The Three Circles – Evaluating a start-up idea

As an entrepreneur or product manager it's very tempting to jump into a project and start developing immediately. ?However, the hard part is knowing just what to spend your time on.

The process outlined here will help you evaluate your opportunities before spending too much time, effort, and money on any one idea.

In using this approach you will be able to quickly sift through all the possible business opportunities and find the one that is strongest to work on today. ?Making this decision confidently and rapidly enables you to push forward in the spirit of “fail fast, fail forward”, and is built upon the principle of the Lean Startup by Eric Riess.

To help you evaluate each idea, we'll look at them through three lenses:

1.?????Desirability (Priority 1)

2.?????Feasibility (Priority 2)

3.?????Viability (Priority 3).

The strongest entrepreneurial ideas fit at the intersect of all three.?It is these ideas that should be prioritised above all others.

Desirability

To begin the analysis the first criteria is Desirability.?You need to discover whether there is a need to fill and does the target market want and/or need this solution.

·??????A simple first test can be: ?How does this solve a problem for someone??

·??????Also consider: How much do they care about this? (Is it compelling for them?)

·??????Also consider: How does this idea contribute positively to the world around us?

This is the most important factor in all the analysis. The #1 reason startups fail around the world is that we build things that people don't want or need. Getting the desirability part right is therefore key to success in the short, medium and long term.

The strongest root for the desirability analysis is in customer interviews, external research and use of credible reference sources. While the entrepreneur will always need, and use, their instincts to push the idea forward the strongest ideas are connected together with more than that.

Feasibility

The second criteria for the analysis is Feasibility.?You need to discover if this idea can be done, and that your team can do it.

·??????A simple first test can be: How can it be done?

·??????Also consider: What strengths from our team are being utilised in getting this idea done?

·??????Also consider: How does the building of this idea fit within the time and resource constraints we have?

Adjusting and augmenting the team to align with the needs of the market is a fundamental part of being able to execute on the idea. Getting support and guidance from mentors and other Founders is a simple way to speed up this part of the process.

Viability

The final analysis of early-stage ideas is Viability.?You need to discover if this idea can be delivered upon in a profitable way.

·??????A simple first test can be: How do we sell this for more than it costs?

·??????Also consider: What are the costs to acquire each customer?

·??????Also consider: What is the lifetime value of each customer?

As the solution is likely to change many times before product market fit is achieved, this viability analysis will be refined quite frequently.

This analysis is the third part of the overall assessment because it is informed and shaped by the previous analysis (Desirability and Feasibility).

The strongest ideas

Remember, the strongest entrepreneurial idea will sit at the intersection of each of three sections of analysis. ?This solution will be:

1.?????Desirable (It solves a problem from a motivated target customer),

2.?????Feasible (it can be done by the team leveraging their strengths), and

3.?????Viable (there are profitable unit economics that can be measured and scaled.)

Entrepreneur Evaluation

Using this approach can help you evaluate and rank the multitude of ideas that any entrepreneur usually has bouncing about in their heads. ?From this prioritisation you can decide which is the strongest idea to work on today, and which to park for the future.

As you test the priority idea, the underlying principle of your effort is to execute expediently and fail fast or move forward.?If the idea quickly fails, then you can move back to the list of parked ideas and look at the next strongest.

When an idea is successful in each step of validation you can continue to work with it exclusively, and leave the other ideas parked until the appropriate time to return.?Any new ideas can also be added into the parked list.

?Three key benefits for the entrepreneur in taking this approach are

·??????Saving time

·??????Saving effort

·??????Saving money.

Every start up is usually short of all three so this analysis helps you to maximise your efforts from the start.?While this technique is perfect for early stage ideas (pre seed, seed), the same approach and analysis can equally apply throughout every stage of the startup journey.