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BUSINESS IDEA DEVELOPMENT AND VALIDATION

BUSINESS IDEA DEVELOPMENT

Introduction

Developing your business idea is the first step in your quest to become an entrepreneur. Your idea would have to be developed as to prepare it to become a commercially viable business idea.

Beyond mere creativity, but also execution. The progression of the development of business idea is no longer about solely being different or creative but it has to follow-through in terms of the execution. The idea has to be developed into a product or services.

Apart from that, you have to ascertain whether the business idea is a good fit for your organization. You have to acknowledge the work that needs to be done to develop the idea into a full-scale business. You should prepare your organization with the right talents to execute the job.

Trends are part and parcel of everyday life. They change constantly. You should prepare your business idea to embrace the current trends and more importantly, is able to ride trends. This would ensure that you idea can survive the change of trends.

In developing business ideas, you have to understand Value Proposition, Gap Analysis and Opportunity Analysis. These areas are vital for you to develop your ideas into a sound and viable business idea.

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What is value Proposition

• What the customer / user gets by purchasing / using this product

• Some issues to consider:– Cost savings– More efficient process– Better quality– Shorter time– Up to date (trendy) and feel good factor– Others

Value Proposition

Value proposition should be the summary of your idea. These values that you are proposing to potential customers are your product’s strength.

In a market, sellers will out-shout other sellers with their value propositions. This value proposition is vital for these are the first things that will attract potential customers.

You should always put yourselves in the customer’s position and ask, “What am I going to get from these product/services?”

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What are the weaknesses in current market situation?Customer base

• Unmet needs• Dissatisfaction

Competitors• Quality• Delivery / Distribution • Support services

Product itself• Product features• Technology change

Contextual (external factors)• Political reasons• Cultural impediments• Religious issues• Social limitations

Gaps & Opportunities Analysis

Gap Analysis

Identifying weaknesses in the current market and analysing them is important. This will help you understand the gaps that are available for you to manipulate.

Entrepreneurial minds always look for the gaps and weaknesses in everything. From that point onwards, the important thing is to understand and analyze the causes. This will help you to see from a larger perspective.

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Opportunity Analysis

Change in something that creates demand and/or opportunity for the product /service

•Technology•Leadership•Social behavior•Economic status•Economy•Spending power•Environment concerns

How the product •Solve problems•Ride a trend•Fill up certain requirement•Overcome restrictions & bring value / benefit to the customer / user

Opportunity Analysis

Changes always happen. And they happen everywhere. These changes inadvertently create opportunities.

Changes in the technology (in this case advancement), leadership, social behaviour, economic status, the overall economy, spending power, environmental concerns, and many more are some of the issues that creates opportunities for you to manipulate.

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BUSINESS IDEA VALIDATION

Introduction

Once you have developed your business idea, you need to validate your business proposal. You have to know who you are going to sell your product/services to.

Conducting some market research, formulating your business model, knowing your revenue streams and understanding the market size and its growth rate are very important at this stage.

These slides below should give you a rough idea on these subjects:

Market Research: Target Market and Market Segmentation

• Target User vs. Target Buyer– Who are the users of your product– Who will be buying your product

• Target market:– Primary market– Secondary market

• Market Segmentation– Which industry– Which socio-economic profile– Which region / area– Which annual revenue bracket

Market Research

Basically you are the seller and you now have a product/service. The next step is to know who your customers are.

Understanding your market is important because you need to address the customer’s wants.

But first you need to know your customers, or your target market. Who are they? What are their socio-economic backgrounds? What are their spending patterns like?

Users are not necessarily your buyers; vice-versa.

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Business Model

• How should my business make money from my buyers?

• ICT business models– Outright sales model– Licensing model– Software-As-Service model (ASP)– Advertising supported model– Subscription model– Donation model– Combination / Rojak model

Business Model

The quintessential question for all entrepreneurs; “How should my business make money from my buyers/ customers?”

There are various business models out there. Some might fit your product/services, some might not. But you need to identify your business model early on.

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Revenue Streams

• Various income generators for my business

• Types of ICT revenue streams:– Sales of product (licensing / outright / subscription,

etc)

– Technical support and maintenance services– User training packages

– Advertisements

– Sale of database

– Others

Revenue streams

A single product can have multiple revenue streams.

The more revenue streams you have, the less dependent you are to any portion of the business; thus less risky. For instance, for a web portal for property listings, apart from the normal fees charged to any transaction, advertisement and other product placements can be a more constant revenue stream.

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Market Size and Growth Rate

• How much are people currently spending on like-products in the market?

• How much will people spend on like-products in the future?

• Is this business in a ‘sunrise’ or ‘sunset’ market?• What are the outlook for like-products, and what

are the forecast for the target market spending habits?

• What are the outlook for the overall economy?

Market Size and Growth Rate

Before you enter the business world, you need to at least understand the business. You have to be aware of the market that you want to penetrate.

Looking at statistics and forecast is a good tip in understanding the market pattern. Business is a numbers game. You need to know your numbers.

This information is useful for you to understand the business from a macro level. Also this will enable you to make an informed decision rather than risking yourself in uncharted waters.

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PITCHING SKILLS

What is Idea Pitching?

• Idea pitching is basically selling your idea to your audience in a short concise manner.

• Relaying the overview of an idea for a product, service, or project; i.e. a short story of your idea. This short presentation should help the audience to understand your idea.

• Make the pitch in tangible terms; not abstract. Make the men on the street understand your idea/solution.

Long pitch vs. Short pitch

• Idea pitch is not a biz plan. It is a summary of your idea, not the details (i.e. the numbers).

• Short pitch is important to get people’s attention straight away, without going through the numbers; whereas for long pitch is more suitable for a discussion setting with the audience already understanding your basic idea.

• Your pitch should grab the audience’s attention.; thus the importance of fitting your pitch inside the audience’s short attention span.

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Elevator Pitch

What is an "Elevator Pitch"?• An "Elevator Pitch" is a concise, carefully planned, and

well-practiced description about your company that your mother should be able to understand in the time it would take to ride up an elevator.

What an "Elevator Pitch" is not:• It is not a "sales pitch." Don't get caught up in using

the entire pitch to tell the Investor how great your product or service is. The Investor is "buying" the business, not the product. Tell him/her how you will run the business

Creating the ‘Elevator Pitch’

Six questions your "Elevator Pitch" must answer:

1. What is your product or service?Briefly describe what it is you sell. Do not go into excruciating detail.

2. Who is your market?Briefly discuss who you are selling the product or service to. What industry is it? How large of a market do they represent?

3. What is your revenue model?More simply, how do you expect to make money?

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4. Who is behind the company?"Bet on the jockey, not the horse" is a familiar saying among Investors. Tell them a little about you and your team's background and achievements. If you have a strong advisory board, tell them who they are and what they have accomplished.

5. Who is your competition?Don't have any? Think again. Briefly discuss who they are and what they have accomplished. Successful competition is an advantage-they are proof your business model and/or concept work.

6. What is your competitive advantage? Simply being in an industry with successful competitors is not enough. You need to effectively communicate how your company is different and why you have an advantage over the competition. A better distribution channel? Key partners? Proprietary technology?

Creating the ‘Elevator Pitch’

Idea Pitching Guidelines

1. Describe your idea. What is your idea?

2. Value proposition. What value does your idea have? What is so special about your idea?

3. Market potential. Who are your target market? How big is the market?

4. Revenue stream. How are you going to make money?

*Answer these questions and practice pitching with a friend. Try keeping it under 3-4 minutes.

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Moving Forward

• Prepare your idea pitch based on the guidelines;

• Practice your idea pitch with friends, strangers, etc;

• Pitch your ideas to the panel during the next session individually.

YOUR IDEA PITCH

What is your idea?

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What value does your idea have?

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What is so special about your idea?

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Who are your target markets?

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How big is the market?

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How are you going to make money?

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