Generating Business Ideas

Knowing the products, services, customers, suppliers, and problems in an industry gives you a strong advantage when starting a new business. It helps you avoid the mistakes of trial and error learning, and gives interested parties the confidence that you are the “right person” to build this business. Your experience will be very important to mentors, advisers, team members, investors, and strategic partners. If you don’t have the knowledge, skills and experience to build your business, you will be fighting an uphill battle.

As we have discussed in this unit, your best business ideas will come to you from 1) working in a specific industry, 2) working in a related industry or 3) from personal experiences with the products and services in an industry. Here are some role models who have gained their industry experience in each of these three ways.

Knowledge of Same Industry

Steve Sullivan is the founder of Stio in Jackson Hole, Wyoming. The company makes and sells outdoor clothing that is both functional and fashionable—the kind of clothes you want to wear every day. The product line includes jackets, vests, shirts, pants, sweaters, tees, hoodies, hats, and scarves. While Stio has two retail stores, one in Jackson Hole and one in Chicago, it primarily sells directly to customers through ecommerce and catalogues.

Steve moved to Jackson Hole in 1989 to be a “ski and climbing bum.” After working in outdoor retailing for a number of years, he started his first venture, Cloudveil. The company sold outdoor products through wholesale channels to various retailers around the country. The downside to this business model was that the retailers he was selling to were telling the “brand story” to the public, not Steve. After going through several ownership groups, the company headquarters moved out of Jackson Hole.

After a short break, Steve was ready to do it again with a different emphasis and philosophy. He wanted more control over the brand experience, and the only way to do this was to sell directly to customers. His new business model allows him to sell his products to customers all over the world and to tell his brand story the way he wants it told. As a prominent center for outdoor recreation, Jackson Hole is the perfect location for the company. Steve stayed with outdoor apparel after leaving Cloudveil because it’s what he knows best. Not only does he have tremendous knowledge of the outdoor apparel industry, but all of his team members are also active users of the products. This is another major source of industry knowledge for the company. Steve explains:

I think it matters that everyone who works in our company is an active skier, climber, kayaker, trail runner, or mountain biker. Authenticity comes from getting out there and using the stuff on a very regular basis. We get to actively test the products that we are making every day. I can run from our office and do a tram lap at lunch and check out the fit and function of a new jacket. That can’t be said of all companies. The culmination of that leads to better products.

In addition, to team members who regularly use the products, Steve has organized a group of Stio Ambassadors. These are athletes, artists, writers, moms, and dads who make the outdoors “an integral part of their lives.” They share the company’s values, test products, provide feedback, and promote the brand and lifestyle. With Steve’s background in outdoor apparel, the vast experience of his team members, and regular input from his Ambassadors, the company has access to ample knowledge about the industry, which leads to better products and a strong competitive advantage.

Knowledge of Related Industry

Allen Lim is another successful entrepreneur who is building a remarkable company around his background. While working as a sports scientist and coach for professional cycling teams (Garmin, Radio Shack, TIAA-CREF), he spent a lot of time trying to keep his riders from “moaning about their upset bellies.” With a Ph.D. in integrative physiology, he knew that pre-packaged sports bars and drinks were full of artificial ingredients and high levels of sugar, which was a big part of the problem. Allen started making natural foods and drinks from scratch to keep his riders from getting sick and to sustain them through grueling events like the Tour de France, the Tour of Italy, and the Tour of California.

Allen eventually created nutrition and hydration mixes that his athletes loved. They contained more electrolytes, less sugar, and no artificial sweeteners or colors. Each flavor contained real fruit rather than artificial flavorings. “Instead of making an ‘orange’ drink, I made a drink with real oranges,” he explained. The problem was the athletes weren’t supposed to use these drinks because they were under contract to use their sponsors’ products. But Allen’s mixes worked so well, they didn’t really care. So he started making his “secret mixes” and putting them in plastic baggies. During this time, Allen realized that endurance cyclists were not the only ones who wanted his mixes. Interest in his products was spreading to racecar drivers, rock climbers, concerned parents, Peace Corps workers, and normal active individuals looking for healthy food and drink alternatives. It was time to start a real business around the mixes.

Allen knew he needed help. He enlisted two friends with the right background and experience: Ian MacGregor and Aaron Foster. Ian is a mechanical engineer and a former professional cyclist. He is the CEO of the company. Aaron is the creative guy. He is an actor, comedian, artist, and an avid cyclist. Although these three friends were moving into a slightly different industry, their credibility to build this business was off the charts. Skratch Labs now sells hydration drinks, fruit drops, cookie mixes, cookbooks, and lots of merchandise (cycling kits, triathlon kits, water bottles, T-shirts, hoodies, and hats). The company has gone from doing a few hundred dollars a month to hundreds of thousands of dollars a month. Here is how Allen describes the wild ride they are on:

We came into this not because we had business degrees or were entrepreneurs. We came into this because we wanted to solve problems in endurance sports. There is no way we would be doing this if we weren’t having a good time. I think everything we have done at Skratch has started out with the line, “Wouldn’t it be funny if . . .” and then we just fill in the blank. If everything starts out with, “Wouldn’t it be funny if . . . .” and then you fill in the blank, things work out because you get engaged at a very intrinsic, unconditional level. Money is a means to an end, not the goal in and of itself.

Knowledge from Personal Experience

Shelia Kemper Dietrich knew absolutely nothing about manufacturing dinnerware. She also knew very little about marketing weight management products. But she had wrestled with her own weight her entire life. She jokes that she was born overweight. For years she felt like this was a personal journey she just had to bear. Then she started reviewing the research and statistics on obesity. As the executive director of the American Heart Association in Colorado, health information was readily available to her—and the news was alarming. The American Heart Association suggested that we are killing ourselves with the food we are eating. The Center for Disease Control declared that many parents are going to outlive their children due to obesity. The American Diabetes Association was focusing on weight gain as a trigger to diabetes and various forms of cancer. This information made Shelia mad:

I thought, “this is insane.” I am a mom of three kids. No one wakes up in the morning and says, “how am I going to figure out how to kill my kids with food today?” I mean it’s crazy. We have no idea because we live in this land of bounty and plentitude.

Shelia went to work on a solution. She learned that the standard dinner plate has increased in size by 50 percent over the years. She knew that eating the right foods was important, but she felt that portion control or “right sizing” was a critical key to weight management. She searched for portion control dinnerware, but couldn’t find what she was looking for. So she created her own: [CO] “I used my own measuring cups and hand drew these templates. I went to the local ceramics shop and hand painted my original designs. I made four sets so my husband and daughter could try it with me. Everything was right-sized, and you could see the right portions no matter what you were consuming. And it worked! I lost 50 pounds, my husband lost over 35 pounds, and my daughter lost 25 – all because we were right-sizing our food portions.”

After Shelia’s test, her husband said, “Honey, I think you really have something here.” And Livliga was born. The company manufactures and sells complete sets of attractive dinnerware that are right-sized. Portions for various food items are clearly displayed on the plates, and bowls and cups are sized for appropriate portions. Shelia’s personal weight challenge, combined with information she obtained while working at the American Heart Association, led to an effective solution to weight management. She is currently working hard to spread the Livliga message around the country, and she is having great success. She is growing her business by partnering with professionals in the field, selling on affiliate websites, and by private labeling her products.

Evaluating Your Experience

You may already have a business idea you want to pursue – that’s great. This section will help you determine if it is a sound concept, and also allow you to explore other options that might work just as well or even better. If you don’t have a specific concept in mind, this section will help you explore a variety of options that might work for you. It all starts with how much you know about a particular industry.

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