Editor’s note: The following is an excerpt from a new book written by Shirish Nadkarni, a Seattle tech veteran who co-founded Livemocha (acquired by RosettaStone) and TeamOn (acquired by BlackBerry).
You think you have come up with a brilliant idea for your startup. You have spoken to your friends and colleagues, and they think that the idea has merit. You have even done the preliminary market research and spoken to many potential customers, and feedback has been positive.
But how do you really know that it will form the basis for a great company? Figuring this out is no easy task. After all, VCs are paid millions of dollars in management fees, and even then, for the most successful investors, only one out of ten picks is a major hit.
To consider whether a startup idea has the potential to become a hit, it is important to consider the idea from a number of different strategic perspectives discussed below.
Incumbents are hard to beat on their own turf
Most markets you will target have existing players and market leaders that have been around for years. Incumbents are extremely hard to beat unless there is a major transformation in the industry that you can exploit first. Incumbents typically have a strong industry reputation, a host of features, a fine-tuned sales engine, and customer lock-ins that make it difficult for customers to consider a new player in the market.
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