My definition of what an entrepreneur is goes something like this; solving problems for profit. If a business offers a service or product that solves a problem for the customer in a way that frees up scarce resources for that customer, allowing for those resources to be used in alternative ways, we have created value and will be rewarded by the market through the price system of profit and loss.
A really great example of this is Walmart. Love them or hate them, no other company has done more to improve the quality of life for more people. As a parent of a 2 year old, the money I save on diapers at Walmart can be used to buy more spa treatments for my wife. This creates value for my entire family.
Everyone has problems. A powerful way to start the ideation process is to ask, "Where's the problem?" Identify pain points and bottlenecks and the people who have them. Then we can start working on solutions. With the use of such concepts as scarcity, comparative advantage, and subjective value, we can find out if our solution actually is feasible as a business. If we can solve a problem for more people with less resources in a way that people want, we might be on to something. If we solve the problem for few people with lots of resources in a way that people don't want, we might be destined for failure. Did you know that 95% of patents registered in the US never create any value? That's according to this article by The Economist. What does that tell you about the amount of bad ideas out there?
It's natural to have the desire to avoid failure. But, in order to succeed, we must fail. Failure is how we identify good ideas versus bad ones. How will we know if we have solved the problem if we don't try it? No matter who is writing the business plan, eventually, we have to see what customers say or do when we present the solution to them. That means we have to get product or service to the customer sooner than later.
We have to "Fail fast & fail cheap."
Don't be Bill Gates, on stage, at the launch of "Windows '98".
Preferably, students in the YE classroom are thinking about businesses that they could start tomorrow with the resources they have today. If students begin their business while writing their business plan, things go much smoother for them. Instead of trying to find out what to charge for a pair of Nike shoes sold at their multi-million dollar sports complex, they are simply writing down what they actually charged for walking one customer's dog. Or they are writing how they plan to market their lawn mowing business this summer, instead of trying to figure out how much national magazine ads cost.
Students come to us with big dreams and we love that so please don't misinterpret that last paragraph. But if your idea is going to take several million dollars, it doesn't really fit with "fail fast, fail cheap". Another question would be: Can we keep the big dream and start working on a stepping stone in the path to it? How much can we learn in the process? How much can we earn, while we learn?
Just an FYI: This is the first of a series of posts on Ideation, so please let us know if you have suggestions or want us to talk about a specific part of the ideation process.
