Concept development
(classnotes build on chapter 9 of Venture Planning Field Guide. 2004 Edition. Kauffman
Foundation)
Introduction
A business concept is a set of thoughts that communicate to others the precise nature of the
propose enterprise. Or more formally, a concept is a set of cohesive ideas about how to create
and deliver value to a market.
It is not sufficient to say: “I want to open a restaurant.” Such a statement tells the listener little.
Instead, a potential restaurateur might say, “I intend to open a restaurant featuring moderately
priced Mexican food served in an attractively decorated Spanish motif building located in the El
Paseo Plaza of Palm Desert, California. In addition to the traditional fare served in such eateries,
we will develop specialty dishes, appetizers, and drinks that will be ours alone.” Now, readers
have a better idea of what the entrepreneur proposes to do. And they get the idea that he or she
has clearly in mind the precise nature of the venture and that much though has already been
given to it.
Successful concepts tend to differ significantly in meaningful ways from those of competitors. A
“me too” concept is weak.
A conceptual model
The model should precisely explain the following:

What value is to be exchanged?

To whom?

By what means?

Where?

Made by whom?

Marketed by whom?

Financed by whom?

Conceptual flaws.
Many new enterprises are doomed from the start because the basic concepts upon which they are
based are somehow fatally flawed.
Problems:

The new product simply will not work

No real need: Business fail when they don’t fill some need perceived by enough people to
make operations profitable.

Hidden traps: A product may threaten the career of the person who is supposed to buy it—
Always assess the intended customer’s reaction to the concept. Most hidden traps lie in the
minds of the intended customers, but not always, sometimes they are physical. For example
a line of 12 plastic disks called Astro Wheels encountered great difficulty obtaining
distribution in the retail outlets it needed (supermarkets, drug stores, and gift shows), because
the size of the disks required that they be hung on a wire rack that simply did not fit
comfortably in those stores. “It just isn’t worth the bother” was an often heard comment.

Unfortunate economics. The cost of some concepts is just so high that they won’t pay
enough to make the venture profitable.

No protection. Some concepts, if proven sound, can be easily copied by other organizations
capable of quickly exploiting the market, perhaps driving the entrepreneur from it. Note that,
sometimes, a venture’s protection lies in the smallness of its market niche; it can make
money serving some small segment of the market while larger firms cannot.

Obsolescence. Many concepts are so faddish that an enterprise based on them has only a few
months to make its profits.

Installation. Many concepts sound great until the realities of placing them into use are
confronted. Customers don’t buy products or services, they buy benefits. They buy
solutions to their problems, which are not solved until the concept is in place and working
satisfactorily.

Education. If the new product will be successful only after the customer has been educated
watch out.

Changing consumer behavior. A concept that requires a change in consumer behavior will
be resisted unless the rewards are obviously sufficient to motivate the change in behavior.

Assumptions. They are unavoidable but watch out some come be devastating: An
entrepreneur may assume that the selected store locations can be properly zoned. If the
locations cannot be zoned for the projected activity, then a new plan is needed. After
identifying the assumptions, the entrepreneur should try to find information that validates
them.

Inconvenient. Legions of retailers have floundered when they assumed that their intended
customers would go a little out of their way to patronize their out-of-the-way store (poor
location) because of its superior offering, be it lower prices, assortment, or service.

Service requirements. Logistical difficulties have ruined many concepts.
Strong attributes of successful products

Involves significant savings

Solves serious problem

Offers convenience

Fits existing scheme of things

Attracts media attention

Clearly identifies market

Captures a monopoly

Joins a rapidly expanding market

Promises a big upside; low downside
Writing a concept
The acid test for a well-defined concept statement is to hand it to a stranger and have him or her
relate back precisely what the proposed business is.
Even when the concept is clear, it will change over time s the entrepreneur learns more about the
market and the economics of the new venture. The concept statement will be reviewed and
modified as additional information is gathered from the answers to other questions presented in
the planning process. The last section completed in a feasibility or business plan is the executive
summary, and the concept statement becomes the basis for this section.