5 Reasons Why Great Ideas Fail
If you are thinking of starting a business based on a great idea you have, please read this article first to avoid failure. This article explains why a great idea is not the key to success. It is the successful commercialization of an idea that brings business success. You might also be surprised that investors do not invest in great ideas.
Below are 5 common reasons why great ideas fail and 4 steps to greatly increase your chance of success.
We have all had at least one great business idea which we envisage as hugely successful. Some people start businesses based upon their genius concept, believing they will make their fortune. Many quickly learn that a great idea is not the key to business success.
Why is a great idea not the key to business success?
The reality is that a great business idea is not the key to success but merely one criterion.
Our world is full of great ideas, and for the vast majority, that is all they will ever be—another great idea.
There are many examples where the best ideas have lost out to lesser competitors.
How do you turn a great idea into business success?
It is the successful commercialization of an idea that brings business success. The number of ideas that become a commercial success is a tiny percentage as it is so tricky to achieve.
There are many commercialization stages and hurdles to overcome, such as product development, marketing, sales and distribution. Alongside these may be starting or running a business, growing a business and dealing with intellectual property protection.
You may need to attract investors to get to market amongst everything else. Getting everything to happen at the right time is not always easy, especially with more complex business ideas.
Investors don’t invest in great ideas.
A common misconception is that investors will flock to a great idea and contribute to its development.
Investors are not interested in great ideas, unless they judge there will be a return on their investment.
They invest in the likely commercialization of ideas.
What is the difference between a great idea and commercialization?
If you are thinking of starting a business, then it’s essential to understand the difference between a great idea and the likelihood of commercialization.
Getting an idea to become a commercial reality can be challenging and costly.
Many entrepreneurs fail to appreciate how hard it is to grow an idea into a business and they make some common mistakes.
There are smarter ways to go about this so that you spend your valuable time and cash wisely.
5 reasons why great ideas fail.
Being too product orientated.
Entrepreneurs often pay far too much attention to developing their product or service, which is frequently within their area of expertise and comfort zone. The product or service development consumes most of their focus and resources. Commercialization is often a secondary focus, as they think their brilliant creation will be so compelling.
Consequently, they pay far too little attention to defining the Value Proposition and Business Model Design that will help to determine the likelihood of commercialization.
Not spending enough effort to prove there is sufficient customer demand.
Without sufficient ongoing demand, the likelihood of success is poor. Over focus on product development is often at the expense of validating a viable market which is fundamental.
Many entrepreneurs are disheartened to find out that sophisticated investors do not invest in great ideas.
Investors put their money behind people whom they believe will generate a return on their investment through commercializing a concept.
Misunderstanding Intellectual property creation and protection.
It is crucial to understand the role of intellectual property (IP).
Mistakenly, many people assume that intellectual property protection prevents competitors from copying. It does not prevent anything from being copied. It provides a way to stop infringement and possibly recover damages.
Not putting equal effort into developing a business plan
You want to develop a business, not a product!
This means you must develop the business plan alongside the product and not leave it to last.
4 steps to avoid common commercialization mistakes.
1) Design your business model before you start developing.
Business acumen, market intelligence and critical thinking can eliminate many common mistakes. Use design thinking and business model design before developing a product or service to establish the likelihood of commercialization.
A great deal can be accomplished as a desktop exercise incurring very little expenditure.
2) Develop a business not a product.
Keep a balance in your development and don’t over-focus on the product. It is just as important to design your business as it is to design your product or service.
Consider the project holistically from a business perspective.
3) Think like an investor, not an inventor.
Investors have plenty of choices, especially with the plethora of technology-based start-ups aimed at disrupting current supply chains.
Many investors are sophisticated investors that scrutinize opportunities and only pick those most likely to give the required return on investment.
Investors expect to see robust research and development (R&D) of the whole business, not just the product.
An investor wants to mitigate their risk by choosing competent management teams.
Cover all the things that investors will look for and use an excellent R&D program to help you.
Keep the commercial development up to date alongside product development. You must ensure that your idea remains commercially attractive. If your product costs start to increase, revisit the R&D program and look for a revised method to keep a handsome margin.
4) Investigate Intellectual Property protection from the start.
Depending upon the idea and your business aspirations, there are several Intellectual Property options to consider, such as trademarks, trade secrets, copyrights and patents.
Some countries may also offer financial incentives for new inventions or innovative products.
There is a threshold to provide an inventive step for a patent or for the creation of new knowledge.
A great idea may be novel, but is it actually “new knowledge”?
Remember, just because the idea is new to you, does not mean that it is new to everyone!
“New knowledge” can only be proven through objective, repeatable experiments that prove or disprove a defined hypothesis. If an expert can predict the outcome, without the need for experimentation, then it is not “new knowledge.”
There are some things to do and NOT to do.
Ensure that your idea is appropriately protected by confidentiality agreements (also called Non-Disclosure Agreements or NDAs) before you discuss it with anyone. If your concept leaks into the market or to competitors, this may prejudice your patent application.
Determine which are your best potential markets and secure patent protection in them.
Get good legal and business advice as early as possible as it will serve you well in the long run.
Understanding The Reality of Business Ownership
The Should I Own A Business Podcast explores the reality of being a business owner.
You may have a great idea but success is the ability to turn it into commercial reality.
Remember, investors are not looking for great ideas. They are looking for great businesses.
Understanding how to develop new products is an integral part of the success equation.
You might like episode 14 called How to Evaluate a Business Idea which helps you decide if a business idea is suitable or viable.
Brendan Barrow Co-Host
The Should I Own A Business Podcast-Listen Before You Leap.
Avoiding new business failures, one owner at a time.