As well as trying to find a co-founder, we are trying to settle on a business idea. In the abstract, a good business idea is a problem + solution + customer.
By providing a solution to a problem you create value for the customer, who then willingly gives you money. In order to find valuable business ideas we ‘ideate’. This isn’t just some silly corporate lingo (okay, it is a bit silly) but a structured design process to develop creative ideas.
The most valuable ideas are usually counter-intuitive at first glance. The innovation market is relatively efficient, so obviously good ideas get enacted upon quickly or turn out not to work. That means that rather than offering a cheaper, faster or better way of doing something that already exists, the most successful startups do something entirely new. For example: search is more lucrative than displaying ads – Google; people prefer music via a subscription rather than owning individual songs – Spotify; if we design it right, people are willing to stay with strangers – AirBnB.
There’s a pervasive myth however that these innovative business ideas appear by accident and fully formed; the cartoon trope of a lightbulb appearing above a character’s head. As we’ve learnt from the EF team, the famously successful startups tell simplified and highly polished origination myths, such as “I was working on X using Y. Then one day I tried to do Z and realised we could use Y. Then we became billionaires”.
The true stories are inevitably more complicated and involve much more iteration: “We were trying to do A using B. We started doing X to make some money on the side so we learnt C, which after a year developed into Y. We tried to use Y for D,E,F… until we stumbled on Z. Then we…..etc. etc.”
Ideation is a deliberate process to speed up “accidentally” stumbling on a great idea. It consists of multiple different ways of thinking that one should alternate between to find “the one” idea to start working on. The two main steps are:
- Generate ideas using lateral thinking
- Use vertical thinking to sift and refine the generated ideas
Lateral thinking was popularised by Edward de Bono as an alternative methodology to solving problems rather than using intuitive step-by-step logic, a.k.a. vertical thinking. It encourages suspending rationality and exploring indirect approaches to a problem.
My favourite example of de Bono’s lateral thinking was his suggestion to use Marmite to solve the Israeli–Palestinian conflict. The logic is that yeast is rich in zinc but bread is unleavened in the Middle East, leading to widespread zinc deficiency. Lack of zinc has been connected with belligerent and violent behaviour. Therefore give everyone lots of Marmite to top-up their zinc levels and lead to a peaceful resolution (assuming the Middle East doesn’t then split between Marmite lovers and haters).
The three lateral thinking techniques we were encouraged to use were:
- Generating alternatives – force yourself to consider a much wider range of solutions than is natural, don’t stop at the first promising idea. The obvious solution is rarely the best, otherwise the problem would probably have been solved already. The best could well be your 34th idea.
- Challenge assumptions – when solving a problem there are always assumptions baked in. Most of these are valid – “gravity will stop things floating” – but some may not be, e.g. “people aren’t willing to do that”. Consciously specify the assumptions being made and then challenge them. No assumption is sacred (anti-gravity machine anyone?).
- Reversal – Every path has an equally well-defined opposite path. Take the current framing and flip it inside-out, upside-down and back-to-front. Instead of people going on holiday, why doesn’t the holiday come to them?
So for example if you wanted to lose weight: don’t just consider dieting and exercise, what about changing how you buy food? Is being overweight actually bad? Instead of you eating food, why doesn’t food eat you? Now that last point seems silly, but what if there was a fat-eating bacteria say that could be injected into you?
Once you’ve generated a plethora of ideas, it’s time to switch our usual logical mind back on (well usual for a recovering mathematician anyhow). Using logical vertical thinking review the ideas, spot those with promise, and refine them.
OK, so you have what you think is a good idea, what next?
Another unhelpful myth is that a startup hinges on its one idea. Multiple people have asked me what our business idea is, “if you can say”. The assumption here is that if you tell people your idea someone might steal it and do it first. This is a risk, but there is an even greater risk that you have a bad idea. As they say, talk is cheap. Ideas are the easy bit, execution is the hard part. Startups are like little fish in the sea, they are far more likely to be killed by big fish or the sea itself than the other little fish.
One definition of a ‘startup’ is that it’s a company that hasn’t found product-market fit yet. In other words, they are still experimenting with the three variables: problem + solution + customer. It is highly unlikely that you’ll completely nail all three from inside your own head. There is a vast graveyard of startups that spent a lot of time and money building products that no one actually wanted. Therefore, idea validation is very important.
How do you validate ideas? With so-called ‘customer development’. This means getting out of the office/co-working space and talking to potential customers (a veritable nerd’s nightmare of awkward social interaction). The aim is to fully understand your customer’s needs and discover “hair-on-fire” problems you can solve. What part of their life is so painful and frustrating they’ll still pay for the crappy first version of your product?
The instinct is to ask customers “We have a great idea for a product, do you like it? Would you buy it?”. The problem with these questions is that people are polite (at least in the UK anyway) and they’re bad at predicting what they’ll actually pay for. This leads to misleading feedback.
Thus enters the “Mom Test”, an unfortunately American named interviewing technique developed by Rob Fitzpatrick. Its name comes from the idea that your mum will always tell you your business idea is wonderful and they’ll buy anything from you. But by following the “mom test” you can circumvent this and get actionable insights from anyone, including your own mother.