Identifying the Idea’s
Identifying a consumer’s needs and turning it into a business idea is how new businesses are born. This session is all about understanding the various steps in the identification of consumer’s needs and identifying gaps basis that. We will be covering the following elements in this session:
- Identifying an Idea
- Assessing the Idea
Identifying the Idea
The first step for an entrepreneur before starting a new company is to find the right idea for his or her startup. The best way to arrive at a good startup idea is not trying to think up new startup ideas – that would be the wrong way. The ideal way is to look for problems and needs, preferably problems and needs you have faced yourself. Alternatively, it could be something you have seen other people, your friends or family, face regularly.
Why is it better to work on such problems? First and foremost – it ensures the problem really exists. It sounds obvious to say that you should only work on problems that exist. And yet, by far the most common mistake startups make, is to try and solve problems no one faces.
Your aim should be to solve a problem that exists. Trying to solve for pain points that individuals or businesses face, can help you arrive at your venture idea. In this video, you saw how your idea should look to solve an existing problem. You also heard how some founders worked on the pain points that they observed to build their businesses:
- Saavn: South Asian music digitally not available (B2C business)
- redBus: Not being able to get a bus ticket at the right time (B2C business)
- Freshdesk: Experiencing poor customer support services (B2B business)
- Science Utsav: Not being able to understand Science subject
- Campus Connect: Experiencing poor accessibility to campus related information
Assessment of the Idea
Identifying the problem or the pain point you are trying to solve is an important step in validating your idea. You want to be able to clearly express a problem, that you or others are experiencing regularly. You should be able to write down the problem that you are solving in a simple statement.
The next step is to understand whether this problem is a major one for your potential customers or not. If you build a startup that solves a problem, but not a serious problem, people might use your product, but never pay for it. Let us understand how you should go about assessing your idea:
So to summaries, you should try and answer the following questions when you are assessing your idea:
- What pain point are you trying to solve?
- Who are you solving it for?
- How are you trying to solve it?
- Is anyone else doing it?
- Can you do it differently from them?
- Can you charge your customer? If so, how much?
You also learned the different factors you should look at while assessing your idea with the example of UrbanClap.
We want you to understand the importance of interacting with stakeholders involved in your business idea (for example in the case of Ola Cabs, stakeholders involved are people using cabs, cab drivers, cab operators etc.). So now you should start interacting with stakeholders in your business, try and understand their view related to the problem you are solving. This will also serve as a good starting point to gain some clarity on the assumptions you are making about the business. It’s quite possible that you may come across some other major problems while interacting with these people.
It is highly recommended to do this activity as it will help you get more clarity on following topics & assessments during the flow of this course and your startup journey. So get out of the building and break the ice.
Identifying Target Segment and Market Sizing
As an entrepreneur, given the amount of competition, it becomes difficult to target all segments. If you try to market your product or service to everyone you will waste both your time and money. Hence, it is important to identify your core target segment, as it will help you enhance your product or service offering and enable you to plan your marketing spends. Once you have identified your target segment, market sizing helps you understand the size of the segment you are targeting. But how do you arrive at the market size? This session will help you understand how to identify your target segment and then size the market.
The broad agenda for the session is as follows:
- Understanding your Target Segment
- Sizing the Market
Understanding your Target Segment
When you start, you are tempted to reach out to as many customer segments as you can – but is that the right strategy? Should you stay focused, or spread yourself across segments?Identifying the right customer segment for your venture idea is important. Equally important is the ability to dissect the customer segment. Doing this allows you to narrow your focus on the right segment and thus market your products to a focused audience, with predictably better results. Let’s first understand market segmentation in detail:
Now that you have understood market segmentation, let’s go ahead and understand how to identify your target segment:
In order to identify the target segment, you should:
- Segment your market correctly, based on geographic, demographic and behavioural traits
- Arrive at the value proposition of your product or service and the customer’s willingness to pay
- Bring out an offering that is dramatically better than the current options available in the market-being just slightly better may not be very helpful
- Assess the size and growth of the appropriate market segment
- Once you have established yourself in a particular segment, you should consider your ability to enter adjacent segments
Target Segment and Market Sizing
Now that you know how to identify or probably have already identified your target segment, do you know how large this target segment is? As an early step, it is extremely important to understand how large your market is and which factors are driving its growth. Let’s understand how one can go about calculating the market size:
Now let’s look at the bottom up approach.
From the above videos, you understood how to size the market. You can look at either of the two approaches explained by Prof. Abha. They are:
- Top down approach
- Bottom up approach
An organisation’s success is affected by the market environment and increases its success rate by understanding and analysing the environment better. A successful entrepreneur understands these factors and uses them to his or her own advantage. Let’s hear from the founders of a few startups on how they faced and dealt with the various market environment factors. While going through these, think about the factors that would impact your venture idea.
In this video, you learnt about the various business environment factors that impact startups and why is it important to analyse them. As an entrepreneur, you should have a good sense of those factors that impact your venture as this will help you critically analyse your product or service.
Understanding Industry (Porter’s 5 Forces Model)
By now, you might have understood the macro environmental factors and must have decided upon the market you want to serve your product or service. But as an entrepreneur, it is equally important to analyse the forces of the industry that you are entering into and critically assess them. Industry analysis is a must to facilitate a company’s understanding of its position relative to other companies that produce similar products or services.
An understanding of the industry enables entrepreneurs to identify the risks and opportunities for their organisation, and use their resources to develop unique capabilities that will help their organization become successful. Let’s go ahead and learn more about the Porter’s 5 forces model:
In this video, you learnt how the 5 forces (Threat of entry, Buyer power, Supplier power, Threat of substitutes and Competitive rivalry) shape the Industry. When you are starting up, it is important to be clear about the industry you plan to operate in. Once you have identified the industry, spend time on assessing its attractiveness and ensure that you are clear about the pros and cons of your industry.