Can Your Business Idea Succeed

Chris’ Story

Chris had a great idea, expand his family’s 50 year old family history publishing house into a one stop shop for people who wanted to tell their family’s story in any kind of format. His publishing house specialized in traditional hard or soft bound books. Their list of publications included more than 450 books.

Chris saw that people told their story using a variety of methods: DVD's, CDs, picture books, calendars, and more. Yet, people had to wade through a variety of publishers, because no one did them all. I will not expose Chris’ strategy. I want to share how he analyzed his idea.

Chris adopted a growing method for exploring his business idea called Lean Startup. It was coined by Eric Ries. Chris explored and refined his idea before he invested a dime.

1. He researched the idea on the Internet and at conventions. He attended lectures by famous family historians. He asked them questions. He modified his idea based on their feedback.
2. He shared his idea and asked for feedback from a variety of vendors who sold the products he hoped to offer. He also asked questions from marketing and business groups he attended. He modified his idea based on the feedback he received.
3. He met with his current clients and with potential clients. He presented his idea and listened to their feedback. He modified the idea and presented it again to the current and potential clients and asked for feedback. He modified it again and presented it again—and again.
4. Finally, when all of his focus groups said they liked it, he invested the money to make it real. His work paid off, within one week of his announcement clients placed orders. They continue to do so significantly increasing revenues and profits.

Chris’ idea will propel his publishing business into the next 50 years of success. A business tied to publishing books had little future as people choose different options for telling their stories. However, a one-stop business that can help people tell their story in any format they desire will continue to grow. Especially, when the ideas was reviewed and refined not by the business owner—but by the very people it chooses to serve.

Traditional Model

In the past, potential entrepreneurs planned two types of businesses. The majority of businesses were (1) small-business startups designed to provide a better than adequate income to support the owners family(s) or (2) large-business startups designed to copy the Rockefellers and Carnegies by making a huge splash that would make the original team of owners and investors rich.

How potential business owners developed their business idea into a company also differed from today. Then, potential business owners discovered an idea they thought could make money. They developed the idea conducting market research through books (Steven Blank offers an amazing historical bibliography) and interviewing a few potential customers. They wrote their business plan and pitched it to potential investors to get money to build a prototype. The owner did not feel they could abandon a flawed model because the investors paid for that certain business model. They spent the investors money retrying their idea until the investors took over the company. A few avoided this pitfall and flew to success with the original creators still in charge. Most either crashed and burned or were taken over.

Today’s Type of Startup or Enhanced Business

Today’s entrepreneur faces a wider variety of choices. John Richards with the Rollins Center for eBusiness in the BYU Marriott School of Management introduced me to Steve Blank’s work.  Steve Blank describes these options in his book The Four Steps to the Epiphany (a definite must read for todays entrepreneurs).

• Small Business Startup Entrepreneurship: basically started on one idea that will provide an income to support the family(s). Similar to what we described as traditional. Most existing and startup businesses fit into this category. Small Business startups receive little of the angel or capital investments today. They can still receive SBA secured loans with approved collateral.
• Scalable Startup Entrepreneurship: seeks to build a small company into a large company based on a business model (not product or service) that can expand globally quickly. Google, Facebook, Ancestry.com, Omniture and others typify this model. It needs startup money to grow the model quickly. Most of today’s investment money goes into scalable businesses.
• Large Company Entrepreneurship: usually stem from existing large companies that spin off a new product or technology. Frequently, these stem from an “intrapreneur” or “skunk works” within a large company. Post It Notes would have been an example of this. Most of the funding for this startup comes from within the parent company or it stockholders.
• Social Entrepreneurship: a new brand of “business” where traditional non-profit endeavors such as literacy, microfinance, health, and other social causes adapt business models and processes. While the startup investment may come from grants or donations, usually they come from the founders approach. Ben and Jerry of the ice cream fame used a lot of their money for social entrepreneurship.

These represent the kind of business models for today. Now let’s examine a better, less costly method for getting your idea to market.

Lean Startups with Pivots

Eric Ries and a number of others advocate a different approach for getting your idea to market. Rather than creating the idea, getting the funding, and then implementing the plan; lean startup believes you get massive refinement before you ask for a lot of money. This was the approach Chris used to bring his idea to market.

Lean startup involves concept called “agile development”, “customer development teams”, and pivots”.

• Agile development implies that you can change your business idea based on customer development to better respond to their desires. Your agility to adapt prevents becoming mired in an intoxicating idea nobody wants. While the term “agile software development” captures a related method used in the software industry we refer to the broader application to business development.
• Customer Development Teams consist of current or potential clients to which you present your idea and solicit feedback. Using their feedback, you refine or drastically change your idea—and present it to the customer development team again. You repeat the process until they completely accept your idea. Then, you begin to implement. Many times customer development team members invest in the idea before it is implemented because they invested themselves in the process.
• Pivoting the act of completely changing the business model, product, or service based on the response of customer development team. Frequently, multiple pivots take place before the company officially opens. Pivoting on paper, rather than in reality, saves time and money.

How do you know if your business idea can succeed. First choose the right business model for your business idea. Second, listen to your clients or potential clients. Be able to reject portions of the idea, or the whole idea for what your clients tell you. Make your mistakes on paper rather than making them with cash. Good luck learning more about these.

Join us next week when we discuss Who and What is Your Competition