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Thomas Edison, in 1877, was still an unknown inventor focused on developing better hardware for telegraph operators. In particular he was trying to create something that would send voice messages over telegraph lines. In July he was recorded as saying
Batch (his assistant), if we had a point on this, we could make a record of some material which we could afterwards pull under the point, and it would give us the speech back.
By breakfast the following morning, they had succeeded in getting clear articulation from waxed paper, which was the first recording medium. However it wasn't until late November, 4 months later, that Edison and his staff had caught onto the commercial potential within entertainment.
The important points for us in this story is that (1) Edison was actively trying to solve a problem he wasn't sitting around waiting for inspiration to strike, (2) he had a clear understanding of the problem and the customer and (3) even he didn't realise the potential of his invention straight away.
Where do good ideas come from?
The simple answer is that good ideas come from problems, Thomas Edison was engaging with telegraph operators around their problem of not being able to send voice messages, from that we have the beginning of all recorded audio.
Start with your personal focus
The world is full of problems and therefore opportunities which can be overwhelming so a good place to start is by understanding your personal focus which is made up of:
- What are you good at? (capability)
- What are you willing to learn and develop? (willingness)
- How could those things come together to serve a customer? (service)
What are you good at?
We are all good at something but it is very common for people not to realise what they are good at, the easiest way around this is to go out and ask the people that know you the best. This is also a great warm up activity for when you need to go talk to strangers about their problems. The reason why this is an important part of coming up with good ideas is that you need to be a useful part of solving this problem. There is no point coming up with an idea for someone else.
What are you willing to learn?
Entrepreneurship is full of learning, you will learn faster and more by doing entrepreneurship than anything else you can do in life. You will also need to learn all sorts of things along the way so if you come up with an idea that needs someone to do something then you will need to learn how to do it. So this step is about identifying the things that you are excited to learn.
Come together to serve a customer?
Next it is about identifying opportunties for you to combine the things you are already good at with the things you are willing to learn in order to serve a customer/solve a problem.
Important note
It is important to note that your answers will change throughout the journey as you will learn more through the process but once you have a draft personal focus is it is time to think through where that intersects with business opportunities.
What is a business opportunity?
It is a “perceived means of generating economic value (i.e., profit) that previously has not been exploited and is not currently being exploited by others” (Baron, 2006, p. 107). That is, it has a newness factor and the potential of profit.
Opportunities can arise from many factors however the three most important are (Baron, 2006);
- Engaging in an active search for opportunities
- The capacity to know what you are looking for
- Prior knowledge of industry and/or customers
However it is important to note that not all three are always required, eureka moments (spontaneous opportunitiy discovery) do happen but they are rare and unreliable.
Engaging in an active search for opportunities can look different but fundamentally you need to be out there trying to understand problems.
Engagement types can include:
- group discussions
- interviewing industry experts
- attending industry events
- reading industry news
- interviewing people
- field observation
Getting to a strategic focus
Once you have your personal focus and you have engaged in actively looking for opportunities the next step is to determine the overlap between those two factors and the size of the business opportunity this is because some business opportunities are too small to support a single employee and some opportunities are large enough to support entire industries. The important thing is that your best guess at the market size is appropriate for the kind of business you would like to build, remember a startup is aiming to be valued at over $1 billion.
Maintaining one strategic focus
Research by Dan Ariely (2008) found that we all have a tendency to think that the more opportunities we are pursuing the more likely we are to succeed. Unfortunately, such thinking actually decreases your odds of success, because you and your new enterprise will lack the necessary focus required to succeed. A key determinant of success for entrepreneurs is their ability both to select a market and to stay disciplined by deselecting the other markets. You need to do one thing well at a time.
References
Baron, R. A. (2006). Opportunity recognition as pattern recognition: How entrepreneurs “connect the dots” to identify new business opportunities. Academy of management perspectives, 20(1), 104-119.
Ariely, D. (2008). Predictably irrational. New York, NY: Harper Audio.
Stross, R. E. (2008). The Wizard of Menlo Park: How Thomas Alva Edison Invented the Modern World. Broadway Books.