Are you considering developing a new product, or perhaps even starting a company? Wanna explore if your business idea has a shot at success before you get too far into development?
Try using the 5 opportunity screens listed below to analyze the viability of the opportunity. If your idea doesn’t get a green light in each of the screens, and you can’t think of a creative way to overcome its limitations, proceed with caution (or not at all).
#1 Burning Need
This is the most important screen. Ask yourself — Who is your customer, and what do they need? Is someone out there biting his or her nails desperate for the solution you provide? What are their major pain points that you are going to fix? Are they going to think to themselves “thank goodness!” and clamor to be early adopters?
The best way to assess the burning need for your product is to talk to as many potential customers as possible. Focus the conversation on their needs and desires. Only once you have fully grasped their needs should you ask their opinion on the desirability of your product. Don’t let your focus on your product/solution cloud your ability to understand the customer.
#2 Large and/or Growing Market
Are there a lot of potential customers for this product/service? Are their needs already being met by someone else, creating a crowded competitive environment?
Identify and quantify a specific segment, and how much of that segment you can expect to capture. Be specific in terms of the demographics, and psychographics of your customer. And get granular – who will be your first 50 customers, and why?
#3 Scalable Business Model
Is there a viable business model? Do the unit economics make sense (for example, when considering the costs and revenue for an individual product being sold, will you make a profit)? With each customer you add, will it become easier and less expensive to serve them? Is there a possibility to grow exponentially in the first few years?
This screen is particularly important for ventures that will require outside financing. Venture capitalists, in particular, expect huge returns and a highly scalable opportunity. Speak with potential customers to check their willingness to pay, look at proxies, and check prices with suppliers to determine your economics.
#4 Right Time
Is the customer ready for this solution? Is the industry or market in its infancy and starting to take off? Is the necessary infrastructure in place to support it (such as broadband being critical to much of the recent internet technology adoption). Are there Macro-economics at play that make this time particularly attractive (such as changing regulations or exchange rates)? Is there a window of opportunity to get in and block future competitors? How defensible is that position?
This can be one of the trickiest screens, because you want to be on the leading edge, particularly with technology products, but you can lose big if you are too early. Even the best and brightest can miss this one. Try talking to as many experts as possible in the industry, particularly those who have tried the same thing and failed.
#5 Right Team
Be honest with yourself. Are you the most qualified (in the world) to succeed at this endeavor? Do you have the passion and the experience to make this work? If not, is there a way you can supplement your team?
Having the right team is critical, particularly if you are looking for outside funding. Many Venture capitalists invest in people, not projects.
Remember – these are just 5 universal screens. An individual business opportunity and even an individual entrepreneur should devise additional screens to determine if an idea is worthwhile. The more you screen an idea, the more solid your business plan will become.
I encourage you to make this a fluid creative process. By analyzing your idea using these screens, you will be best served if you let your vision evolve to meet the market need.
Thanks to Professors Zafar, Star, and Fuchs at the HAAS school of business for their entrepreneurial insights that inspired this post.