Skip to 0 minutes and 7 seconds When there are multiple opportunities, which one will you exploit? For making a good decision, you have to evaluate the opportunities– but how to do it? Research shows that it is beneficial for entrepreneurs to come up with a set of ideas, not just one. The reason is that one of the ideas might not be so feasible. Therefore, instead of searching for new opportunities, it’s better to have them at hand. For example, high-tech companies can think about different applications for their technology and different customers. Consider developing technology in the health industry. Your customers can be end users or insurance companies or hospitals. So let’s assume that you have a few ideas.
Skip to 1 minute and 0 seconds How do you know that at least one is good and worth pursuing? You need to look into the future and assess a future potential of the idea. There are two types of criteria you can use, internal and external. Let’s first focus on the internal factors. These are related to you as an entrepreneur, your team, and resources. How attractive is the idea to me? Remember that you will be doing it full-time. Is it something that you truly have passion and dedication for? Then you assess the resources you have. How long will it take to develop the product? Do you have enough resources to get the product to the market, or do you know where to get them?
Skip to 1 minute and 47 seconds And finally, how about your team? Do you have the best team with the right level of passion and knowledge? Do you have somebody with entrepreneurial experience, or at least some management knowledge? That would be an advantage. Perhaps you could get in touch with a coach or a business developer to help you. The second set of criteria is related to customers, potential market, and industry. When thinking about customers, I would suggest thinking first about the problem you want to solve. How big is the problem of your potential customers? Is your solution the best? You also need to choose type of customers you will be serving, business-to-business or business-to-customers. This is a very important decision because these two types have different needs.
Skip to 2 minutes and 40 seconds For example, businesses might want to use your product to reduce costs of their production or a delivery or to innovate on their product to be able to gain competitive advantage, while consumers will care about their individual needs. Then there are questions about the markets and competitors. Who are your customers? Who are your competitors? You also need to estimate the size of the market. It is harder to acquire customers in a small market. So you need to take that into account. The same goes for a declining industry with many competitors. It is always better if the industry is growing and there is a lot of space to introduce new products or services.
Skip to 3 minutes and 29 seconds You also need to assess whether the market and industry are ready for new products or services. When evaluating opportunities, self-evaluation is the first step to take. Later, your venture will be evaluated by external people, surely by customers, but perhaps also by venture capitalists if you aim at getting funding for developing your business. The bottom line is to be practical, do this research and talk to people. Do not start developing a business model without thinking about the potential of the idea.
Which opportunity to pursue
In the video we gave you a general idea of what factors you need to take into account when assessing whether your idea is worth pursuing.
There are a number of external factors that need to be assessed closely by an entrepreneur. These factors are also used by investors to assess the new venture. Prior studies show that investors make their decisions based on specific characteristics of entrepreneurs, strategy, teams, industry characteristics, market and technology potential (Gartner, et al. 1998; Franke et al., 2008; Chen et al., 2009; Frei, 2004).
Hindle and colleagues (2007) in the VIQ (Venture Intelligence Quotient), emphasise the role of 5 pillars in opportunity evaluation, namely product, market, industry, people, and money. Each of the pillars has to be evaluated at three levels: idea assessment, idea enhancement, and venture implementation. Those who have an idea and want to become an entrepreneur, might get familiar with this particular model and use it to evaluate their idea.
Hindle K., Mainprize B., Dorofeeva N. (2007). Venture Intelligence: How Smart Investors and Entrepreneurs Evaluate New Ventures, Melbourne: Learnfast Press
Chen X.-P.,Yao X., and Kotha S. (2009) Entrepreneur Passion And Preparedness In Business Plan Presentations: A Persuasion Analysis Of Venture Capitalists’ Funding Decisions. Academy of Management Journal, 52(1): 190-214.
Franke, N., Gruber, M. , Harhoff, D. and Henkel, J. (2008), Venture Capitalists’ Evaluations of Start‐Up Teams: Trade‐Offs, Knock‐Out Criteria, and the Impact of VC Experience. Entrepreneurship Theory and Practice, 32: 459-483
Frei, P. (2004). Qualitative Analysis of High-Growth Companies. CHIMA International Journal for Chemistry, 58(11): 803-804(2).
Gartner W.B., Starr J.A., Bhat S. (1999) Predicting new venture survival: An analysis of “anatomy of a start-up.” cases from Inc. Magazine, Journal of Business Venturing, 14(2): 215-232.
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