How to get Good Business Ideas — The Mental Alchemy of Ideation
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Remember, these are designed to feel like short books, you’re meant to meander and spend ~3 hours on this topic this week. Save some of these links and read them throughout the week. Immerse yourself in this topic and leave the week smarter than you started it!
How to create Good Business Ideas
The idea isn’t everything, but it’s an extremely important start. It seems like there is credit given to good ideas, but not enough emphasis on the process behind the idea. We’re given the narrative of the Eureka moment, with no insight into the tributaries of ideas that really created the concept.
This is a dangerous misunderstanding, which causes aspiring founders to have their ‘Eureka’ moment, and start off running without reflecting deeply on the quality of the idea, or the sense that it can be refined as a concept.
Let’s explore how good ideas bubble up, and where to find them. Even more than that… let’s learn to become the kind of people who have good ideas. Here’s what’s coming up in this Edition of Evergreen:
- Change your Perception, and see the world differently
- Games to play that will create new business ideas
- How to use Travel as inspiration to discover opportunities
- More ways to find the right business idea for you
Let’s start with the….
Best Thing Ever Written on Startup Ideas
“the way to have good startup ideas is to become the sort of person who has them.” — Paul Graham
Paul Graham has the definitive essay on this topic in the world of tech Startups. Since it was recommended by 8+ people individually, there’s no doubt that it should lead off. And since every word is worth reading, there’s no need to excerpt it!
Here is Paul Graham’s Essay: How to get Startup Ideas.
As a complement to this, Sam Altman’s thoughts on Startup Ideas (largely derivative from Graham’s) in the first 15 mins of this video are excellent.
The rest of this collection keeps these ideas in mind. Don’t just try to find an idea. Become the kind of person who has them. With that in mind…
Control your Perception
The insight here is that we control what we see — this is an important idea to keep in mind when looking for business ideas. We have to work to create the kind of mind that sees the opportunities that we’re presented with. Two people can look at the same thing and one will see an opportunity where one will see nothing. Become the kind of person who sees the opportunity.
Read like a monster
As a general rule, this is a good one. Just read a ton. Read about your industry, read about business, read about failures, read novels about the human condition, read the classics, read psychology… just read.
If you are interested in technology or building a business on the cutting edge, read Science Fiction. It’s the proving ground for the ‘why’ of technology.
No more elaboration. Read like your life & livelihood depend on it. They do.
Farnam Street says it best: The Buffett Formula — How to get Smarter
One way to get your brain working in a new way is to play games. These games have proven helpful in coming up with new product and business ideas, though there are many more games that may be helpful for you!
Play Word Games to come up with New Ideas
Sometimes nonsense can yield amazing new ideas — just using your imagination to come up with new combinations will surprise you. This is how Shimpei Takahashi comes up with new ideas for toys, and other products for children.
It’s a fun way to get yourself thinking of completely new ideas. Of course, this technique will also produce some incredibly unprofitable ideas, so… proceed with caution.
Maximize or Minimize Variables
As Charlie Munger says: “Success often comes from the maximization or minimization of one or two variables.”
So play this simple game as you go through life: for successful businesses, try to see which variables they have maximized, and which they have minimized. What are their trade-offs? Are these decisions the things that have made them distinct and successful?
For your potential business ideas, ask yourself which variables you are maximizing or minimizing. Explore an industry that you’re interested in, find the variables that are significant within it, and start mentally moving the toggles around. What is the most expensive version of the product/service? The cheapest? What’s the easiest? What is the hardest?
Reapplication of Business models
Business models that have been successful in one industry are often applicable in other areas. Take methods of production or service from a successful business and apply them in new ways, to new industries.
McDonald’s growth came from the application of the principles of efficient production and reliability that came from Studying Henry Ford’s Assembly Line, and applying those ideas to the restaurant industry.
Nest took the design and engineering principles of Apple (and quite a few of their employees) and created products in categories that Apple would never touch, but that people constantly needed. And that worked out great.
So whatever industry you have your eye on, start taking the principles of other businesses, from totally different industries, and apply them. What would Costco do as a restaurant? What would Apple do as a car company? (Oh, right… Tesla).
Live/Work/Play in Right Environments
New ideas are the product of many factors that influence our state of mind. One of the main determinants is our environment, both the physical and social space that surrounds us. To come up with great ideas, we should be mindful of this and do our best to choose good environments.
Hang out in Coffee Shops full of Smart People
Steven Johnson has written a fantastic book, suggested to me by Ben Redfield of Density, called Where Good Ideas Come From, about the environments that are most prone to creating innovation. Here’s his TED talk on the subject, which is a good place to start, but certainly doesn’t do the book justice.
Create and Welcome Serendipity
Serendipity is a powerful force for innovation. Whether that’s attributed to blind luck, good karma, or just stochasticity, things just happen when we are exposed to new things, and open to seeing them for what they are. Greg Lindsay calls this having ‘a prepared mind’:
In other words, it’s a mind that’s open to the unexpected, to thinking in metaphors, to holding back and not jumping to conclusions, and to resisting walls between domains and disciplines. […]
You don’t get lucky if you plan everything — and you don’t get serendipity unless you have peripheral vision and creativity.
He talks about why cities are favorable places for new ideas to emerge:
Cities are the greatest serendipity engines of all. They began life at crossroads as places to exchange goods and later ideas with others you would never encounter on the farm. Only recently, we’ve come to recognize great ones for what they are — not as collections of skyscrapers, but as the sum of their dense, rich, and overlapping networks of people.
He also explains why Serendipity is cited for being the source of inspiration far less than it actually is, falling prey to the narrative fallacy:
Life is emergent and unknowable — we’re just terrified to manage it that way. Because we only attribute our success to serendipity after the fact (if at all), we typically consign it to anecdotes.
Find ways to be in the right environments, with the right people, and ideas will become more plentiful. These resources should give you a start at finding out where those places are, and how you can create them.
Travel to new places & steal their ideas
Perhaps the most fun way to come up with business ideas is simply to travel. This is a kind of cultural reapplication. Products and services that other places take for granted may be new and very welcome in your target market. A surprising number of well-known companies have been inspired by the founders traveling and bringing good ideas home.
Red Bull took a scary Thai beverage worldwide
Red Bull is an interesting example of this — according to the founding story, an early version of the beverage found in Thailand is now a worldwide brand.
Did you know that Red Bull, was once a bizarre energy formula sold in Thai gasoline stations and the favorite drink of late night truckers? Now one of the world’s most powerful brands, commonly associated with extreme sports and athletics, Red Bull was once a working class drink for Thai workers.
Invented in the 1970s by Chaleo Yoovidhya, a Thai business seeking to offer a low-priced energy formula for working class Thai laborers, the product become a huge success in Thailand thanks to its careful sponsorship of boxing matches and sports events. Despite its domestic success, it wasn’t until the late 1980s that Red Bull was exposed to the rest of the world in its current form.
While on holiday in Thailand, Austrian entrepreneur Dietrich Mateschitz found the bizarre energy formula and became fond of it as a hangover cure. He reached out to the Thai company’s founders and offered them a 49 percent share in the company if they were willing to let him tweak the formula and expand it internationally.
How many more products or services are waiting to be discovered in the corners of the world and brought to a global market?
Starbucks brought Italian Coffeeshops to the US
Starbucks’ real breakthrough wasn’t around quality of coffee or scale of coffeeshops — it was about creating a new kind of establishment: bringing the feel of Italian Coffeeshops to America. Schultz’s insight was to create this ‘third place’ feeling.
In 1983, Howard [Schultz] traveled to Italy and became captivated with Italian coffee bars and the romance of the coffee experience. He had a vision to bring the Italian coffeehouse tradition back to the United States. A place for conversation and a sense of community. A third place between work and home. He left Starbucks for a short period of time to start his own Il Giornale coffeehouses and returned in August 1987 to purchase Starbucks with the help of local investors.
What experiences or places exist around the world that your culture would embrace and could benefit from? What kind of cultural ideas can be reapplied to your country?
Chipotle popularized the Mission Burrito
The Chipotle founder lived in San Francisco for a few years after graduation, and discovered the magic of the Mission Burrito, which he brought back to the fine people of Colorado.
Steve graduated from the Culinary Institute of America in 1990 and moved to San Francisco, where he worked as a sous-chef at Stars. Owned by former Chez Panisse chef Jeremiah Tower, the legendary restaurant emphasized fresh ingredients and fetishized its shining, open kitchen. While in San Francisco, Ells also fell in love with the city’s massive, foil-wrapped, Mission-style burritos.
He saw the potential in these taquerias in San Francisco to turn those into something highly efficient. It was just a great way to assemble your food and create your food to your own taste. He liked the packaging, too. In Boulder, burritos were on a plate and smothered with green chili.
Ells took this inspiration and turned it into something magical. A new type of product, with facilities inspired by a high-class restaurant, and constraints ensuring the place could be run easily — this was a recipe for success. (yay puns!)
Act as a Consultant to your Target Market
To build a successful company, you must solve a problem in a meaningful way. If you are not a part of your target market (and even if you are), then the more you can learn about their problems, the better.
The best way to learn about their problems is to make them your own — by shadowing customers, and acting as a personal consultant. Observe their patterns, their habits. See the things that frustrate them, whether they notice them or not. Listen to their complaints, even the most petty.
Paul Graham inspired this idea with his advice to hopeful Zuckerbergs:
Here’s a recipe that might produce the next Facebook, if you’re college students: If you have a connection to one of the more powerful sororities at your school, approach the queen bees thereof and offer to be their personal IT consultants, building anything they could imagine needing in their social lives that didn’t already exist. Anything that got built this way would be very promising, because such users are not just the most demanding but also the perfect point to spread from.
To work on a problem in Education, befriend a teacher and shadow them, talk to them about problems as you observe them, and what could be done to solve them, and what that solution might be worth. You could do the same for nurses, doctors, lawyers or truck drivers.
Live in the Intersection of Two Disciplines
Many of the biggest advances come from the combination of ideas from different disciplines. Those who have mastered two different types of thinking can approach problems in ways that deeply skilled but more one-dimensional thinkers cannot. They see novel possibilities, and their solutions are often unique, surprising, and remarkable.
Here’s Steve Jurvetson of DFJ, a famous Venture Capital firm, on how cross-pollination leads to innovation. They ought to know, as investing in these kinds of innovations is their specialty — they know where to look:
A lot of the advances tend to be interdisciplinary, which is great when you’re at school. You can study many things. The thing about integrating innovations from one domain into another, where the sort of stovepipe thinking within businesses, within academic disciplines, tends to isolate the thinking.
If you can be one of those cross-pollinators, usually you can think of a disruption that hadn’t been thought of before. Now, I might argue that most of the game-changing advances in science tend to come from that field. Not from the warmth at the center of the herd but from some unusual thinker out of the box.
You can see the whole lecture by Steve Jurvetson at Stanford here. It’s one of my favorites from this series. The last minute of this video also has some fantastic thoughts on how to look at the evolution of technology to predict market openings and possible new products. (like the iPod).
Mastering Engineering & Business
Justine Musk, formerly married to Elon Musk, had similar thoughts in this quora answer. Presumably she’s referring to Elon when she speaks of someone who has mastered both engineering and business, and found unbelievable success at their intersection.
Choose one thing and become a master of it. Choose a second thing and become a master of that. When you become a master of two worlds (say, engineering and business), you can bring them together in a way that will a) introduce hot ideas to each other, so they can have idea sex and make idea babies that no one has seen before and b) create a competitive advantage because you can move between worlds, speak both languages, connect the tribes, mash the elements to spark fresh creative insight until you wake up with the epiphany that changes your life.
Thanks to Jukka Multisilta for recommending this post!
The Intersection of Arts & Technology
Steve Jobs famously worked at the intersection of technology and the social sciences. This gave him the scientific chops to build amazing machines, and the empathy and understanding of human habits and desires to craft these machines to fit our lifestyles. His work merging these two fields made him unique amongst social scientists, and among hardware engineers — this ability to pull from two disciplines is the core trait that made him such a boon to humanity.
If none of this has worked for you… work on getting lucky. This is less ridiculous than it sounds. Luck can’t be created, but it can be optimized for. Read How to Get Lucky, and get to work on getting lucky!
If you still don’t have a good idea…
Start working on a bad one. Seriously — trying to sell a bad idea is likely to lead you directly toward a good one. This is (not explicitly, but kind of ) the whole practice of Customer Development. People will tell you ‘No’ and if you collect enough ‘No’s with enough answers to ‘Why not?’ you will have the beginnings of a successful idea!
If you use the ideas in this collection to get crazy rich and build a huge business, this fine print states that by reading this article, you have agreed to grant me 1% equity.
Just kidding. But let me know because I’ll be super happy!
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Massive appreciation for who suggested pieces of content (or wrote something new) for this Edition of Evergreen: Itamar Goldminz, Ben Redfield, Shane Mac, Simon Taranto, Kenny Fraser, Jukka Multisilta, Benajmin Kinnard, Andy Britcliffe, Ryan McKnight, and Victor S.
Many thanks for being a part of this project! Not every suggestion is able to make it to the final edit, but every single suggestion is read and appreciated.
As my Father always says: “There’s always room for the best.” There’s always a better resource out there. These collections can always get better, and I hope that they do. If you can think of anything that was missed, I welcome you to share it.
This Edition of Evergreen, along with all of my others and the ideas behind this project, are inspired by the excellent content created online every day. To name a few that hold particular places in my heart:
If you liked this, check out other Editions of Evergreen:
Building the Business:
How to get good business Ideas: Mental Alchemy of Ideation
Product/Market Fit: What it really means & How to Measure it
How to Failure-proof your business with Customer Development
How Strategy and Psychology Work Together to Perfect Pricing
The Most Important Equations in Business - CAC (Part 1)
The Simple Math Behind Every Profitable Business - CLV (Part 2)
How Psychology behind Word-of-Mouth Works
The Secret Core of Every Successful Business--Distribution
The Most Important Lessons in Sales
Strategy and Competitive Advantage:
How to Master the Craft of Strategy
Competitive Advantage: How to Build a Winning Business
The Power of Network Effects
How Cost Leadership Builds Powerful Businesses
Why the Best Brands Stand Out
Building and Managing a Team:
How to Find and Recruit the Team you Need
How Not to Hire like a Clownshow
Compensation Rules Everything Around Me
Why Employee Onboarding is holding you back
How to Boost Employee Retention
Secrets to Perfecting Organizational Communication
How to Fire an Employee
How to be a Great Employee:
How to Start a New Job: Handling Career Transitions like a Boss
How to Master the Discipline of Product Management
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