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Opportunity Evaluation And Different frameworks. Most businesses fail in less than two years Fewer than 1% of the business plans submitted to VCs get.

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Presentation on theme: "Opportunity Evaluation And Different frameworks. Most businesses fail in less than two years Fewer than 1% of the business plans submitted to VCs get."— Presentation transcript:

1 Opportunity Evaluation And Different frameworks

2 Most businesses fail in less than two years Fewer than 1% of the business plans submitted to VCs get funded Business failures lead to huge “collateral damages” Failures are planned by lack of planning Systematic screening – Why?

3 Mullins 7 Domain Framework

4 Markets and industries are not the same things Both macro-and micro level considerations are necessary: markets and industries must be examined at both levels. The keys to assessing entrepreneurs and entrepreneurial teams aren’t simply found on their resumes or in assessments of their entrepreneurial character.

5 What do we mean by market? A market consists of a group of current and/or potential customers having the willingness and ability to buy products - goods or services - to satisfy a particular class of wants or needs. Thus, markets consist of buyers - people or organizations and their needs - not products. Example: One such market, for example, consists of businesspeople who get hungry between meals during their workday. We'll call this the market for workplace snacks. “ markets consist of buyers, not products ”

6 What do we mean by industry? An industry consists of sellers - typically organizations - that offer products or classes of products that are similar and close substitutes for one another. Example: What industries serve the market for workplace snacks? At the producer level, there is the salty snack industry, the candy industry and the fresh produce industry, to name but three. There are also industries providing the distribution of these products to workplaces, including the supermarket industry, the restaurant industry, the coin operated vending machine industry, the coffee bar industry and so on. Clearly, these industries offer varying bundles of benefits to hungry workers. Some of these industries are more attractive than others to would-be entrants seeking to serve the workplace snack market. “ an industry consists of sellers ”

7 Market, Industry - why care about the difference? Why is the market-industry distinction important? Because judgments about the attractiveness of the market one proposes to serve may be very different from judgments about the industry in which one would compete. This should not be - but often is - surprising, for the questions asked to assess market attractiveness are different from those for industry attractiveness, a point easily obscured when words like 'sector' and 'space' are used indiscriminately or carelessly in the opportunity assessment process. (Does the user of these terms mean 'market' or 'industry'?) So, if market and industry attractiveness are both important, how should each be assessed?

8 1.Micro Level Market Assessment a) Micro level questions about target markets b) Three ways to define market segments c) Micro market test Mullins 7 Domain Framework

9 1.Micro Level Market Assessment a)Micro level questions about target markets Is there a target market segment in which we offer the customer clear and compelling benefits, at a price he or she is willing to pay? Are these benefits, in the customer’s minds, different from and superior in some way –to what’s currently offered by other solutions? How large is this segment, and how fast is it growing? Mullins 7 Domain Framework

10 1.Micro Level Market Assessment b) Three ways to define market segments 1.Demography 2.Geography 3.Customer Behavior Mullins 7 Domain Framework

11 1.Micro Level Market Assessment c) Micro market test What customer pain will your offering resolve? Will customers buy what you propose to offer? Who precisely are the customers? Do you have detailed accurate information about who they are, where they live or do business or what they do? Are there other segments that could benefit from a related offering? Mullins 7 Domain Framework

12 2. Macro level Market assessment Macro Market Test What sort of business is sought? How large is the market? How fast can it grow? How quickly can it grow in the next 6 months or 2/3/5 years? What trends can be identified and how will it affect the business? Mullins 7 Domain Framework

13 3. Macro level Industry assessment a) Porter’s Five forces analysis b) The macro industry test Mullins 7 Domain Framework

14 3. Macro level Industry assessment a)Five macro level questions to assess the industry based on Michael Porter’s five forces - Threat of Entry, Supplier power, Buyer power, Threat to substitutes, Competitive Rivalry Mullins 7 Domain Framework

15 3. Macro level industry assessment b) Macro Industry Test What industry will you compete in? Define it carefully. Based on all five forces, what is your overall assessment of this industry? Just how attractive or unattractive is it? If your industry is a poor performer overall, are there persuasive reasons why you will fare differently? Mullins 7 Domain Framework

16 4. Micro level industry assessment The Micro industry test: Do you require proprietary elements - patents, trade secrets and so on – that other firms cannot likely duplicate or imitate? Can your business develop and employ superior organizational processes, capabilities or resources that others would have difficulty in duplicating or imitating? Is your business model economically viable i.e. can you show that your company won’t run out of cash quickly ? Mullins 7 Domain Framework

17 5.Mission, Aspiration and Risk test for entrepreneurs What’s your entrepreneurial mission? What level of aspirations do you have for your entrepreneurial dream? What sorts of risk are you and are you not willing to take ? Mullins 7 Domain Framework

18 5.Mission, Aspiration and Risk test for entrepreneurs What’s your entrepreneurial mission? What level of aspirations do you have for your entrepreneurial dream? What sorts of risk are you and are you not willing to take ? Mullins 7 Domain Framework

19 6.“The can you and your team execute?” test What are the few - only a handful, please – critical success factors (CSFs) in your industry? Can you demonstrate - in past deeds, not mere words – that your team taken together can execute on each and every one of these CSFs? Have you identified which CSFs your team is not well prepared to meet, for which you need help in filling out your team? Mullins 7 Domain Framework

20 7.The connectedness test Who do you and your team know across the value-chain among your customers, suppliers, competitors and substitutes? Mullins 7 Domain Framework


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