The How-To: Converting Your Entrepreneurial Ideas Into Viable Business Opportunities
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In today’s dynamic, unpredictable world, there is one simple but powerful rule– whoever learns fastest wins. The most successful entrepreneurs win the customer race by learning about unmet customer needs sooner than their competition. They win the innovation race by learning (and implementing) new technologies and business models faster than their rivals. They win the profit race by learning new ways to deliver products and services more efficiently and more affordably than others. Even when an emerging competitor is disrupting a mature market, the best entrepreneurs quickly learn why this new entry is successful, and how to mimic or improve upon their success.
Most of us learn in two ways– either through analysis, or through action. Learning through analysis is the bedrock of modern management, and is the motive behind the rise of big data and artificial intelligence. When we learn through activities like market research, financial modeling, and benchmarking, we are learning through analysis. Traditional business schools are all about learning through analysis. Most of the concepts, frameworks, and tools they teach in courses from economics to accounting and finance are means to analyze business challenges and opportunities. Then, through that analysis, they teach students to develop improved strategies and business plans.
Inside organizations, much of our corporate training is built around helping new employees become better analysts, and we typically reward those that can analyze and synthesize complex, confusing, and sometimes contradictory information to solve problems and identify opportunities. We also reward those who can collaborate with others to combine their analytical powers to find and develop new ideas.
Learning through analysis is important, but the best entrepreneurs don’t succeed because they learn faster than others through better analysis. They learn faster than others because they learn through action. While competitors are in their offices and meeting rooms analyzing and thinking about emerging market opportunities, successful entrepreneurs are out with customers understanding their pain points, engaging them to brainstorm solutions, and quickly prototyping and improving their best ideas with an ever-growing group of enthusiastic users.
When it comes to entrepreneurship, why is learning through analysis slower than learning through action? In many ways, learning through analysis is all about learning from the past using information you already have or can access easily. Helpful, but if that is all the learning you do, you are unlikely to discover something that your best competitors (who also have strong analysts) haven’t learned already. But learning through action is all about learning from newly created insights and reactions coming directly from your current or future customers not from the heads of your similarly-minded colleagues, or the results of a Google search.
Action-generated learning with customers is faster because learning mostly happens through experience and feedback. And the simplest, shortest and fastest feedback loop in entrepreneurship comes from engaging with customers. With an action-based, rapid feedback loop, you can quickly learn whether an idea that sounded good in your head (or generated excitement in a team meeting) actually resonates with customers and truly solves their pain point. Furthermore, the best ideas typically come from surprises, and surprises rarely come from analyzing and thinking; they come from trying something and getting a surprising result.
Of course, to be successful we need to learn from both thinking and acting. At Babson College, we have built our entire business school curriculum around the practice of Entrepreneurial Thought and Action™. We believe in teaching our students to face uncertainty and disruption by first emphasizing learning through action. This means immersing themselves in the lives of customers, understanding their pain points, and engaging customers to brainstorm, prototype, and test solutions. Only when they start to feel confident that they truly have uncovered a viable opportunity and novel solution do they start to shift toward more analyzing, strategizing and planning.
This approach keeps entrepreneurial problem-solving in the customer’s world longer, which successful entrepreneurs have found leads to better solutions and just as importantly, exposes bad ones. It avoids the unfortunate trap common in many companies where “innovation” teams isolate themselves from customers and convince themselves (by thinking and talking amongst themselves) they’ve come up with a winning idea. Energized by false confidence, they commit large amounts of time and resources toward an idea that goes nowhere. Often, it’s an idea that could have been discarded swiftly with early customer engagement. This idea of learning through action isn’t just the habit of Silicon Valley entrepreneurs.
While in Dubai a few weeks ago, I met Manoj Nakra, who has spent the past 25 years in the region as an entrepreneur, business incubator, and educator. He recently published a book entitled A 1000 Days Adventure – Entrepreneur Journeys: The Crafting of Business, where he distils the wisdom of 45 UAE-based entrepreneurs. He has also found that the best entrepreneurs begin by engaging with customers and iterate between problem-finding and solution-testing until they have learned enough to feel confident risking more time and resources testing with a larger group of customers.
In other words, they learn through action until they have a problem solution that with further analysis, planning and strategizing, can lead to a viable business opportunity. So, regardless of your current position, venture or business challenge, ask yourself whether you will learn faster by sitting in your office and thinking harder about an idea, or quickly prototyping your idea and showing it to potential customers. The latter might feel more uncomfortable and risky, but it is the secret to success for serial entrepreneurs. Whoever learns fastest wins.