New Business Ventures Session #3: Opportunity Recognition BALAGOPAL VISSA INSEAD 1, Ayer Rajah...
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Transcript of New Business Ventures Session #3: Opportunity Recognition BALAGOPAL VISSA INSEAD 1, Ayer Rajah...
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New Business VenturesNew Business Ventures
Session #3: Opportunity Session #3: Opportunity RecognitionRecognition
BALAGOPAL VISSAINSEAD
1, Ayer Rajah AvenueSingapore 138676
---Office: (65) 67995382
Hand phone: (65) 94244573Email: [email protected]
These notes are intended to support class discussions. They should not be considered a comprehensive set of issues to be dealt with.
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Frog & Rosbif Key takeaways…..
Creating a new venture from scratch is a process – what you do and how you do it are more crucial than your personality or cultural background
Opportunities are like diamonds in the rough – need to be polished thru hard work
Luck matters a great deal – but on the other hand, fortune favors the prepared!!
It always takes longer than you think – so persistence pays
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Today’s session – How do entrepreneurs pursue opportunity
Discuss the Opportunity Assessment Sheet exercise & Readings
Lecture on what is generalizable Invited Speaker:
Darran Nathan Chief Strategy Officer (Project Proteus) How his team is pursuing an opportunity in
reconfigurable computing His personal journey as an entrepreneur
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Sample of Business Concepts using “Reconfigurable Computing”
Business Concept Count
1. Accelerate drug development thru’ better information sharing
1
2. Scalable system for architects / designers / gaming 2
3. Weather forecasting and climate modeling 2
4. Military applications e.g. simulating nuclear detonations
1
5. Handheld “music box” that plays all types of music files
1
6. System Integration / “Middleware” for large international banks / companies
3
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What’s the difference between an idea and a business opportunity?
An attractive business opportunity consists of
A great business concept Large potential market Technically feasible product Protectable IPR
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Pursuing Opportunity is a subjective process
Three sources of subjectivity Perception Ability Motivation
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Perceiving Opportunity analogous to signal detectionInterpretation of a noisy signal is dependent on stocks of prior knowledge
Success Failure
ActCorrect Decision Type I error
Don’t Act
Type II errorCorrect Decision
Ultimate outcome
Decision to act on the opportunity
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Avoiding Type I & II errors requires….
Immersion in operational details which
Accrues slowly (albeit reliably) through prior experience or
Can be acquired rapidly (albeit less reliably) through vicarious learning
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“Self Knowledge” is equally important …
Do you have the needed abilities (e.g. social networks, team building skills etc.) to execute?
Are you truly motivated to pursue this activity?
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So, is it a good opportunity for you?
Perception
Motivation
Ability
Seriously pursue an opportunity when:
You perceive it
and
Have the ability to exploit it – or get a partner who does –
and
Are motivated to pursue it
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Points to Ponder…
An idea or invention is not a business opportunity
Pursuing opportunity is a subjective process – lookout for type I or II errors
Always ask the question – Why is this a great opportunity for me?
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As an entrepreneur - how do you deal with an uncertain future?
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Type of Uncertainty
Risk Uncertainty Knightian Uncertainty
The distribution of
the future
The future has a known distribution
The future has an unknown distribution
The future has no distribution – it is unknowable
Type of probability
A priori Statistical Unclassifiable instances
Example Urn contains five green balls and five red balls. Drawing a red ball wins $50
Urn contains unknown number of balls. Drawing a red ball wins $50
Urn may or may not contain any balls – even the existence of the urn may be in doubt
Methods to deal with
uncertainty
Analysis Estimation Effectuation
What’s Knight got to do with it?
Sou
rce:
Dew
& S
ara
svath
y(2
00
3)
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Contrasting effectual Vs predictive reasoning
Predictive Reasoning
The goal to be attained is well understood and clear
Focus your attention on the best / most creative means to attain the goal
Effectual Reasoning
The goal to be attained is not clear
Focus attention on the means at your disposal. Ask the question: What possible goals can I achieve with these means
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Difference in underlying logic
Predictive Reasoning
To the extent that we
can predict the future,
we can control it.
Effectual Reasoning
To the extent that we
can control the future,
we don’t need topredict it.
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Effectual Reasoning – core principals
Leverage contingencies (as opposed to executing a pre-determined plan)
Build parternerships (as opposed to competitor analysis)
Focus on affordable loss (as opposed to expected return)
source: Sarasvathy (2001)
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Effectual reasoning – the process Lives and breathes execution
A coherent story binds people together and makes sense of their actions
The set of means and their effects get reconfigured till some effects coalesce into a clear goal
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Key Takeaways
Pursuing opportunity entails dealing with an uncertain future
Two different ‘rational’ ways of dealing with uncertainty – Predictive and Effectual
Effectual thinking likely requires more creativity than predictive thinking
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Preview of next session(Session #4 & #5) – ACG case
Venture design choices concerning Business Model design Market Entry
Immerse yourself in the operational details and link above choices to the P&L of ACG