SPE3002 Entrerpeneurship - Selecting and Evaluating A Busine

SPE3002/SPK5002 COMMERCE AND ENTREPRENEURSHIP
WEEK 12 25 SEPTEMBER - 31 OCTOBER 2006
Mohd. Khata Bin Jabor
email: drhamka@yahoo.com
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AGENDA Selecting and Evaluating a Business
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LEARNING OUTLINE
Opportunity Recognition? Ideas vs. Concepts Global Trends Differentiating Opportunities Harvest Issues
Continue..
Mohd. Khata Bin Jabor email: drhamka@yahoo.com slide 3
LEARNING OUTLINE
Goals for Entrepreneurs Concept of Feasibility Success Criteria Recipe for Success Factors Venture Failures
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Remember what is the definition of
ENTREPRENEURSHIP
It is the process of recognizing, seizing, pursuing and exploiting opportunities without regard to the resources you currently control.
OPPORTUNITY RECOGNITION
What is an opportunity? How do you recognize opportunities? How do you screen opportunities How are concepts different from ideas? What is a business concept? Is the business concept worthwhile? How do you define a superior opportunity and concept?
OPPORTUNITY RECOGNITION
An opportunity is not an idea nor is it a business concept.
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An Opportunity is External
It is not a solution hunting for a problem It is in the environment It is a need to be fulfilled It is a want to be addressed It is a fear to be relieved It is time limited
Ideas vs Concepts
Ideas are often seeing a need, want or fear and saying, Lets meet that Ideas are sometimes a technology hunting for an application or opportunity Concepts are when you put a technology together with the customer and understand the business an revenue models that lead to sales.
The Concept
Distribution & Marketing Products & Customers Services Groups
Resources Needed Money Made

ON IDEAS
If a man makes a better mousetrap than his neighbor, though he builds his house in the woods, the world will make a beaten path to his door.
Ralph Waldo Emerson
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ON CONCEPTS
The manufacturer who waits for the world to beat a path to his door is a great optimist. But the manufacturer who shows this mousetrap (and its value) to the world, keeps the smoke coming out his chimney.
O.B. Winters
Entrepreneurs Bet
Programmers adage Boy Scout Motto Be risk averse. Dont stretch too much, too fast Know your concept
DEFINITIONS OF OPPORTUNITY
Concepts are built
using ideas entrepreneurial creativity in real time, take time and address real problems.
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Good ideas are not always good opportunities nor viable concepts. Opportunities yield measurable net benefits to the entrepreneur and to society.
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Concepts are built
using ideas entrepreneurial creativity in real time, take time and address real problems.
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Opportunities are also situational

The Window of Opportunity
Opportunities take form in real world conditions

Changing conditions Leads and lags Knowledge gaps Chaos and/or confusion Inconsistencies Uncertainties
THE WINDOW OF OPPORTUNITY
Market Size (Revenue Potential)
Time (Years)
Some Global Trends

Social Political Economic Technological Demographic Global Local
Macro-Environment Industry Environment

Competition Customers FIRM Suppliers Demographics
Economic
Social
Substitutes
Global
Political/Legal Technological
Economic Conditions GNP Trends
Demographic Trends Population Growth
Socio-Cultural Trends Lifestyle Changes Family Formations Health Trends Environmental Concerns
Political/Legal Technological Legislation Welfare Housing Agriculture Education

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Govt. Spending Age Distribution Interest Rates Unemployment Levels Income Levels
Population Shifts Immigration Birth Rates
PREVISION
Heuristic Model for Opportunity Identification

VISION
Eureka!
Market Demands Social Forces Technology Cultural Forces
Personal Attributes
DEVELOPMENT
Evaluate Elaborate Modify
DECISION
Go ahead or Quit
Personal Experiences
Environmental Forces
etc.
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Alertness Model
PERSON
Person does not have alertness
SITUATION
No Ability No Gain
COGNITIVE BEHAVIOR
Maximization
OUTCOME
No Opportunity Funding
Ability No Gain
No Ability Gain
Optimization Assessment
Opportunity Funding
Person has alertness
Ability Gain
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Right Person
(has entrepreneurial alertness)
Person-Place Framework
1) Perceptual - attend to new info. Assessment - put self in position to get exposure to new info, etc. - veridical perception 2) Reasoning - tolerance of ambiguity - interpretation of information - presented frame only or best way - why these ends - why these means
Right Situation
(person has ability to grasp and has potential for gain)
Break Create Perception Means- New of Viable Ends Frame Opportunity Frame
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IDEAS VS CONCEPTS
Avoid spending too much time and money on Trombone oil or Space Shuttle docking ideas
You may turn out the best product in the world, but the entire world needs only about a pint a year or five in a generation. These are great ideas, but poor business opportunities or concepts.
ANSWER
Is this really an adequate business opportunity and concept? Is this one I/we want to pursue? What resources are required to exploit it? How do I/we acquire them? How do I/we manage the operation? How and when do I/we harvest?
DIFFERENTIATING OPPORTUNITIES
Revenue Potential C o n c e p t s
Small Obvious Most small businesses Big Highly competitive High potential ventures
Not Obvious
Black holes
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Market Realities Impact Opportunities

$/Unit Price Cost
Supply
Demand
Quantity/Time Period
MARKET & OPERATIONAL ISSUES

Size, market share, growth rate, and penetration rate The 4 Ps and Position The Customer Gross Margin Sustainable ? The Competition Cost Architecture The Operations The Value Chain
SUSTAINABLE ADVANTAGE VERSUS INNOVATION

Fixed and Variable Costs, Contribution Margins, Prices Production, marketing, distribution Barriers, Porters 5 forces, Ego Legal considerations (structure, tax, etc.) Talent or Social Capital
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HARVEST ISSUES
Profitability
Positive Cash flow ROI on Required I Investor Demands/Expectations Value at exit Life style issues
Personal wants Family issues
Changing Opportunities Mean Changing/Shifting the Organization

Opportunities
New Existing
Organization Organization
MANAGEMENT TEAM ISSUES

Team, Founder(s)
Fit with Opportunity Track Record Gaps in Capabilities & Competencies Values and Ethics Personal Goals and Objectives
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Goals for Entrepreneurs

Financial Social Personal Political Shift with Life Cycle
Of Firm Of Entrepreneur
DIFFERENTIATION ISSUES
Technology
Service Team, talent, fit Channels of distribution and marketing Pricing Opportunistic, adaptive
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The Myth of First to Market

It is really the first to market acceptance in a specific market niche.
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Principles of Innovative Opportunity Seeking

Systematically analyze all sources Go out: look, ask, & listen Keep it simple, stay focused Start small (specific) BUT Aim for leadership Be market focused, be market driven
More Principles of Innovative Opportunity Seeking

Dont:
Be clever Do too much at once Innovate for the future
Focus on opportunity, not risk
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In Summary then what have I been trying to say to you for the ninety minutes or so?
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CONCEPT of FEASIBILITY
COMPELLING INTEREST CUSTOMER OPPORTUNITIES CUSTOMERS VENTURE CONCEPTS FINANCIAL RESOURCES ENTREPRENEURIAL TEAM VENTURE EVALUATION
COMPELLING INTEREST
Choose a job you love, and you will never have to work a day in your life.
Confucius
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CUSTOMER OPPORTUNITIES
The secret of life is to be ready for the opportunity when it comes.

Benjamin Disraeli
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CUSTOMERS
I cannot give you the formula for success, but I can give you the formula for failure...which is: try to please everyone.
Herbert Bayard Swope
VENTURE CONCEPTS
"Vision is the art of seeing things invisible.

Jonathan Swift
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FINANCIAL RESOURCES
"Happiness is a positive cash flow.
Fred Adler
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ENTREPRENEURIAL ASSESSMENT
"The true entrepreneur acknowledges that he or she cannot succeed alone."
Dr. An Wang
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VENTURE EVALUATION
"Confidence is what you feel before you comprehend the situation."
Old Proverb
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SUCCESS
"Success, as I see it, is a result, not a goal."
Gustavae Flaubert
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SUCCESS CRITERIA
IT IS NOT ONLY MONEY!!!
Growth Profitability Technological Innovation Market Impact Institutionalization of Success

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Final Words About Opportunities
I was seldom able to see an opportunity until it ceased to be one.

Mark Twain
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AWARENESS OF OPPORTUNITY
Divergent or imaginative thinkers tend to note opportunities or problems. Curiosity and attention are essential for noticing whats wrong or what is an opportunity.
Think of these issues when you we discuss issues ...
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Recipe for Success

Great Value Proposition Technically Feasible Product Protectable Intellectual Property
Sustainable Competitive Advantage

Large Potential Market
Proven Business Model

Causes of New Venture Failure

Market
Small size of the potential market No clear product differentiation Misunderstood customer needs Lack of channel support Competitive response

Timing
Too late in the market me too Too early in the market missionary marketing
Finance
Low Return On Investment (ROI)
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Technology
Right features Performance
Organizational
Promoter conflicts -- different aspirations Poor fit between products and organization (DNA)

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SPE3002/SPK5002 COMMERCE AND ENTREPRENEURSHIP

WEEK 12 25 SEPTEMBER - 31 OCTOBER 2006

Mohd. Khata Bin Jabor

AGENDA Selecting and Evaluating a Business

Mohd. Khata Bin Jabor

Mohd. Khata Bin Jabor

Remember what is the definition of

An opportunity is not an idea nor is it a business concept.

Mohd. Khata Bin Jabor

Resources Needed Money Made

Mohd. Khata Bin Jabor

Mohd. Khata Bin Jabor

Mohd. Khata Bin Jabor

Mohd. Khata Bin Jabor

Opportunities are also situational

Opportunities take form in real world conditions

THE WINDOW OF OPPORTUNITY

Market Size (Revenue Potential)

Some Global Trends

Macro-Environment Industry Environment

Economic Conditions GNP Trends

Demographic Trends Population Growth

Political/Legal Technological Legislation Welfare Housing Agriculture Education

Population Shifts Immigration Birth Rates

Heuristic Model for Opportunity Identification

Market Demands Social Forces Technology Cultural Forces

Mohd. Khata Bin Jabor

Person has alertness

Mohd. Khata Bin Jabor

Mohd. Khata Bin Jabor

Market Realities Impact Opportunities

MARKET & OPERATIONAL ISSUES

SUSTAINABLE ADVANTAGE VERSUS INNOVATION

Mohd. Khata Bin Jabor

Changing Opportunities Mean Changing/Shifting the Organization

MANAGEMENT TEAM ISSUES

Mohd. Khata Bin Jabor

Goals for Entrepreneurs

Mohd. Khata Bin Jabor

The Myth of First to Market

Mohd. Khata Bin Jabor

Principles of Innovative Opportunity Seeking

More Principles of Innovative Opportunity Seeking

Focus on opportunity, not risk

Mohd. Khata Bin Jabor

Mohd. Khata Bin Jabor

Mohd. Khata Bin Jabor

The secret of life is to be ready for the opportunity when it comes.

Mohd. Khata Bin Jabor

"Vision is the art of seeing things invisible.

Mohd. Khata Bin Jabor

Mohd. Khata Bin Jabor

Mohd. Khata Bin Jabor

Mohd. Khata Bin Jabor

Mohd. Khata Bin Jabor

Growth Profitability Technological Innovation Market Impact Institutionalization of Success

Mohd. Khata Bin Jabor

Final Words About Opportunities

I was seldom able to see an opportunity until it ceased to be one.

Mohd. Khata Bin Jabor

Think of these issues when you we discuss issues ...

Mohd. Khata Bin Jabor