Engineers see opportunity in their customers' problems. How can the technologically gifted, but not necessarily business-savvy, engineer judge if a nascent opportunity is fundable and feasible? First, make a business plan.
Many of us in the electronics industry have caught the entrepreneurial bug, despite the legends and cautionary tales of almost-successful startups and abject failures. After all, the allure of a startup holds plenty of challenges for the technologically gifted. It's easy to get caught up in a great idea that seems to have unlimited potential, while overlooking what it takes to build a thriving enterprise.
In any industry, almost all companies get started by individuals who work in that industry and identify a problem that their customers are facing with no immediate solution. These individuals set out to solve the problem based on their technical knowledge and relationships with target customers.
This direct experience circumvents much of the research that would be required to tackle a market unknown to the founding team, saving time and expense. Existing relationships might even be leveraged to get funding from a target customer, or the customer might become the early alpha/beta tester that helps refine and ultimately validates the new product. Add to this the fact that no venture capitalist will fund an entrepreneur new to an industry. The VC's sentiment appears to be "You won't get trained on my dime."
The danger with this approach is that the founders might have a myopic view of the opportunity by believing that the problem may be bigger than it actually is because they have felt its impact directly. The team ends up building an add-on feature that addresses a small market and will quickly be offered as part of the larger package sold by market leaders, effectively killing the revenue opportunity for the new technology.
Living the problem vs. studying the problem
This pragmatic approach to market research is what I call living through the problem. At the other end of the spectrum is the structured and more theoretical approach taught in business schools.
Business schools teach their students a generic approach to Business 101, and entrepreneurship classes have become an essential part of the curriculum of MBA programs. The most popular form is the class that requires students to create a business plan culminating in a pitch to a small group of venture capitalists. The final grade is largely decided by the feedback of these volunteer VCs and is analogous to the process an entrepreneur might follow in a quest for funding.
It is a tough task to assemble a business plan and a VC pitch over the 15-week school semester. I had the opportunity to go through this as a MBA student and, more recently, as a mentor who helped students through this process. I found it to be a great experience for both students and mentors, and it is a process I recommend.
I am going to assume that most readers of this blog are technologists who have gained a deep understanding of the markets they work in and want to improve existing solutions. Why, then, mention MBA entrepreneurship programs, because surely a technologist thinking about launching a startup will not take an 18-month pause to get an MBA? While the deliverable of the entrepreneurship class is a business plan, the real value is drafting the plan, which forces the entrepreneurial team to think about all aspects associated with the creation of the new company.