Identifying Opportunities

Entrepreneurial Process

 Identify and Evaluate the Opportunity  Develop the Business Plan  Determine Resources Required  Manage the Resulting Enterprise Created

Identify & Evaluate Opportunity

 Fruitful Sources: consumers, distributors, technical people, business associates  Evaluation of opportunity most critical element  Window of opportunity (size & duration) are primary basis for determining risks/rewards  Opportunity must fit personal skills and goals of entrepreneur  Opportunity Assessment Plan

Opportunity Assessment Plan

 What market need does it fill?

 Personal observations reflect market need?

 What social condition underlies market need?

 Market research to support need?

 Are patents required?

 What competition exists in marketplace?

 International competition?

 Where is the money to be made in this activity?

Develop a Business Plan

          Executive Summary Description of Business Description of Industry Marketing Plan Financial Plan Production Plan Organization Plan Operational Plan Summary Appendices

Entrepreneurial Interest

    Small firms play a major role in job creation and innovation Most large organizations provide little opportunity for self-actualization New ventures by female entrepreneurs 3 times that of males Life-Cycle Approach   9 areas of development little statistical significance   tend to have self-employed fathers generally know for strong work values and dominant management style

Concept Development

Identify Needs Target Specs Product Concepts Select Concept Test Concept Set Final Specs Plan Downstream Development Plan

Concept Development

Identify Needs Target Specs Product Concepts Select Concept Test Concept Set Final Specs Plan Downstream

Perform Economic Analysis Benchmark Competitive Products Test Models / Prototypes

Development Plan

Opportunity Identification

Identify Opportunity Determine Capabilities Evaluate Opportunity Select Best Opportunity Summary of Concept Test Concept

Nine Categories of Opportunities

 Increase value of a product or service  New applications of existing technologies  Creating mass markets  Customization for individuals  Increasing reach  Managing the supply chain  Process innovation  Increasing the scale of the firm

Trends / Opportunities

 Genetic Engineering, genomics  Information technology  Food preservation / distribution  Video gaming  Speech recognition  Security systems  Nanotechnology

Trends / Opportunities

 Fuel Cells  Superconductivity  Designer enzymes  Smart cards  Software security  Robots

Social / Cultural Trends

 Aging baby boomers  Increasing diversity  Two-working parent families  Rising middle class in developing nations  Changing role of religious organizations  Changing role of women  Media – DVDs, Internet  Growth of Latino population in U.S.

Convergence

Applications

Opportunity

Customer Needs Technology Capacity

Evaluating Opportunity

    

Capabilities:

base ?

is it consistent with mission, knowledge

Novelty:

does product have sufficient differentiating qualities that it creates value for the customer ?

Resources:

venture ?

are the available resources sufficient for the

Return:

venture ?

is expected return consistent with the risk of the

Commitment:

is the entrepreneurial team sufficiently passionate about the venture that they can commit ?

Resources:

financial processes human

Team:

accept risk knowledge base commitment

100% 50% Context:

timeliness industry conditions market conditions

Opportunity:

novelty potential market good risk vs reward

Resources:

financial processes human

Team:

accept risk knowledge base commitment

100% 50%

Holiday Inn

Context:

timeliness industry conditions market conditions

Opportunity:

novelty potential market good risk vs reward

Resources:

financial processes human

Team:

accept risk knowledge base commitment

100% 50%

Electric Auto

Context:

timeliness industry conditions market conditions

Opportunity:

novelty potential market good risk vs reward

Product Development Approach

 Identify Opportunities  Evaluate and Prioritize  Allocate Resources and Plan Timing  Complete Pre-Project Planning  Reflect / Evaluate Results

Product Development Approach

 Identify Opportunities  Marketing & sales  R&D  Manufacturing  Current / potential customers  Third party (competitors)

Product Development Approach

 Evaluate and Prioritize  Competitive Strategy  Technology leadership  Cost leadership  Customer focus  Imitative  Market segmentation  Technological trajectories  Product platform planning

Marketing Research

   Systematic, formal, and objective application of scientific method Advantages  Accuracy Disadvantages  Costly   Requires experience, knowledge Can be wrong (New Coke) Market surveys Hire a consultant

Perform Potential

Technology Life Cycle

primitive growth mature decline time

Generating Creative Business Ideas

Ken Olsen

     Ph.D. student at MIT research team building first MIT computer Liason team with IBM Disgruntled with IBM’s production inefficiencies Started DEC with $70,000  Introduced PDP-1 in 1960 (first small computer)   1964 senior entrepreneurs each totally in charge of a single product line 1979 future in systems and networks, company spent 5 years reorganizing DEC into a unified marketing organization 1994 sales at roughly $14 billion

Sources of Ideas

     Consumers Existing Companies  can we improve existing products Distribution Channels  distributors keenly aware of market trends Federal Government   Patent Office (Official Gazette) Regulations (OSHA) Research & Development  Ken Olsen

Generating Ideas

  Focus Groups  8-12 market group conceptualize new product need Brainstorming   structured      central question is stated each member gives idea in turn (no criticism) ideas written on flip chart ideas generated until all members pass review written list for clarity and discard duplicates unstructured

Generating Ideas

 Variations to Brainstorming  visual brainstorming  analogies/free-word association  6-3-5 method  6 people 5 minutes 3 ideas  pass sheets of 3 ideas to the right  5 minutes 3 ideas which build on first 3  complete 6 rotations (or as many as there are members)

Generating Ideas

  Nominal Group Technique (NGT)  generate list of ideas (brainstorm)    each member rank orders ideas highest to lowest idea with highest total score gets worked on first Variations   One half plus one; eliminate half at a time until arrive at a manageable number Multivoting; rate each idea on scale of 1 to 100 Problem Inventory Analysis  easier to relate to known products and criticize to arrive at a new product idea

Creative Problem Solving

    Brainstorming Reverse brainstorming Synetics   2 step problem solving through one of four analogies: personal, direct, symbolic, and fantasy generally requires considerable training  limited success with some groups (male eng.) Gordon Method   group responds to a general concept respond to related concepts  finally respond to actual problem

Creative Problem Solving

   Checklist Method  modify, adapt, put to other uses, substitute, . . . Free Association  similar to brainstorming - create chain of ideas Forced Relationships  Isolate elements of a problem     Find relationships between elements Record relationships in an orderly form Analyze relationships to find ideas or patterns Develop new ideas from patterns

Creative Problem Solving

 Value Analysis  maximize value by constructively skimping  Attribute Listing  list attributes of a problem  e.g. SD has little economic development, what types of industry/products/services do well here  Matrix Charting  similar to house of quality

Creative Problem Solving

 Big-Dream Approach  ideas should be conceptualized without constraints  Parameter Analysis  2 aspects, parameter identification & creative synthesis Technology Observation Market Need Need Analysis Parameter identification Creative synthesis Realization New Product

Product Development Process

Introduction Growth Maturity Decline t

Product Development Process

EVALUATE Idea Concept Develop Test Market Introduction Growth Maturity Decline t

Evaluation Criteria

     Evaluation of market demand is most important criterion of a proposed new product idea Competing producers, prices, and marketing strategies should be evaluated New product compatible with existing management New product should contribute to company’s financial structure New product compatible with existing facilities

Evaluation

  Idea Stage  each new idea expressed in terms of values & benefits   consumers presented with cluster of ideas determine which should be pursued Table 4.4 & 4.5

Concept Stage  refined product idea tested to determine consumer acceptance  conversational interview - consumers respond to statements that reflect product attributes, quality, reliability, price, promotion, distribution

Evaluation

 Product Development Stage  consumer reaction to physical product is determined  consumer panel tracks use of product  consumer panel records virtues, deficiencies of product and competing products  Test Marketing Stage  New Coke

Evaluation Questions

     How will this venture do in the short run? long run?

Why does this opportunity exist? Is this likely to last?

Who will be the first customer to buy? Will it possible for this company to withstand competition if it comes?

Who else could enter the market and become competitors?

Evaluation Questions

 What are the 3 critical assumptions upon which success is projected? Can these assumptions be tested?

 How sensitive are these projections to variations in key assumptions?

 What is the downside loss if things go unfavorably?

 What has to happen for break-even to occur?

Check Market Fit

 Target Customers  Segmentation  Nichemanship  Positioning  Price/Performance  Comparison Grids  Relative Market Share