Assessing Business Ideas

The video goes on about the litmus test so ........ click here to download the Litmus Test.

Also....

Here also is how to assess a business idea:

There’s lots of interest in being an entrepreneur today around the world. So our question was, how do we figure out how to help our people understand, is this opportunity that I have in mind good enough for me or is there something fatally flawed and maybe I need to tweak it a little bit before I get started, or maybe I should actually put it in the bin and look for something better.

The first lesson we learned is that there is sort of some confusion in most entrepreneurs' and many investors' eyes around these two very simple words that we always use – market and industry.

Markets are really groups of customers, and industries are groups of competitors and so there are different questions you ask to understand, is this an attractive market or, on the other hand, is this an attractive industry and attractive game to play. So that’s sort of the first thing our research taught us – that you have to assess those two sides of opportunity distinctly.

The second thing we learned was that while large fast-growing markets are attractive for example, there is something more important about the market side of the equation and not surprisingly that’s whether the customer is going to buy your stuff.

On the industry side there’s the same kind of problem. You can do an analysis sort of at the macro level, looking at the industry from 30,000ft, as Michael Portev teaches us to do.

But the real question isn’t so much is the industry attractive, it’s can you build sustainable competitive advantage that’s going to last over time, as opposed to you getting started and then some big company comes in and you're lunch.

The third one was really surprising. It’s common for people to say around entrepreneurship and venture capital that it’s all about management, management, management; and clearly management teams are important. But what we learned is what’s important about them isn’t probably found on their CVs and isn’t just about the fire in their belly and their entrepreneurial passion. It’s about three things. It’s about their mission and aspiration and propensity for risk.

The second thing is every industry has some things that we call critical success factors. That is, those factors that if you do them well, your probably going to be successful, even though you don’t do everything else well, but if you do them not so well, you’re probably going to have a tough time, even though other things you get right.

And then the third team issue is the issue about being connected and of course everybody in business knows how important connections are. But the real insight we got from this research has to do with the problems inherent in what we call Plan A. Most entrepreneurs have an idea for a new business and they are passionate about this idea and they just know it’s going to work. But the evidence suggests that most of the time Plan A does not work and what works really is Plan B or Plan C or maybe Plan Z.

So this issue of being well connected becomes the key to getting to Plan B and Plan B is probably where the money is going to be made but on day one you don’t know what Plan B is. What makes an opportunity really attractive, a great place to grow your business, rather than just a ho hum opportunity?

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How to generate powerful ideas by thinking laterally

By Paul Sloane

Lateral thinking is a phrase coined by Edward de Bono as a counterpoint to conventional or vertical thinking. In conventional thinking we go forward in a predictable, direct fashion. Lateral thinking involves coming at the problem from new directions – literally from the side. De Bono defines the four main aspects of lateral thinking as follows:

1. The recognition of dominant polarizing ideas.
2. The search for different ways of looking at things.
3. A relaxation of the rigid control of vertical thinking.
4. The use of chance.

There are dominant ideas in every walk of life. They are the assumptions, rules and conventions that underpin systems and influence people’s thinking and attitudes. The idea that the Earth was flat or that the Earth was the centre of the Universe are examples of dominant ideas that polarized thought along set lines. Once the dominant ideas are in place then everything else is viewed in a way that supports them. Someone who is paranoid sees every attempt to help them as malevolent and manipulating. Someone who believes in a conspiracy theory will explain away any inconvenient facts as deliberately constructed by the powers behind the conspiracy. Most organizations have dominant ideas that polarise their view of the world. It is easy for us to be critical of the makers of horse-drawn carriages who thought that automobiles were silly contraptions that would never catch on. However we are the captives of established ideas too.

A lateral thinking technique we can use is to write down all the dominant ideas that apply in our situation and then to deliberately challenge them. So for example the major airlines used to work with these beliefs:

• Customers want high standards of service.
• We issue tickets for all flights.
• We allocate seating in advance.
• We sell through travel agents.
• We fly to major airports because that is what business travellers want.

Of course the low-cost airlines broke all of these rules and created a huge new market. A good start with lateral thinking is to deliberately turn every assumption and dominant idea on its head and see where that leads.

What if: A powerful lateral thinking technique

Asking "What if?" is a lateral thinking technique that helps us to explore possibilities and challenge assumptions at the same time. We use the "What if?" question to stretch every dimension of the issue. Each "What if?"question should be extreme to point of being ridiculous. Say we are running a small charity that cares for homeless dogs. The challenge is, "How can we double our fund-raising income?" The sort of "What if?" questions we could ask might be:

• What if we had only 1 donor?
• What if we had 10 million donors?
• What if we had an unlimited marketing budget?
• What if we had no marketing budget?
• What if everyone had to look after a homeless dog for a day?
• What if dogs slept in beds and people slept in kennels?
• What if dogs could speak?

The question "What if we only had one donor?" might suggest that we target fabulously wealthy dog lovers in order to raise more funds from fewer donors. We could explore ways of doing this and generate all sorts of ideas. "What if dogs could speak?" might suggest ways of marketing that involved speaking dogs or dog conversations. Each question generates stimulating lines of inquiry by testing the rules and dominant ideas boundaries that are assumed to apply to the problem. Start with a challenge and, individually or in a group, generate a short list of really provocative "what if?" questions. Take one and see where it leads. Follow the crazy train of thought and see what emerges. You will start with silly ideas but these often lead to radical insights and innovations.

How randomness and chance favor the lateral thinker

The role of chance in major inventions and scientific discoveries is well documented. The transmission of radio waves was discovered by Hertz when some of his equipment happened to produce a spark on the other side of the room. Alexander Fleming discovered penicillin when he noticed that one of his old petrie dishes had developed a mould that was resistant to bacteria. X-Rays were discovered accidentally by Roentgen when he was playing with a cathode ray tube. Christopher Columbus discovered America when he was looking for a route to India. The common theme is that someone with a curious mind sets out to investigate things. When something unusual happens they study it and see how it can be put to use.

The same methods can work for us. When we are looking for new ideas and fresh ways to do things then a random input can help us. A highly effective brainstorming technique is to take a noun at random from the dictionary. Write down some associations or attributes of the word and then force fit connections between the word or its associations and the brainstorming challenge. People do not believe that it works until they try it. Some words produce nothing worthwhile but every so often you will get really radical ideas using this method. The same approach works using a random object, picture, song and so on. This is why a walk around a museum or art gallery can be so useful when we are working on a knotty problem. The brain can make all sorts of lateral connections between the variety of stimuli that you encounter and the problem.

A great deal of humour is based on lateral thinking. The comedian ridicules existing beliefs; he comes at an issue from unusual directions; he makes unexpected connections to give the surprise that makes us laugh. The two best reasons to use lateral thinking in our everyday lives are because we will generate many fresh, better ideas and because it is great fun

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