Assessing Business Opportunities: A Framework for Feasibility

Market attractiveness and micro level

1) Market attractiveness and micro level

2) Target segment benefits and attractiveness; Industry domain that addresses macro level

3) Industry attractiveness and micro level

4) Sustainable advantage; Team domain comprising three sub-domains-

5) Mission, aspirations, propensity for risk

6) Ability to execute on Critical Success Factors and

7) Connectedness up, down and across value chain.

At first glance, the seven domains model appears to simply summarize what everybody already knows about assessing opportunities. But upon careful scrutiny, the model goes further to bring to light three crucial distinctions that most entrepreneurs may overlook:

• 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 aren’t simply found on their resumes or in assessments of their entrepreneurial character. The framework does not give a simple scoring sheet at the end. But it helps in answering the most vital question every aspiring entrepreneur asks himself – “why will or won’t this work? So this will not only help you in understanding if your idea will work, but Why it will or won’t work! Below is the framework that can help evaluate your idea for feasibility and qualify it as an opportunity; you may not be able to answer some of the questions but an attempt will help to assess your idea in an effective manner. It can trigger your thinking in more than one dimension. Here is the framework:

1.Market Domain/Micro Level: Sector Market Benefits and Attractiveness

Realistically, it's unlikely that your venture will meet the needs of everyone in the market. You'll be more successful if you target your idea at one market sector or segment , and aim to meet its needs fully.

To identify this segment, look at the market on a micro level. Think about the following questions:

·Which segment of the overall market is most likely to benefit from your venture?

·How is your venture or product different from others already servicing this segment?

·What trends is this segment showing? Is it growing, and, if so, is this growth set to continue?

·What other market segments could you access if you're successful in this one?

Look for qualitative and quantitative data. Talk to prospective customers to gather feedback on their needs, and to find out how well competitors are meeting these. Then, look for data on the sector you're targeting, for example, by reading analysts' reports and market research reports.

Target segment benefits and attractiveness; Industry domain that addresses macro level

Most products don’t actually appeal to an entire market, but rather just a subset of that market. Who are the people within the market that you are going to be serving, and how many of them are there? You can easily make a mistake by thinking you are going to serve an entire market when you are really only targeting a small set of people within that market. In that case, you are left with a market that is significantly smaller than expected, and your sales will likely reflect that fact.

a) Micro level questions about target markets

1. Is there a target market segment where we might enter the market in which we offer the customer clear and compelling benefits, at a price he or she is willing to pay?

2. Are these benefits, in the customer’s minds, different from and superior in some way – better, faster, cheaper or whatever – to what’s currently offered by other solutions?

3. How large is this segment, and how fast is it growing?

4. Is it likely that our entry into this segment will provide us entry into other segments that wemay wish to target in the future?

b) Three ways to define market segments

1. Who the customers are i.e demographic terms (age, gender, education, income etc) if itis business to business, then it will refer to the industry in which the customers do business, plus firm size and firm characteristics.

 2. Where the customers are in geographical terms?

3. By how the customers behave (life style terms) or in business to business how the products may be used.

c) The micro market test

1. What customer pain will your offering resolve? How strong an incentive do customers have to give you their money? Will customers buy what you propose to offer?

2. Who precisely are the customers that have the pain? Do you have detailed accurate information about who they are, where they live or do business or what they do?

3. What benefits does your offering provide that other solutions don’t?

4. Does the target market have the potential to grow?

5. Are there other segments that could benefit from a related offering?

6. Can capabilities that are transferable from one segment to another be developed?

2.Market Domain/Macro Level: Market Attractiveness

This domain looks at market attractiveness from a macro (large-scale) perspective.

Look at the whole market. How big is it, in terms of the number of customers, the value of sales, and the quantity of units sold? Then, look at trends within the market. Has it grown in recent years? If so, is this growth likely to continue?

Industry attractiveness and micro level

What you're doing here is checking that the market is big enough to give you the growth you want, and that it's growing healthily – after all, it's much easier to grow a business in a growing market than it is in a declining one.

This is a point, as trying to enter a market that isn’t big enough to sustain your intended business is a venture that is destined to fail. You don’t necessarily want to be trying to create the market on your own – you want to fill a need where the market is waiting to spend. Is the market that you are targeting on the rise, or is it already in decline? Chasing a fading market is going to be tough in the long run.

Also, use PEST analysis to explore the large-scale factors that affect your market. Do these look healthy?

Information from secondary sources – library materials, internet, newspapers, and publications on recent industry trends should suffice to answer the following questions.

1. What sort of business is sought? One with potential to become a huge business, or a small lifestyle operation? This along with the answers to the following question will determine the need for venture capital. A high potential business in a huge, rapidly growing market will require venture capital whereas a small lifestyle operation in a niche market will not need any.

2. How large is the market?

3. How fast can it grow?

4. How quickly can it grown in the next six months or two/three/five years?

5. What economic, demographic, socio cultural, technological, regulatory or natural trends can be identified and how will it affect the business?

Macro-level Industry assessment:

3.Industry Domain/Macro Level: Industry Attractiveness

It's now time to look at how attractive your industry is on a macro level.

Mullins suggests using Porter's Five Forces to assess which factors affect the profitability of your industry.

To do this, first define the industry that you will be competing in, and then ask yourself how easy it is to enter this industry. If it's easy to get into, you can quickly be flooded with competitors if you are seen to make a success of your business.

Next, look at your competition. Is rivalry in this market fierce or civilized? Are organizations stealing ideas from others in the industry? Take time to gather intelligence about your potential competitors to see what they're up to.

Last, look at buyers and suppliers. How much power do they have? Are they setting their own terms and conditions because of this power? If so, how will this affect your offering?

a) Five macro-level questions to assess your industry: Michael Porter’s five forces Questions to ask Threat of Entry

Is it difficult for companies to enter this industry?

Do suppliers to this industry have the power to set terms and conditions?

Do buyers have the power to set terms and conditions?

Is it easy or difficult for substitute products to steal the market?

Is competitive rivalry intense or genteel?