A few months ago, I spoke at a conference on entrepreneurship at the Indian Institute of Management, Ahmedabad. There were several students in the audience who were aspiring to be entrepreneurs. The most persistent question thrown at speakers during informal chats in the evening was: I want to be an entrepreneur. What business should I start?
Most speakers found the question a bit absurd. Any business that you start has to be your idea. You cannot go haring after an idea that someone else has given you in a casual conversation.
So the question becomes: Where do the best business ideas come from and is that where you’ve been looking? While good ideas can come from anywhere or anyone, the best ones come from observing and interacting with customers.
If you know your prospective customers well enough, if you have spoken to them, if you have been a customer yourself, and if you have felt the pain—then, perhaps, you have gained customer insights that contain the germ of a great business idea.
Great business ideas are those that solve a customer’s problems. Sometimes, customers will tell you what problem they need solved. At other times, they will not articulate it and you will have to dig deep. Many times, customers will not even know they have a problem. You will have to get into their skin, join the dots and figure it out for yourself.
Whichever way you look at it, successful new businesses usually solve a problem. So, the first test of a great business idea is whether you are solving an unsolved problem.
But apart from the unsolved problem test, a good business idea also has to pass three other tests before you can call it a great idea—the right one for you to pursue.
The first test is the test of passion. Does the idea resonate within you? Have you lived with it long enough? Have you explored it from various angles? Have you discussed it with prospective customers? Does it capture your imagination? Does it motivate you enough to spend the rest of your life doing it? Is it your calling? How passionate are you about it?
The second test is the test of unique qualification. Will you be the best person to execute it? Do you have the capabilities required to bring that idea to life? As an individual, you cannot personally possess each and every quality required to build a large business, but do you have a team of founders that can provide leadership to the company in most of the critical areas? Are you and your team uniquely qualified to pursue that business?
The third test is the test of scalability. Is there a reasonable probability that the pursuit of that idea will result in the creation of a large profitable business that grows fast, assuming that you do wish to create this kind of business? I must acknowledge here that you can be perfectly happy building a small profitable business, or doing a not-for-profit. Having said that, the fact is that most people want to build large profitable businesses.
To the extent that the test of passion and, to some extent, the test of unique qualification depend upon qualities internal to you, the answers will be different for different people. However, let us look at the test of scalability and explore some of the generic traits of businesses that become large and profitable.
In general, businesses that scale up quickly address potentially large markets. They solve an important problem that is felt by a large number of people. They are first movers in their space, or at least early movers, entering markets before the competition does. They are usually market leaders.
They have a clear, credible, compelling and differentiated value proposition that is simple and easy to communicate to their prospective customers. They are able to hit a hot button with their intended customers. They execute well and use a service or product creation and delivery method where the capacity can be scaled up quickly. They create defensible intellectual property. They innovate continuously and focus on those areas where they have a core competence. They frequently benefit from a positive network effect, have high operating leverage and are in businesses where revenues scale up disproportionate to headcount.
They build other barriers to entry in their spaces as well. They survive recessionary cycles—more than once. They are magnets for talent and the best people in their industry are usually to be found there. And, they share wealth with the employees, who helped create it.
The most successful firms built in the last three decades around the world by first generation entrepreneurs possess many of the attributes listed above—Microsoft Corp., Yahoo Inc., Google Inc., Oracle Corp., Infosys Technologies Ltd and many others.
So what’s your big idea? Does it measure up?
The author is co-founder and chief executive officer, InfoEdge (India) Ltd, which runs the Web portal Naukri.com. He writes a monthly column on careers and enterprise.
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