Where Do Good Ideas Come From
November 22, 2015
This past summer, I had been exploring the idea of where compelling business ideas emerge from in the technology sector. Popular media seems to paint a picture of great founding moments as founders stumbling upon great ideas (e.g., The Social Network's montage of Mark Zuckerberg creating Hot/Not in vengeance). Although there certainly is some truth to these narratives, it doesn't provide much insight into where one should look to create real opportunities for innovation and value creation. Having read and heard many founders stories, it is apparent that reflection and experience after a pain point or working in an industry often brings about moments of clarity. The below is an attempt to categorize large, successful startups of the last decade into where there greatest advantage came from in disrupting or creating their category (the categories are not always mutually exclusive):
Deteriorating Business Models: The traditional ways in which a business made money is disappearing due to changing consumer preferences, appearance of substitutes, shifting cost structure, and changing purchasing, supplier, and/or distribution power.
Examples: Cost of storage drastically decreasing with the rise of cloud computing/move from on-premise to cloud solutions (Box), Increasingly mobile sales force reliant on more efficient ways to manage pipeline (RelateIQ), Cheaper and more comprehensive ways to provide streaming music (Spotify), Diminishing NASA budget opening up opportunities for better suppliers (SpaceX)
Personal Pain Points / Create Something You Want To See in the World: Observance of pain points through personal experience, either in a business or more likely in your own life; personal passion drives creation of something brand new; often an extension of personal strengths, desire, and interests.
Examples: Jeremy Stoppleman looking for a good doctor in a new city (Yelp), Drew Houston not being able to transfer his file without a disk drive (DropBox), Brian Chesky renting out air mattresses to make rent (AirBnB); No way for people to categorize and search for interests on the internet (Pinterest), Communication application used privately within team while working on another startup (Slack), Created disappearing messaging app after realizing that people were not always willing to be themselves or as creative when content was not ephemeral (Snapchat),Others: Uber, Cloudflare, Periscope, Zenefits, Square, Stripe, Raise, Facebook, Alfred, Flatiron Health
Rethinking Businesses from the Ground Up with Technology: Technology can create massive amounts of efficiency for businesses that have not changed or adopted such technologies, either due to lack of skill, large fixed assets, or cultural/structural impediments
Examples: Wealth management dominated by large banking institutions with limited products serving a broader base of customers (Wealthfront), health insurance holding on to archaic infrastructure and poor customer experience and customization (Oscar), Others: Uber, AirBnB,, RobinHood
Massive Leap in Technology Replaces Incumbents or Creates New Category: New technology or iteration of existing technology easily replaces existing technology offering or creates a new category of product that previously did not exist.
Examples: iPhone introduction creates smartphone category and develops wave of mobile innovation (Apple), Accessible virtual reality platform creates new opportunities in nascent industry (Oculus), Ability to conduct multiple tests with a few drops of blood challenges existing billion dollar test and diagnostic industry (Theranos)
Current Solution is Not Meeting Needs of Large Customer Segment: Existing large incumbents are not capturing full market share; new entrant creates solution to meet need of this segment and often creates new business model to capture other segments as well.
Examples: Small businesses unable to process credit-cards due to high-fee structure and expensive hardware (Square), Difficult for consumers to make secure online payments across the internet given existing solutions at the time (PayPal), Consumers averse to buying songs, even digitally, over streaming services and pirated downloads (Spotify)