The web is plenty of articles and resources on how to start a business and how to make money. However, there is an issue. Those resources give you plenty of advice and give you many options.
But a few help you start a business you’d be for the long term. Indeed, building up a business from scratch isn’t a simple task. Quite the opposite, It is a rollercoaster, which if you’re lucky it will take five to ten years to take off.
Thus it is critical that you not only start a business with great potential. But that you’ll also love what you’ll be working on and the problem you will try to solve. Therefore, finding a successful business idea means three primary things. It starts with solving a problem but then figuring out whether:
That is something you like
Something that you’re good at
And that you can be paid to do
For that matter, the Bud Caddell’s diagram helps us in finding the sweet spot between these three key elements. If you do find yourself within that sweet spot, you can say you’re going after the right business idea and that you’re ready to become an entrepreneur.
Table of Contents
Start with the problem in mind
As highlighted in the interview I had with Ash Maurya, author of Running Lean and Scaling Lean, and creator for the Lean Startup Canvas:
One of the biases that that many entrepreneurs fall run into is this premature love of the solution. Like the first principles in science, you almost have to deconstruct an idea. We have to start with the basics. In this case, when we look at our business, we have to break it down into customers and problems.
While this is an incredible tool, it focuses on how to get there.
Before you start using this incredible tool, you need to answer three primary questions.
Is this a problem I want to solve?
For most entrepreneurs, business is not a matter of choice, but rather an opportunity. However, in today’s world, where barriers to entry have become very low (digital businesses can be created relatively quickly and with meager investment), the competition is fierce.
Thus, endurance has become a critical element. And to make it through your business you need to love the problem enough to keep going for at least five to ten years.
Am I good at it?
As competition is fierce, it is critical that the solution you offer bring value to the table. For instance, when Brin and Page launched Google (initially called BackRub), it was argued that it was 10X better than any other search engine out there.
However, the Brin and Page not only fell in love with the problem of indexing and ranking a whole web (which at the time was way smaller than it is today) but they were pretty good at it (Google was born as result of their thesis as P.h.Ds).
Can I be paid for that?
No business model can be called viable if it lacks the monetization strategy or the profit formula. That’s because usually a business model to work in the long run has to be scalable and repeatable.
As we’ve seen to make a digital business take off so that you reach the so-called ramen profitability, it might take a few years. And if you don’t like or love the company you’re after it is very hard that the business itself will be successful. That’s because you’ll hardly have the willingness to put through the hard times.
Serial entrepreneur and venture capitalist Paul Graham popularized the term “Ramen Profitability.” As he pointed out, “Ramen profitable means, a startup makes just enough to pay the founders’ living expenses.”
Key takeaway
Starting a digital business, today has become fairly quickly. However, starting and growing a successful business is as hard as ever. That’s because, with the advent of the web, the barriers to entry have been lowered and pretty much anyone can test its entrepreneurial skills.
However, this also generates the confusion that you can build a business very quickly. However, to build a successful business from scratch, it might well take five to ten years of struggle. Therefore to understand if you are up to this struggle, you need to answer three basic questions:
Is this something I like (love)?
Am I good at it?
Can I get paid for it?
If you’re able to find the sweet spot, you’re ready to start!
Key Insights
The Importance of Finding the Right Business Idea: Starting a business from scratch is a challenging and time-consuming process. To ensure long-term success, it is crucial to find a business idea that not only solves a problem but also aligns with your passions, skills, and potential for profitability.
Bud Caddell’s Sweet Spot: The Bud Caddell diagram helps entrepreneurs find the sweet spot between three key elements: solving a problem they love, something they are good at, and something they can be paid to do. Being within this sweet spot indicates that you have found the right business idea to pursue as an entrepreneur.
Problem/Solution Fit: Ash Maurya, the author of Running Lean and Scaling Lean, emphasizes the importance of focusing on the problem before jumping to the solution. It’s essential to deconstruct ideas and analyze the potential customer problems that the business aims to address.
Use the Lean Startup Canvas: The Lean Startup Canvas, developed by Ash Maurya, is a valuable tool to help entrepreneurs clarify their business ideas on one page. However, before using this tool, you must answer three critical questions to assess the viability of your business idea.
Endurance and Passion: In today’s competitive business landscape, endurance and passion are vital for long-term success. Loving the problem you are solving will keep you motivated to overcome challenges and sustain your business for five to ten years.
Value Creation: For your business idea to succeed, it must bring value to the table. Being good at solving the problem and offering a solution that stands out in the market are essential components of value creation.
Monetization Strategy: A viable business model must have a clear monetization strategy or profit formula. Achieving ramen profitability, where your startup makes enough to cover founders’ living expenses, is an important milestone in the early stages.
The Reality of Building a Successful Business: While digital businesses can be started relatively quickly, building a successful business takes time and effort. It’s important to recognize that success might not come overnight, and the journey may involve several years of struggle and perseverance.
Three Basic Questions to Determine Business Viability:
Is this something you love and are passionate about?
Are you skilled and proficient in addressing the problem?
Can you develop a scalable and repeatable monetization strategy for the business?
Business modelinnovation is about increasing the success of an organization with existing products and technologies by crafting a compelling value proposition able to propel a new business model to scale up customers and create a lasting competitive advantage. And it all starts by mastering the key customers.
The innovation loop is a methodology/framework derived from the Bell Labs, which produced innovation at scale throughout the 20th century. They learned how to leverage a hybrid innovation management model based on science, invention, engineering, and manufacturing at scale. By leveraging individual genius, creativity, and small/large groups.
According to how well defined is the problem and how well defined the domain, we have four main types of innovations: basic research (problem and domain or not well defined); breakthrough innovation (domain is not well defined, the problem is well defined); sustaining innovation (both problem and domain are well defined); and disruptive innovation (domain is well defined, the problem is not well defined).
That is a process that requires a continuous feedback loop to develop a valuable product and build a viable business model. Continuous innovation is a mindset where products and services are designed and delivered to tune them around the customers’ problem and not the technical solution of its founders.
Disruptive innovation as a term was first described by Clayton M. Christensen, an American academic and business consultant whom The Economist called “the most influential management thinker of his time.” Disruptive innovation describes the process by which a product or service takes hold at the bottom of a market and eventually displaces established competitors, products, firms, or alliances.
In a business world driven by technology and digitalization, competition is much more fluid, as innovation becomes a bottom-up approach that can come from anywhere. Thus, making it much harder to define the boundaries of existing markets. Therefore, a proper business competition analysis looks at customer, technology, distribution, and financial model overlaps. While at the same time looking at future potential intersections among industries that in the short-term seem unrelated.
Technological modeling is a discipline to provide the basis for companies to sustain innovation, thus developing incremental products. While also looking at breakthrough innovative products that can pave the way for long-term success. In a sort of Barbell Strategy, technological modeling suggests having a two-sided approach, on the one hand, to keep sustaining continuous innovation as a core part of the business model. On the other hand, it places bets on future developments that have the potential to break through and take a leap forward.
Sociologist E.M Rogers developed the Diffusion of Innovation Theory in 1962 with the premise that with enough time, tech products are adopted by wider society as a whole. People adopting those technologies are divided according to their psychologic profiles in five groups: innovators, early adopters, early majority, late majority, and laggards.
In the TED talk entitled “creative problem-solving in the face of extreme limits” Navi Radjou defined frugal innovation as “the ability to create more economic and social value using fewer resources. Frugal innovation is not about making do; it’s about making things better.” Indian people call it Jugaad, a Hindi word that means finding inexpensive solutions based on existing scarce resources to solve problems smartly.
A consumer brand company like Procter & Gamble (P&G) defines “Constructive Disruption” as: a willingness to change, adapt, and create new trends and technologies that will shape our industry for the future. According to P&G, it moves around four pillars: lean innovation, brand building, supply chain, and digitalization & data analytics.
In the FourWeekMBA growth matrix, you can apply growth for existing customers by tackling the same problems (gain mode). Or by tackling existing problems, for new customers (expand mode). Or by tackling new problems for existing customers (extend mode). Or perhaps by tackling whole new problems for new customers (reinvent mode).
An innovation funnel is a tool or process ensuring only the best ideas are executed. In a metaphorical sense, the funnel screens innovative ideas for viability so that only the best products, processes, or business models are launched to the market. An innovation funnel provides a framework for the screening and testing of innovative ideas for viability.
Tim Brown, Executive Chair of IDEO, defined design thinking as “a human-centered approach to innovation that draws from the designer’s toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Therefore, desirability, feasibility, and viability are balanced to solve critical problems.
Gennaro is the creator of FourWeekMBA, which reached about four million business people, comprising C-level executives, investors, analysts, product managers, and aspiring digital entrepreneurs in 2022 alone | He is also Director of Sales for a high-tech scaleup in the AI Industry | In 2012, Gennaro earned an International MBA with emphasis on Corporate Finance and Business Strategy.
