How to Come Up with the Right Startup Idea?

This is the module you must have been waiting for this because like most aspiring entrepreneurs you too must be dealing with the classic question:

“ How do I come up with the right startup idea?”

It’s a simple enough question, but also the most difficult one to answer.

Ideation is fun and free. Anyone can come up with ideas. The difficult part is coming up with the right startup idea. But when you do come up with the right startup idea, you improve your odds of successful execution.

I have been asked this question many times. You might have also heard plenty of simple answers like “convert your passion into a hobby”, “look for a large underserved market”, “pick an industry which is trending”. Unfortunately, these approaches aren’t really helpful, nor are they universally applicable.

After studying thousands of startups, talking to their founders, recording their stories, I began to notice a pattern about how entrepreneurs come up with ideas for their startups.

I was able to broadly categorise these into three buckets:

• The Lightning Strike
• The Right Place at the Right Time
• The Brainstorm

How many times have you come up with brilliant ideas when you least expected it? Like you were struck by a bolt of lightning. It can happen when you’re in the shower, driving your car, talking with friends, or just mindlessly going through the Instagram feed. You start connecting the dots in a new way and have an epiphany. This sudden insight seems surprising at first. And then it becomes exciting when the value of this new idea seems obvious to a point where you wonder why nobody else has thought of it before.

Naturally, you go online, research a little bit only to find out that someone did actually think of it before you did. Still, it is very often possible to use this idea and execute it better than people who are already in the market. You might even find a new angle to the whole idea and create a very different solution. That’s great, isn’t it? Finding a million-dollar idea.

Unfortunately, this doesn’t happen to everyone. If it’s happened to you, consider yourself lucky.

The second way to get a great idea is to be in the right place at the right time and spot an opportunity. Imagine this scenario: you’ve spent the last 7 years building a custom software for hospitals. You’ve noticed some obvious gaps in the product or issues with how your company is selling it. You point out these issues to your boss and how improving these can make this product better. But the company doesn’t take any action to address these issues, because they have other priorities.

And right there, you have a business opportunity.

Let’s look at another scenario. Maybe your company outsources some work to vendors and pays them a big amount for this. But nobody is satisfied with the quality of work they do. You know there’s a better way to execute this process and at a lesser cost.

Here’s one more. Maybe your company shelved an amazing product or feature purely because of political and organizational reasons.

Or, you might have come across a business opportunity while working abroad, which you feelmight work very well here in India too.

These are all the kind of opportunities where you feel you can deliver a better solution. That’s when you should start working on a solution – on your own time, of course. You need to get specific information, bounce your ideas with trusted co-workers and industry contacts and try to determine the feasibility of solving the problem.The good thing is that you already know the problem and the challenges and are therefore well-positioned or networked in that particular space. So your chances of successfully executing your idea increases manifold.

Such opportunities don’t arise for everyone. So if you get such an opportunity, go out there and make something of it.

Both these methods rely on some amount of luck. And luck is not something you can control.

This is exactly why I zeroed in on a third way of coming up with new ideas. I call this the Brainstorm Matrix. This framework gives you all the triggers to connect the dots and come up with brand new ideas. Here’s how it works:

Step 1: Make a list of audience segments

Step 2: Make a list of problems that the audience is facing

Step 3: Match it up with a couple of business model

Step 4: Evaluate these models and narrow it down to a single idea

So shall we go create your own brainstorming matrix?

First: Make a list of audience segments

Create a spreadsheet and type out a list of 15-20 different customer segments in the first column. You don’t have to get too specific about this. Let it just be a general representation of audience segments. These are easier to conceptualize so they’re more useful and helpful for generating ideas.

You can create audience segments like college students, stay-at-home moms, MNC professionals, HR professionals, retired people, agencies, manufacturing companies, first-time parents – whatever you can think of. Don’t think too much or too deeply about this. Just go ahead and list out everything that comes into your mind.

You can also begin by picturing yourself as your target audience. Identify problems and issues that you yourself might be facing, for which you want solutions. You can start with issues related to your personal interests, hobbies, experience, or professional network, but don’t limit yourself to these.

If you’re having trouble coming up with more ideas, you can merge two audiences to make a new audience. For example: stay-at-home moms who are first-time parents. You can dwell deeper into specific categories too, or you could add an extra layer with geography and start with your own city. Before moving on, make sure that you have one clearly defined audience segment.

Next: Make a list of problems that this audience is facing

In the second column, put down all the problems your audience segment is facing. If you are part of this audience segment, it really helps in listing out the pain points. When you’re doing this, don’t worry if you don’t come up with well-defined problems. This is just to get the ball rolling.

Your market represents an audience segment with an unmet need or an unsolved problem. What are their hopes and dreams, their priorities, all the challenges they are facing, how are they spending or wasting their time and money? Make sure you check out discussion forums where they participate. Understand what they are complaining about. Research online for companies who are already offering them a solution.

List it all down. Keep adding problems to the list as and when you think of them.

After this, Match up the problems with business model(s)

Broadly speaking, there are only a few business models out there. You can come up with a brand-new business model, but it’s fine if you don’t. You can simply start playing around with existing business models.

Here are a few you can try

• Services
• Physical Products
• Digital Products
• Subscriptions
• Marketplace or Aggregator
• Crowdsourcing, and of course,
• A New Biz Model

List out all these business models in separate columns at the top of your sheet.

Your spreadsheet is now a matrix with customer and audience segments along with their problems down one side and business models across the top. Each cell where the two lists overlap is a place to brainstorm ideas. Go through each cell in this grid. You’ll probably dismiss many of the boxes within just a few seconds, but it is worth giving them some consideration. Who knows? You might come up with an idea you least expected.

The easiest way to do this is to go column by column. Pick a business or pricing model, search for a few existing businesses that use it, and spend a few minutes reading about them to get your head into that space. Then, check it against each potential customer or audience group.

Usually, the first column will take the most time because you are learning about each of the customer types as you go. It gets faster after that. Every time you come up with a solution worth trying out, highlight it as being viable.

The goal is to come up with at least 5-6 solid ideas. You then create another tab in the spreadsheet and list all your ideas there. Next to the ideas, write down the ideas, what the goal is, the audiences and business models for each one. This is not set in stone, but it is good to have a base from where you can move forward.

Step 4: Evaluate your shortlist and zero in on a single idea

Evaluate your list of 6+ ideas against criteria that will help you narrow down the list to the most promising 3.

You should evaluate your ideas in terms of these factors:

1. Competitiveness : Check how competitive the field is, but don’t get too deterred by the competition. If there are competitors, it usually means that there is a market for that product or service.
2. Your skillset & interests : Do you have the right skillsets to get into this industry? Do you have any experience in the industry or an industry similar to this one? Do you have the right connections that can help you navigate this sector?
3. Your goals : Will this industry help you in achieving your goals? Are you comfortable with the risk of investing money, time and effort in this industry?
4. Market opportunity : How big is the market, not just in terms of people but also in terms of how much each person in that market is willing to pay for your offering?

You probably won’t have time to do a deep-dive into all your ideas, so getting this narrowed down is both a science and an art. What does your gut tell you? What would be fun? Where are you most comfortable and confident? Let the answers to such questions guide you in your selection.

To make it easier, you can quantify it too. To quantify, add a column to the Ideas tab, for each of the criteria. Then, score your ideas from 1-5, with 5 being the best.

Don’t worry too much about whether something scores a 3 or a 4. Just keep going with your gut or do a few minutes of online research. Keep moving forward, don’t get stuck here.

When you’re done, add up the score and ideally, the higher the score, the more interesting the idea is.

Once you are done with this, run them by a couple of trusted friends to get an unbiased opinion and narrow them down to the three that seem most promising.

Many entrepreneurs think that they must come up with a business idea that no one has thought of before. But this is a misconception, because if the idea has any merit to it, someone would have definitely thought about it. See how you can add your insight and give it an interesting twist.

Don’t get too carried away by words like “innovation” and “disruption”. While going through this exercise, you may have realized that there are some industry segments which can lead to exponential results with just an incremental change.

Of course, being a first-mover is a big advantage. But being the first to market can also mean being the first to fail. And here’s the thing: you don’t necessarily need to be the first to market to succeed. Often, the second mover has a big advantage. The second to market can avoid the mistakes their predecessors made; you can improve in areas where they fell short. You can also

use all the consumer and market research that’s already been done.

And the best part is, it’s now easy to convince the investors and get funding for a proven market.

But merely copying a pre-existing product isn’t going to be enough. You must fill in the gaps and provide value and novelty beyond what already exists. You have to truly fix a problem that the existing product or service did not solve.

Let’s look at an example. We all used Gmail, right? But when it came out, there was already Hotmail, AOL, Yahoo … so many other free email services. But with its clean interface and better SPAM filters, Gmail became the winner, beating everyone out there.

One more: consider the case of the iPhone and iPod.

The iPod wasn’t the first MP3 player in the market. The iPhone wasn’t the first smartphone. There were many other brands like Sony, and there were mobile phones from Nokia, Blackberry, Samsung… But none of them were able to stop Apple. With their sleek, minimalist product design, features, and superior software, iPods and iPhones became super successes and helped Apple’s fortunes skyrocket and become the most valuable company out there.

That’s all we have. Now it’s your turn to take some time to work on this and brainstorm a few ideas using the template we discussed.