An entrepreneur must look into this aspect and must decide about how much value is going to be generated through its idea (for all the parties involved).
Yeah! parties, that’s important as the value of a business will be different when viewed from different perspectives.
OK lets take some example. Like Reliance entered the retail business. It will
– Add value for the consumers, as they will get better quality of product for maybe at cheaper price.
– Add value for the farmers/(sadly brokers as well) as they may get a better price and maybe by entering into long term contracts, they will get more or less even returns from their farms.
So by and large this is an idea that is seriously going to generate some value.
Now take a counter example,
Suppose some S/W engineer with entrepreneurial dreams, enthusiastically comes up with an idea of starting a portal on which you can order for your meal and it will be delivered at your doorstep within 1 hour. Now on the face of it he may say that his plan is also going to create some value as by tying up with some good hotel it will provide a good service to customers and for hotel as well it provide provide it a much wider and bigger customer base.
but in reality it is hardly going to create any value as –
– Such bookings through phone is already possible, So the quantum of value addition for customers is not that big.
– A lot will depend on the efficiency of execution.
Again i am not totally denying the idea, and will restate that a lot depends on the way of execution.
But theoretically this created value concept is very important, no doubt that this is a framework through which we can distinguish between an outstanding idea and a not so great idea.
Once an entrepreneur believe that his idea is going to generate a lot of value he need not look back, if his conviction is correct, he will never fail. You just see whatever till date has added value to the business(Like Microsoft, Google, Reliance or maybe your city’s most famous Sweet shop) has never failed, provided the initiator sustained for a time period that was long enough to yield result. And similiarly about the Dot Com burst in 2000, guys over-estimated the value they were going to generate, given the limited and apprehensive customer base of that time.
P.S. This apprehensive customer base part of the above sentense should be ignored as this factor is outside the concept of value generation, as it concentrates on the value generation through your business and ignores the current customer preference or inclination, believing that it will follow you if you are providing something that makes sense and provides additional value)
Where was the “dreams” part?