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APS 1015 Class 6 - Market Validation

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Students will be exposed to methods for screening entrepreneurial ideas and evaluating its “business potential”. Students will be introduced to data collection methodologies and evaluate some of the challenges associated with synthesizing market data and applying this data to business decisions.

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APS 1015 Class 6 - Market Validation

  1. 1. APS 1015: Social Entrepreneurship Class 6: Validation of Market-Based Solutions Tuesday, May 27, 2014 1 Instructors: Norm Tasevski (norm@socialentrepreneurship.ca) Alex Kjorven (alex@socialentrepreneurship.ca)
  2. 2. © Norm Tasevski Agenda • Recap of Business Modeling (Class 5) • Screening Entrepreneurial Ideas • Break • Validation Techniques • Tomorrow 2
  3. 3. © Norm Tasevski Recap: Business Modelling
  4. 4. Screening Social Enterprise Ideas 4
  5. 5. © Norm Tasevski The Idea Funnel 5 Idea Brainstorm Internal Screen External Screen Validated Solution # Ideas = Dozens # Ideas < 10 # Ideas = 1 to 3
  6. 6. © Norm Tasevski Step 1: Idea Brainstorming • Our idea jam… 6
  7. 7. © Norm Tasevski Step 2: Internal Screen • Goal: assess the quality of the entrepreneurial idea before conducting market research • Why screen internally first? • 2 Parts: – Assessment of Business Potential – Assessment of Social “Fit” 7
  8. 8. © Norm Tasevski Business Potential • Evaluate based on: – Potential financial performance/sustainability of the venture (and scalability) – External need/want of the product/service – Market barriers 8
  9. 9. © Norm Tasevski Business Potential 9 Measure Rating 0 1 2 3 Level of Customer Need Not a significant need Need that is addressed by others reasonably well Unmet need and strong customer base willing to pay for it High level of unmet need amongst people with the ability to pay Competitive Advantage Competitive disadvantage – many other competitors are serving needs well No significant difference from competitors Good value proposition but could easily be matched No other competitors, and sustainable unique solution for niche Profit/Surplus Potential Likely loss $0 - $50,000 $50,000 - $100,000 $100,000 + Additional Investment Required Major investment required (>$20,000) Moderate investment required ($10,000-20,000) Little investment required (<$10,000) Could be done with existing resources Return on Investment Timeframe Long payback period not justified by return Reasonable ROI over 2 or 3 years First year profit = first year investment Strong positive return on investment in first year Access to Required Start-Up Funds Not fundable Could be fundable but unsure of sources and or %; funding difficult to attain Relatively easy to find funding for start-up costs, but for a smaller proportion Very easy to get funding for start-up costs
  10. 10. © Norm Tasevski Social “Fit” • Evaluate based on: – Desired social outcomes – Internal capacity to deliver value 10
  11. 11. © Norm Tasevski Social “Fit” 11 Measure Rating 0 1 2 3 Fit with Desired Mission/Vision Does not fit with mission and values Minimal link to mission and vision Some fit with mission and values Strong fit with mission and values Ability to Generate Social Benefit None Low Medium High Existence of Skills and Capacity Large amount of skills missing Skills available from partners and/or consultants Minimal training necessary Current team already has the necessary skills Risk High risk Moderate risk Manageable risk (strategies to address) No risk Partnership/Collabo ration Opportunity No probable partners exist No partnership needed, or probable partners exist and are interested Advances Our Name/Reputation/V alues Potential for negative impact Slight increase in awareness of org Moderate increase in awareness of org Direct significant increase in awareness of org Other Barriers Significant cultural or other changes required Some barriers which may be difficult to address Some barriers, but likely to be able to address No significant barriers
  12. 12. © Norm Tasevski Screening Matrix 12 BusinessPotential Social “Fit” Low social impact/internal capacity High social impact/internal capacity High Financial & Market Potential Low Financial & Market Potential Consider Second Top Priority Not Strategic Do Not Consider Further Possible Quick Win
  13. 13. © Norm Tasevski Now… • Screen your initial ideas according to social fit and business potential 13
  14. 14. © Norm Tasevski Initial Reactions • What assumptions did you make that drove either high or low ratings of your ideas? • Were any ideas ranked artificially high or low due to a misperception of the opportunity? If so, would a change in perception change your rating? • What info do we not know now that are important in confirming the potential of the idea? 14
  15. 15. Break 15
  16. 16. Validation Techniques 16
  17. 17. © Norm Tasevski Data Sources 17 Call key industry players (suppliers, competitors, etc) Search databases (industry, scholastic, etc) Conduct web search (Google, etc) Ask people!!! (friends, potential customers, etc)
  18. 18. © Norm Tasevski Primary Research Methods Step 1: Identify people to speak with – Create a spectrum of participants based on desired criteria (e.g. gender, age, socio-economic status) – Identify sources/places to meet participants – Identify community contacts to arrange meetings with participants Tip: identify participants on the “extremes” – E.g. if spectrum is based on “adoption of technology”, pick the quickest technology adopters and those who are resistant to new technology 18
  19. 19. © Norm Tasevski Primary Research Methods Step 2: Determine your method – Individual interview – Group interview – In-context immersion – Self-documentation – Community-driven discovery – Expert Interviews 19
  20. 20. © Norm Tasevski Primary Research Methods Individual Interview: one-on-one gathering of rich/deep information on the behaviours, reasoning and daily realities of the interviewee Group interview: one-to-many gathering of information focused on understanding group dynamics/community life In-context immersion: meeting people where they live/work/socialize (i.e. observing their context directly, walking “in their shoes”) Self-documentation: empowering the participants to document their own experience (e.g. through journal writing, note taking) Community-driven discovery: empowering participants to also be researchers (e.g. have them conduct interviews) Expert Interviews: one-on-one gathering of info with academics, industry experts, other researchers, etc 20
  21. 21. © Norm Tasevski The Interview Guide • A semi-structured set of questions that allow for dialogue while retaining focus on a specific topic • What to ask? – Start by listing the assumptions you’ve made in your idea screen. Turn these assumptions into research questions – Categorize the questions by topic. For instance, you may want to ask participants several questions on “livelihood” or on “cultural dynamics” • How to ask? – Start specific (e.g. “yes/no”, simple-answer questions) – Then ask broader questions (e.g. “how”, “what” questions) – Then probe deeper (e.g. “why” questions) • Tips: – Avoid “abstract” questions (e.g. “how much would you pay for…”). Instead, create a scenario (e.g. “you have a choice between A & B…”) 21
  22. 22. © Norm Tasevski Some other Techniques 22
  23. 23. © Norm Tasevski A Point on Asking People… 23 There are… Lovers Don’t give a %&$#ers Haters Listen to HALF of what they say!!!
  24. 24. © Norm Tasevski What did we learn? 24

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