When starting a business, should you provide a product or service purely from inspiration, find out what the market wants first or combine the two approaches? While some business advisers point to the second technique, increasing numbers of online entrepreneurs are seeing results from an approach which takes an original idea, exposes it to the world and communicates with customers. Understanding each approach provides new entrepreneurs with valuable information.
A traditional business plan begins with an executive summary or business description. This summary includes highlights of the business and the mission of the entrepreneur. These details usually identify the needs that the business will satisfy, the guiding principles of the business and the specific type of service or product that will be provided to the target demographic. Although business plans are often formed by entrepreneurs who do their research, many are not aware of their customers’ needs to the degree that it will take to run a successful business.
In Entrepreneurship: An Innovator's Guide to Startups and Corporate Ventures by Marc H. Meyer and Frederick G. Crane, a lack of customer research is described as the main pitfall for beginning entrepreneurs. Crane and Meyer suggest that entrepreneurs must "watch, meet and talk with customers to generate concepts." From this starting point, the successful entrepreneur will continue communication through a series of prototype, product or service tests. After first understanding their market response, this individual can then begin a business plan.
Crane and Meyer's suggestions point toward a method which identifies what the market wants and then begins a plan which can address those details. The authors believe the technique is revolutionary in that it involves customer oriented learning and helps produce more "value-rich" services in order to maintain customer satisfaction. They also believe monetary goals have a stronger chance of success with this method in place.
Crane and Meyer compare their technique to the idea driven approach, pointing out that 78% of new businesses fail. While referencing other possible causes for this failure such as "poor management and inadequate financing," the pair also state that they believe the idea driven approach is the core mistake. Specifically, "inadequate attention to the marketplace of customers and competition" would likely cause the large percentage of business failures.
Creative internet start-ups like those by Marie Forleo, Gabrielle Bernstein, Jonathan Fields, Kate Northrup and many others point to a combination of careful market analysis, customer feedback and an idea driven mission. Their approach does not completely obey Crane and Meyer's theories of supply and demand because they allow for the initial mission to be purely from the entrepreneur. Yet, their approaches also involve active customer involvement, quantitative analysis of customer response and the use of tools which help the entrepreneur identify the needs and desires of their target market. In their work, the core services or products may be completely original and the tweaking of the delivery of those products or services is determined by customer response.
These separate approaches may reveal more about how to succeed in the marketplace. The success rate of some entrepreneurs who start with an inspired idea may come from the fact that most of their business is done online, where they can more easily connect to those who might be interested in their products. Their success rates may also be attributed to the fact that they do address needs they recognize in themselves and others while receiving additional confirmation through a growing online audience. Understanding the importance of customer feedback is of great value to those starting a business. Seeing examples of those who combine customer research with innovative work may be helpful as well.