Where do business ideas come from?
That subject comes up a lot in the entrepreneurship courses I teach at University of Michigan. Students in those courses must concoct their own business idea and then explore developing that idea into an actual business. Often their ideas involve needs they see in their immediate environment – a smartphone app to skip the line outside a busy nightclub, or a service that delivers snacks to the dorm. The repetitiveness and small scale of such ideas can be frustrating until you realize that most entrepreneurs are motivated to solve the problems they directly experience or witness. Even as kids we did this. As I recall the “kid businesses” in my own neighborhood, I am reminded of lemonade stands and lawn mowing services and bicycle “repair shops.” Those were the needs we experienced in the neighborhood, and we enterprising future entrepreneurs created “businesses” to address them.
When young people enter college they, by definition, immerse themselves in a different environment, and hence they experience and witness a new set of problems. When Mark Zuckerberg and his colleagues invented what would become Facebook, they were responding to the need for a better student directory at Harvard. Some college students, especially grad students, get immersed in the culture of their professional specialization, and that gives rise to new problems and new business opportunities. A famous example: Sergei Brin and Larry Page, two Stanford graduate students, became immersed in their university’s desire for a “universal digital library.” Their research eventually led to the company we know today as Google.
When the student leaves college and gets a job, he is immersing himself in yet another culture – the culture of his employer and whatever field that employer participates in. This is where many new business ideas originate. When I left the University of Michigan and began my professional career at AT&T Bell Labs, I was immersing myself in the telecommunications industry culture. The needs I witnessed within that culture led me and my co-founders to develop a very successful company, one that still thrives to this day.
Is it possible or desirable to make this “cultural immersion” process intentional? Can we purposefully select an environment to study with the intent of creating new products and services for people in those environments? Of course we can – individuals and companies do this every day. My friends at Menlo Innovations, a software design firm in Ann Arbor, Michigan, call this process “high tech anthropology,” and they have even trademarked the term. Entrepreneurs are trained to identify a customer segment, i.e., a group of people who respond to the same value proposition. They then devise a product or service that delivers that value proposition, hopefully more effectively than the inevitable competitors. Sometimes entrepreneurs do this well, and other times not so well. In the cases where things don’t work out and the business fails, the cause can usually be traced to inadequate understanding of customer needs.
I’m especially interested in intentional cultural immersion because I feel that urban environments contain huge untapped opportunities for innovative entrepreneurs. In order to tap those opportunities, though, the entrepreneurs will have to possess the skills of the anthropologist, i.e., the ability to objectively observe and determine the needs of a community. They will have to intentionally immerse themselves in the customer environment in order to devise products and services that will effectively address the needs of those customers. Many would-be entrepreneurs who live in urban environments fail to step back and take a structured, dispassionate look at customer needs. Others understand the needs but lack the capability or the resources to respond. Many entrepreneurs who don’t live in urban environments are simply unaware of the needs of urban dwellers.
If we can make entrepreneurs more capable at responding to the true needs of urban communities, we can improve the quality of life for billions of people, one product or service at a time. In the process, we will have more capable entrepreneurs and much healthier urban economies. I believe these are worthwhile goals.