How to choose winning startup ideas?
If I put you on the spot right now and ask you to come up with a winning business idea, you might feel you are not educated, smart, or savvy enough to do so. But it is not just the fact that we cannot come up with business ideas but the invisible effect of it on our entrepreneurial journey. Let me explain this a bit further.
When all your focus is on coming up with unicorn business ideas, the majority of your energy will be used and wasted on coming up with those billion-dollar ideas that nobody has ever thought or dreamed of. But business ideas are always shared by at least a group of people. So at some point, you are going to get discouraged or misguided by not finding that brilliant idea that could become a successful business and giving up in the process or pursue the wrong idea. That is a troublesome way of thinking about business ideas.
What you need instead is a curious mind, brave heart, deaf ears for naysayers, and sensitive eyes for joining random and vague pieces of the business puzzles together. A business idea is never an end result; it is an untested question or hypothesis that needs a brave and skilled go-getter to figure it out and make something of it. But does it mean that business ideas are worthless?
Absolutely not. Business ideas in retrospect are the product of a very hard and long process of figuring out thousands of hypothesizes in a business context, and they are never finished. If I want to write down on paper the business idea of Facebook on paper in the year 2021, it is possible to do so. But it does not make that piece of paper worth millions of dollars because going forward, Facebook needs to evolve its business idea into new areas which need a lot of experiment, execution, and failures. Remember that most famous startup founders were never sitting down or joining mastermind groups looking to come up with unicorn business ideas; but rather have a hypothesis or question that was itching them and in the process of finding an answer to that question they formed a successful company.
Should we talk a bit more in practical terms, perhaps? How can you prepare yourself to come up with hypotheses or questions that could form successful businesses in the future? I love Sam Altman's answer to this question:
You want to look for the intersection of what you are good at, what you enjoy and where you can create a value in the world
When you rely on what you are good at (skill), what you enjoy (passion), and where you can create value in the world (market), then it becomes somehow easier to generate new hypotheses about a successful business. Let's break these elements apart and analyze them in detail.
What you are good at (skill)
A good place to start looking for business ideas is the areas in which you are good at and have domain knowledge. We cannot deny the correlation between having experience in a field like technology, music, or real estate and the ability for generating new ways of working and solving problems in those fields.
Just imagine asking an engineer without any taste for art to generate new business ideas in the context of art. They would no be able to properly address a pain point for that audience, but that is something that someone with an art background could be capable of.
On the other hand, if you observe the majority of technology startups like Apple, Dropbox, and Facebook, you can see the founder's technical background was a helpful asset in imagining the initial hypothesis for their business; asking someone with an art background without any experience in coding or technology to generate technology-based business ideas sounds impossible.
But even though being good at a skill is an important factor to generated business ideas, it acts as an excuse for a lot of potential funders. The more technical in the field, the more in-depth skills you might need; but you also need the courage to test and fail at generating and working on solutions for interesting problems.
But as I have seen repeatedly, sooner or later life happens and people get stuck in their current positions and get complacent. I am not trying to argue here that everybody should start a startup because startups are volatile, risky, and demanding; but it is a shame to lose potential founders and their startups which could have brought more wealth to the world and make it a bit better in the process.
So starting from now, improve your expertise, understand the pain points in your field and its audience and try to think critically and creatively about your surroundings. By having a proper overview of your field of expertise, not only you will be able to generate new business ideas but gain enough wisdom to carve out the bad ones immediately without wasting energy and time and only focus on the promising ones.
What you enjoy (passion)
Having a passion and true desire to work on something is not just a cheesy term that successful founders throw out to hide their true success factors. When you are passionate about a field, you are probably thinking 10X harder about the problems in that field compared to others. Do the following experiment to validate this.
Ask someone random about interesting technical fields like AI, machine learning, or data mining and they either get bored in 2 seconds or just shout out buzzwords without understanding them. But if you ask the same question to a tech-savvy programmer, you might get a totally different and surprisingly good answer. When you enjoy your field, your mind is working 24/7 to find new and interesting ways to make sense of things and ask questions. If you keep at it, at some point your mind will formulate business ideas that could be hidden from other people's eyes. This is the power of passion that can give you leverage.
For a lot of successful founders, sitting down and coming up with systems and plans to generate business ideas could be boring and counter-intuitive. Steve Wozniak was passionate about building a microcomputer and Steve Jobs was in love with bringing a lot of people together to solve a problem he has encountered when dealing with complicated, boring, and ineffective electronic devices. If instead, Steve and Woz sat down or joined a mastermind group to come up with a business idea without following their own passion, I don't think we would have any of the Apple devices today.
Even if down the road these smart founders form systems and processes to generate and validate new business ideas, it is mainly the result of their unconscious knowledge that was formed in their journey. So in that sense, you need practical knowledge that has been formed due to your problem-solving abilities in your field. And only the truly passionate people will endure this journey.
Where you can create value in the world (market)
For a lot of founders, the startup is all fun stuff until it comes the time when they have to sell their product to customers. This is mainly because the smart but naive founders think that their good idea and product should bring customers to their doorstep. This makes them ignore customer needs, sales and distribution strategy, and product-market fit. But what causes this way of thinking?
This is mainly due to how people or in broader terms markets work. They always change, are unpredictable, and not always rational. So in the world of a founder where everything has order and logic, this chaos can seem intolerable. And the more your product is connected to people, the higher level of uncertainty. This is why some technology-based companies ignore direct customer feedback to an extent, but they still need to know if their product is going to create value in customer's lives and if the asking price point makes sense to them or not.
A startup is half an innovative machine and half a sales and marketing machine. So it pays off if somebody from the team always shouts about sales and customer needs. Otherwise, the startup might be able to create value in the world but not be able to capture any of it and die eventually.
So in order to base your business ideas on a solid customer need base, look for clues in unspoken words of your potential audience. People are really bad at spelling out their problems but their action speaks a thousand words. If in your field of interest, you see enough people putting together half-based solutions to solve a problem, you might be onto something. After observing their behavior, put together a possible solution and show it to a few of them. Show them how you will make their faulty solution better, easier or cheaper. If their eyes lit up, or you got a pre-payment or contract from them for a solution that you have not even built, then my friend, you are onto something.