All new business ventures start with an idea. However, not all ideas can (nor should) become business ventures. Being able to efficiently differentiate between an idea and a viable opportunity is a must for successful entrepreneurs.
The genesis of an idea is merely the first step to uncovering an opportunity. The next step should be an objective, dispassionate assessment: What is the true opportunity here, and is it worth pursuing?
The following provides a quick yet robust framework for assessing the opportunity potential of your idea.
1) idea analysis
Opportunities are rarely “found”. They need to be created and earned.
The first step is to “stress test” the idea itself. You should be able to accurately and clearly articulate the idea in no more than 50 words. If you cannot, then the idea requires further refinement.
Most entrepreneurs discover that the venture they end up running differs markedly from that which they originally started. As they learn more about their chosen market and the opportunity itself, they uncover different – and more lucrative – applications.
It is important to understand the macro forces (social, political, demographic, technological and economic) that gave rise to the change that, in turn, created the opportunity.
2) intellectual property position
The next step is to conduct a thorough intellectual property (“IP”) analysis to determine whether IP protection is available or, alternatively, whether your idea (in its present form) contravenes the IP rights of others.
Securing IP rights is not mandatory but does provide a lawful means for excluding or inhibiting competitors from market entry.
3) competitor and market analysis
Two primary predictors of market success are the extent to which a venture is isolated (initially at least) from potential competitors, and the degree of demonstrated market demand for the product or service.
It is important to ‘touch the market’ as early as possible. Identify who the consumers will be. Conduct primary market research, speaking directly to potential consumers, suppliers/manufacturers, distributors and industry experts to gain alternate perspectives.
An important caveat: ensure that your interview sessions are exploratory, and non-specific. This will not only ensure you do not tip off potential competitors, but, under the Patents Act, you may lose your patent rights if you demonstrate, sell or discuss your invention in public before filing a patent application.
Analyse the competitive situation by identifying all potential competitors and then conduct a traditional SWOT analysis. Having distinguished that which differentiates your proposed product/service, test whether this is sufficient to provide a competitive advantage and whether such an advantage is sustainable in light of likely competitive responses.
4) barriers to market entry
The business context defines the true nature of the opportunity. Macro and micro-economic factors, regulatory burdens, approval processes and other government interventions, demographics, cultural issues and the nature and degree of competition affect your opportunity.
5) window of opportunity
Opportunities are created in ‘real time’, so it is important to understand both the size and time-sensitivity of the ‘window of opportunity’ created. Moving earlier – as the window is opening – is more conducive to success. As the market grows and matures, the conditions may become less favourable.
6) self analysis
It is important to assess your personal capability to pursue the opportunity. Put bluntly, having the best idea does not make a critical difference. The ability to follow through is what matters.
Commercial success requires hard work. However, it doesn’t need to involve heartache. Save yourself the frustration of pursuing an ill-conceived idea by doing your homework before investing the dollars and the effort. Ask yourself, ‘Is your idea really an opportunity?’