BY ROBIN GHOSH
( FORMER CHIEF ECONOMIST, BENGAL CHAMBER OF COMMERCE AND INDUSTRY)
KOLKATA, 18 JULY 2022
Like a screen test is taken before an actor is finally cast in a movie, your business idea too needs a fitness test.
Every potential entrepreneur, more often than not, has a bagful of business ideas. You are excited, and you think your business idea is brilliant. It will bring a pot of gold. Unfortunately, case studies have shown only a few business ideas score success. Hence, validation of your business idea is important. How do we validate our business idea? What are the parameters? Is there a qualifying framework ?
If any business idea is to be taken up for a startup, it has to pass some tests so that risks involved in the venture are minimized and chances of success is maximized.
The first test is whether it is solving a practical problem. A real world practical problem. Second, is the business idea on the table fulfilling a demand which as yet has not been met by any business owner.
The third test is a little revolutionary. If your idea is so mind blowing and so innovative that it has the possibility of creating a new industry.
Another test apparatus is to check your business idea whether it is co- terminus with the emerging wave of technology and has the scope of devising an application solving a specific problem.
Last and not the least, you need to do a deep research on what other startups are doing and copy cat or replicate. Find out a unique problem which can be solved with solutions available in the market.
While deep research is important but at the same time let us understand what we are really looking for, what is the key factor ?
Simply said, it is the potential value of the idea. Does this idea have the scope to move from a lower efficiency quadrant to a higher efficiency quadrant.
Therefore, you can pursue a business idea only if it has the power to impute a unique differential value as also the prospects of exponential growth.
Added to this is another factor. How much of your business idea can create network effects?
Before you launch your business, start putting money and time, assess the network effects of the product or service you propose to market. Network effects is essentially a concept where the value of the product or service increases when the number of people who use that product or service increases.
The criterias outlined in this note is simply a kind of a process of sieving to reduce the quantum of risk associated with the business idea. However much would depend on changing market dynamics and a pot of luck.