Why Most New Business Ideas are (almost) Useless
Wednesday, May 31st, 2006Great post by BusinessPundit on what he’s learned about the key to entrepreneurship:
The first blow came when I realized that ideas are mostly worthless. Somebody else has thought of your invention, they just haven’t built it. If no one had thought of your idea, then it is probably beyond current technology to build anyway. That is why you don’t see business plans for time machines.
When that was stripped away, I realized it was all about being first to market. Right?
The second blow came when I realized that too was wrong. Google wasn’t first to market. Neither was Microsoft. Few companies successful over the long term were first to market. First to market means you get to learn from your own mistakes… and so does your competition. But it costs you more than it does them. So I put that aside and started to think it was about the execution.
I was getting warmer now, and at least I hit on something that really makes a difference, but the third blow came when I realized execution wasn’t enough. Peter Drucker wrote that “nothing is worse than doing something very efficiently that shouldn’t be done at all.” He’s right. I could execute the hell out of a dumb business plan and I might have enough for a bus ride at the end of it, if I borrowed $0.50 from you.
He comes to the conclusion:
Good ideas for startups basically come from recognizing an opportunity that could perhaps be described as “productivity and/or value arbitrage.” You see a chance to do something better in a way that encourages people to pay for it. You see a way to let people trade time for money, simplicity for money, productivity for money, or some other combination.
If you want to start a company, study the economics of various industries. Look at how you create value for customers. Not assumed value. Not vapor-value that you think exists until you try to move from free to fee and realize no one will pay your fee.
If you want to start a business, please read the whole thing.
