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DEVELOPING NEW BUSINESS IDEAS8

problem to the development of a hot wax product for a spray-on water
system that would adhere to car bodies and provide a worthwhile
benefit.

The failure in the market of the Sinclair C5 battery-powered vehicle
also highlights the dangers of incorrectly defining the opportunity, as
well as ignoring possible alternative solutions, and is explored more
fully in the case study at the end of this chapter.

financial reality Rushing to implement a business idea can also

blind you to its financial realities. Budding entrepreneurs who start
new businesses, and executives who have a new idea for their
company, particularly when it is for the first time, often radically under
estimate their capacity to burn cash in the start-up phase and over
estimate their ability to bring in customers and profitable sales.
Research undertaken by enterprise guru Jeffry Timmons highlights that
for the average start-up it takes 30 months to achieve cash break-even
and a full seven years for the investment to be paid back.7

dot.com casualties The dot.com boom of the 1990s exemplifies

this type of trigger-happy attitude. Literally thousands of wannabe
entrepreneurs rushed into creating and developing web-based
companies on the basis of ideas which appeared not to have passed
through a robust development process. First-mover advantage was
portrayed as paramount; the key objective was to maximise the number
of website hits in the untested expectation that hits would lead to
market share which would lead to profits.

What was often missing was a sound business model and a recognition
of fundamental business principles, such as the need to gain paying
customers early and to manage cash. Cash-burn caused the rapid death
of many of these Icarus-like companies, epitomised by fashion e-tailer
Boo.com.

The number of survivors from the dot.com boom is staggeringly small,
with achievement of financial break-even making front-page news even
today. For example, e-commerce icon Amazon.com, founded in 1995,
took until 2004 to report three consecutive quarters delivering profit.
We explore more fully how the application of the idea development
process contributed directly to the success of Amazon.com and of
online financial information provider Internet Securities, Inc. in later
chapters.