We think of a groundbreaking venture opportunity as a venture that will transform millions of peoples’ lives in a positive way. You have a passion in life to make a difference.
How do you find your groundbreaking opportunity?
Sometimes you can find these opportunities just by entering the market with a product, pivoting your market and product until you reach product/market fit, and then advancing the opportunity with speed and agility. But that process will rarely create a breakthrough venture. You need to work out what your customer wants before you run out of money and just launching a product without understanding the unmet need fully makes it less likely you'll do that. From our experience, here are some approaches to finding great venture concepts:
Find an unsolved problem
Find an unsolved problem in a large and rapidly growing market screaming to be disrupted and conceive of a solution that is a “painkiller” not a “vitamin” for the customer. But almost every great entrepreneur recognizes one fundamental tenet: that pain = opportunity. And greater pain = greater opportunity. By pain, we mean something is difficult or expensive or time-consuming, or … For example, when a person has cancer and wants to be cured, it is pain. Or when some college students want to find a place for the night, and can’t afford a hotel, it is pain. Or when a health business pays millions of dollars to maintain a secure health system for their patient data, it is pain. Or when a person can’t find a taxi and it’s raining and have no idea whether they can make their appointment, it is pain. Or when a person has a disability and their only choice is a wheelchair for $3000 that doesn’t let them go outside on a snowy day, that’s pain. All these pain points indicate that there is likely a market opportunity to reduce the pain. And for the examples above, multi-B$ opportunities like Uber, AirBnB, Omada Health, and more were created to relieve that pain.
Why don’t people already in the industry and closest to the problem recognize the unsolved problem themselves and start the venture? Sometimes they do. But many are so immersed in the current approaches they don’t recognize possible new approaches. Also, even if an entrepreneur recognizes a market problem, they may not have the skill or creativity to recognize the potential solution.
Conceive of differentiated solutions
Conceive of differentiated solutions that trump the current approaches. These solutions are sometimes breakthroughs in technology, utilizing new tools like AI, Blockchain, or a new constellation of micro-satellites. Sometimes the solutions are using new technology that have become widely available, but primarily they are developing new business models, like enabling individuals who own their own car to become drivers that derive revenue from providing a taxi-like service. The difficulty here is that most entrepreneurs pick solutions that either aren’t particularly differentiated or don’t provide enough added value to make a difference to the customer. Differentiation through technology should be so powerful that it provides an order of magnitude improvement. Otherwise, customers won’t need to buy your product - the constant exponential improvement of processing power will be sufficient.
Understand your key insight
Understand your key insight and differentiate it from other solutions. When I hear about the insight for the solution to a market problem, I often look for my own reaction to be “surprise and delight” and hopefully a reaction of “can that really be done?” Or “why didn’t I think of that?” I remember taking a flight on United airlines sitting in coach class with my wife, and I was beta testing Siri. We were going to be late, and a passenger next to me asked when we arrived and if he would be able to make the next flight. I asked Siri about the flight times, which worked well, and I gave my fellow passenger the answer. He responded, “I have only one question: Why are you not sitting in first class!” That’s the reaction I want.
That was surprise and delight.
Recognize trigger points that create groundbreaking opportunities:
- Major societal issues need solutions. Take for example the struggles of our families and our planet for food, clean air, healthy food, clean oceans, low-cost housing, and more.
- Market and technology trends converge. For example, Siri succeeded in large part because of the convergence of the following multiple exponential trends colliding just at the right time.
- Smartphones were emerging with the computing power, storage capacity, and bandwidth to perform application functions with low latency.
- Speech recognition – that is, automatically translating the spoken utterance to text – had reached a high level of accuracy at a reasonable cost
- Natural language understanding – that is, automatically understanding the intent of the utterance had improved substantially
- Web applications had become ubiquitous for a broad array of functions, such as making hotel reservations or buying a movie ticket
- Cloud services were now available that provided servers to perform the complex speech and natural language processing that was required. Cloud services were also connected to the web.
- New technologies emerge that create new product and service opportunities. Obvious examples are the emergence of machine learning, or deep learning, or autonomous systems, or blockchain, etc.
- New government regulations create new markets. For example, when in 1995 the FCC required that HDTV in the United States be developed with an entirely digital solution, the solutions to that regulation created a multi-$T industry.
Understand the answer to the most important question: why you?
Why are you the right person to solve this problem? The answer for many great founders is that you are driven by a mission to solve the market problem. You have passion, key insights, and unique skills to build solutions. You and your team are precisely the right people to serve that role for the company.
- Don’t think that the team necessarily must come from the industry that the venture is in. Bezos wasn’t in the book industry, Elon Musk wasn’t in the car industry, and so on. In fact, there’s a strong argument to be made that teams who are disrupting an industry are best if they’re not from the industry.
Get the timing right
You have to answer the question “Why now”? Market trends, technology trends, customer preferences trends, and more will offer profound opportunities for innovation. It’s true that it’s impossible to predict timing with high accuracy, but develop a thesis as to timing – it’s considered by investors one of the most crucial elements of a venture’s success.
Find opportunities where there is a “basecamp” as you climb Mt. Everest.
- Don’t have a plan that attempts to “boil the ocean”.
- None of this advice matters if the team isn’t focused on the financial opportunity. The team needs to understand how to enter the market, how and when they’ll earn their first revenue and profitability, how the market works, how it will be disrupted, and how they will compete.
- The team needs to have a reasonable expectation that the unit economics can work - that you can make more money from each customer than it costs you to acquire them (more on this topic in a later article).
Find opportunities where you have the strength and confidence to believe in yourself and your solution.
Commit to your venture. Remember that any breakthrough idea will likely be against the conventional wisdom at the time. Going from an idea to a successful venture is your job. You will have feedback from others like:
- “It probably would have been done if it could have been,”
- “It’s impossible,”
- “It’s already being done by others,”
- “Smarter people than you have tried this,”
- “You’d be destroyed by the major companies in this market.”
To overcome all these negative forces, the entrepreneur needs constant courage, conviction, and strength. If the majority of people you talk with don’t think it will work or hate it, but a small minority absolutely love it and are crazy for the solution, then you might have the right signal. Listen closely to the people who don’t think it will work, and use their negative comments to better understand the issues. Listen closely to the people who love it, and better understand why.
Our next post will be “Against Conventional Wisdom: The Source of Groundbreaking Opportunities”. Make sure to subscribe so you don’t miss it!