These series of guest posts are written by the teams attending the Tetuan Valley Startup School 2010 Fall edition. This post is from the Serendipio team, formed by Luis Muñoz.
Statistics tell that most of new ventures fail relatively soon after they launch. That means a lot of resources, time and effort wasted, not to mention the personal implications of the stakeholders involved, specially founders. So since stakes are so high, any founder should try to validate whether their idea is a feasible one, worth investing in it to create a business that profits from it, despite the obvious passion and belief every founder has in their baby. The question is, how to do it?
Some time ago I came across the book “The new business road test”, by professor John Mullins from the LBS, which provides what I believe is a good answer to this question. This book provides a framework to investigate your idea and the chances of success, at a very early stage, before you even decide to write a business plan (if you believe in them 
) or spend resources in building a prototype or test the idea in the market.
This framework divides the idea into 7 different domains to check, as a result of looking at the market and industry domains at the macro and micro level, and including an additional team domain composed of three subdomains. In summary, the 7 domains you need to investigate are:
- Market attractiveness (macro-level market domain): how large is the market and what’s the growth rate? How can you justify it? What external factors (economic, demographic,…) might affect the market?
- Target segment benefits and attractiveness (micro-level market domain): Is there a target market segment big enough to enter? Do we provide superior benefits to customers in this segment? Do you know who are these customers?
- Industry attractiveness (macro-level industry domain): Can you define the industry you will compete in? How is competition? Are suppliers/buyers strong or weak in the industry? How are the competitive forces in the industry?
- Sustainable advantage (micro-level industry domain): Do you have patents or other proprietary elements that defend you from competition? Do you have a superior organization or culture difficult to imitate? Is your business model economically viable considering all revenue, costs and sources of financing?
- Mission, aspirations, propensity for risk (team subdomain): Are you passionate enough for your idea? Are your aspirations aligned with what the venture can deliver to you? What sort of risks are you willing to take?
- Ability to execute on critical success factors (team subdomain): Do you know the critical success factors (CSFs) in your industry? Is your team able to deliver as group on every one of these CSFs?
- Connectedness up, down, and across the value chain (team subdomain): Who do you know up, down and across the value chain of your venture?
The seven domains of attractive opportunities.
I really recommend following this framework to evaluate ideas, for many reasons. If you’re lucky, it can validate your idea and give you the confidence to take the step forward and create a venture based on it. At the very least, it will help you identify the problems, and give you the tools to fix them. In the worst case scenario, it can save you a lot of time, efforts and pain if you realize the idea is not fit enough.
Pictures:
1.- Flickr / Stuck in Customs
2.- Reproduced with permission of John Mullins
