What’s the big idea? Why stress testing your business concept is vital
David Kirk is a former Rhodes scholar, All Black and Rugby World Cup winning captain and currently the co-founder and managing partner of Bailador, an ASX-listed investment fund. In addition, he is the chair of both the NZ Food Network and KiwiHarvest.
OPINION: When starting out in business, there is no other consideration more important than getting clear on just one thing – your raison d'être. Another way to put this is, “what’s your big idea?”, quickly followed by “why should anyone care?”.
What are you trying to do here? Is the big idea you have about how to change the world actually a good one? The first step after coming up with the big idea is to stress-test it.
There is a saying that goes around in some of the circles I move in that goes, “ideas count for nothing; it’s all about execution”. That’s not true of course, and it’s pretty obvious why. If there is no idea, there is nothing to execute. “Nothing will come of nothing," as King Lear says.
But it’s true in another sense. In the history of business - profit and not-for-profit - there have been a gazillion good ideas and relatively few successes. We should call this the execution gap. The gap between the number of good ideas and the number of successful ventures. It’s huge. Ten times? Twenty times? A hundred times? Nah, probably more like a billion times.
For every good idea, only one in a billion turns into a long-term successful business. I have absolutely no data to support this contention, but I’ve seen it heaps of times. And so have the people who thought up the saying.
A good idea that is executed well is something. A good idea that isn’t, is nothing. And the former are a billion times rarer than the latter. But this piece is about the idea itself. Before you start spending a lot of time on it, and possibly some money, you need to know that it is a good one and that with good execution it will actually work.
Here are the questions you need to ask yourself and answer yes to, to know if you have a good idea when it comes to starting a new business, for profit or not-for-profit.
What problem am I solving? Is it important?
Is it important enough that people I don’t know will give me money to solve this problem?
Do I understand the business model that is needed to solve the problem?
Is the business model scalable? That is, will the business get increasing benefits for each extra dollar invested as the business gets bigger. Or alternatively, will the business reach a point when it will not need more money, but still be able to grow the benefits it delivers?
Is anyone else working on the problem? If yes, is my idea about how to solve this problem better than theirs?
No doubt there are other important questions. But if you are confident that your idea is important, you understand the business model needed to execute it, it scales well, and no one else has shown they have a better way to solve the problem, then you are likely on to something. And you will be able to raise funds to turn the idea into a first step reality.
Whether you are personally up to the execution challenge is another matter. The next step after stress-testing your idea is to stress test yourself. Are you up to it? Can you execute on the idea? That’s the subject of the next piece.