The new business road test

The new business road test – John W. Mullins

Summary of the book “The new business road test”: Most start-ups fail because entrepreneurs don’t sufficiently test their idea before going to market; this book gives us a 7-step method to give your business a test ride before you even write the business plan, allowing you to reject bad ideas and avoid wasting valuable resources encouraging the wrong horse.

The new business road test

Chapter 1 : What Entrepreneurs and Executives Should Do Before Writing a Business Plan

La passion. La conviction. La ténacité. Voici des traits communs à la plupart des entrepreneurs, sans qui ils ne pourraient pas affronter les challenges, les revers et les coups durs qui se tiennent entre leur idée révolutionnaire et sa mise en action.

The best entrepreneurs, however, have something more: a willingness to get up every morning and ask themselves this simple question: “Why is my business going to succeed when most fail?”. In other words, “What’s wrong with my business idea, and how can I fix it?”

The 7 steps of the book The new business road test are the 7 areas of attractive opportunities, which fall under three main elements :

  • The market: potential and current customers who are willing to buy your type of products to satisfy their needs or desires.
  • The industry: competitors who offer products or services similar to yours.
  • The key people who make up the company.

The market and the industry are analysed at the macro and micro level, which is 4 of the 7 steps of the test round. The analysis of key persons consists of at the level of :

  • The team’s corporate mission, their personal aspirations and their ability to take risks.
  • The team’s ability to act on the critical success factors.
  • The team’s connection up, down, and across the value chain – suppliers, customers, competitors.

and form the last 3 of the 7 steps, which are detailed chapter by chapter in The New Business Road Test. Each chapter includes between one and four detailed case studies of small and large, known and unknown, successful and unsuccessful businesses to illustrate the author’s point, which I have not reproduced here. I have, however, indicated in brackets the companies studied in the book. Follow the guide.

Chapter 2: Will the fish bite? (micro market analysis)

If you already have an idea for your business, you probably think it’s a good idea.

“Of course customers will buy!” you probably say, “it’s much faster (or better, or cheaper) than what they’re using right now”.

While you may be right, chances are that, based on the accumulated experience of generations of entrepreneurs who have gone before you, you may not be so much right, or even maybe you’re wrong!

But without targeted customers who have needs to be satisfied, your beautiful business project will turn out to be an engine, no doubt fantastic, but one that doesn’t have enough fuel to power: its customers, and the resulting sales.

There are four crucial questions you need to answer to understand your opportunities at the micro level of the market:

  1. Is there a target market segment that we can enter and where we can offer the customer clear and convincing benefits or – even better – solve their problem, at the price they are willing to pay?
  2. Are these benefits, in the customer’s mind, different and superior in some way – better, cheaper, faster, etc. – to what is currently on offer?
  3. How big is this segment, and how fast is it growing?
  4. Is it likely that our entry into this segment will give us the opportunity to enter other segments that we would like to target in the future?

The answers you will be looking for, however, will vary depending on the type of business you want to create and develop. If you want to create a fast-growing company that eventually becomes a multinational that will one day make you rival Richard Branson or Bill Gates, you will need to answer “yes” to the first two questions, “large and fast-growing” to the third, and “very likely” to the fourth.

If your dream is rather to build a simple and satisfying lifestyle with a company that flies under the radar of the big competitors, then a small market with limited scope will be fine.

Although world domination may be their ultimate goal, most successful entrepreneurs start with a single market, targeted like a laser, and often niche markets that are rather small. How are these markets defined? In three ways:

  • Who the clients are, in demographic terms (age, gender, education, income, etc.). For B2B companies, the demographic terms refer to the industry in which the customers do business, plus the size of the company and other characteristics.
  • Where the customers are, in geographic terms.
  • By how customers act, in terms of behaviour or lifestyle. For BtoB, segmentation by behaviour refers to differences in product usage.

Different market segments have different needs, and usually require different solutions.

Many companies succeed because their creators find a new way to segment and target an existing market, often in terms of behaviour. Doing so allows entrepreneurs to target a segment defined by behaviours, with benefits that are uniquely designed for that segment and not offered by other solutions.

Companies studied : DoCoMo’s iMode service, Miller Brewing Company’s Lite beer, Nike, .

Chapter 3: Is it a good deal? (the macro analysis of the market)

Having a target market where customers are likely to buy your products is a good start, but it only scratches the surface of the tools you need to use to assess your opportunity. After analyzing the market at the micro level, you now need to go 30,000 feet to analyze the market at the macro level, asking yourself three crucial questions:

  1. Is my market big enough today to allow different competitors to target different segments without stepping on each other’s toes?
  2. What are the predictions for the short-term growth of your market? (In the absence of information to the contrary, the recent growth rate of your market may be the best indicator of growth in the near future.)
  3. What are the predictions for the long-term growth of your market (this will be strongly influenced by macro trends: economic, demographic, socio-cultural, technological, legal, natural)?

As before to answer these questions you need to know what you want. If you have a long-term perspective and want to build a large and sustainable business that creates value over time, you will be concerned with the answers to all three questions. If you want to create a small business in a protected niche market, then questions 2 and 3 will be less crucial for you.

In addition, large and rapidly growing markets are attractive to investors who are looking to get the maximum profit from their investments. If your goal is to build a business that you can control without having a board of directors or other controllers looking over your shoulder – apart from bankers perhaps – then the fact that a market is very attractive may push you away: such a market attracts many competitors financed by deep-pocketed investors, which may also force you to resort to them and reach a certain critical size. Not exactly what you had in mind.

In this case, a smaller and perhaps more stable market, or a market niche – too small for the big guys to handle – could be much more attractive, allowing you to fly under the radar.

Companies surveyed: Hero Honda, Whole Foods Market, EMC, Thinking Machines.

Chapter 4: Is it a good industry? (macro analysis of the industry)

Michael Porter identified in the 1970s the five forces that determine the attractiveness of an industry:

  • The threat of potential entrants
  • Clients’ bargaining power
  • The bargaining power of suppliers
  • The threat of substitutes
  • The intensity of competition

To understand them well, let’s look at them through the story of François, ten years old, living in the suburbs of a big French city:

It’s a quiet neighborhood of suburbs, mostly inhabited by retired people. For the past two summers, François has spent time developing a profitable small lemonade business. His lemonade stand consists of a folding table and a large poster pinned to a pole. His lemonade recipe is his grandmother’s, an acclaimed combination of lemons, sugar, water, ice and a little orange juice.

François has an excellent system. Every Monday, his mother goes to the local supermarket to do her weekly shopping. He makes her a list of the lemons, cups, sugar and orange juice he needs, and stores everything in the unused fridge in his garage. Mum is very proud of her entrepreneurial son and is a very reliable supplier: every Monday she supplies him with all the ingredients he has asked for, and then asks for payment for the products.

With a neighbourhood full of retirees, very few adults have a job. This is wonderful for François’ business, as there are many people walking in the street all day long. And those grandparents melt away at the sight of a few children’s faces – and François’ is especially cute. Although Francois is somewhat reluctant to get his cheeks pinched all day, he can suffer from it, because he knows that adults find it hard to say no to a glass of iced lemonade from such a cute child.

But why don’t the other kids in the neighborhood get into this lucrative market? The reason seems to be that François’ brother, Jacques, who weighs 70 kilos at only 13 years old. Francois gives him 10% of the profits to discourage the other children from entering this market. And no child has dared to start his own lemonade stand.

François is very happy: at the end of last summer he bought a brand new mountain bike, and this summer he is saving up for a games console.

Now let’s take a look at Porter’s five strengths in François’ case:

Readers of this article have also read : 7 Steps to Conquer Your Goals – by Brian Tracy

The threat of potential entrants

With only a little lemonade and a makeshift stand required, there is no significant upfront cost to enter this market. And it’s not an industry requiring advanced knowledge: anyone can understand how to make lemonade. And François can’t file a patent to protect his intellectual property – grandma’s recipe. But thanks to the work of Jacques, his brother, competitors are afraid to enter the market.

Jacques has done a fantastic job so far. The threat of potential entrants is very low.

The bargaining power of suppliers

Mommy buys supplies every week at the supermarket and doesn’t take a markup on these sales. She also asks her to pay only when she delivers, and the supermarket never runs out of supplies. If for some reason Mommy doesn’t want to be her supplier anymore, Francois is sure he could convince one of the pensioners to take over.

So the power of suppliers in François’ industry is very weak, which is good for his small business.

The bargaining power of customers

François’ clients, grandparents who are melting at the sight of the few children in their neighbourhood, have a perfectly decent amount of money to spend and seem to enjoy hydrating themselves with iced lemonade. With no other lemonade stands around, Frank’s customers have no way of choosing another supplier in their neighbourhood. These buyers are satisfied with the status quo and do not pressure François to lower his prices.

The power of lemonade buyers is weak. It’s good for his industry.

The threat of substitutes

Those who want a little change can buy Lipton Iced Tea a few blocks away in Sophie’s grocery store. Her prices are competitive. Some people carry small bottles of water or juice while walking.

In reality there are many substitutes for François’ product. This is the biggest drawback in his industry, but for now his smile always seems to keep customers coming back.

The intensity of competition

Thanks to Jacques there are no other lemonade stands in the vicinity of François. If there were, it is unlikely that they could offer better prices than those of François. However, the local grocery store does offer fresh lemonade, but at a much higher price. In addition, Francois has been selling his Lemonade Made by Francois for 2 summers now, and his brand has started to become known.

François’ reputation, coupled with the lack of other children in his neighborhood, makes the competitive landscape rather empty. Few rivalries is good news for François’ industry.

Overall attractiveness of the industry

The analysis of the five forces shows that François’ industry is rather favourable, since 4 out of 5 forces are positive. The only unfavourable one – the threat of substitute products – does not seem severe. François has chosen a good industry to start his small business. As a result, it is profitable.

In fact, few industries are as attractive as the one in this scenario, just as few industries are as simple and easy to analyze.

Defining your industry

Is François in the lemonade stand industry or in the retail industry? Is Easyjet in the airline industry or the transport industry? Of course you can’t evaluate an industry until you have defined it.

The real question is: is it better to define your industry precisely or generally? Defining it precisely has its merits. It can help you define who your main competitors are, which in turn can help you determine the level of rivalry more precisely. EasyJet competes with Ryanair, Air France, etc. But too precise a definition of an industry can, if you are not careful, prevent you from seeing relevant substitutes that are, in some industries, extremely important.

Defining an industry broadly has its merits, particularly by bringing substitutes directly into the assessment. It also makes it easier to consider changes in what you offer to increase sales. For example, seeing himself in the retail industry, François may decide to sell cookies at his lemonade stand. On the other hand, seeing things too broadly can lead to a lack of focus. And in many companies with little seed money, focus is essential. There are too few resources to do many things right.

So what’s the answer? There is no easy answer. It’s usually better to think both precisely and broadly. The key point is that your industry is made up of other vendors – not other customers or products – of products and services that can meet the customer needs you want to meet yourself.

Companies studied: the pharmaceutical industry, the DSL industry.

Chapter 5: How long will your advantage last? (micro analysis of the industry)

Why have so many American entrepreneurs tried to hit the jackpot in the beer industry but failed? Why do so many restaurants fail? Because in these industries, the threat of potential entrants is extremely high and new competitors arise every day. And there are almost an infinite number of substitutes as well – many ways to satisfy your hunger or get drunk. The result is that the failure rate in these industries is enormous, and the average return on investment is modest.

But despite these difficulties, many restaurants and beer makers are doing very well. Why are they doing well?

The main answers to fighting in an unattractive industry are at the micro level. We’ve seen above the importance of selling what your target customers want to buy. At the beginning of a business, doing this sometimes overcomes the difficulties inherent in an unattractive industry. If customers rush to your products because it’s better, faster, or cheaper, then you’ll be able to get ahead.

The hardest part, however, is to maintain that initial advantage, because offering higher product benefits at the beginning of a business is not enough to build a business that lasts over time. Imitation is widely practiced in most industries, both by existing competitors and new entrants, so your initial advantage can disappear in a heartbeat.

What most large companies do best, in fact, is to act as quick followers, letting small companies like yours take all the risks and then stealing the show with their vastly superior firepower.

So for aspiring entrepreneurs, the second key to success in a not-so-competitive industry is whether there are factors present that will allow the company to maintain its initial advantage over a long period of time.

An initial competitive advantage arises when the products offered provide benefits that – in the customer’s mind – are better, cheaper or faster than those offered by competitors. Such an advantage is more likely to last when :

  • There are proprietary elements – patents, secret agreements and so on. – that other companies are unlikely to duplicate or imitate.
  • There are superior organizational processes, capabilities or resources that others will have difficulty duplicating or imitating.
  • The business model is economically viable – i.e. the company will not run out of cash quickly. Economic viability depends largely on these factors:
  • Revenues are commensurate with the required investment and achievable margins.
  • Customer acquisition and retention costs and the time it takes to attract customers are viable.
  • Margins are adequate to cover the necessary fixed costs of the structure.
  • Operating cash flow cycles are favourable, including
  1. How much cash needs to be tied up (in inventory or other things) and for how long.
  2. How quickly customers pay.
  3. How slowly suppliers and employees can be paid.

Companies surveyed: Zantiac, Nokia, EMI, Ebay, Webvan.

Chapter 6: What drives your entrepreneurial dream? (mission, aspirations, willingness to take risks)

Every successful entrepreneur brings to his or her business an important set of elements that propel their entrepreneurial dream:

  • A mission that determines what kind of business to build and what kind of market to serve.
  • A set of personal aspirations that guide them in the level of success they want to achieve.
  • A certain propensity for risk that indicates what kind of risks are taken and what kind of sacrifices have to be made in the pursuit of the dream.

Phil Knight, the founder of Nike, had a mission to serve athletes and help them achieve the best possible performance. He probably wouldn’t have been interested in targeting another market. Jeff Bezos, founder of Amazon, had an aspiration to revolutionize the way people buy books and become one of the biggest retailers in the process. He would not have been satisfied with developing a company that was smaller and limited in scale and focus.

The point is that entrepreneurship – the pursuit of an opportunity regardless of the resources controlled by the individual – is a very personal game. Successful entrepreneurship requires a clear vision about what you as an entrepreneur want as a result of your effort. What is your mission? Do you want to serve the athlete market? Do you want to sell coffee? What level of aspiration do you have?

Do you want to be the next Richard Branson or the next Phil Knight, or do you prefer to develop a nice little family business that you can manage yourself? What kinds of risks are you willing to take? Are you going to invest your own money? How much will you invest? Are you going to pay yourself a salary at the beginning? For how long? Do you want to control your business, or do you want a smaller piece of a larger entrepreneurial pie at the risk of one day losing control of the business you started?

Readers of this article have also read: The Power of Now – Eckhart Tolle

Only you can decide that, and you have to decide. Without a clear mission, your efforts will be fragmented and lack purpose and direction. Without understanding your own aspirations, you will be unable to explain to others the help you need – for money, time, love and many other things – and why they should help you.

Finally, without identifying your risk appetite, which is different for everyone, you will be unable to demonstrate to investors that you are willing to share the risks you are asking them to take.

And it’s equally important that the three elements that drive your entrepreneurial dream – mission, personal aspirations, and risk appetite – must fit together as a coherent whole. You can’t aspire to greatness without tolerating some form of risk. You cannot aspire to greatness without a willingness to share ownership and control.

Company studied: Starbucks.

Chapter 7: Can you and your team perform on the critical success factors?

Just as almost every sport requires athletes who are physically at their best, every entrepreneurial adventure needs the fundamentals to succeed: a superior product or service, an efficient supply chain, motivated people, etc. Without these, a business cannot survive for long. But to get back to sport, it takes more than just being physically fit to win an Olympic medal.

What separates the good athletes from the very, very good ones? The very good are those who can consistently perform consistently on the critical success factors of their sport, whether it be speed, balance, tactical or other. The ability to perform on these critical success factors is the difference between good and almost good. Just as in the World Cup or in a tennis tournament where there is a significant difference in performance between winners and those who do not qualify, the same is true in the corporate world. Nokia and then Apple took off in the mobile phone market while Motorola and others stagnated. What causes such variations in performance in an industry?

We’ve already seen factors such as patent protection or more efficient organizational processes and capabilities that are difficult to imitate. But what makes the difference is the team’s ability to perform on the few critical success factors that make all the difference in performance from one company to another. So a common difference between winners and losers is that the winners have understood what the critical success factors are in their particular industry, and then compose their teams in accordance with those factors. The losers either do not identify the critical success factors or do not have a team capable of performing on them.

Even in a relatively unattractive industry, at least a few companies do quite well. The others bite the dust. In this case, entrepreneurs can succeed in difficult industries, but they must be able to :

  • Identify the specific critical factors for success in their industry.
  • Assemble a team that performs well on these factors.

Identify critical success factors

How to identify the critical success factors of an industry? Can they be found in the specialized press, on the Internet or in books? Unfortunately not. CSP knowledge in an industry lies in the experience of those who have learned – often the hard way – what things must be particularly successful.

Either you have this experience or you need access to people who do, and then there are two key questions to ask when identifying CSPs:

  • What are the few decisions or activities that, if bad, will almost always affect a company’s performance in a very negative way?
  • What are the few decisions or activities that, if done well, will almost always lead to disproportionately positive results on performance?

In retail – where John W. Mullins spent most of his career – the critical success factors are location, location and location. Retailers who are in great locations can make mistakes about a lot of things and still get away with it – at least at first. Conversely, those in bad locations can do everything right and yet struggle to survive.

To identify CSPs in your industry, ask the two questions of 15 or 20 successful entrepreneurs and executives in your industry.

Companies surveyed : Palm Computing, Schwinn.

Chapter 8: Your Connections Are Important: Which Are the Most Important?

The Mount Everest Base Camp has served as a temporary camp for many climbers wanting to reach the 8,848-metre summit of this mountain. The base camp has many roles, including acclimatizing climbers to the high altitude. Another role is to serve as a central communication node for the climbing teams perched much higher up the mountain.

Mont Everest

Thanks to radio communication technologies, mountaineers can stay in close contact with the base camp, and can communicate, for example, about the weather. This communication can make the difference between life and death, as knowing whether a storm is brewing can be a decisive factor in deciding whether or not to attempt to reach the summit.

The team leader therefore regularly contacts the base camp with a satellite phone. The base camp is in contact with many teams of climbers who are in many different parts of the mountain. So each team has a different point of view on the clouds and a possible thunderstorm coming up. Each team can give critically important information about the changing weather.

Choosing to communicate with your base camp before reaching the summit may seem like an obvious choice: with small reserves of oxygen and the difficulties of climbing, why risk braving difficult weather on top of it? Although lack of oxygen doesn’t play such a big role in the entrepreneurial world, the ferocity of the competition can make you dizzy. The speed of technological change can create new markets in a heartbeat.

Companies that have strong networks of contacts with a variety of viewpoints – including customers, suppliers, others in the industry and related industries – are better able to anticipate and understand the changes ahead and are therefore more capable of managing them.

Put another way, the legendary tenacity of entrepreneurs combined with the ability to change course – typically when changes in the marketplace occur – can make all the difference. Sometimes such changes in the market are favourable: sometimes luck can help. But luck is more likely to pay off when those running the business have the right connections that give them the information needed to help them respond to market changes quickly and skillfully. Otherwise, the company is unlikely to know how to take advantage of luck when it comes.

So you should ask yourself how well you and your team are connected above, below and across the value chain:

Connections with suppliers, competitors, distributors and customers can provide you with crucial first-hand information that can make the difference between the success and failure of your business. If you are not connected enough, start building your network now!

Businesses surveyed : Virata, Digital Equipment Corporation.

Click here to get a copy of the Book

Chapter 9: Making the seven areas work together

If you already have a business idea in mind, you’ve probably gone through the seven areas of study. And it probably shone in some areas and not in others. What can you do with this result?

Unfortunately, it is not possible to use a simple checklist or formula to interpret the results. Indeed, the seven domains interact with each other and their relative importance may vary. The wrong combination of factors can kill your new business. More importantly, enough strength in a few factors may be enough to compensate for the weaknesses of others.

One way to use the seven areas would be to give them a score and then add them together, 70 being a perfect score. But that would be too simplistic: instead, the author suggests giving a score to six factors (your entrepreneurial dream not being noticeable) by following these steps:

  • Consider your mission, your aspirations and your ability to take risks, so that you know what kind of opportunities you are looking for.
  • Look for an area where your opportunity score is outside the scale – for example, 12 out of 10 points. If you see one or two of these scores located in certain areas of the model, then you may have a high-potential opportunity. This can be the “moment of insight” that can completely change your life! If you are aiming for a niche business, which flies under the radar of the competitors, then this criterion is not so critical.
  • Look for all areas where your score is low – below 6 or 5 out of 10. Then ask yourself if a very good score in another area can effectively compensate for the problem. If not, then you’ve discovered that this opportunity needs more work. You’ll want to put more effort into developing and reshaping your opportunity, because you don’t want to have investors – let alone go to market – with critical flaws in your project. If you can’t find a way to compensate for the weaknesses you’ve discovered, then perhaps you should abandon your project now and find a more attractive one. Finding your Achilles heel before writing your business plan is not a bad result.
  • For other areas with an intermediate score, see if a redesign may be required to increase the score or compensate for them.

Areas where you have a high score

Which area with a sufficiently high score – 10 or even 12 out of 10 – makes a business project a winner, regardless of the score of the other areas?

The macro market

Here a very good score is never enough. Large and fast-growing markets are never, by themselves, a reason to pursue a business project.

The micro market

For a niche business project, a high score here may be all it takes. For an ambitious business project with venture capital investment, a high score here is essential, but by no means sufficient. A strong team is also essential, as well as an attractive industry at the micro and macro levels.

Readers of this article have also read: Think and Grow Rich: Napoleon HILL

The macro industry

If an industry is incredibly attractive – although few are – and most companies succeed in it, then a high score in this area may be enough for a niche company. Again, a good score is required for a more ambitious company, but is by no means sufficient.

The micro industry

The ability to maintain one’s advantage is important, but only if that advantage is enough to get started. So a strong score is good news, but only if the benefits to the customer are sufficiently differentiated and attractive to have value over the long term.

The mission, aspirations and risk-taking capacity of you and your team

This area is not notable. Rather, it functions as a filter to see if a particular opportunity fits with what you and your team are looking for.

The ability of you and your team to perform on the critical success factors and the connection of you and your team

Just because you’ve done this before doesn’t mean you can do it again in the future. And as Warren Buffet says:

When a management team with a reputation for brilliance takes over a company that has a reputation for bad numbers, it’s the reputation of the company that stays intact.

So success requires more than just a good team: it requires good scores in a certain combination of industry and market.

Areas where you have a low score

Conversely, can a bad score in one area kill your business project, regardless of the score in other areas? Let’s look at this.

The macro market

A low score here doesn’t have to be a problem. Innovation can achieve great success in a stagnant market.

The micro market

Here it’s different: if your product doesn’t offer any clear benefit, if it’s not different from what already exists on the market and you can’t find a way to modify it to solve this, then it’s better to put it aside and look for another opportunity. The only exception is when the industry is incredibly attractive and you want to build a small niche business, in which case you may have a chance.

The Macro Industry

A low score is not harmful here: good opportunities can be found in unattractive industries. The key to success then lies in precisely targeted, differentiated benefits and in the construction of complex, hard-to-imitate processes that provide the foundation for sustainable advantage.

The micro industry

What happens if you have a very attractive opportunity, but cannot protect it with patents and have no way to build superior processes and capabilities that competitors cannot emulate? Should that scare you off? Not necessarily, but it will set the bar higher for what you need to accomplish to grow your business. This is the classic advantage and disadvantage of being an innovator: if you can keep innovating to stay ahead of your competitors or build a reputation strong enough to win customer loyalty, then you can win. Another way to deal with this problem is to plan to sell your business before the competition gets too fierce.

The mission, aspirations and risk-taking ability of you and your team

The problems here will not kill your opportunity. But if your mission, aspirations and risk appetite are not consistent with the investors you are targeting or the level of resources you need, then the chances of getting venture capital are zero.

The ability of you and your team to perform on critical success factors

If you and your team could not perform on the critical success factors, you may have difficulty raising capital. The only exception is in cyclical market peaks – such as the one that created the Internet bubble – where anyone with a pen and napkin can raise funds.

Connecting you and your team

Does a bad score here kill your opportunity? No, not really. This factor is most useful in generating initial sales and seeing market signals that may indicate the need for a change in direction. So not having these useful connections is a risk factor, but it won’t break your business.

Five common pitfalls to avoid

The author gives us 5 traps he has commonly seen in his career:

1 – The Broad Market Trap

Investors often hear something like “My market is huge. If I can just get 10% (or 5% or even 1%) then we’ll be rich!” The problem with large markets is that other people like them too, and those other people are often established companies with deep pockets. For entrepreneurs, broad markets are only good when they deliver profits for at least one segment of it.

2 – The Best Mousetrap Trap

Especially in technology industries, entrepreneurs sometimes try to capitalize on new technologies just for the sake of new technologies. Doing this rather than asking how this new technology can help the target customer segment is a trap. A better mousetrap does not necessarily mean a better solution for the customer.

3 – The trap of the untenable business model.

Many of the failures of the Internet bubble had business models that were simply untenable. How to avoid this trap? Build your network in order to understand your industry and its economic parameters. Then do the math of your opportunity.

4 – The ego trap

The combination of a strong threat of potential entrants and a lack of opportunities to sustain one’s advantage may result in a large number of competitors pursuing the same opportunity, only to be scattered to the four winds. The only ones who should tolerate such an industry are those who are niche entrepreneurs and therefore fly below the radar. Otherwise it is easy to avoid this trap: stop before you start.

5 – The trap of excessive pretension

Some people manage to become serial entrepreneurs. They start business after business, always successfully. Those who succeed in this way usually choose opportunities that have no serious flaws and perform well. But many successful entrepreneurs found themselves one day in a boat that was sinking on all sides, despite their experience. How can this trap be avoided? Having created one or more companies beforehand is a great advantage, but that does not in any way negate the need to pay attention to the seven areas. Don’t rest on your laurels; do your homework. No one is invincible!

Review of the book The new business road test

When you are an entrepreneur and you have a business idea, it often seems to be the best in the world. We don’t understand that anyone can dislike it, and we are sure that customers will jump on our product and beg us to take their money 😉 .

The New Business Road Test offers a 7-step method of analysis of our business project, and allows us to determine its strengths and weaknesses and to make an informed decision whether or not to continue before we have invested significant time, money and resources. It’s not necessarily infallible – just because you score well in all 7 areas doesn’t mean your business is going to be successful, and vice versa – but this method from The New Business Road Test seems to me to be excellent because :

  • First of all, it forces us to sit down and think about our project long enough,
  • It makes us ask ourselves questions that we would probably never have thought to ask ourselves,
  • Making us consider possibilities that might have eluded us…
  • And I think that applying it to any business creation project can significantly reduce our chances of betting on the wrong horse… and significantly increase our chances of success!

The new business road test should therefore be part of every entrepreneur’s toolbox, especially since all the concepts presented are systematically illustrated by real case studies of small and large companies, known and unknown, that have succeeded or failed. I have not presented these case studies here, but they are really excellent and provide a good understanding of what the author is presenting. In addition, a section at the end of each chapter of The New Business Road Test is dedicated to investors, and clearly the method proposed by this book is also excellent to help investors choose in which companies to place their hard-earned marbles.

The second part of the book (not reviewed here) contains some tools to add to your box: a methodology to interview your prospects for micro market analysis, a macro market analysis matrix, an industry checklist, a methodology to conduct marketing research yourself, and how to make effective forecasts.

In terms of flaws, it could be criticized for a style that is sometimes a bit academic and dry, with a few repetitions here and there. But on the whole this book reads quickly and well. It gives us precise steps and questions to determine whether we can commit ourselves fully to our business project.

As usual, reading this book can save you a ton of money and years of your life. A must-have.

Click here to get a copy of the Book

Tell me the weaknesses of the book below.

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