This document discusses evaluating entrepreneurial opportunities using seven domains: 1) Market attractiveness, 2) Industry attractiveness, 3) Sustainable competitive advantage, 4) Alignment with entrepreneurial goals and risk tolerance, 5) Management team capabilities, 6) Connectedness across the value chain, and 7) Financial viability. It provides examples of analyzing opportunities across macro and micro levels, and emphasizes the importance of distinguishing between markets and industries. The seven domains framework helps entrepreneurs identify attractive opportunities and determine if ideas can successfully be converted into businesses.

1. ENTREPRENEURSHIP
Opportunity Evaluation

3. INTRODUCTION
 Three traits of Entrepreneurs : Passion ! Conviction
! Tenacity !
 Entrepreneurs‟ daily question – “Why will this new
business work when most will fail ?”
 Reason to ask the above question –
 To know the fatal flaw well in time
 If answer is positive : to embrace their opportunity with
renewed passion

4. INTRODUCTION
 Serious Entrepreneurs run road tests of the
opportunities they consider.
 Not about success story of one Entrepreneur or a
method to get rich quick
 Map for opportunity-assessing, opportunity shaping
process
 Useful framework – the 7 domains-to lay the
foundation on which to build a B-Plan

5. 7 DOMAINS

6. THE MARKET/ INDUSTRY DISTINCTION
 What‟s a market?
 What‟s an industry?
 These are frequently confused

7. MARKET DOMAIN :-MACRO
LEVEL
• Size of the Market
• Number of Customers
• Aggregate money spent
• Number of units bought annually
• Growth prospects of the Market
• Recent historical data – on market growth and available
forecasts of the future
• Broad Macro-Environmental Trends
• Demographic
• Socio-cultural
• Economic
• Technological
• Natural

8. INDUSTRY DOMAIN :-MACRO
LEVEL
• Industry Attractiveness - Porter’s Five Force Model
• Threat of Entry
• Buyer Power
• Supplier Power
• Threat of Substitutes
• Competitive Rivalry
• Future changes in the Industry
• Collection of Primary Data

9. MARKET DOMAIN – MICRO LEVEL
 Naïve entrepreneurs say “We have no
competition”
 Prudent ones, ask these questions:
 Is there a customer segment willing to
pay a price for the a compelling
benefit/resolution of a “pain”
 Are these benefits clearly differentiated in
the customer‟s mind? –
better/faster/cheaper
 Size and growth rate of segment?
 Will entering this segment allow entry in

10. INDUSTRY DOMAIN –MICRO LEVEL
 Is the business model of the entrant
sustainable ?
 Barrier to imitations
 Proprietary elements : Trade secrets?
Patents?
Organizational capabilities?
 Economically Viable Business model :
ASSESS RISK
 Revenue w.r.t investment
 Costs to acquire and retain customers
 Contribution margins and their adequacy

11. MICRO- ANALYSIS
 First-hand experience in the industry makes all the
difference
 Partner ?
 Network?
 Such answers cannot be found on the internet
 Micro factor are more important to evaluate

12. CAN THE TEAM DELIVER?
• Management- single most important factor
• The 3 Domains
• Opportunity and team‟s business mission,
personal aspirations and risk propensity – How
big ? How soon
• Ability to execute on the critical success factors
• Response across the value chain
• Competencies - experience & industry knowhow
• Connectedness – Up & down the value chain
• Benefits of assessing themselves in the
three team domains

13. LIVE EXAMPLES

14. DOTCOM CRASH
 Markets? Or Industries?
 Markets
 Growing fast
 Shrinking digital divide
 Industries
 Low entry barriers
 Differentiation difficult to establish
 Hard to sustain competitive advantage
 Introduce both old and new paradigm people on the
team

15. NIKE WINS AT MICRO LEVEL
 Running shoes for distance runners
 Lighter, better cushioning, better lateral stability
 Micro perspective
 Similar successes in other sharply targeted
footwear niches

16. PUTTING THE 7 DOMAINS MODEL
INTO ACTION
 Secondary Data
 Trade & Business Publications in Library/Internet
 Government Reports
 Primary Data
 Interviews
 Observations
 Focus Groups
 Surveys
 Market Experiments
 Interpretation

17. WHY WON‟T THIS WORK?
 Finding the major flaw that cannot be resolved
 If found, abandon the opportunity
 If not, two outcomes:
 Best Case: resource providers identify the flaws and
refuse you the resources needed
 Worst Case: you secure the required resources and
start the business only to discover the flaws later

18. WHY WILL THIS WORK?
 Opportunities can be shaped & developed in many ways
 Fatal flaws can be fixed
 A different target market can be chosen
 The offering can be adapted
 Opportunity can be pursued at a different level in the
value chain
 Additional individuals can be found

19. HOPE THIS WILL BE USEFUL TO YOU THANKS!

20. SESSION PLAN
 Moving from Ideas to Opportunities
 How to assess opportunities
 Seven domain framework to evaluate opportunities
 Evaluation process
 Creating, shaping, recognizing and seizing
opportunities

21. NEW VENTURES
 Fundamental realities
 Success is highly situational, depending on time, space,
context, and stakeholders
 The best entrepreneurs specialize in making “new
mistakes” only
 Starting a company is much harder than it looks, or you
think it will be; but you can last a lot longer and do more
than you think if you do not try to do it solo

22. WHEN IS AN IDEA AN OPPORTUNITY?
 They create or add significant value to a customer
or end user.
 They do so by solving a significant problem or
meeting a significant want or need
 They have a robust market, margin that will create
a substantial value to potential stakeholders
 They are good fit with founder‟s and management
team and market place along with attractive risk
reward balance.

23. SUMMERY
 In short , a superior opportunity has the qualities of
being attractive, durable and timely and is anchored
in a product or service which creates or adds value
for its buyers or end users usually by solving a very
painful or serious problem.
 Opportunities always start with customers and
marketplace want.

24. SPAWNERS AND DRIVERS OF OPPORTUNITIES
 Changes in business environment & ability to
anticipate these changes
 Use of IT, microcomputers, MIS and computer
networking in routine business
 Regulatory changes such as deregulation of
telecom, airlines, insurance, financial services,
banking, pension fund management, etc
 Emergence of service industries – higher focus on
customer service
 Sea changes – technology, market & societal – eg
– Moor‟s law of computer chips power, gene
mapping, cloning, nanotechnology, biotechnology,
internet, etc.

25. EVALUATING
 Criteria for evaluating venture opportunity
 Industry and market
 Economics
 Harvest issues
 Competitive advantage issues
 Management team issues
 Personal criteria
 Strategic differentiation

26. 1. INDUSTRY & MARKET
 Market: identifying a market niche for a product or a
service that meets an important need of the customer
 Market structure: number of sellers, differentiation in the
product or service, conditions of entry & exit, number of
buyers, cost conditions, sensitivity of demand to
changes in price, income, etc.
 Marker size & growth rate
 Market capacity: a demand that existing suppliers are
not able to meet
 Potential market share
 Cost structure: whether economies of scale is possible

27. ECONOMICS
 Profit after tax: high & durable gross margins result in at
least 10 to 20 % profits after tax.
 Time to breakeven & positive cash flow: within two to
three years
 ROI potential: more or up to 25 % per year.
 Capital requirement
 Internal rate of return potential: Is the risk reward
relationship attractive? – if 5 to 10 times of original
investment in 5 to 10 years
 Free cash flow characteristics: capital requirement of
fixed & working capital, capacity to serve external
capital, etc
 Gross margin: unit selling point – direct & indirect costs-
up to 40 % leads to healthy growth.

28. HARVEST ISSUES
 Value added potential: ventures based on strategic
value in an industry are more attractive than those
having less or no strategic value. Eg. Proprietary
technology, contractual rights, geographic
coverage, etc.
 Exit mechanism & strategy: realising capital gains
from sale or IPO or exit from the industry
 Capital market context: proper timings for entry &
exit

29. COMPETITIVE ADVANTAGES ISSUES
 Variable & fixed costs: potential for being lowest
cost producer eg- electronic goods like calculators
 Degree of control: moderate to strong over prices,
costs, channels of distribution, etc.
 Entry barriers: proprietary protection, regulatory
advantage, contractual advantage, advantage in
lead time/ response in technology, product
innovation, people, location, etc. create entry
barriers.

30. MANAGEMENT TEAM ISSUES
 Entrepreneurial team
 Industry & technical expertise
 Integrity
 Intellectual honesty
 Fatal-flow issues: an opportunity is rendered as
unattractive if it suffers from one or more fatal flows
such as high cost of entry, inability to produce at
competitive prices, etc.

31. PERSONAL CRITERIA
 Goals & Fit: good match between requirement of
business & what the founders want out of it.
 Upside & downside issues: If downside is more
than entrepreneur‟s net worth, the opportunity
becomes unattractive
 Opportunity cost: of time, experience, resources
used in the venture
 Desirability
 Risk/ reward tolerance
 Stress tolerance

32. STRATEGIC DIFFERENTIATION
 Degree to fit: good fit among the driving forces & timing
given the external environment
 Team: execution & ability to adopt and devise new
strategies, constant learning & improvements, etc.
 Service management
 Timing
 Technology
 Flexibility
 Opportunity orientation
 Pricing
 Distribution channels
 Room for error

35. WHY OPPORTUNITY MAY OR MAY NOT WORK?
 What most new start up need to understand:
 A. Market & industries are not the same.
 B. Both macro & micro level considerations are
necessary: markets & industries must be examined
at both levels.
 C. The key to assessing entrepreneurs &
entrepreneurial teams aren‟t simply found on their
resumes or in assessing their entrepreneurial
character.

36. M
Team
Domain
Mission,
aspiration,
risk
Ability to
execute
Connectedness –
up, down, across
value chain
Industry
Attractiveness
Market
Attractiveness
Target segment
benefit &
attractiveness
Sustainable
advantage
Micro level
Macro level
Market domain Industry domain

37. SEVEN DOMAINS OF ATTRACTIVE OPPORTUNITY:
 1. Is market attractive?
 Market & Industries are different:
 Market consists of group of current or potential
buyers having willingness & ability to buy products.-
not products.
 An industry consists of sellers that offer products
that are similar or close substitute for one another.
 The distinction is important as the judgment about
attractiveness of market can be different than
attractiveness of industry. E.g – In dot.com failures
while market was attractive, industry was not.-
recognition came late.

38. SEVEN DOMAINS OF ATTRACTIVE
OPPORTUNITY
 At micro level, one needs to see if target consumer
segment which we want to cater to is willing to pay,
getting additional value, how large is this segment,
is it growing, is entry in this segment provide us
entry in other segments, etc.
 Eg. Nike- though at macro level demand for sports
shoes was stagnant, the demand for running shoes
for distant runners was high, which later on spread
to other specialty sports shoes.

39. SEVEN DOMAINS OF ATTRACTIVE OPPORTUNITY:
 2. Is this a good market?
 Is my market large enough today to allow different
competitors the opportunity to serve different
segments without getting in each other‟s way?
 Macro level market assessment such as size of the
market, growth rate, demographic, socio-cultural,
economic, technological, regulatory trends have to
be assessed to see the attractiveness of the
opportunity.
 How can short term and long term growth be
predicted?
 Hero Honda: market driven company

40. SEVEN DOMAINS OF ATTRACTIVE
OPPORTUNITY
 3. Is industry attractive?
 Macro level: Porter 5 forces model:
 Threat to entry
 Buyer power
 Supplier power
 Threat of substitutes
 Competitive rivalry
 Eg: Pharma industry in 1980s and 2000

41. SEVEN DOMAINS OF ATTRACTIVE
OPPORTUNITY
 4. How long your advantage will last?
 What sustainable competitive advantage we have? –
proprietary element such as patents, trade secret, etc;
presence of superior organizational processes,
capabilities, resources, etc; presence of economically
viable business model, etc.
 Eg – Zantac, an anti ulcer medicine produced by Glaxo
 5. What drives your entrepreneurial dream?
 An integration of organization mission, personal
aspirations and personal risk propensity
 Eg. Jeff Bezos of amazon.com, Phil Knight of Nike or
Howard Schultz of Strbucks

42. SEVEN DOMAINS OF ATTRACTIVE
OPPORTUNITY
 6. Can team deliver?
 Does the team have experience, industry know
how, to deliver the superior performance?
 Do you have a control over crucial success factors
required in your business?
 Eg: Kishor Biyani- Pantaloon; Jeff Hawkins- Palm
Computing
 7. Connectedness up and down the value chain
 Is the team well connected up, down and across
the value chain so it will be quick to notice any
opportunity or need to change its approach if
conditions warrant? – people make more money in
plan „B‟ than on „A‟.

43. SEVEN DOMAINS OF ATTRACTIVE
OPPORTUNITY
 Seven domains road helps an entrepreneur to see
whether the idea can be converted into opportunity.
 It also enables an entrepreneur to take the
necessary mid course corrections to reshape
opportunity when micro or macro indicators change.
 It helps an entrepreneur to see the fatal flaws in the
business plans and shows how and where
attractive opportunities can be found in stagnant or
otherwise unattractive markets.