Lastly, it is interesting to note that while many peoplehave a theoretical background on how business works andhow to successfully launch new companies, fewer havepractical experience; and thus success rate of newcompanies is low (a rule of thumb success rate often citedby Venture Capital partners is about 1 in 10). The RapidInnovation Cycle seeks to provide a low-risk method topractice business thereby ideally improving the successrate of entrepreneurial startup companies and / orintraprenurial corporate projects.The conventional hurdles to enter the marketplace aresufficiently large to prevent the majority of peopleinterested in innovation from ever attempting to start abusiness that revolves around a product or service idea.Typical
factors affecting innovation are a region’s
education and human capital, governance and corruption,macroeconomic management, regulatory framework andgender equity (López-Claros, 2010).It is unclear how reducing the barriers to creatinginnovative companies via innovation processes like theRIC might impact the public
would quality decrease?
Would people’s safety be put at risk? Would innovation
happen at a faster rate? Would large companies bechallenged by underdogs, thereby improving product andservice offerings in general?However, it is hypothesized that the Rapid InnovationCycle can actually help answer these questions in thesense that if an entrepreneur and their team executesuccessful market tests that suggest positive return oninvestment for their business opportunity, they can bemore confident about investing more into their customers,the product, the service and the business in general ratherthan lose it investing in an unwanted product or servicesolution. Venkataraman (2003) describes that
“a fear of
realizing the downside of creating a new business biasesone towards analysis. A bias for analysis significantlydecreases the probability of business entry, but increases
the probability of success.” The data collected from the
RIC should assist these types of analyses and thereforeincrease the probability of building a successful business.
Opportunity Recognition (OR)
The first phase of cycle allows anyone using the RIC toidentify market opportunities. Sarasvathy (2002)describes
as an obviousexistence of both supply and demand that is identifiedand is consequently brought into existence by a new orexisting firm. In the context of the RIC, this phasetypically includes effective brainstorming, seeingproblems as opportunities, constantly looking at the worldwith fresh eyes, asking questions like:
“what bothers you?
What causes you pain in your business? What keeps youup at night?
looking for workarounds(Figure 5),traveling and any other form of seeing the world aroundthe observer as a source for numerous marketopportunities.
Figure 5: An example how looking for workarounds can helpidentify a problem and define a market accepted solution. Asimple door wedge is nothing new, but applying it to a differentproblem and adding features that may be interesting to differentcustomers present new business opportunities. People exposed to
this “market experiment” subjectively said they would pay
about$US 4.00 for a gadget that costs less than $US 0.40 to produce. Thenext step would be to actually sell at that price and see what
percentage of people would actually pay the “claimed” buying
price of $US 4.00.
“Entrepreneurial opportunities are r
they have to be created and earned.”
(Venkatamaran, 2003)Sarasvathy (2002) further identifies an entrepreneurialopportunity consisting of three key characteristics: 1) Anew idea / invention that will possibly lead to theachievement to one or more economic ends, 2) beliefsabout things favorable to the achievement of thesepossible valuable ends, and 3) actions that generate andimplement those ends through specific new economicartifacts.At the end of the Opportunity Recognition phase, the userhas a large number of recognized market opportunitiesand some ideas of technical solutions for them. But now,the participants need to choose the best or most promisingopportunity depending on their goals. This filteringprocess happens in the Solution Selection phase.
Solution Selection (SS)
Amongst the number of potential market opportunitiesgenerated in the previous OR phase, the RIC participantsevaluate which idea is best suited for market testing. Theplethora of ideas is quickly filtered by time limitations,financial constraints,
technical abilities and theavailability of other resources. All filtered ideas shouldbe saved for future venture development.The
market study which assesses competition,market size (both in revenue and people), trends, andother information relevant to a market / industryrepresents one component of solution selection but are farfrom the most important selection criteria. Traditionalmarketing studies are conducted with the assumption thatthe customers within this segment actually know whatthey want from a product or service. Consumers howeverhave been academically proven to be unpredictable whenthey make purchase decisions (Armstrong, 1991). In fact,a typical quote (often referred to as the business tycoonHenry Ford) that describes such situations is