Download A framework for analysing opportunities

© 2007 John Wiley & Sons Australia, Ltd
Announcement
• Replacement class today
• Venue: 2-6:ROOM-4 ENT3
• Time: 13:45 - 15:45 hr.
• Topic: Presentation by 3 groups
Question:
What are the key steps in analysing
opportunities to identify commercially viable
applications?
Commercial viability = Feasibility
What are the key steps in analysing
opportunities to identify commercially viable
applications?
1. Determine the novelty, the patentability
and the ownership of the innovation.
2. Identify technical advantages over rivals.
3. Brainstorm for potential applications.
What are the key steps in analysing
opportunities to identify commercially viable
applications?
4. Identify commercial advantages (i.e.
whether technical advantages are
relevant) for each of these applications.
5. Identify potential lead customers ―
individuals or companies willing to adopt
and pay for the commercial advantages.
6. Conduct market research to identify
market size and segments
Chapter 6
Analysing opportunities and developing
a strategy
Chapter outline
• A framework to analyse opportunities
• The role of market research
• Developing a strategy
Learning objectives
• Explain how to evaluate entrepreneurial
opportunities
• List the types of secondary research
sources commonly available
• List some common forms of primary market
research
Learning objectives
• Explain the different perspectives on
strategy
• List the key steps of strategy formulation for
new business ventures
Evaluating Opportunities
A framework for analysing
opportunities
• Many different tools available to evaluate
entrepreneurial opportunities
• Most have been developed by venture
capitalists and business consultants
A framework for analysing
opportunities
• One tool is the ETeCH Technology
Bridge™ (so called because it builds
bridges for technology into markets)
– The process consists of a series of strict
filters that leave only the technologies
that are viable, and for these, only their
significantly commercially viable
applications. Only upon these can a
business plan be developed
A framework for evaluating
opportunities
• Example: No. 1
• Iron that stops when not in use
• Sell to electric iron companies not after
market.
~Nokia Morph~
TECHNOLOGY TRENDS
Flexible and
Changing Design.
Self-Cleaning.
Advanced Power
Sources.
Sensing the
Environment.
~ Zigo Leader Carrier Bicycle ~
TRANSPORTATION TRENDS
• Example: No. 2
• Bicycle-cum-stroller
Normal Bicycle
Stroller
Carrier Bicycle
Bring a lot of
convenience for
busy parents.
The parent and
the child can stay
healthy and strong.
FROM IDEA TO CUSTOMER BENEFITS
You must however ensure that
any latent demand idea would
create real customer benefits.
Latent demand idea
What are the customer benefits
20
Copyright: Andrew Jong, 04.09.02
Source: Philip Kotler et al.
DOES YOUR IDEA CREATE EXCEPTIONAL UTILITY?
Many forget to ask and check for buyer utility in their ideas
because they are obsessed by the novelty of their product or
service – especially if a new technology plays a part in it.
Buyer utility and technical advance are not the same!
Using the buyer utility methodology is easy…
21
Copyright: Andrew Jong, 04.09.02
Source: W. Chan Kim and Renee Mauborgne
Another approach for
evaluating Opportunities
Establishing the novelty,
patentability and ownership
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Is it novel?
Is it patentable? [do not introduce it first]
Who owns the technology?
Typically, about 50% of opportunities would
not pass this filter because the innovation is
not really novel, it cannot be patented, or
the entrepreneur does not have ownership
of the technology.
Does it work and is it better than
existing products?
•
•
•
•
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Does it work?
Is it better than rivals?
What are the applications?
Are there commercial advantages?
Here, 30% of ‘innovations’ fail because
there are often misinterpreted results, or
simply, a better product already exists
Identify potential buyers
• This filter checks that there are indeed
potential buyers (individuals or companies)
willing to adopt and pay for the commercial
advantages
• A few ‘lead buyers’ buyers should then be
contacted to verify if they would value the
advantages that could be offered
Is there a positive return?
• What is the market size and attributes?
– Market research asks if the market size
and attributes would lead to the
advantages actually being paid for,
i.e. whether the applications are viable
Is there a positive return?
• Drafting a business plan
– Involves planning the resources and
developing a budget
– This is then compared with the end-point
value to ascertain the true market size
that can realistically be captured
The role of market research
• One of the most common problems faced
by entrepreneurs is a lack of suitable
information for their business idea
• Market research is the use of information to
identify and define market opportunities
and problems
• Includes identifying target markets for a
new product and surveying members of
these markets to understand their
purchasing behaviour relevant to such
products
What to research?
• One of the first issues to be considered is
exactly what information should be
investigated
• The most conventional framework in
marketing describes the environment of the
entrepreneur in terms of an ‘onion’, which
distinguishes between three different
degrees of interaction:
– the market
– the industry
– the macro-environment
The market
• Consists of the people or firms who could
benefit from the new product, have the
means to buy it and will be offered the
opportunity to do so
• Specific information requirements about the
market include:
– The customer profile(s) and segment(s)
– The product or service
– The price
– Sales and distribution channels
The macro-environment
• Contains the major factors which determine
the performance of the new business
venture
• These external factors are most often
grouped as the STEP factors (social,
technological, economic and political)
• Environmental scanning is a common
method that enables entrepreneurs to
understand the external environment and
the interconnections of its various elements
PEST
•
•
•
•
P – Political Factors
E – Economical Factors
S – Social Factors
T – Technological Factors
Constraints on research
•
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Cost
Research experience and competency
Reliability of data
Personal prejudices of researcher
Uniqueness
Time
Conducting research
• The business researcher has two main
avenues when seeking and collecting
information
– to consult existing sources of data
(secondary information) which will provide a
general picture of the current state of
knowledge about a particular problem
– After this, it may be necessary to investigate
some issues in more detail by undertaking
original research from primary sources
(primary information)
Secondary information
•
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•
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•
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Publications
Business directories
Private market researchers
Government bodies
The internet
Trade shows
Company annual reports
Industry associations
Primary information
•
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Observation
Experimentation
Surveys (telephone, personal, email)
In-depth interviews
Focus groups
Train in China
Types of primary research
Developing a strategy
Developing a strategy
• Immediate objective of market research is
to determine the feasibility (commercial
viability) of a new start-up business,
product offering, or purchase of a business
• But this information will also help to
forecast likely future events, and will
provide the foundation to develop a
strategy for the business venture
• Strategy matters because of its role in the
direction taken by the firm
Two perspectives on strategy
• A strategy defines the business direction, its
scope, and it will seek competitive
advantage
• The strategic fit between the internal
aspects of an organisation and the external
environment determines competitive
advantage
• Two dominating perspectives which explain
how to achieve a strategic fit:
– the market-led view
– the resource-based view
The resource-based perspective
• Resource-based view suggests that the
business venture should assemble and
deploy appropriate resources that provide
opportunities for sustainable competitive
advantage
• Competitive advantage is thus created by
distinctive, valuable, firm-specific resources
that competitors are unable to reproduce
The market-led perspective
• Firms gain competitive advantage through
identifying external opportunities in new
and existing markets and then aligning the
firm with these opportunities
• Approach rooted in the ‘strategy-conductperformance paradigm’:
– the economic performance of an industry
is a function of the conduct (or strategy)
of buyers and sellers which, in turn, is a
function of the industry's structure
The market-led perspective
• Competitive changes within an industry
determine which markets the business
venture should enter, stay in, or exit
The process of strategy
development
The market-led perspective
• The essence of strategic planning revolves
around three questions:
– Setting objectives — where do you want
to go?
– Doing a situation analysis — where you
are now?
– Selecting a strategy — how to get there?
Strategy formulation – 3 steps
• Where are you now?
• Where do you want to go?
• How to get there?
Strategy formulation – 3 steps
• Setting the objectives by crafting a vision
[a long term view]
• A mission [the role that the organisation
gives itself in society]
• Selecting a strategy that will provide the
enterprise with a competitive advantage.
[How to get there]
Blue Ocean Strategy [BOS]
• Where competition is irrelevant
• To beat competition is not to compete with
competition – seek out your blue ocean
• Rules of the games are yet to be set
• Go for untapped market place
• Beyond existing industry boundaries
• Value innovation – differentiation and low
costs
• Eg. Making wine more fruitier target the beer and
cocktail drinkers, Non alcoholic wine
Towards 'blue ocean' strategies
• Contrary to most corporate strategies
based on military models and direct
confrontations, ‘blue ocean’ strategies build
new business where none existed, giving
innovative entries clear sailing
• The core element of a ‘blue ocean’ strategy
is ‘value innovation’, that is, tangible
product advancements accompanied by
demonstrable savings
Towards 'blue ocean' strategies
•
1.
2.
3.
4.
5.
6.
The six principles of a ‘blue ocean’
strategy:
Reconstruct market boundaries
Focus on the big picture, not the numbers
Reach beyond existing demand
Get the strategic sequence right
Overcome key organisational hurdles
Build execution into the strategy