Knowing a Winning Business Idea When You See One

Knowing a Winning Business Idea When You See One

Objective: To understand how to assess an idea's distinctive value to customers, and how to create a sound business model to assure an innovation's profitability.

The paper starts with the question of identifying the business ideas which have commercial potential. It gives the example of Motorola’s Iridium satellite phone which was a total failure in the company’s history with an absurd price and low-usability. Motorola’s mistake with Iridium according to the authors was the deadly mistake of rushing a new technology to the market at the wrong time with the wrong price. So a good manager must assess the “commercial readiness” and the potential of new business ideas.

Authors here have built up a database of more than 100 companies which have innovated successfully and looked for the similarities between them. Then they compared them these companies with underperforming companies. Using this data they have created three analytic tools in order to have a systematic approach to reducing the uncertainties of innovation.

These tools are:

* Buyer Utility Map

* The Price Corridor of The Mass

* The Business Model Guide

Generally, a customer passes through six basic stages of buyer experience cycle: Purchase > Delivery > Use > Supplements > Maintenance > Disposal

The six stages in a utility lever:

Consumer Productivity> Simplicity> Convenience> Risk> Fun and Image> Environmental Friendliness

Based on this analysis, we can create a buyer utility map which plots the effect on the buying experience of the customer for the particular product.

Setting a strategic price:

Setting a price which will attract the “large pool of customers” is a crucial point to the success. Strategic pricing means having the price which will both attract the customer but also help you retain them. Exceptional utility is not enough to be successful. Products are subject to network...