IDEA GENERATION AND OPPORTUNITY ASSESSMENT Stephen Daze

Guy Kawasaki on Innovation: Where Ideas Come from: m

On Ideas Paul GrahamPaul Graham, Co-founder of Y Combinator: (1) Learn a lot about things that matter, then (2) Work on problems that interest you (3) With people you like and respect

Idea Generation Principles 1. Good Business Ideas make Money. They have a value proposition for a critical mass of addressable customers. - Value Proposition = 1) there is enough pain to pay for a solution and 2) relative to competition. - Critical Mass = big enough market that can be efficiently addressed. - Addressable = I can reach them with my revenues greater than expenses.

Idea Generation Principles 2. Ideas evolve over time (eg. Facebook, Blackberry) or start as mistakes (eg. 3M Sticky Notes.)

IKEA IKEA- Ingvar Kamprad founded IKEA in 1943 at his Uncle Ernst’s kitchen table. IKEA was basically an acronym of his name Ingvar Kamprad and Elmtaryd, his family farm and the village Agunnaryd. At first the business was typically mail-order and included only small household goods such as picture frames, wallets, nylon stockings, pens and wallets.

Nintendo The Nintendo Corporation’s domination of the gaming industry didn’t start with their first video game console. They have actually established themselves 70 years before the first video game came to life, in the 19th century when they brought back the popularity of card games to Japan. A new card game, Hanafuda, was invented, by Fusajiro Yamauchi (Nintendo founder) which used images instead of numbers, making it difficult for gambling.Hanafuda

How Netflix got started (Fortune Magazine) -- The genesis of Netflix came in 1997 when I got this late fee, about $40, for Apollo 13. I remember the fee because I was embarrassed about it. That was back in the VHS days, and it got me thinking that there's a big market out there. So I started to investigate the idea of how to create a movie- rental business by mail. I didn't know about DVDs, and then a friend of mine told me they were coming. I ran out to Tower Records in Santa Cruz, Calif., and mailed CDs to myself, just a disc in an envelope. It was a long 24 hours until the mail arrived back at my house, and I ripped them open and they were all in great shape. That was the big excitement point.

Idea Generation Principles 3. Ideas can come from anywhere, most often we see good business ideas starting with one (or more) of the following:

Personal Pain I have a problem that needs solving. 100,000 customers in 80 countries and a $1B valuation.

Market Gap A critical mass of customers are looking for solution. “I had never built a fence or deck before.”

Interest I love this so much, I can see myself working on it 24/7.

Insight I understand the industry and see where it is going.

Good Business Ideas Necessary conditions:  Can make money (or not loose it): value proposition; critical mass; and addressable customers. And:  Evolve over time.  Usually start with one or a combination of: Personal pain (I have a problem that needs solving.) Market gap/need (Others will pay for a solution.) Interest (I can see myself doing this 24/7.) Insight (I understand the industry and the trends.)  The best business ideas satisfy most (or all) conditions - If your current idea doesn’t, look to evolve it sufficiently such that it does.

In-class Assignment Part 1 1. Generate as many potential business ideas as you can. They don’t have to be good. 2. Look to combine ideas, eliminate and make existing ideas as good as possible. 3. Pick the best business idea. 4. Prepare to discuss why this is the best idea.

Opportunity Assessment

Opportunity Assessment Considerations 1. Idea Pain or gap hypothesis Potential solution (v.1) Advantage? 2. Market Typical customer Size of the market Competitive Landscape Advantage? 3. Any Big Issues Costs? Resources required? Rules; regulations; risks: economic, political etc? Advantage? 4. Revenue Model How do you get paid; how do you make money? Advantage?

In-class Assignment Part 2 1. Consider and record your thoughts related to the main Opportunity Assessment considerations (see previous slide) – likely guesses at this time. 2. Prepare your thoughts in order to present (informally).

Opportunity Assessment Considerations 1. Idea Pain or gap hypothesis Potential solution (v.1) Advantage? 2. Market Typical customer Size of the market Competitive Landscape Advantage? 3. Any Big Issues Costs? Resources required? Rules; regulations; risks: economic, political etc? Advantage? 4. Revenue Model How do you get paid; how do you make money? Advantage? Necessary conditions:  Can make money (or not loose it): value proposition; critical mass; and addressable customers. And:  Evolve over time.  Usually start with one or a combination of: Personal pain (I have a problem that needs solving.) Market gap/need (Others will pay for a solution.) Interest (I can see myself doing this 24/7.) Insight (I understand the industry and the trends.)  The best business ideas satisfy most (or all) conditions - If your current idea doesn’t, look to evolve it sufficiently such that it does.

Introduction to Business Models What are the businesses associated with the coffee?

Any more?

Business Models Answer questions such as: - who are your customers? - how many are there? - how do you access them? - how do you make money? - what are your costs? - who pays you? - what are your key activities? - what are your human resource requirements - what are the operational considerations? - who are your key partners? - etc.

Upcoming: September 23rd Opportunity to pitch an idea to the class (attract a team). What’s your idea? What do you know about the industry, clients, trends etc? Why could it work? What skills do you need to round out your team? (marketing, finance, engineering, arts..) Individuals pitching ideas: me with your name, student number and 1 sentence describing the idea you will pitch before the 30th. It must be a real idea and somewhat thought out, but know it doesn’t have to be perfect!