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OPPORTUNITY ANALYSIS

OPPORTUNITIES AND UNCERTAINTY
 If I want to take a leap of faith, how do I know it will succeed?
 My opportunity – kingdom of Heaven
 Others haven’t spotted it
 I need to take advantage of uncertainty but I can reduce it by
o Planning: Strategy
o 3 types of uncertainty;
 What is known
 Uncertainty
 Unknown risks
o Planning reduces uncertainty. There is a lot more
uncertainty.
o In a conventional strategy, there is a past record and
there are some knowns.
o In entrepreneurial strategy, you know very little –
customers, pitch, funding, market, customer, legal
problems.
o Startups need to learn as they go
o Changes in direction (‘’pivots’’ are normal) Startups that
change direction a lot have the same or better survival
rates than those who don’t. This would be a problem in
established companies
o The key is to test often and early and update
assumptions
 Methods for planning a startup:
o The Lean Startup Methodology
o The Business Model Canvas
o Discovery-Driven Growth
 There is no ‘’best’’ way

PUSH, PULL AND THE SOURCES OF INNOVATION
 Where does advantage come from? It’s the source of profits
o Illegal or regulated monopoly e.g. National broadcasting
in China
o Cost advantages from scale e.g. Dangote
o Doing something valuable, better and different
 Different service
 Rare capabilities e.g. cost efficiency
 Innovation = a new match between a solution and a need
 Conditions for value creation in innovation:
o The need must be real
o The solution must meet the need
o The customer has to be willing to pay more for the
solution than it takes to create it
 How to find a match between solution and need

small businesses o Function – change managers. Ask ‘How do I solve this problem?’  Which solution best meets the needs at an attractive cost?  Afreecon o Push  Start with a solution and ask what you can do with it  Kleos Change  Risk – what would a rival do. project managers. oil companies. you need to incentivize customers with:  Monetary incentives  Get a company to address their needs and solve their problem  Opportunity to develop their skills o Market research? o To get customers:  Incentivize  Provide value to even those that don’t win  Encourage a sense of community  Indirect sources of customer feedback: o Online product reviews and social media posts  For startups: Reach out to prospective customers o Reviews o Social media posts – LinkedIn? . o Pull (Textbook Model) – Product Design:  Start with a need. Classify them by: o Industry – banks. taking the pull approach? That logic would probably lead to a superior solution o Another Flavor of ‘’Push’’  An acknowledged need  A solution is pushed onto the world without application CUSTOMERS AS SOURCES OF OPPORTUNITIES  Client at the Core – study the LBSAA Directory. CEOs  How to limit uncertainty of business ventures: o Explore and nurture multiple alternatives o Test with multiple opportunities to identify exceptional opportunities o Invest and develop  I can use prospective customers to source opportunities and ideas worth pursuing o Crowdsourcing – votes on platforms can be a proxy for demand. For it to work.

THE IMPORTANCE OF THE IDEA (VIDE MODEL)  What explains success – the idea?  The idea must be important  Others say it must be the team  Value is a function of the idea. Kleos Change. ASSESSING OPPORTUNITIES  Which of several opportunities should I pursue? Assess against these criteria: o How significant is the need? Number of potential customers? Depth of pain? o How effective is the solution at addressing the need? o Will there be a large gross margin? o How hard will it be to acquire customers? o Are we the best team to go after this opportunity?  Criteria: o Big market o Big gross margins o Strong recurring revenue streams o Take advantage of my unique product development capabilities o Utilize our sourcing connections o Flow through supply chain capabilities o Leverage sales capabilities o Will resonate with our friends in the press o In markets with large. development and exogenous factors o Idea = Business model. hard work o Exogenous = Economy. ‘’obvious’’ potential acquirers (good ‘’exit’’ possibilities) – Return on Investment  TO DO: Assess Kleos HR. The race is not to the swift but time and chance happen to all men. outside your control  How much of the variance in outcomes is explained by the variance in the quality of the raw ideas? o Quality of ideas can be measured by a purchase intent survey – would you buy or would you not buy? Findings:  Experts are not very good at measuring the quality of an idea – consumers are o Many ideas are available publicly and are not available publicly  Pick the best idea which is received by consumers  Don’t impute wild success to your brilliance or failure to your incompetence. Are there customers with this pain point? o Development = Team. Afreecon. YEAP and CIA using the tournament approach . Exogenous factors matter a lot.

I need to test everything with consumers to get the best opportunity DECISION: For Afreecon:  My unfair advantage is the LBS/EDC community  My strategy is the ‘’pull’’ strategy TO DO: 1. Assess my opportunities against the relevant criteria. I can develop 20. Decide: Push or pull innovation? 2. the logo etc.THE TOURNAMENT APPROACH More details in his book. Consider 5 – 10 opportunities. 20. 3. invest a little in exploring and nurturing each and then invest and develop 1. and select one. Source for opportunities from customers 3. invest a little in exploring and nurturing each and then invest and develop 1. I can only minimize uncertainty but can mitigate it by diversifying across several opportunities and delay commitment until more information is obtained about the promise of the opportunity. . Consider 5 – 10 opportunities.  Any problem with the business can be viewed as a tournament – the name.  Cast your bread upon many waters and you will know which shall grow  I need to run my own tournament.