2.03 – Identifying Market Opportunities
Some highly successful businesses might start with a flash of inspiration, but most develop through careful analysis of the market. Entrepreneurs often look for new or improved products or services, better ways to deliver value to customers, or entirely new business models. Sometimes, technological innovations or regulatory changes spark great business ideas. Other times, passion drives the creation of new ventures. These sections provide tips to help you recognise opportunities that might lead to an unbeatable business idea.
Tuning in to What Customers Have to Say
Online review sites can be an excellent source of inspiration for new business opportunities. Customers are vocal about their opinions on what they’ve bought or what they want. Just look at reviews on Amazon, Yelp, Vrbo, and other consumer sites. These reviews, both positive and negative, can tell you exactly what customers like, dislike, and desire in products and services. Their input is a gold mine of information.
For instance, if you’re interested in designing a computer program for composing music, check sites like Musician’s Friend. You’ll find plenty of feedback from satisfied and unsatisfied customers. Their likes and dislikes can guide you in deciding what your product needs to offer to compete effectively in the marketplace.
Keep in mind that the people who write online reviews are often outliers—they either loved or hated the product, which motivated them to write a review. Most customers fall somewhere in between, so online reviews give you a good sense of the two extremes. Most of your potential customers are likely to lie somewhere in between.
Pursuing Changes That Open Up New Opportunities
Many successful businesses emerge by seizing new opportunities created by technological, social, policy, or other changes. While change can be intimidating, it also opens new doors. Spotting and opening those doors requires skill and a bit of daring. For example, when Apple launched the iPad, a new industry of apps and accessories sprang up, created by designers and developers ready to dive into a new technology and marketplace.
As internet bandwidth increased, companies like Amazon, Netflix, and Hulu seized the opportunity to establish themselves as leaders in streaming video, leaving competitors like Blockbuster Video behind. Today, with baby boomers retiring, many companies are exploring ways to strike gold by offering high-end retirement communities, healthcare consulting services, or products that promise to keep people youthful as they age.
Regulatory changes and new tax incentives also open new opportunities. If you’re smart and agile, you can take advantage of these changes. As part of your brainstorming, consider ongoing or likely changes that could create new opportunities.
There are many ways to spell business success. True, many companies succeed by creating brand-new products or services. But opportunities also arise from selling existing products or services to new customers or creating a new business model that makes an existing product or service more appealing.
These days, many companies prosper by finding clever ways to make people’s personal or working lives easier or more efficient. Think no-iron shirts, parking garages that offer car washes, dictation software that eliminates the need to type, or apps for making restaurant reservations. Evaluate your promising business idea to see whether you can take advantage of new opportunities to improve the efficiency or effectiveness of your customers’ lives.
Narrowing Your Choices
After brainstorming, market analysis, and a few flashes of brilliance, you might end up with a drawerful of promising business ideas. Here are two guidelines to help you separate real opportunities from fluff:
- Focus on ideas you’re really excited about. Your passion will keep you motivated on the road to success.
- Pursue ideas you can follow through on. If you don’t have the means or drive to turn an idea into reality, scrap it.
To help choose among your ideas, use the following questions for each possibility you’re considering. Tally your answers and consider any idea with a score of 24 or higher worthy of serious consideration. If an idea scores high on every question except for number 3 (Is this the kind of business you really want to pursue?), it may be a great idea for someone else—but not for you.
- Describe your promising idea in two sentences.
- Rate the idea on a scale of 1 to 10, with 1 being "the only thing we could come up with in a pinch" and 10 being "the best thing since sliced bread."
- Is this the kind of idea—and the kind of business—you really want to pursue? Rate your interest on a scale of 1 to 10, with 1 for "so-so" and 10 for "very high."
- How easy would it be to convince an investor that your idea has the potential to make money? Rate from 1, meaning "very difficult," to 10, meaning "a breeze."
- What are the odds your idea will become a real business venture? Rate from 1, meaning "it's a long shot," to 10, meaning "it's a guaranteed overnight success."
Use these questions as a first test for any business idea. If the idea scores high, it still has to pass other hurdles, but at least you know it’s worth pursuing.
After narrowing down your ideas, answer some basic questions to reveal whether an idea has what it takes to become a real business.
- Describe your business opportunity in two sentences.
- List the three most important features of the product or service you propose.
- What basic customer needs does your product or service fill?
- Briefly describe who is likely to buy your product or service.
- List two or three existing products or services that meet a similar need.
- Why would customers choose your product or service over others?
- How will you reach your customers?
- How do you plan to make money?
If you struggle to answer these questions, your idea may be too sketchy to evaluate. That doesn’t mean you have to abandon it, but you should take the time to understand the opportunity more fully before moving to the next stage. For example, if you can’t easily describe the customer need you’re filling or how you plan to make money, you still have homework to do.
