The current pandemic is boosting demand for some business and slashing it for others. Covid-19 beneficiaries include home remodeling companies, makers of personal protection equipment, suppliers of lumber, and purveyors of online shopping and payment services. Conversely, business that depend on people being physically close together — e.g., airlines, cruise ships, restaurants, bars, gyms, and shopping malls — have suffered near-fatal contractions.
Surprisingly, the winners and the losers share something in common: Their leaders should be thinking about big new ideas to boost their growth. The Covid-19 losers urgently need ideas that will reorient their strategy so that the pandemic becomes a tailwind rather than a headwind. The Covid-19 winners must find ways to sustain their growth when the pandemic ends.
Here are three things you must do well to turn a big idea into big revenue.
1. Earn the Right to Believe in Your Idea.
Many founders I’ve listened to have a misplaced belief in the brilliance of their ideas. While passion for a new business idea is essential, that alone will not turn the idea into a big source of revenue.
A justifiable belief in your idea depends on three things:
- You’re targeting real customer pain that existing companies ignore
- Your team has the skills to design, build, and sell a market-beating solution
- The market opportunity for the solution is large — at least $10 billion
If independent research — such as interviewing at least 100 potential customers (which I have almost never seen in a business plan) — proves that your idea passes these three tests, I think you’ve earned the right to believe in your idea.
2. Keep trying, failing, and trying again.
How do you to turn such an idea into a revenue-generating business? The concept is simple — build a quick, inexpensive version of the idea, get feedback from potential users, and try again. Add in a huge dollop of unexpected bad and good luck and you could succeed.
PayPal co-founder Max Levchin told me in August 2012, how this worked for him. Levchin’s contribution to PayPal did not start out as the famous online auction currency for eBay. Instead, the company — originally called Confinity — delivered security software for handheld devices such as PalmPilots.
That business imploded along with demand for the Palm Pilot. But it spurred Levchin to think about handheld devices — then wallets. Levchin raised capital to develop an electronic wallet and when Confinity delivered the product, they received emails from people who were using part of their service as an eBay auction currency.
Levchin disliked what customers were demanding because it was not the purpose for which his team had designed the product. However, they decided to scrap their original idea after six months to focus on serving the eBay community. In 2002, PayPal, which formed two years earlier, went public, enabling Levchin to cash out his 2.3 percent stake.
3. Solve the Small Scale Problem First.
Even though your business may urgently need a new source of revenue, make sure you can prove that your idea works on a small scale before trying to get big fast. If you don’t, you could end up like the grocery delivery service Webvan.
Twenty-one years ago, it raised $375 million in an IPO — achieving a peak stock market value of $1.2 billion. The company bragged about its 26-city expansion plan, signing a $1 billion Bechtel contract to build high-tech warehouses worth $30 million each. Then, it filed for bankruptcy in July 2001, after losing money every year.
CEO George Shaheen likened running Webvan to building a rocket to Mars — which was his way of explaining why Webvan decided to build a national network of warehouses and delivery trucks without testing whether it would work locally.
Board member Mike Moritz, a partner at Sequoia Capital, said that Webvan “committed the cardinal sin of retail, which is to expand into a new territory before we had demonstrated success in the first market [the San Francisco Bay Area].”
Follow these three principles and you can turn your big idea into sorely needed big revenue.