The Easiest Way to Know You’ve Got a Business Idea Worth the Investment
David Segal is an entrepreneur and retail thought-leader. He is best known for bringing radical innovation to a 5,000 year product category with the launch of DAVIDsTEA, the company he co-founded in 2008. Segal takes audiences through the entrepreneurial journey, delving into the brand experience, growth at scale, managing the digital and retail waters, and more. In this column for Fotune, David looks at how to know when a business idea is worth pursuing:
It turns out that there’s a scientific explanation for why so many entrepreneurs refer to their businesses as their babies. In a recent study, researchers in Finland found that the brain activity of entrepreneurs as they looked at images of their companies was similar to that of parents looking at their kids.
This probably won’t come as a surprise to many business owners (or their loved ones), but it also confirms my belief that many of the best consumer brands are those that almost seem like living, breathing things.
When I look at business ideas to pursue as an entrepreneur or to invest in—particularly startups focused on consumer and lifestyle products—there are three key criteria I use to assess if the concept’s shelf life will be a long and fruitful one:
Can you bring it to life?
I’m talking figuratively rather than literally here, so please don’t pitch me if you’re a mad scientist. What I mean is: Can you create a compelling customer experience around your idea?
People often tell me how much they love my first company, DavidsTea, but I think they mean the whole experience—not just the teas themselves. They love to have their senses engaged when they visit stores, where staff are helpful and maybe make them smile. They love the idea of consuming a familiar product in an entirely new way.
Ultimately, bringing a product to life means finding ways to create an emotional attachment with users. This can be as simple as the naming and branding. (Mr. Clean, for instance, isn’t better than any other cleaner, but the buff, bald, neat freak on the label brings the product to life.) But, beyond just personification and mascots, this really comes down to creating a whole experience around what could be an ordinary task. People sip tea all of the time. Find a way to make the experience memorable, however, and you’re onto something.
Does it have a soul?
When I say “soul,” I mean does the business have a deeper value beyond the bottom line? I’m not talking about corporate social responsibility or even necessarily having a charitable component.
Instead, the key question is, does the world really need your product or business? Would we be worse off—in big or small ways—if it never existed? It’s important to be able to answer that question.
Sometimes a product or a concept that makes people smile and brings joy into their lives is all that’s needed. (Random example: How much worse off would we be today if pizza were never invented?) Other times, a business—like Facebook—truly moves the needle and changes the way people go about their lives. The important thing is that someone is deriving real benefit from the product—and lives are being changed in measurable, even if small, ways.
Look at the startup Shopify and the way it has created a level playing field in the world of e-commerce. It has almost positioned itself as a Robin Hood of the business world—robbing from the big businesses and giving to the small—by letting people easily set up shop online without needing to know how to build a website. It’s not exactly saving the world, but it’s making a real difference.
Can it foster community?
A final key question is if it’s possible to create a community around a product or idea. Is it something that people can share or socialize around? If so, there’s a built-in marketing machine and real viral potential.
Starbucks is the classic brick-and-mortar example. It may sell coffee, but—in essence—Starbucks is a destination to meet, socialize, and interact. It has embraced this status as de facto gathering space from the start, which ensures that people are constantly meeting colleagues at Starbucks—and also spend a good deal of time there buying coffee.
It’s important to note here that “social” doesn’t necessarily mean that people have to physically come together to use the product or service. But it has to generate some kind of buzz and excitement and be “shareable”—whether that’s old-fashioned word-of-mouth (i.e. fidget spinners) or digitally (a la Angry Birds).
Consumers are hardwired to crave a human component—something with life, soul, and community. Companies that capitalize on this tend to go far. Just imagine if a major cell phone carrier were to guarantee that, if you call their customer service line, an actual person would answer on the first ring. Yes, personnel costs would be prohibitive. But I’d gamble consumers would change carriers in droves. Life, soul, and community just can’t be re-created with a pre-recorded phone tree.
Obviously many brands have found success without meeting any of these three components. But, as an entrepreneur and investor, it just doesn’t interest me if there’s no human touch.