These five methods can assist you in determining if an idea has voltage.
A “voltage drop” occurs when a promising concept loses effectiveness or profitability as it grows: A piece of information or data has been incorrectly interpreted as proof that something is true. A false positive in scaling indicates that a concept has voltage when it does not. Consider Elizabeth Holmes and Theranos’ allegedly revolutionary blood-testing device. McDonald’s was subject to selection bias when introducing the ill-fated Arch Deluxe.
Participants in focus groups were not indicative of most Americans who want to continue eating Big Macs. Often, talent-centric ventures do not scale well (i.e., they cannot be cloned), and at scale, quality suffers. Regulatory limitations, resource limits, fidelity concerns, and other challenges may occur as your business grows. I saw this personally as Uber’s top economist. When building your business, you must consider two sorts of expenditures: initial fixed costs and continuing running expenses.
It is possible to recuperate initial expenditures, but running expenses might drain funds and cause a voltage reduction. There are also positive spillovers, such as network effects that increase the value of a social media platform as more users join it. The massive success of Tesla may be attributed to the economies of scale of its two most crucial components, batteries, and solar power production cells. Finding and compensating high-performers will become costly as your business grows. The idea is to design solutions that can provide total value to clients even when delivered by mediocre performance. After anticipating and avoiding them, you can scale your vision to its maximum voltage.