How to Choose a New Business Idea

There is a science (process) to determining if you have a viable new business idea.
We are living in the era of the great American Entrepreneurial Society. We live in an age when more and more Americans are leaving Corporate America to pursue the great American dream of starting their very own new business venture. To support these start-up initiatives, networks are popping up everywhere to facilitate the needs of entrepreneurs and start-ups. You can see this trend continuing to evolve in the massive proliferation of support resources such as: business incubators, expanded course offerings in colleges for such new business topics as entrepreneurship, leadership, business funding, venture capitalism and angel investing, in addition to a spike in new franchises openings.
Organizations funded by city, state and Federal Government agencies to support new business start-ups are everywhere and include: Economic Development Centers, Small Business Development Centers, SCORE, the Small Business Administration, WIBO, the Marion Ewing Kaufman Foundation, the Levin Institute, New York City Business Solutions Center, micro-lenders. crowd-based funding sources (like Kick Starter and IndieGogo) etc.
How can you decide if a business idea or new product/service idea you have can be developed into a new business? Here’s how…
Create a New Business Framework.
In step one of Customer Discovery, you’ll first summarize (and then develop a one- or two-page brief about each of the following:
1. Value Proposition: the product/service, its features and benefits or uniqueness versus the competition; size of the market opportunity; and the minimum viable product that best illustrates the product as quickly as possible, to elicit customer feedback early.
2. Customer Segments: who your customer is, and what problems the product solves. You want to define your ideal customer in as much detail as possible.
3. Channels: how you’ll distribute and sell your product. Are you going to sell direct to your consumer, or sell through an e-commerce website. Will you employ a direct sales force? Will you sell your products at street fairs, bazaars, or flea markets?
4. Customer Relationships: how will you create demand? Through traditional advertising, personal parties where you demo your product, other?
5. Cost Structure: you need to determine what all of the fixed and variable costs are that are required to operate your business.
6. Key Activities: what tasks must your company perform, in order to succeed?
7. Key Resources: suppliers, commodities, or other essential elements of the business.
8. Key Partners: other enterprises essential to success of the business.
9. Revenue Streams: revenue and profit sources and size.
In the earliest stages of business model development, it’s often most helpful to start with the first four elements at the heart of most businesses.
Testing the Model
Customer Discovery involves testing your above list of hypotheses with customers, preferably in face-to-face interviews. At least once a week, update the canvas to reflect any pivots or iterations, highlighting in red the changes from the last week. After you and your partners agree on the changes to your business model, integrate them into what becomes your new canvas for the week (with accepted changes then shown in black). During the next week, note any new changes again in red. Then repeat, repeat, repeat.
Don’t expect every customer or channel prospect you interview to have a valid opinion on every aspect of the business model. Some users will know a great deal about the features they’d like to see, and perhaps about competition. Others will know more about how the company buys products, some will know about how much the company might pay, or how serious the problem actually is. Most will offer good feedback about the way they learn about new products in their industry.
Your job as the entrepreneur pursuing this new business idea is to get as much feedback as possible using the Customer Discovery method to assemble a credible, validated “mosaic” that over time will affirm or validate all nine sets of business model hypotheses.
Define Your New Business/Identify a New Market in SIX (6) Easy Steps:  
Following is a six-step “cheat sheet” of actions you should employ, in order to determine if you have an idea for a new product, service, or business that can be pursued as a viable new business venture:
1. Investigate opportunities in an existing or new value system: Begin by assessing the the value chain (a.k.a the playing field) to consider all of the key stakeholders. That will enable you to determine where your new company will compete. Find a space, niche, or opening. Think about the opportunities that exist for you to add value to potential customers, either by unlocking value by creating more efficient ways of doing things. You can also deliver “New to the world” value by creating new benefits. Lastly, opportunities may exist for you to customize offerings. You do this by allowing your potential customers to personalize your products/services or remove unwanted features (think Yahoo! News, for example.) You can also build community by developing chat rooms, user forums, or closed community websites like Lastly, you can introduce new functionality/user experiences. Since communications, computing, and entertainment keep converging, there are continuously new customer experiences to offer.
2. Identify unmet or under-served needs: You can reveal unmet or under-represented needs by mapping the entire customer decision-making process like Amazon uses personal recommendations. Ask yourself what steps the customer goes through? Where does the customer obtain their information? Where does their decision-making process take place? What opportunities exist online for customers to enhance or entirely transform the customer’s experience. These are all valid steps to find customer needs not being met in the marketplace.
3. Determine your target segments: A market is the set of all actual and potential buyers who have sufficient interest in, income for, and access to your products/services.
Market segmentation divides your market into distinct groups of homogenous consumers who all have similar needs and consumer behavior, and thus require similar marketing mixes. Segmentation strategies that can be applied for both Business-to-consumer & Business-to-business markets include the following:
* Behavioral
* Demographic
* Psychographic
* Geographic
* Occasion
* Benefits
* Nature of good or service
* Buying condition of the consumer
* Demographic details
Descriptive or consumer-based markets are related to what kind of person or organization the customer is. Behavioral or product-oriented target markets are related to how the customer thinks of or uses the brand, product, or service. Behavioral segmentation bases are often most valuable in understanding branding issues, because they have clearer strategic implications.
You can find your ideal target market / segment by determining who you want to sell your products to. Actionable segmentation is when your ideal segments are easy to identify. Segments can be easily reached by defining in terms of their growth, size, profile, and attractiveness. Meaningful segmentation is when you can explain why customers act the way they do. This can be accomplished because customers in a segment behave in similar ways. Sheds light into customer motivations, and correlates to differences in profitability or cost to serve these segments.
4. Assess resource requirements to deliver the offering: Begin by asking what capabilities you are going to need, in order to deliver a new offering. You are going to have to determine what experience and benefits the product will provide your customers. Define the capabilities and technology that will be required to deliver the benefits of your product/service offering. You’ll need to develop a resource system, the collection of individual and organizational activities and assets you and any of your employees will have to bring to the table. For online marketing, shift the focus from activities and capabilities in the “physical” world to a mix of marketplace and virtual assets you’ll need, like social media, blogging, web development video capabilities, email surveys, etc.
5. Assess the attractiveness of the opportunity: This is no easy task. You’re going have to gauge what the competitive landscape is like? Who are the key players. Then tackle your potential customer dynamics, by assessing the level / amount of unmet need, any interaction between customer segments, and the likely growth rate of your target segment. Technology vulnerability is another factor I suggest you consider. To explore this area, you will need to figure out how vulnerable your new product/service is to technology trends/advancements. See this cool video on how cloud computing is changing the marketing game. The last consideration to factor into the equation is “microeconomics” namely the size/volume of the market and your projected profitability.
6. Make an educated “Go/No-Go” decision: If you do the prior FIVE steps then this becomes a fairly easy final touch to the entire process, namely deciding whether or not to move ahead or abandon this new business idea. Of course reaching this stage and deciding NOT to proceed can be extremely difficult even when all indications lead you to avoid pursuing because you are so emotionally committed to/invested in wanting to charge boldly ahead.
1) “World Wide Rave” book by David Meerman Scott. His rules:
* NOBODY cares about your products except you.
* No coercion is required.
* You should lose control.
* Put down roots.
* Create triggers that encourage people to share.
* Point the world to your (virtual) doorstep.
2) “How to make your case in 30 seconds.” How to craft a KILLER elevator pitch.
3) Entrepreneurship/Start-Up Social Media Sites & Resources:
* PartnerUp: online community on Twitter for entrepreneurs.
* StartUpNation: Everything you need to start a business.
* Biznik: Going at it alone…together.
* Cofoundr: Exclusive deals for entrepreneurs.
* The Funded: All-in-one resource for entrpereneurs.
Here’s to your success in starting a new business in 2013. May it be the start of an entirely new path for you!
Ethan Chazin, The Compassionate Coach