A generalizable framework for evaluating new business opportunities

Whether an idea for a startup or new product or service offering at an existing company, the following is a framework I use to evaluate new business opportunities.

Usually, the truth is that we aren’t deciding between pursuing one opportunity or not; rather there are multiple opportunities available to us and we must prioritize which opportunities are best to pursue. To do this, our goal ultimately is to stack rank the new opportunities by quantifiably answering the following two questions: 1) the business value we could expect to gain and 2) our ability to execute on these opportunities. If there is only one opportunity available to evaluate, the process is simplified such that only opportunities with positive net business value and reasonable ability to execute are pursued. The challenge with this framework will be establishing the acceptable level of ability-to-execute beyond which you will choose to execute on the opportunity.

the pivot: another entreprenuership lesson that’s relevant for business strategists and managers

The articulate and insightful Eric Ries, coined the term “pivot”.   In the entreprenuership community, we hear this term a lot.  The definition and examples he provides in a SXSW interview  are just very well explained and insightful.    He says “A pivot is a change in strategy without a change in vision.”

I highly recommend the other videos in the PIVOT Series as well.

Takeaways in business and innovation from an internet icon

Marc Andreessen was recently recognized as a Wired Icon and pioneer of the internet.   Given his 20+ year history within the industry as an entrepreneur and now venture capitalist, his perspective has proven to be an insightful one; and so I read the transcript from his interview Chris Anderson.

At one point, Andreessen said something that I think is pretty powerful for innovators and business:

But making it [the internet] easier to use also made it more apparent how to use it, all the different things that people could do with it—which then made people want it more. And it’s also clear that we helped drive faster bandwidth: By creating the demand, we helped increase the supply.

This quote is dense.   It is a comment on multi-sided business models.   It is also a comment on the power of user-centered and service (since we cannot design experiences) design.

Another interesting strategic business lesson to learn came is Andreessen’s comment on why the LoudCloud business didn’t work:

Well, it worked beautifully right up to the point when all the startups went bankrupt, and then all our big clients decided they didn’t have to worry about competing with the startups anymore. After that, it went completely sideways.   ….

and the pivot:

So we just went back to basics and we said, OK, we couldn’t make it work as a service provider, but we think we can make it work as a software company, selling the back-end software to manage big networks of servers. We changed our name to Opsware. That ultimately worked, as a business.

On the importance of timing to market adoption and overall success of an innovative product/business:

Andreessen:  We see [social] playing out in retail, where ecommerce is becoming a group activity. Long before Ning, actually, in 1999, I invested in a company called Mobshop, which was Reed’s law applied to commerce, through group sales. It didn’t work back then. But 10 years later, I invested in Groupon, because I could see it was the same idea—finding, on the fly, a group of people who want the same product and using their massive numbers to command steep discounts. …

Anderson: What changed between 1999 and 2009 that made Groupon—and Facebook, and all these other profitable consumer Internet companies—possible?

Andreessen:A big part of it was broadband. Ironically, it was during the nuclear winter, from 2000 to 2005, that broadband happened. DSL got built out, cable modems got built out. So then you started to have 100, 200, 300 million people worldwide on broadband.

How society and culture changes influence success of innovations:

Andreessen: I often wonder if we should have built social into the browser from the start. The idea that you want to be connected with your friends, your social circle, the people you work with—we could have built that into Mosaic. But at the time, the culture on the Internet revolved around anonymity and pseudonyms.

On the power of optimism or the lack of cynicism, Andreessen comments that this is one of the reasons Zuckerberg and Andrew Mason were able to pursue their ideas (i.e. they weren’t burned by the previous dotcom bust).

On which industries are closest on the horizon to being improved by internet technologies:

Andreessen:  The next stops, I believe, are education, financial services, health care, and then ultimately government—the huge swaths of the economy that historically have not been addressable by technology, that haven’t been amenable to the entrance of Silicon Valley-style software companies. But increasingly I think they’re going to be.

On “software expressed as hardware”:

Andreessen:  … There’s a lot of hardware engineering that goes into it, but 90 percent of the intellectual property is software.  So we look at Lytro and we look at Jawbone and we see software expressed as hardware—highly specialized hardware that will be hard to clone.

Its not one big thing, but rather a lot of little things

Today, early Facebook employee and now Quora founder, Charlie Cheer, came to Tepper to talk to us about his entrepreneurial experiences in the web 2.0 space.  He said a lot of interesting things, but one thing in particular I thought was quite smart and different.   When asked how Quora competes with other question-and-answer websites, especially as a late entrant, he said that Quora’s competitive advantage–and I am paraphrasing–

It’s not one big thing, but rather a bunch of little things.

He then went on to give an example of one of these little things that Quora has done with the design of its product; and that’s when I started to believe in my theory that a web-based platform business can not only compete with but beet incumbents with better user-centered design.   This made me then wonder why might this be true?  Are these web-based platform businesses unique from other businesses in this way?  Could any other business enter a market and create better user experiences by simply out-designing the competition?

Fortunately, I had the chance to ask Charlie what his biggest challenge(s) was in running such a web-based platform as opposed to say, a web app that taps into a platform, and he said it was growing the number of users that use the platform.  This of course made sense, and so I wondered, if users are the lifeblood of the platform, and the entire user experience dictates whether users continue using, join, or stop using the platform, shouldn’t we expect these platform businesses, which sometimes depend on network effects, to consistently announce that their competitive advantage will be user experience and product/service design?

All businesses need to care about the experiences of their users/customers, but I think network effect-dependent businesses/products may be uniquely positioned to make a focus on user experience design a market entry strategy against a sea of incumbent players.    This may be especially true given customers/users have such low costs of switching to competing products.

Large American Corporations Recruiting MBA Students of Entrepreneurship

I just read a BusinessWeek article (see quote from article below) that mentioned Microsoft’s increased level of interest in recruiting MBA students of entrepreneurship, and I think it this is smart.    Ever since my introduction to corporate entrepreneurship at RPI, I started thinking that corporations could really benefit from hiring true entrepreneurial personalities to evaluate company/brand/product/marketing strategy and to look for new opportunities.   The fact that Microsoft is one of the first large corporations to publicly state their interest in us entrepreneurs proves the company believes in being an industry leader.

Overall, I think this initiative to recruit entrepreneurial minded and skilled employees reflects a smart realization that innovation and creative evaluation of new market opportunities are the skills that are needed in the most developed economies of the world.  No longer is information enough; it is what we do with the information that we are so fortunate to have.

 MICROSOFT ACQUIRING ENTREPRENEURS

Microsoft (MSFT), too,  tailors its recruitment pitch to entrepreneurial MBAs. Half the candidates the company targets for openings say they hadn’t previously considered applying to the software giant, say company recruiters. Microsoft’s corporate development area, which was responsible for the company’s $8.5 billion acquisition of Skype in May, often competes with startups and venture capital firms for talent.

“Even if they are only here for three-to-five years, that is actually a huge amount of work and return we are getting out of them,” says Stacey Stovall, Microsoft’s university staffing manager.”

feelings are the new margin

I was just reading the current issue of IDEO’s Patterns: http://patterns.ideo.com/issue/quality_design_for_the_poor/

What caught my attention was the piece quoted below–in particular the underlined ideas at the end.
Dignity: king for a day

Sarah has been working with Disney for 10 years and loves the way the company “makes people feel so special.” She knows that many people save for years to visit Disney World. Thus, she says, “Let’s make it as magical as we can.”

Disney is a master at conferring on people the feeling of dignity and privilege. Its customers range across demographics, and Disney recognizes that for many families a trip to Disney World is the vacation of a lifetime. Disney respects this audience, and designs an experience down to the smallest details.

Unlike mainstream restaurants, where servers are encouraged to recommend the second most expensive bottle of wine on the menu, Disney servers are encouraged to suggest lower-end bottles so that guests, irrespective of their means, can feel great about any choice they make. Disney proactively identifies moments when its customers can be made to feel like a kings and queens.

See, I’m a businessman who desperately wants to believe that a business will be successful if it focuses fundamentally on serving the human needs of its customers.  This entry reminded me of this, but took the idea to a new level for me.  Here, it is suggested, that Walt Disney purposefully recommends guests a less expensive bottle of champagne instead of the more expensive and more profitable bottles so as to avoid guests ever thinking about wishing they could afford the more expensive bottles.   This business decision too forgo short term profits in favor of creating the most enjoyable possible human experience for guests, is clearly purposeful and reflects a deep fundamental  business strategy based on the belief that word of mouth advertising is the most valuable form of marketing.  Walt Disney clearly believes this and is very sensitive to the small details of every guest experience.   I love this story, and know from my personal experiences that the best business managers, small business owners, and entrepreneurs make a point of connecting on a personal level with customers and communicating to customers that they care more about the long term happiness their customers feel towards the business; and their actions are congruent with ideal so that the businessmen all demonstrate to the customer that–allow they are in business to make money and a living–they are not going to county pennies.  They are going to do things–however–small that the customer appreciates and when doing so makes the customer feel like they are being treated like a human being and a person who consciously decides to be loyal or not with their buying decisions.

Be bold

I’m not sure why, but I am scared to be bold; and I think this is bad. I think our society and business educations teach us that an idea can be good only if supporting evidence/data can be found.  I find this troubling.  I want to be the innovator that I was born to be, and that probably many more people were meant to be.  I want to keep that playful-kid part of me alive so that my imagination runs wild.    The epiphany I just had related to keeping this part of me alive, is two fold.  First, I need to guard and protect it from people and organizations that try to kill it–for whatever reason, whether intentionally or not.  Second, I need to proactively surround myself with people who encourage this abductive reasoning and dreaming.

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