Entrepreneurship has exploded in recent years. The Global Entrepreneurship Monitor (GEM) report for 2020-2021 shows that the Total early-stage Entrepreneurial Activity (TEA) rate increased by 2.8% worldwide, from 14.2% in 2016 to 17% in 2021. The GEM South Africa report indicates that we are seeing similar growth here.
For startups to succeed, in the face of growing competition, a rapidly globalising economic market, and (especially in developing economies) infrastructure and resource challenges, they need to adopt best practices with everything from choosing a business concept to selecting co-founders (or not), developing their business models and every other element of their business.
In this blog series, I plan to outline best practices South African entrepreneurs can learn from based on my experience developing a sustainable impact business over the past 3 years, running an innovation consulting practice for 5 and building tech business units for international corporations for 20.
Problem 1 - Defining and developing a business concept
You don't want to start a startup to deliver food faster from restaurants because everybody else is working on that. Look for a real problem to solve. The STEEP Framework is useful here. STEEP stands for Social, Technological, Economic, Environmental, and Political factors and can be used to identify the opportunities and risks related to technologies or trends, for example AI, renewable energy, scarce resources and so on.
Once you’ve narrowed down a real-world problem you’d like to solve, you need to assess where the business opportunities lie. A landscape assessment will enable you to plot out who else plays in your chosen sector, what they do, what isn’t being done, and where there are needs you could possibly fill.
A problem topology workshop will give you a bigger picture view of your selected problem and clearer understanding of the elements involved. It’s important to include the right people in the workshop who understand the context and the market of your proposed business. In this workshop you’ll ask the critical question: “How big is this problem?” Is it a hundred billion Dollars? Is it a trillion Dollars? Is it ten million Dollars? Who is affected by it? What are the current workarounds? What solutions have already been tried? What is preventing the problem from being solved? All of these are research and discovery elements that will help you build your problem topology.
Once you know you have a problem worth solving, you do a 5 Why’s assessment. It might break your brain but in a workshop with other interested parties it’ll help you to really drill down and refine your problem statement through asking why questions.
Now it’s time to meet your customer. Construct a high-level definition of your customer segment, then go out and meet the people or businesses you want to sell to. Based on what you find out, refine your customer segment using something like the Customer canvas tool (do the left half first). This will put you into your customer’s shoes and help you to understand their roles and motivations. As your business evolves your ideal possible customer will evolve too, so don’t get married to the personas you come up with.
Time to switch sides, now, and draft a Value Proposition canvas. Twin to the Customer canvas, it outlines how you will create, deliver and capture value. A key concept worksheet will give you enough practical detail to start briefing a UX or engineering team, if you’re developing an app or a physical product.
Finally, your Business Model canvas - this will detail how you communicate your value proposition, who your suppliers and partners are, how you’re going to make money, and most importantly how you will spend your own time and, only if necessary, money. Once you have the canvas, you can make an Excel business model based on assumptions. Know that your assumptions and forecasts will be wrong most of the time.
All of these are essential before you get to something people often start with - the pitch deck. We’ll cover that in our next blog.
Essential reading before you build a pitch deck