The First Step: Opportunity Screening

The First Step:   Opportunity Screening

At the very start of an Entrepreneurs adventure, the first step is most often the attempt to answer the question: What venture am I going to start? 

Unless one inherits an existing business or has had a “eureka” moment that immediately decides what product or service to embark on, the start-up question on what to do is the initial, and perhaps one of the more difficult steps to overcome. 

And this is where “Opportunity Screening” comes in. As the term suggests, starting an entrepreneurial venture is looking at various opportunities that can come our way. How to screen these opportunities and deciding on which one to “start-up” is the first step in any entrepreneurial adventure.
During my studies at the Asian Institute of Management in Manila, my professor in Entrepreneurship gave a very interesting analogy on “opportunity screening”. He likened this to going fishing. Specifically, fishing along a shore line and Spear Fishing. 

Shore or Surf fishing is when you cast a line and hope that a fish bites the bait. 
Spear fishing is going under the water via free-diving, snorkeling or scuba diving, and targetting the fish with a spear-gun or sling. 

With the fish being the opportunity or venture, these two types of fishing illustrates how entrepreneurs screen opportunities. 

Either you Surf Fish – prepare your resources, send out feelers and inquiries, and wait for replies or expressions of interest from various business proposals. 

Or you can Spear Fish – you get out into the business ocean, armed with your resources and pick out a target that you like, and shoot for it. 

After a lengthy and heated discussion during this class where our professor asked which type of fishing or opportunity screening is better, it was agreed upon that both are good ways of opportunity screening, and what is best is using both, depending on the following: 
a) Personality, Abilities, Strengths & Weaknesses of the Entrepreneur.
b) Available resources.
c) Industry & Market / Competitor conditions.
d) Existing organisation of the entrepreneur.

Whatever style you may choose, it is also best to be guided with some basic questions. Below is a worksheet that can help new and experienced entrepreneurs in picking out those opportunities that are worth building. (Adapted / Modified from: www.pmtraining.com.tw/article/5phase/Phase0.../OpportunityScreen.doc)‎

Bacon & Potatoes Opportunity Screening Worksheet:
This Opportunity Screening worksheet is used to help determine if an idea is worth enough to develop.  The Entrepreneur can use this worksheet to evaluate a number of factors in determining if a new product development project should be undertaken and identify the important issues in making that decision.

Opportunity Overview:
General information about the proposed product or perceived opportunity.
1. What is the opportunity?
2. What is the market need to be served by this idea?
3. What is the market or markets to be served?
4. What product or package improvements are needed by the key market(s)?

Fit with Core Capabilities:
Defines how well this product leverages the entrepreneur's existing strengths and core capabilities and competencies.   
1. Does the opportunity represent a fit with the entrepreneur's  personal vision and mission in life? (If not, state what should change and why.)
2. Does the entrepreneur have the necessary management capability, capacity and competency to manifest this opportunity into a reality?  (If not, what skills, etc. would have to be learned or acquired?)
3. Does the entrepreneur have the wherewithal  to understand the technology?  Can it integrate the technology, manufacture the technology, etc.?  (Has it been done, done in this entrepreneur's existing organization, has it been done by others?  What changes are necessary to be able to handle the technology?)
4. Does the entrepreneur know how to manufacture this and handle the required operations?  (If not, what needs to be learned, acquired or changed and why?)
5. Does the entrepreneur have the necessary skills to market this opportunity?  (If not, what's different about this opportunity and how would the entrepreneur  need to change to accommodate the opportunity?)


Barriers to Entry:
Careful consideration is required here since barriers can be positive and negative.
Negative: The entrepreneur cannot muster the resources necessary to enter the market effectively
Positive:  The entrepreneur can enter the market because of certain core competencies and capabilities that are unique to the entrepreneur (for this market).

1. Is there potential for a specialty market or niche market for this opportunity?
2. What will be the likely competitive response?  From our traditional competitors?  From unlikely competitors?
3. Are there any threats to the market?  (Environmental, regulatory, economic, technology, etc.)
4. Is there any potential for product displacement already in place?  Will this product cannibalize any current product mix?  Proposed or future product mix?  Will it displace a competitor's product?

Value Added:
Will the proposed product be perceived by existing and prospective customers as adding value to their shareholders, their customers, their employees, themselves, etc.?

1. How are the market needs and requirements for the proposed product currently being met?  (List the entrepreneur's and the competition's current or expected products and the needs they meet for various market segments.)
2. How will the new opportunity shift existing paradigms or perceptions (if any)?
3. Will the proposed change be perceived as valuable?  (If there are multiple targeted market segments, list any commonalties and differences for each segment.)
4. Can the proposed change be marketed as desirable?  (Are there different levels of "desirable" for different market segments?)

Essential Advantage:
Evaluate whether the critical blend of available or acquirable raw materials and the entrepreneur's capabilities will result in a product that is unique enough to provide our entrepreneur with sustainable strategic advantage.

1. Is there a competitive opening in one or more targeted market segment?  What unique characteristics or capabilities does the entrepreneur possess that will increase success for chosen market segments?
2. Is there a reasonable basis for a competitive advantage for the entrepreneur?  (For example, can we build it cheaper, does our brand carry a margin, will we be first to market, etc.?)

Long Term Sustained Revenue:
Objective: Long term profitable relationships are developed and maintained at the client level; the revenue stream from the market as a whole will continue into the foreseeable future.

1. Is the market too large or too small for the entrepreneur's participation with this product?  Ask the question of separate market segments and the combined, total market.
2. Can the entrepreneur achieve significant or adequate market penetration?  What are the drivers and the inhibitors to making the penetration larger?
3. What is the expected growth rate for the market?  What is the expected market share of this for the entrepreneur?  Why?

Market Position:
1. How should the product be positioned to achieve optimum performance in terms of market share and profitability?  Identify this for each targeted market segment.
2. Will the product have a positive or negative impact on the historic markets of the entrepreneur's existing products or services?  Will this product change customers' perceptions or expectations?  Will this change be good, bad or both?  (Explain)
3. Will the product alter or confuse the position we hold in the customer's mind?

Profitability:

1. Can the entrepreneur be cost competitive?  (Evaluate this for all targeted market segments.)
2. Can the entrepreneur safely finance the new product?  What are the financial risks?
3. What are the expected profit-levels for the market or market segments?
4. What is the expected return on invested capital?
5. What is the downside exposure to financial loss?  (Identify some worst case scenarios here.  Expand the scenarios and include "what-ifs" and why these scenarios may occur.)
6. Can the entrepreneur afford the downside exposure?  Can the entrepreneur take the risk?  Consider the worst case scenarios as a spectrum and show where the boundaries are if negative events take place.  Use these to justify taking the risks or not undertaking the project.

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Do you have other ways to screen entrepreneurial opportunities? Any questions on venture screening  I can help you with? Do drop me a note / comment below. Or email me at adrl@me.com - ADRL

Image credit: http://assets.samyroad.com/uploads/2705/attachment/67845/big_spear-fishing-perfect-timing.jpg

innovation Excellence: ENTREPRENEURS DEFINE RISK DIFFERENTLY

Reposted from innovation Excellence - http://www.innovationexcellence.com/blog/2013/05/25/entrepreneurs-define-risk-differently/

Entrepreneurs Define Risk Differently

Posted on May 25, 2013 by Deborah Mills-Scofield

Most people think entrepreneurs are willing to take on more risk than the average person. I’ve often wondered if that’s really true. After almost three decades of working with large corporations and entrepreneurs, I’ve developed a theory.

Now, this theory hasn’t been vetted with controlled experiments and testing. It is based solely on experiential and intuitive data drawn from my life experiences. For instance, I have 12 years of working with entrepreneurs as an early-stage venture capitalist; 19 years working for a large corporation (Bell Labs & AT&T) and consulting to their multi-national, multi-billion dollar customers; 10 years of mentoring entrepreneurs; and created a carve-out start-up within AT&T.

Here’s my theory: most entrepreneurs aren’t more risk-o-philic than anyone else — they just define risk differently.

For some I’ve known, the risk of losing autonomy and control of one’s “destiny” was far riskier than losing “guaranteed” income and benefits. Working for someone else’s company, reporting to a boss, and living under rules they weren’t sure made sense were a lot riskier than creating their own business. The risk of not pursuing their passion, of not making a meaningful and significant impact on the world around them, feels much riskier than starting their own venture.

For them, risk isn’t as defined by losing tangibles (e.g., income, benefits, “stuff”) as it is by losing intangibles: fulfilling a passion that won’t let go, defining their own sense of purpose, sating their own curiosity, looking themselves in the mirror.

The difference here is between risking outputs and outcomes. Outputs (such as products, profits, etc) are necessary and good, but they have their most profound effect when driving significant, palpable outcomes — like reducing chronic pain, creating a prosthetic leg for an Olympic runner, or inventing an app that eliminates a time-consuming task. Most of the entrepreneurs I’ve worked with would gladly risk a few outputs for an outcome they believe in.

For many entrepreneurs, another critical risk worth taking is making themselves vulnerable in order achieve the outcomes they envision. As John Hagel has said, the risk of embarrassment, ridicule, skepticism, perhaps even humiliation is much less than the risk of not putting oneself out there to try.Anthony Tjan astutely summarized it this way: “The willingness to be vulnerable isn’t driven by the desire for exposure, but by the possibility of what that exposure might lead to — be it a meaningful role, the possibility to affect change, and, of course, greater financial gain.”

I’ve seen, heard, and felt so many entrepreneurs’ intense passion and purpose for the outcomes they want to create. It is what defines who they are and why they’re here. I know that risk-reward equation. While food, shelter, education, and health matter a lot, I need to see outcomes when I look my children, husband, friends and clients in the eye, not just outputs. If I don’t see a positive, wonderful impact on their lives and the lives they are responsible for and encounter, then my life was just a series of outputs — maybe even large ones — but not outcomes; and I will have failed tragically.

While this is a theory ripe for a more scientific validation, I’m pretty confident it will prove out, at least in some great part. The risk of not pursuing that passion, of not fulfilling that purpose, of having lived a life of stuff without also living a life of significance, is the greatest risk of all.

image credit: etftrends.com

An Apple Story.

An Apple Story.

I was working on my one year five month old MacBook Air one morning, two months ago, at home,  when I got up to get a glass of water. When I got back from the kitchen, the screen was blank. Thinking that  it just went to sleep, I pressed the spacebar to activate the screen. It was still blank. The power cable was working but the MacBook Air was dead.

For the next several hours and three days, I searched online for a fix for my laptop problem. I tried a number of things suggested in Apple Forums. No success. 

An inquiry with an Apple Service Centre - Powermax Computers here in downtown Lismore, NSW- told me that a diagnosis would cost Fifty Five Dollars. I let it go at that, wondering,  if somehow, one day, my Macbook Air would just suddenly spring to life. 

Finally, after a month or so, I tried to turn it on. Still dead.

I brought it to the service centre and after a day, they told me that the Logic Board needs replacement and the parts and labor would cost more than Six Hundred Dollars. I decided to just pick it up and pay the diagnosis fee since the cost of repair was beyond what I could afford at the moment. 

The service technician, Bryan, was very helpful and gave me some advice. He informed me that the logic board was usually covered by a two year warranty, but since I bought the laptop in the Philippines, the warranty could not be applied in Australia. He told me to try and give Apple a call, and see if they could make an exception and provide warranty for my unit. He said all I would lose is thirty minutes of my time. It seemed to be a pretty neat suggestion. 

When I got home, I looked up the Apple Support online and since they did not allow you to email a request, I was pondering whether  to give them a 1300 call, wondering how much a thirty minute call would cost me. 

In their support site, I noticed that you could ask them to give you a call and I thought, this is great. It would save me the cost of a  lengthy telephone call. I logged in, typed in the required serial number of my MacBook and pressed next. The site then asked me if I had  Apple's AppleCare Protection Plan, which I don't. This nearly prompted me to just pick up the phone and dial the number, costs and all. But.... just below the link where you say Yes or No to the question was another link that asks you if you want to request for an exemption to the AppleCare Plan, for the reason that your Apple product is fairly new. Obviously, I clicked on that link and was prompted to enter my phone number. Which I did. 

After 2 seconds (no exaggeration), my phone rang and a Call Centre agent (who I found out later was based in the Philippines) asked me about my problem. I explained my predicament and she told me that although I should not expect any possible exception to the warranty rule, she will get in touch with her supervisor and asked me to wait for a few minutes. 

So I waited. Around five to eight minutes, which I did not mind since they called me up and I was using Facebook while waiting. She got back on the line and told me that she will transfer me to her supervisor.

When the supervisor was patched through, he introduced himself and told me that he was also named Alan, spelled correctly with one "L" just like me. 

He then proceeded to tell me that unfortunately, the service centre gave me the wrong information and that even if they allow the servicing in Australia, the warranty for the logic board was actually for just one year, and not two as Powermax Computers told me. I thanked him for the clarification and for taking the time to discuss it with me. 

But the story does not end here.  He immediately told me that he did not feel good about leaving me hanging since their accredited centre gave me the wrong information and that I would be stuck with a broken Apple product. 

He informed me that although they cannot make it a policy to extend the warranty beyond what they have stipulated, he was willing to make an exception and provide my unit with the warranty to cover the logic board replacement. He even added that if the service centre found any other matter to repair and replace, that I should give him a call ( he gave me his direct extension number) and he will see what he can do. 

He there and then updated the record of my MacBook and asked me to just bring it back to the service centre and they will be able to fix it up since the record would reflect an active warranty cover. 

Two days later, I had my Macbook Air back, up and running. And it just cost me the diagnosis fee of  Fifty Five Dollars 

Customer Service. Apple style. 

Excellent.