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Lecture 2 - Idea Identification


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Lecture 2 of the New Venture Creation series

Lecture 2 of the New Venture Creation series

Published in: Business, Economy & Finance

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  • 1. Idea  Identification   Will  Your  Business  Idea  Fly?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 2. “There  is  nothing  more   powerful  than  an  IDEA  whose   time  has  come.”  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 3. We  all  know  this  phrase  in  respect   to  politics  and  social  change,  but   have  you  ever  thought  about  it   from  the  business  point  of  view?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 4. Ideas  are  the  basis  of  the  new   digital  and  knowledge  based   economies.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 5. For  decades,  business  ideas   required  huge  capital  investment   to  setup  factories,  distribution  and   sales  engines.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 6. Now,  the  best  ideas  can  be   implemented  with  3  –  4  driven   individuals.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 7. But  the  idea  must  be  the  right   idea…  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 8. Three  Types  of  Ideas   Useless,  Workable  and  Quick  Hit  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 9. Useless  Ideas  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 10. A  Useless  Idea  is  something  that  is   dreamed  up  but  the  entrepreneur   has  no  personal  understanding  or   experience  in  the  business  they  are   proposing.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 11. When  you  don’t  have  the   experience  to  back  up  the  idea,   you  are  dependent  on  other   people  to  make  it  successful  and   personally  have  no  buy-­‐in  with  the   venture  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 12. That  makes  you  –  replaceable  –   and  that  is  not  a  viable  idea  for  a   venture  capitalist,  angel  investor  or   bank.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 13. VCs,  Angels  and  banks  only  invest   into  ideas  where  the  person  sitting   in  front  of  them  has  a  personal   buy-­‐in  with  the  venture  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 14. They  are  either  the  vision  that   drives  the  organization,  the  force   that  runs  it  or  the  intelligence  that   builds  it  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 15. The  world  is  full  of  idea  men,  very   few  of  them  can  deliver  on  their   ideas.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 16. Examples  of  a  Useless  Idea  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 17. A  farmer  starting  a  manufacturing   plant  that  produces  auto  parts  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 18. An  MBA  starting  a  game   development  house  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 19. A  plumber  starting  an  electrical   business.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 20. I  think  you  get  the  idea  –  if  you   don’t  have  any  real,  measurable   experience  in  the  industry  that  you   want  to  start  –  you  have  the  wrong   idea.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 21. Workable  Ideas  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 22. A  Workable  Idea  is  something  that   will  take  time  and  effort  to  develop   but  will  be  profitable  once  stable.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 23. These  ideas  are  the  basis  of  the   knowledge  economy  because  they   will  continue  to  grow  and  develop   as  the  venture  grows  –  in  other   words,  they  don’t  stagnate  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 24. VCs,  Angels  and  banks  love  these   types  of  ventures  because  they  are   able  to  invest  into  the  initial  start-­‐ up  and  reap  their  returns  during   the  growth  stage  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 25. Allowing  them  to  cash  out  –  or   capitalize  –  when  the  venture  is   mature  with  very  high  returns  on   their  investments.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 26. Software  Development  Companies  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 27. Consulting  Firms  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 28. Research  Houses  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 29. Technology  Planners  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 30. These  are  all  ventures  that  take   time  to  build  and  become   successful,  but  will  continue  to   expand  and  develop  over  time   increasing  their  product/service   offering  with  each  expansion.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 31. Quick  Hit  Ideas  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 32. A  Quick  Hit  Idea  is  one  that  will   generate  revenue  from  day  1  of   operations.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 33. These  ventures  are  typically  called   quick  hit  ideas  because  they  return   the  investment  immediately  but   the  returns  are  minimal  at  best.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 34. Experience  doesn’t  matter  because   you  are  only  looking  to  capitalize   on  a  temporary  need  in  the  market   and  know  that  you  will  be  “out  of   business”  once  the  need   disappears.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 35. Quick  hit  ventures  are  also  low-­‐ experience,  low  intelligence   businesses  –  and  I  don’t  mean  that   to  be  rude.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 36. Take  for  example,  your  local   general  store  –  what  does  he  offer   that  the  general  store  next  door  or   down  the  street  doesn’t?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 37. In  other  words,  the  revenue   generation  of  this  idea  is  limited   until  someone  opens  another  store   in  the  area  that  cuts  into  their   limited  customer  base.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 38. So  now  that  we  have  identified  the   different  idea  types  –  how  do  we   judge  our  own  ideas?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 39. Idea  Proofing   Determining  If  Your  Idea  Will  Last  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 40. People  will  give  you  a  lot  of  ways   to  judge  your  idea,  but  most  of   them  are  not  useful  from  the  point   of  view  of  “idea  proofing.”  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 41. What  is  Idea  Proofing?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 42. Idea  Proofing  is  something  we  do   at  emagine  to  determine  whether   an  idea  is  viable  and  feasible  or  not.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 43. It  is  not  difficult,  but  it  requires   removing  the  emotion,  excitement   and  passion  of  the  entrepreneur   from  the  equation.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 44. Ideas  can  not  be  judged  based  on   what  the  entrepreneur  says,  but   how  it  looks  on  paper  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 45. So  what  are  we  looking  for?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 46. Does  it  solve  compelling   unserved  need?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 47. Every  entrepreneur  thinks  they   have  the  million  dollar  idea,  but   deciding  if  it  really  is  starts  with   this  question  –  what  need  does  it   solve?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 48. Ask  people  if  the  need  you  see  is   really  a  need.  Society  is  the  best   judge  of  the  idea  because  they  are   your  future  customers.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 49. But  here’s  the  trick,  you  can’t   explain  the  business  idea  to  them  –   only  the  end  result  product/service   you  will  provide  them.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 50. If  they  can’t  see  it  from  that,  your   idea  is  not  going  to  work  without  a   lot  of  work,  education  and   marketing  –  all  of  which  means  the   need  is  not  really  there.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 51. How  much  money  will  you  need   and  how  will  you  use  it?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 52. This  is  a  big  question  because   capital  is  what  makes  businesses   run  and  grow.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 53. If  you  need  too  much  capital  or   can’t  explain  how  the  capital  will   be  used  to  build  the  business,   attract  the  customer  or  grow  it,   your  idea  may  not  be  the  right  one.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 54. What  are  you  offering  and  how   does  it  work?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 55. Exactly  what  product/service  are   you  offering  and  how  will  it  work?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 56. You  must  be  clear  with  this   definition  because  if  you  are  not   clear,  how  do  you  expect  anyone   else  to  understand  it?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 57. We  have  talked  to  people  with   great  ideas  and  what  could  be   outstanding  products,  but  they  are   unable  to  explain  their  product/ solution  in  simple  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 58. Our  test  –  if  you  can’t  explain  the   product/service  in  15  words  or  less,   you  are  not  clear.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 59. More  importantly,  if  it  takes  more   than  2  minutes  to  explain  how  to   use  it  –  it’s  game  over.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 60. Customers  don’t  read  manuals,   instruction  booklets  or  websites  –   they  either  understand  how  to  use   it  or  call  you.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 61. Who  exactly  is  your  customer?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 62. The  answer  to  this  question  is  not   everyone  –  no  product  or  service   has  ever  been  designed  for   everyone’s  use.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 63. You  need  to  be  able  to  define  who   will  buy  your  product/service.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 64. B2B,  B2C,  B2G,  Fortune  500,  SME,   NGO,  Men,  Women,  Housewives,   Bachelors,  Students,  Athletes….   And  the  list  goes  on  and  on….  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 65. Another  question  you  have  to   answer  with  this  question  is  –  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 66. Is  there  a  specific  situation  that   will  drive  the  purchase  or  use  of   my  product/service?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 67. The  more  precise  you  are,  the   better  you  idea  proof  your  idea.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 68. How  will  you  provide  your   product/service?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 69. One  of  the  biggest  questions  is   HOW  you  plan  to  win  customers  –   what  is  your  strategy  for  product/ service  delivery?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 70. Do  they  need  to  come  to  your   office  or  shop  to  buy?  Will  you  go   to  them?  Can  it  be  bought  and   installed  online?  What  hours  will   you  keep?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 71. Who  is  involved  in  your   venture’s  success?  Who  are  the   stakeholders?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 72. Every  entrepreneur  would  like  to   believe  that  they  can  do  everything   –  we  are  all  Superman  when  it   comes  to  our  ideas,  but  that  is  not   possible.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 73. Of  course,  the  entrepreneur  must   have  a  strong  foundation  of   experience  and  stability  in  their   professional  life,  but  who  are  the   other  key  resources?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 74. The  first  way  to  destroy  your   business  is  to  hire  friends  because   they  are  friends  and  you  like  to   hang  out  together  –  hanging  out  is   very  different  than  working   together.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 75. Business  relationships  are  very   stressful  and  can  destroy   friendships,  especially  if  you  have   to  fire  a  friend…  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 76. But  does  that  mean  you  don’t   hire  friends?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 77. Of  course  not  –  it  just  means  that   you  must  be  very  clear  about  the   skill  set  and  abilities  of  your  friend   before  hiring  them  –  this  is   business.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 78. Who  will  be  your  competition?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 79. Ideas  are  great  things,  but  you   have  to  look  at  the  whole   environment  before  deciding  if  the   idea  is  viable  or  not.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 80. Competitors  go  a  long  way  to   helping  you  understand  if  your  idea   can  succeed  or  not.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 81. There  are  no  businesses  that  have   no  competition  –  that  idea  only   exists  inside  an  entrepreneur’s   head.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 82. If  there  are  a  great  deal  of   companies,  you  will  only  get  a   limited  share  of  the  existing  pie.  If   there  are  few  competitors,  you   need  to  understand  why.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 83. Talk  about  your  competitors,   understand  them,  figure  out  how   your  business  will  be  better  and   how  you  will  beat  them  –   otherwise  get  ready  to  fail.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 84. What  makes  your  venture   special?  What  makes  you   different?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 85. Startups  are  risky  for  investors,  so   they  want  to  know  what  will  make   you  successful  compared  to   everyone  else.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 86. Does  your  business  have  a  unique   skill  set  or  knowledge?  Proprietary   methods?  Unique  brands  that   aren’t  available  anywhere  else?   Innovative  technologies?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 87. The  thing  that  makes  you  different   will  usually  make  you  successful   because  it  changes  the  way  the   consumer  does  something  –  or   what  we  call  revolutionizes  service   delivery.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 88. These  are  all  questions  that  we  ask   when  we  idea  proof  a  venture   before  investing  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 89. Anywhere,  we  have  hesitation  will   cause  us,  and  any  other  VC,  to  stop   and  think  –  even  if  it  is  days  before   the  check  is  written.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 90. VCs  have  to  be  sure  before  they   release  the  money  to  the   entrepreneur  because  getting  it   back  is  very  difficult.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 91. We  also  use  a  Buyer  Utility  Map  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 92. http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 93. This  6  x  6  table  is  one  of  the  best   tools  we  have  for  determining  if  an   idea  will  be  successful  or  not.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 94. Why  is  this  a  great  tool?  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 95. The  Buyer  Utility  Table  forces  you   to  look  at  your  business  idea  from   the  view  of  the  consumer  to   determine  whether  the  idea  will   work  or  not.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 96. So  let’s  look  at  both  sides  of  the   table  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 97. The  Six  Stages  of  Buyer  Experience  Purchase   How  &  where  do  they  get  it?    Delivery   Can  it  be  delivered  to  their  home  or  office?  Use   How  do  they  use  it?  Supplements   Does  it  require  any  special  or  addi@onal  items  to  use?  Maintenance   How  oBen  will  it  need  to  be  serviced  or  checked?  Disposal   What  does  the  consumer  do  with  it  when  they  are  done?   http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 98. The  Six  U7lity  Levers  Environmental   In  today’s  world,  everyone  is  environment  friendly  –  is  your  product?  Friendliness  Fun  &  Image   Does  it  improve  the  consumer’s  image  or  give  them  more  enjoyment?  Risk   Is  there  any  risk  involved  with  product/service  usage?  Convenience   How  easy  is  it  to  carry  and  store?  Simplicity   How  easy  is  it  to  use?  Customer   Does  it  improve  their  produc@vity  in  any  part  of  their  lives?  Produc@vity   http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 99. You  now  have  a  basis  for   understanding  how  to  idea  proof   your  venture.  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 100. Next  Lecture:     The  Business  Model  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled  
  • 101. Readings  for  Next  Week:     Knowing  a  Winning  Business  Idea  When  You  See   One   Launching  a  World  Class  Venture   The  Questions  Every  Entrepreneur  Must  Answer  http://emagine-­‐   Brand  Focused,  Socially  Active,  Digitally  Enabled