Not every business idea is a winner. (Ever heard of the Keurig Kold?) Tom Schryver, executive director for the Center for Regional Economic Advancement at Cornell, joins host Chris Wofford to discuss common pitfalls for new ventures and ways to increase your chances for success.
As the executive director for the Center for Regional Economic Advancement at Cornell (CREA) and a visiting lecturer at the Cornell Johnson Graduate School of Management, Tom Schryver helps entrepreneurs launch and scale new ventures—by starting with a solid idea.
In this episode of the Cornell Keynotes podcast from eCornell, Schryver and host Chris Wofford discuss the components of good product concepts and more.
Tune in to learn how to:
Learn more about building successful ventures in eCornell’s business and finance certificate programs, including Startup Funding and Finance and Business Management in STEM from Tom Schryver.
CREA is a division of Research & Innovation at Cornell.
00;00;01;21 - 00;00;23;00
Chris Wofford
Welcome to Cornell Keynotes. I'm your host, Chris Wofford. And I'm joined by our friend Tom Schryver from Cornell's Center for Regional Economic Advancement to talk about business ideas or rather, how to ask the right questions like what makes a great business idea? Is it even viable? How do I validate my business thesis before going to market? Or how do I raise capital or pitch investors?
00;00;23;03 - 00;00;41;15
Chris Wofford
Lots to consider. So if your entrepreneurial instincts are firing and you want to know where to go with your great business idea, today's episode with Tom should get you moving in the right direction. Be sure to check the episode notes for some of the links and next steps we mentioned in today's conversation. So thank you for listening and enjoy the episode.
00;00;41;17 - 00;00;43;21
Chris Wofford
Tom Welcome to the KEYNOTES podcast.
00;00;43;23 - 00;00;44;28
Tom Schryver
Thanks, Chris. It's great to be here.
00;00;44;29 - 00;00;47;20
Chris Wofford
All right. What makes a good business idea?
00;00;47;23 - 00;01;07;18
Tom Schryver
The way we think about it is we have a kind of rubric that we use like a number of factors. So what I would look for is something that is really great on several factors, things like a really big market, things like a really compelling value proposition, that is to say, people who have a deep need. We talk about hair on fire problems and you've got the bucket of water, right.
00;01;07;18 - 00;01;28;26
Tom Schryver
And they desperately need your solution. Things like sustainable competitive advantage, something that you can do that other people are going to have a hard time replicating things like low capital requirements. So you don't need a lot of resources to get started up front. And a really important one is what we call team market fit, some kind of connection between the individual entrepreneur and the space that they're in.
00;01;29;01 - 00;01;50;01
Tom Schryver
The reality is no business idea is perfect on all of those things, right? I mean, Wal-Mart is a very successful business and it's used its scale. To have great competitive advantage is huge. But it took a lot of money to build all those stores, Right. So you can't really get all of those things at once. But those are the factors that we encourage people to evaluate and say, where are you really strong?
00;01;50;01 - 00;01;56;01
Tom Schryver
And there better be a couple of those factors that you're strong on to make a business idea worth pursuing.
00;01;56;04 - 00;02;00;05
Chris Wofford
So where do business ideas come from and where should we look to find them?
00;02;00;07 - 00;02;18;10
Tom Schryver
There's two ways that people find business ideas. One is they've got a product or service in mind, or maybe they have a technology, right? And they're thinking about the product or service that you could create from that technology. We see that all the time at Cornell with researchers, right? Folks like Ph.D. engineers and such. I invented this great thing.
00;02;18;10 - 00;02;35;06
Tom Schryver
What do I do with it? I invented Flubber, right? What do I do with Flubber? And so we often talk about that as being a hammer looking for a nail. Right. And so that's one way to go. The other way to go is to say, I see this need. Hey, there's these people who seem really dissatisfied with this thing that's out there.
00;02;35;06 - 00;02;55;23
Tom Schryver
Or maybe I myself am really dissatisfied with the offerings in a particular area. One of the things that I find really inspiring is when you look at people, particularly in a business context and you see them doing something that they've created themselves that looks really cumbersome, like they've created this really complicated like spreadsheet or clipboard system or whatever, you're like, Why are you doing it that way?
00;02;55;26 - 00;03;15;12
Tom Schryver
And the really realization is because nobody's created a better system yet. That can be a great opportunity. So again, two ways. One. Start with a solution. The other start with a problem. I'll note that both of those have flaws. Neither of them are perfect, right? So I tell my students there are some cautionary tales on both sides. You remember the Segway, right?
00;03;15;13 - 00;03;35;23
Tom Schryver
It came out 20, 25 years ago. It stands upright and it's going to go revolutionize last mile transportation. But nobody wanted to buy that thing for $5,000. Right. It was solving a real problem, but it was the wrong solution for the problem. As far as I can tell, the only use case for a Segway is Paul Blart Mall Cop, and those tours around the National Mall.
00;03;35;24 - 00;03;54;05
Tom Schryver
Right. And on the other side. Hey, wouldn't it be cool if you could go to your doctor and with one single pinprick rather than like, having to go stop at the lab and have a phlebotomists take a few vials of blood and all that with big needles, you get one pinprick and with one drop of blood, they could test for 150 things.
00;03;54;05 - 00;04;06;27
Tom Schryver
Wouldn't that be amazing? It would promise it doesn't work, right? We learned that with Theranos. So on either side, you have to watch out for stumbling blocks. But those are still the places that I like to start with a solution in mind or look for a problem.
00;04;06;29 - 00;04;16;01
Chris Wofford
So, Tom, you're executive director of Cornell Center for Regional Economic Advancement. Tell me how you work with people who have business ideas and maybe within the Cornell context as well.
00;04;16;06 - 00;04;38;17
Tom Schryver
The Center for Regional Economic Advancement or Korea, where part of the Office of Research and Innovation at Cornell and I and my colleagues also teach at the SC, Johnson College of Business. So we bring a lot of that kind of business aspect learning, scholarship and pedagogy into what we do. And we run a number of programs, but they all have one thing in common, which is that we help people start and grow new businesses.
00;04;38;19 - 00;05;03;15
Tom Schryver
And the fundamental approach that we take behind everything we do is that we look at developing new ventures as a set of assumptions. People make assumptions that can be tested by experiments. So we take this experimentalist view an approach to helping people start new ventures. So a lot of what we do is advising and workshops and really poking and prodding at people to say, state your assumptions, right?
00;05;03;15 - 00;05;21;08
Tom Schryver
What are the beliefs that you have about this business idea or this business model? And how can you test those assumptions to make sure that you're heading in the right direction before you take the big leap of creating an entire product, only to find out that you created the wrong product or you launched it the wrong way, or your customers and who you thought they were.
00;05;21;14 - 00;05;33;26
Tom Schryver
And you spend a bunch of money marketing to get the attention of people who aren't going to buy what you want to sell them, right? So that if you can test those things ahead of time, you can dramatically increase your chances of success. That's what we're all about.
00;05;33;28 - 00;05;48;18
Chris Wofford
The business idea is just the beginning of a long series of tasks and endeavors that have us hurtling toward developing the actual business idea into a business making the thing. What are the processes that we can anticipate following this? Just give us a big picture trajectory here.
00;05;48;24 - 00;06;09;18
Tom Schryver
When we work with students, when we work with people in the community and talk about business ideas, first thing we do is we go through the process of thinking about do you have a product or service in mind or a technology? Do you have a problem that you're looking to solve? So start there right? Then we go through the process of creating what we call a business thesis, which is just a framework for how you define what a business idea is.
00;06;09;24 - 00;06;29;27
Tom Schryver
From a business thesis, we develop that into a level that we call problem solution fit, which is really more deeply connecting a product or service to the customers that it's trying to serve by looking at it through the lens of what is the job that customer's trying to get done, what is the thing they're trying to accomplish that this product or service can help them with?
00;06;30;00 - 00;06;49;17
Tom Schryver
Once you've established problem solution fit, done some testing around that, then it's around developing an entire business model. So now you've got a customer in mind. You've got value that they might derive from having your solution. Now how do you find those customers? How do they buy? How do they pay you? What's your revenue model? What resources do you need?
00;06;49;17 - 00;07;07;29
Tom Schryver
What do you have to do? What kind of people do you have in place? Doing what? What's your cost structure? Right. Those are the things that go into an entire business model. And again, getting back to this idea of testing what it is, just layers of assumptions that are made, each one of which can be stated and tested.
00;07;08;02 - 00;07;25;01
Chris Wofford
So that's the larger picture framework. Let's go back to the business idea itself. How should we vet our business idea or the concept? Obviously, it's not a great idea to pitch to just family members or colleagues, those who are close to you. You've got to get outside of your zone. So how might I do this if I was an entrepreneur in Ithaca, for instance?
00;07;25;01 - 00;07;29;20
Chris Wofford
Right. I have a great business idea. Let's talk about that process, how we vet it, who we should vet it through.
00;07;29;23 - 00;07;45;02
Tom Schryver
You bring up a great point, Chris, Like, is it good to talk to friends and family about this kind of stuff? I'd say kind of, yes. But the sooner you can get past that, as you alluded to, the better off you are. There is a cartoon that one of my colleagues uses in her class that she teaches.
00;07;45;02 - 00;08;07;13
Tom Schryver
I forget who the author is, but it's basically three young men in a room clearly programing something and one says to the other, if I were a teenage girl, I would love to play this game. Right. And so there's kind of echo chambers are really not that helpful. I mean, I often jokingly say like one smart person talking to another smart person about their opinions about what a third party would do.
00;08;07;15 - 00;08;23;24
Tom Schryver
Just go to the third party, right? Like, do not pass, go. Do not collect $200. Right. Get directly to the people that you're talking about. So when we think about vetting a business idea, as we look at it, is made up of three core parts. One is what's the product or service? A brief description of what it is.
00;08;23;26 - 00;08;44;22
Tom Schryver
The next is who is it for? What's the grouping of customers that you're targeting? And when we say grouping, we mean like a really specific group, not just like all people, right? I make that joke sometimes, I've got shoes. So who are my customers? Anybody with feet? Well, no, not really. Right. I mean, who are the people who actually can derive the value for whatever attributes are of the special shoe that you're making?
00;08;44;22 - 00;09;12;23
Tom Schryver
Maybe it's something that's great for people who do CrossFit. Great. Well, then competitive cross fitters might be your customer and then the last part of the business thesis is what does it help them accomplish? Right? So what is it? Who's it for? What does it help them accomplish? And once you get those in place, that is a business thesis that articulates a business idea and you start getting some core hypotheses that can be tested and the next thing you do, get out in front of those customers, go talk to them a Literally go find them and talk to them, right?
00;09;12;23 - 00;09;32;16
Tom Schryver
Go find yourself one of the people who is in that group that you're targeting and ascertain what have they done in the past to solve the problem that you think that they have? That's the first question. What have you ever done to solve this problem or to do this thing? And the answer you might get back is, I've never done anything to solve that problem.
00;09;32;16 - 00;09;40;14
Tom Schryver
Well, that's a pretty good indication that you're barking up the wrong tree and then you can very quickly iterate on to something else before you spent a bunch of time and money.
00;09;40;16 - 00;09;52;26
Chris Wofford
Okay. You have identified the constituent parts of a business thesis. It should really be ideally a one sentence, right that you're ready to pitch anyone. You never know who you're going to end up in an elevator with at a party next to talk to me about the importance of that.
00;09;52;26 - 00;10;12;17
Tom Schryver
Yeah, it couldn't be more important. Good communication skills is not the end all, be all for being an entrepreneur. If you have good communications skills and nothing else, you're not going to get anywhere. I would call it necessary, but not sufficient. There is a lot of academic research though, that shows that the best entrepreneurs, the most successful ones have phenomenal communication skills and so you can't get past it.
00;10;12;19 - 00;10;29;12
Tom Schryver
And this is the first part of it. It's the tip of the iceberg, if you will. You don't get past to the next step if you don't do this part right. So we do spend a lot of time with people in programs, in workshops and advising and so on, trying to refine that business season. So couple parts to it.
00;10;29;18 - 00;10;55;19
Tom Schryver
One is you're always iterating it and so getting comfortable with the idea that I have a really crisp business thesis now and it may change tomorrow. And that's totally fine. You got to be cool with that. Right? There is a joke from Stephen Colbert in the White House Correspondents Dinner back in 2007 where he said if then President Bush, who was sitting on the dais, if you recall, he's a man of principle, he believes on Wednesday what he believed on Monday, regardless of what happened on Tuesday.
00;10;55;21 - 00;11;15;00
Tom Schryver
I love that joke. Right. And I use it all the time. You don't do that. Right. But whatever it is, you've got your thesis right now that you're pointing out and you made mention of an elevator, and that's the apocryphal like elevator pitch. But the truth is you often do have 30 seconds, 60 seconds, 90 seconds to say, this is who I am and this is what I'm about.
00;11;15;02 - 00;11;31;19
Tom Schryver
And if you can focus in on those three things, what you got in terms of what are you doing, product or service for whom, who's the customer and what does it help them do that gives the recipient of the information enough to click into to say, okay, I'm interested to learn more or not. And that's what it's all about.
00;11;31;22 - 00;11;36;11
Chris Wofford
So Tom, what are the frameworks for validating a business idea? What are the processes involved?
00;11;36;13 - 00;11;56;16
Tom Schryver
There's no single right way to go. First up, this is where you start to get into the combination of art and science. We do talk about and we really sincerely believe, taking an experimentalist approach, but some of my scholarly colleagues at Cornell might look at how we do experiments and say that's a little bit loose compared to what would lead to a peer reviewed paper.
00;11;56;18 - 00;12;23;18
Tom Schryver
But something as simple as if I assume you, Chris, are a member of a customer segment who would value a solution. I'm making another hypothesis. I'm making an assumption there that you have a particular problem or job to be done that you're trying to get done. So as I alluded to before, something as simple as asking you how if you solve this problem in the past is the really key first step that I always find.
00;12;23;18 - 00;12;43;15
Tom Schryver
To my surprise, a lot of entrepreneurs have a hard time even getting to you, and that's a key first step. Getting to your question about frameworks, we use a framework from Alex Oster, Walter and his colleagues. It's called the Business Model Canvas. It is a very good strategy framework that we like a lot. Like any framework. It simplifies things.
00;12;43;15 - 00;13;03;13
Tom Schryver
That's what it's there to do. It simplifies and creates categories so that people can understand things better. Means it's not perfect. There is no perfect one, but it's one that we find works quite well for articulating the entirety of a business model, which again is both the delivery of value as well as the capture of value. So it's that third step beyond an idea.
00;13;03;13 - 00;13;13;05
Tom Schryver
Start with an idea established problem solution fit, then get to a business model. And so we use the business model canvas as a way of articulating the assumptions within a business model.
00;13;13;08 - 00;13;19;19
Chris Wofford
So at this point, are we ready to develop or produce a minimally viable product, or am I getting ahead of ourselves?
00;13;19;22 - 00;13;44;08
Tom Schryver
So that's a great phrase. Minimum viable product or MVP is one that gets trotted out all the time in the entrepreneurial community, and it's one where I have a very specific meaning, and so I almost get a little allergic when other people use other meanings for it. So let me elaborate. My engineer friends, my computer science friends in particular are prone to thinking of an MVP.
00;13;44;08 - 00;14;08;10
Tom Schryver
A minimum viable product is what I would describe as a technical proof. So I'll see computer science students come to me all the time and say, Professor Scrivener, I made an app and they'll show me the app that they made and the looking scrolls and buttons do things. When you click on the buttons and the dropdowns have dropdown text in them and so on, what did they actually prove by creating this app?
00;14;08;12 - 00;14;29;08
Tom Schryver
They didn't prove anything about customer demand. They didn't prove anything about whether or not it does a thing that people cared about. They proved whether or not they could make an app, which is not an insignificant thing for many people. But but Cornell, we have a pretty good computer science department, so I never really doubted that at Cornell, Computer science student could create an app.
00;14;29;11 - 00;14;57;20
Tom Schryver
So I'm usually in that position of giving them the disappointing news that they didn't actually prove anything that really moved the needle on understanding. So what is a minimum viable product then? It is about demonstrating customer demand. So there a test of whether or not the solution, the product or service that you're offering meets a customer demand and creates value enough to induce that customer to do something about it.
00;14;57;23 - 00;15;18;07
Tom Schryver
So the best phrase that I ever heard about it is that you're guessing what's minimum the customer is telling you whether or not it it's viable. That's what a minimum viable product does. And so whenever I hear somebody talk about, I've got an MVP, my first follow up question is great. An MVP as a test. What were you testing?
00;15;18;09 - 00;15;28;05
Chris Wofford
Okay. So, Tom, through this whole process, many phases through this, how do we deal with setbacks, whether they come at us early on or even late in the process, which can be even demoralizing?
00;15;28;07 - 00;15;44;16
Tom Schryver
Yeah, I've yet to meet an entrepreneur, successful or otherwise, who didn't have setbacks. Right? So that is inherent to the process. And I think number one is my advice to people to say just find a way to be comfortable with that. You're going to wake up one morning and some unexpected negative thing is going to have happened. Right.
00;15;44;16 - 00;16;16;06
Tom Schryver
And that's just the way unfortunately, it is. There's no way to completely isolate out of that. So the question is, what do you do about it? And within any one of these things is information. That's the key thing is the first thing to do is to say, let me extract the information that I'm gathering. And the information might be that the supplier that I thought would supply me is no longer willing to do so, or the partner is not going to partner or my marketing strategy to get my customers to be aware of who I am and even show up on my website isn't working as well as I thought.
00;16;16;08 - 00;16;34;24
Tom Schryver
Everyone of those things has information in it. It's a question of what you do with that information next. That's the key thing. And so this gets to an entrepreneurial concept that we call a pivot, pivot. Think about basketball, right? You've got one foot planted on the ground. You're moving the rest of your body around an axis. You're changing direction.
00;16;34;24 - 00;16;55;10
Tom Schryver
You're not changing the entire space you're in. You're not moving both feet because that's traveling. Right. And I'm pretty sure that's against the rules. You're keeping one foot planted, but you're moving your body around to look for open space where you can go. And so these setbacks are never fun, not something anybody enjoys. And I think it's important to kind of sit with that as well.
00;16;55;12 - 00;17;16;21
Tom Schryver
Bad news is bad news, but take the information out of it and then use it to say, okay, so if that door is now closed to me, that's information that I have now about reality that I didn't have before. It was always closed. I just didn't know it. Now I know that it's closed. Where can I look for potentially open doors that I can now go through?
00;17;16;23 - 00;17;21;02
Tom Schryver
Right. So it's a question of using the information to try and design a good pivot.
00;17;21;04 - 00;17;37;17
Chris Wofford
For those of us who don't have the benefit of a Center for Regional Economic Advancement and the expertise and wealth of research and scholarship that's associated with Cornell University, which is most of our audience, are there similar local resources, incubators, hubs for people in the U.S. or even outside of the U.S.?
00;17;37;21 - 00;17;55;25
Tom Schryver
Yeah, absolutely. So entrepreneurial community is a really important thing. And there's been a lot of scholarly research that shows that when people operate within a community, it's the old it takes a village, right? People do far better when they're part of a community than when they operate on their own. And there's a lot of research that backs that up.
00;17;55;25 - 00;18;21;10
Tom Schryver
And very fortunately, it's not just Boston, New York City, Silicon Valley that these communities are operating now. They're all over the country. There's really vibrant startup communities in Chattanooga, Tennessee, and nearby here in Rochester, New York, and of course, here in Ithaca and in Boise, Idaho, all over the country. And usually there is a kind of center mass or center of gravity for these communities.
00;18;21;10 - 00;18;43;02
Tom Schryver
And very often it is programs that might have a name like a business incubator, business accelerator or some other startup community. And so if you're listening to this podcast and you're wondering where to look yourself, that's where I would start. I would look in your own town, look for an incubator, look for an accelerator, look for a startup meetup, something like that.
00;18;43;02 - 00;18;53;29
Tom Schryver
Chances are there are going to be free events that bring that community together that you can go to and join and start to meet people and then start to benefit from being part of that community.
00;18;54;01 - 00;19;01;09
Chris Wofford
We're at the part of the journey now where we need to prepare to pitch the idea to capital investors to get some money for this thing. How do we approach that?
00;19;01;12 - 00;19;21;14
Tom Schryver
Yeah, so first thing is I find a lot of people making a key mistake. So sorry to start in the negative, but I'll try and steer people away from doing something that's not helpful. Very often I'll see people say, I have an idea. How do I get money to see if my idea is viable? And the answer is you don't.
00;19;21;16 - 00;19;54;13
Tom Schryver
What those people are really asking is they would like someone else to take the risk of whether or not their idea is viable. And from an investors perspective, that's not really a great trade off. So what you would find instead is an investor is going to look at it and say, What have you been able to do cheaply for free to test your core hypotheses and assumptions so that the thing that is next to do is something that is more expensive, requires capital, financial resources is to go to the next step.
00;19;54;15 - 00;20;25;16
Tom Schryver
And so what I would do as an entrepreneur is really think hard about all of the assumptions that underlie the business idea problem solution fit the business model. What are all the things that you can do to test whether or not your customers are who you think they are, that you can find them, that they have the problem or job to be done, that you think that they do, that they're motivated to actually get that job done, that they have the resources to pay for a solution that your partners are willing to partner with you, that you can acquire the resources and so on.
00;20;25;18 - 00;20;51;10
Tom Schryver
And this is really a planning activity. And the way we look at that planning activity is foundationally based on stating assumptions or hypotheses and then testing them experimentally so that by the time you get out to ask an investor for money, you have gone and answered all the questions that you can answer cheaply or for free, so that their next step of what they are funding and the value that can be created with their funding is more clear because that's what's in it for them right?
00;20;51;12 - 00;21;03;15
Tom Schryver
You want their money to create value. They want to put money into things that create value. You can do the planning, run these experiments to make sure that you're articulating a plan to do exactly that.
00;21;03;18 - 00;21;09;24
Chris Wofford
Tom Schryver, thank you so much for joining us in the studio today and helping us work through what makes a good business idea and how to make it happen.
00;21;09;26 - 00;21;13;16
Tom Schryver
It's my pleasure.
00;21;13;19 - 00;21;27;13
Chris Wofford
Thank you for listening. And be sure to check out the episode notes for more information on Cornell's online startup funding and finance certificate program, which happens to have been authored by our guest, Tom Schryver. So thank you for listening to the Keynotes podcast and we'll see you next time.