because it may have made him give up.
Instead of starting with a minimum viable product Silbermann developed Pinterest based on how he perceived a great product to look and feel for his customers. The first version of Pinterest was tested on only 5000 people and Silberman offered his personal phone number to receive feedback. His concern was only for the customers.
All successful startups of the last 10 years thrive because of their founder’s inherent desire to make their customers’ lives better. This requires true understanding and empathy.
The most important skill that you as an entrepreneur can develop is to listen. If you are mindful of your customers’ needs you can spot opportunities that others are too busy to witness. Customers want to matter as individuals. And in a world of unlimited choices, you can only cater to individuals if you understand their individual needs.
Empathy happens on an emotional, not a logical level.
Neuroscientists tell us that when we hear stories our brains release cortisol and oxytocin, brain chemicals that allow us to feel the story teller’s pain and pleasure. Ideally, we must try to understand our customer’s needs in a wider context, as a story.
A relatively recent approach in innovation that uses empathy as a starting point is called “design thinking”.
Initially, design thinking was developed as a process to resolve problems in current designs. But the approach can also be useful for startups. There is no need for you to invent something new if there are products and services that could be better. You can use design thinking and create a new business that builds on the flaws of other companies.
There are five steps to design thinking: empathise, define the problem, ideate a solution, create a prototype and test. The process is circular rather than linear and can require many iterations until a useful solution emerges.
To empathise means for you to understand the problem from the perspective of the user. Once you collected information from the customer the problems can be interpreted and analysed to formulate one or several solutions. During the creative step of ideating solutions, you can brainstorm and imagine many different ideas. From this, you can create a prototype, the physical or tangible solution. In the test phase, you put the prototype to the test and observe the customer interacting with it. Collecting feedback allows you to evaluate the prototype and to make possible adjustments. You can decide on a final solution which is then rolled out to the bigger market.
Thinking of new solution in the context of the whole system can be another way of coming up with new creative business ideas. This approach will allow you to see how improvements in one area can lead to significantly improved outcomes elsewhere. For example diabetes is a significant health problem in western society, which is tackled mainly with advice to reduce the intake of sugar and refined carbohydrates or through pharmaceuticals. A whole system approach would consider the causes of sugar consumption and might identify the lack of sleep as a main contributor for sugar cravings. This opens the door to many possibly solutions to tackle sleep problems, and in turn diabetes, in unexplored ways.
The human body is a classic example of a complex system. Another example is transport. Uber created an entire new system for transporting people because the founder faced the problem of not being able to get a taxi when in a foreign city.
Many people shy away from considering systems a whole. We feel that we might not be able to grasp solutions when we look at enormous complexity. But in reality, whole system thinking is simply a way that allows you to see opportunities by zooming out.
Once you have discovered a part of the system that is worth investigating, you do the reverse and zoom in.
Imagine in your quest for finding a better solution to treat diabetes you zoomed out and saw that a healthy lifestyle, including a healthy blood sugar level, boils down to three things: eating right, moving more and sleeping better. You dismiss ideas around eating because most people already work on that. But the moving part intrigues you. You think there might be business opportunities around finding ways to encourage people to move more. Especially older people, who are more likely to suffer from diabetes.
To find a business opportunity you now need to zoom in. You need to discover exactly why older people don’t engage in more physical activity and why the fitness industry does not target them as a group.
One method which has become popular over recent years is the analysis of customer experiences.
Many companies trying to improve their products or services are mapping the entire customer journey from beginning to end. The purpose is to zoom in and uncover friction points that can be improved.
Customer journey mapping was developed to help companies improve their services and create growth. But this method can also be applied to an imaginary customer journey for a company that you might be planning. Here is a video that explains how customer mapping works for an imaginary restaurant. You could easily apply it to other industries.
Of course, when you contemplate how your offer needs to look to appeal to your target audience, you need to consider what you promise to the customer.
Customers will only spend their money if they perceive the value of an offer to be fair. But first, you need to understand what it is that the customer values. Many rich people buy Ferraris but this cannot be explained as a clever motoring choice. There are many other cars that are cheaper, more economical, more environmentally friendly and safer. The reason people buy Ferraris because it is a status symbol. This is the value that the customer is happy to pay for.
Many companies, Ferrari included, thrive because they communicate their value proposition clearly. A Mont Blanc pen does not compete with other pens, but jewelry. The value is not in the pen being a writing instrument, but a luxury present.
A recent article in Harvard Business reviews entitled “What your customers really value” highlights beautifully that there is a hierarchy of values. The more values a company can tap into and the higher they are perceived the stronger a company performs.
If you see where the value comes from and you can communicate this better than competitor companies, you have an opportunity for a startup.
In the end, it’s all about you
We are living in unprecedented times where most people have access to the same information. And it is free. This was not the case even 15 years ago. Knowledge then was valuable and quality information a priced commodity.
But regardless of the ubiquity of information, your knowledge is still one of the most important facets of your business. Your experiences are unique; nobody has lived the same life as you did. Your brain processed all your experiences in a distinctive way and this now gives you an opportunity, because you view the world differently. If you are lucky your unique perspective will allow you to imagine solutions that are better than those already in the world.
Our everyday experiences give us many new start points for business opportunities. But mostly we just ignore them and get on with our busy lives. If you are looking for a startup idea one option is to look at what is annoying you in your life. What could be done better? Richard Branson started Virgin Airlines when he was frustrated by being bumped off a flight. He hired a plane, borrowed a blackboard and wrote “Virgin Airlines” at the top. Then he went around all the passengers also affected by the cancelled flight and filled his first plane.
Also, hobbies can be a great source of inspiration. When you are indulging in your hobby you are engaging freely, your mind will be more relaxed allowing you to see opportunities. You can see trends because you are often involved over a long period. You can see what experts do and what others aspire to become. Think: what do people need to reach their aspiration? What solution can I create?
The reason hobbies work so well for creating excellent ideas is because we keep an open mind. We see without judgment. We feel the atmosphere, which is the key to success for many brands like Apple Stores, GoPro, Redbull or Starbucks.
It is important to keep an uncluttered mind to absorb more experiences and to process them. Taking notes can help you to remember ideas later or combine them with others.
It is important to also realise that starting up is only the beginning.
Your idea is a seed. But unlike a plant seed it is not going to grow by itself; you need to provide the energy to make it grow.
Over time you can create a body of work. The idea is just the beginning. You make personal progress and advance your company by developing your skills and by understanding the customer better. Neuroscientists tell us that what many people consider as intuition is in reality highly developed pattern recognition. It takes most entrepreneurs years to master the skills so they appear like intuitive decision makers in their business.
Innovation and moving with the times will always be part of your business. Companies that fail to innovate simply die as other supersede them with better solutions.
Stop believing that your idea has to be perfect. Your idea doesn’t have to be perfect and neither do you. All you have to do is keep trying to improve.