Generating

1

• Generating Assessing Your
• New Venture Idea
• Prof. Rachael E. Wells
• November 20, 2008
• Workshop associated with
• Fordham GBAs 2009 Business Plan Competition

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The Venture Idea

• Your idea is the center of everything. Its the
  root of all your pitches, marketing plans,
  management decisions, financial analyses
• What kind of idea will create value?
• Innovation is the key you are looking for an
  innovative business model, product or service

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What is an innovative idea?

• Old has completely been done before
• New to me You think its new, until you do
  some investigating
• New-ish hasnt been literally done before, BUT
  new part has no or few particular advantages
• Innovative hasnt been done before is
  potentially valuable
• Innovative PLUS hasnt been done before, is
  valuable and you can keep all that value for
  yourself

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All creativity is not assessed equally Know the
difference between what will be called bizarre
vs. innovative
5

• Successfully innovative ideas are more about
  assembling what is already known in a unique
  fashion or for a new application than an
  ingenious, revolutionary brainstorm.

6

• Where do ideas
• come from?

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Sources of Opportunities

• Economic Environment (esp. long-term)
• Decreasing costs
• Productivity gains
• New laws/regulations
• Improved service
• Existing supply is insufficient
• Market size/growth/outlook
• Market areas with low rate of competition,
  innovation
• Areas outside the experiences of the layperson
  (limits future competition)
• Monopolist (doesnt feel it has to innovate)
• Industry that competes on costs doesnt have
  resources to devote to innovation
• Industry/product/service that hasnt changed much
  in years
• Emerging fields

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Sources of Opportunities

• Demographic Environment
• User needs change
• User preferences change
• Market demographics may be forecasted to shift
  over the long term, leading to new user
  needs/preferences
• Geographic Transfer
• Technology Environment
• Existing technology is replaced
• Technology creates a new nice
• Infrastructure/business system replacement or
  transfer
• New industry standard

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• Who helps
• Develop ideas?

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What resources do you have to help you come up
with new ideas?

• Previous work consumer experiences existing
  social networks
• Your professional social networks within
  orgs/industries and outside listening to
  colleagues in industry, previous customers
• Some entrepreneurs set up product or service
  lines similar to those in which they previously
  worked/serving some of the same customers
• Family/friends
• Experts
• Industry experts (including consultants)
• Potential customers
• Potential suppliers for a space
• Potential investors for a market space
• Pull a panel of a variety of the above,
  representing different points of view/expertise
  (not all industry insiders) together for a
  brainstorming session
• Is there dissatisfaction or problems with the
  status quo?
• What can be done better?
• What else can be done, period?

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Some Tips for Brainstorming Sessions

• Pull together as diverse a group of participants
  as possible (not just your own close
  colleagues/friends)
• Diversity in professional expertise
  experiences, social networks, even
  cross-industries (as long as potentially related
  to industry of interest) maybe mix customers
  professionals, etc. etc. etc. better if its
  people who wouldnt usually talk to one another
• Locate yourselves in a good environment with no
  disturbances
• No cell-phones, blackberries, instant messengers
  invited
• Find a space that is large enough for the group
  comfortable away from participants daily
  routines
• Supply water, coffee/tea, snacks sometimes even
  a little alcohol can be helpful just enough to
  loosen people up and reduce inhibitions about
  proposing potentially crazy ideas

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Some Tips for Brainstorming Sessions

• Defer Judgment/Criticism or No Squelching
• Nothing can kill the spirit of a brainstorm
  quicker than judging before ideas have a chance
  to gain legs
• You also want to maintain psychological safety of
  each participant
• Have an enthusiastic facilitator who will
  encourage wild ideas/experimentation/building on
  others ideas/no judgments
• This person should ideally not be supplying ideas
  him/herself
• Know if you yourself are not best-suited for that
  role!
• This person will keep people away from buts
  keep people toward ands
• Stay focused on the topic (another helpful role
  of the facilitator) otherwise you can waste
  time and the build up of mental energy
• Have only one conversation at a time
• No interrupting, dismissing, disrespect, rudeness
• Also keeps diverse perspectives interacting with
  one another

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Some Tips for Brainstorming Sessions

• Go for quantity
• Aim for as many new ideas as possible. In a good
  session, up to 100 ideas are generated in 60
  minutes.
• Be visual
• Use yellow, red, and blue markers to write on big
  30-in. by 25-in. Post-its that are put on a wall.
• Often nothing gets an idea across faster than
  drawing it (esp. for new design or product
  ideas) doesnt matter how terrible of a sketcher
  you are.

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Assessing Your Idea(s) Have you pinpointed a
true, high value entrepreneurial opportunity for
yourself/your venture team?
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• Entrepreneurial Idea
• A product or service that somebody might
• find useful
• Entrepreneurial Opportunity
• A product or service for which a large number of
  people will pay good money to obtain, and around
  which you can build some competitive barriers

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Use the ABC TIP to help you screen
analyze A --Abundant demand, esp. over
long-term? B --Better product/service vs.
existing ways? C --Competition now? Easy entry? T
--Technically feasible, esp. over long-term? I
--Investors interested (if needed)? P
--Patentable/ protectable? S --Skills Needed?
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A is for Abundant Demand

• Whats 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
• Do you have more than one customer group?
• How many transactions will there be (per day, per
  year)? How often will customers have to buy?
• 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 countrys many local hardware
  stores.
• How susceptible to variation is this number?
• How much profit per transaction?
• Consider both gross profit (the pie) and profit
  to you (your slice)
• Inject a dose of realism
• If you dont have realistic reasons why youll
  have 5 market penetration instead of 0.1, there
  may not be enough value

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B is for Better Product/Service

• Describe the service/product
• Will it change the way people live, work or do
  business?
• What problem will it solve?
• WHY will customers buy?
• What are current substitutes?

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C is for Competition P is for Patentable

• Are there already competitors in this space? What
  will they do?
• Will they ignore you indefinitely?
• You will make profits, but no (existing or
  emerging) competitors will be attracted to take
  those profits
• Will they buy you?
• Do they need to, or is it cheap to copy you?
• Will they just immediately copy you the moment
  you prove theres value in the idea?
• Can you obtain patents?
• Inhibits (free) copying by others
• More revenue opportunities through licensing,
  partnerships, etc.

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I is for Interest of Investors
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Investors back lt5 of the venture ideas they
screen

• Venture-backed projects MUST HAVE
• A product offering/ concept that solves a
  significant problem or unmet need
• Significant means a problem or need where
  customers will pay for a solution
• In a very large potential market
• High of transactions each transaction can
  support incremental charge of a few
• That can yield a large return (5-10x) on their
  original investment in 5-7 years
• Other key characteristics
• Good economic model
• Does it cost more to acquire new customers than
  the profits you ultimately collect from them?
• Good fit with founder/ management
• Do you have some basis for knowing this industry?
  
• Effective staging of capital
• Does it cost a lot of money to build the first
  version of the product and see if anyone wants to
  buy it?

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T is for Technical Feasibility S is for Skills
Needed

• Make sure you know that this idea is technically
  possible even better if the technical capacity
  is projected to improve over the next months,
  years
• Seek input from a technical expert if you dont
  have the expertise needed to assess this
• Do you have the existing skills/capabilities
  needed to execute get this venture running?
• If you dont, how will you get them? Can you
  build them? Can you buy them?

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Resources to draw on in your analysis of market,
competition, etc.

• Research into existing businesses
• Patent brokers
• Trade shows and associations
• Customers
• Suppliers/distributors
• Competitors
• Former colleagues
• Industry professionals experts
• Consultants
• Networking
• Websites like Hoovers, ProQuest, Investext,
• Mags like Business week, Inc, Forbes, Fast
  Company, Fortune
• Investors targeting a particular space