My simple framework for quickly prospecting lucrative ideas is a multistep process:
i. Inspect what current solutions exist in your field of interest; then ask, can I implement a far better solution? If yes:
ii. Will my far better solution be valuable enough to compel existing customers of currently available solutions to switch? If yes:
iii. Can I charge equal or higher margins than existing competitors and still attract their customers?
The first provides directional validation of your idea from existing competition. It tells you that the business idea is viable and has an existing market.
The second forces you to adopt a realistic measure of the importance of your idea. Something can be very valuable by itself, yet, not critical enough to force an inbound migration of users.
The third ensures you’re not merely competing on price and scrapping for low margins and leftovers. This will severely affect your compensation and profitability. It implies you will work twice as hard as (possibly) better-resourced competitors for less than half the reward.
Also, what happens when your competitors crush you on pricing? Or worse still, fill the gap your solution thrived on?
Business mostly involves capturing the margins you can, while you still can.
In other words, the killer formula for a lucrative idea is: highly viable, compelling, high margins. Expressed as (eponymously named) Chu’s Equation:
viability * margins / compelling (v*m/c)
I call it the VCM framework (viability, compelling, and margins). Can this work? Is it compelling enough to attract customers? Can I make high enough margins?
People will mostly switch for two main reasons:
i. Critical to their needs but not provided by current solution, or
ii. Frustrated by the implementation of current solution.
Not all gaps are created equally. Some gaps —no matter how well-filled— will not incite customers to switch.
