Quantum mechanics – a fundamental theory in Physics that studies the behaviour of subatomic particles – continues to puzzle many including some renowned physicists. The intricacies of the working of this branch are explained by physicists through various models and experiments. One among them is a twentieth century thought experiment propounded by Austrian physicist Erwin Shrödinger. He suggested that when a cat is placed inside a sealed box with a poisonous gas and a radioactive element, there are equal chances that the cat stays alive or dies depending on whether or not the element reacts with the gas. Until the box is opened, the cat is simultaneously “dead and alive”. This is known as the paradox of quantum superposition.

Leaving behind the complicated quantum mechanics and the innocent feline for a while, take a moment to ponder over this question- have you ever imagined yourself in Shark Tank pitching one of the many business ideas that came to you on a hazy afternoon? You’re not alone. Most of us stumble upon such ideas that we believe can make our lives easier. And that’s not a bad thing as many services that we avail today, say AirBnb or Dunzo, were once such ideas that got transformed into successful business models.

As the inner entrepreneur in you begins to feel the rush of adrenaline after reading the success stories of these companies, here’s a reality check: not all good startup ideas are actually one. Some cannot even qualify as an ‘idea’. The question which pops up now is: is there a criteria for an ‘idea’ to be perceived as a ‘startup idea’, or are all those ideas that rattle your mind, however unique they might be, feasible enough to be launched in the market?

Let’s dig a bit deeper.

For a startup idea to do well in the market, it needs to have a good business model, adequate funding, and engage in marketing to reach out to the customers. Now while this sounds perfect, it actually isn’t.

Many entrepreneurs have come up with a solution as a startup idea, and then tried to find the problems that could be addressed by their product, which is misleading. The ideal thing to do would be to first find a prevalent problem and then try to come up with an idea that can solve it. Since many entrepreneurs fail to realise this, they later struggle to sell their product in the market as people don’t really have any incentive to buy it.

So should budding entrepreneurs find a good enough problem to be solved first? Yes. Product development, marketing, and a gazillion other things can be taken care of later, since it is the idea that sellsin the market, not just the product. People want to pay for what they believe can solve their problems and add value according to their perspective.

Now it remains questionable as to what distinguishes a ‘brilliant startup idea’ that has the potential to do extremely well in the market from mediocre ones, which usually run out of business within a few years. Fret not, as economists and businessmen have come up with a way wherein you can ‘validate’ your idea before jumping into the formalities to set up your company.

‘Idea validation’ or ‘Market valuation’ is a process whereby entrepreneurs assess the economic, technical, and financial feasibility of their supposedly genius business solutions. A lot of steps are involved in the process, requiring time, sweat, and money. If properly implemented, it can help a long way in growing your business. But, is the process really worth the effort?

The Black

Now while this process may seem lucrative to entrepreneurs (as they get a kind of ‘pilot run’ of the product before launching it in the market), there are some drawbacks of it. First, it is an expensive affair. Unless and until the entrepreneur has huge lumps of money to shell out, this merely acts as a barrier for those who have good ideas but lack funds. Second, the process is time-consuming. Though for all prudential reasons, a preliminary screening is fairly reasonable, market validation may deprive businesses of the opportunity to cash out profits at the right time. An idea might have very good chances of succeeding in the market at a given instance, but taking out time to test it may mean losing the idea to competitors who might come up with a very similar business model, and launch the product way ahead of the originator. Third, market validation in no way guarantees that your product would succeed. It merely assesses the viability of your idea. In other words,spending fortunes on pre-selling before even kickstarting your business may sometimes lead to incurring heavy losses. This comes in the form of sunk costs, expenses for alpha and beta tests, marketing expenditure, etc. So, if things go south, your startup idea, aka the ‘cat’, would be found lying dead inside the box(i.e., the market).

The White

Despite the costs involved, idea validation is a sine qua non for assessing the financial and economic feasibility of the product. Without it, any plan laid out or any projections for future growth can go futile. If the results of preliminary tests do not seem very encouraging, the idea could be abandoned; and this saves a lot of time for the entrepreneur as he/she ensures that efforts are not wastefully channelized in building a product that has bleak prospects of growth. A lot of risks are also averted before making substantial investments for the long run. As an outcome, we have an estimated blueprint of how the market would react to the product being launched. Thus, if during the market validation process, all the elements are in your favour, then you would find your ‘cat’ minting money inside the box.

The Grey

Market validation by itself will not magically remove the obstacles and pave a way for the product’s grand success. In spite of being absolutely essential, the process is useful only up to a limited extent. This is because there is a huge difference between a small group of prospective buyers reacting to the product and the entire target market reacting to it. The sample size and diversity play a vital role here. How people from a region react could be starkly different from how those from another react. Geographical and cultural differences cannot be easily reflected in pre-marketing studies. Also, competitors too might have come up with a similar idea earlier but then would have abandoned it for reasons like poor feasibility, higher chances of replication, or less profitability. Thus, it also becomes important to analyse the reasons for non-existence of competitors. It is also argued that time spent on idea validation can instead be used for building brand awareness after launching the product in the market. Rolling out the product first and then gradually fixing flaws is also equally pragmatic.

Now, if Schrodinger were an economist, he would probably come to a conclusion that his cat would be minting money and looking for company liquidators at the same time. But as an entrepreneur, one needs to look out for ways to leverage the benefits of market validation and try to go high up on growth trajectory!

By Subhashini K