CorporateViews - Entrepreneurship

How does successful entrepreneurs churn out wonderful business
ideas?

How does successful entrepreneurs make "good" money out of their
business ideas?

Have you ever wondered about the above questions as you ponder over
starting your own business?

For the former, think of Dell or Amazon.

Before Dell started to proliferate the online ordering of customized
computers, PCs are only sold through the usual retail distribution networks
such as computer shops and megamarts. As traditional computer
companies such as HP, IBM, Compaq need to stock up inventory for their
distribution channels, huge costs are incurred in warehousing and the vast
distribution networks. In addition, as the computers are pre-built before they
are being sold to the customers, consumer demand for the PCs have to be
generated by the computer companies with massive investments on
advertisements and marketing campaigns. The returns on such expenditure
are often unpredicable at times due to rapidly changing consumer tastes and
preferences.

These 2 big problems faced by the computer industry soon found a relatively
good solution introduced by Dell Computer- the premier online distribution
channel for computers.
As the internet gains prominence in the 1990s, Michael Dell seized on the
opportunity to distribute computers via this platform to further enhance the
reach of Dell's direct marketing model. With this business model,
warehousing and distribution costs can be minimized as PCs are built only
upon demand. This helps enhance the Just-In-Time production model which
reduces manufacturing costs significantly. Furthermore with this built-to-order
model, consumer demand can be met without much difficulty as the products
are built as per according to the customers' actual requirements.

By providing a good solution to the then computer industry, Dell Computer is
able to craft a niche for itself in the highly competitive PC market, to become
one of the largest computer companies in the world today.

Utilizing on a similar business model as Dell, Amazon has adapted and
implemented a highly efficient model for the online retailing of books and a
wide variety of other consumer products too.

So if we are able to come out with a solution for an existing problem, will we
able to make money out of it?

Think about Yahoo and Google.

Both these 2 companies started out as internet firms specialising on data
categorization and internet search, of which is almost impossible to be made
chargeable to its customers.
Though they do help customers solve the problems of finding relevant
information on the internet, the search engines are unable generate revenue
and profits by itself.

Hence, to help ensure the sustainability for such companies, the business
model of Yahoo and Google has to be altered such that they become
essentially internet advertising firms. By utilizing their proprietary search
engines as the tools to compliment their banner and search advertisements,
profits can be made by convincing companies to advertise via the
Yahoo/Google platform.

Value Proposition - The start of a good Business Plan

From the above examples, we can see that in order to develop a strong
business plan, you need to come up with a convincing value proposition for
your product/service. To do this, the below requirements must be fufilled:

1. The product/service must solve an existing problem for the customers

2. The product/service must be new
(i.e. being technologically more advanced or novel to the existing industry)