The Venture Idea Dean Alderucci How to discover, evaluate and exploit opportunities.
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Transcript of The Venture Idea Dean Alderucci How to discover, evaluate and exploit opportunities.
The Venture Idea
Dean Alderucci
How to discover, evaluate and exploit opportunities
The Venture Idea How do you generate the idea? How do you assess the idea?
The Venture Idea How do you generate the idea?
Find a new idea that generates value
How do you assess the idea?
The Venture Idea How do you generate the idea?
Find a new idea How do you assess the idea?
Assess its value in light of long term forces (e.g., competition, the market, technology)
Generating the Idea Innovation is the key
Bring an innovative business model, product, service to market
If the idea is your competitive advantage, always treat it like one
New Ideas - How new is new?
Old Has been done before
”New to me" You think it's new, until you do some investigating
New-ish Hasn’t been literally done before, BUT The new part has no particular advantages
New Hasn’t been done before, and is potentially
valuable Innovative
Hasn’t been done before, and you can keep all that value for yourself
What Creates Opportunities?•Technology Environment
• Existing technology is replaced • Technology creates a new niche • Infrastructure replacement• Industry standards emerge
•Economic Environment•Decreasing costs •Productivity gains•New laws and regulations•Improved service
•Demographic Environment• User preferences change • User needs changes
• Will these opportunities persist?• For how long?
• What is the market size, growth, and outlook?
• Will this venture lead to other opportunities?
What Creates Opportunities?
Finding the Idea What’s the process for generating
your venture idea? Finding and developing your idea
requires innovation. How should you target the focus of your
innovating?
Innovation Strategies: Overview
1. Select areas with High Value,AND ALSO
2. Choose to Preclude Competition,
AND ALSO 3. Maintain Your Position with
continued developments
Innovation Strategies: Overview 1. Select Areas with High Value
Areas with significant dollar amounts (in the aggregate) Think big – valuation depends on upside potential
2. Select Areas where you can Preclude Competition
The areas don’t have existing natural competitors Can you obtain patent protection?
3. Maintain Your Position with continued developments
Keep moving forward to keep competitors behind you
1. High Value Areas Industry-wide, there are significant dollar
amounts in the aggregate High number of transactions Each transaction can support an incremental
charge of a few percent Significant means “very, very significant”
Need to aim for very high value innovations This high value will be discounted by the
speculative nature of innovation (e.g., 1%, 0.1%)
1. High Value Areas High number of transactions
credit card purchases interactions between a customer and cash register ATM transactions Internet software downloads usages of MP3 players Web page advertisements
Each transaction can support an incremental charge of a few percent
Generally, it’s easier to add 1¢ to a billion transactions
than to add a dollar to a million transactions
1. High Value Areas Finding an Innovation’s Value -
Do the Math Answer at least three questions
(realistically):1. What’s the target market?2. How many transactions will there be? 3. How much profit per transaction?
i.e., what's the value add?
1. High Value Areas1. What’s the target market?
Are the target buyers actually willing buyers? Are you trying to sell to tough customers?
e.g., government, companies traditionally unwilling to innovate
2. How many transactions will there be (per day, per year)? Do you need to partner with one large company or with many
small companies. E.g., easier to sell the idea once to Amazon.com than to each of
the country’s many local hardware stores. How susceptible to variation is this number?
3. How much profit per transaction? Consider both gross profit (the pie) and profit to you (your slice) Inject a dose of realism:
If you don’t have realistic reasons why you’ll have 5% market penetration instead of 0.1%, there may not be enough value
2. Precluding Competitors Are there already competitors in this
space? Will they immediately copy you the
moment you prove there’s value in the idea?
Can you obtain patents? Inhibits (free) copying by others More revenue opportunities through
licensing, partnerships, etc.
2. Where are the New Ideas?
Areas with low competition in innovating
A. Emerging fieldsB. Areas with a low rate of innovationC. Areas outside the (age old)
experiences of the layperson
2. Where are the New Ideas?
A. Emerging Fields Not many people thinking about the
field (yet) The competition is not fully aware
of, or tuned into, the area yet EXAMPLES?
2. Where are the New Ideas?
B. Areas with a low innovation rate Monopolist – doesn’t feel it has to innovate Industry that competes on costs – doesn’t
have resources to devote to innovation Industry that competes on distribution
capabilities or customer lock-in may behave like a monopolist and / or competes on
costs Any industry / product / service that hasn’t
changed much in 10 years Examples?
2. Where are the New Ideas?
C. Areas outside the (age old) experiences of the layperson
Many, many people over many decades interact with certain things
ladders, cars, light bulbs, exercise videos, etc. Improvements that could occur to anyone
using these ‘probably’ have occurred already
If the idea could have been developed decades ago, it is ‘less likely’ it’s a new idea
2. Where are the New Ideas?
C. Areas outside the (age old) experiences of the layperson
Example: brake light that turns on when your foot leaves the accelerator
could have existed (i.e., been constructed) in 1940 decades of possibility => it’s ‘more likely’ that the idea is old
Example: new uses of an Internet search engine could not have existed until search engines existed (about 10
years) 10 years of possibility => it’s ‘somewhat likely’ that the idea is old
Example: new uses of cheap (<$1000) genome sequencing could not have existed until cheap sequencing (just a few years) a few years of possibility => it’s ‘not as likely’ that the idea is old
2. Where are the New Ideas?
Think forward Create innovations for the world as it will be in a
few years Different technologies will be available, some ubiquitous
Most people are thinking about the world as it exists today
They're stuck in the conventional mindset of doing everything themselves, today
It can be beneficial to assume the future technology exists
This removes impediments to generating innovations
3. Maintain Your Position
Innovation is the realm of possibilities, not certainties.
It’s better to initially generate many ideas and variations
Choose from among your best ideas
3. Maintain Your Position Attempt to Generate Related Ideas Contemplate all of the details of the
business This generates many valuable,
subsidiary ideas Each such idea could be patentable in
its own right These ideas form a diverse portfolio to
work from in the future
3. Maintain Your Position Contemplate all of the details of the business
How it is designed How it is constructed and built How it is repaired How it communicates with other systems and
subsystems How it handles and recovers from errors, even very
infrequent ones How it complies with any applicable laws or regulations How it avoids being regulated or falling within a
regulated category How it deals with customers How it sells to customers Identify novel opportunities to sell, up-sell and cross-sell How can I get someone else to pay?
e.g., pay for a new opportunity they want to receive
3. Maintain Your Position Contemplate all of the details of the
business There are probably many, many high value
features of any novel business idea Identify them all Is a new form of data collected? Is a new customer segment identified? Is a new industry standard useful or required?
What might competitors do to try to get around your current business?
What other products / services / activities may emerge if your idea becomes widespread?
Examples for Consideration ofEmerging Fields
How will the mobile web be used differently than it is used today?
How could you improve Internet news sites? blogs? FaceBook? online dating sites? eBay?
What features should Microsoft Office have? Internet Explorer? How will a rational and business-like online music market
work? How will television shows (not TV sets) be different with
emerging technology? The infrastructure for registering scent trademarks
How do you replicate a scent? How do you standardize a description of a scent? How do you accept a sample of a scent?
Cheap (<$1000) genome sequencing and services surrounding it
GPS outages in 2011 - 2012 due to the cyclical increase in sunspot activity?
Examples for Considerationof New Opportunities
What new opportunities / products / services may emerge in the customer experience with:
Airplanes that have TV screens on the seats and internet connections
Cars that have iPod interfaces and Internet connections
Wireless internet connectivity that’s available everywhere
Wireless location determination that’s available everywhere
Online service providers that limit bandwidth (“traffic shaping”)
Better cell phone / computer communications
Improving your Venture Idea
How can the value proposition be enhanced and improved?
What can be done to enhance the risk-reward balance?
Evaluating Your IdeaWhat existing need or want does the concept fill?
In other words, what is the problem you solve?
Describe the service/product will it change the way people live, work, or do business?
Who is your customer? What is your market segment? Is there more than one customer group?
Why will customers buy?
Evaluating Your Idea What will your competition
do? The competition will ignore you indefinitely
You will make profits, but no (existing or emerging) competitors will be attracted to take those profits
The competition will buy youDo they need to, or is it cheap to copy you?
The competition will copy you
Evaluating Your IdeaWho can help you evaluate the idea?
Who has the expertise?Who knows the industry? The product? The market?