Human creativity knows no bounds. However, not all great ideas can and should be turned into successful businesses. How exactly can you tell if you have a winner? In this blog and the corresponding video, we present a five-step framework you can use to determine if your idea is viable enough to pursue it further.
Step # 1:Conduct market research to validate that the problem is real. Talk to prospective customers.
As part of this step, you have to research the target market, or markets, in depth. I recommend that you specifically focus on the latest industry and technological trends as well as analyze all distinct prospective customer segments. Your goal is to confirm with concrete data that the problem you identified is indeed a real pain point for at least one target customer segment and that it has not been solved efficiently as of yet.
Step # 2: Prove that the problem addresses a big enough market to justify creating a business solving it.
Now that you confirmed that there is a gap to be filled, you need to validate that it addresses a big enough market. Even if you found a real problem, but it serves a niche audience, you may find it challenging to raise capital because of limited growth prospects. Further, when you combine limited upside with a high startup failure rate, it is not hard to conclude that all such ventures have a low risk/reward ratio and are unattractive investments.
Step # 3: Understand why it has not been solved by the existing market players as of yet.
The third key piece of analysis is to understand why the issue you identified has not been solved by the existing market players. Very often, there are legitimate reasons why that is the case such as lack of adequate technology, no market access, an inability or slowness to recognize a new market need, absence of capital, etc.
However, if you can find no such reason and there are no barriers to entry such as intellectual property or regulatory requirements, the danger is that once you start working on your product and the word gets out, any big player can simply allocate enough capital to develop your idea on its own and go to market faster and bigger using its much more significant resources as well as the brand power.
Step # 4: Ascertain that your proposed solution is 1000x better than the competition.
We live in an age where only remarkable products, as described in the book “Purple Cow: Transform Your Business By Being Remarkable” by Seth Godin, have a chance to succeed. Thus in order for your idea to have a chance, it must be 1000x better than all the existing market solutions. Conducting a thorough competitive analysis and specifically focusing on the comparison of features and benefits will help you reach the correct conclusion in a logical data-driven manner. Generally speaking you want to create a painkiller, as opposed to a vitamin pill.
Step # 5: Gauge the urgency, or how badly target customers need a solution.
Finally, you need to gauge the urgency of bringing your solution to market. How much do the prospective customers suffer from the problem you identified not being solved? Are they losing a lot of money? Will they soon be unable to meet new regulatory requirements? A sense of urgency adds marketability and viability to your idea because it is a big driver of demand.
To learn more about how to evaluate the financial feasibility of your ideas, check out Course # 2.
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