Business Idea generation
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MGMT20143_Week7.ppt
MGMT20128 / MGMT20132:
Innovation and (Sustainable) Business Development
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MGMT20143: THINK BIG
Week 7: Ideation and Feasibility
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Seminar Outline
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Content:
- Discovery
- Perspectives on feasibility
- Suitability of business model
Workshop:
- Is there a business model that will deliver your business idea profitably?
DISCOVERY
"Discovery is seeing what everybody else has seen, and thinking what nobody else has thought”
Albert Szent-Gyorgi, Nobel Prize in Medicine 1937
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- “Every problem is a brilliantly disguised opportunity” John Gardner*
- Discovery requires
- being observant
- deconstructing the symptom to identify the cause
- Being a paradigm pioneer**
- There is no shortage of ideas!
- There is a shortage of viable solutions
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John Gardner, cited in Kotler, P. (2003) Marketing Insights from A to Z. New York: John Wiley & Sons. P.128
** A paradigm pioneer: Entrepreneurs operating in a dynamic changing environment assume the role of paradigm pioneers and architects of innovation. Their role involves aiding others to make paradigm shifts to develop innovative products and services. The paradigm pioneer must help others to share the vision of positive outcomes, to help them move away from their resistance to fantasies or punishment. Winslow. E. k., & Solomon, G. T. (1993) Entrepreneurs: Architects of innovation, paradigm pioneers and change. Journal of Creative Behaviour, 27 (2) p.75-88
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“If there’s something you want to build but the tech isn’t there yet, just find the closest possible way to make it happen”
Dennis Crowley, Co-founder, Foursquare
https://foursquare.com
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Distinguishing between research and discovery
- Research commonly fails to ask how much people want something … particularly how much ‘pain’ it will solve for them … and how much that would positively contribute to their life.
- Discovery is uncovering value – once experienced, can people live without your solution?
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Evaluating your business idea
- In evaluating your business idea*:
- Create value: Can you do something that someone else values?
- Capture value: Are you able to keep enough of that value in the form of profit or assets, to be worthwhile?
- How feasible is it?
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* Source: Liubinskas, M & Morle, P. (2012) Startup Focus: The science of turning an idea into a business. Sydney: The Messenger Group.
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Testing value creation
“If you’ve spent time understanding [potential] customers, they become like friends. What you want is the brutality of the market – the cold call. That’s when your offer is really tested”
“The earlier you learn that your idea isn’t viable, the less time and money you’ll waste on it”
Mick Liubinskas & Phil Morle
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* Source: Liubinskas, M & Morle, P. (2012) Startup Focus: The science of turning an idea into a business. Sydney: The Messenger Group. P.96
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Visualising the value creation process:
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Source: Armstrong. G., Adam, S., Denize, S., Volkov, M., & Kotler, P. (2018) Principles of Marketing 7e Melbourne: Pearson. p.239
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Lessons from the ‘bleeding edge’
- The ‘bleeding edge’ precedes the ‘leading edge’ of innovation and new venture creation
- The bleeding edge process evaluates:
- Does your product/service idea solve a REAL problem?
- What are the biggest assumptions and uncertainties of the idea?
- What’s the fastest, cheapest and easiest way to answer those questions?
- Do it
- Measure it (does it confirm your hypothesis, did it identify something you didn’t expect?)
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Feasibility Analysis*
Copyright © 2016 Pearson Education Ltd.
Role of feasibility analysis in developing business ideas.
Copyright © 2016 Pearson Education Ltd.
* Source: Barringer, B.R. & Ireland, R. D. (2016) Entrepreneurship: Successfully launching new ventures. 5e. Harlow, UK: Pearson
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Product/service feasibility
- Does your idea make sense? Is it reasonable? Is it something that potential customers will get excited about?
- Does it take advantage of an environmental trend, solve a problem, or take advantage of a gap in the marketplace?
- Is this a good time to introduce the product or service to the market?
- Are there any fatal flaws in the product or service’s basic design or concept?
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* Source: Barringer, B.R. & Ireland, R. D. (2016) Entrepreneurship: Successfully launching new ventures. 5e. Harlow, UK: Pearson
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Confirming product/service feasibility
- Before you even build your product, can you rent someone else’s product to then quickly imitate yours?*
- Until you get your product into the hands of a real customer, you’re only guessing and you’re starving your idea of oxygen.*
- Make sure the idea is as focused (streamlined) as it can be (no ‘bells and whistles’)
- Focus on a small group of customers to more readily identify if it creates REAL value for them
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* Source: Liubinskas, M & Morle, P. (2012) Startup Focus: The science of turning an idea into a business. Sydney: The Messenger Group. p.97
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Target market feasibility
- How attractive is your core target market?
- Is it large enough for the proposed business but small enough to be ignored by established businesses?
- How accessible is your core target market?
- Facebook groups (type your keyword in the search bar)
- LinkedIn groups (type your topic area into the search bar)
- Twitter (simply place the hashtag (#) in front of the topic)
- Blogs (www.google.com/blogsearch)
- Tumblr (www.tumblr.com and type in your query in the search bar)
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Is the Industry Attractive
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Copyright © 2016 Pearson Education Ltd.
Copyright © 2016 Pearson Education Ltd.
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Examples
- Based on what you know now and without detailed analysis: are these industries attractive?
Newspaper industry
Electric cars
3D selfies
Soft drinks
Cat café
- * Source: Barringer, B.R. & Ireland, R. D. (2016) Entrepreneurship: Successfully launching new ventures. 5e. Harlow, UK: Pearson
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Organizational Feasibility Analysis
Management prowess
Do we (as an entrepreneur/ entrepreneurial team) have sufficient passion, management expertise and organizational competence to launch this business?
Resource sufficiency
Do we have sufficient non-financial resources to successfully launch this business?
* Source: Barringer, B.R. & Ireland, R. D. (2016) Entrepreneurship: Successfully launching new ventures. 5e. Harlow, UK: Pearson
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Examples of non-financial resources
- Space to launch a service business, manufacturing space, lab space
- Availability of contract manufacturers or service providers
- Key support people (now and in the future)
- Access to or ownership of Intellectual Property
- Ability to form favourable partnerships in the supply chain
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* Source: Barringer, B.R. & Ireland, R. D. (2016) Entrepreneurship: Successfully launching new ventures. 5e. Harlow, UK: Pearson. P.114
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Resources – a typology*
Macht, SA (2008) ‘How are Business Angels Involved in their Investee Companies? A Theoretical and Empirical Study of Business Angels’ Post-Investment Involvement.’, Unpublished PhD thesis, Northumbria University.
* Source: Macht, S. A. (2008) ‘How are Business Angels Involved in their Investee Companies? A Theoretical and Empirical Study of Business Angels’ Post-Investment Involvement.’, Unpublished PhD thesis, Northumbria University.
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Financial feasibility
First screen of financial feasibility encompasses:
- Steady and rapid growth in sales during the first five-to-seven years in a clearly defined niche market
- High percentage of recurring revenue from customers
- Ability to forecast income and expenses with a reasonable degree of certainty
- Internally generated funds to finance and sustain growth
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* Source: Barringer, B.R. & Ireland, R. D. (2016) Entrepreneurship: Successfully launching new ventures. 5e. Harlow, UK: Pearson p.116
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WHICH BUSINESS MODEL?
- Which business model pattern best suits your business idea, the customers you propose to serve, the solution your are providing in terms of product or service, and the challenges you are likely to encounter in delivering this to them?
- The following business models are elaborated in Osterwalder & Pigneur’s Business Model Generation.
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Unbundling Business Models
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| Context (before) | An integrated model combines infrastructure management, product innovation, and customer relationships under one roof |
| Challenge | Costs are too high; Several conflicting organizational cultures are combined in a single entity, resulting in undesirable trade-offs |
| Solution (after) | Unbundle separate but complementary models reflecting: Infrastructure management Product innovation Customer relationships |
| Rationale | IT and management tool improvements allow separating and coordinating different business models at lower cost, eliminating undesirable tradeoffs |
| Example | Australian banking sector (refer Australian Banking Royal Commission 2018) |
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The Long Tail
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| Context (before) | The value proposition targets only the most profitable clients |
| Challenge | Targeting less profitable segments with specific value propositions is too costly |
| Solution (after) | The new or additional value proposition targets a large number of less profitable niche customers segments – which in aggregate are profitable. |
| Rationale | IT and operations management improvements allow delivering tailored value propositions to a very large number of new customers at low cost |
| Example | Publishing industry (www.lulu.com) |
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Multi-sided Platforms
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| Context (before) | One value proposition targets one customer segment |
| Challenge | Enterprise fails to acquire potential new customers who are interested in gaining access to a company’s existing customer base (e.g., game developers who want to reach console users) |
| Solution (after) | A value proposition “giving access” to a company’s existing customer segment is added (e.g., a game console manufacturer provides software developers with access to its users) |
| Rationale | An intermediary operating a platform between two or more customer segments adds revenue streams to the initial model |
| Example | Apple iPod, iTunes, iPhone |
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FREE (freemium) as a business model
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| Context (before) | A high-value, high-cost value proposition is offered to paying customers only |
| Challenge | The high price dissuades customers |
| Solution (after) | Several value propositions are offered to different customer segments with different revenue streams, one of them being free-of-charge (or very low cost) |
| Rationale | Non-paying customer segments are subsidized by paying customers in order to attract the maximum number of users. |
| Example | Skype; Survey Monkey; Flickr |
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Open business models
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| Context (before) | R&D resources and key activities are concentrated in-house: Ideas are invented ‘inside’ only Results are exploited ‘inside’ only |
| Challenge | R&D is costly and/or productivity is falling |
| Solution (after) | Internal R&D resources and activities are leveraged by utilizing outside partners. Internal R&D results are transformed into a value proposition and offered to interested customer segments. |
| Rationale | Acquiring R&D from external sources can be less expensive, resulting in a faster-time-to-market. Unexploited innovations have the potential to bring in more revenue when sold outside |
| Example | Innocentive; GlaxoSmithKline |
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WORKSHOP
- How did you go with last week’s workshop exercises?
- Did you Pressure Test your idea? (if not the slide follows)
- Have you thought any more about how to ‘monetise’ your idea?
- With the benefit of last week’s Workshop 4, and this week’s lecture, where or how vulnerable is the profitability of your business idea?
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Workshop 1: Idea ‘pressure test’
(Score between -3 and +3)
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| Idea 1 | Idea 2 |
| Can you describe your idea with a name? | |
| How fast to get a first version of a MVP? | |
| Is the idea obvious to explain? | |
| Will lots of people find it valuable? | |
| Can you keep adding value after the first version? | |
| How will this idea make money? | |
| Is it easy for people to discover (virally)? | |
| Is it awesome? | |
| What is the minimum investment required to test it? | |
| Do you have the skills and knowledge to develop it? | |
| TOTAL (out of 30) |
Workshop 2: Feasibility Screen
Access the First Screen Feasibility uploaded to the Moodle web site for Week 7
- Part 1: Evaluate the strength of your business idea
- Part 2: Explore industry-related issues
- Part 3: Examine target market and customer-related issues
- Part 4: Evaluate Founder-related issues
- Part 5: Examine financial issues
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Workshop 3: Overall potential
Access the First Screen Feasibility uploaded to the Moodle web site for Week 7
- Evaluate the overall potential of the business idea on each Part
- Critically discuss ways to improve the potential
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Workshop 4: Your preferred business model
- Reviewing the various patterns of business model, which is best suited to your business idea (now and in the future)?
- What aspects are you relatively strong in (well-resourced)?
- How can you realistically cover any deficiencies?
- Which business model will deliver your business idea more profitably?
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