There’s a big difference between an idea and a successful business (or a successful new product/service). Here are a few quick thoughts on how to evaluate whether your idea is worth pursuing as a business opportunity:
1. Is there a compelling need? Do people really need the solution you are proposing? Or is it just a ‘nice to have’, something they might think about doing sometime if the mood strikes them. Too many consumer internet businesses fail this test, in my opinion – they may have some novelty or coolness value but this erodes very quickly. If you’re going to build a real business, you need to be serving a compelling customer need.
2. Will they pay for it? The gap between “yeah I’d buy that” and “here’s the money” is surprisingly large. This means that asking people about a potential product/service is not as useful as actually getting real customers. One framework that may help is to consider what drives value for the customer – e.g. the value of a published report, software-as-a-service, or tangible product typically depends on its own quality; but the value of a marketplace or advertising opportunity depends on how many of the right people are using it.
3. Is there a viable business model? Can you deliver the product/service at a cost that is sufficiently less than people’s willingness to pay? This is a common stumbling block since the devil is in the details and things inevitably cost more and take longer than you expect. Chances are your initial business model will need to be evolved after you launch, but it’s still worth doing some sanity checking first before you spend time on it. Also, if your business model only works “at scale” – e.g. a marketplace – then you need a good answer to how you will actually getting to scale without going bust.
4. Are you the right people to launch it? Execution counts for a lot in business. It’s not just how good your idea is, but whether you have the capabilities, expertise, network, and resources to make it happen. Sometimes it may be a cracker of a business idea, but you’re simply not the right person to build that business. Partnering may be a solution to this, but then again maybe you should just move on to your next good idea.
What do you think? Are there other key issues you would suggest someone consider in evaluating their next big idea?