Idea to Opportunity: Using a framework Close to the Heart Debrief

Ideas -Dos and Don’ts Having a flow of new ideas is critical to successful entrepreneurship but having a love affair with one idea does not help It is always better to detach from emotions while assessing an idea; sacrificing or letting go of an idea will not be a huge problem then It is ok to share ideas in a forum. An opportunity is ideally derived from an idea which is executed with a great plan by an excellent team. So most often no one can steal an idea National Entrepreneurship Network

Are all ideas good? Often good ideas fail or are replaced by better ideas led by the market response; it is the customers that determines the success. Most businesses fail in less than two years Fewer than 1% of the business plans submitted to VCs get funded Business failures lead to huge “collateral damages” Failures are planned by lack of planning National Entrepreneurship Network

Idea to Opportunity One needs to be able to evaluate if ideas are really opportunities Objective assessment can lead to an accurate judgment of an opportunity Potential customers, facilities/infrastructure, availability of resources have control and influence on an idea turning into an opportunity National Entrepreneurship Network

What defines a good opportunity? An opportunity is characterized by the following: There are customers willing and able to purchase your product that either solves their problem or satisfies a need A large enough number of customers exist The industry allows you to start and build - no regulations or monopoly, no supplier domination An ability to differentiate your offering from your competitors A good match with your own and your team's interests, abilities, and network Source: The New Business Road Test, John W Mullins National Entrepreneurship Network

How to evaluate an opportunity? Opportunity evaluation is not rocket science and can be learnt –You already instinctively ask many of the relevant questions; that is good but not enough – the key is to not ignore any of the critical questions, hence having solid frameworks to work with is important National Entrepreneurship Network

Are there any logical questions or frameworks? How to evaluate an opportunity? National Entrepreneurship Network

Opportunity evaluation… Who is your customer/market? Which industry will you operate? Who is going to execute this and how? Source: The New Business Road Test, John W Mullins National Entrepreneurship Network

First step to assess opportunity National Entrepreneurship Network

What do we mean by market? A market consists of a group of current and/or potential customers having the willingness and ability to buy products to satisfy wants or needs Thus, markets consist of buyers - people or organizations and their needs - not products Example: Businesspeople who get hungry between meals during their workday = market for workplace snacks “ Markets consist of buyers, not products ” Source: The New Business Road Test, John W Mullins National Entrepreneurship Network

What do we mean by industry? An industry consists of sellers - typically organizations - that offer products that are similar and close substitutes for one another Example: What industries serve the market for workplace snacks? –Producer level: salty snack industry, the candy industry and the fresh produce industry etc –Distribution level - supermarket industry, the restaurant industry, the coin operated vending machine industry, the coffee bar industry etc –Some of these industries are more attractive than others “ An Industry consists of sellers ” Source: The New Business Road Test, John W Mullins National Entrepreneurship Network

Market Vs. Industry If Market and Industry are different - So, if market and industry attractiveness are both important, how should each be assessed? Source: The New Business Road Test, John W Mullins National Entrepreneurship Network

Is there a target market segment in which we offer the customer clear and compelling benefits, at a price he or she is willing to pay? Are these benefits, in the customer’s minds, different from and superior in some way –to what’s currently offered by other solutions? How large is the market? How quickly can it grow in the next 6 months or 2/3/5 years? What trends can be identified and how will it affect the business? Opportunity Evaluation - Market Source: The New Business Road Test, John W Mullins National Entrepreneurship Network

Is it difficult for companies to enter this industry? Do suppliers to this industry have the power to set terms and conditions? Do buyers have the power to set terms and conditions? Is it easy or difficult for substitute products to steal the market? Is competitive rivalry intense or genteel? Opportunity Evaluation - Industry Source: The New Business Road Test, John W Mullins National Entrepreneurship Network

Do you require proprietary elements - patents, trade secrets so that other firms cannot likely duplicate or imitate? Can your business develop and employ superior organizational processes, capabilities or resources that others would have difficulty in duplicating or imitating? Is your business model economically viable i.e. can you show that your company won’t run out of cash quickly? Opportunity Evaluation - Industry Source: The New Business Road Test, John W Mullins National Entrepreneurship Network

What level of aspirations do you have for your entrepreneurial dream? What sorts of risk are you and are you not willing to take? What are the Critical Success Factors required in this Industry? Does your team have it? Who do you and your team know across the value- chain among your customers, suppliers, competitors and substitutes? Opportunity Evaluation - Team Source: The New Business Road Test, John W Mullins National Entrepreneurship Network

Mullins’ 7 Domain Framework National Entrepreneurship Network

Wrap Up Using the model is not a simple matter of constructing a score sheet that adds scores for the seven domains The domains are not additive and their relative importance can vary. Thus, a simple checklist will not suffice A wrong combination of factors can kill a new venture If flaws that cannot be fixed are found, then the best thing to do is to abandon the opportunity at this early stage The crucial things to look for on the downside are elements of the market, industry or team Source: The New Business Road Test, John W Mullins National Entrepreneurship Network

“Most business plans should have been abandoned before they were written.” - Prof. John W. Mullins, London Business School The New Business Road Test National Entrepreneurship Network

NEN Resources All materials used in this session are available in the NEN CD Kick-Starting the Entrepreneurial Campus under Inside the Classroom – section “Entrepreneurship Concepts”, subsection “How to evaluate opportunities” National Entrepreneurship Network