Solution Development:
What is the product, can we make a business model work, is this a good opportunity?
At this point you have come up with a small number of promising problem opportunities. You have connected with potential customers and built a better understanding of their needs and how they perceive value. It is now time to define a solution that would solve, reduce, or eliminate the pain of their problem(or generate greater value with new revenue).
It is important to not let the technology or preconceived notions influence this too much.
Sure you need to work within your expertise and foundations, but many times we lock in a complex and costly solution because of personal context and not because it is what the customer wants or needs.
A great example of this is drones. Drones are great for many applications where one needs to surveil large areas affordably, but I can’t tell you how many applications for drone technology I have seen that would be better served by pole-mounted cameras. Most drone entrepreneurs focus on the aircraft itself and neglect that the value to the customer is in the imagery and analytics to provide actionable information.
So following our example of the airport marshalling wands/batons:
A kinetically charged airport wand would use the waving motion of the ground crew to recharge, eliminating the need for battery changes.
It is key to make this solution as simple and basic as you can while still delivering value. If your solution requires a long, detailed explanation, you probably need to simplify or narrow the problem you are solving. Remember, we are here to prove the technology can address a problem and that the market will pay for that solution. We want a Minimum Viable Product we can deploy for perhaps $1M. So before you move on, make sure you have a narrow, specific problem and simple, elegant solution:
A rechargeable wand system with a ruggedized recharging base is a simple solution. It could be mounted to the gate or even the tugs.
Reality Check
At this juncture, you have invested quite a bit of time learning about an problem and market. You also probably have 1-2 opportunities you are trying to carry forward. It is time to narrow that even further. It is time for a reality check. I tend to use Micheal Porter’s five forces as a model to think about the headwind or tailwind in a market:
How real is this opportunity?
Are their barriers to entry (keeping us out and/or keeping competitors out)?
The incumbent wand manufacturer will be tough to compete with. They already know all the associated FARs(regulations) and have good relationships with the terminal managers.
Will our suppliers have power over us(ie, a single all powerful supplier will capture the value)?
Not much, most components are commoditized.
Will the buyer have power over us (ie a single all powerful buyer will beat us up on price)?
The many different airlines allow us to have options for buyers but not many. This is probably neutral.
Do we have the competency to solve the problem? What else do we need?
It is not inherently difficult but we don’t know much about the current batons or the requirements for them
Is anyone else solving this problem?
The current batons are getting longer and longer battery life at lower costs with LEDs.
Business Models
With the information you have gathered, it is also time to start thinking about your business model. Will you sell widgets, will you license technology, will you give away hardware and charge a subscription for accompanying software? Will you lease widgets? Is there money to be made on training, extended warranties, and support?
As you can imagine, selling a widget is not necessarily the best way to make money. Subscriptions, services contracts, leases tend to be more interesting business models as they provide recurring revenue and a certain measure of customer stickiness. Look at existing business models to get a better sense for what the options might be. Think about how cell phones, music, airliners, printers, cars, tax-prep services are sold. Your monthly credit-card statement probably has a dozen different business models represented. It is important to think back to your customer interviews as well. Does everyone lease in your market; are they used to buying subscription services? At this phase, you will want to answer the following questions:
What is the current method for buying/selling/leasing something similar?
Wands are likely just bought outright
What would be a disruptive model?
Perhaps a service model would be viable. We have 1 affordable worker at each airport responsible for ensuring a customer who uses our service has fully functional wands. They therefor don’t pay the price of a union maintenance tech to do the battery replacement.
What model do you suggest?
The service is intriguing and is used in many airport functions. Building a better baton is easier but may be harder to turn into a viable business due to competition and the lack of a true revolution. Innovating on business model might be enough to dominate the market.
How hard will it be to scale distribution: manufacturing or servicing many?
These could be manufactured by a contract manufacturer and likely serviced by the same outsourcing company.
You should now have a refined, simplified solution as well as some good beginnings of a business model. It’s now time to continue refining your solution and value proposition with more customer feedback.