The biggest mistake, in my view, is for a founder of a business to believe too strongly that they have a winner. This is counter-intuitive since passionate faith in your idea is usually the prerequisite advocated by every How-I-Made-My-Fortune book and entrepreneurial lecture or training course you'll find. These two things, passion and doubt, are not mutually exclusive. You can be passionate about an opportunity, indeed you need to be passionate about all your plans, but only if you are equally passionate about realising that you might be wrong! This means making sure that your idea makes sound business sense, and working hard to become your own devil's advocate.
For example, you might think there's a need for double (or half) length cigarettes. Some people may indeed like the idea and be prepared to buy them. But a huge raft of other factors might affect whether you can make any money out of the idea. These include: Legislation; Customised machine costs and impracticalities; Declining markets for toxic habits; People's long term experience of trying to use them (don't fit in pockets etc); Political pressure to prevent people liking them; Packaging; Shelf space; Distributor difficulties etc. So even if your idea 'tests' well on the high street, or wherever, there are many other reasons why the big companies investing billions in research and NPD (New Product Development) haven't launched the idea themselves. There simply isn't a market in that gap you identified. It's a gap for a reason.
On the other hand, big corporations can't cover every possibility. Coca Cola have long ago decided that the best people to innovate new products are 'the little man'. The legions of frustrated or desperate people in their bedrooms, kitchens and garages dreaming up ideas they naively (usually) think are going to make their fortune. 20 or so years ago Bill Gates was asked who he feared most, expecting him to say Oracle, AOL or maybe even Netscape (remember them?!). He said "a kid in a garage". It's where he and Jobs started, and prophetically it's pretty much where Page / Brin and Zuckerberg would emerge from. It's not just that they started small. It's that thousands, perhaps millions of Page / Brins and Zuckerbergs are beavering away in garages all over the planet. Like that famous ad for juice, "It's the fruit that Tropicana reject that make Tropicana the best". Pure Darwinian selection. Lots of experiments, and then if you can afford it, buy and propagate the survivors. Which is why Coke, Google, MS et al, buy much of their innovation rather than believing their own experts will have the answers. They might, but it's incredibly expensive if they don't. The vast majority of big corporation NPD budget is therefore invested in product enhancements as well as operational efficiencies rather than bold new ideas. What's going to be Apple's next big thing? In the final analysis, they have only ever had 1 product - a neat type of computer (of varying sizes, doing various but similar jobs). Everything they've ever done since the days of the first Mac have been machines to store and use digital information - although I will admit that iTunes is a separate success story (and one which ought to be smarter than it is and easier to use)... but you wouldn't use it if you didn't own an iJobs.
Once again my appeal to entrepreneurs everywhere is by all means dream big, but always test, test, test those ideas before you waste time, money, self-confidence, enthusiasm and energy. Knowing what NOT to do is the mark of a successful businessman.
BIG NEWS UPDATE. Since writing this post in 2013, I've started a social enterprise called, not surprisingly, Market in the Gap? Ltd (note I was allowed to register a company name containing a '?'). Details can be found at www.marketinthegap.com. Basically it offers British start-ups a low cost market research package.