What is the value of a good idea?
In a startup, a founder who comes up with an idea but is not involved with execution could expect to own 1%-10% of the business. Ultimately, success is not in the idea, but in execution.
Even though the good idea is only a small piece of the puzzle, it is a necessary and critical piece. A mediocre idea will flounder, if not fail.
How, then, can we characterize a good idea for a business?
- Potential of becoming large (“ability to scale”)
- Potential to grow quickly and absorb investment capital
- Solves a problem for customers that the customer is willing to pay for
- Customers are not satisfied with the products available through the competition
- Not easy for customers to execute a “copycat” strategy: note that the idea might be simple, but execution difficult (e.g., good customer service).
- Doesn’t require the market to change significantly from where it is now – people rarely change existing habits – so don’t bet your business that they will for you
- Not too many problems to solve – management must be able to focus resources on solving one or two problems. If crises are arising from all directions, there is low chance of success
- Strong management team – know thyself and they weak points. Build a board of advisers to compensate for weaknesses
Even a good idea is likely to face challenges. One of the keys to successful innovation is determining the likelihood/ease of overcoming any challenge. If there appear to be critical issues that might be impossible to overcome, one should focus resources to resolving that issue. If the issue cannot be overcome with the given resources, then it is time to abort and find a new idea.