I mentor for one of the entrepreneurship courses at University of Michigan’s Ross School of Business. This is one of the ways that I give back to our educational community and it keeps me in touch with what is happening on campus. Some things I’ve heard really intelligent students say:
“I quit using Facebook, it is a dead platform”
“I’d never play those lame Facebook games, they need to get more sophisticated”
“Companies are killing Facebook, I don’t want brands on my social network”
These students all had “Facebook killer” business ideas that were in part based on these beliefs. They’ve all heard the advice, ”Start a business that meets a need you feel personally.” Too often, they interpret this advice as, “base all design and marketing decisions on what I think.”
I learned this lesson when I was in business school and met some alums who were revolutionizing the toy business with a company called eToys. According to the founders, eToys was going to take over the toy business. ”Toy ‘R’ Us is a dinosaur would soon be extinct thanks to eToys,” was their mantra. It didn’t happen that way. eToys went through over $100 million in investment capital, filed for bankruptcy, and sold their assets for $5 million. Today Toy ‘R’ Us owns eToys.com.
eToy’s failure and the reason for it was predicted by a seasoned venture capitalist at the peak of their popularity. This wise VC was a guest speaker in one of my classes. He told us that eToys would fail because it was designed by MBAs for MBAs. My classmates and I wrote him off as another one of those people who just didn’t “get it.” It wasn’t until years later that I fully understood what he meant and why eToys failed. eToy’s creators didn’t understand the market. Their toy shopping experience was buying for nieces and nephews. In their world, the ability to use a “selection engine” that would automatically pick out the right toy, have it gift wrapped and shipped was a huge time-saver. Obviously they had never taken a child to Toys ‘R’ Us and seen the excitement in their eyes as they walked among aisle after aisle of toys. They had never watched a parent examine a toy to make sure it was “the perfect gift” for their child. They built the toy buying experience that they wanted, efficient and unemotional.
I’ve found that the solution to this problem is explaining to students that they are not the market. I think this is good advice for all entrepreneurs. Whether you are a student in business school or just an individual with the intelligence and courage to start or join a startup, you are not normal. You are not like “most people.” If you design the perfect solution for people like you then you will have a very small market. If your business is going to be big, you will be selling to “most people.” Your intelligence and ambition gives you the ability to understand most people better than they understand themselves. Use this ability to figure out how to test your ideas and base your decisions on what works, not on what you think should work.
Starting a business based on a need you feel is still a good idea if you understand that you are not the market.