I have had number of business ideas in my career, and I have heard and seen many more from others in my life. If you spend a month in an IT incubator or a week at a Startup event, you will witness tens of ideas which some may make you excited, some other may not interest you and some may even delight you!
I will go further… don’t need to go anywhere! Google something like this: small profitable business ideas
And it’s a fact, whatever is in great supply, worth less and whatever is scarce and limited in supply, attracts more attention and value; So how much an Idea worth?
Ideas are worth nothing
Yes! That’s right. Idea itself doesn’t worth anything. I am not even a fan of execution value! What worth and brings value to an idea is Business Model
What is Business Model?
Simple: How you are going to monetize your idea, is your business model.
A business model includes 9 segments, which I put them in below order, from the most important to the least. And I really believe the first two will fulfil 60% of the total value, the third one is 15% and the rest are 25%:
- Value Proposition (what Value you add to your clients’ life?)
- Customer Segments (who are your customers?)
- Revenue Streams (where the money comes from?)
- Partners
- activities
- Costs
- Resources
- Customer relationship
- Channels
Business Model Canvas
Let’s have an example:
There was a small group of university graduates, in Electrical engineering, software and hardware engineering, from university of Tehran and Sharif. They started a very simple RFID project to:
- Serve a client who has a lot of users, needed to be identified physically
- Need to collect their information
The idea was simple. The solution was selected among different technologies like NFC, magnetic stripe cards etc. and it was meant to be monetized through value added services to clients, from the analysis on the collected information from them.
I was the company’s CEO’s “Market development Advisor” and we had tremendous problems. We thought though the idea may be good, we lack in a good business model. So we changed our focus from offering our service to clients who have clients, to clients who want big number of clients!
Complicated? No!
We could serve a client who needed the service for free (like a cinema complex) and sell the Consumer Base to someone who was interested in Personal Identities (like a bank).
It means we changed our Value Proposition from being a technology provider, to a consumer base provider;
We changed our customer segment from organization who have a lot of clients, to corporate who like consumer bases;
We changed our revenue streams from collecting pennies out of each transaction to selling the whole platform to someone who is interested in the CB.
This case was a very clear example of PIVOTING which is worth to talk about in a separate post, but the change in business model was very important, which made the value of the company from a bankruptcy with 500.000 USD debt, in to a company worth 1.5 Million USD and sold to a private bank; everybody was happy!
The point is, the idea was simple, frequent and not unique; and yet not working! how we managed to solve the problem, was by looking through the Business Model glass.
you have to ask yourself:
- How this business can make money?
- How can I monetize my idea?
In the first Business Model:
Why the client should choose us? would bring us a competition challenge
In the 2nd BM:
Why the cinema would choose us? because we were free!
Why the Bank would choose us? because Banks like to put their names and chips on a card many already hold! (to make it a payment card)
Please feel free to drop me a line, share your thoughts and experiences and let me learn from you.