Why are ideas a dime a dozen? we can write a whole essay answering this question but to sum it up in a sentence, it is because no one is willing to pay anything for just an idea; they are worthless no matter how good they sound and seem promising.

This is a scene from the King of Queens series when Jerry Stiller (older man in the photo) overheard the main character’s (Kevin James) father, a carpenter, talk about screw drivers and how someone came up with a new type that sold millions, he said something in the lines of, “…what if I designed my own? I think I have a shot at a million dollars..”. Jerry went straight ahead to him and asked him to sign a release form for the idea. The father asked for a buyout. I think it was $20. Jerry bought it but couldn’t do anything with it. The point is that the value of an idea comes in the proof. A few are those who seek the proof; execute. Testing ideas quickly is the subject of the next guide, for now, it is about an earlier stage in the startup building process, it is about answering the question: how to generate startup ideas worth pursing. If you are looking for one single source that sums up all the best ones out there about idea generation, this will be it. More specifically, in this guide, I make sure the frameworks, methods, techniques and example are presented to help you connect the dots and not some standalone tips that you can apply wherever they fit your stage. It is important though that you read the guide from start to finish even if you get confused in the middle, earlier or later. An example at the end will make all the frameworks and methods clearer and actionable. In bullet points and in the form of questions, this is what you will find in the guide:

1- Why do we call them ideas?

2- Is it really a problem?

3- How big is it and is it worth solving?

4- Is there a solution for it?

5- Is it a good enough solution?

6-Example: healthy food on demand

7- Other things to keep in mind about startup ideas:

  • It is not always about innovation
  • What if you want to innovate?
  • Billion dollar opportunities
  • Quick revenue generating ideas
  • Avoiding the bad ideas that seem like good ones
  • Final notes
  • What to do next

By the end of the guide, you will have enough knowledge about the tactics, strategies, frameworks and techniques to come up with startup ideas quickly and/or improve existing ones.

 

What do we really mean by, I have an idea?

Think about it for a second. What’s an idea? in other words, what happens when we come up with ideas for X or Y? An idea is nothing but a proposed solution to a problem. We simply look for the best solutions to solve problems. When we think (brainstorm ideas), we start with the problem, evaluate existing solutions, browse our directory of relevant solutions to find a way to connect the dots and offer solutions that have a potential to solve the problem in hand. This process implies two things: 1) if we don’t have a big enough directory of existing and relevant solutions, our options would be limited and our ideas (solutions) would thus not be optimal, 2) knowledge is the foundation and prerequisite of the best ideas.

This guide will equip you with the necessary knowledge that will enable you to come up with more than one idea for the same problem, propose ideas for solving big problems and urgent needs and improve the quality of existing ideas.

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Since ideas are a response to observed problems and needs, the focus should thus begin by identifying such problems and needs and not forcing ideas into qualified solutions. In other words, instead of saying, what if we build an Uber for Y, we are better off studying and carefully evaluating Y and then offering a solution that Yes can potentially be an application of an existing model such as Uber but not necessarily it. Starting with the problem keeps our minds open for the right solutions and not those that we feel might solve it only because it proved it could with other problems.

 

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Since knowledge is the foundation and prerequisite of the best ideas, the next sections are all meant to equip you with the essential tools. The final example is to demonstrate how to use the learned tools and frameworks.

Defining The Problem

“A problem well stated is a problem half solved.” Charles Kettering.

It is very logical to say that the best business opportunities are when problems and needs are big and urgent enough that people cannot live without finding a solution to. Think about it in terms of pain. If the problem is so painful that people spend a lot of their time finding a solution to, you are likely into something big. A good question to ask is, can customers live with some headache pills or is it so severe that they need antibiotics? Medicine is one of the best analogies we can use since the demand for this industry is usually inelastic meaning that price is not an important variable with spending especially when the pain is severe. In other words, if you are in a desperate need for a relief, you will do whatever it takes to find the cure; and sometimes getting into so much debt for it. So how can be qualify the severity of the problem?

At first, a lot of the information and frameworks discussed in this guide ca seem confusing but the idea will be much clearer at the end of the guide. The content is meant to be actionable; something you can use today. 

The 4Us Approach Proposed By Michael Skok

Is the problem unworkable, unavoidable, urgent and underserved?

Unworkable problems are those that require antibiotics. Customers can’t hack a solution for, they lose a lot of time, get frustrated and often quit their activities to find a valid solution online or by asking friends. For instance, business owners who start by using excel sheets for bookkeeping will most likely find this solution to be very time consuming and inconvenient as the business grows so they will immediately turn into finding a faster and simpler bookkeeping software such as Quickbooks. As you can see, any workable problem can turn into an unworkable one if certain conditions and milestones are met. Visionary founders can see things coming and propose solutions accordingly. We will discuss this point more into details later in the guide.

Unavoidable problems are out of customers’ control. What happens if you reach you internet data limit? you will either have to pay more or get disconnected which can have an even bigger impact on you than the extra amount you will pay. What happens when the government requires a license for starting blogs? you have no option but getting one if you are seriously planning to start blogging. What happens when your kids’ kindergarten teachers mandate certain books? parents buy because the consequence is bigger; kids’ failure and humiliation among other kids and parents. What happens when people have to walk 20 miles to get water? they will still do it because the consequence is death. Unavoidable problems represent one of the best business opportunities because the negative consequence is usually major.

Urgent problems mandate imminent solutions even if such solutions are not optimal or function properly. For instance, for companies and professionals who rely heavily on the internet for their work, the consequence of an internet disconnection, especially for long periods, can mean loss of data, meeting interruptions, loss of content, frustration, etc. A potential solution to such an urgent problem is a backup internet connection that connects the moment the main one fails. Furthermore, for enterprises, solving urgent problems is about asking, what is the top priority of this company? urgent problems don’t necessarily have to occur occasionally. Enterprises may have urgent needs to improve internal communication, optimize sales, and improve training but cannot find a solution that seems to meet their expectation. They know that if they don’t find one, they will lose X amount of money or Y employees. They also know that if they build their own, it will cost them Z amount of money in W time which is too long in a competitive environment. Finding a solution is thus urgent. The same logic applies to consumer goods such as finding the dream home before the lease expires, generating enough money before the birth of the baby, raising funds for the business within 3 months, etc.

Underserved problems are either not being solved at all or have solutions that are not well serving the customer. Such situations are often described by the statement, I just can’t find a better solution; this is all I got for this price, etc. or, they don’t have X in this area, or this is very inconvenient, there must be a better way. Underserved problems are very easy to find and can represent great business opportunities.

 

With the 4Us in mind, how can we describe a 100-billion-dollar business idea? it is simply one that solves an unworkable, unavoidable, urgent and underserved problem all at once. Can one problem have all 4? The answer is Yes, depending on the industry, existing competition and future trends. Although rarely will we find a startup with one product solving all these problems. As the startup grows and matures, it can offer a list of solutions to solve the 4Us all at once such as Google. It is also important to keep in mind that the 4Us for one target are not necessarily the same for another so startups should always focus on becoming the best solution to a targeted group’s problems.

The good news is that a successful startup doesn’t necessarily have to solve all problems to reach extreme success. We will be covering the third problem/idea evaluation framework below and you will find as an example that Facebook in fact addresses one single need, the need to be social, while solving a problem for business owners wanting to reach millions of people efficiently.

 

The question that you may be having in mind right now is, how do I know the unworkable, unavoidable, urgent and underserved problems of my targets? And what if I don’t have a target in the first place? 

The answer to this question is in the example at the end of the guide. Things will get much clearer as you go through the different sections.

The second way to qualify problems is by using the BLAC framework. It is about classifying problems as Blatant, Latent, Aspirational, or Critical.

Blatant problems are obvious. The customer recognizes their existence. Latent problems are unacknowledged such as the example of a startup one of our community members is building as a security upgrade to the common use of passwords. Since potential buyers are not aware of the importance and significance of latent problems, entrepreneurs have a challenging job to prove their point. To understand latent problems better, assume that every time you change a password someone hacks and uses your account. Three times later, you realize that this indeed is a problem and you desperately search for a solution. At first, you didn’t think this was a problem until you got hacked. Before you get hacked, you knew that hackers can access your account but never thought the problem was as significant; the problem was latent. When you got hacked a few times, a latent problem turned into blatant (clear and acknowledged). Aspirational problems are optional. That is, people can live without whereas critical problems need solutions right away.

In sum, the best problems to solve are unworkable, unavoidable, urgent, underserved AND critical and blatant.

Which startup became very successful from addressing latent and aspirational needs?

Facebook did. We all have a blatant and critical need to socialize and interact with others but who thought we could do it online the way Facebook is allowing us to do. Facebook turned an aspirational and latent need into a blatant and critical need.

We discussed problems and how to qualify them, what about needs? they’re different. While problems cost discomfort, time, energy and money, needs can cost a life. Needs are what exist regardless of what you desire. In other words, many of a person’s needs are predefined. Using Maslow’s hierarchy of needs, we can classify their urgency based on their importance to survival and happiness. The base of the pyramid represents our most basic and most important needs; food, water, warmth and rest followed by security and safety. We cannot live unless we satisfy those needs in one way or another. Facebook addresses psychological needs. For a happy life, we need to have friends, build relationships, and exchange feelings with others.

This framework is one of the best foundations for the best startup ideas. For instance, which needs guarantee demand? clearly it is the basic needs that people will want to satisfy with certainty. Does it make sense now that the competition for food products, water, hotels (hospitality), and insurance is extremely high? all of those companies recognized the importance of addressing those needs because people would do anything to satisfy them.

For newly established startups trying to compete in a crowded space like this, I assure you there is still a lot room for market share. In fact, the big corporations are encouraging and actively seeking for startups that try to make a difference in the same space in a unique and innovative way. One of the easiest way for corporations to grow is by acquiring innovative and disruptive startups.

Startups can build a profitable and scalable startup from faster, cheaper and better products but rarely do you find a startup disrupting a sector or industry without some form of innovation. A useful approach to classify innovations is in the context of the 3Ds.

By looking at the problem differently and offering a never thought of solution that turns out to solve the problem in a transformative and unique way, a startup can create discontinuous innovation.

The common patent protection to create barriers to entry and an unfair competitive advantage is what we call defensible innovation.

Finally, and more commonly, we have been witnessing the rise of many disruptive innovative business models that don’t necessarily have unique technologies but a different process for solving an existing problem. One of such examples is Uber under the sharing economy business model.

Solutions

In the first half of this guide, our entire focus was on defining, identifying and qualifying problems. There is a solution for every problem and this is where Ideas come to play. Can an investment banker propose a nephrectomy procedure? or can a medical doctor discuss a trading strategy for an overvaluation in the dollar, an undervaluation in the euro while the Fed is planning an increase in interest rates? the point is, knowledge is the prerequisite of all great ideas. Without good understanding of the concepts, existing methods, models, technologies, customer pain, and alternative solutions, one cannot propose superior ones. More specifically, as entrepreneurs looking for the best ideas, you have two homework assignments:

1) Know the industry inside out: existing technologies, existing business models, market size, customer needs, where the experts see it heading, etc. One of the benefits of solving your own problems is that you can relate and answer most of the questions or at least come up with a blueprint for what the answers might be.

2) Learn solution types: every idea is a form of connected dots between existing tools and resources and the problem in hand. The Uber for X, the Airbnb for Y, the Amazon for W, the Google for Z, or any other formula. Notice that all ideas are existing solutions we borrow or customize to fit new problems. This lead us to one conclusion: if we are not familiar with existing solutions, our sphere of knowledge is limited and therefore our ideas will be less. Learning about existing tools, solutions, competitors and available resources is every entrepreneur’s second homework. Most of these models created some type of innovation (3Ds) in the market but are now available for recycling since startup strategy is not always about innovation (details below).

Some of the models you may want to consider and learn more about include: sharing economy (Airbnb), software as a service (Salesforce), marketplace (Ticketmaster), e-commerce (Amazon), on demand (for food and other services), advertising based (Forbes), virtual goods (Candy Crush), APIs (Paypal), social (Facebook), dating (Tinder), freemium (MailChimp), group buying (Groupon), and many others.

Customer Gain/Pain Ratio

In line with all the frameworks, methods and tests to generate and qualify ideas (solutions) that would make a major impact in the lives of buyers, the question becomes, how hard is it for customers to learn and use the product? Sometimes we see a lot of value from using a product or service but feel very discourage or lazy just because we can live without it. For instance, it would be great to have someone deliver us healthy food every single evening but after a while, it can be overwhelming having to log in, choose items, order, and wait till it comes. Eating unhealthy, fast food, can sometimes seem more convenient. The gain/pain ratio involves measuring the gain delivered to customers vs. the pain and cost of adoption. Ideally, you want to deliver a 10X gain/pain promise. In other words, the benefit from using the product or service is so high that buyers have no choice but use it.

It is important to note here that for enterprise solutions where a lot more is at risk such as sensitive data, high volume of frequent transactions, media coverage, etc. the gain/pain ratio is even more important since it can be safer for such large corporations to “do nothing” rather than bear the risk of default or a mediocre solution.

Matching Problems With Solutions- IDEAS

1) An idea is a fit between problems and solutions. Therefore, to come up with an idea, all you have to do is list the identified problems/needs in one column and available solutions/resources/technologies in another column then find a match.

The classification is only a cheat sheet to help you find the fit. The final word always goes to the buyer but the idea is that if we don’t know what we want to test, we have nothing to measure. The step by step example below will make things clearer. Before we get to the example, we must discuss the next step: finding the fit.

2) How do we know which solution or technology to use for the identified problem? as unprofessional as it may sound, we will simply guess. We will make an educated guess that solution/technology X will best address problem Y and the revenue stream will be Z.

We will finally let the customer tell us if our educated guess is a match or not. If it is, we move on with execution (product development), if not clear, we take another round of interviews and surveys or incorporate customer insights and propose a different solution/technology. If the identified problem/need turns out not as big and urgent as we thought, we can adjust to that too by making better guided guesses. The initial startup phases from idea to qualitative validation will be covered in details in the next guide.

With this, we have acquired and been exposed to the best important frameworks, methods, and techniques to generate startup ideas worth pursuing. For all of this to make sense, we will use an example that incorporates all these tools and finally answer questions like what kind of ideas investors fund? what are some quick revenue generating ideas? and finally, what I suggest you do next?

 

Example

It is clear to us now that coming up with ideas simply means identifying problems/needs and finding solutions. Focusing on the problem first is how the idea generation process should begin because my choosing a solution then forcing it into a problem, we risk of missing the better solutions. For instance, instead of looking at the business model of Airbnb (sharing space) then finding different areas like sharing music equipment, we risk of missing the possibility that exchanging equipment, building and selling disposable equipment, and other models as better ones.

1) Identifying Problems And Needs:

A problem or need can either be personal meaning faced by the entrepreneur or external, that is faced by our surroundings. There is a proven fact though that the most successful startups are built out of personal needs. Almost every single billion-dollar company started because the entrepreneurs were tired of dealing with a problem so they sought a solution, did not find ones that directly solved their problems so they built theirs. Solving personal problems is also a motivation for consistency and continuity which are one of the ingredients of startup success. When entrepreneurs work on improving their own lives, they are more likely to do a better job.

So,

1) Start with areas you have expertise in: running restaurants, building software, renting apartments, teaching, writing, etc. Essentially, what you do or did for living even if it is only a high school or college experience that you have.

2) Define the problems you face on a consistent basis: list the top two to three of the problems you wish you didn’t have. If it takes you more than 5 minutes to identify a problem or need, it is most likely not a big one for you.

For the sake of the example, here are two of my main problems:

-Fresh, healthy and affordable daily meals: I prefer healthy food over fast food. My wish is to have healthy and fresh meals at the same price it would cost me to shop and cook at home. Cooking is not my passion and can be very time consuming especially after a long day of work.

-I see no value from owning a car because I live near grocery stores, shopping malls and everything I need but I sometimes need one for meetings outside of the city, airport pickups, and get togethers. It doesn’t make sense for me to buy a car just for rare occasions.

3) Ask: which of these problems would you pay for right now if someone presented you with a solution? if the answer is none, your problems are not big and painful enough to build a solution for. In this case, look at your surroundings and start from step two by defining the problem people you know are having then ask if they would pay to solve this problem right now (you can use many tricks and tactics that will be discussed in the next guide). Continue with the process until you find a problem worth solving.

For me, I am more likely to pay for a service that provides me with affordable, fresh and healthy food only if it cost me the same as if I were to shop and cook. Since I will be saving a lot of time and energy, I am ready to pull money out of my pocket and pay for such service right now.

2) Qualify The Problem Or Need:

We know what our top problem is, we now want to assess its importance and urgency to us. Is it unworkable, unavoidable, urgent and/or underserved? blatant and critical or latent and aspirational?

Solving your own problems meaning answering your own questions which can save you some time in customer research and interaction. My answers and evaluation for the 4Us are:

Is it unworkable? not necessarily. I still can shop and cook but would save time and energy that I can use for entertainment or work with a service like this. Evaluation: 4/10.

Is it unavoidable? No. I can survive without a solution but will improve my life with one. Evaluation: 4/10.

Is it Urgent? depending on the day of the week and periods in the year, it can be very urgent. So my answer is occasionally. Evaluation: 6/10.

Is it underserved? Yes. There aren’t many alternatives to the traditional shop and cook option besides eating unhealthy (fast food) or spending a lot of money on restaurants which is time consuming too. Evaluation: 7/10.

Finally, I classify this problem as blatant (obvious to me) and somewhat critical. It is a problem that I can live with. It is great to have but not imperative for me.

Does it address an urgent need?

According to Maslow’s hierarchy of needs, food is classified as one of the most important needs a human can have. However, food is not the problem in this case, it is the inconvenience in accessing food that we seek to solve. Our problem is thus not urgent because it is not essential to our survival.

In conclusion, the identified problem for a person with my needs and situation is not big enough to mandate an imminent solution. BUT, what about families of 6 and more with busy parents and insufficient financial resources to hire a full-time nanny or cook? for this group, the problem can be critical and a solution can be a must because the consequence can be exhaustion, possibly depression, financial crisis, and as bad as possibly getting fired if productivity of parents significantly declines. Furthermore, a service like Airbnb is good to have but has become essential in the lives of travelers despite the hotel options we are all presented with. The point is that Not As Urgent problems can still become successful startups.

 

Next,

 

List Possible Solutions

Again, one of the benefits of addressing our own needs and problems is that we can propose solutions based on our preferences. How do we want this problem solved? It is the I Wish statement that most of us use from time to time? I wish I could get home and find a hot healthy meal, I wish I could eat from these restaurants but at my own place and for a much lower cost, I wish I did not have to pick up food every day, etc. So, what wishes do you have? note that the exact process is applied with problems and needs that others have. Meaning the only difference between this example and another where we are trying to come up with ideas for other people, is that we will simply ask them all these questions but the benefit of being our own customer is that we can answer most of the questions before interacting with others like us. We will even better understand others’ response if we have been in their shoes unlike trying to solve problems that don’t relate to us directly or indirectly.

For me, I wish I can still choose my meals but what I wish more is getting home and 15 minutes later, someone is knocking with the food. Based on our knowledge of the different solutions in the market, we can propose that food on demand and pre-prepared meals are two possible solutions for this problem.

Pre-prepared meals are usually not fresh and most of the time frozen. Even if such meals are delivered on time every day, they don’t interest me. Food on demand can be an interesting option only if I like the type of food and the price is the same as if I were to shop and cook. At first glance, it may seem impossible to get fresh food delivered at your door at a price equivalent to a home cooked meal. The question that comes to mind next is, what makes meals expensive? it is usually overhead: renting an office space, paying cooks, and utility bills. Therefore, ordering from restaurants is not an option if we care so much about pricing. Our cooks must thus not own restaurants. What about cooks who work from home? this is an interesting option to explore.

We have finally taken all the steps to go from a problem to an idea worth testing.

Evaluate Solutions (Gain/Pain Ratio)

Is the gain from using the solution 10 times or more the pain of adopting it? In other words, does the gained time, energy, and money a lot higher than the cost of creating an account in the website or mobile application, building a menu, making a payment and trying a new service? If there is an inertia (risk) in adoption, you will have a hard time selling the product. The best solutions are those that solve big problems and address an urgent need while making adoption extremely easy. If you are a buyer, begin by answering your own questions and focus on removing the friction out of the things that make you hesitate like safety, quality, risk of food not showing up on time, etc. Your gain/pain ratio should be 10X.

 

Finally,

It is time we look if others like us are ready to pull money out of their pocket to solve the problem right now. As an initial step,

  • Search for a similar solution in the market: spend 1 hour on Google. Do not get discouraged if you find one or multiple (competitors), then
  • Search for alternative solutions: we, humans, often get creative by sticking things together to solve a problem in a unique and indirect way. Can you solve your problem that way? and finally,
  • Find others who are facing the same problem: as simple as a Google search can help you find a quick answer to this question.

Google Autosuggest:

First, we want to test one of our safe assumptions which is that many others like us are looking for healthy food. I typed the sentence, “where can I find healthy” and Google suggested that the highest search is for healthy recipes followed by food. It seems that more people are looking to cook then buy.

The second assumption is about food on demand. When typing healthy food on demand in Google, the autosuggest shows that most searches are coming from the UK. This is a good initial insight as to who needs the solution the most.

When typing food on demand without ‘healthy’, we see that Morocco followed by the University of New Haven then San Francisco are where the highest demand for the service is.

Competitors:

It is likely that every problem we face has been addressed in one way or another. The presence of competitors can mean that the problem is worth solving, customers are demanding a solution and finally, that you can be a potential acquisition or acquire incumbents (existing companies) for expansion one day.

In my Google search, I found that competitors are dispersed geographically where most of them focus on one region and not all the country. This is another good insight because it shows in which regions the solution has been proven valuable the most. It also implies that there is a lot of room for growth as the market is not saturated yet. Finally, the Google search shows that big cities is where the demand for the service is the highest.

Customer Reviews:

By exploring what people say about the service, you can get a much clearer idea about their likes, dislikes and expectations.

In less than an hour, we can easily confirm or reject whether people like us are facing the same problem. In this case, the answer is indeed Yes. Many see value in an affordable healthy food delivery service.

The next step is EXECUTION. How to take what we have done so far and qualitatively then quantitatively validate customers’ needs. This is the topic of the next guide.

 

Some Other Very Important Things To Learn And Keep In Mind About Startup Ideas:

 

Startups Are Not Always About Innovation

In other words, an entrepreneur can build a successful startup without introducing and building innovative solutions but rather, replicating, repurposing, or upgrading existing ones.

With replication, founders take an existing model and adopt it to new conditions. The startup cloning icons, Samwers brothers, built a billion-dollar empire from replicating existing successful startups such as Zalando (Zappos clone), Lazada (Amazon clone), and Wimdu (Airbnb clone) to name a few.

In replicating an existing successful model to new geographies, the focus goes to understanding user needs in the new market. For example, if my idea is to build an Airbnb like platform for a certain country, I would need to know whether Airbnb’s sharing economy model is a viable solution to the hospitality problem if faced by the residents or visitors of the targeted country. Most often, the culture, habits, and rules of a market make product adoption slow and sometimes impossible.

Repurposing is about taking an existing model and adopting it to new solutions. It’s where the fun begins; the Uber for XYZ, the Airbnb for ABC, the Zappos for X, the Facebook for Y, and the list goes on with essentially every proven model in the market. Some of the startups that successfully repurposed existing ones include:  DogVacay, an Airbnb for dogs, Fon lets you share WiFi network, Vayable lets you take a guest on a tour, and you share goods with your neighbors through NeighborGoods.

In repurposing an existing model, the focus goes to testing the viability (qualification) of the existing model to solve a different problem. For example, to serve those who use computers occasionally and do not see a need in buying one, can the sharing model be a potential solution to this problem? in other words, are people willing to share their computers to strangers?

Upgrading or enhancing existing solutions through quality, speed and performance is a form of competitive advantage and one of the four startup strategies. Within upgrading, entrepreneurs can enter an existing market or resegment one.

In an existing market, potential buyers are known and can identify themselves since they already recognize a problem and use existing solutions to solve them. In such market, the difference that newly established startups can make is in building better solutions based on speed, performance, or feature. For instance, Quickbooks is an accounting software with many features and a large user base. An entrepreneur interested in upgrading Quickbooks or one of its features is interested in knowing what users are struggling with and how a better solution can improve their experience. Online customer reviews and interaction with existing Quickbooks users can reveal a lot of insights that entrepreneurs can use to build a plugin, integration (API) or a competing Quickbooks platform that satisfy the unmet needs of customers.

In a resegmented market, startups target a niche with a slightly better value proposition. An example would be Southwest’s low cost service or Airfordable, a Y Combinator startup, that enables users to book flights and pay over time.

 

What if we want to innovate a solution? create a discontinuous, defensible and/or disruptive models.

I studied the business model of many innovative startups to conclude that each and every one of them innovates by simply moving some pieces of the puzzle around to create a different shape. I propose the following framework for business model generation:

For customer M, service S leverages X and Y, to achieve Z without relying on W but by relying on this hidden V that is currently used to serve other purposes but can possibly serve Z.

Let’s use the framework on Robinhood, a no-fee stock trading app.

For fee sensitive investors, Robinhood leverages technology (X) and interest income (Y) to offer free stock trading (Z) without relying on investors’ monthly fees or per trade commissions (W) but by accruing interest from investors’ uninvested cash (V).

What’s more important than the framework is the logic behind it. Look at every successful innovative business model in the market, almost none creates something out of the ordinary such as discovering electricity or inventing the cellular phone. Even in these two cases, inventors leveraged existing resources (moved things around) to introduce something new. Much harder back then; relatively easier today.

 

Billion Dollar Opportunities

If you want to build a billion-dollar company, solve a billion-dollar problem or one that a hundred million are willing to pay for, Y Combinator, published a top target list of ideas they’ve “been waiting for”. This list is to encourage you to think big and dream big. It is also for you to keep in mind as you are building and growing your first startup(s). Research clearly shows that the more you fail, the higher your chances of success. Your chances in fact increase to 30% according to a research paper by Gompers and his colleagues in 2010. Bryan Johnson, founder of Braintree payment, failed twice before taking a sales job then building a startup he sold for $800 million to Paypal. From nothing to multimillionaire and an influential in 4 years. This was not a miracle. It was the result of perseverance and belief. Steve Jobs once said, “I am now convinced that about half of what separates the successful entrepreneurs from the non-successful ones is pure perseverance.”

Y Combinator encourages entrepreneurs to think of ideas in energy (low-cost energy), artificial intelligence, robots, biotech, healthcare, pharmaceuticals, food and water, education, internet infrastructure, government, virtual and augmented reality, science, transportation, diversity, developing countries, telecommunications and others. You can find the post they wrote here.

 

Quick Revenue Generating Ideas

To gain experience and more knowledge, I encourage that you exercise and apply some of the things you learn by executing. There are many business models that don’t require a lot of resources and that can be executed very quickly. Some of those models include on demand services such as food and errands, or peer to peer models such as that of Airbnb to solve other problems like sharing notes, services (help me with this, I’ll help you with that) and other ideas that I am sure you now can generate. These models are not tech heavy and very easy to set up, test and run. More details about quick execution and testing techniques, strategies and tactics will be found in the next guide(s).

 

Some Bad Ideas Can Seem Like Good Ideas. And Vice Versa

To better explain this point, I am referring to a passage from an essay by Paul Graham:

For example, a social network for pet owners. It doesn’t sound obviously mistaken. Millions of people have pets. Often they care a lot about their pets and spend a lot of money on them. Surely many of these people would like a site where they could talk to other pet owners. Not all of them perhaps, but if just 2 or 3 percent were regular visitors, you could have millions of users. You could serve them targeted offers, and maybe charge for premium features.

The danger of an idea like this is that when you run it by your friends with pets, they don’t say “I would never use this.” They say “Yeah, maybe I could see using something like that.” Even when the startup launches, it will sound plausible to a lot of people. They don’t want to use it themselves, at least not right now, but they could imagine other people wanting it. Sum that reaction across the entire population, and you have zero users.”

So How Do You Know If An Idea Is Bad Or Not?

Ask for payment. If people are not willing to pull money out of their pocket, they are not as interested in the product as they may claim unless there is a competitor that offers the same solution for free. You can use several tactics to test buyers’ real intentions. I will discuss some of these tactics in the following guides.

Final Notes

As vague as it may sound, one of the best ways to come up with good ideas it to keep an open entrepreneurial mind. The way many successful founders had their ideas was through external stimulus that hit a prepared mind. For instance, Drew Houston, founder of Dropbox was in an airplane when he realized he forgot his USB stick and thought, “I really need to make my files live online.” The aha moment may have hit many others like Drew but because his experience prepared him to notice entrepreneurial opportunities like this, he got an idea. The best advice is to notice, experience and keep an open mind. Ideas that grow naturally out of founders’ own experiences are organic and most likely to turn into success stories.

Think about the future. Where are things heading? focusing on problems within your own field of expertise can help you imagine the future. Are there any waves that you can predict and ride? for instance, the prices of 3D printing is experiencing an exponential decline. Everyone will be able to afford a 3D printer one day soon in the future. How can we leverage this trend? or, in general, what are some of things that seem impossible today but we have all the proof that will happen one day? Living in the future and riding waves are two other ways founders can generate revolutionary startup ideas.

 

What To Do RIGHT NOW.

1- Read the guide twice over two days. It takes a little bit of time to connect the dots and relate the knowledge that you acquired to your interests, existing ideas and future ones.

2- If you already have an idea, qualify the problem the way we did above and reevaluate the solution (idea). If you don’t have an idea, follow the guide and generate one or two ideas. They don’t have to be perfect! the guide is a foundation that will help you Notice, Keep An Entrepreneurial Open Mind, and Capture the best opportunities when they unexpectedly come.

3- As you are going through the whole idea generation process, write down your questions then email them to me all at once. I will make sure everything is clear as we go from one guide to the other on our way to building valuable startups.

 

Join us for our latest announcements, presentations, events and above all to be surrounded with a group of likeminded entrepreneurs.

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