Be passionate about the territory, not the map
The business that dominates the market is often not the first but the one that learns from the first to finally get it right enough to penetrate the mass market. Think Facebook, not Myspace. Think Google, not Altavista. Think iPhone, not Blackberry. History is littered with late movers over taking first movers.
But why?
The best way to discover unambiguous market trends is to look for instances where customers are innovating by themselves by modifying or re-imagining existing products.
Another way to discover good business opportunities is to take the latest innovations in technology and imagine how can such innovations offer a radically better solution for existing customer desires.
It's important to clearly distinguish between what people desire and how they fulfill them. Our desires usually remain the same, but methods of fulfillment keep changing. For example, the desire to have good oral hygiene can be fulfilled in multiple ways: toothbrushes, mouth wash, or even by crunchy foods like carrots that help clean mouth as we chew on them.
What people care about is their desires and not how they’re currently fulfilling them
Many people say they want to quit smoking or reduce their alcohol intake.
Yet days later they find themselves smoking or drinking again. How many times your friends have told you that they want to get fitter, only to later discover them ordering a large, cheesy pizza?
Human desires have been shaped by millions of years of evolutionary programming and therefore haven't changed much during the course of history. In fact, the most fundamental desires of food, sex, health and security have remained the same as they were for our hunter-gatherer ancestors.
Startups succeed because people are forever looking to fulfil their desires better than before.
You create value when you fulfill the unmet desires of people better than the alternatives they have (from competitors).
However, a fatal but common mistake that entrepreneurs make is misjudging what makes something valuable.