© 2007 John Wiley & Sons Australia, Ltd

Announcement

• Replacement class today

• Venue: 2-6:ROOM-4 ENT3

• Time: 13:45 - 15:45 hr.• Topic: Presentation by 3 groups

Question:

What are the key steps in analysing

opportunities to identify commercially viable

applications?

Commercial viability = Feasibility

What are the key steps in analysing opportunities to identify commercially viable

applications?

1. Determine the novelty, the patentability and the ownership of the innovation.

2. Identify technical advantages over rivals.

3. Brainstorm for potential applications.

What are the key steps in analysing opportunities to identify commercially viable

applications?

4. Identify commercial advantages (i.e. whether technical advantages are relevant) for each of these applications.

5. Identify potential lead customers ― individuals or companies willing to adopt and pay for the commercial advantages.

6. Conduct market research to identify market size and segments

Chapter 6

Analysing opportunities and developing a strategy

Chapter outline

• A framework to analyse opportunities• The role of market research• Developing a strategy

Learning objectives

• Explain how to evaluate entrepreneurial opportunities

• List the types of secondary research sources commonly available

• List some common forms of primary market research

Learning objectives

• Explain the different perspectives on strategy

• List the key steps of strategy formulation for new business ventures

Evaluating Opportunities

A framework for analysing opportunities

• Many different tools available to evaluate entrepreneurial opportunities

• Most have been developed by venture capitalists and business consultants

A framework for analysing opportunities

• One tool is the ETeCH Technology Bridge™ (so called because it builds bridges for technology into markets) – The process consists of a series of strict

filters that leave only the technologies that are viable, and for these, only their significantly commercially viable applications. Only upon these can a business plan be developed

A framework for evaluating opportunities

• Example: No. 1• Iron that stops when not in use• Sell to electric iron companies not after

market.

TECHNOLOGY TRENDS

~Nokia Morph~

Flexible and Changing Design. Self-Cleaning.Advanced Power Sources.Sensing the Environment.

TRANSPORTATION TRENDS ~ Zigo Leader Carrier Bicycle ~

• Example: No. 2• Bicycle-cum-stroller

Normal BicycleStrollerCarrier BicycleBring a lot of convenience for busy parents.The parent and the child can stay healthy and strong.

20

FROM IDEA TO CUSTOMER FROM IDEA TO CUSTOMER BENEFITSBENEFITS

You must however ensure that

any latent demand idea would

create real customer benefits.

Latent demand idea

What are the customer benefitshat are the customer benefitsSource: Philip Kotler et al.Copyright: Andrew Jong, 04.09.02

21

DOES YOUR IDEA CREATE EXCEPTIONAL DOES YOUR IDEA CREATE EXCEPTIONAL UTILITY?UTILITY?

Many forget to ask and check for buyer utility in their ideas because they are obsessed by the novelty of their product or service – especially if a new technology plays a part in it.

Buyer utility and technical advance are not the same!

Using the buyer utility methodology is easy…

Source: W. Chan Kim and Renee MauborgneCopyright: Andrew Jong, 04.09.02

Another approach for evaluating Opportunities

Establishing the novelty, patentability and ownership

• Is it novel?• Is it patentable? [do not introduce it first]• Who owns the technology?• Typically, about 50% of opportunities would

not pass this filter because the innovation is not really novel, it cannot be patented, or the entrepreneur does not have ownership of the technology.

Does it work and is it better than existing products?

• Does it work?• Is it better than rivals? • What are the applications? • Are there commercial advantages? • Here, 30% of ‘innovations’ fail because

there are often misinterpreted results, or simply, a better product already exists

Identify potential buyers

• This filter checks that there are indeed potential buyers (individuals or companies) willing to adopt and pay for the commercial advantages

• A few ‘lead buyers’ buyers should then be contacted to verify if they would value the advantages that could be offered

Is there a positive return?

• What is the market size and attributes?– Market research asks if the market size

and attributes would lead to the advantages actually being paid for, i.e. whether the applications are viable

Is there a positive return?

• Drafting a business plan– Involves planning the resources and

developing a budget– This is then compared with the end-point

value to ascertain the true market size that can realistically be captured

The role of market research

• One of the most common problems faced by entrepreneurs is a lack of suitable information for their business idea

• Market research is the use of information to identify and define market opportunities and problems

• Includes identifying target markets for a new product and surveying members of these markets to understand their purchasing behaviour relevant to such products

What to research? • One of the first issues to be considered is

exactly what information should be investigated

• The most conventional framework in marketing describes the environment of the entrepreneur in terms of an ‘onion’, which distinguishes between three different degrees of interaction:– the market– the industry– the macro-environment

The market• Consists of the people or firms who could

benefit from the new product, have the means to buy it and will be offered the opportunity to do so

• Specific information requirements about the market include:– The customer profile(s) and segment(s)– The product or service– The price– Sales and distribution channels

The macro-environment

• Contains the major factors which determine the performance of the new business venture

• These external factors are most often grouped as the STEP factors (social, technological, economic and political)

• Environmental scanning is a common method that enables entrepreneurs to understand the external environment and the interconnections of its various elements

PEST

• P – Political Factors• E – Economical Factors• S – Social Factors• T – Technological Factors

Constraints on research

• Cost• Research experience and competency• Reliability of data• Personal prejudices of researcher• Uniqueness• Time

Conducting research

• The business researcher has two main avenues when seeking and collecting information

– to consult existing sources of data (secondary information) which will provide a general picture of the current state of knowledge about a particular problem

– After this, it may be necessary to investigate some issues in more detail by undertaking original research from primary sources (primary information)

Secondary information

• Publications • Business directories• Private market researchers• Government bodies • The internet• Trade shows• Company annual reports• Industry associations

Primary information

• Observation• Experimentation• Surveys (telephone, personal, email)• In-depth interviews • Focus groups

Train in China

Types of primary research

Developing a strategy

Developing a strategy

• Immediate objective of market research is to determine the feasibility (commercial viability) of a new start-up business, product offering, or purchase of a business

• But this information will also help to forecast likely future events, and will provide the foundation to develop a strategy for the business venture

• Strategy matters because of its role in the direction taken by the firm

Two perspectives on strategy

• A strategy defines the business direction, its scope, and it will seek competitive advantage

• The strategic fit between the internal aspects of an organisation and the external environment determines competitive advantage

• Two dominating perspectives which explain how to achieve a strategic fit:– the market-led view– the resource-based view

The resource-based perspective

• Resource-based view suggests that the business venture should assemble and deploy appropriate resources that provide opportunities for sustainable competitive advantage

• Competitive advantage is thus created by distinctive, valuable, firm-specific resources that competitors are unable to reproduce

The market-led perspective

• Firms gain competitive advantage through identifying external opportunities in new and existing markets and then aligning the firm with these opportunities

• Approach rooted in the ‘strategy-conduct-performance paradigm’:– the economic performance of an industry

is a function of the conduct (or strategy) of buyers and sellers which, in turn, is a function of the industry's structure

The market-led perspective

• Competitive changes within an industry determine which markets the business venture should enter, stay in, or exit

The process of strategy development

The market-led perspective

• The essence of strategic planning revolves around three questions:– Setting objectives — where do you want

to go?– Doing a situation analysis — where you

are now?– Selecting a strategy — how to get there?

Strategy formulation – 3 steps

• Where are you now?• Where do you want to go?• How to get there?

Strategy formulation – 3 steps

• Setting the objectives by crafting a vision

[a long term view]• A mission [the role that the organisation

gives itself in society]

• Selecting a strategy that will provide the enterprise with a competitive advantage. [How to get there]

Blue Ocean Strategy [BOS]

• Where competition is irrelevant• To beat competition is not to compete with

competition – seek out your blue ocean• Rules of the games are yet to be set• Go for untapped market place• Beyond existing industry boundaries• Value innovation – differentiation and low costs• Eg. Making wine more fruitier target the beer and

cocktail drinkers, Non alcoholic wine

Towards 'blue ocean' strategies

• Contrary to most corporate strategies based on military models and direct confrontations, ‘blue ocean’ strategies build new business where none existed, giving innovative entries clear sailing

• The core element of a ‘blue ocean’ strategy is ‘value innovation’, that is, tangible product advancements accompanied by demonstrable savings

Towards 'blue ocean' strategies

• The six principles of a ‘blue ocean’ strategy:

1. Reconstruct market boundaries

2. Focus on the big picture, not the numbers

3. Reach beyond existing demand

4. Get the strategic sequence right

5. Overcome key organisational hurdles

6. Build execution into the strategy