The following is a guest piece by Derek Lidow.
Most people assume that successful entrepreneurs are created solely based on how innovative and groundbreaking their new idea is. We fantasize about coming up with that invention or idea that solves a gargantuan problem for a lot of people and therefore is the main driver that propels businesses to be wildly successful.
It might amaze many people to know that successful entrepreneurs are rarely building on new ideas or disrupting existing industries. In fact, this is almost never the case.
While this might be a letdown for the budding inventor, this is great news for aspiring entrepreneurs to know that there are ways, right now, to help their businesses succeed without being hit on the head by an apple and coming up with a new scientific theory.
Let’s look into the history of some household entrepreneurs and their industries. Ford did not think up the combustion engine or automobiles, Edison did not think up incandescent light bulbs, Larry Page did not think up search engines. Disney didn’t think up animated films, or even amusement parks.
These great entrepreneurs did not wake up out of a deep sleep and begin drawing the next big thing. No, they succeeded by working tirelessly to tune existing ideas and inventions in ways that excited vast numbers of new consumers.
Ideas are not the keys to entrepreneurial success. Even a once in a lifetime, an unprecedented, world-changing, patent-protected new idea won’t guarantee success. Business history is littered with brilliant new ideas and inventions that were not able to sustain themselves on their novelty or necessity alone and were therefore dismal failures.
Poor leadership and poor execution can sink even the greatest ideas.
Do you find that hard to believe? Well, think about this. No new idea comes formed ready for delivery to the market. The more unique the idea, the less any human is able to predict or assess all the complexities of how supply and demand will evolve. Nobody has ever shown they have infallible, let alone reliable, instincts for anticipating how customers and markets receive new ideas. Sure, you can do a ton of research to forecast how customers and suppliers will react to an incremental change to an existing product or service.
The reason new ideas are not a slam dunk success story is because you still have to package, market and sell them. This is where some people make a huge mistake. They rest in the novelty of the idea alone. People who are building on old ideas already know they have to go into it ready to convince their potential customers why they are the best.
Whether new or old ideas, all successful entrepreneurs ultimately operate under the same guiding principle: They make their customers so happy that they gladly give them money in return.
Can it really be that simple? Well, that’s what history has shown.
Look at your own buying preferences.
Have you ever paid a few dollars more for something to get better quality or to have a better experience?
Ever gone to the “other guy”, who charges a little extra but provides excellent customer service?
Do you spend extra money on a movie ticket because the chairs are more comfortable or the theater cleaner or the popcorn better than at the $1 theater?
As customers ourselves, we will pay to control our outcome. One horrific experience with a product or transaction can make many people take their money elsewhere. On the other hand, we will throw our money at things that have delivered for us in the past.
Though our businesses and products have gotten more complicated over the last hundred or so years, the customer’s basic desire to have a good experience and be satisfied have not.
Business transactions boil down to three essential truths. If you are in business yourself, these are the three most important focal points for your business experience.
First, is the earliest and most basic form of all entrepreneurship—trade. “I will give you the fur from the antelope I killed (my product) in return for you giving me a basket full of grain (your currency).” The antelope fur will make one person happy, while the other person will be happier with the basket of grain. Trade is at the core of the entrepreneurial transaction, whether you’re trading real estate, products, or services.
Second, this unifying principle of entrepreneurship conveys an essential insight: emotions drive all actions, including the actions required to complete a transaction. Clearly, then, the positive emotions associated with delivering a product or service must be big enough to swamp the negative emotions associated with handing over money.
Entrepreneurs who overlook or forget this principle become frustrated and distracted when somebody doesn’t buy their product or service, even though they said they liked it. A person who likes something that you do or make may not like it enough to actually want to part with their money to buy it. Building a product or service to be more positively emotive will increase the chances people will want to pay real money for it.
Third, understanding the emotional state of your potential customer pre- and post-sale is critical. The jargon of value propositions causes many businesses and entrepreneurs to neglect monitoring or measuring the emotive responses of customers once they have received the product or service.
Our prehistoric entrepreneur could see that antelope fur kept his customer warm in the winter and therefore knew he could barter away the furs of all the antelope he could kill. A modern developer of Android apps has a much harder time knowing whether his or her app actually made the person who downloaded it happy enough to recommend it to others so that her business can grow and prosper. Most don’t even care to find out—and most app developers fail.
Further, to sell a product or service to a business, you usually have to make many people simultaneously happy. And because business people may feel pressured in different ways at work and at home, making businesses happy enough to buy can be enormously challenging.
Entrepreneurs who cease to control or care about how they deliver happiness will ultimately fail. And when you cease to control or care about being rewarded for delivering ever more happiness to ever more customers, it’s time to sell or retire.
Entrepreneurship has not changed. Often, today’s more complex entrepreneurship terminology—phrases like “value proposition” and “product market fit”—can obscure what it has always been about. Students and other aspiring entrepreneurs I counsel get distracted by such terms, particularly when these terms are introduced before the aspiring entrepreneur knows what they want to do. But aspiring entrepreneurs know intuitively how to answer when I ask, “What can you do to make some group of people so happy that they’ll give you lots of money?”
Derek Lidow is the former CEO of International Rectifier and the founder of iSuppli, a leading market research firm, which he sold in 2010 for $100 million to global information leader IHS.
He also has written two books on entrepreneurship: “Building on Bedrock: What Sam Walton, Walt Disney, and Other Great Self-Made Entrepreneurs Can Teach Us About Building Valuable Companies” and “Startup Leadership“. He is currently a professor at Princeton University, where he teaches entrepreneurship, innovation and creativity. To learn more about Derek’s work, visit his website: Dereklidow.com.