What Is a Type C Idea for a Business Plan?

Entrepreneurs and aspiring business owners may come up with hundreds of ideas before they find one that looks like a golden opportunity. There are basically three kinds of business ideas, referred to as types A, B and C.

Type A ideas: These ideas take a product or service that is already available in some places and bring them to a new market where it is not yet available.

Type B ideas: These ideas introduce a new technology to a market, providing customers with a new product or service.

Type C ideas: These ideas provide customers with an improved product.

The vast majority of businesses are based on type C ideas. There are many more opportunities to improve an existing product, like making a better mousetrap or a longer-lasting light bulb, instead of coming up with a brand-new idea from scratch.

If you look around your house or office, you'll find that you are surrounded by type C ideas that have materialized as successful businesses. Your microwave, your LCD TV, your computer, your refrigerator and even your LED light bulbs are all significant improvements on products that were on the market a decade or two ago.

Perhaps there is no better example in the 21st century of a type C idea than the Apple iPhone. This was not by any means the first cell phone or even the first smartphone on the market, but it was such an improvement over existing phones that it has become synonymous with the word "smartphone" even today.

When the iPhone was released, many people were already using Blackberry smartphones, which had apps and a full keyboard below the screen. In fact, the history of the smartphone can be traced back to 1992, when IBM developed its Simon Personal Communicator. At a cost of $1,100, it sold only 50,000 units when it was made available to consumers in 1994.

The sad fact that IBM's venture failed within six months illustrates for innovative entrepreneurs that being first on the market with a new product does not always pay off.

When the Ford Model T was introduced in 1908, there were already hundreds of car manufacturers in the United States. Cars were expensive and unreliable, essentially no more than a novelty item for the affluent. The Model T changed the auto industry forever.

What made it innovative was the way the cars were made. Using an assembly line with unskilled laborers rather than trained craftsmen putting together one car at a time, Ford was able to reduce labor costs by 60 percent. The result was a car that cost consumers half the price of other cars, each made exactly the same way with the same standardized parts, making them highly reliable.

What the Model T should illustrate is that if you can produce a superior product at a much lower price than what is currently on the market, the odds of your business succeeding are staggeringly high. Of course, this is not the only way to do well with a new idea, but it's vital that you are able to clearly assess your strengths in the market as well as your competition's ability to respond once your product is on the market.

Consequently, the most important part of your business plan for a type C idea is the SWOT analysis. Not only do you need to analyze the strengths, weaknesses, opportunities and threats related to your idea but your business model as well.

List all of your business's strengths, including your skills, experience or any other strength that gives your company an edge over the competition that cannot be easily copied.

Technological innovation should certainly be at the top of this list. However, there are many other advantages you may have. These could include intellectual property ownership, modern equipment, a superior sales team or an established, loyal customer base.

List your company's limitations. For example, if the innovative factor behind your product can be quickly adopted by others, this should be listed. If you have a poor distribution network or don't have established suppliers, or if you are not experienced in the industry, these should be listed too.

Write down anything that will give your business a chance to grow and make a profit. These could include a documented shift in consumer preferences, upcoming advances in technology, endorsements or partnerships with other businesses.

List any obstacles your business will need to overcome, including a decline in the economy, a negative shift in consumer preferences, a lack of skilled labor or regulatory changes.

Never underestimate the ability of your competition to adapt. For every company like Apple, there is a company like Samsung vying to dominate the market, which is a second lesson to be learned from the iPhone.