| How to capitalize on a
brainstorm |
| |
| Entrepreneurs are often creative types who generate a
constant flow of ideas and insights but are flummoxed by the next step: how to
turn a great concept into reality. |
| |
| They need to analyze the opportunity in a methodical fashion
- that means understanding its potential and determining if they can make it
work, then designing a strategy to pull it off. |
| |
| Here is a step-by-step approach to managing
brainstorms: |
| |
| Is the opportunity real? The key to discovering whether an
idea is an opportunity is to ask a few potential customers for their feedback.
A typical approach would be to describe the product or service and ask them
what they think. Find out if they would be interested in it, how they would
like to see it modified and what they would pay for it. |
| |
| How would they expect the product to be made available to
them? Do they know of any similar ideas? How many people in their industry
might want to use the concept? If someone is already doing it, what value could
you add to make the customer want to buy from you? Be careful only to ask
questions of potential clients who are incapable of quickly taking your idea
and doing it themselves. If customers don't seem to like your proposal, move on
to something else. |
| |
| Determine the size of the opportunity. Once potential
customers have confirmed that an opportunity exists, it is time to do your
homework to determine the characteristics and nature of the industry. |
| |
| This would include how it conducts business, its normal
cycles, and the types of suppliers and customers it contains. How do goods or
services add value in this industry and what are the critical success
factors? |
| |
| Find out why businesses fail and how well new ideas are
accepted. What are the substitute products or services and the nature of their
industries? Most important is to determine how your product or service will get
to market. |
| |
| One entrepreneur created a new type of frozen dessert
product that customers loved. But he discovered too late that the only way to
move it to market was in refrigerated trucks operated by ice cram
manufacturers, who viewed this new dessert as major competition. The venture
failed when the product was not properly delivered to stores. There is no
substitute for this kind of insight. |
| |
| Basic information on industry size, structure and performance
characteristics can be assembled from various sources: government statistics,
trade associations, magazines, bankers, accountants, suppliers, local chambers
of commerce and potential customers. |
| |
| Risks and rewards. Once the research is complete, evaluate
your findings. This is the step where most losses occur. Entrepreneurs are
often so enamoured with their idea that all the information they have gathered
is rationalized to support it. But you might also get negative feedback: "It
has never been done before." "You are ahead of your time." "How can you compete
against the industry leader?" At this stage, you must exercise your instincts.
Is this opportunity consistent with your entrepreneurial dream? Can you make it
happen and can you overcome the obstacles? Make sure you talk to your
accountant or business adviser for their views on the opportunity. |
| |
| Risk and reward tend to be correlated - the bigger the
payoff, the higher the risk. You must be rigorous in your evaluation, but you
must also be prepared to accept the pitfalls inherent in any new business
venture. |
| |
| Part of accepting risk is organizing your start-up to
minimize the downside as much as possible. The idea is to be able to walk away
at any time with a minimal loss. |
| |
| Prepare a business plan. If you still believe your idea will
work, the next step is to set up a business plan. This should include a clear
definition of what line of work you are in. It must also contain a marketing
plan, an outline for manufacturing the goods, a description of how they will be
sold, compensation plans, financial statements and - most important - cash flow
projections. |
| |
| A business plan will also help you think through the process
you intend to follow. By taking time to do an outline first, you will go a long
way to protecting against risk. |
| |
| Successful entrepreneurs know how to take new ideas,
evaluate them vigorously and either drop them or move them forward to satisfy
their customers' needs. This knowledge often comes from experience gained
through previous failures - never be afraid to try if you believe in the idea,
but also strive to keep the risk as low as possible. |
| |
| Published May 19, 1997 |
| |
