World-famous inventor Thomas Edison once said that the value of an idea lay in using it.
Taking an idea to utility, however, remains one of biggest stumbling blocks for entrepreneurs. Scores of startups fail to convert seemingly perfect ideas into opportunities for a multitude of reasons.
Let’s take a few examples to understand this.
Suppose you want to come up with a product or service for the elderly. That's your idea. If the product or service can address the pain points of the elderly while helping you make money in the long run, it is definitely a business opportunity. But the idea may not materialise into opportunity for several reasons.
Maybe there aren’t enough old adults, i.e., the target group is small. Or maybe the target group is big enough but there is little value in the idea, i.e., the demand is being fulfilled by existing market players and there is marginal scope for you to generate revenues. Or maybe the target group is big enough and there are no competitors, but the idea is not feasible due to lack of resources, such as finance, people or infrastructure.
So how do you determine if an idea is a real opportunity?
If an idea fits into the following framework, you can explore it further to ascertain its attractiveness.
Relevant: It must address customers' needs or solve their problems. In entrepreneurial lingo, this is called problem-solution fit.
Eric Ries, the pioneer of the lean startup movement, firmly believed that the success of a startup lay in its relevance. “Success is not delivering a feature; it is learning how to solve the customer’s problem,” he said.
When Shashank ND launched health-tech startup Practo nine years ago, his aim was to simplify healthcare for the common man. Practo has been registering four-fold growth year on year, earns revenues of Rs 100-120 crore, and is the largest doctor appointment-booking platform in the country.
Innovative: The idea should be innovative or, at the very least, have a unique selling proposition. This will give it competitive edge, if not enough firepower to disrupt the industry.
Arguably, Apple’s iPhone was one of the most innovative products launched in the last decade. It simply redefined the way people used their mobile phones. Now, self-drive car companies like Tesla, Uber and Google, among others, are set to disrupt the automobile industry.
Scalable: The idea should be rapidly scalable and expandable without burning cash.
Instant messaging service WhatsApp is a case in point. The app, which has a staggering 1 billion daily active users, has scaled dizzying heights with a tiny team. When it was acquired by Facebook for $19 billion, WhatsApp reportedly had 35 engineers and reached more than 450 million users. Today, despite the growth in user base, it employs only about 50 engineers.
That's scalability for you.
Timely: The timing of entering the market should be appropriate. Being too early or too late can mar the idea's value.
In a TED talk, American investor and serial entrepreneur Bill Gross mentioned that ‘timing’ was the single biggest reason most companies succeeded.
Airbnb and Uber have one thing in common—timing. They entered the market at a time when it was just ready for their kind of business. The rest, as they say, is history.
Viable: Does the idea provide a one-off or short-term solution? Can it ensure repeat customers to make the business profitable in the long run?
Most food-tech startups, including names like Dazos and TinyOwl, had to shut shop because they were not able to manage their unit economics. They were following the 'me-too’ model, which failed to sustain in the long run.
It doesn’t take a dime to ideate but if the idea is experimented into opportunity without deliberate consideration, it can result in huge costs in terms of money, time and resources. Remember, an idea doesn’t carry a risk, but an opportunity does.
Amit Dua is co-founder and CEO of Signity Solutions, and founding partner at ValueAppz Solutions