ECU 302 LECTURE FOUR

METHODS OF GENERATING BUSINESS IDEAS

Having considered a wide variety of sources of ideas available in the last section, coming up
with an idea to serve as the basis for a new business can still pose a problem. Hence the need to
clearly understand the several methods of generating business ideas.

These methods are best suitable for an organization that needS expansion in products or services.

Focus Groups

A focus group is defined as a group of individuals providing information in a structured format.

A moderator leads the group of about 8 to 14 participants through an open, in-depth discussion
rather than simply asking questions to solicit participants’ responses.

For a new product or services area, the moderator focuses the discussion of the group in either a
directive or non-directive manner.

The group is stimulated by comments from other group members in creatively conceptualizing
and developing a new product or service to fill a market need.

The focus group is an excellent approach for initially screening ideas and concepts. Existing
company can use this method to expand a section or department to be able to achieve greater
productivity in its services.

Brainstorming

The brainstorming method allows a group of individual to be stimulated to greater creativity by

interacting with each other and participating in organized group experience.

Most of the ideas generated from the group have no basis for further development, yet there are
times that a good idea emerges. This has a greater frequency of occurrence when the
brainstorming effort focuses on a specific product or market area.

For this approach to be successful there should be no negative comment or criticism, quantity of
ideas should be encouraged, the wider the idea, the better and combinations and improvements of
ideas are encouraged.

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Many modern commercial banks successfully used brainstorming techniques to develop a series
of product for their clients or customers.

Problem Inventory Analysis

Problem inventory analysis is a method for obtaining new ideas and solutions by focusing on
existing problems. In this approach, the customers or consumers are provided with a list of
problems in a general product category.

Thereafter, they are asked to identify and discuss product in each category that have a particular
problem. This method is effective when an improved service/product is desired.

When known product or services are related to suggested problems, a new product idea emerges.
Result from product inventory analysis must be carefully evaluated as they may actually reflect a
new business opportunity.

For maximal result, it is advisable that problem inventory analysis should be used primarily to
identify new product ideas from existing product before further evaluation.

Creative problem solving – is a method of obtaining new ideas by focusing on the parameters
such as Brainstorming – group method of obtaining spontaneous ideas

Reserve brainstorming – a group method of obtaining new ideas but by focusing on the negative
i.e by finding fault.

Brain writing – is a form of brainstorming which gives participants more time to think than
brainstorming which dwells on spontaneous ideas the participants write their ideas on a special
form.

The Gordon method- is the method of developing new ideas when the individuals are unaware of
the problem.

- It ensures that the solution is not clouded by pre-conceived ideas or behavioral patterns

- Checklist method.- is a method of developing new ideas through a list of related issues

- Free association method - i. A new idea is developed through a chain of world association

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Forced relationship - it is a technique that asks questions about an object or idea in an effort to
develop a new idea it follows the following five steps:

i. Isolate the element of the problem,

ii. Find the relationships between these elements,

iii. Record the relationship in an orderly way,

iv. Analyze the resulting relationships to find ideas pattern,

v. Develop new ideas from the pattern.

Collective notebook method

Develops new ideas by group members regularly recording ideas.

Attribute listing

Developing a new idea by looking at the positives and negatives.

Big-dream approach

Developing a new idea by looking without constraints i.e think of the problem and its solutions I,
thinking big.

Every possibility should be recorded and investigated without regard to all the negatives.

Parameter- analysis

Developing a new idea by focusing on parameter identification and creative synthesis

Parameter identification involves analysis variables in the situation to determine their

importance.

KEY FACTORS TO CONSIDER WHEN STARTING A BUSINESS

Almost every individual dreams about starting his own business. Yet only 4% of the newly
started businesses manage to reach the 10 year mark. In fact, over 50% of the small businesses
don’t even make it to the fifth year. Most people have no idea about the various things to
consider when starting a new business.

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It is just a desire to be on top of things that motivates many to start businesses. They have no
idea about the money that is required, the hard work that they have to put in, the knowledge and
the experience that they have to gain, and the kind of patience they need to have, until their
business reaches up to a certain level for them to break even or make profits.

‘Well begun is half done’ is what they say. So if you want to start your business, you have to get
all the things needed to start a business.

Here is a checklist that will give you a list of factors to consider before starting a business:

1. A Business Idea

2. Knowledge or Expertise

3. Market or Demand

4. Start-up Costs

5. Capital and Finance

6. Competition

7. Location

8. Staff

9. Technology

1. A Business Idea

Every business starts with an idea – a super duper idea that actually works. If you want your
business to stand out, you will need to offer something that no one else has offered till date

That said not everyone can come up with a unique business idea. There might be hundreds of
businesses just like the one you are going to start. Yet you can make it better by answering the
following questions:

• What do I need to do to make this better?

• What is it that I can do better than what the other guys are doing?
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• Will I be able to grab some market share in this category?

You may have a great business idea; but unless it solves someone’s problem it is not going to
work. So start by listening to frustrations – both of yours as well as others (your family members,
your neighbors, your friends, and your associates). Once you have understood these, here is what
you can do:

• See what best you can do to address these frustrations.

• Identify the skills in you that will help you offer the right solution.

• Find out if you are actually passionate about offering that solution.

And Voila! You have your business idea.

2. Knowledge or Expertise

Once you know what business you want to start, you will have to start gaining the required
knowledge and expertise to start that business.

This might take a lot of research and planning; but at the end all these efforts will ensure that you
have everything in place to get your business idea off the ground.

Having a business plan can be highly advantageous at this stage. It will tell you whether your
business has a place in the market and if the idea is worth or profitable enough to go ahead with.

If you have the knowledge you can construct one, all by yourself. If not, you can always hire a
professional business consultant to do it for you.

Meanwhile you will have to continue with your research to keep your knowledge up-to-date.

3. Market or Demand

Once you are sure of starting your business, your next step would be to explore the market or the
demand for your product or service.

Start by answering the question, who are your customers. If you are selling your product or
service locally, you may have to assess the demand for it. In case you are taking up on an
international level, you may have to understand the rules and regulations of dealing
internationally.

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A market survey should reveal all the details that you may need about the market for your
product or service. Basically you are looking for:

• The current size of the market (the approximate number of potential buyers)

• Its growth potential (whether it is likely to grow in size or contract)

• The market share that you can expect to take

• The buying habits of the target audience (and how to exploit them)

• The different segments of the market

• The kind of margins that you can expect from the market

Thankfully social media has made it possible to reach out to target audience, anywhere in the
world, without having to put in too much of efforts.

4. Start-up Costs

Estimating your start-up costs is one of the very important things to consider when starting a new
business. You will have to assess the total cost that is required to set up and run your business
successfully.

If you are thinking of starting a manufacturing plant, your start-up costs could be very high. You
may have to think about the cost of the land or building, setting up the plant, buying the
equipment and machinery, investing in furniture and office equipment, and various other things.

In case of a retail business, you may still need to think of the cost of the store as well as the
furniture required to decorate it. An office can be started with relatively lower cost since all you
may have to invest would be in furniture and office equipment.

Once your business is set up, you will have to think about the working capital needed to run your
business.

You will have to take into account the inventory that you need to maintain, the credit that you
can extend to your customers and the supplier’s credit that you can get.

In not all cases can you expect credit to be given by the suppliers, especially if you are a new
name in the market.

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5. Capital and Finance

No business in this world can run without money. Depending on the type of business you are
starting and the initial costs that you will have to pay up for, you will know what kind of capital
you would need to start your business.

Whatever steps you take, to finance your business, you will have to make sure you have the
required funds to take you through the startup phase.

The financing pattern is one of the most important factors to consider before starting a business.
This generally includes the capital that you can introduce from your savings as well as the funds
that you can borrow.

Personal savings are what 77 percent of the small businesses rely upon while gathering their
initial funds. But you can’t really go over the board if you cannot fund your entire business.

Funds can be borrowed for business, either through short-term or long-term loans. Nevertheless,
you may have to keep in mind the terms and conditions of borrowing such funds including the
cost of borrowing, the rate of interest, the repayment terms, and the security that is required.
Approach a few banks and private lenders, get a few quotes, and compare them to identify the
most beneficial type of funding.

It would be ideal to go for long-term funds only if you have to purchase any fixed assets. For
working capital requirement short-term funds would be sufficient. This way you can make sure
they are paid back once your business starts progressing.

6. Competition

Unless you know who your competitors are and what they are doing, you will not be able to
survive in the market for long.

If your product is a monopoly competition will not matter. Else, you will have to come up with
an excellent strategy to fill in the demand and supply gap.

Gaining a market share should be on top of your mind if you are about to start a business. If there
is a huge demand for your product, this shouldn’t be too difficult. If not you may have to
strengthen the position of your business to gain an entry into the competitive market.

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Analyzing competition includes getting to know your competitors, figuring out how they have
positioned themselves, identifying their pricing and marketing strategies, and evaluating their
strengths and weaknesses.

Once you have all the information it is all about conveying your unique selling point to your
target audience. If you can do this well you will survive no matter how tough the competition is.

7. Location

One of the most important things needed to start a business is a good location.

If yours is a retail business you will have to look for a well-populated area that is easily
accessible.

If it is a manufacturing unit you can choose a location that can let you save money on electricity,
water, taxes, and transportation. Look for a place where manpower is easily available and raw
materials can be sourced easily. You can even look for a location that can get you rebates and
subsidies from the government.

If yours is a niche product or a service, you may have to look for a single location where all your
competitors are. For instance, if it is a software company you want to start, you may have to look
for a software belt where all other software companies have set their shops. Similarly, the ideal
location for a gold vendor/jeweller would be a gold mart that has housed many such shops.

Offices can be set up in any place that is accessible and offers good facilities such as parking
spaces, refreshments, transportation, and so on.

Make sure the location fits well within your budget and offers scope for expansion. An ideal
location would be one that complements your business in the best possible way.

8. Staff

Your staff members are the ones that can make or break your business. Without efficient
manpower no business can ever succeed. That said an efficient staffing strategy needs to be in
place if you want to reduce your staff replacement expenses. You can hire a recruitment agency
or use various recruitment tools to fill in your positions with the right talent. There are also a

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number of websites that make it easy to find the exact kind of people you are looking for.
Signing up for a couple of these can make your job, both easy and cost-effective.

Apart from hiring the right staff there is also the training that you need to think of. This will
ensure your staff members will be in a better position to handle their responsibilities and meet
the expectations you have set for them.

Finally, you will also need to think about paying their salaries and perks to keep them motivated
enough at work.

9. Technology

Technology is one thing you can never compromise on when it comes to starting a new business
in today’s world.

Whether it is office equipment, plant and machinery, or the software required to monitor your
business, you will have to make sure it helps your business to perform well in the long-run.

Here are a few steps you can follow, while choosing the right technology for your business:

• Assess the requirements of your business

• Make sure the technology you choose helps in making things run smoothly

• Consider leasing technological equipment if you want to stay up-to-date

• Always have a backup plan

• Make sure you have the required support for installing, upgrading, and troubleshooting
the technology that you choose

• Invest in training so that you can make maximum use of the technology

Bonus Factor: A ‘Can-Do’ Attitude

When trying to start a new business you may see a lot of doors getting slammed in your face, a
lot of people trying to shut you down, and a zillion cant’s and don’ts from all over; but with a
‘Can Do Attitude’ you can rise above all of it.