If you are a serial entrepreneur starting to look for an idea for your next startup, you are likely to want a way to stimulate your brain to come up with as many good ideas as possible. This blog post outlines a framework that is designed to fire up your best creative thinking modes, triggering the creation of new ideas.
The idea for this framework came to me when I realized that all of my early startups had been triggered by the following ingredients: an unmet customer need (or pain), and some disruptive new technology that had allowed that pain to be solved in a new way.
Think about many of the great startups we know and love, and you will recognize this pattern:
Two of my own startup ideas were driven by spotting an unmet need and recognizing that there was new technology that solve those needs. My other two startups were driven the other way round: recognizing that there was an important technology disruption, and then looking for what customer pain I could now solve.
The Framework evolves: New Business Models
In early 2004, I invested in JBoss, a company who disrupted the two leading players in the Java Application Server space, IBM and BEA. They did this by giving away their software completely free of charge, and making money by selling a low cost subscription that included things like support. JBoss was highly successful with this new business model, and shot to a $65m run rate in just two and a half years.
When I looked at what had been the disruption that had allowed them to succeed, I realized it wasn’t new technology like we had seen with previous startups, but rather a new business model. So the framework needed to evolve:
There are many other examples of businesses that have recently succeeded using new business models to disrupt existing players. These include:
- Groupon: Group buying to drive significant discounts. (Also represents a new customer acquisition model for local businesses).
- Zynga: Leveraging the Facebook platform as a way to acquire customers virally (extremely fast and free)
- Gilt Groupe: Flash sales of overstock clothing
- Salesforce.com: the SaaS business model, making it easier for customers to buy and implement. (This also did depend on a new technology appearing: the wide availability of broadband internet connections.)
- Angry Birds: Apple’s App Store as a new low cost way of acquiring customers
- 99Designs: crowdsourcing as a way to provide design services
A final twist: Consumers become the biggest customers for technology
Since the crash of 2000/2001, an interesting change happened in the tech startup world: consumers became the biggest buyers and users of technology. This has created some of the biggest startup successes, including Facebook, Zynga, Groupon, Apple, Gilt Groupe, etc.
Although one of the drivers for why consumers buy technology is solving unmet needs (pain) in their lives, there is also another very important driver: entertainment, (or pleasure). So to make the framework complete, we should also consider entertainment as an alternative to unmet customer need (pain).
How to use the Framework
Now that we have identified these four elements, let’s look at how we can use these to trigger creative thinking in a brainstorming session. First create a working space where ideas can be written down. If in a group setting, this is probably a large whiteboard. Then write down the headings, as follows:
Then start to capture ideas under any of the five headings, in whatever order they occur to you. For example, under Disruptions, you might list things like the following:
New Disruptive Technologies
- Mobile computing
- Smart phones and tablets become the dominant computing platform (over-taking PCs)
- Touch screens
- GPS
- Accelerometer and Gyroscopes
- Cameras and video cameras built-in
- Always on WiFi and 3G internet access going to 4G shortly
- Mobile Applications
- In application payments
- Near Field Wireless (NFC) coming to smartphones for payments shortly
- New features in iOS and Android operating systems
- The Social Graph, Facebook and LinkedIn API’s
- The Interest Graph
- Facebook’s new Mobile Platform
- Cloud computing
- Infrastructure as a Service (IaaS) – Amazon, Rackspace, etc.
- Platform as a Service (PaaS) – Heroku, EngineYard, CloudBees,
- Software as a Service (SaaS)
- HD video on the Web, and IPTV
- HTML 5
- SSD disk drives dropping in price and increasing in capacity
- Big Data, and NoSQL alternatives
- Virtualization and desktop virtualization
- Nanotechnology
- etc.
New Business Models
- Leveraging platforms like Facebook, etc. for low cost, viral customer acquisition
- App Stores from Apple, Android, etc. for low cost customer acquisition
- Open Source
- Freemium
- SaaS
- Virtual Goods
- CrowdSourcing
- Flash sales
- Group buying
- Marketplaces to match buyers and sellers
- Lead generation (e.g. LendingTree.com, Quinn Street)
- etc.
Other Disruptions
- Rising oil prices
- New government regulations
- Global warming
- High US Unemployment
- Aging of Baby Boomers
- New wealthy class in China
- etc.
When it comes to writing down ideas around unmet customer needs (pain), I recommend that you stay close to areas where you have domain expertise. This is usually the entrepreneur’s secret sauce: their unique understanding of how a particular industry, or consumer segment works. While there are a few exceptions that prove the rule, varying from your area of domain expertise usually results in failure, as other people are better suited to tackling that area. For example entrepreneurs that know the enterprise infrastructure space don’t usually do well when they try to start consumer internet companies.
With no particular domain in mind, here are some quick examples of unmet needs:
Unmet Customer Needs (Pain) – Businesses
- Need more customers
- More leads (web traffic, etc.)
- Better ways to convert leads to customers
- Improved targeting
- Better understanding of customer needs
- Better personalized messaging
- Better ways to get customers to buy more
- Personalization
- Better ways to pay and track payments using a smartphone instead of credit cards and cash
- Need to analyze and make sense of increasing large amounts of data coming from the web
- Restaurants, event venues, etc.: fill up empty time slots which would otherwise be lost inventory
- Needing to comply with new regulations
- Need to prevent security breaches, and data theft
- eMail overload
- Want to have effective meetings without travel
- Data centers exceeding their power, cooling, or space limits
- Enterprises need to engage with their customers via Social Media – and are not sure how
- Eliminating the pain and expense of backup and disaster recovery
- etc.
Unmet Customer Needs (Pain) – Consumers
- Need better ways to find and meet the right people to date
- Need better ways to find a job when they are out of work, or looking to change jobs
- Identity theft
- Aging parents that have health and other issues
- Aging baby boomers: Health
- Fitness
- More effective and entertaining education
- Financial security and a way to retire with confidence
- Information overload
- Want computers that are easier to use and manage
- Need synchronization of all their data, music, photos, videos and apps across multiple devices
- etc.
Entertainment is the one heading which may not need any further expansion, as it is a clear need in itself. However if this is the area that you are explicitly focused on, it might make sense to more clearly articulate the needs around entertainment that are still unmet:
Entertainment
- Music
- Easier ways to find new artists and songs that you will like
- Easy access to your library of music anywhere, any device, any time
- Videos
- Better video playback on mobile devices
- Ability to access the latest movies and TV shows in HD from any device, anywhere, at any time
- etc.
How the Brainstorming process works
What we are looking for in this process is to trigger the creative thinking process. My personal experience suggests that one of the best ways to get your creative thinking going is to put your ideas down on a whiteboard (or some other medium), and look at them. The process of reviewing what you have written down and organizing it into some kind of structure will trigger new spurts of creative thinking. (In this case, the framework provides the organizational structure.)
What we are looking for
We are looking for one of the following:
- An important new disruption that can be matched with some customer need
- An unmet need that you realize can be solved.
In both these cases, we are looking for an idea on one side of the whiteboard, that can be matched with an item on the other side. Those matches represent startup opportunities.
It is highly unlikely that you will come up with a great startup idea in a single brainstorming session. More likely is that this list will sit in your mind over a period of time, and cause you to keep thinking. Then at some unpredictable moment in time, your mind may recognize the breakthrough idea.
Validating and Scoring your different Ideas
For some thoughts on how you might want to validate or score your different ideas, try the following starting points:
- Are well suited to this particular opportunity. Do you have some unique domain insight or technological background that makes you uniquely well suited to tackle this opportunity?
- Is there strong enough customer motivation (pain in the case of a B2B sale) to get the customer to buy and use your product?
- Market size: are there enough customers that have this strong motivation to make a big company?
- Competition: are there entrenched competitors who would be hard to dislodge?
- Does this product truly solve the customer problem (without introducing some new problems in the process of adoption)?
- Are there strong barriers to entry that can be sustained over time? (Ideally the differentiation should be strong enough to allow you to beat major players who may decide to copy your idea, and benefit from their brand, distribution, customer base, etc.)
- Can you build a viable business model around this idea? (Specifically is it going to be possible to acquire customers for less money than the profit you can make from selling to them?)
- How long, and how much capital is required, to complete the solution?
- How significant are the risks involved?
You may also wish to add your own validation/scoring ideas to this list.
The need for “Hair on Fire” customer pain
The importance of the second validation point, customer motivation, became horribly obvious to me in my fourth startup, Watermark Software, where the idea that I came up with was based more around my excitement for some cool new document imaging technology. When we took this to market, we managed to get the press very excited about what we were doing, resulting in a half page article in the Sunday edition of The New York Times, and many other positive reviews.
We could also get as many customer meetings as we wanted because it was interesting and innovative. But because there was no clear customer pain that the product addressed, we had great difficulty closing sales.
Even when there is some minor level of customer pain, it is still hard to get orders as you may not rise high enough in the priority list to be one of the projects that customers actually decide to purchase and implement. When we finally realized this at Watermark, and focused on finding vertical applications like insurance claims processing, and mortgage application processing where there was enough pain, we got orders and found success.
That led me to realize that any future B2B startup ideas I created should be focused on “Extreme Pain”, and not just pain. When working as a board member with the Netezza sales force, where a typical sale of their data warehousing appliance was around $1m, I heard them use the expression “look for customers who have their hair on fire”, as those will be the one’s who will actually purchase. Their product was extremely cool, and could also get meetings with pretty nearly any customer, but to get someone to pay a million dollars clearly required extreme pain.
A common problem: Technology without a clear customer
As a VC, it is pretty common to see entrepreneurs that have come from technical backgrounds figure out some very cool new technology, and want to start a company around that. They have only one of the two requirements for a successful startup idea.
To be successful, they need to get very specific about which customers have pain that this technology can solve. They should then allow the needs of those customers as a group to drive the definition of the product. That is also why so many of the startup schools recommend a team of two founders: one with the business brain, to figure out who will buy, what they want to buy, and how they will buy; and the other with the technology brain.
Conclusion
The thesis of this blog post is that your brain’s creative juices will work better by writing down, and then reviewing and organizing your ideas.
The second idea in this blog post is that many great startup ideas are about matching a disruption with a set of customers that have an unmet need. (This may not be the only way startups work.) It is my belief that dividing your ideas into a two-sided diagram, as shown above, should help trigger additional creative thinking.
I have no proof that this idea works in practice, so would love to hear feedback from my readers who give this a try.
Note that since writing this post, I read a good post by Paul Graham on the topic that can be found here.
