5 Questions You Should Ask to Find Out If You Have a Good Business Idea or a Dud
It's frustrating to watch: So many innovative individuals and teams come up with new business ideas, yet struggle with how to screen the good ones from the not-so-good ones and articulate their concepts to potential customers, investors or partners. As a consequence, good startup or new product ideas too frequently fail to see the light of day.
For innovators, what's often missing is simply knowing what questions to ask and how to go about addressing them. That's why there is tremendous value in taking the time early on to clearly define, screen and communicate a new business concept. I created the "Launch Lens" framework to do just that.
Developing the Launch Lens has been an iterative process. Personal entrepreneurial experience combined with more than 15 years' worth of teaching MBA students at the University of Michigan has shown me that there are reoccurring challenges founders face in getting a new venture off the ground. Over time and with further development, application and refinement, the Launch Lens emerged, and I recently published a book by the same name. The series of 20 questions is a simple yet powerful framework that takes innovators through a structured process to distinguish good ideas from the weak ones, and lay the cornerstones for the startup planning process.
Before diving head-first into a new business, entrepreneurs (and intrapreneurs, too) should ask and answer at least these five questions from The Launch Lens:
Who are your customers?
Describe the types of customers you plan to serve and be as specific as possible. If your product is a football-oriented mobile game catering to 18- to 24-year-old "gamer" males, say so. Stating that your potential customers could include anyone with a mobile phone is too broad and nonspecific as to be unhelpful. If you plan to produce fancy designer jeans, are they skinny jeans targeted toward hipsters? Dad jeans targeted toward guys like, well, me?
If your new business is a B2B product such as a CRM (customer relationship management) app, the same solution could theoretically be targeting ecommerce companies, big-box chains or Main Street retailers; which is it? A healthcare product might be targeting standalone health clinics or large hospital systems; decide. And importantly, with B2B customers, you need to specify not just the type of enterprise that would use your product or service, but the job description of the individual who would be the typical user. Would the end user be a warehouse manager or a forklift operator? A teacher or an administrator? A clinic director, a physician's assistant or a billing specialist?
What is your customer's unmet need?
Put another way, what is the customer's "pain" that your product or service is designed to address? This could be an acute or dramatic unmet need -- for instance, the inventors of the pacemaker saw an unmet need for individuals whose hearts were beating slowly or unpredictably, thereby endangering their lives. In other cases, some businesses fulfill unmet needs that might be less of a need than a want. For instance, when my daughter took a gap year during her education and launched a business producing hand-sewn, leather-bound journals, the "unmet need" was the desire on the part of some writers and diarists for a more personal, unique notebook.
Generally speaking, you'll encounter greater customer demand for your new product based on the extent that it's addressing a more burning need. So ask yourself, would your solution be solving a "shark-bite pain" (your target customers must have this solution) or more of a "mosquito-bite pain" (it'd be nice to have your solution but by no means critical)?
How are your customers addressing this need today?
It's never OK to say, "My customers are not addressing this need today." Of course they are, albeit perhaps by using another, less elegant method. Before antibiotic cream, for instance, people still tried to remove germs from their cuts and scratches by washing with soap and water. Prior to the advent of antilock braking systems, drivers pumped their breaks manually. Prior to CRM systems, businesses tracked customers by keeping lists and spreadsheets.
What is your solution?
What product, service or product/service combination will you be offering? And remember, you ought to be able to describe your solution in a single, clear, unambiguous sentence. Run your brief solution description by several people who don't know your business to see if they all come away with the same understanding. I can't tell you how many times I've read or heard an entrepreneur's product description and come away confused: Is it a service? A mobile app? A physical product?
How will your customers benefit?
Related to our second question -- "What is your customer's unmet need?" -- asking how customers will benefit from your solution helps to clearly articulate the "value proposition" of the business. With our previous designer-dad-jeans example, the benefit I might realize as a customer would probably be tough to quantify and somewhat marginal: The new product makes me seem like a cooler dad (oxymoron alert!). With our pacemaker example, by contrast, the original inventors could have quantified the customer benefit in very concrete terms of number of patient lives saved and lifespans extended.
The foundational question when a new product or business idea comes to mind is, "Is this worth pursuing?" Some ideas that may appear strong at first prove sketchy -- and the converse. From my personal experience as an entrepreneur and in advising thousands of others, I've seen that asking these rigorous "filtering" questions and others in the Launch Lens (helping define market size, business model, fundability, etc.) brings clarity. When a quick 20-minute screen shows an idea to be weak, abandon it and move on. For others that show preliminary promise, you may find them worth a more detailed "drill down" exploration on some of the questions, developing your thinking for a stronger business plan.