It’s barely a week into the new year, and everyone from entrepreneurs to chief executives and even petty traders are getting big ideas on how to do more business. In the quest for growth, cash flow projections have been made and critical targets enacted to guide all operations for the year; but just before you sign off on the plan for 2015, be sure your ideas can scale through these tests below.
The Value Creation Test. This is supposed to be a no-brainer but many people continue to concentrate on developing and marketing new products/services without asking the all-important question: “Does this create significant value for my customers?” People buy solutions, not products, and if your proposition neither solves a problem nor add value greater than the price paid to acquire it, you will be in for a “swell” time this year.
The Execution Test – After ensuring your idea adds value to customers, you need to determine just how executable it is. This is necessary because your proposition may be a great idea whose time has not come, or it may just not be feasible given certain prevailing circumstances. Also, your idea may require certain precedents before they can fly, and this is why feasibility studies are engaged prior to launching any business. You know that your idea is executable when there is a clear plan of action that is SMART and, this is very important, can be achieved right away or with some little stretching.
The Scalability Test – How fast can you scale up, and how much revenues must be garnered before then? How many customers must you acquire before you can take the business to the next level? Is this an idea that can “catch” national or regional fire? Obviously, many will have to start small but they can’t remain small, not if they will stay in business. Scalability demands that the idea shows a solid and definite potential for growing way past the initial state in the near future, and it is this factor that investors are particularly concerned with.
The Defensibility Test – As you scale and grow the business that results from your idea, expect new entrants who are more commonly called competitors! Therefore, you have to determine, in advance, what defensibility strategies can be put in place to ensure you have a competitive advantage whether or not you have the first mover advantage. You must think up definite strategic barriers that could be erected or clear ways to differentiate yourself from the rest of the pack, this way, you are better able to defend your brand and margins.
So ideation is not enough, the output of such processes should be subjected to these tests in a bid to justify a continued pursuit of the ideas. Ideas that do not pass these tests can be shelved until their time comes, keep in mind that this can be in January 2016 or earlier.
By Emmanuel Iruobe
