Many successful businesses were started by entrepreneurs with an ability to see a trend before everyone else. They were able to take their insight and capitalise on it in a new and creative way.
Businesses from Uber and Lyft to Airbnb and HomeAway are just some of the most recent examples of entrepreneurs benefiting from emerging trends. But just because it’s been done before doesn’t mean it is easy to see trends first and find ways to capitalise on them.
Smart entrepreneurs are always looking for an edge. They want to know how they can identify trends and how they can use that skill to build and grow a business. Fortunately, there are steps you can take develop this skill yourself.
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Here are five keys to spotting trends and capitalising on them before your competition does.
1. Anticipate change
I frequently remind coaching clients that the only constant is change. Believe it. Assume that change is coming and look for it.
Change can be either social – as in the rise of socially responsible business – or technological, as exemplified by the growth of mobile commerce. Sometimes change can be both. Social media is a great example of that.
Don’t forget the cyclical, up-and-down, back-and-forth nature of business while you are looking.
Change doesn’t have to be permanent to provide a viable opportunity for business creation and growth.
When the real estate crisis hit in 2008, construction activity shrank, and many people were forced to make do with what they had. But trend-spotting entrepreneurs were able to adjust their plans depending on the market.
For example, savvy interior designers marketed their services to those who wanted something new but couldn’t find or afford a new home.
2. See it coming
The basic tools of the trend tracker are seeing, hearing, smell, taste and touch. In other words, every sense that can be used to get information about the world should be employed in looking for upcoming changes.
Start by reading and watching everything you can. That should include general interest news outlets, trade publications, blogs, government reports and casual conversations overheard in elevators. Be especially alert for problems people are talking about.
Consider using trend-tracking tools like Google Trends, Topsy and Trendhunter to help you zero-in on trends that are worth investigating further. You won’t be the only entrepreneur looking for business ideas on these platforms, but you can use them to dig deeper to validate hunches.
3. Distinguish between short-lived fads and long-term trends
Strive to identify big changes that create lasting problems that lots of customers will be happy to pay to solve.
The idea is to wind up with a business model in which revenues are much larger than costs for a long period, not one that limps by on slender profit margins before competitors take even that away.
To filter out fads, talk to the potential buyers of the solution to the problem. The more frustrated they are, the more likely they are to pay for a solution.
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In extreme cases, potential customers may be willing to fund the development of solutions. Also talk to experts. While they may not be able to write checks, they can provide insights and point to possible solutions that customers could not even imagine.
4. Make sure your solutions are realistic
An online retailer that aims to beat Amazon at its own game is unlikely to show up on top of any fast-growing startup lists very soon.
Make sure the solution you envision is one you can realistically provide with features and costs that will compare favourably to established alternatives.
Again, it’s vital to talk to potential customers. Don’t just brainstorm in-house. What you can do conveniently and inexpensively may be of little value to customers. The sweet spot for a trend-exploiting startup is at the intersection of business capability and customer need.
5. Create a competitive advantage
To get the biggest benefit, be the first mover. It is rare for any single entrepreneur to be the only one who sees an opportunity. Most will hesitate and not move at all. Many others will not move swiftly enough.
Lasting competitive advantage usually goes to the first entrant to stake a market out and capture customer loyalty. Those who come later usually have to settle for slimmer profits and more competition.
Being first is not enough, of course. Business history is littered with well-financed startups directed by well-regarded leaders who committed too much, too early and in the wrong place. So test before committing. Again, look for revenues that overwhelm costs and customers who are overjoyed.
For every trend that supports a future startup star, any number go ignored, leaving potential customers searching for solutions and opportunities for established companies to fill their needs. But it only takes timely identification of one trend to get a startup in flight, and these techniques can point you to the one you need.
This article was originally posted here on Entrepreneur.com.