Practical applications

The New Business Road Test

the new business road test john mullins

Summary sentence of “The new business road test”: Most start-ups fail because entrepreneurs do not test their idea enough before entering the market; this book gives us a 7-step method to get test drive your company before even writing the business plan, thus allowing you to reject bad ideas and avoid the loss of valuable resources backing the wrong horse.

By John W. Mullins, 2006 (2nd edition), 290 pages

Chronicle and summary of The new business road test :

Passion. Conviction. Tenacity. These are the common traits amongst most entrepreneurs, who, without them could not face the challenges, setbacks and hard blows that stand between their revolutionary idea and its implementation.

The best entrepreneurs always have something extra: a will to get up every day and ask themselves this simple question: “Why will my company succeed when most fail?” In other words: “What is wrong with my business idea and how do I fix it?

These entrepreneurs ask themselves this question for obvious reasons: they know what the stakes are. They know that most companies fail, and they don’t want to start by actively supporting a limping business, the kind that eats up a year of their energy and resources only to arrive at an impasse.

But, when we are driven by passion, is it possible to realise that a project is doomed to fail before launching it? Just as most car buyers take a test drive before making up their minds, serious entrepreneurs test-drive the opportunities they are considering. And The New Business Road Test gives us 7-steps to complete this test drive, even before we have to write the business plan.

7 stages of The new business road test

The 7 stages of The new business road test are the 7 areas of attractive opportunities, embedded in three principal elements:

  • The market: potential and actual clients that are willing to buy your products to satisfy their needs or wishes
  • The industry: competitors that offer products or services similar to yours
  • Key people in the company

The market and industry are analysed at macro and micro levels, which constitutes 4 of the 7 stages of the test. The analysis of key people is made up of:

  • The team’s corporate mission, personal aspirations and ability to take risks.
  • The team’s ability to upon critical success factors.
  • The team’s connection at the top, bottom, and across the value chain – suppliers, customers, competitors.

These make up the last 3 of the 7 steps, which are detailed chapter by chapter in the book. Each chapter consists of one to four detailed case studies of small and large companies, known and unknown, having succeeded or failed, to illustrate the author’s words, which I have not reproduced here. However, I have indicated in parentheses the companies studied in the book. Follow the guide.

Chapter 2 : Will the fish bite? (the micro analysis of the market)

If you already have an idea for your business, you will certainly think it is a good idea.

“Of course the clients will buy!” you say with conviction, “it’s might faster (or better, or cheaper) that what they use right now”.

Although you may be right, chances are that, from the accumulated experience of generations of entrepreneurs who have come before you, you may not be so right, or maybe you’ll get it all wrong!

The New Business Road Test

But without targeted customers who have needs to satisfy, your great business idea may prove to be a fantastic engine, but one that doesn’t have the necessary fuel: the customers, and the sales that result from them.

Four crucial questions need to be answered to understand your opportunities at the micro-level of the market :

  1. Is there a market segment we can target and offer clear and convincing benefits to customers or – even better – solve their problem, at the price they are willing to pay?
  2. In the customer’s mind, are these benefits different and superior in one way or another – better, cheaper, faster, etc. – to what is currently being offered?
  3. What is the size of this market segment and how fast is it growing?
  4. How likely is it that our entrance into this market, will allow us to enter other segments that we would like to target in the future?

The answers you seek, however, will vary depending on the type of business you want to launch. If you want to create a fast-growing company that eventually becomes a multinational that one day allows you to compete with Richard Branson or Bill Gates, you will have to answer “yes” to the first two questions, “broad and fast” to the third, and “very likely” at the fourth.

If instead, your dream is simply to obtain a satisfying lifestyle with a company that operates below the radars of big competitors, then a small market with limited scope will be fine.

While world domination may be their ultimate goal, most successful entrepreneurs start with a single market, targeted laser-like, that are often niches and quite small. How are these markets defined?

In three ways:

  1. By who the clients are, in demographic terms (age, gender, education, income, etc.). For B2B companies, demographic terms refer to the industry in which customers do their business, plus the size of the business and other characteristics.
  2. By where the clients are, demographically.
  3. By how clients act, in terms of behaviour or lifestyle. For B2B, segmentation by behaviour refers to differences in product use.

Different market segments have different needs and generally require different solutions.

Many companies succeed because their founders find a new way to segment and target an existing market, often in terms of behaviour. Doing this allows entrepreneurs to target a segment defined by its behaviour, with benefits designed for that segmentonly that are not available through other providers.

Companies studied: DoCoMo’s iMode service, Miller Brewing Company’s Lite beer, Nike, Ourbeginning.com.

Chapter 3: Is it a good market? (the macro analysis of the market)

Having a target market where customers are likely to buy your products is a good start, but it only scratches the surface of the tools you need to evaluate your opportunity. After analyzing the market at the micro-level, you now need to fly at 30,000 feet to analyze the market at the macro level, asking yourself three crucial questions:

  1. Is my market big enough today, for different competitors to be able to target different segments without treading on each other’s toes?
  2. What are the short-term growth predictions in your market? (In the absence of any contrary evidence, the recent growth rate of your market may be the best indicator of growth in the near future)
  3. What are the long-term growth predictions for your market? (This will be strongly influenced by macro trends: economic, demographic, socio-cultural, technological, legal, natural)

As above, to answer these questions you need to know what you want. If you have a long-term perspective and want to build a broad and sustainable business that creates value over time, you will be affected by the answer to all three questions. If you want to start a small business in a protected niche market, then questions 2 and 3 are less important.

Also, large and fast-growing markets are attractive to investors, who are looking to maximise their investments. If your goal is to build a business that you can control without having a steering committee or other management looking over your shoulder – apart from bankers perhaps – then the fact that a market is very attractive, can put you off: such a market attracts many competitors financed by deep-pocketed investors, which may also mean you have to resort to some yourself and have to reach a certain critical size. Not exactly what you had in mind.

If that is the case, a smaller and perhaps more stable, niche market — too small for the big ones to be bothered with — could be much more attractive, allowing you to stay below the radar.

Companies studied: Hero Honda, Whole Foods Market, EMC, Thinking Machines.

Chapter 4: Is it a good industry? (the macro analysis of the industry)

In the 1970s, Michael Porter identified the 5 forces that determine the attraction of an industry:

  • The threat of other entrants
  • The negotiation power of clients
  • The negotiation power of suppliers
  • The threat of substitute products
  • The intensity of competition

To understand them well let’s examine them through 10-year-old Francois’s story, who lives in a suburb of a big French city:

It is a quiet residential area, inhabited mainly by retirees. Over the past two summers, François has developed a small, profitable lemonade business. Its lemonade stand consists of a folding table and a large poster pinned to a post. His lemonade recipe is his grandmother’s, a famous combination of lemons, sugar, water, ice, and a little orange juice.

Francis has a brilliant system. Every Monday, his mother goes to the local supermarket to do her weekly shop. He gives her his list of lemons, cups, sugar and orange juice that he needs, and stores everything in the unused refrigerator of his garage. Mum is very proud of her entrepreneur son and is a very reliable supplier: every Monday she provides him with all the ingredients he needs and then asks for payment of the products.

A glass of iced lemonade

A glass of iced lemonade

With a neighbourhood full of retirees, very few adults have a job. It’s perfect for François’ enterprise because many people walk down the street all day. And these grandparents melt at the sight of children’s faces – and Francois’s is especially cute. Although François is somewhat reluctant to have his cheeks pinched all day, he suffers through this because he knows that adults can’t resist a glass of iced lemonade offered up by a cute kid.

But how come other local kids don’t launch themselves into this lucrative market? The reason seems to be Francois’ brother, Jacques, who weighs 70 kilos at just 13 years old. Francois gives him 10% of all profits to discourage other kids from entering the market. And no other child has dared open up his own lemonade stand.

Francois is very happy: at the end of last summer he bought a brand new mountain bike, and this summer he is saving for a gaming console.

So let’s look at the 5 Porter forces in Francois’ case:

The threat of other entrants

With only a little lemonade and a makeshift stand, there are no significant costs to enter this market. And it’s not an industry that requires cutting-edge knowledge: everyone can learn to make lemonade. And Francois can’t file a patent to protect his intellectual property – Grandma’s recipe. But thanks to Jacques, his brother’s work, competitors are afraid to enter the market.

Jacques has done a fantastic job up to now. The threat of new entrants is very weak.

The negotiation power of suppliers

Mom buys supplies every week at the supermarket and doesn’t take a margin on these sales. On top of that, she asks him to pay only when she delivers it, and the supermarket is never short of supplies. If for some reason or another mom doesn’t want to be his supplier anymore, François is sure that he could convince one of the retirees to do this.

The power of suppliers in Francois’ industry is therefore very weak, which is good for his little business.

The negotiation power of clients

François’ clients, the grandparents who melt away at the sight of the few children in their neighbourhood, have decent amounts of money to spend and seem to enjoy the refreshment of iced lemonade. With a total absence of other lemonade stalls in the area, François’ customers have no other choice of suppliers in their neighbourhood. These buyers are satisfied with the status quo and do not put pressure on Francois to lower his prices.

The power of lemonade buyers is weak. This is good for his business.

The threat of substitute products

Those who want a bit of change can buy Lipton Iced Tea a few blocks away at Sophie’s grocery store. Her prices are competitive. Some people carry small bottles of water or fruit juice while they walk.

There are many substitutes for François’ product. This is the biggest drawback of his industry, but for now, his smile always seems to ensure customers come back.

The intensity of competition

Thanks to Jacques there are no other lemonade stands in Francois’ neighbourhood. If there were, it is unlikely that they would be able to offer better prices than Francois. The local grocery store, however, offers fresh lemonade, but at a much higher price. Also, François has sold Francois’ homemade lemonade for 2 summers now, and his brand is established now.

Francois’ reputation, coupled with the lack of other kids in his neighbourhood, means there isn’t much competition. Fewer rivals is good news for Francois’ business.

The industry’s global appeal

Analysis of the five forces shows that Francois’ industry is rather favourable since 4 out of 5 forces are positive. The only unfavourable one – the threat of substitutes – does not seem severe. François chose a good industry to start his small business. So, it’s profitable.

Few businesses are as attractive as the one in this scenario, much like few businesses are as simple and easy to analyse.

Defining one’s business

Is François in the lemonade stand industry or the retail industry? Is Easyjet in the airline business or the transport business? Of course, you cannot evaluate an industry until you have defined it.

The real question is: is it better to define one’s business in precise or general terms? A precise definition has its merits. It can help you to work out who your main competitors are, which helps you determine the quality of your rivals more precisely. Easyjet competes with Ryanair, Air France, etc. But too precise a definition of an industry can, if you aren’t careful, prevent you from spotting substitute products that, in certain industries, are extremely important.

A broad definition of an industry has its merits, notably by allowing substitutes into the evaluation straightaway. It also makes it easier to consider changes to your product, to increase sales. For example, if Francois sees himself in the retail business, he could decide to sell cookies on his lemonade stand. On the other hand, too generalised a view can lead to a lack of focus. And for many companies with limited launch funds, focus is essential. There are too few resources to do to many things well.

So what’s the answer?

There is no easy one. It is generally better to think both precisely and broadly. The key point is that your industry is made up of other suppliers – not other customers or products – products and services that address customer needs that you want to address yourself.

Companies studied: the pharmaceutical industry, the DSL industry.

Chapter 5: How long will your advantage last? (micro analysis of the business)

Why have so many American entrepreneurs gone for the jackpot in the beer industry but failed? Why do so many restaurants fail? Because in these industries, the threat of potential entrants is extremely high and new competitors are popping up every day. There is an almost infinite number of substitutes too -many ways to satisfy a hunger or get drunk. The result is that the failure rate in these industries is huge, with only modest average returns on investment.

But despite these obstacles, many restaurants and beer brewers do very well. How come?

The main answers to being able to fight in an unattractive industry are found at the micro-level. Earlier we saw the importance of selling what your target customers want to buy. When a business launches, doing this can sometimes overcome the difficulties inherent in an unattractive industry. If customers rush to your product because it’s better, faster or cheaper, then you’ll hit the ground running.

However, the hardest thing is to preserve this early advantage, as supplying superior products from launch isn’t enough to build a long-lasting business. Existing competitors and new entrants use imitation in most industries, so your initial advantage can disappear in a heartbeat.

The New Business Road Test

What most large companies do best is to copy very quickly, letting small businesses like yours take all the risks and then stealing the lead with their vastly superior firepower.

So for aspiring entrepreneurs, the second key to success in a not-so-competitive industry is whether there are factors present that will allow the company to maintain its initial advantage over a long period.

An initial competitive advantage comes about when a product provides benefits that – in the mind of the customer – better, cheaper, or faster than those supplied by competitors.

Such an advantage will last if:

  • There are proprietary elements – patents, secret agreements, etc  – that other companies are unlikely to be able to duplicate or imitate.
  • There are organisational processes, superior abilities or resources that the others are unlikely to duplicate or imitate.
  • The business model is economically viable– in other words, the company won’t suddenly have a cash flow problem. Economical viability largely relies on these factors:
    • Revenues are in line with the required investment and the margins are achievable.
    • The costs of customer acquisition and retention, as well as customer acquisition, are sustainable.
    • The margins are enough to cover the business’s fixed costs.
    • The operational cash flow cycles are favourable, including
      • How much cash must be locked in (for inventory or other things) and for how long?
      • How quickly customers pay.
      • Whether suppliers or employees be paid slowly.

Companies studied : Zantiac, Nokia, EMI, Ebay, Webvan.

Chapter 6: What drives your entrepreneurial dream?  (the mission, the aspirations, the propensity to take risks)

Every successful entrepreneur brings important elements that propel their entrepreneurial dream:

  • A mission that determines what kind of company to build and what type of market to address.
  • A collection of personal aspirations that guides them to what level of success to attain.
  • A certain propensity for risk which indicates what kind of risks are taken and what kind of sacrifices must be made in the pursuit of the dream.

Phil Knight, the founder of Nike, was dedicated to serving athletes and helping them obtain the best possible performance. He probably would not have been interested in targeting another market. Jeff Bezos, the founder of Amazon, wanted to revolutionise the way people buy books and in the process, become one of the biggest retailers. He would not have been happy to develop a smaller, limited business with the growth scale he had in mind.

The point is that entrepreneurship

The pursuit of an opportunity regardless of the resources that the person has available – is a very personal game. Successful entrepreneurship requires a clear vision about what you as an entrepreneur, want as a result of your effort.

What’s your mission? Do you want to address the athletes market? Do you want to sell coffee? What level of aspiration do you have? Do you want to be the next Richard Branson or the next Phil Knight, or would you rather develop a nice little family business that you can manage yourself? What kinds of risks are you prepared to take? Will you invest your own money? How much? Will you pay yourself a salary from the start? How long for? Do you want to control your business, or do you want to have a smaller share of a larger enterprise, even if this risks of losing control of the business you started?

Only you can decide this, and you do have to decide. Without a clear mission, your efforts will be fragmented and will lack purpose and direction. If you don’t understand your aspirations, you will be unable to explain to others what help you need—money, time, love and many other things—and why they should help you.

Without identifying your propensity for risks, which is different for everyone, you will be unable to demonstrate to investors that you are prepared to participate in the risks you ask them to take.

It is also equally important that the three elements that drive your entrepreneurial dream – mission, personal aspirations, and risk – must come together as a whole, coherently. You cannot aspire to greatness without some form of risk. You cannot aspire to greatness without the will to share ownership and control.

Company studied: Starbucks.

Chapter 7 : Can you and your team perform, based on critical success factors?

Just as almost every sport requires athletes to be at the top of their game physically, every entrepreneurial adventure needs the fundamentals to succeed: a superior product or service, an efficient supply chain, motivated people, etc. A company won’t survive long without these. In sport though, you need more than physical fitness to win an Olympic medal.

The New Business Road Test

What separates good athletes from very, very good ones? The very good ones are those that can consistently perform on the critical success factors of their sport, be it speed, balance, tactical or something else. The ability to perform on these critical factors of success is the difference between good and almost good.

At the World Cup or an ATP tennis championship, there is a significant performance difference between winners and those who do not qualify, and the same is true in the corporate world. Nokia and Apple took off in the mobile phone market while Motorola and others merely stagnated.

What causes such performance variations in an industry?

We have already seen factors such as patents or more efficient organisational processes as well as capabilities that are difficult to imitate. But it is the team’s ability to perform on the few critical success factors that make all the difference from one company to another.

So a common difference between winners and losers is that the winners understand what the critical success factors are to succeed in their particular industry; they then configure their teams in accordance with these factors. The losers either do not identify critical success factors or do not have a team capable of performing based on them.

Even in a relatively unattractive industry, some companies perform quite well. The others fail. In this case, entrepreneurs can succeed in difficult industries, but they must be able to:

  • Identify the specific critical factors requires for success in that business.
  • Bring together a team that performs well based on these factors.

Identify the critical success factors

How do you identify critical success factors in an industry? Can they be found in specialised press, on the Internet or in books? Unfortunately not. The knowledge of CSFs in an industry comes down to the experience of those who have learned – often the hard way – which things have to be especially successful.

Either you have this experience or you need access to those that do, in which case there are two questions you need to ask yourself to identify these CSFs:

  1. What are the few decisions or activities that, if bad, will almost always affect a company’s performance in a very negative way?
  2. What decisions or activities, when done well, will almost always lead to a disproportionately positive performance?

John W. Mullins spent most of his career in retail – critical success factors are location, location, and location. Retailers who are in great locations can make mistakes in many ways and still get away with it — at least in the beginning. On the other hand, those who are in bad locations can do everything well and yet have to fight to survive.

To identify CSFs in your industry, ask both questions to 15 or 20 successful entrepreneurs and executives in your industry.

Companies studied: Palm Computing, Schwinn.

Chapter 8: Your connections are important: which ones are the most important?

The Mount Everest base camp has been a temporary camp for many climbers seeking to reach the 8848 meters summit of this mountain. The base camp has many roles, including acclimatising climbers to high altitudes. Another role is to serve as a communication hub for climbing teams perched much higher up the mountain.

Thanks to radio communication technology, mountaineers can stay in close contact with the base camp and can communicate about the weather. This communication can make all the difference between life and death, because knowing if a storm is brewing can be a decisive factor as to whether to go for the top or not.

The team leader regularly contacts base camp with a satellite phone. The base camp is in contact with many climber teams who are in different places all over the mountain. Each team has a different view of the clouds and any possibility that a thunderstorm is brewing. Each team can provide critical information about weather changes.

Communication

Choosing to communicate with your base camp before reaching the top may seem like an obvious choice: with small oxygen supplies and climbing challenges, why take a further risk of bad weather? Although the lack of oxygen does not play such a big part in the entrepreneurial world, the ferocity of competition can make you just as dizzy. The rapid pace of technological change can create new markets in the space of a heartbeat.

Companies that have strong networks of contacts with diverse perspectives –which include customers, suppliers, others in the industry and related industries – are more able to anticipate and understand future changes and are therefore more able to manage them.

In other words, the legendary tenacity of entrepreneurs combined with the ability to change course—typically when changes take place in the market—can make all the difference. Sometimes such changes in the market are favourable: luck can sometimes help. But luck is more likely to pay off when those who run the business have the right connections that provide the information they need to respond quickly and skilfully to market changes. Otherwise, it is unlikely that the company will be able to take advantage of this luck when it presents itself.

So, you should ask yourself just how connected you and your team are, below, above, and within the value chain:

Connections with suppliers, competitors, distributors, and customers can provide you with crucial first-hand information that can make the difference between the success and failure of your business. If you’re not very connected, start building your network now!

Companies studied: Virata, Digital Equipment Corporation.

Chapter 9: Make the seven areas all work together

If you already have a business idea in mind, you’ve probably run it through the seven areas already. And it probably shone in some areas and not in others. What do you do with the result?

Unfortunately, it is not possible to use a simple checklist or formula to interpret the results, because the seven fields interact with each other and their relative importance may vary. The wrong combination of factors can kill your new business, and enough strength in certain factors can be enough to compensate for the weaknesses of others.

the list

One way to use the seven fields is to give them a score and then add them up, 70 being a perfect score. But that is too simplistic: instead, the author suggests you give a rating to six factors (your entrepreneurial dream is not rateable) by following these steps:

  1. Think about your mission, aspirations, and ability to take risks, so you know what kind of opportunities you’re looking for.
  2. Look for an area where your opportunity score is off the scale – for example, 12 out of 10 points. If you see one or two of these scores in certain areas of the model, then you may have a high-potential opportunity. This may be the “insight moment” that can completely change your life! If you are targeting a niche business, which flies below the competitors’ radars, then this criterion is not so critical.
  3. Look for all the areas where your score is low – below 6 or 5 out of 10. Then ask yourself if a very good score in another field can compensate effectively for the problem. If not, then you will know that this opportunity needs more work. You’ll need to develop and reshape this opportunity because you don’t want to have investors – let alone launch into the market – with crucial flaws in your idea. If you can’t find a way to compensate for the weaknesses you’ve discovered, then maybe you should abandon this project now and look for a more attractive one. Finding your Achilles’ heel before writing your business plan is not a bad result.
  4. For other areas with an intermediate score, look into whether some remodelling can increase the score or compensate for it.

The areas you score well in

Which domain with a strong enough score – 10 or even 12 out of 10 – makes a business idea a winner, regardless of the score in other domains?

The macro market

Here, a very good score is never enough. Big, growing markets are never in themselves a reason to pursue the launch of a company.

The micro-market

For a niche business project, a high score here can be all you need. For an ambitious business idea with venture capitalist investment, a strong score here is essential, but by no means sufficient. It is also essential to have a strong team, as well as an attractive industry at micro and macro levels.

The macro industry

If an industry is incredibly attractive – even though few are – and most companies in it succeed, then a high score in this area may be enough for a niche company. Again, a good score is required for a more ambitious company but is by no means sufficient.

The micro-industry

The ability to maintain one’s advantage is important, but only if that advantage is enough to get started. So a strong score is good news but only if the customer benefits are sufficiently distinct and attractive to deliver long-term value.

You and your team’s mission, aspirations and risk capacity

This field is not rateable. Instead, it works as a filter to see if a particular opportunity pops up in what you and your team look for.

You and your team’s ability to perform on the critical success factors, and your connections

Having succeeded once doesn’t mean you can do it again in the future. And as Warren Buffet says:

When a management team with a reputation for being brilliant runs a company that has a reputation for bad numbers, it is the reputation of the company that remains intact.

So success required more than just a good team: you need a certain combination of good scores, the industry, and the market.

Those areas where you have weak scores

Alternatively, can a bad score in one area kill off your business idea, regardless of the score in other areas? Let’s look at that.

The macro market

A weak score here is not a problem. Innovation can lead to significant success in a stagnant market.

The micro-market

It’s different in this case: if your product doesn’t offer any clear benefit if it’s no different from what’s already on the market and if you can’t find a way to change or solve it, then it’s best to drop this and look for another opportunity. The only exception is when the industry is so incredibly attractive and you want to build a small niche business, in which case you may have a chance.

The macro industry

A low score here is not damaging: good opportunities can be found in unattractive industries. The key to success is about in precisely targeted and distinct benefits as well as building complex and difficult-to-imitate processes that provide the basis for long-term benefit.

The micro-industry

What happens if there is a very attractive opportunity but you can’t protect it with patents and have no way to create superior processes and capabilities that your competitors can’t copy? Should that scare you? Not necessarily, but this will set the bar higher for your business to grow. This is the classic advantage and disadvantage of the innovator: if you can continue to innovate and beat your competitors or build a reputation strong enough to win customer loyalty, then you can prevail. Another way to deal with this is, is to sell your business before the competition gets too fierce.

You and your team’s mission, aspirations and risk capacity

The problems here won’t kill your opportunity. But if your mission, aspirations and risk propensity are not consistent with the investors you are targeting or the level of resources you need, then the chances of getting venture capital are zero.

You and your team’s ability to perform on the critical success factors

If you and your team can’t perform based on critical success factors, you will struggle to raise capital. The only exception is cyclical market peaks – like the one that created the Internet bubble – where anyone with a pen and napkin was able to raise funds.

You and your teams’ connections

Does a bad score here kill your opportunity? Not really. This factor is most useful for generating early sales and spotting market signals that may mean you need to change course. So not having these useful connections is a risk factor, but it won’t break your business. 

Five common pitfalls to avoid

The author gives us 5 pitfalls that he experienced in his career:

1 – The pitfall of the big market

Investors often hear things like “My market is huge. If I can corner just 10% of it (or 5% or even 1%) we’ll be rich!” The problem with large markets is that others love them too and that the others are often established companies with deep pockets. For entrepreneurs, large markets are only good if their product or service delivers profits for at least one segment of it.

2 – The best mousetrappitfall

Especially in the technology industries, entrepreneurs sometimes try to capitalise on new technologies just for the sake of them. Doing this, rather than wondering how this new technology can help this segment of customers, is a trap. A better mousetrap doesn’t necessarily mean a better solution for the customer.

3 – The pitfall of the untenable business model.

Many of the failures of the Internet bubble had business models that were simply not tenable. How can we avoid this trap? Nurture your network to understand your industry and its economic parameters. Then look at the sums of your opportunity.

4 – The me too pitfall

The combination of a strong threat of potential entrants and a lack of opportunities to sustain their advantage can mean a large number of competitors pursue the same opportunity; only to be dispersed to the four winds. The only ones who can handle such an industry are niche entrepreneurs that can fly under the radar. Otherwise, it is easy to avoid this trap: don’t even go there in the first place.

5 –  The overstatement pitfall

Some people succeed as serial entrepreneurs. They launch company after company, always successfully. Those who succeed like this generally choose opportunities that do not have serious failings and perform well. But many successful entrepreneurs have found themselves at one point or another in a sinking boat, despite their experience. How can we avoid this trap? Having created one or more companies beforehand is a great advantage; but it does not eliminate the need to heed the seven areas. Don’t rest on your laurels; do your homework. No one is invincible!

Book critique of The new business road test”

As an entrepreneur with a business idea, it often seems like the best idea in the world. We do not understand when someone doesn’t like it and are sure that customers will jump on our product and beg us to take their money ;-).

The New Business Road Test offers a 7-step analysis method for your business idea, identifies its strengths and weaknesses and helps make an informed decision; about whether or not to proceed before you invest time, money and significant resource. It’s not infallible – just because you get a good score in all 7 areas doesn’t mean your company is headed for success, and vice versa – but this method seems excellent because 1) it forces you to ask yourself and think about your idea long and hard; 2) it makes us ask questions that we probably would not have asked ourselves; 3) thus makes us see possibilities that could have eluded us and 4) I think apply it to any creative project significantly reduces your chances of betting on the wrong horse… and significantly increases your chances of success!

Entrepreneurs’ toolkit

The new business road test should, therefore, be included in every entrepreneurs’ toolkit; especially since all the concepts presented are systematically illustrated by real case studies of small and large companies, known or not, successful or failed. I have not presented these case studies here; but they are excellent and provide a good understanding of the author’s vision. To boot, at the end of each chapter there is a section dedicated to investors, and clearly; the method put forward by “The New Business Road Test” is also an excellent help for investors to choose companies in which to place their hard-earned cash.

The second part of the book (not reviewed here) contains tools to add to your box; a methodology to question your prospects on micro market analysis, a macro market analysis matrix; an industry checklist, an industry methodology to conduct marketing research yourself, and how to create effective forecasts.

In terms of defects, his tone can sometimes be a little academic and dry, with repetitions here and there; but overall “The New Business Road Test” reads fast and well. It gives us precise steps and questions to determine whether we can fully engage with our business idea. If you read “The New Business Road Test”, you can save a ton of money and save years. A must-have.

Strong points :

  • The new business road test offers a detailed and clear 7-step method for making an informed decision; will I launch the business?
  • Illustrated by numerous small and large company case studies, some known and some not, have succeeded or failed.
  • A section at the end of each chapter, designed for investors who want tools to help them make their decision.
  • Stuffed with loads of tools in the second half of the book.

Weak points :

  • Sometimes a bit dry, with some redundancies.
  • Not translated into French.

My rating : The new business road test methods ideas company entrepreneur The new business road test methods ideas company entrepreneur The new business road test methods ideas company entrepreneurThe new business road test methods ideas company entrepreneurThe new business road test methods ideas company entrepreneurThe new business road test methods ideas company entrepreneurThe new business road test methods ideas company entrepreneurThe new business road test methods ideas company entrepreneurThe new business road test methods ideas company entrepreneur

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