But to expand a new business idea to support a company, three elements need to be present – the problem / the solution / the market. Without all three, you don’t have the foundation to take a new business idea and turn it into a new company.
A New Business Idea in Healthcare
A few years ago, I was consulting with a company that had developed an interesting product. They contracted with hospitals to provide surgery using a flat-rate pricing model. The key to their strategy was transporting patients from around the country to the facilities they had under contract.
It’s actually a pretty good new business idea. By bringing the patients to the hospitals, they could focus their efforts on contracting with just a few select providers and concentrate all their volume in those facilities. And because those providers were getting the higher volumes, they would agree to reduced fees for the surgeries.
The Missing Element
The problem they were attempting to solve was the high cost for surgery. Their solution was a travel-based, flat-rate program. The part they were missing was the market.
People don’t usually travel for medical care unless there is a compelling reason. Travelling is a hassle. And travelling when you’re ill or recovering after surgery is even more difficult. Travelling is also expensive. So to make the program work, they would need to change people’s behavior.
The other problem is that for the most part, patients do not pay for their own surgery. They have insurance that pays the bulk of the expense. This means that lower cost isn’t a compelling reason for the patient to go through the hassles of travelling for surgery. Lower cost only benefits the insurance company, not the patient.
This company discovered that although they had found a problem and created a solution, the market wasn’t interested in buying that solution. And because they were missing one of the three elements, their new business idea was destined for failure.
They eventually shut down the business.
Readers, I’m leaning more and more towards launching a startup. I have a new business idea that I’m currently testing which I will write more about later. I would love to hear from others who have been involved turning a new business idea into a startup company. What were some of the challenges you faced?.