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A key thing to remember is "e;Putting a hammer in your hand does not make you a fine carpenter"e;. |
This process can be a powerful tool, though much detail is missing here due to space limits, but without the right team of people, and with the exact right experience working on this process with you, even this process is doomed to failure. After almost 16 years as a CEO now I would still not expect to cover even half of the skills needed to design virtually any business worth launching. Even the Lone Ranger had his trusted sidekick, Tonto, and he was not doing anything so complicated as launching a new business venture.
Unfortunately, there are no "e;business design simulation tools, like there are for verifying the design of complex computer chips. Frankly, I think there are too many variables for there ever to be good tools for this. So the only practical way to simulate a business must be to "e;run it"e; in the mind of the CEO and other senior executives with lots of experience. Each expert must verify that their portion of the business will work in their own head based on their own past experiences and by using their personal and subjective judgement. So this process clearly has lots of risk because people can be wrong or have the wrong experience. This risk must be addressed in several ways by testing in the real world, all those assumptions that are risky and critical to success.
You may use tools to verify "e;pieces"e; of the design that will work. For example, a spreadsheet model of the financials will verify that the business could actually produce a profit long before a product is actually produced. This is actually one of the easier things to verify because it is mostly math; however, it is only as good as the assumptions put into it. "e;Garbage in, garbage out"e; as they say about any computer operation. Verifying that sales, marketing and operations processes will work is a different matter entirely. The key is to break out and prove that key higher risk pieces, or assumptions will pan out.
There is one remarkable tool available today, which was not available a few years ago to test the market demand for a new product. It is the Internet. The Internet can be used to promote and measure interest and exactly measure how many people searched on specific words related to a product need. You can see who came to read a pitch for a product and actually hit the "e;BUY NOW"e; button too. Getting both readership and conversion to buyer ratios. More specifically there is an Internet tool that can do this for you in twenty-four hours for most product ideas. It is called "e;Google Adwords"e;. With a credit card and less than a one hundred dollar budget you can instantly set up a small ad to pop up in front of people searching on specific key words. All you have to do is figure out what words people will be search on when they have a need for your new product. There are probably many, but some can be so specific that you can be pretty certain most would want to know about your offering. You will also be able to track how many of those people click on your ad and send them to a simple web "e;brochure page"e;. This is also easy to set up. This is actually the biggest market research development in the history of mankind. And I do not say this lightly.
The reason that it is the greatest is that it is:
1. Exactly measurable
2. Cheap to implement
3. Easy to change in real-time without mailing, surveys, telemarketing
4. Can be used before the product is available
5. Samples a huge amount of the population, with only a slight skew to Internet users
6. Provides a wealth of data on actual historical keyword search volume to help you know which keywords to use even before you launch your research campaign
7. Is real-time
I do not believe you can say all these things, not even close actually, about any other market research vehicle available today. It is actual an almost perfect tool to figure out if there is a need for what you are thinking of creating before you invest one red cent in product development, hiring, sales or even marketing. And not only this but you can actually roll this into a real sales campaign and begin selling almost instantly.
Most products fail because people build products that other people actually don�t want, are too expensive, or the company cannot economically find good prospects or buyers. This tool actually solves all three problems, on a small scale, and allows you to know: A) There is demand for product, even before you create the product, B) Test any number of prices and other variable quickly, and C) Identify actual buyers, and the number of them available on a monthly (through the Internet channel anyway). You can then even have a good chance of interviewing both those people who bought, and those who did not, if you can simply capture their email addresses or other contact information in exchange for some small bribe of a free something or other. The economics of this, as compared to doing traditional, formal market research are literally 100 times better or more!!
I recommend using only PowerPoint slides for the first few iterations of the business design, rather than writing a significant business plan document. The reason is that the rate of change of information is so fast that you waste an enormous amount of time writing text that needs to get change dramatically. If you just have bullet points for the key design elements they are very easy to change, reorder, delete and expand on. When the design begins to solidify and change less rapidly you can write a paragraph of text for each bullet point and expand as needed. I do recommend writing a full business plan; you really cannot have a complete business design without one, it is just that you need to have a very mature design before you begin putting in this kind of effort into writing. The business plan is absolutely necessary and you should run, not walk, from any consultant or advisor who tells you otherwise. Even if you throw it in the trash when it is done the planning process is the value, not the resulting document. You will have a different, and much better, business design as a result of the discipline enforced by writing a business plan and it will pay huge dividends. Far more than the cost of doing it, because you will clearly avoid many expensive mistakes as a result. That said this is a big job and generally requires a few weeks of full-time effort. So ideally you want to write it before you have full-time employees on your payroll and have ratcheted up your burn rate. This can be done using a virtual team as discussed for the business design process. You should spread the writing effort around and get the expertise and thinking of lots of good people. Although the best people will not do this for stock, they don�t have too and the success rate is too low for this to make sense for all but the most desperate consultants.
Each time you go through this cycle your business will improve significantly. Each time you do it early on it will probably take longer because you are going deeper and deeper into each step and more things are starting to harden up. Later, as less information changes, you can actually repeat the cycle faster and faster.
I would venture to say most of the best entrepreneurs do much of this business design process at some point intuitively along the way; they are forced to by circumstances. The problem is most often they do it way too late and long after resources and people have been committed, based on earlier faulty assumptions. It gets harder and harder to change these major variables as time goes on, and as people are hired based on assumptions of distribution, market position (pricing, volume, quality) and many other factors.
So the key could be stated as "e;Understand you do not understand anything at the start."e; or in other words go into the business design and market research process with very few, if any, preconceived notions. I know it sounds like a line to grasshopper from his Shaolin monk Master Po in Kung Fu, but you must empty yourself and be aware of everything you assume, but do not know for certain. You must be aware of what you do not know. You must bend like a tree in the wind and yield like water, yet flow back again and again with the raw determination to find the right way to leverage your core value. These are great metaphors for the business design process.
The way the human mind works if you do not do these things then you will work hard to prove your preconceived assumptions and ignore much data that says they are wrong ("e;Cognitative Dissonance"e;). This results in proving a market you set out to prove existed, instead of being open to all possible uses for your core value and letting the market tell you where the most valuable, "e;lowest fruit"e; market opportunity really exists. You must also start out understanding you will need to draw on the experience of several other high-quality, highly experienced people who have experience in areas where you do not.
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