Over the blog Jumpstart, Becca Braun has a listing of the 10 worst business ideas:
# Coffee shops? The world hardly needs more coffee shops. Plus, coffee shops don’t scale.
# A Maine-based line of natural products that are made with bees wax? Last time I checked, the “bee” supply chain wasn’t that scalable.
# Overpriced, finely made historically accurate dolls that will teach children about history? Seriously? I don’t even know where to go with that.
# An algorithm that will improve upon Yahoo’s web search technology? Fatal flaw: why couldn’t Yahoo just do that themselves?
# Packages overnight? The infrastructure required to make that happen is prohibitively expensive. Nice idea, but too much capital risk.
# Growing a technology business in Seattle? Cow town, and too far away at that: investors want to be able to drive no more than four hours from their home. Plus, there’s no entrepreneurial talent in Seattle.
# You want to trade collectibles and knick-knacks on the web? That’s maybe, like, a $1,000 market on a good day.
# Your children have an “orphan disease” for which you want to find a cure? OK, so what don’t you understand about the healthcare industry(?): orphan diseases are unfundable.
# Sell books on the Internet? People want the experience of touching books, opening the covers, being in a bookstore. Sorry, but the need just is not there.
# You don’t want to develop computers but you do want to (basically) assemble them? There’s nothing novel or even very protectable about that. If you had invented a new microprocessor or something, I might be interested. But just putting the boxes together isn’t going to generate sustainable gross margins.
Of course, these are all examples of highly successful companies:
1. Starbucks, founded in 1971 and a market cap of $17.2 billion today
2. Burts Bees, acquired by Clorox for $913 million in 2007
3. American Girl, founded in 1986 and acquired by Mattel Inc. for $700 million 1998
4. Google, founded in 1998 and a market cap of $184 billion today
5. FedEx, founded in 1971 and a market cap of $27 billion today
6. Microsoft, founded in 1975 and worth $274 billion today
7. eBay, founded in 1995 and a market cap of $29 billion today
8. Novazyme, acquired by Genzyme for $225 million in 2001; see Extraordinary Measures, which came out last week
9. Amazon, founded in 1994 and a market cap of $55 billion today
10. Dell Computers, founded in 1984 and a market cap of $28 billion today
What strikes me, however, is how many of this successful “bad” ideas are business innovations — not technological. Starbucks, FedEx, American Girl, Burts Bees are not what one would call “high-tech” companies. Even eBay and Amazon were built around a new business model using modifications of essentially existing technology. And while Dell makes a technology product, its innovation was the process — not the product.
So why is our national innovation strategy still fixated on “high-tech”?