How to Test Your Business Idea
Passion! Conviction! Tenacity! Without these traits, few entrepreneurs could endure the challenges, the setbacks, the twists in the road that lie between their often path-breaking ideas – opportunities, as they call them – and the fulfillment of their entrepreneurial dreams.
The very best entrepreneurs, however, possess something even more valuable – a willingness to wake up every morning and ask a simple question about their nascent opportunity: ‘Why will this new business work when most will fail?’ Or, to put it more realistically, ‘What’s wrong with my idea, and how can I fix it?’
Overview: The Seven Domains, a Great Tool for Entrepreneurs
At its heart, successful entrepreneurship comprises three crucial elements: markets, industries and the one or more key people who make up the entrepreneurial team.
The seven domains model brings these elements together to offer a new and clearer way to answer the crucial question that every aspiring entrepreneur must ask themselves every single morning: ‘Why will or won’t this work?’
Markets and Industries: What’s the Difference?
Moreover, the model’s seven domains are not equally important. Nor are they additive. A simple scoring sheet won’t do. Worse still, the wrong combinations of them can kill your venture. On the other hand, sufficient strength on some factors can mitigate weaknesses on others. Good opportunities can be found in not-so-attractive markets and industries.
To understand the diagram, it’s worth starting by addressing a very common confusion. As mentioned above, markets and industries are not the same thing. But very often entrepreneurs and even investors blur the definitions. This leads to trouble.
What Do We Mean by Market?
Markets consist of buyers, not products.A market consists of a group of current and/or potential customers having the willingness and ability to buy products – goods or services – to satisfy a particular class of wants or needs. Thus, markets consist of buyers.
Example: One such market, for example, consists of businesspeople who get hungry between meals during their workday. We’ll call this the market for workplace snacks.
What Do We Mean by Industry?
An industry consists of sellers – typically organizations – that offer products or classes of products that are similar and close substitutes for one another.
Example: What industries serve the market for workplace snacks? At the producer level, there is the salty snack industry, the candy industry and the fresh produce industry, to name but three. There are also industries providing the distribution of these products to workplaces, including the supermarket industry, the restaurant industry, the coin operated vending machine industry, the coffee bar industry and so on. Clearly, these industries offer varying bundles of benefits to hungry workers. Some of these industries are more attractive than others to would-be entrants seeking to serve the workplace snack market.