The art of finding business startup ideas

 

Wouldn’t it be great if it were easy for entrepreneurs to generate business startup ideas worth pursuing?

While everybody agrees that execution is crucial, generating great ideas is equally important: no founder could seriously expect investments when pitching poor initiatives.

Finding ideas may be easy for some; however, generating impactful initiatives that justify several years of hard labor and capital investments is an entirely different challenge. Fortunately, there are ways to make the ideation process doable.

Paul Graham recently published a great essay (that will be discussed below): ‘How to Get Great Startup Ideas,’ in which he details a clear ideation methodology rooted in his extensive start-ups experience.

Beyond this must-read essay for entrepreneurs, I encourage aspiring startup founders to seek out other idea generation techniques, too. Why? First, exposure to different points of view and methodologies is an effective fertilizer. Second, these philosophies are not necessarily mutually exclusive. Third, idea generation processes – just like the startup ideas themselves – are a lot about personal preferences and fit.

Let’s review four different ideation philosophies:

Methodology #1: Solving your problems

How to Get Startup Ideas – Paul Graham

Graham is the co-founder of Y Combinator, the startup incubator that has funded Dropbox, Airbnb, Stripe, and Reddit, among many other startups.

Key Points:

  • Great business startup ideas share 3 characteristics: the founders need the solution offered by the ideas, the founders can personally build them, and not many others believe in them.
  • The problem to be solved should be severe and urgent, at least for some people, as opposed to a problem that only mildly interests many potential customers.

 Graham’s advise to entrepreneurs:

  • Notice an existing real problem; don’t ‘think about one.’ Noticing comes from looking for things that are missing, and it is much easier to do when the founder is at the leading edge of a domain. Graham cites Robert Pirsig in Zen and the Art of Motorcycle Maintenance:

“You want to know how to paint a perfect painting? It’s easy. Make yourself perfect and then just paint naturally.

  • Get to the leading edge of a domain (even if only as a user). Further, mastering two domains (e.g. programming plus life sciences) will give you a huge advantage.
  • Turn off distracting filters, such as, “Can this idea really turn into a big business?” These should only be applied at a later phase, because it takes time to realize the full potential of good ideas.
  • Pay attention to ideas for things that some dismiss as “toys.” Often, these lead to great products.
  • Ignore competition. Graham claims that “it’s exceptionally rare for startups to be killed by competitors- so rare that you can almost discount the possibility.

My suggestions:

  • A good starting point to finding problems and solutions: try thinking about ‘a job that needs to be done.’ Many years ago, Harvard’s Prof. Ted Levitt said “People don’t want to buy a quarter-inch drill. They want a quarter-inch hole!” Understanding the real job that needs to be done – and that different customer segments may need different jobs – will improve the ideationprocess. [More about this concept could be found at the HBR article Marketing Malpractice: The Cause and the Cure by Prof. Clayton Christensen et al.]
  • To learn more about “toy” ideas that became successful products, check Chris Dixon’s post: The next big thing will start out looking like a toy.
  • Finally, an ambitious innovator who comfortably considers becoming the next Zuckerberg, Page, or Brin is advised to read Graham’s Frighteningly Ambitious Startup Ideas.

Methodology #2: Looking for places prone to innovation

How to find startup ideas – Matt Cutts

Cutts is the Head of Google’s Webspam team. His popular blog focuses mainly on SEO. 

Key Points:

  • Cutts presents a structured approach to identifying ‘hot spots’ that need solutions. He defines a hot spot as: an area of high information density, clutter, stress, disorganization, or any place that has a suboptimal solution.”
  • After finding a hotspot, Cutts explains, one should think about a  solution via the web or cloud. He provides examples of hotspots (like piles of business cards and pens) and their solutions (CloudContacts and Livescribe, respectively). 

My suggestions:

  • Some people are more perceptive than others, and as Cutts mentions, some are more irritated than others by everyday problems that sometimes go unnoticed. By methodically looking for potential hotspots, other people can make up for their relative disadvantages.
  • Training yourself to look for hotspots may take time, but it’s worth the effort. Start with the places where you spend lots of time and energy, for example at home and work. Later, you can progress to the less obvious ones.
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Methodology #3: Testing startup ideas systematically

Developing new startup ideas – Chris Dixon

Dixon is a prominent angel investor. Foursquare, Kickstarter, Pinterest, Dropbox and Skype are some ofhis investments.

 Key Points:

Dixon urges aspiring founders to keep updated spreadsheets with all their ideas and discuss them with as many relevant people as possible (in another post, he explains why entrepreneurs should be the opposite of secretive).

When listening to many people, the challenge is to sift for the signal among the noise. Dixon’s experience is that feedback often depends on the position and environment of the speakers:

  • Employees of large companies are more useful for providing data and less for evaluating the strength of a startup idea.
  • VCs are good at discussing other relevant companies and testing the idea’s validity through several key business filters.
  • Potential customers: there is a big difference between B2C and B2B (who will most likely buy the product only 2-3 years ahead).
  • Entrepreneurs: the only group Dixon suggests fully listening to. 

My suggestions:

  • This post is more about idea valuation and less about idea generation (which Dixon discusses in another post, explaining why the myth of the ‘Eureka’ moment is far from reality).
  • When sharing and discussing ideas with fellow entrepreneurs, keep in mind that not all innovators are alike. Some differences are meaningful and should be acknowledged when considering the given feedback. For example:
  • Customer types with whom the speaker is experienced (Corporate vs. SMEs vs. individuals)
  • Industry sectors (e.g., biotech, medical devices or renewable energy vs. internet or mobile apps)
  • The speaker’s personal experience with VCs / angel investments, or lack thereof.

Methodology #4: Making changes to existing products

Finding Your Innovation Sweet Spot  – Goldenberg et al.

The writers of this 2003 Article built on the TRIZ (‘Theory of Inventive Problem Solving’) technique developed by Genrich S. Altshuller.

Key Points:

The above methodologies focus on identifying problems or customer needs. In contrast, this system focuses on existing products. You can change existing products in five different patterns and examine the resulting new product for feasibility and market potential.

The five innovation patterns are:

  • Subtraction. Eliminating the wheels from a bicycle results in stationary exercise bikes; alternatively, subtracting bicycles’ pedals leads to balance bikes for toddlers.
  • Multiplication. Gillette’s practice of adding razors to its blades is an excellent example. It started by creating double-blade razors, and led to today’s five-blade Fusion.
  • Division. Many years ago, hi-fi came in integrated systems, which were replaced by standalone units over time (separate CD/DVD players, receivers, speakers, etc.).
  • Task unification. Adding new functionality to an existing component, leading it to perform two tasks. (e.g., adding wheels to suitcases, diminishing the need for luggage carts).
  • Attribute dependency change. Creating new dependencies between a product and its surroundings. For example, sunglasses whose lenses change depending on sunlight.

My suggestions:

The aforementioned examples may seem dated. However, the digital age offers new modern examples. Check these out to get inspired:

  • Subtraction: Apple’s iPhone, released in 2008, presented only two primary buttons and moved the functionalities of most of the common buttons to the touch screen.
  • Division: for years, no competitor succeeded in presenting a valid alternative for Craigslist; however, many ventures succeeded by focusing on only one domain of Craigslist., For example, ELance (in services); Airbnb (in sublets); Etsy (in art and craft); okcupid and JDate (in personals). [To see more, check Andrew Parker’s post and infographic The spawn of Craigslist].
  • Task unification: Today’s smartphones offer functionality that once required many different gadgets: watches, alarm clocks, cameras, GPS, etc.

Business startup ideas: the bottom line

There are various ways to go about startup ideation; one of them should fit you. Just do it!

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