29 January 2015

What to think about when coming up with a BI startup idea

Recently, I did the exercise of creating a business plan, following the single requirement that the business should be focused on Business Intelligence (BI). Almost all businesses nowadays are data driven, i.e. they incorporate some form of BI to drive the company decisions. However, the restriction for us was that our businesses had to deliver information, not only use it internally.

Now, even though I have been working in the area of BI for the past two years, coming up with a business idea from scratch was not an easy task. In this post I will share with you some of the learning outcomes of this experience, so that if you desire to start up your own BI focused business, you can benefit from what we learned.

First comes first. The first step to coming up with your business idea is to figure out what area you want to create an impact in. You want to make sure that your business idea is not only relevant now but that it will continue to be so in the upcoming years. The best way to figure this out, is to research the so called MEGA TRENDS that are moving the world. In our research about this, we discovered that one current trend was related to fitness and health, specifically to the need of changing people’s eating habits as a means to reduce public health expenses. We were particularly inclined towards this trend because we were personally motivated by it. Ideally, you should be personally motivated by the impact that your business idea will have, since this will encourage you to stick behind it.

Once you have identified a trend (or a couple of trends), take a moment to sit down and think of business ideas related to it. This sounds very easy, but the truth is that in our current world of distractions, sitting down, disconnected from all outer stimuli, focusing only on your creativity, requires some effort. Go to a quiet place, turn off your phone and start brainstorming. Take a pen and paper and write down any ideas that come to mind.

At another moment, go over the ideas from your brainstorming and stick with your favorite one or two. Once you have chosen an idea, it is time to refine it. This means analyzing who your clients will be, studying which competitors exist, and defining what makes you different from them. There are business tools for this like SWOT analysis and Porter's analysis. It is a very good exercise either to present this first refined version to someone, or to write it down on a document which you can come back to as your idea evolves.

Up until now I have talked about the creation of a business idea from a general perspective, not focusing specifically on BI entrepreneurship. Now let's focus on what's important to consider in the BI world.

The most important point to consider is this. In order to deliver analytics, you need one essential thing: DATA! Your business will depend on it, whether it is generated by your users or it will be provided by (or retrieved from) some supplier. We will analyze the pro's and cons of both approaches:
  • Data from suppliers. When I refer to this I mean that the data has not been generated by you or your users. A straightforward example of this are news feeds like Flipboard. Flipboard crawls the web to obtain news stories from different suppliers, to provide users access to different sources from a single platform. Similarly, search engines such as Google, store information about web pages, and links between them to provide you the most relevant results to a search query. The information of the webpages and links is not directly input by users to Google, it is obtained by crawling the web. The difficulty of this way of obtaining data is twofold. First and most importantly, you need to figure out a way to transform the data from the suppliers to your data model, and what is more challenging, you need to be able to automatically update data when it suffers changes. The second issue you may encounter is that there may be legal regulations over the use of the data you wish to store.
  • User generated data. The most obvious example of this type of business is Facebook. In this type of schema you do not have to deal with the problems of transforming and updating data, since you decide the format of what users can input. However, since you rely on user data, if you do not get users to interact with your platform, it is unlikely that you will become successful as a business. One of the ideas we had come up with while thinking about our business idea, was to create a platform to allow users to analyze job markets in different cities of the world. However, when realizing we would be directly competing for user data with a giant like LinkedIn, we quickly desisted.
I mentioned Google as an example of a business which uses data from suppliers. However, this is not really true, since Google's business model is mostly based on advertisements which are personally targeted thanks to user generated data. As a matter of fact, my recommendation is that whatever business idea you think of, try to find a way to combine both data you receive from suppliers and user generated data, since this will mitigate some of the risks associated to using only one approach.

This raps up my advice for coming up with an innovative business idea for a BI related company. Sounds pretty simple right? Even for those not planning on becoming entrepreneurs, I invite you to do this exercise since it provides a lot of insight as to what it takes to start a business and how the tech world is moving nowadays. Just as a final point, though this is included as part of the SWOT and Porter's analysis, I cannot stress enough the need to think about who will be paying for the service that your business aims to provide. 

In a future post I will cover next steps once you have come up with your business idea.

Good luck!

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