 So you've started a new business, maybe even a Natural Enterprise. You've done your homework, and found a need
with a solid business case that you think you and your partners can
fill better than potential competitors. And you've been careful to avoid the landmines. The customers you tried out the idea on are enthusiastic, and maybe even are doing some viral marketing for you already. You've found a way to organically finance
the business launch, so you keep total control over decisions and don't
need to get stressed about money. And most importantly, you've found
the right partners
to start the business with, rather than trying to go it alone, and your
partners have skills that complement yours and cover all the bases, and they're people you know you'll love working with.
If
so, there's just one more step before you launch the business: The
Feasibility Test. This article explains what that's all about.
The
feasibility test will allow you to prove your business concept quickly
and inexpensively, and will allow you to rapidly prototype your concept
with 'pathfinder' customers (those who see more value than others in
your concept, and are on the leading edge of thinking about their own
industry), and, when you fail to get it perfect the first time, will
enable you to 'fail fast and cheaply' and learn a lot quickly from your
mistakes.
There are no hard and fast rules for feasibility tests
-- they depend on the size and nature of the business. Generally
however, they take you through three steps: viability testing (validation), piloting (prototyping and experimentation), and scaling (gearing up to full production of your product or services).
In the course of these three steps, you will be attempting to answer 'yes' to all of the following questions:
- Have you determined, to a detailed level, exactly what capabilities
your team must have (the eight capacities in the green box above right,
plus any technical capabilities specific to your business)? Once you
have done that, have you ensured that your team members
between them have all these capabilities, and that their capabilities
do not overlap so significantly that one or more of them is redundant?
Redundant skills are costly and often lead to infighting. Skill gaps
are worse. Your team members may consist of (a) inside partners (who
will share in the success of your enterprise), (b) outside partners
(who will generally charge you a flat amount regardless of success),
and (c) alliance partners, organizations that will jointly do some of
the work of the new business with you, according to your joint venture
agreement.
- During the period from now to launch (assuming launch will be late) do you and your partners have the time, the passion, the energy and the financial wherewithal to do the vital, mostly unpaid work of launching the business?
- Is the chemistry
of the partners good, do all the partners respect and trust each other,
are they all deeply committed to what you're doing together, and do
they all love the idea of working with the rest of you?
- Is your idea sufficiently new or different that you can pretty much rule out the risk of some established competitor or vendor of a substitute
product or service, outracing you and cannibalizing your market before
you've begun? This doesn't mean you should charge ahead recklessly to
be 'first to market' ('first mover advantage' is a myth: Apple and
other successful companies pride themselves on being 'second movers').
In any case you should have done a lot of research already that will
make it difficult for other small companies to catch up, while larger
companies are unlikely to go after your niche unless doing so is
low-risk and very profitable. There's no point being secretive about
your idea. If the need was that overwhelming and the means of filling
it that simple, someone else would already have done it.
Good ideas are cheap. Taking a good idea through all the steps to
commercialization is very difficult for anyone, including potential
competitors, to do successfully. If you've done your homework, you
should already know this -- chances are you tossed out several good
ideas before you hit on the one you are now pursuing.
- Do you know precisely (a) which vendors
the supplies you need will be purchased from, and in what quantities
and at what prices they will be able to provide them to you, (b) what capital assets (premises, equipment etc.) you will need, and what they'll cost, and (c) what financing
you will need until the business gets into a positive cash flow
position, and whether you will be getting it all from organic sources
(and you have ironclad assurances from those sources) or whether you
will have to get short-term loans from sympathetic financial
institutions (ideally those that are nearby and entrepreneurial
themselves, like credit unions)?
- Have you checked to ensure your business satisfies all relevant regulations -- zoning, licensing, trade regulations, intellectual property laws etc.?
- Have you ensured that your business will not have adverse social, environmental or ethical impacts
in the eyes of partners (that includes 'employees'), suppliers,
customers, and communities in which you do business? A big corporation
with an army of lawyers can Wal-Mart or bribe its way through such
impacts -- you can't, and you shouldn't anyway. In the long run
unethical business is bad business.
- Did your homework prove definitively that there is a significant identified need for your product or service, and that those who need it recognize that need, want it and can afford it?
- Have you decided exactly how you're going to sell and distribute
your product or service? The best ideas don't need a lot of marketing,
but they do need a customer-responsive system that will accept and
process orders correctly and effectively and deliver them promptly. We
all know of great products that failed because the first customers got
poor service or late delivery, and quickly spread the news of their
dissatisfaction to the whole market.
- Have you done enough
testing, using rapid prototyping, parallel experiments, 'taste tests'
with prototypes, and pilot programs, to ensure both the technical feasibility
of producing the product or providing the service even when you scale
up to full capacity, and that your final product or service offering
lives up to the customer expectations
that you raised when you did your research. The whole viability of your
idea was based on what you promised when you did your research -- you
cannot offer your customers any less than that. It's better
to underpromise during research, even if that brings the viability of
the idea into question, than to overpromise and not be able to deliver.
- Have you run parallel experiments
with several alternative 'versions' of your product or service, with
different customers, both to gauge how different types of customers
will react to your offering in the market, and to fine tune the details
of your offering before you decide which 'versions' to take to market.
- And
finally, just before you ink all the contracts that will bind you and
your partners to this business for awhile, did you and your partners
take a final look at the financial forecasts to ensure they are still plausible and conservative, and do you and your partners still have the same passion and commitment to the business you did when you began your research.
I
have met entrepreneurs who went through all of the above steps, and at
the end of them had lost their enthusiasm for the idea, but still went
ahead because they had invested so much time and energy that they
didn't want it to go for nothing. Life is too short for that. As I've
said before, if the work you're doing, or planning to do, is not at the
intersection of What you love, What's needed and What you're good at,
it's time to quit. Even if it's before you start.
If you have done your research and
you can answer 'yes' to all of the above questions, you're miles ahead
of most entrepreneurs, and you'll have dramatically increased the
probability that your enterprise will be low-stress, beholden to no one
but you and your partners, financially successful, and a place where
people love to work. And damn, could we ever use some more of those. |
MADE IN CANADA
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