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Ideas for new businesses are sometimes like policemen: they're never around when you need them. When they do appear, they can be triggered in different ways, by different mechanisms that each have benefits and pitfalls.

I've been working on three business opportunities recently, and long debates and discussions have helped them take shape. The whole process of developing hazy ideas into a business proposition is one I find fascinating and enjoyable, but almost always requires hard work and involves frustration. Just occasionally, you get good light bulb moments, too.

The starting point

Technology has lowered the barriers to entry: a smart schoolboy can put an application together without much difficulty, and get it out there ready for customers: "build it, and they will come".  Possibly.  The fact that something can be done doesn't mean that lots of people will want to do it. These are solutions looking for a problem. Almost as hazardous are the ideas the entrepreneur thinks are really great because he likes them. The more he likes them, the more he thinks other people will too. Usually, over enthusiasm in an entrepreneur is a bad omen because it swamps objectivity and scepticism. Big business opportunities rarely find their starting point in things that the entrepreneur can do or things he likes. It can happen, but the idea still has to resonate with enough other people.

A want is a need created by Marketing

So what might drive lots of people towards a business proposition?  Two reasons could be Need and Want. You could argue that regulatory requirement is a third, but I'd say that's just a need created by a Regulator. There again, as Steve Jobs proves time and again, perceived need can be created by the right marketing. Perhaps there is only one reason that people buy, namely need, whether this is real need, or perceived need created by Marketing, or required need created by regulation. Need, for whatever reason, is always a great starting starting point for an entrepreneur. Is there a big group of people that would need what this new business might do, how urgently do they need it, and how much would the solution be worth? Is the need real or does it depend on something else that might change?

I can see the problem, but what's the need?

Two of the business opportunities I've been working on have a common theme: they both have a big problem as the starting point. Both problems are widely understood, even widely commentated on. One is discussed regularly in Parliament. Each is a problem that affects a large number of people and causes real difficulties for them, so you would think a solution to either ought to be a great business opportunity, but this is where it starts to get interesting.

Since the problems are identified and widespread, why has no solution been found? With both opportunities there are several different audiences of participants, and it's not immediately obvious who is the right customer to buy a solution. In researching one opportunity, there were two approaches our team identified: one seemed to get great traction from some people, but the key audience was lukewarm. The other approach has yet to get us a solid pull on the line, but we're convinced that we've now pin pointed the real need that is firmly connected to financial pain. 

This experience is strikingly similar to what a different team has found with the second opportunity. Here, though, the team has had two exciting light bulb moments in the last month. We think we now understand the dynamics of the audiences, and have a clear and simple proposition to test. We're now running hard to bring this to life in time to do our market testing as soon as Summer's over.

The conclusion reached in both cases is that while the problem may be easy for all to see, it's much harder to narrow down the right solution and the right audience that has the urgent need and the ability to pay.

The case for a better mousetrap

The third opportunity has emerged because the Cloud opens up simple and improved solutions, previously ruled out by economics. In this case, while the problem is very real and a solution of sorts has existed for some time, the present way of doing things is clunky and requires time and effort to implement. The Cloud makes possible an elegant, ready-made solution that can be implemented in a fraction of the time, and at a cost that's almost ignorable.

The concern is that this is the proverbial Better Mousetrap: the solution to a problem that's already been solved. The Cloud creates lots of propositions like this, and we're back to the danger of assuming that because it can be done in the Cloud and it's neat, the customers will buy. The entrepreneur risks mistaking the nature and amount of real value that can be delivered to the customer. The new solution is better than the old, but only in certain very specific ways relating to simplicity and cost. Unlike almost all new technology propositions, functionality needs only to be adequate. So the proposition and marketing must project simplicity and value, because these are the benefits that customers might buy.

Calibrating new ideas

There are lots of triggers that cause customers to buy, but by far the most reliable is Need. Of course Need requires a reason, and the strength of the reasons drive the need to buy. Try thinking about the differences between the market drivers for 24hour drainage engineers or plumbers, and interior decorators or landscape gardeners. So if you have an idea, calibrate it by the cost of the need, the number of people who have it, and the urgency of the reasons for it. If you don't yet have an idea, ask yourself: "Where's a really big group of people with a really horrible problem that they just have to fix?"

(c) 2010, 2011 Peter G. Osborn