Every innovative entrepreneurial firm starts with a creative new venture idea. New venture ideas are preliminary, mostly incomplete, and not well articulated mental images of the concept for a possible future venture. For example, the idea that everyone with a driver’s license, car and mobile phone could be a taxi driver resembles the initial idea for ride-hailing companies like Uber and Lyft. To come up with such creative new venture ideas, entrepreneurs use a wide variety of thinking processes. But what is the best way to come up with a really good idea?

New venture ideas are, in the beginning, just that: ideas. Ideas can develop over time, get more detailed and precise and can be discussed with and communicated to others. Friends, family members, experts and potential customers can give feedback on these ideas. New venture ideas do not exist in a tangible form and are future oriented: it is what an entrepreneur may develop in the future. Therefore, our research investigates the effects of three future-oriented cognitive processes on the quality of new venture ideas: 

1. Prospective thinking. This is thinking about the future. For example, “How will the taxi industry develop if everyone can be a ride-hailing driver?”

2. Counterfactual thinking. This is thinking about possible alternatives to life events that have already occurred. For example, “How would last Saturday evening have ended more pleasantly if only I would have had the opportunity to quickly get a ride-hailing driver to bring me home?”

3. Perspective taking. This is understanding a situation or concept from an alternative point of view, such as that of another person. For example, “How would existing taxi drivers react to a steep increase in ride-hailing drivers?”

Two experiments showed that it matters which cognitive processes people use in generating new venture ideas. Prospective thinking and perspective taking generated ideas of higher quality than counterfactual thinking or participants in the control group. Our research also showed that the positive effects of these cognitive processes depend on the characteristics of the entrepreneur. For instance, individuals with prior knowledge about the relevant technology for a new venture idea benefit even more from engaging in these thought processes.

Our findings imply that aspiring entrepreneurs should train their use of prospective thinking and perspective taking to generate new venture ideas of higher quality. Take the perspective of your potential customer: “If I would use this product, what would I need it to be like?” or “Would I be willing to pay for this solution or would my neighbor?”. Or try to think about the future and ask yourself: “How will this industry develop towards the future?” “How will this market develop in the coming five to ten years?”

For existing entrepreneurs, it is important to create time in their busy schedules to imagine future scenarios and reflect upon them for future new product and service ideas. Asking such questions is especially relevant if you already have prior knowledge of a technology because this will strengthen the effects of the thinking processes. It helps them to step away from the technological details and redirect their attention to the venture as a whole. 

Author: Arjan Frederiks – a.j.frederiks@rug.nl

References:

Frederiks, A. J., Englis, B. G., Ehrenhard, M. L., & Groen, A. J. (2019). Entrepreneurial cognition and the quality of new venture ideas: An experimental approach to comparing future-oriented cognitive processes. Journal of Business Venturing, 34(2), 327–347. https://doi.org/10.1016/j.jbusvent.2018.05.007