12/9/2019

ENTREPRENEURSHIP
CMS-109

Ent@MTJ
Prof. Dr. M. Tayyeb Javed
New Enterprises

(Head ORIC, Advisor SPEL)

E: mtayyebjaved@gmail.com
Office: C-209 (Ext. 3243)

Idea Generation
or
“How do I get a good idea to
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start a company … and how

New Enterprises

much does it really matter?”

Courtesy: MIT OpenCourseWare (Aulet, Bill. Disciplined

Entrepreneurship: 24 Steps to a Successful Startup. Wiley, 2013. 2
ISBN: 9781118692288)

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FOUR FACTORS FOR IDEA GENERATION

 ____ S (S=Suit)
  Represents personal & financial drive
  Good later but need much more for idea generation
 ____ T (T=Technology)

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  Represents “technology push”
  Good or bad depends on how handled & specific scenario
  Can you find a good match?
 ____ B (B=Balance)
  Looking for customer need to meet
  Domain expertise is important
  Passion matters
  Looking at trends
 ____ P (P=Propulsion)
  You must iterate an idea
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S… SUIT
 You must have passion about the idea
 You must be able to execute it
 You must see a path to make money to justify
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the effort and make it sustainable

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 Because you want it & you have succeeded

in class room setting, does not mean you will
succeed no matter what the idea
 The market is a tough & unrelenting place
 “Chance favors only the prepared
mind,” Louis Pasteur
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T… TECH
• Innovation = Invention x Commercialization
• Innovation = Finance + Technology + Entrepreneurs (JFDI)
• 90% of companies started by MIT alum are not

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from technology in the labs
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• You have to find a customer who can use your

technology to make substantially more money
• Technology Push has it advantages but it is a
higher risk exercise
• To optimize success, need to have a systematic
way to evaluate markets & then choose one to
start and focus on it 5

B… BALANCE

• Empathizes with customer

• Market pull
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• Looking for trends as well to anticipate

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new opportunities
• Google/Travel Company example, raises
question of timing
• Considering personal fit
• Lack of focus is concerning but can
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P… PROPULSION
• Bias to Action – “JFDI”
• Represents the need to iterate on idea to
determine viability

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New Enterprises

• Engage directly with customers

• Show them prototype, screen shots & discuss
value proposition
• Thomas Edison’s measure of success – how many
times he could iterate on an idea in first 24 hours
• “Ideas are cheap, implementation is expensive,”
Michael Schrage (sh-r-AI-j)
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IN SUMMARY …
Three ways to start a new venture
I have a technological breakthrough!
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I have an idea!
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I have a strong desire and drive!

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TECHNOLOGY PUSH VS. MARKET

PULL

Technology Market Pull

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Push
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Risk - +
Unit + -
Profitability

MARKET PULL & TECHNOLOGY PUSH

Type Market Pull - Market Pull - Tech Push - Tech Push - Megatrends
Personal General Personal General

How You “I have this “I have seen “I have this “I have “There is a
problem” this tech” found/seen huge wave
Can Tell problem” this tech” coming & I
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want to have a
surfboard”
New Enterprises

Examples Julia Hu Kevin & Thomas Vanessa Pedro Santos

Gihan Massie Green - OsComp
Fatma Yalcin Student Tony Fan Fuser
- Curisma Microloans/ Sagneri,
F B Justin,
George
New Dog
Grooming
Tool

Having been too often sleep deprived and dropping off exercise and diet
regimens, Julia's goal is to make people happier and healthier as the CEO of
lark technologies. Named Top 10 Most Innovative CE Companies in the World
by Fast Company, lark is a mobile and wireless technology company that uses
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behavior change to personally coach people to feel great.

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WELL, ARE IDEAS IMPORTANT

THEN?

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New Enterprises

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COMPANY SUCCESS
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New Enterprises

Horse Jockey Race

Technology or Management Market

Innovative Team Selected
Idea
10-15% 65-75% 15-20%
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Source: David Morganthaler, Morganthaler Ventures

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THE IMPORTANCE OF A GOOD IDEA

TO START A COMPANY
• Is this important?

• Yes

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 If you are not over a good target, your efforts are much,
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much less effective

Your ability to recruit & motivate people
Your ability to put your head down & focus on execution
Credibility in the longer term with customers & others
Build your expertise that makes you unique

• No
It will change; the concept of pivoting
 You get 1-2 major adjustments (e.g., A123)
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 Don’t use as an excuse not to do the job properly up front

VIDEOS

• Watch video on how to do Improvisation and take

notes
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• http://www.youtube.com/watch?v=MUO-pWJ0riQ
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• Then watch the IDEO video "Deep Dive" parts 1 & 2

on YouTube and especially focus on the beginning of
part 2 - the brainstorming part
 Part 1: http://www.youtube.com/watch?v=JkHOxyafGpE
 Part 2:
http://www.youtube.com/watch?v=pVZ8pmkg1do&feature=re
lmfu

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SO HOW DO WE GENERATE NEW

IDEAS?

 Brainstorming

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 Open Environment – Flat & Heterogeneous
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 Flexible & Environment Matters

 Medium Sized Group (3-6)
 But Still Important to Have a Process
 IDEO is a Master at This …

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THE KEY RULE OF IMPROV

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YES, and …
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 We can make it better by …

 I see it and this person will want it because
…
 I can add my perspective to make it real by
…
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IDEO’S PROCESS
 Time bracketed
 Stages

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 Facilitator
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 Brainstormers
 At Some Point, Adult Supervision
 Prototyping
 Fail Often so We Can Succeed Sooner
 Funnel

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IDEO’S CULTURE
 Failure and Trust
 Sharing and Respecting
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 Simple Rules
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 Enlightened trial and error

 Fail often to succeed sooner
 If a picture is worth a thousand
words, a prototype is worth ten
thousand

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IDEO’S RULES IN BRAINSTORMING

 One conversation at a time

 Stay focused on topic

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 Encourage wild ideas
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 Build on the ideas of others

 Accept judgment

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IDEA BRAIN STORMING

COMMANDMENTS
 Thou shalt love thy neighbor and her ideas
 Thou shalt not crap on others’ ideas
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 Thou shalt not take over the floor

New Enterprises

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RULES OF IDEA BRAIN STORMING

1. Withhold judgment of ideas

2. Encourage wild and exaggerated ideas

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New Enterprises

3. Quantity counts, NOT quality

4. Build on the ideas of others
5. Every person and every idea has equal
worth

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POTENTIAL TOPICS
 Megatrend: Smart phones
 Megatrend: Mobility
Megatrend: Social Media
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 Megatrend: Big Data

New Enterprises

 Tech Push – Sensors

 Tech Push – GPS
 Tech Push – Voice Recognition
 Tech Push – Graphene
 Market Pull – Personal: Fitness
 Market Pull – Education
 Market Pull – Personal: Aging Population
 Market Pull – Arts
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 Market Pull -- Sports

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EXERCISE NOW (“IDEASTORM”)

• Now form teams based on potential topics
• No more than 5 per team
• Everyone should be involved but you need to appoint

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a facilitator immediately for the group
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• Prize? for the most ideas & the the craziest idea
• Facilitator should set up a schedule, rules and a
process
Suggest you discuss topic for 5 minutes
Generate lots of ideas for 25 minutes
 Return to classroom
• Remember the Improv lesson and the IDEO lessons
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SUMMARY
1. The Idea for the Company is Important – Even if it Will
Transform Over Time
2. Personal Drive is Not Enough

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Tech Push is One Option to Start

 Market Pull is Another
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3. Let the Ideas Flow Now & Don’t Get Too Hung Up on
How Great They Are to Start
 Quantity over quality to start and encourage crazy ones
4. Suggest You to Revisit the Videos to Fully Grasp Process
5. Brainstorm with a Heterogeneous Group
6. Consider If You Have Some Special Advantages
7. Look for Personal Impedance Match & Diverse Team
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SOME GOOD VIDEOS TO WATCH:

 https://www.youtube.com/watch?v=NugRZGDbPFU

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NEW ENTERPRISES
“IDEA FILTERING/SANITY CHECK”
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 Analyzing Ideas and Inspirations

 Systematic Way to Sort Out Good from
Bad

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THE TURTLE ANALOGY?

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New Enterprises

Courtesy of USFWS/Southeast on Flickr. License: CC-BY.

To start, we need to produce some eggs that

could grow into big turtles
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CASE STUDY:
• Stealth Wax; makes cars “stealth”
invisible to police radar.
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• -you own IP; you have some startup

money.

• Q: How can you make this idea better?

• Q: How can you make sure that your
sea turtle makes it to the sea?
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A FEW FACTS..
• Product is legal… but there might be
legislation in some states/countries to make
it less attractive

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• (example: radar detectors are illegal in
Connecticut)
• (radar detectors:$200 Million dollar/year
business)
• Vehicles per 1000 people:
US 765 total: 230 Million
• Germany 558 45 29

• Pakistan 10 2.2

SO… AS YOU THINK ABOUT YOUR

“PRODUCT”…ASK YOURSELF …
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STEALTH WAX – WHAT WE WANT TO

KNOW:
1. What’s the Problem? Who suffers because of
it? How do you propose to solve it? What’s

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the best existing solution? What makes this
solution inadequate? Why is your solution
better?
2. How much will it cost you to solve the
probem? Whose help will you need? Who will
pay for your solution? How much? Will more
people pay over time?
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MORE…
3. How many of them are there? Where are
they? Who are they? How will you find
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them? Convince them?

4. Who else is trying to solve the same
problem? Why can’t they do what you
are doing?
5. If I give you money, how quickly will you
spend it? On What? How many years?
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IN SHORT, HOW WILL YOU GO TO

MARKET? WHAT IS YOUR STRATEGY?

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This image is in the public domain.
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TODAY:

• Every major company has an IT Department.

40% of capex goes to IT.
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• Why can’t companies buy computing as a

service, abandon their own “generators”, just like
Insull did.
Example: Marc Benioff (Salesforce.com)
Everything that can be done with a PC, storage,
appls… can be done on a computing grid.
Samuel Insull: British-born American business tycoon;
An innovator and investor based in Chicago who greatly
contributed to creating an integrated electrical infrastructure
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Salesforce: American cloud-based software company

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Q: HOW COULD YOU COMBINE

CLOUD
COMPUTING AND STEALTH WAX TO MAKE
YOUR PRODUCT MORE VIABLE?

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1. What would social networking offer?
2. Who do you want to be the first
users?

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WHO IS YOUR MARKET?

 Individuals who got a speeding ticket
in the last three years (proven
speedies)?
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 Individuals who want “speed

insurance”.. Or those whose livelihoods
depend on the ability to drive
 Assumption: Speedies x 10 + Speed
Insurance x 5 = market potential
 Which States give the most tickets/cap?
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WHERE CAN YOU TEST?

• Porsche Club of New England?

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• New Car Dealers… of Audi, BMW?
• Owners of Performance Cars?
• Could you make an offer to PAY the
speeding tickets…? Co – pay?

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OK, HOW DO YOU GO FROM AN

“IDEA” TO A “VIABLE” IDEA?

• You learned how to generated lots of

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ideas to put into the funnel

• Wild ideas to expand your landscape
• Now how do we evaluate & prioritize to
come up with the best idea
• How do we determine viability?
• 27 simple rules follow
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1. AT FIRST, DON’T WORRY IF AN IDEA

IS VIABLE

A.The process will begin to select out viable

from non viable, non feasible from feasible

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B.See how many ideas can come out of one
thought process. (Example: Build a Video
Game Company. Build a video game
company that centers on youth.)

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EXAMPLE

• RCA: invented radio… then

• Needed programming..so
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• Started radio networks to sell

• Radios…

RCA Corporation, founded as the Radio Corporation of

America, was an American electronics company in
existence from 1919 to 1986.
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2.GETTING THE RIGHT IDEA MAY

COME FROM WRONG IDEAS.

A. The process is looking at what makes

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the idea wrong….and correcting it.
B. Example: Meals Ready To Eat…. May
lead to a line of camping/dry food
meals using a new irradiation process.

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EXAMPLES

• Post it Notes
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3. LOOK FOR IDEAS THAT REQUIRE

AS LITTLE CAPITAL AS POSSIBLE.

A. Capital-inefficient ideas (start an airline) are non

starters. Use as little capital as possible. Or use other

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people’s capital.
• <$1m: can probably be pulled together by angels
• $1m-$5m early stage and boutique VCs
• $5m-$20m reasonable size of first round from major VC players
B. Assets are liabilities; liabilities are assets
C. Find resources that can be rented, not bought.
(outsourcing)

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EXAMPLE: VIRGIN AIRLINES

• Branson was stuck at a
• Carribean resort with others;
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• Chartered a plane, flew for

• Free….

• (build the traffic; only buy planes when

you have the volume)
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4.LOOK FOR IDEAS THAT WILL

GENERATE SOME SALES QUICKLY

A. Long development cycles scare everyone

B. Look for a family of products, the first of which can

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come early and help finance the later ones.
Example: Japan stuffs circuit boards, then builds circuit
boards, then builds subsystems, then builds computer
Example: India does data entry, the does maintenance on
code, then writes software
Example: Pharma company takes existing drug and
makes it for aerosol, then makes proprietary
(Alkermes)
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5. LOOK FOR IDEAS WHERE THE

VOLUME DOES NOT HAVE TO BE
EXTRAORDINARY FOR THE COMPANY
TO BREAK EVEN.
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• Example: Need 1,000,000 games to get

costs down
• Big companies can live with the loss
until volume is reached. Small
companies can not.
• Example: The Source @$1.75/hour
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6. LOOK FOR PRODUCTS

WHERE PERFECT EXECUTION
IS NOT A REQUIREMENT

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A.You won’t execute perfectly with a new
company. No one will.
B.Look for products where mediocre
execution can win…at first
Example: Fed Ex
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7. LOOK FOR PRODUCTS/SERVICES

THAT ARE EGREGIOUSLY PROFITABLE
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A. Don’t worry, they won’t be.

B. Big gross margins allow you to make
mistakes and still make money
Example: The Yankee Group

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8. LOOK FOR PRODUCTS AND

SERVICES WHERE THE MANAGEMENT
TEAM DOES NOT HAVE TO BE
EXCELLENT

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 Why?
A.You may not really be able to recruit a super
management team.
B. Best players may be on the other team

C. You may not be at a stage where you can

 afford them.

D. You can and will upgrade

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9.LOOK FOR A PRODUCT WHERE YOU

CAN IDENTIFY SOME QUANTIFIABLE
NUMBER OF CUSTOMERS

• Example: Enterprise Software that

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converts to different currencies..

Quantity: 100 companies

• Example: wrench for left-handed

plumbers
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10. LOOK FOR A PRODUCT WHERE

THE SALES AND PROMOTION COSTS ARE
REASONABLE

• Example: Avoid packaged goods that

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require television advertising

• Example: Could a Tupper-Ware model

work for your product?

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11. LOOK FOR A PRODUCT WHERE THE

BUYER DOES NOT HAVE ALL THE POWER

• Example: Selling to Wal-Mart

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• Example:

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12. LOOK FOR A PRODUCT THAT WILL BE

ATTRACTIVE TO THE MORE INTELLIGENT
CUSTOMERS

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A. Avoid selling to dumb customers.
There aren’t enough of them

Example: new power tools based on

better battery life

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13. AVOID PRODUCTS THAT APPEAR

TO BE JUST FADS.

• Example: hula hoops with memory

(bad)
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• Example: Wet suits that can keep divers

5 degrees warmer (good)

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14. AVOID PRODUCTS/SERVICES

THAT REQUIRE A GLOBAL MARKET

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A.Cost justify your decision on the local
market
B.Export is hard, expensive, time
consuming and frustrating

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15. Avoid products that require an

OEM for you to succeed, or where
some big company has life-or-death
control over you
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A.Big company may say No

B. Margin will be eaten up
C. You need some self reliance
D.Ok if it is part, but only part, of plan
Example: Iridium
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16. AVOID PRODUCTS THAT REQUIRE

A CHANGE IN GOVERNMENT POLICY

• Example: Government mandates

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archival procedures… in 3 years.
• Example: Pollution controls

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17. AVOID PRODUCTS THAT ARE

SIMPLY PRODUCT EXTENSIONS OF A
COMPETITOR

A. They will get there before you… with a

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brand name
B. Your distribution will leave you.

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18. AVOID PRODUCTS WHERE THE

LEAD TIME TO DECISION MAKING IS
LONG ( 6MONTHS +)

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• Example: new accounts receivable
package

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19. AVOID PRODUCTS WHERE THE

JUSTIFICATION IS TOO SOFT

A.“Staff not hired”

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B.Savings are 6 minutes per day per

employee

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20. AVOIDPRODUCTS WHERE THE

BUYING DECISION IS TOO DIFFUSE, OR
LOTS OF BIG PLAYERS ALL HAVE
TO LINE UP AND COOPERATE

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• Example: a Hospital information system
• Various banking/bill payment systems
that require banks, consumers, and
Visa/MC to all buy-in.

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21. AVOID PRODUCTS WHERE THE

MARKET IS NON PROFIT
ORGANIZATIONS

• Example: Universities
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22. AVOID PRODUCTS WHERE THE

COST JUSTIFICATION CUTS ACROSS
DEPARTMENTAL LINES

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• Example:
Will save 5% in manufacturing, 10% in
engineering, 8% in shipping.

Make the equation reasonable for any

department to justify on its own

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23. SELECT PRODUCTS WHERE THE

BENEFIT CAN BE 400 – 1000% OF WHAT
THEY ARE CURRENTLY DOING
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• Packaged software

• Find metrics that work for the customer

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24. AVOID SWISS ARMY KNIVES

• … a dive computer that also keeps track
of calories and works as a compass.

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• …. Product is usually not the best of
any

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25. PICK PRODUCTS WHERE A

TRAINED SALESPERSON CAN GET X
SALES/YEAR
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A. You want an idea that you can scale

B. $2 million /year/salesman achievable in
the second or third year
C. Enough potential customers
D. Add enough channel

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26. PICK PRODUCTS WHERE THE

USER EXPERIENCE IS CLOSE TO HIS
EXISTING BEHAVIOR

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Courtesy of humboldthead on Flickr. License: CC-BY.

27. PICK PRODUCTS THAT CAN BE

PART OF THE FAMILY

• New Products to existing customers

• Same Products to new types of
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customer

• Avoid: New Products to New Types of

Customers

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JEFF BEZOS’ LIST

• Obsess over customers

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• Invent

• Think long term

• It’s always day

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http://tinyurl.com/jeffbezoslist

SUMMARY
1. You now have general rules to analyze the
viability/attractiveness of your three ideas
2. You may have new ones now too
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3. You must now narrow this down to one idea

before the next class
4. Enter it online for analysis by your classmates
5. Review and analyze your classmates ideas and
comment (on at least 3 of them)
6. Come to class with a 2 minutes elevator pitch
summarizing your idea – and be ready to give it &
listen to others 70

7. Darwinian selection process

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