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Brainstorm wall

by • December 1, 2011 • Best of, Business models, Founders, Tools & frameworksComments (17)1329

How I come up with new startup ideas (in 4 steps)

The approach I follow is a combination of customer discovery and effectuation, constrained by lifestyle goals (and making heavy use of the business model canvas).

Begin with constraints

Which parts of the business model do you care about? This takes a little bit of soul searching.

Start with a business model canvas and fill in the boxes for which you have strong preferences. Here are my personal constraints right now.

You’ll see that I’m comfortable doing both sales and marketing, which gives me quite a bit of flexibility on channel (which drives revenue model). On the other hand, I prefer talking to coding so I don’t want my key activity to be programming or my key resource to be obscure technology. I’d even be happy outsourcing the coding to partners.

Constraints are in yellow (I want it) and red (I refuse to do it). The green ones are assets I have access to, but which I don’t have a particular emotional attachment to making use of. I’ll use them if they help.

Some people start with a value proposition (I want to improve healthcare) and don’t care about anything else. Others care about a certain customer segment (anything for teachers!) or want to use a certain channel & revenue stream combination (SaaS).

There’s no right answer. Just be honest. When you take the leap, you’re committing yourself for 3-5 years.

And don’t start writing in things you don’t care about. This is meant to be a skeleton which defines your wiggle room for the type of company you’d be happy running. You would rather go out of business than stray from this structure, so keep it as generic as is acceptable to you.

This is not meant to be a business model (yet).

It’s okay to use several canvases.

Next, consider assets

Do you have an amazing designer ready to co-found a company with you? Are you an amazing designer? Is your father-in-law an angel investor? Have you spent 6 years in your phd building up a warchest of patents?

Your assets can make a typically “easy” business inaccessible (e.g. you have no programmers) or make a nightmarish business a defensible breeze (e.g. you’re starting a mobile events app and your best friend owns the world’s largest chain of nightclubs).

Cash you’re willing and able to spend is an asset. Measure it in runway, not in absolute terms, e.g. you have 3 months or cash, or 12 months of cash. This will affect whether you lean toward a slow-growth business you can begin on the side, or an all-or-nothing sprint trying to gain momentum and a round before you hit the bottom of your bank account.

And please remember, your cash assets are not everything you have — it’s just what you’re ready (and able) to spend. Lots of potential businesses exist which don’t involve risking more than you can bear.

Third, combine your assets & constraints into ideas

I’m comfortable with the canvas, so I like to use that, but you can write value propositions or do video pitches or make product mockups or whatever you want.

Make as many ideas as you can, as quickly as you can. Quantity trumps quality.

You may have thought that the skeleton of constraints I created already had a few completely obvious business models just screaming to announce themselves. That is true!

Write down the obvious ones, but don’t dwell on them. Get into the weird and wonderful nooks and crannies of your potential business.

And finally: Review, sort, and kill your ideas

Until now you’ve had essentially zero grounding in reality. Now it’s time to kill off the weak ideas.

Review the ideas and try to clump them into groups, however makes sense to you. I usually organise by either channel or customer segment, but it doesn’t really matter.

Put the most exciting clump at the top of the pile.

Now kill those ideas.

Choose whatever method of death is quickest. If you like an idea because it seems “new”, a google search will usually cool your thrusters. If it involves a wacky payment setup, checking Paypal’s T&C is probably a good starting point.

If an idea survives the google test, I’ll usually bounce it off an expert or someone from the target market. The people I want to build for are also the people I hang out with (an unsung advantage of following passion instead of markets) so it’s easy to grab someone for a coffee. If you’re entering a completely new [for you] market, you may need to man up and attend a meetup.

If it survives the first conversation, then it’s a contender. As soon as a contender enters the ring, it becomes the only idea.

I’ll work on it exclusively until it’s either completely invalidated or has become my full-time job. Brainstorming is about creating tons of ideas, but for validation and execution you need to focus on one at a time — don’t allow yourself to jump around wildly.

Well that was easy ;)

PS. If you’re in the UK, I’m putting together a little workshop/bootcamp about getting over this first set of humps. It’s going to kick off in February and be awesome. Drop in your email if it’s relevant.

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17 Responses to How I come up with new startup ideas (in 4 steps)

  1. Bojan says:

    Excellent article that really highlights the importance of placing focus on value producing activities. I think the most important sentence though was how you said focus on what you enjoy but be prepared to commit for the next 3-5 years. It better be something you enjoy because that’s a long term comitment!

  2. John Q Passerby says:

    I love this blog, it’s one of the only blogs that is consistently worth reading. But is there a reason for not giving any attribution to http://www.businessmodelgeneration.com/ for that specific worksheet?

  3. Dan says:

    Totally agree with this. The Stanford design school has great work around this very process, and have put a lot of time into thinking about what it means to find great ideas. Check out the following:

    http://dschool.typepad.com/news/2009/10/rules-for-brainstorming.html

  4. jan sauer says:

    Thx for sharing, appreciate your perspective, very helpful.

  5. Marlene says:

    This was just what I needed to read. A friend of mine on Twitter passed on the link.
    @Talktorami
    Here’s to all of us as we work the plan!

  6. Mr Gaur says:

    Excellent post… A database of successful startup concepts (like http://www.100mills.com) may also be useful for people trying to launch proven startup concepts for untapped markets.

    Cloning or being one of the early movers.. or targeting a different market with a proven concept sometimes fetches bigger rewards than the original innovators.

  7. Francesca says:

    Hi
    Can you let me know about your workshop? Where it is being held etc
    Thanks
    Fran

  8. cathy says:

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  10. Roger says:

    I like this combination of brainstorming, effectuation and talking to customers… but curious as to why it focuses on ideas rather than problems?

    Would that adaptation make sense, or did I miss your point? :)

  11. Heya are using WordPress for your blog platform?
    I’m new to the blog world but I’m trying to get started and create
    my own. Do you require any html coding knowledge to make your own blog?
    Any help would be greatly appreciated!

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