Who’s the customer… is your offer attractive?
- Entrepreneurial ambition and/or potential scalable product or service idea for a big enough target market.
- Initial business idea on why and how it would create value.
- One person or a vague team; no confirmed commitment or no right balance of skills in the team structure yet.
Million $ Question
Assuming that you have not identified the user need through your own pain point (experience in market);
How can you discover that need? How do you generate the hypothesis?
Walk In Their Shoes
A good starting point for developing your idea, is to ‘walk in the customers shoes’. One way to do that is to go out, and try to understand what it’s like to be a customer.
Have intimate discussions with potential customers.
By having intimate discussions, you can arrive at many insights (pain points to be solved). However, according to Prof. S. Zenios (Stanford), ‘you have to go down a lot of alleys to see what the real underlying problem is, that you’re trying to solve (just pick a group you want to serve, and learn what their problems are).’
The greatest correlation to the success of entrepreneurial students at Stanford University is; how many interviews they have done do potential customers.
One crucial distinction to be made at the startup ideation stage is trying to understand:
Is my hypothesis valid — and if it’s not valid – why is it not valid?
That question can be partially answered by deploying the ‘concierge minimal viable product’. In other words, creating a something (napkin image, presentation, demo etc.) with just enough features to gather meaningful feedback from potential customers. For what ever idea you might be testing, it’s always also a good idea do something (get a job or work placement), in a field close to your startup idea area of interest (gaining domain expertise).
Remember to also develop a repeatable process of experimentation (ideation). Because your first idea might not ‘fly’, that repeatable process can be used later when testing future ideas (hypothesis).
How to examine your business idea?
NOTE: video starts & stops at pre-assigned times
Turn customer needs/problems into a profitable company.
Take the time to understand the primary function of your startup idea, and variations on that idea or ideas (in a broader way than what you’re currently considering). The ‘Business Model Archetypes’, provides a conceptual framework for thinking through the possible startup opportunities you may not have considered earlier (different business model options).
7 Business Models
When evaluating each of your ideas, consider how those ideas might (or might not), fit into the different business model archetypes.
- Product focuses on the development of a tangible artifact that can be bought and sold for a one-time cost. Attributes include; product development and monetization (sale of product).
- Subscription is a blend of product and service (continued access for a monthly cost etc.). Attributes include; customization, maintenance and monetization (time and materials).
- Service is an intangible solution (integration, maintenance, or customization by skilled professionals). Attributes include; customization, maintenance and monetization (time and materials).
- Brokerage combines the activities of Trade and Service by trading on behalf of clients, as a service (provide assistance through more efficient sourcing). Attributes include; recruiting wholesalers and monetization (base-fee plus commission).
- Trading connects buyers and sellers (buy product for less than it is sold). Attributes include; sourcing, advertising and monetization (arbitrage)
- Marketplace brings together buyers and sellers (self-service platform). Attributes include; recruit vendors, advertise and monetization (commission).
- Ecosystem combines all archetypes – Product, Service, and Trade… Typical prototype examples of an ecosystem are the technology platform. Attributes include; develop software, manage servers and monetization (subscription).
What needs to be true… for idea to work?