Musings of a twenty-something entrepreneur.
Aug
11

Part 1 in this “How to Come Up With Business Ideas” series explained that the Initial Spark is a new idea with the potential for practical uses. This new idea is essentially composed of the combination of two or more existing ideas. Part 3 covers practical ways to come up with new ideas.

Now that we have an (admittedly ambiguous) answer to the question of “What is the initial spark?”, we can discuss what kinds of forms it can take when we’re talking about startups.

In general, these ideas are potential solutions to some type of problem or market opportunity. So what do they look like?

Below are 7 different forms that business ideas can take. Some ideas will have many of these features (and indeed the more the better). Understanding these forms will give you an idea of the kinds of things to think about when trying to come up with new ideas.

Here’s the Table of Contents:

  1. Solve Your Own Problems
  2. Create a Totally New Problem
  3. Take Advantage of Change
  4. “Tweak” an Existing Idea
  5. Adopt an Existing Idea to a New Market
  6. Niche-ify
  7. Do it Better

1. Solve your own problems

This is standard advice for coming up with startup ideas, and there’s a good reason for that. Solving your own problems is a tried and true way to identify opportunities for new products. For me, every single company I’ve started has been an attempt to solve problems that I have.

There are several advantages to solving your own problems, which have been covered extensively by others. Basically, being a potential customer yourself, you’ll know firsthand what the needs of potential customs are. Moreover, since your problem relates to some type of activity you are involved in, you’re more likely to be passionate about it.

One implication of this is that the more problems you have, the more potential ideas you will have. If you are a rock-climbing, book-loving, traveling, concert-going, nature-loving young professional foodie in Oregon, then you’ll be exposed to all kinds of potential problems in those areas.

Not only will involvement in these areas give you ideas for problems that need to be solved, but exposure to the frameworks in these different areas will give you new perspectives from which to gain insights from other areas.

If instead you’re an alcoholic compulsive World of Warcraft lover, you’re simply not putting yourself in a position to have problems that can lead to new ideas. Thus, curious, active, and engaged people are more likely to come up with ideas.

An important caveat is that you shouldn’t take this advice too literally. You’re not actually solving the problem necessarily for you; instead, you’re using your experience to identify an opportunity. That’s only the inspiration part; the perfect solution for you, however, won’t necessarily be the best solution for the majority of your potential customers.

2. Create a Totally New Problem

Not every new idea addresses a well-known problem. No kids needed Pokemon cards until the other kids had them. I didn’t know I wanted biodegradable shoes until I was told I did by Crocs.  And who knew that so many people needed to buy virtual seeds for their virtual farms and tell all their virtual friends about it?

New problems can come about because of changing circumstances, in which case they are literally “new problems”. However, new problems aren’t necessarily “new”. Many times, a new problem is just an old problem that nobody recognized before.

This is a tricky one to address directly. You can’t just start throwing darts randomly against the wall hoping you’ll come up with a new problem. Instead, this one comes direct from the imagination, and more on that in the next section.

For now, just note that in general these “new problems” aren’t what we’d call “real” problems. Most of the examples I’ve come up with fall under entertainment or games, or are essentially marketing gimmicks.

Now that you’ve read this section, go back and replace every “problem” with “opportunity”. Now you’re thinking like an entrepreneur!

3. Take advantage of change

Change is a powerful agent of opportunity. Google couldn’t exist without the internet.  Below are a few different types of change that you might consider:

  • Technological. New technologies create opportunities for new products or business models. The internet is the obvious example, but even within the internet the pace of technological change is rapid and creates a ridiculous amount of opportunity. For web-based startup ideas, here are a few relevant kinds of echnological change to look for:
    • Hardware: The iPhone created a billion dollar market for smartphone apps overnight. In addition, as these devices get more powerful, they’ll be suitable for more and more services that wouldn’t make sense right now. (Just look at what geolocation has done for companies like Foursquare, Gowalla, etc.)
    • Software: Commodity software stacks have made sophisticated technology affordable for bootstrapping entrepreneurs. Does your product require a maps feature or video streaming? You don’t have to make those from scratch anymore, and instead can license them cheaply from Google or Wowza. Your can make products combining these resources that weren’t available five years ago.
  • Social. Social change creates demand for products that didn’t make sense before. For instance, as more people become comfortable using video chat, this opportunities in this place are exploding. The emergence of the Tea Party (shoot me now!) creates new opportunities to cater services to this group.
  • Demographic. Demographic changes increase the size of target markets, perhaps to the point where there is sufficient demand for a product that didn’t have a large enough demand before. When thinking of demographic changes, be specific. It’s not just that there are more people aged 60+, but there are more people that are 60+ and have some familiarity with computers. There aren’t just more people that are have smart phones, but there are more people that have smartphones and are younger than 18 and want to play games.

Anticipating changes is a great way to take on large companies that spend their energies addressing the status quo. To generalize, larger companies are much better at incremental change than revolutionary change, which makes them bad at addressing new opportunities that emerge as a result of change. Your agility and fearlessness make you a daunting David to their Goliath.

4. “Tweak” an existing idea.

“Tweaking” implies taking an existing product or business model, whether successful or not, and changing a critical aspect of it to address a problem in the existing market or in a completely separate market.

Tweaking is highly dependent on the specific market or product, but below are some reasons why businesses may leave themselves vulnerable to a tweak:

  • Something is “too hard” or outside the domain expertise of a company
  • Its simply poorly-managed, and they’re letting opportunity glare them in the face
  • They’re not current with technological trends (I’ve seen so many niche websites, apparently making money, that look like they were made in 2003).
  • They’re in the wrong business. Maybe they have a great business model, but their product isn’t suitable, or vice versa.

This is not limited to the product itself. Perhaps there’s a huge hole that you’ve observed in their sales model, or maybe you come up with a brilliant way to market the product.

As stated above, new ideas are simply new combinations of elements of old ideas. “Tweaking” is simply dissecting an old idea and finding the critical points that could be adjusted to create something new.

5. Adopt an Existing Idea or Model to a Different Market

On its surface, this form of a startup seems less original than others, but the creativity involved shouldn’t be underestimated. The key is to extract value from one product or service, and adapt it to the customs, laws, and environment of another market.

OLX is the eBay for much of Europe and South America. Baidu is the Google of China. And while adapting old products to new geographies is a great way to start a new company, geography isn’t the only flexible aspect of a current idea or model. For example, Chegg applied rental economics to textbooks. Ning made it easy to create customized social networks for groups and organizations. Amie Street brought auction economics to music sales.

6. Niche-ify

When companies create a product with a very wide target market, they have to compromise the value of that product within every single niche market within the larger target market. If I’m making a ballpoint pen for the masses, then i can’t include that fancy push-button top and multi-color option that only some people want.

To be attractive, a niche market must first be large enough to support a product. A niche market’s geography, preferences, demographics, or cost-consciousness are somehow relevant to the product and substantially distinguish this subset from other rest of the target market.

Find a group of people being underserved. Make the iPad cover for the traveler, with a waterproof seal and extra strong cover. Create a music-sharing service for hip hop enthusiasts, an online art gallery for Surrealist artists or an interior-design firm for coffee shops.

7. Do it Better

This is a tricky one, as it can be easy to underestimate the challenge of taking on a competitor’s market by trying to do what they do better. It can work, but you must be able to clearly formulate how you’re going to do something better than an established company that is already doing it.

Maybe a company is doing well, but only because they were first to market and not because their business model is the best to fulfill a certain service.

Perhaps a large company is afraid to move to fast and is innovating too slowly. Make an innovation in their area ahead of the competitor, and you could become an attractive acquisition target.

Maybe a brand has been tarnished beyond repair, or maybe they don’t have the network that you do, or they clearly have incompetent leadership.

For “doing it better” to work, marginal improvements won’t do. Marginal improvements can be quickly copied by your better-entrenched and better-funded competitors. But it can work. Does Hotmail ring a bell? Maybe not, because Gmail kicked their ass straight to the curb (atleast in the U.S.) with a vastly superior product.

As with many of the other ideas above, “doing it better” will achieve best results when combined with other tactics. Vimeo made a better online video player, but targeted it to higher-end and more serious video creators through its community. There were plenty of online t-shirt shops before Threadless, but conquered with amazing products.

Epilogue

The point of this post was to examine a few different forms that new startup ideas can look like. Sometimes incorporating just one of these aspects is enough to give an idea legs, other times it won’t be. Every idea is different, but hopefully this gives you some things to look for.

What’s missing from this list? I’d love to hear your praises, criticisms, or scorn! Leave it in the comments.

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About jesse:

"I move Onward, the only direction. Can't be scared to fail- searching perfection... Loiterers should be arrested!" -Jay Z Find out more about me at www.JesseMaddox.com

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20 Responses to “How to Come Up With Startup Ideas: Types of Startups”

 
  1. nate says:

    Great info Jesse. I’ve recently been thinking about potential ideas for iPad and iPhone apps. I am always thinking about new startups and this is a good read for someone like myself.

    Thanks for taking the time to share!

    Nate.

  2. Rossalie says:

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  3. angel808 says:

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  6. rain0506 says:

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  7. avatar0506 says:

    Awesome info! I might share this blog to my friends.

  8. Lauer69 says:

    Interesting post! I really love how you’ve written this article, thanks so much for sharing.

  9. diamond56 says:

    I’ve recently been thinking about potential ideas for iPad and iPhone apps. I am always thinking about new start ups and this is a good read for someone like myself. | 😛

  10. Tannya says:

    Thanks for the great information you have posted here…

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  12. ducati56 says:

    Pleasant post, thank you for the knowledge about startups. It could be a big help.

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