Chapter Four - Small Business Ideas: Creativity, Opportunity, and Feasability

Design Thinking

A customer-focused approach using interviews, observation, and exercises to create products and services that provide demonstrated evidence of solving customers' problems.

Customer Segment

A group or subgroup of potential purchasers that can be approached in a coherent manner.

License

A legal agreement granting you rights to use a particular piece of intellectual property.

Royalty

A payment to a licensor based on the number or value of licensed items sold.

Retail Arbitrage

An approach to business where the entrepreneur buys something at a severely reduced retail price (like clearance or closeout merchandise from a retailer) and then resells it (most typically online) at a price closer to the typical retail price.

Freemium

An approach to pricing, and a business model, that connects free and premium products or services. Typically a free version is offered and users have the option to pay to move up to premium features. Popular examples include Dropbox (5 GB of space for free, with more space or services at a price) and Angry Birds (free ad-supported version; paid version removes ads).

Imitative Strategy

An overall strategic approach in which the entrepreneur does more or less what others are already doing.

Gain

Any sort of outcome (a product, service, outcome, or situation) customers or potential customers would like to encounter or be able to depend on. It is one of two driving forces of creating new products or services, with the other driving force being pain.

Pain

Any sort of problem, annoyance, source of aggravation, shortcoming, or suboptimal situation customers or potential customers face. It is one of two driving forces of creating new products or services, with the other driving force being gain.

Feasibility Study

Evaluates the potential of a business opportunity by studying five primary areas in depth: the overall business idea, the product/service, the industry and market, financial projections (profitability), and the plan for future action.

Casual Model of Entrepreneurship

One of two approaches to thinking about entrepreneurship (the other is effectuation). The casual approach is one in which you want to create a particular product or service that does not yet exist, and to achieve that end, you have to cause the product or service to exist. This can mean you will have to learn new skills, or find others to help you achieve your end.

Radical Innovation Strategy

Rejecting existing ideas, and presenting a way to do things differently.

Opportunity Recognition

Searching and capturing new ideas that lead to business opportunities. This process often involves creative thinking that leads to discovery of new and useful ideas.

Value Proposition

Small business owners' unique selling points (also known as benefits) that customers can expect from your goods or services, including benefits that differentiate your offering from those of the competition.

Incremental Strategy

Taking an idea and offering a way to do something slightly better than it is done presently.

Feasibility

The extent to which an idea is viable and realistic and the extent to which you are aware of internal (to your business) and external (industry, market, and regulatory environment) forces that could affect your business.

Licensee

The person or firm that is obtaining the rights to use a particular piece of intellectual property.

Licensor

The person or organization that is offering the rights to use a particular piece of intellectual property.

Customer Job

The term given to what a potential customer is trying to do—perform or complete some sort of task, solve some problem, or try to achieve some outcome. The target of the job is often the key to what a proposed product or service is intended to help.

Brainstorming

A group thinking technique where you ask participants about a situation or a product or service. You ask them to tell you all the things that come to mind when they think of that situation, product, or service. You can ask for specifics, like ways to make something better, or ways to create new versions, or ways to imagine how it would be used at other times or in other situations. In this group discussion, criticism is suspended in order to generate the maximum number of ideas.

Conversion Rate

A preliminary run of a business, sales effort, program, or website with the goal of assessing how well the overall approach works and what problems it might have.

Business Model

A way to identify and organize key information on a business and how it achieves its goals. Business models can be analytic tools (like a business model canvas) or a way to do business (like the "razor and blade" business model).

Painstorming

A group thinking technique where you ask participants about a situation, product, or service they experienced. You ask them to tell you all the things about that experience that were suboptimal—what was wrong, what didn't work well, what caused pain or discomfort, what could have been better. Their results can help describe how to improve the product, service, or situation, or possibly even provide alternatives to the original.

Target Market

A marketing term (also called serviceable obtainable market, or SOM ) that refers to the group of customers in the area you plan to serve who would be likely to be interested in your product, or those of competitors. Target markets can refer to individuals or market groups called segments.

Pilot Test

A preliminary run of a business, sales effort, program, or website with the goal of assessing how well the overall approach works and what problems it might have.

Creativity

A process producing an idea or opportunity that is novel and useful, frequently derived from making connections among distinct ideas or opportunities.

Entrepreneurial Alertness

A special set of observational and thinking skills that help entrepreneurs identify good opportunities; the ability to notice things that have been overlooked, without actually launching a formal search for opportunities, and the motivation to look for opportunities.

IDEO Screen

A technique for conducting a fast initial analysis of ideas for their potential. An IDEO screen looks at three elements - market desirability, technical feasibility, and organizational viability.

A/B Testing

A way to check customer reaction to websites describing your product or service. Two versions (version "A" and version "B") of the site are posted and are served up randomly to prospective customers. The version of the website that gets the most commitments from customers is the one kept and the less attractive site is revised and the two versions tested until one revision gets consistently superior customer reactions.