What Is My Idea Worth? Not As Much As You Think…

While the exploration of ideas is a consistent theme in this blog, I felt it was important to drive home a point that is often overlooked when drumming up new ideas or starting new businesses. And that is that execution and monetization of an idea is where the real value lies. There are an immeasurable number of  ideas out there, and good ones at that, which will never see the light of day. The ability to execute is why so many good ideas never make it and so many bad ones do. Ideas are great and I encourage you to never stop creating them, but face it folks, execution is where it’s at. Anyone can be an idea person, but if you can’t bring it to life, it’s really of little value other than the pleasure you get from thinking it up.

Where this really becomes a sore spot is when someone wants to build a business out of their idea. All too often, “idea people” want too much ownership or revenue from their idea while failing to possess the skills necessary to bring it to life. Sometimes that bridge can be gapped but in most cases if you really want your idea to take off, you have to be prepared to give up a lot of the money to see that happen. It’s important to also remember that giving up money doesn’t necessarily mean giving up control but be prepared to give up some of that too. At the end of the day, if you are nothing more than the idea person and wind up with 3% - 10% of the bounty, you’re doing pretty well. If you are able to also help bring the idea to life, you’ll likely wind up with more but keep your expectations in check.

Always remember, it’s better to own 5% of something than 100% of nothing. Here are a few thoughts that might help keep you grounded as you set out to bring your ideas to life:

1. Focus on ideas that are in an area you know, you’ll have better luck knowing what the need really is and of having the ability to contribute to executing on the idea. So, if your idea is for the next generation of social networking websites but you can’t even spell HTML, be prepared to give up some ownership.

2. Be diligent in working with people who have the skills you don’t and compensate them well.

3. Don’t be a tyrant. It might be your baby but other people may be very good at expanding an idea even if they didn’t think it up to begin with.

4. Work with people you can trust. I can’t emphasize this enough.

5. Be prepared to work 12 hours a day 7 days a week if you really want to make it. If it’s a labor of love, you probably won’t mind anyway.

The reality is that most of the hard work and true art is in the execution, not in the idea; so, if the idea is what you bring to the table, great. It might start a business or product, but be satisfied with not owning the whole thing. Trust me, if you have thought of it, odds are someone else has too so learn to execute if you want to win the game.

As an added thought, if you just want to be an idea person and don’t want the rest of the hassle and are willing to accept a less ownership, learn the licensing game and license your ideas to people or companies that will run with them. You might only get a modest percentage but it takes the work off of you beyond a prototype.

Open Source Software for the Enterprise

There is no shortage of great ideas floating around right now. Unfortunately, as much value as we like to put on our good ideas, failure to execute on them means they turn out to be little more than dreams with practical application but no realization.

However, over the past few years, the open source movement has gained tremendous ground in it’s battle for broad acceptance and reliability. I would dare say, open source is coming of age. The broad use of LAMP (Linux, Apache, MySQL and PHP) to build still more open source applications is eclipsed only by the applications built on that framework. Of course WordPress and Firefox immediately come to mind but the number of open source projects abounds.

The open source platform enablers such as Apache and Linux have enjoyed wide use in the enterprise for some time but the applications built on them have struggled to gain acceptance in those same businesses though for good reason. Most of them simply weren’t ready for prime time. But that’s changing and quickly so. With applications such as MySQL driving more and more databases, and WordPress running some large and complex websites, businesses are starting to realize the benefits of using free, open source applications and are finding out how reliable they can be. More importantly, the age and durability of those applications means there is also a growing talent pool of professionals capable of supporting them.

The idea is, that out of this movement a few things will happen.

1. Incumbent, non-open source giants will begin to be displaced for basic service offerings (think Apache instead of IIS).
2. New businesses will grow on the backs of open source applications, and not just new products, but services companies as well
3. Open source technologies could eventually rival complex enterprise applications.

Number 2 is exactly why I started BlackBox Technologies. A lot of businesses are using open source applications and need expertise to support them and help them get up and running or to maintain those applications. Also, a lot of small businesses and individuals can now afford powerful, scalable, flexible websites because they can be built by professionals at a relatively low cost without incurring software licensing fees, now or ever.

But, number 3 is what intrigues me the most and is where I hope BlackBox will go, eventually, even if only in part. The open source movement has proven that it is capable of building applications that can operate effectively at the enterprise level. When coupled with a subject matter expert in a particular discipline such as law, real estate, corporate governance, etc… the technical minds that contribute en masse to open source projects will have an opportunity to compete or displace incumbent software providers.

There will be concerns about security, reliability, support … all of which are quite valid to the enterprise, and all of which can be addressed and mitigated. Early adoption would likely begin at a snails pace, but there is a very viable opportunity with a fortune waiting to be made from the services associated with those applications (see #2). At the same time the cost savings to large companies would be quite literally billions per year.

There are some applications which don’t lend themself to a services oriented revenue stream and will always cost money, and quite frankly, that is ok. People deserve to make money for their hard work and some apps will demand a premium, but the opportunity abounds for those willing to start the ball rolling now on the open source revolution for the enterprise.

PS: Just as I was finishing writing this I caught wind of a website that is at the grassroots level of just such a project. Slipfire is a start-up, open source project aimed at developing a CRM (Customer Relationship Mangement) application on the WordPress platform. If you are inclined to help an open source application out this might be a good one to get involved with. I don’t know much more about it but I’ll be keeping a close eye on where this goes.

Idea Lifecycle Pt. 7 - Sustain/Improve

As long as we own a product,idea or business, there really is no end to it for us until we choose to kill it (which is sometimes the right choice) or sell it off. Until then, we should seek to continually improve upon the product, marketing and delivery of that product though we can say with some confidence that reaching the phase of “Sustain/Improve” brings some sense of accomplishment and closure.

If we have done our homework and sought from the beginning to automate where possible or plan for automation once we reach this phase, it should by far be the least work with the greatest amount of reward. At this point we continue to collect feedback from our customers and integrate appropriate changes to the product, bearing in mind you can’t make everyone happy and you’ll get some genuinely off-the-wall suggestions. We’ll continue to further our use of automation so that maintenance requires the least amount of time from us while delivering the best possible product most efficiently and at the least cost. If anything, we continue to make small tweaks which become periodic and are adjustments for a changing market environment. Making those changes and adjustments as well as handling the occasional client service need (most of that has been automated or outsourced too) should require little more than a few hours a week if that.

It’s important to keep in mind that as we continue to improve those improvements are going to be very incremental and may be very small. Some, if requiring a significant level-of-effort vs. the ROI for implementing may not be worth doing. Always perform due diligence and asses the ROI of what you are about to do. Don’t analyze it to death, but pay attention.

Some of the ways we can gather feedback for making those improvements to the product include a feedback form, a customer survey, simple observation of conversations (forms, blogs), web analytics (how do people actually use your site and get to purchasing your product) and business intelligence (which is an entirely different conversation but think “data mining” and making sense of all that raw data you are capturing).

It’s very easy to get complacent at this point. Don’t. You should be working less (on this idea) but you need to stay on top of it or all of that hard work will start to wane as observed through declining sales.

A few bullets to keep in mind:

- Keep an open mind about the feedback you get
- Don’t try to please everyone (sure path to failure)
- Improve your product and your internal processes
- Make your customers happy but they are NOT always right
- The ones who are the least pain are the most profitable, don’t be afraid to fire the one’s who cause you most of your headaches (yes you can fire customers and should)
- Automate, Automate, Automate!
- Always look at ROI.

And when it’s all over and requires only a little of your time, move on to the next idea and start it all over!

(Idea Lifecycle Frameowrk, Phase 7. click to enlarge)

If you would like the original framework form with added detail request it here:
#SignUp .signupframe {<br /> border: 1px solid #000000;<br /> background: #ffffff;<br /> color: #226699;<br /> font-family: Arial, Helvetica, sans-serif;<br />}<br />

Idea Lifecycle Pt. 6 - Monetize

This may not actually be your favorite part, but it’s likely to be your favorite result! The fact is that the monetization phase is probably the most difficult and is as much an art as it is a discipline.

In this phase we get to do things like:

Determine the ideal price. It needs to be profitable for us but within reach for our buyers. There really is no right answer here because it depends on your product and what the triggers are that get your specific audience to give up their money.

How to get the word out about your product and get people to buy. Marketing, advertising (know the difference), word-of-mouth? Online, radio, tv, trade show?

Once we have interested buyers, are there way’s to upsell? A customer you already have is much easier to sell to again and much expensive to acquire.

What data do we need to capture and how will we capitalize on that? Is it traditional demographics or some other analytics? Figuring that will make all the difference in our ability to sustain sales into the future and keep making money.

Be careful during this time not to anticipate your profits. Have a plan but give your system time to work. If you run out and start spending money on marketing, advertising, pr, schwag, … and the sales don’t come in as expected you might find yourself in-the-red very fast. Remember that it’s a lot easier to get into a hole than to get out of one so be cautious. You might also find yourself missing good opportunities if you cant’ capitalize on them because you spent your funds elsewhere.

Also, a word to the wise, make it easy for people to pay you and they will. Take credit cards (of all sorts), paypal, google checkout…

With a little luck and a good plan the outcome should be $$$$! Of course there are no certainties. Even if you don’t make it big at first tweak all of the above and try different things. If it still doesn’t work don’t get married to one idea. Find the balance of knowing when not to give up too soon but not holding on too long. Above all automate, automate, automate and make your life as easy as possible!

(Idea Lifecycle Frameowrk, Phase 6. click to enlarge)

If you would like the original framework form with added detail request it here:

Idea Lifecycle Pt. 5 - Test

Ahhh testing! Having spent years as a developer, I can tell you this was about the least exciting part of the process next to maintenance. It’s brutal on your ego and some of the feedback you’ll get can be downright brutal, so be prepared. But like many things that are “less fun” to deal with (e.g. insurance), it’s a necessary evil. We need to know how well our product will fulfill it’s mission, hold up to abuse and generally provide a positive experience for it’s users and give them more than their money’s worth (if we ever want them to buy from us again). I usually look to four kinds of testing to get enough feedback to insure I’m not overlooking things:

1. Inspection : The perfect place to start to ensure you didn’t over look something obvious, or something you “intended to do” and to be sure the thing just plain works before you put it in someone else’s hands. Figure out if it makes sense to you.
EX: If we’re talking IP type products, review, listen, watch, spell check.. that sort of thing. If t-shirts does the color look good? Is the print look like you envisioned?

2. Functional : This is like “mechanical testing.” Try to break it, poke holes, drop it. Let’ others do the same.
EX: IP products: spell check, edit, review, copy, how does it look in digital and maybe hardcopy. T-shirts: wash it a bunch of times and see if the color stays, does the printing last, is the material comfortable, does it breathe, fit well?

3. Usability Testing: How easily can users utilize your product as intended? If it has an interface can someone who has never seen it start using it quickly and easily. Apple are masters of this and making things “easy to understand” is critical! How do people use it in ways you didn’t anticipate. How does it feel to them.
EX: IP products: Clean, intuitive interface that doesn’t require a lot of “figuring out.” If it’s a book or e-book, can they easily understand the content, or execute the steps if it’s a “how to?” T-Shirts: Are they comfortable to the users? Do they look good on people?

Along the way you’ll want to log and compile what is happening so you can go back and make correction. Some might be critical fixes, others less essential for initial launch. Keep in mind potential maintenance issues down the road for things you defer. As you go through several iterations of testing you’ll want to grab the good things people say to use as testimonials for the product when you launch.

(Idea Lifecycle Frameowrk, Phase 5. click to enlarge)

If you would like the original framework form with added detail request it here:

Idea Lifecycle Pt. 4 - Build It

Other than coming up with the idea this is probably my favorite part of the process. Getting hands on and creating/building the product is fun and really what it’s all about. What about “Monetization” you ask? Making money is of course essential and fun in it’s own right but this is really about getting to do what we enjoy, whether that’s building websites, writing a book, taking pictures … the money part just enables us to keep doing it.

In this phase, we’ll typically be constructing a working prototype or our first iteration of the product. We’ll also get some idea of how we are going to handle manufacturing if needed (e.g. writing an e-book doesn’t but if your selling t-shirts you’ll need to understand your printing and distribution options).

The end result should be something we’re comfortable with showing to other people and getting feedback on. It won’t be perfect and may be laced with our own bias on how it will be used and work so striving for perfect is an exercise in futility. Sticking with the examples above, for an e-book you might start getting feedback from someone else knowledgeable in that books area of focus or help from an editor polishing the content and writing. In the t-shirt business we’ll want feedback on our ideas, designs, choice of materials, colors, …

Once you get to a final product, ask yourself if the product will be easy to replicate and can the process be automated? The more you automate the better off you’ll be in the long run but don’t expect to automate everything right up front, just try to get their quickly. You’ll want to be able to produce the product rapidly, easily and as inexpensively as possible. IP products, like e-books are the pinnacle of this.

The biggest risk of this phase is scope creep. ie. lot’s of new ideas about things to do to the product, improve it… will start creeping in and you’ll be tempted to do them all, don’t. If it’s essential and makes a big difference do it but keep a tight leash on that and have a plan for future versions with improvement and changes. Otherwise you’ll be permanently stuck in “build” mode and never get out of it.

Finally, be sure to to protect your idea. At this point, you have something to copyright, trademark or do a patent search on. It’s worth taking the time and money to protect your idea, otherwise you are asking for trouble.

(Idea Lifecycle Frameowrk, Phase 4. click to enlarge)

If you would like the original framework form with added detail request it here:
#SignUp .signupframe {<br /> border: 1px solid #000000;<br /> background: #ffffff;<br /> color: #226699;<br /> font-family: Arial, Helvetica, sans-serif;<br />}<br />

Idea Lifecycle Pt. 3 - The Market

Up to this point we have still existed in a bit of a cloud. We had fun brainstorming an idea or two, and got through the work of defining that the idea we like best. In looking at the market we now get to figure out whether or not everyone else will take to our idea. “The Market” is really a broad concept and there are entire blogs dedicated to this, and no single entry can to it justice but we can get an idea of how this will go and what we are trying to accomplish.

Our goal is to gain a clear understanding of who we are targeting with our idea (i.e. who is likely to buy) and how much they will pay. Peripherally, though no less important, we need to understand how large that group of potential buyers is and what motivates them to give up their credit card numbers to us in exchange for whatever it is we are doing/creating.

We’re still researching a lot at this point but now we have to shift gears and get analytical about our research. When we finish the “Market” phase we should be able to attach concrete findings to the following attributes:

- Niche Definition: Who exactly is our market. This should be as highly specific as possible. e.g. “people who own a German Shepard” is a better mark to shoot for than “people who own a dog” because the latter will have lot more competition and noise in the market place. Go into extreme details to know your buyers, research demographics and buying trends among that demographic as much as possible. This will help you make more realistic projections.

- Market Size (how many buyers are in our market): The market needs to be big enough to be worthwhile but not so large that we are over generalizing. The danger in overgeneralizing is that you, as an individual entrepreneur will be competing with the big dogs of your area. But if your market is too small you won’t make any money.

- Projections: The bottom line is how many buyers times how much we make per sale = revenue. Keep in mind, only a percentage of the potential market will buy, and that is likely to be a small percentage. I usually expect a conversion rate of about 2% for online selling. I have seen much higher, though anything above 6% has been rare to my eyes with most at about 2.5% or below. I prefer to project conservatively though as accurately as possible. I have heard too many people say “even if only half the people who see my [whatever] buy, I’ll make $XYZ.” You won’t get a 50% conversion rate unless you only have two possible buyers and 1 of them buys. So be realistic here.

There are a lot of ways to map out your market. Once you have the basic market defined and know a bit more about your customers keep the following in mind as you move into the build phase:

- What up-sell opportunities can I attach to my idea?
- What partnerships or alliances can I form to help drive sales or add value?
- What extra information or services can I offer that will give me an excuse to keep in touch with my customers? This kind of follow up will lead to more sales later?

Think about different revenue streams you can attach and look at how others are doing it for examples. The easiest (and least expensive) customer to sell to is the one

(Idea Lifecycle Frameowrk, Phase 3. click to enlarge)

If you would like the original framework form with added detail request it here:

Idea Lifecycle Pt. 2 - Define

I’ll start with a confession. “Define” is not my favorite part of the process because we jump from freely associating (fun) to analyzing our idea in much greater detail which feels more like work. Define is also tough because it is the first step at which an idea we think might be a winner can get turned on it’s head when we realize there are challenges we never dreamed making the idea infeasible based on our existing knowledge and experience. The result can often be frustration and disappointment. On the brighter side, ideas which hold up to the scrutiny of the “Define” phase already have a better chance of succeeding and we aren’t wasting time on ideas which are less likely to thrive. FYI, most ideas don’t get past “Define” so prepare to go through several of them.

I firmly believe that writing out a description of your idea is the most essential activity in this phase. By doing so you will force yourself to consider things which don’t come to mind if you are just “thinking” about it. Don’t just think about the idea and don’t be lazy, you must now write it out. I usually shoot for about two pages of text. Writing it out will also help you figure out how to explain your idea to other people clearly and concisely. If you can’t do that, you don’t understand it well enough yourself to move forward.

A more fun part of documenting your idea is mapping it out with a tool like MindJet MindManager. It’s easier because it allows us to think about things in a non-linear fashion which is far more natural. Once you are comfortable and efficient with using a tool like MindManager you might be able to eliminate the two pages of text above and loose a little of the work aspect. The mapping part can actually be fun.

Once we have a well documented idea, we now have to research it. I stick to the Internet and bookstores primarily but also actively talk to people I know or look for experts in the area whom I know or can figure out how to contact. You would be surprised how often people will happily talk to you about what they know, it usually makes them feel good though a word of caution: When you pen your first letter or email to them, do so thoughtfully, be brief and specific. Most of all be humble and polite. You are asking them for help on your idea after all. Don’t ramble on about your idea or they’ll know you are going to do the same if they talk with you on the phone or in person and probably won’t want to bother.

When you are doing your research make sure you log everything. Bookmark links, dog-ear pages of magazine or books, write down what you find, where you found it and if it’s a periodical include the date of the publication and volume/issue numbers and title/page of the article. There is nothing worse than loosing track of some really great info. If you interview someone record the conversation (with their permission) so you can more easily refer to it later. All the research can take time though it doesn’t necessarily have to. It really depends on who you already know, how easily you find references and how much you already know yourself. It can take from as little as a day to months. Either way, don’t skip this step! BTW, it is for occasions like this that real networking comes in handy.

At the end of “Define” you’ll have a good idea as to whether or not you have a good idea. If it starts to look like it might not be the right idea but you aren’t quite convinced either, look at it from a few different angles and start getting input on it. You don’t want to dismiss and idea too early but you don’t want to be married to a bad idea either. All of the research and thought can spring board a great idea forward much more quickly than if you just try to hack it; so instead “Define” it and be rewarded.

(Idea Lifecycle Frameowrk, Phase 2. click to enlarge)

If you would like the original framework form with added detail request it here:
#SignUp .signupframe {<br /> border: 1px solid #000000;<br /> background: #ffffff;<br /> color: #226699;<br /> font-family: Arial, Helvetica, sans-serif;<br />}<br />

Idea Lifecycle Pt.1 - Discovery

I come up with new ideas almost everyday, many of them out of the blue, yet don’t get side tracked from the ideas I’m actively working on. Lets do a deeper dive to better understand where those ideas come from and how to keep focus. Along the way, be sure to capture your ideas in a way makes sense for you. I use a MindMap and, if I happen to be out and about, I’ll send my self an e-mail from my Blackberry so I don’t forget it later. I always put the word “idea” somewhere in the subject so that it’s easy to search for and I set up Gmail to automatically tag those emails with the label “idea”.

This should be the one of the most fun parts of the whole experience. Unfortunately, many fall into the trap of only generating ideas and never doing anything with them. We’re going to avoid that!

Now that you have a bucket or two to capture your ideas, let’s start generating:

1) Professional Experience: This one is often the most obvious place to look but our ideas can also seem the most daunting. We have all had a job though where we saw something could be improved upon? Usually a way of doing something but that idea for improvement can often lead to a product or service solution. It may also be that that process which needs improvement is symptomatic of a larger issue upon which an entire business can be built.
2) Groups You Are Involved With: What are their challenges? What are their needs? Odds are that lots of groups have similar needs so start small and grow.
3) Hobbies: This one is the most obvious, especially for all of the inventors out there
4) Other Interests: i.e. things you are interested in but which don’t really constitute a hobby.

All of these are great options because they come from places you already know something about. But even if you know about those areas, it can still be challenging to come up with initial ideas for products or services. Brainstorm away but use other resources to jump start your list by picking a topic and then:

1) Surf Google or Amazon and see what titles or ad’s pop up around your keywords
2) Actually go to the bookstore. What is on the magazine rack or in the section that addresses your area of interest.
3) Watch your reader or favorite web portal for new links related to your topic(s) of choice.
4) Talk to your friends, family co-workers with similar interests (again professional, hobbies, …) and listen to what are they talking about. Focus on paying attention to the needs they mention.
5) Make a note whenever you think to your self “I wish ….” there is probably an idea germinating in there.

If you are still having trouble, look at other ways to kick start your ideas here.

Once you have a good list you might want to Eliminate. At some point along the way you’ll come up with a few ideas that you’ll look back at as (probably) just nuts. I never throw them out but I do find a place to put them out of my sight so they aren’t a distraction. Still, keep them, they might spawn other ideas later which make more sense.

It may take the ideas a while to start flowing but eventually they will; and they might come at you faster than you can deal with them which is why it’s important to have a place prepared to capture your ideas and not loose them. If you hit a bump in the creative road don’t get frustrated. Rather view that as the right time to move on to the Define phase with the ideas you have.

(Idea Lifecycle Frameowrk, Phase 1. click to enlarge)

If you would like the original framework form with added detail request it here:

Idea Lifecycle - Intro

This week I have decided to do a “mini-course” on the lifecycle of an idea. Undoubtedly there are those for whom the lifecycle might look a little different but generally this should provide you with a framework for what the process really looks like. Each day we’ll do a deep dive into one of the following sections to better understand the process, pitfalls, activities and outcomes.

The sections are as follows:

1. Discovery : This is the fun part we all do. Throw it on the wall, see what sticks, brainstorming… Unfortunately with most people, ideas also die here.
2. Define: This is where the work begins and we really start to understand our idea. This is also be the first decision point where we decide to “go forward” or “kill it.”
3. The Market: Based on what we know to this point, is there even a market for our idea? If so we’ll gain a better understanding that market. Is it narrow or too broad? Viable? Transient?
4. Build: This includes design and prototyping and is the first point at which your idea will really be challenged. The Market step is tough but here you’ll find the kinks that make or break your idea. All the “obvious” things you didn’t think of will start to come out.
5. Test: We’ve done our homework and now have to find out if it’ll fly. Perhaps the most nerve racking part of the whole lifecycle because we’ve put in a lot of work and even if our market analysis looked positive we might find out it doesn’t sell. But keep in mind, it might also just be our approach to selling.
6. Monetize: We’ve built it, tested it and are ready to go full boar and make money. This is where it gets fun again!
7. Road Mapping, Improvement and Sustainability: Some would call this exit strategy but by default I don’t like to assume you are going to build your idea then try to “get away from it.” For the right price you might but that is really a different discussion.

This is going to be a fun week and as a part of this week we’re going to fill out the matrix below (click on it to make it bigger) as we go along to help clarify the process and let us know when to keep an idea or leave it, without the emotional confusion that is often a part of making those tough decisions.

If you would like the original framework form with added detail request it here:
#SignUp .signupframe {<br /> border: 1px solid #000000;<br /> background: #ffffff;<br /> color: #226699;<br /> font-family: Arial, Helvetica, sans-serif;<br />}<br />

Next Page »