“Wow! My business idea is the next unicorn in the making!”
Ever enjoyed this surreal feeling? But then comes in the doubts, because not every idea works (in fact the majority don’t!). Next in line is the most important thing, you take a bet on the business idea, because the best business ideas are always out of the box! If you want to test if a business idea will work, you need to spend a huge chunk of time, effort and resources. Still the management gurus and case studies suggest a few things that can make your decision a bit safer! So, let’s start this journey with the most important question- Is your business idea viable?
P.S.: My focus is more on lines of the most logical findings! Enjoy!
Quick Ways to Test if Your Business Idea is Viable
After reading quite a few management books + case studies, here are three most conventional ways to check the viability of a business idea (but a game changer check is in the next section!)
1. Market Research + Pilot Testing
Imagine you developed a new unique recipe for making mango pickle, but will it actually sell? The best way to check is understanding if there is a market. How? Simply refer to some case studies, try to understand your prospective customers’ needs and pain points then see if you can make a successful business here. Next, take feedback directly! How? Make your friends, neighbors and even unknown people taste your pickle for free and get their feedback. There! You now know where to improve or is your business idea already ready for launch!
Fun fact: this process is also known as curating a Minimum Viable Product (MVP) i.e. an early prototype of a product to just test with a few consumers to get feedback!
2. Ask an Expert
What did you used to do in school when you were stuck at that pesky math algebra problem? Reach out to that topper geek of your class or go to your favorite math teacher! Do the same here. If you can find an industry expert from the same industry that your idea belongs to, you can get genuine feedback from them. What’s even better? If your idea is fantastic, they can connect you to the correct people who can help you further.
3. Finance Check
Money! That’s one of the biggest challenges for every business. The mango pickle idea probably doesn’t require much investment initially considering it would be a home grown business, but still you need to foresee the costs and where you are planning to invest. If your ‘next billion dollar’ company idea needs big investment, you need to plan even more ahead on how you will get the finances and how you will service the investment.
Don’t just think about short term, you need to think about overall investments too that include:
a. Initial capital requirement
b. Salaries
c. Day to day expenses
d. Raw materials
e. Projected investment for growth
And many more such finance decisions based on your idea!
Finding Your Market as Per Blue Ocean Strategy
Just like the name sounds it’s actually a super cool concept also known as value innovation! Though it’s a tough approach but often leaves you with better chances of your business idea skyrocketing and growing like anything!
The book Blue Ocean Strategy by Renée Mauborgne and W. Chan Kim details some really interesting facts and gives brilliant practical marketing lessons. If you ever went scuba diving or love the marines then you will enjoy this strategy even more. With context to our topic, here’s how it’s applicable!
There are two types of oceans being referred to here. In the first one there are just too many fishes, sharks etc in the same space, everyone’s fighting for survival. Result, the ocean water starts getting red, because there’s literally blood bath. Ouch! That sounds too brutal. But that’s how it is in competitive well known market spaces too. If too many players keep entering the same market, result is they have to keep on lowering their prices and still maintain the quality because the customers have too many options to choose from. That leads to the businesses barely surviving and exiting the market while new ones keep coming. A few older players here might still be doing well as they are already veterans and ruling the market (like sharks in the ocean!).
Second situation is a cleaner, much calmer ocean with just a handful of fishes having more than enough space to swim and live. Result, the ocean water remains blue, clear and happier! But what is this magical space? This is a market space that functions on originality and unique value proposition. Your business is the only go to option for the consumer and if there is demand for it, your business gets successful too!
Want an example here? It’s Uber! Yes, those same taxi rides you enjoy at a tap of your fingertips. They disrupted the traditional taxi business by creating a technology driven platform to make hiring taxis and commuting easier, accessible, convenient and somewhat cheaper too. And as you can see the business is flourishing and has become a household name world over!
An Indian example? Zerodha! They made the brokerage industry super accessible for every household by introducing a user friendly and low cost pricing model that is still working really well even after some competitors have entered the market.
So, how can you find if your business idea falls under the Blue Ocean Strategy?
Here’s a quick check, Your business idea should:
1. Have a unique value proposition
2. Potentially creating a new unexplored market
3. Have almost zero competition
4. Ensure you are reducing the cost
5. Address unmet customer needs
For everyone interested in more theory, Blue Ocean strategy works on the Eliminate, Reduce, Reuse, Create (ERRC) framework. This tool helps in unlocking new markets and identifying the value proposition by answering a few questions
Eliminate
What factors can be eliminated that the industry kept competing on since long?
Reduce
Which factors can be reduced below the normal industry standards?
Reuse
What factors can be raised above the normal industry standards?
Create
Which factors can be created that the industry was never offered (unique value proposition)?
Sounds a little technical but once you find your true product differentiator, your business idea has way more chances of flourishing.
The risk involved? Demand! When you venture into a new market of an existing broad industry, it’s literally category creation and that can become a hassle if there’s no potential demand for your product. Catering to a new market or market gap is great but you need to be double sure there is a potential demand for the product or service. That’s why the 5th point is so important, your product should address unmet customer’s needs.
Be unique but not so unique that no one wants your product!
There’s actually something called purple ocean strategy too which is a mix of both concepts, but let’s leave it for another time as it can get confusing!
So, this was an interesting yet scientific way to ensure your business idea has better chances of working. Does that mean conventional businesses don’t work? No, they still do but the difficulty and success rate is significantly very low if your business has nothing unique to offer.
That brings us to concluding my very first blog on this journey to find the logic behind every marketing concept. Hope you enjoyed it!