By Linda Darragh, Clinical Professor of Entrepreneurial Practice
Kellogg School of Management
You have an idea, and it’s a big one. You’re motivated. You’re passionate. You’re smart. So here is the question: Is a good idea really all it takes to build a viable business? Ideas, that’s what it’s all about, right? Wrong.
I have advised thousands of aspiring entrepreneurs over the years, and again and again they tell me, “I have an idea for a business.” If you are starting with an idea, you need to back up and answer an important question. What is the problem in need of a solution? Without a problem, ideas are irrelevant.
Look for a problem that comes with real “pain” and not one that’s “nice to have.” The more pain a problem causes, the more people will want the solution and will pay for that solution. I see too many apps these days that solve an “annoyance” and are targeted to a fickle customer base that will quickly move to the next app.
After you have identified the problem, studied it, and decided it is worth solving, you can begin the road to a successful new product or service. We divide this process into three stages: Discover, Test, Launch.
Discover the Customers’ Needs
The discovery stage, often referred to as Stage Zero in the innovation process, is perhaps the most important moment in the life of a business. Here the entrepreneur determines if the solution is unique, relevant, profitable, and sustainable. Get the solution right, and your primary challenge will be how to scale your business.
You get the solution right by talking to potential consumers and learning what they need. This research shows you whether your proposed solution to the consumer’s problem is, in fact, the best solution for the consumer. If it is not, you adjust your initial hypothesis based on this feedback, ultimately accelerating the time between inspiration, execution, operations, and growth.
Test the Solution
You have researched what consumers need and want in a solution to their problem. The test phase is about confirming product-market fit and refining as needed. Here is the pitfall for many early-stage entrepreneurs. They think they need to hire programmers at this point and end up wasting precious time and money. A significant amount of testing can be done without programmers. Create a test landing page with Unbounce, Balsamiq, or another program. Drive traffic to the page through blogs, ad words, and Facebook, and see the conversion rates based on different messaging, pricing, and so on. You can even make sketches of your idea and talk to strangers. Do they get it? Listen to their ideas on how to improve it.
Get your proposition to the marketplace quickly. That way, if your hypothesis does not sell despite your research in the discovery stage, you can avoid wasting additional time and money. Fail fast and move forward. Remember, for every one bit of good news, you are bound to have many more obstacles.
Launch the Plan
You have decided there is a product-market fit. Now it is time to fine-tune the business model. What will be the key drivers of growth and profitability for your business? Find a beta client(s). Work out the bugs in your product or service. Test pricing strategies. Sell! Before you raise capital, investors will want to see that you have customers—and preferably paying customers. Understand the key growth metrics for your business and then collect and analyze the data rigorously. To grow your business, you will need partners and investors. If you show them that you have a sustainable business model and that this is not just an “idea,” you are more likely to the see the interest and support you are after.
Coming up with an idea is simple. Coming up with the right solution is much more difficult, but searching for problems and following the Discover, Test, Launch process has brought entrepreneurs success at Kellogg and beyond.
Linda Darragh is a clinical professor of entrepreneurial practice and executive director of the Kellogg Innovation and Entrepreneurship Initiative (KIEI) and the Levy Entrepreneurial Institute at the Kellogg School of Management at Northwestern University.