M3-S3 - Session notes

Ideas are not the same as opportunities:

• Opportunities are presishable
  • Ideas last forever
• Window of opportunity depends on:
  • Technology, Demographics, Competitors, Consumers
• Ideas are free
  • Opportinities require work

The opportunity Step 1:

• Large and growing market
• Structurally attractive industry

Step 2: Show how the venture can launch the opportunities: see the nine questions:

1. Who is the new ventures customer?
2. How does the customer make decissions about buying this product or service?
3. To what degree is the product a compelling purchase for the customer?

• • A 'prototype' or 'vision' of a product may result to a favorable response but this quit different than paying for the real thing.
  • Do not really 'trust' a favorable response. Ask questions like:
    • What money will you save using our product?
    • Where would you go without our product
    • Also see: M3-S3 - Reading - Coyne, K.P. Sustainable Competitive Advantage
    • A Sustainable Competitive Advantage is the best predictor for business success

1. How will the product be priced?
2. How will the venture reach all customer segments?
3. How much does it cost (in time and resources) to acquire a customer?
4. How much does it cost to produce and deliver the product or service?
5. How much does it cost to support a customer?
6. How easy is it to retain a customer?

Step 3: Cash flow implications of pursuing the opportunities Step 4: Map business beyond initial opportunity / product Step 5: Competition Step 6: Explain how the above will be influenced by changes in the context & how the business will mitigat, exploit those Step 7: Convince sceptical audiance of the above

Hazards of opportunity exploitation

1. Accepting "yes" at face value
2. Financial projections which are not adequately built upon Bottom up forecast evidence

Risk and reward:

• "True entreprenuers want to capture all the reward and give all the risk to others"
• "The best business is a post office to which people send casier checks"

Questions:

1. Is there anything i can do to move my business closer to Sahlman's best business
2. Are we taking ANY avoidable risks and if so why?
3. Where do the owners endgames come in my priority list?

Visualizing the risk:

• Plot probability on y-axs
• Plot gain on x-axis
  • -100% (loose everything)
  • -50%
  • +0%
  • +10%
  • +50%
  • +100%
  • +200%

People

• Which personal question really count:
  • What are the motivations
  • How committed in this venture?
  • Are they prepared to hire high quality people?

Both expierence and skills are necessary:

• Genuine intrensic interest is critical
• Interest is the oxygen of comittment: sustaining you through thick and thin
• Being interested in money making potential of the opportunity is not the same thing as finding the business exiting

People conundrum:

• Past track record isn't a guarantee of future sucess or failure
• Every great entrepeneurs first success had no precendent
• Experience shapes the perception of opportunities removing some blind spots and introducing others
• Who are these people anyway vs "forget the proven team"
• Timing, time, test, terms