Opportunity Evaluation

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• Opportunity Evaluation
• And
• Different frameworks

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Systematic screening Why?

• Most businesses fail in less than two years
• Fewer than 1 of the business plans submitted to
  VCs get funded
• Business failures lead to huge collateral
  damages
• Failures are planned by lack of planning

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Mullins 7 Domain Framework
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Mullins 7 Domain Framework

• Markets and industries are not the same things
• Both macro-and micro level considerations are
  necessary markets and industries must be
  examined at both levels.
• The keys to assessing entrepreneurs and
  entrepreneurial teams arent simply found on
  their resumes or in assessments of their
  entrepreneurial character.

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What do we mean by market?

• A market consists of a group of current and/or
  potential customers having the willingness and
  ability to buy products - goods or services - to
  satisfy a particular class of wants or needs.
  Thus, markets consist of buyers - people or
  organizations and their needs - not products.
• Example One such market, for example, consists
  of businesspeople who get hungry between meals
  during their workday. We'll call this the market
  for workplace snacks.
• markets consist of buyers, not products

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What do we mean by industry?

• An industry consists of sellers - typically
  organizations - that offer products or classes of
  products that are similar and close substitutes
  for one another.
• Example What industries serve the market for
  workplace snacks? At the producer level, there is
  the salty snack industry, the candy industry and
  the fresh produce industry, to name but three.
  There are also industries providing the
  distribution of these products to workplaces,
  including the supermarket industry, the
  restaurant industry, the coin operated vending
  machine industry, the coffee bar industry and so
  on. Clearly, these industries offer varying
  bundles of benefits to hungry workers. Some of
  these industries are more attractive than others
  to would-be entrants seeking to serve the
  workplace snack market.
• an industry consists of sellers

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Market, Industry - why care about the difference?

• Why is the market-industry distinction important?
  Because judgments about the attractiveness of the
  market one proposes to serve may be very
  different from judgments about the industry in
  which one would compete.
• This should not be - but often is - surprising,
  for the questions asked to assess market
  attractiveness are different from those for
  industry attractiveness, a point easily obscured
  when words like 'sector' and 'space' are used
  indiscriminately or carelessly in the opportunity
  assessment process. (Does the user of these terms
  mean 'market' or 'industry'?)
• So, if market and industry attractiveness are
  both important, how should each be assessed?

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Mullins 7 Domain Framework

• 1.Micro Level Market Assessment
• a) Micro level questions about target markets
• b) Three ways to define market segments
• c) Micro market test

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Mullins 7 Domain Framework

• 1.Micro Level Market Assessment
• Micro level questions about target markets
• Is there a target market segment in which we
  offer the customer clear and compelling benefits,
  at a price he or she is willing to pay?
• Are these benefits, in the customers minds,
  different from and superior in some way to
  whats currently offered by other solutions?
• How large is this segment, and how fast is it
  growing?

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Mullins 7 Domain Framework

• 1.Micro Level Market Assessment
• b) Three ways to define market segments
• Demography
• Geography
• Customer Behavior

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Mullins 7 Domain Framework

• 1.Micro Level Market Assessment
• c) Micro market test
• What customer pain will your offering resolve?
• Will customers buy what you propose to offer?
• Who precisely are the customers?
• Do you have detailed accurate information about
  who they are, where they live or do business or
  what they do?
• Are there other segments that could benefit from
  a related offering?

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Mullins 7 Domain Framework

• 2. Macro level Market assessment
• Macro Market Test
• What sort of business is sought?
• How large is the market?
• How fast can it grow?
• How quickly can it grow in the next 6 months or
  2/3/5 years?
• What trends can be identified and how will it
  affect the business?

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Mullins 7 Domain Framework

• 3. Macro level Industry assessment
• a) Porters Five forces analysis
• b) The macro industry test

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Mullins 7 Domain Framework

• 3. Macro level Industry assessment
• Five macro level questions to assess the industry
  based on
• Michael Porters five forces -
• Threat of Entry, Supplier power,
• Buyer power, Threat to substitutes, Competitive
  Rivalry

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Mullins 7 Domain Framework

• 3. Macro level industry assessment
• b) Macro Industry Test
• What industry will you compete in? Define it
  carefully.
• Based on all five forces, what is your overall
  assessment of this industry? Just how attractive
  or unattractive is it?
• If your industry is a poor performer overall, are
  there persuasive reasons why you will fare
  differently?

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Mullins 7 Domain Framework

• 4. Micro level industry assessment
• The Micro industry test
• Do you require proprietary elements - patents,
  trade secrets and so on that other firms cannot
  likely duplicate or imitate?
• Can your business develop and employ superior
  organizational processes, capabilities or
  resources that others would have difficulty in
  duplicating or imitating?
• Is your business model economically viable i.e.
  can you show that your company wont run out of
  cash quickly?

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Mullins 7 Domain Framework

• Mission, Aspiration and Risk test for
  entrepreneurs
• Whats your entrepreneurial mission?
• What level of aspirations do you have for your
  entrepreneurial dream?
• What sorts of risk are you and are you not
  willing to take ?

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Mullins 7 Domain Framework

• Mission, Aspiration and Risk test for
  entrepreneurs
• Whats your entrepreneurial mission?
• What level of aspirations do you have for your
  entrepreneurial dream?
• What sorts of risk are you and are you not
  willing to take ?

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Mullins 7 Domain Framework

• 6. The can you and your team execute? test
• What are the few - only a handful, please
  critical success factors (CSFs) in your industry?
  
• Can you demonstrate - in past deeds, not mere
  words that your team taken together can execute
  on each and every one of these CSFs?
• Have you identified which CSFs your team is not
  well prepared to meet, for which you need help in
  filling out your team?

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Mullins 7 Domain Framework

• The connectedness test
• Who do you and your team know across the
  value-chain among your customers, suppliers,
  competitors and substitutes?