Top 10 Business Idea Mistakes

By Christopher Keene www.ckeene.com

“If I were to wish for anything, I should not wish for wealth and power, but for the passionate sense of the potential.”
- Soren Kierkegaard, Either/Or

This document comes out of a course I taught in 2006 at the INSEAD business school called "Venture Opportunity." Think of it as a two page summary of an 8-session MBA course.

One of the toughest questions for a new entrepreneur is how to determine the potential for a new venture opportunity. How do you know if an opportunity is just okay or could be the next Google? (not that the Google guys saw that one coming when they started out!)

Top 10 Business Idea Mistakes

Learning how to evaluate business ideas is a skill that takes practice, like any other business skill. Although there is luck involved as well, like most other things in life, the more you practice the luckier you get.

Here are the top ten mistakes I saw in evaluating over 150 business ideas generated by INSEAD MBA students:

  1. Fox ideas – lack of focus is the single biggest idea-killer. The idea that you will do everything everyone else does only better is more of a utopian philosophy than a business opportunity. Pick one thing that you are going to do better than everybody else, what Jim Collins, author of “Good to Great”, calls the hedgehog strategy.
  2. Mini-me ideas – overestimating the number of people in the world who are exactly like you (a world full of mini-mes). Nerds always assume everyone is a nerd. MBAs assume everyone spends their lives in business hotels. Focus instead on a real and rapidly growing customer segment.
  3. Confusing theory with reality ideas – as the saying goes – “in theory, there is no difference between theory and practice. The best examples of this are failed internet-based delivery services like Kazoo. In practice, there is.” Physical delivery of anything is hard – good ideas minimize the number of moving parts.
  4. Grass is greener ideas – every business is hard, which makes it understandable that people always believe the businesses they know nothing about must be easier than the ones they know all too well. Working on business ideas in industries you know nothing about are like starting a fight with one hand tied behind your back.
  5. All by myself ideas – new ideas are like plants, they need sunlight to grow – if you keep them all to yourself they will end up stunted and pale. Find one or two people whose skills complement yours, who you trust and who you like to work with and develop the idea with them – two heads really are better than one!
  6. Go-along ideas – just like investments, successful ideas need to take a contrarian point of view (e.g., let’s start an internet search company). Good ideas don’t go along with the the crowd, they take a controversial point of view, have an opinion about where the market is going that challenges conventional wisdom
  7. Immaculate birth ideas – some ideas assume that somehow the business will just be born at a large scale (e.g., we will start with a worldwide chain of business hotels), completely ignoring the critical startup phase of the business. Every idea needs a clear idea of who will walk in and pay you your first dollar of revenue – what will they buy, where will they buy it, why will they buy it?
  8. Shiny-shiny ideas – often the idea is focused around a new and innovative product idea, unencumbered by concrete customer benefits or market dynamics to drive growth (e.g., a light that hooks up to your computer and flashes when you get email). Don’t be too fascinated with the shiny newness of your product. Dig down and figure out how to solve a real problem for people.
  9. Disconnected dots ideas – every idea needs to be connected to a business model which tells a story about how the product gets created and delivered to customers in some new and compelling way. Many stories look good from a product and customer perspective, but don’t work at the market level (e.g., just try selling unpasteurized French cheeses in the US) If you can’t connect the dots between supply and demand, your idea isn’t ready.
  10. Humpty-dumpty ideas – highly fragmented markets are usually fragmented for many good reasons (e.g., let’s get all the doctors to sign up for a big system that ranks them all based on quality). If all the king’s horses couldn’t put Humpty Dumpty back together, there is no a priori reason that you will do any better.

How good ideas go bad

Here are some additional thoughts to improve your business ideas:

Copyright 2005 Christopher Keene

A long, long time ago, I can still remember how the music used to make me smile -Don McClean

Links

Here are some other interesting places to go