At the Sussex Innovation Centre, we strive to make ideas happen. It’s at the core of what we do, as a business incubator working with entrepreneurs, start-ups and innovative companies. The phrase “making ideas happen” is even part of our logo. But it doesn’t tell the whole story. Perhaps a better description of our method would be “turning ideas into business opportunities”.
An idea by itself isn’t a business. Ideas are important and valuable things, and anyone with the creative capacity to mine the information they see every day for new ideas has a great advantage when it comes to finding success as an entrepreneur – but the real hard work is in coming to understand the opportunity that your idea creates. Creating a business model is about seeking that opportunity to deliver value to your customer.
There are many tales of businesses that started life as one idea, before evolving into a completely different business model as their founders discovered more about the market they were operating in. In 2005, a small podcasting company called Odeo created a product that enabled users to call a phone number and have their message turned into an mp3 hosted on the internet. The technology worked smoothly, but was slow to attract customers.
When Apple announced that podcasts would become a key feature of their fast-growing iTunes platform, Odeo began to explore other applications for the infrastructure they had created, and hit upon the idea of using it to send SMS messages to groups of friends online. Several iterations later, they had created the first microblogging platform, and renamed their company Twitter.
Here at the Centre, there are numerous examples of businesses that have ‘pivoted’ in this manner, having discovered a market where their idea was in demand. Tanglewood Productions started life as a video production company, creating promotional content for clients’ websites. When speaking to their customers, they noticed a recurring theme: many had produced video content in an effort to drive online traffic to their site, but had not seen the results they were hoping for.
Tanglewood began to research methods of hosting and optimising video content, offering ‘video SEO’ as part of their service. This year, the company launched V-AMP, a video marketing engine that maximises the reach of businesses’ online videos, driving more customers to their websites by helping search engines to find the content.
“We’ve always been very customer focused, so when we realised our clients had a problem we naturally looked into how to solve it. When we realised that there wasn’t a solution out there, we were amazed and it struck me – why don’t we make this ourselves? It was a bit daunting at first as we’d never built anything this complex, but we’re so glad that we stuck with it as we’re seeing some incredible results,” says Raha Kazemi, co-Director of Tanglewood and founder of V-AMP.
A business model starts with an idea, and an assumption of the value that idea provides to a customer. By challenging that assumption, and taking every opportunity to test whether that value exists, and whether that customer is who you think they are, you begin to learn exactly where the opportunity lies. It might mean taking an existing business model into a new industry, developing an existing product for a new purpose, finding a more efficient way to deliver a service, or even discovering the value created by an entirely new technology.
Peter Lane is the Centre’s Innovation Support Manager, and spends much of his time working with academics from the University of Sussex to help find commercial applications for their research. “Often, academics will come to us with an idea that is quite brilliant, but exceedingly complex and difficult for the layman to wrap their head round”, he says.
“The process of building a business model around such an idea involves thinking laterally around the value that this new research or new technology delivers. Can you simply explain a problem that it solves? If it’s something really revolutionary, it might solve many potential problems. Is there a defined group of people that suffers from one of these problems, and are they prepared to pay someone to make it go away? That’s how you uncover the beginnings of a business model.”
So the question I’m sure you’re asking now is, “how do I find the business opportunity in my idea?” For that, you’ll have to wait for next month’s column, where we’ll be looking at market segmentation, and learning to understand your customers.
Joseph Bradfield is a communications specialist at the Sussex Innovation Centre, an incubator for high-growth businesses based at the University of Sussex, where he works with growing businesses to help share their innovative ideas with the world. He writes a monthly column for entrepreneurs and start-up companies, drawing on the experience of the Centre’s dedicated business support team to provide step-by-step advice and insight, helping readers to navigate some of the challenges involved in launching a new enterprise.