What’s the Big Idea?
“To me, ideas are worth nothing unless executed. They are just a multiplier. Execution is worth millions.” — Steve Jobs
Conventional wisdom in the entrepreneurial community says that ideas are not valuable.
Let me tell you, as a wannabe entrepreneur without an idea of what you want to do … it doesn’t feel easy. I’ve started two businesses, and in both cases it took about 18 months for me to get from “I wish I had a good idea for a business to start” to actually starting a business.
Part of the reason for the conventional wisdom is the higher success rate of businesses started by operating executives, who see an unmet need in their domain or a chasm their employer can’t cross, and they go start that business. As an investor, I would prefer to back a business started by an insider.
But the problem remains: If you want to be your own boss, and you have skills and fortitude to do so — but not an idea — what do you do? Going to work for a trucking company in the hope that you glean some insight about the unmet needs in the transport industry seems like a time-consuming and low-probability path to idea generation.
Having spent at least 36 months of my life searching for ideas, I’ll share four things I learned about how to do so successfully:
Don’t read the tech blogs (well, other than this one)
You can drive yourself crazy focusing on the hype of what’s going on today. Moreover, you will get stuck in a loop of derivative thinking (Uber for cats. No … the Secret for cats!).
It’s one thing to play chess one move ahead when you are an established company or an entrepreneur uniquely positioned to attack a market. Reading other people’s analysis of why new ideas are groundbreaking, and pattern-fitting the success of still unproven “winners” to what we perceive their strategy or actions were, is folly.
You need to be informed by new businesses that are starting and having an impact on the market. But I suggest that you largely inform yourself about who they are and what they do, and form your own, independent view of what is interesting, disruptive and likely to succeed in the long term. Get conviction around who you think are the non-obvious winners, and be inspired by them.
When we founded Flutter.com (now Betfair.com), eBay was a key inspiration. While the power of the model is obvious in hindsight, even as it IPOed, it was viewed as one of more than a dozen possible winners. It was hotly debated whether OnSale.com, also public, was a better business.
My co-founders and I had conviction around two key elements of the eBay model: The ability to connect consumers directly in a transaction was novel and powerful (versus e-tailers that were just another channel), and that the network effects inherent in the model would be a huge barrier to competition, and would allow you to protect your pricing and margins over time. These facts are obvious now, but were not widely accepted in 1998.
I would argue that we were right on both counts, and we identified the most important elements to be right about. While Amazon has crushed straight e-commerce retailing, I would argue that its execution has been 100 times better in consistency and quality than eBay’s, and yet eBay had an idea so original and good that it could build an enormous business with mixed execution. And, given that I was no Jeff Bezos, that’s exactly the kind of idea I needed.
Wondering what other businesses could exist connecting consumers directly in a transaction, process virtually or with reasonable shipping dynamics, and not get crushed as eBay expanded, we considered things like dating or lending, but chose sports betting.
“Ideas are commodity. Execution of them is not.” — Michael Dell
This may be true. But I found an idea that, when mediocre “commodity” execution was applied to it (for lack of experience and ability, not effort) — has worked out just fine. So put that in your pipe and smoke it, Michael Dell!
Eat lots of lunch
While the food, in and of itself, won’t help you succeed, I would encourage you to try to never eat lunch by yourself. Enormous creativity can be found by surrounding yourself with thoughtful, intellectually curious folks, and talking with them in an unstructured way.
Idea generation is the point. It is hard to sit around an office and generate new ideas — the well will run dry quite quickly. It’s much easier to build and explore new notions in a back-and-forth dialogue. Talk about which businesses they think, or you think, will be non-obvious winners, and why those businesses will be particularly disruptive or powerful.
The processes of coming up with your next business is a combination of idea generation and idea selection. You may be particularly strong at one or the other, and in that event, I would encourage you to surround yourself with people who have the alternate skill. They often don’t go together — good filterers tend to snuff out promising but imperfect ideas too early, and often the best ideas come from a kernel of truth in a crazy one.
In my case, I am much better at selection than generation. I have good ideas from time to time, but I have a knack for selecting the great idea from a field of good ones (which is, in part, why I’m now a venture capitalist). It was important to surround myself with people who were prodigious idea generators. I frequently did this by buying them lunch.
You will find that you work better with some people than others, and ideally you can build a deeper and more ongoing relationship with the best fits. (I would dissuade you from deciding to become co-founders before you know what the idea is — founding teams are better built around a business rather than in advance of knowing what you are going to do, in my view.)
Venture capitalists are an interesting source of ideas in a different way: They may not generate ideas, but they do get to see a wide cross-section of them, and they spend their whole day trying to synthesize the key ingredients that will make them successful. A lot of this is useless to you right now (team insights, for example), but the stuff around business models is gold. If given the opportunity, pick their brains around the notion of non-obvious winners. Ask: “Tell me a company that’s below the radar, but you most regret having missed the opportunity to invest in in the last six to 12 months? Why?”
Become a truffle hog
Once again, eating is not going to solve this problem for you. Sniffing, however, might.
Just as a truffle hog can sniff out a truffle up to three feet underground, your senses should come alive when you find someone hiding a good idea. Lots of folks in the startup ecosystem are hunting for gold, and some have found a vein. They may not want to share it with you, but if you are persistent, helpful or nice enough … they might. The goal is not to steal their business idea, but to glean a non-obvious insight that is generalizable to other businesses.
My second business, eHow, came out of a combination of all these methods, but this one was a big part. I had heard about a little business in Seattle that my friend and former classmate Edward Yim had started, and I chanced on an opportunity to talk to him about it. He was (and remains) reticent about sharing much about what’s he’s working on, and with good reason: He is a great entrepreneur who needs no limelight, happy to be successful and confused as to why others talk about their great ideas and invite competition.
Sensing that he was onto something interesting, I persistently chased him to tell me more, and began to learn about a small business he had bought that now generated millions in annual profit, just a couple years in, with no outside investors.
He taught me terms like “page rank” and “search engine optimization” — terms that very, very few people in the tech world appreciated were going to be so impactful. I printed a three-inch-thick stack of articles, containing everything I could find on the Web about the topic, and immersed myself. Combined with experimentation, that led directly to buying eHow.
The key instinct was sensing that someone was onto something novel and powerful, and following that instinct to see where it led.
Try things. It’s surprising what you can learn by doing, and often there are things you fail to appreciate if you just dissect something from the outside.
If you want to start a consumer app, go learn to code and write one.
If you think drones are the future, go buy a drone. Better yet, go build a drone.
Google AdSense launched in June 2003. At the time, I was hunting for an idea, and had just begun learning about SEO as a source of traffic. My friend Rich Chen was working at Google, and he suggested that I check out AdSense, which he thought was a compelling new product.
It was hard to check it out without trying it, so I decided to create a website — something I had never done before. I searched the Web and downloaded CuteSiteBuilder, a tool for idiots in the pre-cloud, pre-Wix days, and asked my friend Jack Herrick what topic I should write about. He suggested that data recovery would be interesting, so I created a really lame site called DataRecoveryFAQ.com, and put up some AdSense ads. I stood it up in December 2003, less than six months after AdSense went live.
This single, lame site immediately began making $100 a day in profit. Combined with what I was learning about SEO, and through having brainstorming lunches with Jack, we bought eHow, which far exceeded our expectations.
Just looking at AdSense — what it did, how others implemented it — would never have led me to understand how dramatically intent-based advertising was going to change the value of content on the Web. By the time that insight was common knowledge, it would have been too late to profit from it, or much harder to do so.
These were the tools that worked for me. My process was unstructured, and deliberately so. I have seen other techniques employed — more structured analysis, market sizing, diagramming and dissecting — but for me, these dampen the element of creativity. It won’t look like much to an outsider — I am reminded of the great screenwriter Aaron Sorkin, who commented that developing the idea for his new show looked a lot to his wife like “watching baseball on TV.” In my case, idea generation looked a lot like surfing the Web and lunches with friends.
“The value of an idea lies in the using of it.” — Thomas Edison
Are ideas super valuable? I suppose not, in comparison to the value of great execution. But if you don’t have one, you still need one. And if you’ve never run a business before, never hired anyone before, never fired anyone before, then let me assure you: You are highly unlikely to bring great execution to the table. So you might as well start with the best idea possible and hope it’s good enough to power you through the inevitable mistakes you will make.
Josh Hannah is a general partner at Matrix Partners, where his investments include Huddle, Inflection, JustFab, Quora and Taulia. He is also the co-founder of Flutter.com, which he successfully merged with Betfair.com to create the world’s first online marketplace for sports betting. Reach him @jdh.