While it is a challenge to find the right gap in the market, it is also a challenge to find the right model to monetize the opportunity and make it into a viable business.
Very often, opportunities do not translate into viable businesses due a lot of hidden costs, unforeseen obstables, regulations, team issues etc.
Here are some of the things that I've seen working in trying to find the right model:
1. Define the canvas: Define the scope of your market and the outer limits. That makes it easier to take yes/no decisions when presented with an immediate opportunity that is not in the line of business you decided to start.
2. Talk to customers: Spend time talking to your customers about their experiences with your product/service and how you can improve. You might find that the reason they are buying your product/service is very different from the reason you made it in the first place!
3. Try multiple models: Don't overspec the product. Create quickly. Release in the market. Listen really hard to customers. Improve. Release again. A quick turnaround will help improve the product faster. It is important to fail quickly if it is not working and focus your energies on a new model.
4. Talk to the ecosystem: Lot of other players in the ecosystem (not necessarily competitors) have a lot of knowledge about how things work in this space. Talk to them. Pick their brains.
5. Talk to experts/advisors: Reach out to folks that have the experience of building businesses as well as folks that have functional expertise. Grasp the prevailing knowledge and wisdom.
6. Follow your instinct: Finally, filter all of this with your judgement. If you dont feel good about it, dont do it. If you feel it is right, go ahead even if everyone else thinks it is a waste of time.
And if it doesn't work, go back to Step 1.
Thursday, September 16, 2010
The Scalability Factor
If there is one factor that adds a lot of oomph to your business plan, it is the famous "S" word: Scalability.
Investors across the world are hunting for the business plan that requires a one-time product development (read: one-time risktaking) and then once it works, you just replicate the product and get busy counting the dollars. Makes complete sense. For the investors.
As an entrepreneur, how does this word pan out?
At one level, the same benefit that an investor reaps is reaped by the entrepreneur - once the business scales; is extremely valuable and provides an exit and hence wealth creation for all stakeholders.
At another level, things are not that clear.
Scalable businesses are "Winner-take-all" businesses. So, you better be number 1 or 2 if you are in a scalable business. Else the returns decline exponentially with your market share to an extent that you might as well give up. Unless of course, you use this base to try a new model/market and become number 1 or 2 in another scalable business opportunity.
While the scalable business is part of a portfolio for any fund; for an entrepreneur, that is the only "play" in the portfolio! So, while accessing money is relatively easier with scalable business plans, it is equally easy to end up with nothing at the end of a few of the best years of your life! Or to put a positive spin on it: you better win if you have a scalable business. There is no prize for coming second - or having tried really hard. Tough.
Scalable business typically require a lot of money up-front. And then again some more to keep the product on the cutting-edge; to acquire new customers; to retain existing ones; to build monetisation mechanisms etc. By definition, such businesses also push-out the break-even stage due to the burn-rate required to stay ahead of the market. To recover this kind of money, you have to capture the lion's share of the market. And if you don't, refer earlier paragraph. :)
As an entprepreneur, you can only invest so much and then are committed to 1 idea. No portfolio for you.
Scalable businesses, very often, are successful because of an inflexion point in the market. When you study how some of the most successful and scalable businesses today started, it seems like they just tried something new - and before they knew it, the market responded in a fantastic manner. Right place, right time - in addition to a lot of smarts, hardwork, toil, sacrifice etc. Can any entrepreneur predict an inflexion point? Tough. Works easier if you have a portfolio of "bets" and one of them works.
But then, every entrepreneur believes that he can take on the world (competition, inflexion points, changing customer behaviour etc) - with one hand tied behind his back.
"All of this is fine - but I am different"
So, none of the points above will make a lot of impact, i guess.
And the S factor will continue to seduce all entrepreneurs. :)
Investors across the world are hunting for the business plan that requires a one-time product development (read: one-time risktaking) and then once it works, you just replicate the product and get busy counting the dollars. Makes complete sense. For the investors.
As an entrepreneur, how does this word pan out?
At one level, the same benefit that an investor reaps is reaped by the entrepreneur - once the business scales; is extremely valuable and provides an exit and hence wealth creation for all stakeholders.
At another level, things are not that clear.
Scalable businesses are "Winner-take-all" businesses. So, you better be number 1 or 2 if you are in a scalable business. Else the returns decline exponentially with your market share to an extent that you might as well give up. Unless of course, you use this base to try a new model/market and become number 1 or 2 in another scalable business opportunity.
While the scalable business is part of a portfolio for any fund; for an entrepreneur, that is the only "play" in the portfolio! So, while accessing money is relatively easier with scalable business plans, it is equally easy to end up with nothing at the end of a few of the best years of your life! Or to put a positive spin on it: you better win if you have a scalable business. There is no prize for coming second - or having tried really hard. Tough.
Scalable business typically require a lot of money up-front. And then again some more to keep the product on the cutting-edge; to acquire new customers; to retain existing ones; to build monetisation mechanisms etc. By definition, such businesses also push-out the break-even stage due to the burn-rate required to stay ahead of the market. To recover this kind of money, you have to capture the lion's share of the market. And if you don't, refer earlier paragraph. :)
As an entprepreneur, you can only invest so much and then are committed to 1 idea. No portfolio for you.
Scalable businesses, very often, are successful because of an inflexion point in the market. When you study how some of the most successful and scalable businesses today started, it seems like they just tried something new - and before they knew it, the market responded in a fantastic manner. Right place, right time - in addition to a lot of smarts, hardwork, toil, sacrifice etc. Can any entrepreneur predict an inflexion point? Tough. Works easier if you have a portfolio of "bets" and one of them works.
But then, every entrepreneur believes that he can take on the world (competition, inflexion points, changing customer behaviour etc) - with one hand tied behind his back.
"All of this is fine - but I am different"
So, none of the points above will make a lot of impact, i guess.
And the S factor will continue to seduce all entrepreneurs. :)
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