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From Idea to IPO: Where Do Ideas Come From?

04/18/2013 02:04 pm ET | Updated Jun 18, 2013
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What is really new anymore?

If you tell me the latest new thing, I'll tell you what idea was innovated to create it.

Tell me about Vine and I'll tell you about YouTube.

Point out the newest Apple Gadget and I'll show you 10 products they innovated to create it.

This doesn't diminish anything that these companies have done. They are great successes that have built great products.

But it does force us to take a second to recognize that we are no longer inventing, we are innovating; and that is where ideas come from.

We are now, and have long been an innovation economy, and you know what...That is A-OK!

Anyone remember Friendster or MySpace? They were first to the market for what is now recognized as mainstream Social Media.

Now, let's take a look at the ideas and start-ups that blossomed out of the growing Social Media Space.

  • For Facebook it was exclusivity (Harvard.Edu) and to some extent simplicity (Minimal Customization) that set it apart from other social sites that were out there like Friendster or MySpace.

  • Twitter came into its own as a "Microblogging" platform that limited posts to 140 characters or less.
  • LinkedIn took the approach of being Facebook, but focusing 100% on the professional user.
  • These three companies are now the largest in their industry, however not one of them created the industry. Leaving you to wonder what is next and whether or not the products and services we are using today will continue to our chosen products and services in the future?

    Innovation is unequivocally the greatest opportunity for the next big success. And in order to have the next big success you need to have the next big idea.

    Begging the question, where do great ideas come from?

    First and foremost, great ideas have one thing in common. They are almost always disruptive. After that, I propose that great ideas come from 4 broad areas of innovation which I refer to as...

    • Problem Solving
    • Spontaneous Combustion
    • Pent Up Demand
    • Continuous Improvement

    What many sources won't tell you is that a great idea alone won't get you there. It will take a lot of hard work and a little bit of luck and probably some money to get that idea on the big board.

    But we can talk more about that later. For now, let's look at the 4 areas of innovation where ideas come from.

    Problem Solving - Your Day to Day Challenges Become a Source of Inspiration?

    Did you know that Standard Oil only discovered gasoline as it was determining what to do with the byproducts created by their manufacturing of kerosene? While Standard Oil was a giant, it was that type of innovation that helped them grow. Beyond gasoline, Standard was responsible for the creation of other products such as Vaseline and Chewing Gum.

    While Standard Oil is the exception rather than the rule, almost every company faces certain challenges on a daily basis and sometimes creating the solution becomes a business bigger than the business itself.

    Ironically, did you know that most Gas Stations make more money on their convenience stores than they do on the gas itself? Think about the evolution of the Mini-Mart.

    There are many instances where problem solving became the next big idea, can you name any?

    Spontaneous Combustion - The idea doesn't actually blow up, but it comes out of nowhere

    The gist for ideas that fall into this category is that they come out of almost nowhere at the most random time. It is that moment when the bell goes off in the entrepreneurs head and says, "Why isn't anybody doing that?"

    Occasionally the idea is completely new and different.

    Consider what Groupon did. Essentially they built a category that wasn't there.

    It seemed like one day it was every man (woman) for themselves in finding the very best deal, and then overnight came Groupon and getting a deal for dinner, a massage or a haircut became a community thing.

    Showing two things.

    First, the viral nature of the marketplace today and second the fickle manner in which we can love an idea and ever so quickly grow tired of it. (For more information, visit Groupon's stock ticker)

    Did you know that Groupon was offered 6 Billion dollars at their peak by Google?

    I don't think Andrew Mason will ever struggle to eat, but he and the board members that said no to that offer probably wake up in a cold sweat from time to time.

    Sometimes ideas that fit into the spontaneous category are a mere micro improvement. It makes me think about the massive trend toward these self-serve frozen yogurt shops. Let's charge more to let you get the ice-cream yourself and put your own assorted toppings on it. Well guess what, the creators of many of these yogurt shops are crushing it right now.

    Sounds an awful lot like 4 dollar cups of coffee? Maybe consumers can be suckers?

    Pent-Up Demand - The Market Wants It, But No One Has Built it Yet

    I put dibs in a long time ago on the teleportation device. The only reason this business hasn't taken off so far is because I have no idea how to build one and I couldn't begin to afford the person who does (If such a person exists).

    However, sometimes pent-up demand is for something that can be built, but just hasn't been yet.

    A good example of this type of idea is Tesla Motors. While Hybrid Motors were the "Quicker" to market solution for building more fuel efficient automobiles, Tesla chose to go after the more coveted fully electric car. An endeavor that required not only tremendous knowledge, but massive cash resources.

    But when you think about it Tesla is really just substantial innovation of the automobile rather than the creation of something completely new, but the market has been clamoring for the fully electric car and Tesla had the wherewithal both financially and technically to make it so.

    Now, will Tesla ever sustain a long term profit?

    Continuous Improvement - Making A Big Business out of Small Improvement

    More often than not, ideas come from innovating on what is already there.

    This makes me think of a classic commercial, which later became a slogan for BASF. For those that still watch commercials (Tivo was a pretty cool idea) Does anyone remember the famous tagline that BASF used?

    "We don't make most of the things that you use, we make most of the things you use better."

    BASF is a multi-billion dollar global chemical company and it is entirely possible that you have never heard of them. They have made a fortune on innovation and enhancing...

    In their case they have done it at the micro-level, truly putting their touch on products we know and use like make-up, plastic bags and the interior of your car.

    BASF is just one of many companies making things better inches at a time.

    Some of the most disruptive companies in the market use simple continuous improvement to bring ideas to life. Who has an iPhone 5? Not that different from the original.

    Ideas Come From You

    The next big thing may just be right in front of you.

    Whether figuring out how to fix a problem around the office and then realizing you could fix the same problem for many, or taking a product that is working and making it just the slightest bit better, it is the entrepreneur with an idea and the willingness to take a chance that helps bring ideas to life.