JWI 575 New Business Ventures & Entrepreneurship, Week2 Summary, 7/9/13
This week we learned a framework for evaluating strong vs weak opportunities. Evaluate every promising new venture using 3 factors of success - market, offering, team.
Dr DP
I. Flying solo - A reality check (Welch, Business week 2007)
*********************************
First, Need a great idea that creates or fills a market need - the exciting product/service idea should change the market
Second, need great leadership - passion, bursting with energy
Entrepreneurship grants independence - but only after months/years of toil
New business will control your life
You may only have a customer of two in the beginning - you will need to work with their whims in the trenches, taking orders
You will be owned by the venture - you will become poorer before you get rich; torn between giving up control vs selling stock to raise money
AS the leader, you own all the outcomes, good and bad
II. Company man or Free Agent? (Welch, Business week 2007)
**********************************************************
Imagine your life 5, 10, 20 years out
What do you want to be ? independent contractor, company man or entrepreneur?
It all comes down to fit
Independent contractors
************************
Advantage for hiring companies: no benefits to be paid, no appraisals, no neuroses management, no HR/legal battles - just move on
Advantage for contracotrs: maximize earning power - work for multiple firms at once, work overtime or just as much needed, be own boss, no politics, 360 eval
Disadvantage for contractors: No insurance benefits, No vacations, No job security
Company man
************
- part of something bigger: comaraderie, with a room full of co-workers working together
- identity: belonging to an organization; fulfilled rather than overwhlemed or diminished
- thrill of building something, a product, service or team
- fun of laughing, debating, sweating it out with colleagues while competing for customers and profits
- energized by prospect of leadership: rise to be managers or CEO, strategic planning, budgeting
Entrepreneurship
****************
- Characteristics of both independent contractors, company types
- invent something, build and belong
- risky
III. Recession is a good time to start a new business (Welch, Business week 2009)
*************************************************
New idea - Do considerably more for less
Layoffs - Plenty of Smart and Hungry people available
Humility - recognition that livelihood depends on true team work, relentless productivity
Money - available for breakthrough ideas from VCs, regional banks
IV. What's the Big Idea? (JWI 575 W2L1 )
*************************
ABSOLUTELY MUST HAVE A GREAT IDEA before you start a company.
- must be superior
- validate: others should also think it is the greatest gift to mankind
Gauge the idea: Is it a big time winner or a dud ?
***************
- Iterative process: You won't always know in advance; just get out there and try things
- Invest time and resources: get some early customer engagement
- Dive in, assemble a great team, be responsive to changes in the marketplace
- move forward with a solid sense that you've got enough of a big idea
Before going all out, check the basics
(1) Know the history: how did the world come to this point of need? sequence of events, stakeholders in the value chain, orgs stuck in ways, customer expectation
*********************
(2) Know your customer:Analyze the market. Tell a story - a day in the life of one human being who is going to be happier as a result of the new big idea.
********************** Learn all about this person and how she makes decisions.
Tell people exactly how someone's life will change as a result of the product.
Truly compelling big idea > simple to answer
Sense and Respond - Read your customers' responses, quickly alter the vision to match the feedback obtained
(3) Know your competitors: is anyone else doing it? lock on to a unique angle you bring to the solution. Market timing is key. Understand why you are in a position to win.
**************************
(4) Know the state of art:Understand ingredients necessary for your innovation. Is it feasible to build? what elements will you rely on to build your vision ?
*************************
(5) KISS: Keep it simple. Do not try to design a product that does everything for everybody. Focus the minimal amount of special value you can deliver. Nail that. Go from there.
*********
(6) Who cares ? Why?:
********************
Customer side - who might care about what you're developing?
Business side - who is committed to working with you to keep your idea moving forward
Adapt and Adjust with guidance from stakeholders.
Sense when change is needed, keep taking steps forward.
Not the strongest or most intelligent, but the one that is most adaptable to change
V. Analyze the market & Plan the Business (JWI 575 W2L2)
*****************************************
Who is going to buy this ? (everybody, it depends, not sure yet - these are weak answers)
How else are people satisfying their needs today ?
Business plan elements: who what where when why how of your potential business
(i) Size the market opportunity
********************************
Top down - estimate consumer spending on the issue; capture 1% of the market
Bottom up - estimate how much product you might successfully sell in a month
New Product category - Look at related markets and spending habits and technology-adoption history
Look carefully at what you will be replacing
Brand new product => initial sales roughly based on existing sales of substitutes; refine response with consumer response trial offers & repeat users
Recalibrate continually
If results lower than expected, modify product to appeal to larger segment of market
Conduct market research and segment the markets (refer to marketing class)
(ii) Pick your niche
**********************
major sea changes under way in society
educated guess about how people are changing their behaviors, which emerging technologies will profoundly affect people, what people buy and how they buy it
(iii) Know the story - learn all you can about the history of the market
**********************
why does the opportunity exist now
who has come before you and tried to solve it in other ways?
what is the source of the problems you are trying to solve ?
(iv) Identify experts
**********************
who understands this market today ? what are they talking about it?
Who are the thought leaders ? - cite their opinions in justifying market need
Take time to listen to expert opinions on future of the market you want to enter
(v) Learn how to keep score
****************************
which metrics will you measure to determine if the market is adopting your solution ?
eg. 40% of my customers must become repeat customers
my customer base should double within 30 days
Establish next steps to take if product becomes a runaway success or not
(vi) Know how to keep ahead of competition
*******************************************
How will others respond to you ?
How will you in turn respond to them ?
Study how competitors react to the introduction of your product and whether their responses are consistent with your expectations
(vii) Pick the right market (size, dynamics)
*********************************************
Total Addressable Market: current user base + industry reports, census data, analyst projections, annual reports)
Initial Target Market: Focus on the group you are most likely to succeed
(viii) Understand Market Dynamics
**********************************
What do buyers spend now ?
Who do they spend it with ?
How do they make their spending decisions?
What features are important to them?
What overall values, quirks, tastes do they have ?
(ix) What are the trends ?
***************************
- is the market growing, how fast ?
- what makes the market grow ?
- is growth the result of overall expansion or customer switching ?
- why will people switch to your product or consider a new purchase ?
- what are product life cycles in the market and required technology investments to stay ahead of the curve?
- who has buying power in your industry's value chain ? eg. WalMart can dictate terms for price, quality, delivery schedule to manufacturers
- Do external factors influence the potential size of your market ?
(x) Look at market segments
****************************
Geography "NorthEast customers bought 60% more heating oil in winter 1999"
Industry "Financial services firms comprise 40% of the market for supercomputers"
Type of buyer "Early adopters seeking professional edge make up 40% of the market for Blackberry"
Distribution channel "30% of customers shop at WalMart at least once a week"
Market share " Coke owns 45% of market, Pesi 40%, assorted juice drinks own 15%"
This week we learned a framework for evaluating strong vs weak opportunities. Evaluate every promising new venture using 3 factors of success - market, offering, team.
Dr DP
I. Flying solo - A reality check (Welch, Business week 2007)
*********************************
First, Need a great idea that creates or fills a market need - the exciting product/service idea should change the market
Second, need great leadership - passion, bursting with energy
Entrepreneurship grants independence - but only after months/years of toil
New business will control your life
You may only have a customer of two in the beginning - you will need to work with their whims in the trenches, taking orders
You will be owned by the venture - you will become poorer before you get rich; torn between giving up control vs selling stock to raise money
AS the leader, you own all the outcomes, good and bad
II. Company man or Free Agent? (Welch, Business week 2007)
**********************************************************
Imagine your life 5, 10, 20 years out
What do you want to be ? independent contractor, company man or entrepreneur?
It all comes down to fit
Independent contractors
************************
Advantage for hiring companies: no benefits to be paid, no appraisals, no neuroses management, no HR/legal battles - just move on
Advantage for contracotrs: maximize earning power - work for multiple firms at once, work overtime or just as much needed, be own boss, no politics, 360 eval
Disadvantage for contractors: No insurance benefits, No vacations, No job security
Company man
************
- part of something bigger: comaraderie, with a room full of co-workers working together
- identity: belonging to an organization; fulfilled rather than overwhlemed or diminished
- thrill of building something, a product, service or team
- fun of laughing, debating, sweating it out with colleagues while competing for customers and profits
- energized by prospect of leadership: rise to be managers or CEO, strategic planning, budgeting
Entrepreneurship
****************
- Characteristics of both independent contractors, company types
- invent something, build and belong
- risky
III. Recession is a good time to start a new business (Welch, Business week 2009)
*************************************************
New idea - Do considerably more for less
Layoffs - Plenty of Smart and Hungry people available
Humility - recognition that livelihood depends on true team work, relentless productivity
Money - available for breakthrough ideas from VCs, regional banks
IV. What's the Big Idea? (JWI 575 W2L1 )
*************************
ABSOLUTELY MUST HAVE A GREAT IDEA before you start a company.
- must be superior
- validate: others should also think it is the greatest gift to mankind
Gauge the idea: Is it a big time winner or a dud ?
***************
- Iterative process: You won't always know in advance; just get out there and try things
- Invest time and resources: get some early customer engagement
- Dive in, assemble a great team, be responsive to changes in the marketplace
- move forward with a solid sense that you've got enough of a big idea
Before going all out, check the basics
(1) Know the history: how did the world come to this point of need? sequence of events, stakeholders in the value chain, orgs stuck in ways, customer expectation
*********************
(2) Know your customer:Analyze the market. Tell a story - a day in the life of one human being who is going to be happier as a result of the new big idea.
********************** Learn all about this person and how she makes decisions.
Tell people exactly how someone's life will change as a result of the product.
Truly compelling big idea > simple to answer
Sense and Respond - Read your customers' responses, quickly alter the vision to match the feedback obtained
(3) Know your competitors: is anyone else doing it? lock on to a unique angle you bring to the solution. Market timing is key. Understand why you are in a position to win.
**************************
(4) Know the state of art:Understand ingredients necessary for your innovation. Is it feasible to build? what elements will you rely on to build your vision ?
*************************
(5) KISS: Keep it simple. Do not try to design a product that does everything for everybody. Focus the minimal amount of special value you can deliver. Nail that. Go from there.
*********
(6) Who cares ? Why?:
********************
Customer side - who might care about what you're developing?
Business side - who is committed to working with you to keep your idea moving forward
Adapt and Adjust with guidance from stakeholders.
Sense when change is needed, keep taking steps forward.
Not the strongest or most intelligent, but the one that is most adaptable to change
V. Analyze the market & Plan the Business (JWI 575 W2L2)
*****************************************
Who is going to buy this ? (everybody, it depends, not sure yet - these are weak answers)
How else are people satisfying their needs today ?
Business plan elements: who what where when why how of your potential business
(i) Size the market opportunity
********************************
Top down - estimate consumer spending on the issue; capture 1% of the market
Bottom up - estimate how much product you might successfully sell in a month
New Product category - Look at related markets and spending habits and technology-adoption history
Look carefully at what you will be replacing
Brand new product => initial sales roughly based on existing sales of substitutes; refine response with consumer response trial offers & repeat users
Recalibrate continually
If results lower than expected, modify product to appeal to larger segment of market
Conduct market research and segment the markets (refer to marketing class)
(ii) Pick your niche
**********************
major sea changes under way in society
educated guess about how people are changing their behaviors, which emerging technologies will profoundly affect people, what people buy and how they buy it
(iii) Know the story - learn all you can about the history of the market
**********************
why does the opportunity exist now
who has come before you and tried to solve it in other ways?
what is the source of the problems you are trying to solve ?
(iv) Identify experts
**********************
who understands this market today ? what are they talking about it?
Who are the thought leaders ? - cite their opinions in justifying market need
Take time to listen to expert opinions on future of the market you want to enter
(v) Learn how to keep score
****************************
which metrics will you measure to determine if the market is adopting your solution ?
eg. 40% of my customers must become repeat customers
my customer base should double within 30 days
Establish next steps to take if product becomes a runaway success or not
(vi) Know how to keep ahead of competition
*******************************************
How will others respond to you ?
How will you in turn respond to them ?
Study how competitors react to the introduction of your product and whether their responses are consistent with your expectations
(vii) Pick the right market (size, dynamics)
*********************************************
Total Addressable Market: current user base + industry reports, census data, analyst projections, annual reports)
Initial Target Market: Focus on the group you are most likely to succeed
(viii) Understand Market Dynamics
**********************************
What do buyers spend now ?
Who do they spend it with ?
How do they make their spending decisions?
What features are important to them?
What overall values, quirks, tastes do they have ?
(ix) What are the trends ?
***************************
- is the market growing, how fast ?
- what makes the market grow ?
- is growth the result of overall expansion or customer switching ?
- why will people switch to your product or consider a new purchase ?
- what are product life cycles in the market and required technology investments to stay ahead of the curve?
- who has buying power in your industry's value chain ? eg. WalMart can dictate terms for price, quality, delivery schedule to manufacturers
- Do external factors influence the potential size of your market ?
(x) Look at market segments
****************************
Geography "NorthEast customers bought 60% more heating oil in winter 1999"
Industry "Financial services firms comprise 40% of the market for supercomputers"
Type of buyer "Early adopters seeking professional edge make up 40% of the market for Blackberry"
Distribution channel "30% of customers shop at WalMart at least once a week"
Market share " Coke owns 45% of market, Pesi 40%, assorted juice drinks own 15%"
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