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Structured processes for creative discoveries – an oxymoron?

Structured processes for creative discoveries – an oxymoron?

I just came back from teaching the Market Opportunity Navigator at the Technology University in Munich, where I had a very interesting discussion with my students: does a structured process inhibit or enhance creative discovery of business opportunities? Coming from a generation that often perceives itself as ‘out of the box thinkers’, their insights surprised me. Before I share these insights, let me first describe the context: during the course, students work in teams on developing a focused strategy for an innovative technology. The very first step of this process requires the discovery of different market opportunities stemming from the innovation. In other words, they need to deliberately take a step back from the original idea, and strive to uncover other applications of the technology, and other types of customers who may need it. To guide them through this process, we created Worksheet 1- a structured thought-process for generating a set of market opportunities. This dedicated worksheet begins with characterizing the unique abilities or core technological elements of the venture, detached from any specific product. It’s a ‘de-linking’ process that helps managers think of their assets in a more generalized manner. Then comes the ‘re-linking’ process, where you combine these assets in different ways to identify what types of jobs they can do for different types of customers. Worksheet 1 of the Market Opportunity Navigator. Download the worksheets here. This framework offers a process for creative ideation. But processes can be binding and boring. They emphasize structure and restrictions where freedom and exploration is required. In fact, creativity is all about thinking outside the box, breaking the rules and escaping constrains, so it is not surprising why many claim that structure actually kills creativity. But is this really the case? Are creativity and structure really contradicting? Gladly, my students thought the opposite… After working with Worksheet 1 to generate their set of market opportunities, they claimed that a structured approach leads to creative discoveries, and that both are actually two crucial sides of the same coin. Here are the main reasons why: Define what we are looking for To encourage a discovery process, we cannot simply wonder in the dark. We have to define very clearly what is it that we are looking for, or how would the light at the end of the tunnel look like. The students were not just looking for great new ideas, they were trying to uncover new market opportunities, defined as any application of the technology to a specific set of customers. They claimed that this clear understanding simplified their search process. Set the boundaries of our playground A structured process sets the boundaries for our search: it guides us where to look for answers and how to unleash our creativity. Worksheets and templates channel our thinking process: they offer step-by-step sequences of operations that lead us to focus on the core elements of the problem. The students felt that this systematic approach not only helped them to generate creative opportunities, but also gave them confidence in a process that can be quite chaotic. Play in teams Lastly, innovation is a team sport. We need to play in teams if we wish to truly unleash creativity. Worksheets and frameworks, in this case, provide a communication tool. They create a shared language that we can use to debate and discuss with peers. For the class assignment, this element was crucial. The students realized it and appreciated this advantage. Overall, although structure and creativity might seem like an oxymoron, I agree with my students and was glad to hear their insights. The best creativity comes when there is a strong framework of structure to push against. By the way, academic studies found supporting evidences, indicating the advantage of structured methods over conditions of total freedom. Oh… and one more insight: creativity requires structure, but structure requires creativity first, to design the right frameworks. I hope we were successful in this task when designing our worksheets. Such discussions with students definitely encourage me that we were.

5 Steps to Strengthen your Lean Startup Experimentations

5 Steps to Strengthen your Lean Startup Experimentations

Before you ‘get out of the building’: How to adopt a top-down orientation to improve your lean startup experimentations.

Lean Startup, by Steve Blank and Eric Ries, is a great bottom-up approach. Through local experimentations, you can gradually reveal a promising market opportunity. In fact, think about these opportunities as mountains. As you gradually begin your climb – through customer interviews and minimum viable products – you can find out if this is at all a ‘mountain’, and if so – whether it is high enough to make the climb worthy. As fogginess gradually fades, you can also check if your trail will take you up the top, and pivot left or right if you find a better one.

But wouldn’t it be devastating to find out that your mountain was actually a hill, or that your Everest was hiding all that time just around the corner? In other words, can you do anything to improve your starting position before you begin your bottom-up journey? Luckily, the answer is yes!

In a remarkable HBR article called Lean Strategy, Harvard’s professor David Collis emphasizes the importance of combining a defined strategy with adaptive experimentations.  Although planning in advance and continual pivoting are viewed as polar opposites, Collis claims that they are mutually reinforcing, and in fact must go hand in hand to achieve lasting success. In short, initial strategic analysis provides overall direction and alignment. It can help you uncover promising market spaces, and save your venture from going down the wrong path.

Yet, integrating the top-down orientation of strategic screening with the bottom-up approach of lean startup is not trivial at all. At some point, you might even feel it is stopping you from running forward… but eventually, it will help you make sure you are running in the right direction. And that is indispensible!

So, before you ‘get out of the building’, make sure to adopt these 5 key steps:

1. Take a step back to widen your lens

Even though entrepreneurs tend to fall in love with their initial idea, what you should actually do is take a step back, and deliberately attempt to uncover other possible target markets for your innovation. In fact, a Management Science study clearly showed that generating a set of market opportunities at the outset increases your chances of success. This is not only because it provides a choice set, but also because you can leverage these opportunities in your favor later on. You should therefore take the time to identify different types of customers that may value your innovation, and map out your landscape of opportunities – or the mountains that you can possibly climb.

2. Rely on your core competencies

Your search for potential market opportunities should not be sporadic. In fact, you are not simply searching for unmet market needs, but searching for those that you can actually address with your core strength or unique competencies. The logic here is simple: relying on your core abilities dramatically increases your likelihood to succeed. To identify such opportunities, think of your core technological elements or unique strengths as building blocks – detached from any envisioned product. This will open you up to other possible applications that can be created with these blocks, and to different types of customers who may need them.

3. Set your strategic boundaries

Once you have identified a set of potential target markets for your innovation, you should do some analysis to weed out few options and highlight others. Invest some time and engage in a short market research to understand the major pros and cons of your opportunities, and to assess their attractiveness. An attractive opportunity offers high potential for value creation, and limited challenges in capturing this value. This exercise is essential for identifying the bounds within which experimentation should take place. Setting your strategic boundaries will therefore enable you to focus on more meaningful learning cycles.

4. Figure out what not to do

One of the best advices for entrepreneurs is know what not to do. A resource-constrained startup must learn how to put options aside, and concentrate on a primary business idea.  This strategic analysis will therefore help you clarify not only which customers are worth further validation, but also which target markets should be ‘placed in storage’. Opportunistic sales and inquiries could also be screened based on these strategic bounds.

The wide perspective that this strategic analysis provides is essential before diving into the validation process of a specific market opportunity through intensive customer interviews and minimum viable products. The Lean Startup Methodology is truly invaluable in this search for clear market evidences. Once you are ‘back at your building’ however, you should also go back to your strategic overview, and reflect on your learning. It will help you to interpret the feedback from the market and effectively learn from your experiments. Furthermore, if the validation outcome is simply a no-go decision, you will be able to pivot more easily, and even more distantly, as you already have other options at hand. Put differently, you will be able to combine deliberate and emergent strategies as you strive to find a promising, viable opportunity.

5. And finally… use tools available out there

A new business tool that can help you combine these top-down and bottom-up processes is the Market Opportunity Navigator. This visual framework structurally guides you how to generate your market opportunity set, and how to evaluate and prioritize your markets. You should apply it before engaging in intensive market validation – to set your boundaries, and once you gather enough information – to compile and reflect on your learning. Furthermore, the tool will guide you how to set a strategy that focuses on the most promising target while smartly leveraging other opportunities to keep you agile and ready for pivots.

 

Market Opportunity Navigator Visualisation

 

One example of a company that was able to combine strategic planning and lean experimentations using this strategic tool is OnSiteIQ – a NY based startup offering visual documentation and safety analytics monitoring to improve safety and quality control in construction projects. Ardalan Khosrowpour, founder and CEO, originally planned to utilize his deep know-how in computer vision and machine learning to tap into the existing cameras in the buildings and create smart ambient temperature control solutions for large commercial buildings to improve the energy efficiency and air quality. Strategic analysis of other market opportunities stemming from his unique abilities revealed the attractive opportunity of improving safety in construction sites, where he eventually decided to set his boundaries: “The Market Opportunity Navigator provides a broader view of the market opportunities before diving into customer discovery with a laser-focused approach. It helped OnSiteIQ exit a local optimum market opportunity. It helped us take a step back from our laser-focused customer discovery and revisit our decision regarding the customer segments and the product-market fit before moving forward” says Ardalan.

Success story: how startup Augury determined its market opportunities

Success story: how startup Augury determined its market opportunities

The tale of an Industrial IoT startup discovering a new strategic business tool.

Augury is bringing predictive maintenance technology to new markets. The technology combines two key shifts in the industry: artificial intelligence and the Internet of Things. The intersection of these trends allows Augury to provide machines with a mechanical nervous system and the awareness to optimize their own health, thereby accelerating human productivity and safety.

Founded by Saar Yoskovitz (CEO) and Gal Shaul (CTO), and backed by leading venture capitalists, the company was recently recognized for its standout contribution, named one of CRNs Internet of Things top 50.

In the following blog, Co-founder and CEO Saar Yoskovitz describes how they chose their first market opportunity, with the help of a newly designed business tool.

Augury Startup Logo

 

Having a clear vision doesn’t automatically mean having a clear target market

When we founded Augury, we had a very clear vision in mind: ‘machines talk, and we should be able to understand what they are saying’. We wanted to develop a technology that listens to the sounds machines make to diagnose their problems and predict malfunctions.

An initial technological investigation revealed that developing this technology would be challenging yet doable. As we started working on this project, we quickly realized that machines are literally all around us – all the way from complicated manufacturing lines to simple home appliances. This raised an even more challenging question for us – how can we know what type of machine we should listen to, or choose which target market to focus on?

At times, it seemed like the possibilities were endless. As we looked closer at the market, many verticals were underserved by the existing solutions that were expensive and complicated to use. As a small team, we knew that we couldn’t possibly tackle all of these verticals at once, and therefore, had to focus our efforts on one.  But choosing a beachhead can be a complicated task.

We put great effort into narrowing our options to few market opportunities that we could more deeply investigate. It ranged from cars and complex industrial machinery, to air-conditioners and even the human body. We then embarked on the time-consuming task of researching these different markets to ensure we had all the necessary information at hand to make the right choice.

Using the right business tools

We followed the Lean Startup approach to test our assumptions on each of these market opportunities. We performed interviews, showed mockups, handed out surveys, and visited several conferences to validate our assumptions and to better understand the business environment of each option.

The more information we gathered, the more perplexed we felt. We tried to work systematically and to document our learning, but each iteration generated even more questions to be answered.  Each option had different upsides and downsides, and it felt like comparing apples to oranges lacking a clear framework through which to put all the options on the same map. Eventually, after many hours of research, hard work and tough decisions, we found our way and began to navigate the industrial markets.

When I later learned about the Market Opportunity Navigator, it was abundantly clear to me that such a tool would have helped us focus and streamline our decision-making process. And we have been using the tool ever since.

The Market Opportunity Navigator , a new business tool designed by entrepreneurship professors and researchers Marc Gruber and Sharon Tal, helps founders set a smart market strategy. The Navigator is a structured framework for identifying, evaluating, and strategizing your market opportunities. It is visual and easy to apply, with 3 dedicated worksheets to walk you through these 3 steps. But most importantly – for us at least – we found a way to make sense of all the data we gather, and make more informed choices.

At the heart of this method lies the Attractiveness Map – a simple two-by-two matrix, to map out your options based on two dimensions: the potential of each market, and the challenge in capturing it. A special worksheet guides you through the process of measuring each dimension. The overall potential is assessed by evaluating the compelling reason to buy, the market volume and the economic viability of the opportunity. The overall challenge is assessed by evaluating the implementation obstacles, the time to generating revenues and the external risks. Once you are done, you can place each option on the Attractiveness Map, and finally compare apples to oranges.

The matrix divides your options into four groups: Moon-shots (high potential, high challenge), Gold-mines (high potential, low challenge), Quick-wins (low potential, low challenge) and Questionable opportunities (low potential, high challenge). For us, it was great to see that we had a Gold-mine market opportunity – one that stood out over the others. It was the auxiliary equipment and infrastructure of large industrial and commercial facilities.  A complicated strategic choice turned into a structured and manageable task.

Augury Tool in Use

As a bonus, we also liked how the tool guides us through the process of designing our strategy to remain agile without losing focus. It guides us on how to select backup and growth options, and on how to devote the right amount of attention to keep them open.

Now that our initial market is maturing, we yet again find ourselves searching for our next vertical. If you visit our offices you will see the sticky notes and worksheets of the Market Opportunity Navigator on our walls as we select our next market.

3 Interesting Insights from Students and Why We Should Care about Them

3 Interesting Insights from Students and Why We Should Care about Them

I recently came back from teaching a 5 day course at the Technical University of Denmark. Master students from different departments came to learn how to identify, evaluate and strategize market opportunities for innovative technologies. During the course, they learned how to apply our new business tool, the Market Opportunity Navigator, and implemented it on university-related inventions.

I have been teaching this course for quite a while now, and in many institutes around the world. Yet, there were three sentences that I heard from my students this time, that really got me thinking about the quality of the course and made me realise we are probably doing something well.

I want to share them with you, as I believe they can provide some important insights on how to design a meaningful learning experience and increase the engagement of our students.

 

Students at DTU learning how to go through the Market Opportunity Navigator

 

“This was much harder than I expected”

During the course, postgraduates work on identifying and evaluating different market opportunities for a given invention, and learn how to set a promising strategy in an uncertain environment. When they first hear about the idea from the inventor, it seems like an easy task for them: they can imagine the target customers and envision the business potential. Yet, during the course they understand the challenges and all the considerations that come into play when making such a profound strategic choice. Their ability to go deep on the evaluation, and to reflect that this was actually much more complicated than they thought it would be, showed me that the process was right. The message here is clear: setting a good strategy is a complicated task. Different opportunities have different upsides and downsides, and there is hardly ever a ‘perfect’ option. This is exactly what I want my students to understand, and this is exactly why they need a good set of tools to help them make difficult decisions in a solid manner.

 

“I don’t think the inventor will like our recommendations”

Getting real engagement from the students in an academic course is never easy. One approach that usually helps is working on live cases, preferably by university inventors. In fact, when the students meet the inventor in person, and actually sit and discuss the business idea together, their engagement raises tremendously. They no longer work for the sake of an ‘academic project’, but to help a founder deal with his real dilemmas. Interestingly, they start talking about the project as if it was their ‘baby’: we will do that… we will focus on this… etc. This empathy and involvement are great. It helps them gain first-hand experience in setting up a new venture, and this is exactly what we want. However, because they are not actually working on their very own ideas, they still can find the required distance to put their biases and emotions aside, and analyze the opportunities in an objective manner. It was when I heard this sentence that I fully realized this great advantage.  The students can find the justification to recommend a strategy that was completely different than the original intentions of the inventor. Well… now I am sure they actually know how to make an informed strategic choice. Great achievement!

 

DTU students

 

“A good framework makes you think out of the box”

I believe frameworks are very important for a good learning experience. It is absolutely essential that we provide the students with very clear guidelines on what they need to do and how they should do it. The Market Opportunity Navigator and its worksheets present a very structured and visual framework, and therefore it does the job well for students: it bounds them and helps them to focus on their key assignments. In fact, as a good framework, it simply provides the questions that they need to ask themselves. Finding the answers is actually their task. But structured processes have some limitations. They might lock our minds and put our creativity aside. That is exactly why I liked this last sentence so much! We want the students to be open, think broadly and creatively about different business opportunities, and at the same time be structured and systematic in their analysis. We want to provide them good frameworks that actually help them think out of the box. Bingo!

Getting a good vibe from your students is the highest incentive a teacher can get. So I was heading back home after this great week in Denmark, and kept thinking about these unique sentences. They are not fawning in any way, but they really gave me the feeling that we are doing something right!

 

If you want to apply the Market Opportunity Navigator in your own teaching, head on to the new page for educators on our website. You can download a free Educators Guide and plenty of other supporting materials.

Startup Growth Strategy: How to Pursue Multiple Market Opportunities

Startup Growth Strategy: How to Pursue Multiple Market Opportunities

Start-ups must focus sharply. Everybody knows that! And the reason for that is very clear: they are always limited on resources – money, management attention, time… so they simply cannot afford to spread it too thinly. In that case, is it at all possible, and even more interesting – is it at all worthwhile for start-ups to pursue multiple market opportunities simultaneously?

Parallel is not a dirty word

As we found in a research studying early market choices of over 300 new technology ventures, the answer to these questions depends on the specific conditions that the firm faces, and surprisingly – it is not always negative. In fact, such parallel strategy may actually turn out to be beneficial if done under proper conditions!

The main condition for the suitability of parallel strategy is acting in highly uncertain markets. When customers’ needs are not sufficiently clear, and founders cannot articulate the features and usage of their product, you can consider pursuing two market opportunities in parallel, to balance your risk and limit the chances of failure. Alternatively, if your initial idea offers limited potential for value creation or long time to revenues, you can bundle it with an additional opportunity to improve your performance.

Think carefully about your bundle

Yet…the only possible way for new ventures to actually benefit from this mitigation strategy, is if they carefully identify, evaluate and choose to pursue markets that are closely adjacent. Adjacency between two market opportunities means that they are tightly related on two aspects: the development of the product, and the delivery of the product.

While technology entrepreneurs usually think thoroughly about the development of the product, they often tend to underestimate the required capabilities for the delivery of the product in the market- which might be just as challenging, if not even more.

Tight relatedness between two markets will enable start-ups to grow and leverage the resources and capabilities that they are already developing for one market, and use them for succeeding in the other. It is the only way to overcome the scarcity of resources that founders face in these early days.

The case of through-wall visioning

 

The Xaver™ 400 by Camero

 

One example of successful parallel strategy is a company named Camero. Camero developed a pioneering technology for through-wall visioning, and aimed to address both police forces and militaries from the very beginning. This was possible because the development of the product, and bringing it to the market, required relatively similar resources and capabilities. It thus enabled the new venture to mitigate the risk of slow adoption and long sale cycles, without spreading themselves too thinly. Indeed, it turned out to be a significant strategic decision for the successful future of the company.

Summary

Overall, while a focused strategy is – with no doubts – a critical element for start-ups’ growth and success, you may consider and even benefit from a smart parallel strategy when it is highly critical for your performance. Pursuing tightly related opportunities will enable you to balance risky moves yet stay focused, as the resources and capabilities that are required to succeed in both are almost similar.

From Quick-Wins to Moon-Shots

From Quick-Wins to Moon-Shots

4 Types of Market Opportunities and Why Should You Care

Any venture can apply its abilities or core technologies to create different types of applications and address different types of customers. This creates a set of strategic possibilities, or market opportunities, which need to be prioritized so that you can focus on the most attractive option.

Clearly, market opportunities are not ‘born equal’: some are more valuable than others – offering different levels of value creation potential (link to post: is this opportunity worth pursuing), and some are easier to pursue than others – offering levels of value capture challenges (link to post: is this opportunity reachable for us).

A visual and intuitive way to distinct between market opportunities and grasp their differences is to map them on a simple 2*2 matrix which we call The Attractiveness Map. The Y axis represents the overall potential of each market opportunity (ranging from low to super-high), and the X axis represents the overall challenge in capturing it (ranging as well from low to super-high).

This creates 4 quarters, or zones, that represent 4 types of market opportunities: Quick Win, Gold Mine, Moon Shot and Questionable.

I. Quick Win

Opportunities that are located in this quarter of the map offer relatively low potential but also entail low challenge for capturing it. You can choose to focus on such options to increase your sales volume in a relatively safe manner, or simply as a stepping stone towards a larger and more challenging opportunity in the future.

Tesla chose such a strategy when focusing first on the high-end electric sports car, as a stepping stone towards an affordable electric car for the mass market.

II. Gold Mine

Gold Mines are rare opportunities that promise high potential with a relatively low challenge for you. Uncovering a Gold Mine is usually a result of identifying a significant need in the market that no one has been aware of before (think about Facebook for example), or of developing an extremely powerful capability that no other company has. If you have a Gold Mine opportunity in your map, you should definitely focus on pursuing it.

III. Moon Shot

Just like their name, Moon Shot opportunities promise you tremendous potential, but are extremely challenging. In the risk-return analogy, these are high risk – high return options. Breakthrough ideas often fall in this quarter of the map (innovative drug development is one clear example). Choosing to focus on a Moon Shot means that you accept the entailed risk and that you are prepared for the long-term ride, with a hopefully rewarding end.

IV. Questionable

Questionable opportunities offer a challenging climb towards a relatively low reward. Logically, companies should avoid pursuing questionable opportunities, but yet the #1 reason for startup failure is putting much sweat in developing an offer that no one really needs. So, if you invest time and effort in researching and validating your business ideas before pursuing them, you just might save yourself from focusing on such questionable options. Alternatively, you can think how to re-shape your idea so that it becomes more attractive to you.

Overall, while estimating the potential and the challenge of your opportunities require a great deal of attention, it will help you to distinguish between your options, and to be fully aware of their upsides and downsides before choosing where to play.

When to Let Go of Plan A

When to Let Go of Plan A

Entrepreneurship is fueled by urgency, by running fast. But, have you ever stopped to check that you’re running in the right direction? Have you ever really considered your business focus?

Our recently published book, Where to Play, features a 3-step guide to help entrepreneurs discover their most valuable market opportunities. However even before this, entrepreneurs must know the precise direction in which they are headed. This is why a business plan must have a clear focus with succinct definition and flexibility. As we all know, business is unpredictable, and things can change at short notice. Bumps in the road are par for the course, and entrepreneurs need to be prepared to adjust their way of thinking to ensure maximum success.

There are many tools out there that entrepreneurs find helpful in guiding themselves through the challenges. Using the Market Opportunity Navigator, you can structure your thoughts and create a strategy to ensure focus.

Of course, flexibility and changing the structure of your plan is challenging. It is difficult for us to convince ourselves that our original plan may not be the best one. Entrepreneur Paul Graham says that, “You have to be prepared to see the better idea when it arrives. And the hardest part of that is often discarding your old idea”. So how do we mentally prepare for this eventuality? Here are 3 tips to help you make this mental change.

  • Cognitive flexibility
  • Backup plan
  • Keeping options open

Cognitive flexibility

Cognitive flexibility is the mental ability to switch between thinking about two different concepts, and to think about multiple concepts simultaneously. This is what gives us the power to let go and accept change. In order for this to occur, additional strategies should be identified so that we have alternative options, which may be necessary in the future.

Backup plan

What is your Plan B? What will you do if your initial plan proves unsuccessful? The best back up plans are less risky, and should give you the confidence to let go of Plan A if necessary.

Keeping options open

Keeping your options open is, in other words, maximum flexibility and being open to change. Be aware that Plan A may not succeed as expected, and as such reduce expectations.

The most important thing to remember is that your first plan may not always be your last, and that your success may not be achieved the way you originally planned. Or as Scottish National Poet, Robert Burns wrote, “The best-laid plans of mice and men do often go awry.”

 

3 Steps to Discover Your Most Valuable Market Opportunities

3 Steps to Discover Your Most Valuable Market Opportunities

About “Where to Play”

In today’s fast-paced business world, entrepreneurs, innovators, and business leaders are trained to act quickly in order to make their ideas a success. With such a focus on running fast, entrepreneurs often fail to make sure that they are actually running in the right direction. They either jump straight into the first market opportunity that looks good, or attempt to pursue too many opportunities at once.

Where to Play, a new book by Dr. Sharon Tal and Prof. Marc Gruber, helps business leaders to quickly identify, evaluate, and focus on the opportunities that offer the most value for their innovations, while keeping them agile enough to respond to unforeseen changes.

Where to Play helps readers set a promising strategy for their business through a simple Market Opportunity Navigator, which was developed based on 15 years of rigorous research and hundreds of real-life cases. This structured and easy-to-use framework allows readers to set their strategic focus in three important steps:

  • Generate Your Market Opportunity Set
    Assess your core strengths and identify which market opportunities exist for your business
  • Depict Your Attractiveness Map
    Evaluate your market opportunities to reveal the most attractive option for focus
  • Design Your Agile Focus Strategy
    Create a strategic plan for your chosen market opportunity that keeps you open-minded and agile

Where to Play is presented in a highly visual and engaging style that breaks up a complex decision-making process into clear, easy-to-manage tasks.

Who is this book for?

This practical book is not only invaluable for entrepreneurs and startups who are searching for the best markets to focus on, but will also help the heads of established firms to free themselves of distractions and focus on the growth opportunities that will add value to their business.

In fact, anyone attempting to commercialize new innovations can benefit from this structured process, including investors, venture capitalists, and even technology transfer offices. Educators and accelerators can teach their trainees how to apply this tool, while using it to reflect on their learning and track their ongoing progress.

 What will you achieve with this book?

The book presents the Market Opportunity Navigator and takes you by the hand as you progress through its 3 steps, illustrated with numerous cases and examples.

Applying this structured business tool will help you to:

  • Identify potentially groundbreaking new market opportunities
  • Make a well-informed market choice
  • Communicate, share, and debate with team members and stakeholders by creating a common understanding and language
  • Track and update your market opportunity strategy over time to better manage the commercialization effort
  • Obtain valuable insights into other key business tools, such as the Business Model Canvas and the Lean Startup Methodology

Eventually, it will help you to reap the greatest benefits from your innovation.

How much time should you dedicate for the book?

To read through the book, you will only need a few hours, because the book is highly visual and not text-heavy. However, if you wish to apply the Market Opportunity Navigator on your own business idea, be prepared to invest a significant amount of time. Remember that this is a learning process: you will need to discover different types of customers and understand their motivation, you will need to set your strategic focus wisely, and you will need to set your assumptions for each market and to validate them in order to assess and compare your options. This learning process takes time, and rushing it may have dramatic consequences on your venture. The process could extend from a few days to a few weeks or even months, depending on your situation and your current knowledge. Take your time and don’t forget – running fast is useless if you are not running in the right direction!

Chapter Breakdown

In this book, you will find:

 1) Overview

  • Introduction: Are you running in the right direction?
  • The Market Opportunity Navigator in a nutshell

2) The Market Opportunity Navigator: 3 Steps to Discover Your Most Valuable Market Opportunities

  • Market Opportunity Set
  • Attractiveness Map
  • Agile Focus Dartboard

3) Implications & Benefits

  • Implications of the Agile Focus Strategy
  • Ongoing benefits of the Market Opportunity Navigator
  • Using the Market Opportunity Navigator with other business tools

4) Beyond Startups – The Navigator for:

  • Established firms
  • Investors
  • Technology Transfer Offices
  • Educators and Accelerators

5) Epilogue- the Navigator’s Navigator

Part 1- Overview

The first part of the book discusses why it is so critical yet so challenging to set a proper market opportunity strategy for your venture. It presents the logic behind the Market Opportunity Navigator and its three steps, and highlights some important concerns to keep in mind as you go through this learning process.

Part 2- The Market Opportunity Navigator

This major part of the book clearly guides you in applying the three steps of the Navigator, with the help of detailed explanations and numerous examples.

  • Step 1: Using Worksheet 1, you will learn how to describe your core abilities independently of any product, and how to identify different applications that can be developed with these abilities, along with potential customers that may need these applications. The desired outcome is your Market Opportunity Set.
  • Step 2: Using the dedicated Worksheet 2, you will learn how to evaluate the attractiveness of each market opportunity based on two dimensions: The Potential of the opportunity and the Challenge in capturing its value. The result of this scoring process is depicted in the Attractiveness Map.
  • Step 3: Using the dedicated Worksheet 3, you will learn how to assess potential Backup and Growth options, once the Primary Market Opportunity is chosen. By examining the value and relatedness, you are able to decide which opportunities to pursue now, which will be kept open for later, and which will be placed in storage. The resulting strategy (the “Agile Focus Strategy”) is depicted on the Agile Focus Dartboard.

Part 3- Implications and Benefits

This part digs deeply into the final outcome of this process — your Agile Focus Strategy — and how it influences different aspects of your emerging venture, in an attempt to balance focus and flexibility. It also illustrates how to work effectively with the Market Opportunity Navigator, both over time and in concert with other well-known business tools such as the Business Model Canvas and the Lean Start-up Methodology.

Part 4 – The Navigator for Established Firms, Investors, Technology Transfer Offices, and Educators and Accelerators

Even if you are not the founder of a young startup, you can find the process depicted in this book extremely relevant and valuable. This part of the book describes how different types of customers, including established firms, investors, technology transfer offices, and educators, can benefit from applying the Market Opportunity Navigator.

To summarize and illustrate this profound decision-making process, we finish the book with an example of how we used this tool to set up our very own market opportunity strategy.

About the Authors

Professor Dr. Marc Gruber is a world-leading researcher in the field of innovation, entrepreneurship and technology commercialization. Marc is Vice President for Innovation at the Swiss Federal Institute of Technology (EPFL) in Lausanne, Switzerland, where he also heads the Chair of Entrepreneurship & Technology Commercialization. He works as the Deputy Editor for a prominent empirical research journal in management, the Academy of Management Journal. Marc is actively engaged in teaching, consulting, and executive training programs in Europe, the US, and Asia, and regularly acts as a jury member in startup and corporate entrepreneurship competitions across Europe.  He has been ranked as the #1 researcher in entrepreneurship for 2005-2015.

Dr. Sharon Tal is the co-founder and former executive director of the Entrepreneurship Centre at the Technion, Israel Institute of Technology, and a well-recognized lecturer on marketing for high-tech start-ups. She gives lectures and workshops on a regular basis, and serves as a mentor in many organizations that aim to help budding entrepreneurs. Sharon also has significant experience in marketing and in strategic consulting. Her Ph.D. research analysed the market entry decisions of hundreds of startups and their consequences on firm performance and flexibility.

Where can you get the book?

Where to Play is available on amazon.co.uk for £16.99, and will be available in bookshops around the world.

3 Key Factors for Evaluating the CHALLENGE of a Market Opportunity

3 Key Factors for Evaluating the CHALLENGE of a Market Opportunity

Is This Market Opportunity Reachable?

Not all opportunities are equal… in fact, understanding how valuable and attractive your strategic options are, is crucial for setting a winning strategy and choosing where to play.

But what is an attractive market opportunity for you?

Research on motivation and goal-setting clearly emphasizes the importance of setting goals which are both desirable and achievable at the same time. Hence, an attractive market opportunity for you to focus on is one that will likely produce significant potential for value creation (i.e. desirable) and that poses relatively few challenges in capturing that value (i.e. achievable).

In a previous post, we discussed how you can systematically evaluate the potential inherent in a market opportunity and find out if it is worth pursuing. In this post, we will deal with how you can uncover the main challenges associated with each market opportunity, by looking at three key questions.

Assessing the challenge of a market opportunity is critical to your evaluation process.  It looks at which obstacles lie ahead if you decide to pursue it, what will be your main risks, and how difficult will it be for you to overcome them and conquer this opportunity.  While the potential of a market opportunity is assessed in and of itself, this parameter examines your own capacity to succeed in it, given the resources and capabilities that you already possess.

To evaluate the challenge of any market opportunity, you will actually need to assess three key factors:

  1. Implementation Obstacles

On your way to a successful market launch, you will face challenges in creating and delivering the product. Assessing these difficulties, and the additional resources that you will need to develop or acquire in order to face them, is critical for your evaluation.

In order to assess this, you need to consider three main questions:

  • How difficult will it be for you to develop the product?
  • How difficult will it be for you to access the market?
  • How challenging will it be for you to raise funding for this option?

The answers to these questions offer key insights on the challenges that you will face during implementation.

Remember that while innovators often give much thought to the challenges of creating the offering, they often tend to neglect the challenges of bringing it to the market, which may sometimes be much more difficult. So, give it careful attention.

  1. Time to Revenues

Your clock is ticking and money is usually burned quickly, so the speed in which you can generate cash flow through sales is definitely a major consideration.

To estimate this, you need to consider the three main questions once again:

  • What is the estimated time for development?
  • Will we need to wait until the market is ready for our offer?
  • How long is the sales cycle expected to be?

Based on the answers to these questions, you will have a better understanding of the time element associated with your market opportunity.

Of course, this time element is tightly related to your implementation.  However, they emphasize two different perspectives that are both important when seeking to understand the underlying challenges of a market opportunity.

  1. External Risks

Lastly, your success can be put at risk by many companies and players in your business environment.  While you most probably cannot control this risk, it still has to be taken into account when assessing how difficult it will be to succeed in any specific market.

To assess these risks, consider three important questions:

  • How threatened are you by competition?
  • How dependent are you on other companies or players?
  • How susceptive are you to adoption barriers?

Objective answers will help you to get important insights on the risk level inherent in your opportunity.

Once you have thoroughly gone through these three key factors, the overall challenge of a market opportunity becomes more apparent.  You can adopt a quantitative approach or a qualitative approach for summarizing your analysis and estimating how reachable it is for you.

In any case, using such a structured checklist will help you to perform a comprehensive evaluation, and to make sure that you have not missed any important consideration. It will also enable you to compare different market opportunities, and set your strategic goals to be desirable and achievable.

Good luck!

Which Markets Should You Play In? A Free Online Course for Entrepreneurs and Innovators

Which Markets Should You Play In? A Free Online Course for Entrepreneurs and Innovators

Free online course first released on October 3rd, 2017
Click here to enroll

Overview

As an entrepreneur or innovator, you are trained to run fast, but…Are you running in the right direction?

Choosing the right market for your innovation is one of the most critical yet challenging decisions for innovators. As we have seen over and over  in our studies, entrepreneurs don’t spend enough time assessing their possible market opportunities. They tend to focus on the first opportunity that seems interesting, and fail to evaluate other options and unleash their true potential and power. As a result, they might choose the wrong market for their business to “play in”, or simply lock their company into one specific direction.

In this course, you will learn how to discover which markets are most valuable for your business and how to set your focusing strategy properly using the Market Opportunity Navigator. This business tool provides a clear framework to help you identify, evaluate, and strategize your market opportunities through three simple steps:

  1. Search broadly – To generate your set of market opportunities
  2. Assess deeply – To evaluate your options and compare their attractiveness
  3. Strategize smartly – To focus on the most attractive opportunity while remaining agile

Three dedicated worksheets guide you through the process, and we illustrate it with many examples and case-studies.

The course is given by Prof Marc Gruber, a world leading researcher in entrepreneurship and the Vice President for Innovation at EPFL (Swiss Federal Institute of Technology), along with Dr. Sharon Tal, Co-Founder and former Executive Director of the Entrepreneurship Center at the Technion (Israel Institute of Technology). They developed the Market Opportunity Navigator based on 15 years of rigorous research and hundreds of real-life cases.

Who is this course for?

This hands-on course is valuable for anyone interested in commercializing innovations.

Whether you are already running your startup or only dreaming of establishing one, you will find this practical know-how extremely useful, as it will help you to set your strategic focus from the outset, or set your pivoting strategy whenever required.

The course provides novel insights and creates value for managers in established firms, just as it does for founders of newly created ventures. Whether you are the CEO, VP for Business Development, the Innovation Manager of your firm, or any other role that faces the challenge of finding new growth paths, the course will help you to better position your entrepreneurial endeavors for success! Enroll today to receive valuable business advice for your startup or for your next venture.

Overall, the Market Opportunity Navigator is an important tool that you should add to your management toolbox and turn to whenever you need to design or redesign your strategy.

Course Structure and Content

The course includes over 50 video clips, organized in 5 modules and spread across 5 weeks of learning:

Week 1 – Introduction

Presenting the challenges of choosing which markets to play in and the underlying logic behind the Market Opportunity Navigator

Week 2 – How to Generate Your Market Opportunity Set

Presenting the first step of the Market Opportunity Navigator: Using Worksheet 1, you will learn how to decouple your core abilities to identify different applications and different types of customers that need them. The output is your Market Opportunity Set.

Week 3 – How to Evaluate Your Market Opportunities

Presenting the second step of the Market Opportunity Navigator: Using Worksheet 2, you will learn how to evaluate the attractiveness of each market opportunity by estimating its potential and the challenge in capturing it. The output is your Attractiveness Map.

Week 4 – How to Design Your Agile Focus Strategy

Presenting the third step of the Market Opportunity Navigator: Using Worksheet 3, you will learn how to design a smart portfolio of Backup and Growth Options around your Primary Market Opportunity. The output is your Agile Focus Strategy.

Week 5 – Implications and benefits

Understand the implications of the Agile Focus Strategy on your venture, and how to benefit from applying the Market Opportunity Navigator over time in concert with other well-known business tools (including the Lean Startup and the Business Model Canvas).

Overall, expect to invest between 1-2 hours per week to get the most out of this learning journey.

What will you achieve with this course?

At the end of this course, you will be able to:

– Discover multiple market opportunities stemming from your core strengths

– Evaluate the attractiveness of your opportunities in a comprehensive and unbiased manner

– Make an informed choice on which markets to play in, in order to increase your chances of success

– Balance focus and flexibility, two very critical aspects that often contradict one another

– Develop an open mindset and nourish your receptiveness to change and adaptation

– Facilitate team discussions and debates on this all-important strategic choice

How to register?

The course is run on edX.

Registration is free of charge!

You can find more information and enroll here.

3 Key Factors for Evaluating the Potential of a Market Opportunity

3 Key Factors for Evaluating the Potential of a Market Opportunity

Is This Opportunity Worth Pursuing?

Managers of small and large firms encourage their employees to identify innovative business ideas, often resulting in a wealth of opportunities for company growth.

Surely, having a set of possible market opportunities at hand is a valuable asset for the business. However, it also tends to create a dilemma for you: which option(s) should you focus on and pursue with full force? Which ones should you put aside for now?

To make this all-important decision, you need to carefully evaluate your options, as opportunities clearly differ in their level of attractiveness.

An attractive market opportunity is one that will likely produce significant potential for value creation, and that poses relatively few challenges in capturing that value.

In this post, we will focus on how you can evaluate the potential inherent in a market opportunity by looking at three key questions. In our next post, we will deal with how to uncover the challenges associated with these opportunities, so make sure to subscribe in order to get updated when it’s live.

Assessing the potential of a market opportunity is critical to your evaluation process.  It involves asking certain questions, such as: How BIG is this opportunity? Is it at all worth pursuing? If so, how much value can we create if we choose this path?

To evaluate the potential of any market opportunity, you will need to assess three key factors:

  1. Compelling Reason to Buy

If no one wants to buy it, it isn’t worth anything…So the first thing you need to learn about a market opportunity is whether someone will really want what you have to offer. If the compelling reason to buy is low – it’s simply a ‘No-Go’, because demand will not fly.

To evaluate this key factor, you need to look deeply into three important questions:

  • Is there a real unmet need?
  • Can you provide an effective solution for this need?
  • Can you address it (much) better than current available solutions?

An honest answer to these questions will lead you to estimating how compelling your offer is.

Note that the only way to assess this factor is to look through the eyes of your customers. It’s not what you think, it’s what they think that counts – what they say, or even more importantly, what they do. So, go out of the building and talk about this market opportunity with as many potential customers as possible, to validate your beliefs.

  1. Market Volume

Satisfying a real need is an important condition for creating value. Yet, it is the market volume that will determine to what extent you can sell your product and, thus, to what extent you will create that potential value.

To evaluate this key factor, you need to look closely into two important questions:

  • What is the size of the current market?
  • How much is it expected to grow over time?

Try to estimate how many customers actually face this need (now and in the near future) and how much they will be willing to pay for what you plan to offer them. Objective answers to these questions are the basis for estimating the volume of the market.

To size a market, you will have to talk to potential customers and other experts or sales channels representatives, look for competitive approximations, and search for existing analyst reports and relevant market research.

Remember that for completely new markets, which have no customers, no well-defined competitors, and no products yet, measuring the size of the opportunity is more of a ‘guesstimation’ than an exact evaluation.

  1. Economic Viability

The last factor for assessing the potential of a market opportunity estimates the economic benefit of this option for you. Without getting into a detailed sales plan or profit-and-loss calculations, it refers to the basic elements that influence the economic value of a market opportunity.

You can get a relatively good understanding of this economic potential by examining three main questions:

  • Do you have sizeable margins?
  • Are the customers well-funded enough to pay the price?
  • How sticky are customers expected to be?

While challenging to estimate, it is important to make sure that you have enough slack between the cost of your offer and how much customers are willing to pay for it.  In any case, make sure to talk to your ‘economic buyers’ to understand their perspective.

Once you have thoroughly gone through these three key factors, you can estimate the overall potential of your market opportunity.  You can adopt a quantitative approach for that by scoring each factor on a pre-set scale (for example 1-5 or low to super-high), and then averaging the results to get an overall score, or you can adopt a more qualitative approach by taking into account the major pros and cons that you identified as you analyzed these factors.

In any case, using such structured framework will help you to be more comprehensive in your evaluation, and to make sure that you have not skipped any important consideration. It will also enable you to compare different market opportunities, and to make a more informed strategic choice on which markets you should focus on.

Good luck!

Entrepreneur, Are You Betting on the Right Horse?

Entrepreneur, Are You Betting on the Right Horse?

Markets & Choices that May Keep You Awake at Night

As an entrepreneur or innovator, you must decide which market opportunities you should focus on. Without a doubt, this is one of the most fundamental decisions you will ever make in your commercialization process. It is crucial, not only because this choice is key for creating value and generating sales, but also because it has a long term impact on the DNA of your venture. The market choice influences the venture’s identity, culture, structure, brand name, and many other aspects which are difficult to change down the road, or might even be irreversible.

So, once you need to set your strategy, you must thoroughly investigate your options, and understand the pros and cons of each market opportunity on your table, so that you can choose a promising path.

Yet… here’s the catch: despite the critical nature of this choice, and your best efforts to find the most fertile ground for your venture, chances are that you will need to change or adapt your market choice over time. This is because innovation is all about uncertainty and the unpredictable future. Conditions of uncertainty require placing flexibility at the top of your list of priorities. In other words, once you have chosen your direction of focus, you also need to make sure that you remain agile while keeping your eye on the target.

This makes your choice of ‘which horse to bet on’ even more complicated. In fact, as you strive to set your strategic focus, you actually need to consider two questions:

  1. WHAT
    What is the most attractive market opportunity that you should focus on?
  1. HOW
    How can you focus and stay flexible, agile, and open-minded at the same time?

Here are some basic tips that can help you find your answers and make this profound decision.

WHAT

Whether you foresee only one single market opportunity, or have a set of possible opportunities to choose from, you must take the time to carefully evaluate the attractiveness of your option(s), or you may find yourself running in less than optimal direction. An attractive market opportunity has two main characteristics:

First, it bears high value creation potential. iI other words, it offers a compelling reason to buy for a large set of customers who will be able and willing to pay for it.

Second, it entails a relatively low challenge in capturing this value, meaning that the difficulties in developing and delivering your offer and the risks associated with your business environment are manageable, and overcoming them is achievable in a reasonable time frame.

All in all, you need to assess both aspects to make sure that you are ‘betting on the right horse’.

HOW

Balancing focus and flexibility is a critical challenge, especially for startups. In a classic HBR paper, Eric Beinhocker claims that established companies must bet on multiple horses and cultivate a portfolio of strategies to hedge against key uncertainties. This creates a robust and adaptive strategy, that willingly sacrifices focus for the sake of flexibility.

However, startups are so scarce on resources and management attention that they simple cannot afford to follow this advice. Instead, once you choose your primary market opportunity, you must carefully select very few options that you consciously keep open, so that you will be able to mitigate your risk and increase your value with minimum effort.

To do so, pick at least one backup option and one growth option, and make sure not to lock yourself out of these markets as you develop your technology, write your patents, or even set your brand name.

Overall, keeping these considerations in mind will enable you to make a more informed choice, and hopefully… sleep better at night.

4 Common Mistakes Entrepreneurs Make When Choosing Their Market

4 Common Mistakes Entrepreneurs Make When Choosing Their Market

Uncertainty is a primary reason. Choosing the best markets for an innovation is almost always a high-risk, low-data decision, which calls for informed intuition rather than purely analytical reasoning. That said, it does get more complicated…

Choosing what market a start-up should focus on is so difficult because this decision usually entails some major trade-offs. The pros and cons of various options create real dilemmas for entrepreneurs (one option can have high potential but bear high risk from competitors, another option can offer a lower but safer payout, etc.). Given this quandary, it is not surprising that many entrepreneurs ‘take a wrong turn’, or make decisions that may ultimately cause the venture to never take off.

Based on our research and experience, we have identified four common mistakes that entrepreneurs make as they attempt to find the right market opportunity:

  1. Fail to look before they leap
    Often enough, founders jump at the first envisioned market opportunity, without taking the time to uncover other, potentially more valuable options.  They tend to fall in love with their idea, and don’t extend their vision to other customers that may need whatever it is that they are developing.  Being blind to other alternatives may simply mean that you are aiming for an inferior market. Furthermore, having a set of options at hand should come in handy in the future, if pivoting is required.  A research published in Management Science found that the mere identification of alternative markets, in and of itself, increases the start-up’s chance of success.
  2. Base choice on partial information
    Although the great impact of a market choice is clear, entrepreneurs often make this choice based on very limited knowledge. They count on their intuition, or they simply follow a specific customer that expresses interest in their offering. While both intuition and an interested customer are important factors, there are other things that must be considered to verify the potential of a market opportunity.  Overall, poor research and insufficient evaluation of the market can lead to big disappointments down the road.
  1. Choosing too narrowly
    Common mistakes relate not just to choosing the ‘wrong’ market, but also to the scope of your market choice. Following the common advice regarding the importance of laser-sharp focus for start-ups, entrepreneurs often concentrate their resources on pursuing a single narrow path at the expense of flexibility. They develop their product, build their network, and define their branding and identity all to target a very specific set of customers. While sharp focus is clearly important for start-ups, they must simultaneously ensure that they keep other options in mind and retain their flexibility. Eventually, locking the venture into a narrow development path means losing the ability to adapt or pivot over time, as too much ‘undo’ will be required.
  1. Choosing not to choose
    Lastly, some founders find it difficult to be decisive about this critical decision, and choose to postpone it until major uncertainties fade. Choosing not to choose means that you keep your coexisting efforts in several markets. Ventures that try to juggle with several balls in the air spread themselves too thin, and because they fail to concentrate their scarce resources, they can’t win in any key market. Deciding what markets we should focus on is definitely difficult, but it is a must if you want progress and get traction in the market. So, make sure you’re clear on the markets that you’re targeting, and on the ones you’re avoiding.

These mistakes may turn out to have fatal consequences for new ventures, or at least may significantly prolong the entrepreneurial start-up phase.

The Market Opportunity Navigator offers a clear, step-by-step guide on how to master the art of choosing a market. It guides the readers on how to uncover and assess different markets to pick the most attractive one, and how they can hedge their bets by keeping some related options open, while avoiding the risk of over commitment to any particular option.

Click here to download the Market Opportunity Navigator worksheets for free and start looking for the most lucrative markets for your startups.

Fifty Shades of Focus: Why Focus is Key to Succeed in Business

Fifty Shades of Focus: Why Focus is Key to Succeed in Business

Focus is believed to be one of the most important factors in achieving success. This is true in all aspects of life, including personal and professional aspirations, and it applies to businesses as well as individuals on the same level.

For a business to focus, it must have clearly defined goals to drive its strategy. In startups, a focused strategy is even more critical, as new ventures lack the abundance of time and resources.

Focus has many interpretations. It’s not a dichotomous behavior (either you focus or you don’t), but it’s more of a scale; on one end, you have very sharp and narrow ‘laser-like’ focus, and the other end is broad, dispersed, and lacking in focus completely.

What does it mean for a start-up to be in-between the two polar ends of the scale?

A study that examined the focus scope of over 300 startups describes different scales of focus and their implications on startup’s success:

  1. Laser-Sharp Focus

    New ventures that adopt a laser sharp focus target one single market opportunity and focus all their resources and attention on pursuing it. They deliberately neglect all other opportunities and strictly insist not to be disrupted by opportunistic alternatives. The common assumption in the startups’ ecosystem is that this is the only possible strategy for new ventures, and the reason for this is clear: startups lack the resources and capacity to branch out. They simply cannot afford not to be narrowly targeted in their strategy. However, this approach comes at a price: focus at the expense of flexibility, and laser-like focus may turn into a fatal lock-in ultimately rendering itself extremely dangerous for startups.
  1. Extended Focus

    On the scale of resource allocation, extended focus is the middle part. At first, extended focus seems like an oxymoron, but a deeper observation reveals not only that it is possible, but also that it can be beneficial, if done right.So, what does extended focus mean? It refers to balancing the delicate trade-off between focus and flexibility, to avoid locking-in when working in an unpredictable environment, as startups often do.This can be executed by the start-ups by keeping related options open for backup or future growth. Startups that adopt the extended focus strategy keep most of their attention on a primary market, but allocate some resources to stay informed in alternative markets and to broaden their capacity so that pivoting and adaptation become more feasible. They might even choose to pursue two tightly related opportunities in parallel, to increase their value or mitigate their risk with minimum effort.
  1. No-focus

    This is the other polar end of the scale. Firms at this end simply don’t know what they should focus on, so they strive to pursue different opportunities simultaneously, at least until uncertainty fades.  While this approach helps them to maintain flexibility, it clearly prohibits their progress and might become detrimental as they risk spreading their scarce resources too frivolously.

Overall, the scope of focus that new firms adopt, or where they choose to position themselves on the scale, is critical not only for their success but also for the DNA of the firm they’re establishing. For example, it can influence how startups develop their technology and file their patents, what type of employees and stakeholders they gather, how they pick a brand name, develop their marketing approach, etc.

In startups, just as in life, the polar ends of the scale are usually too extreme. Instead of black and white, think gray. True, there are many shades of gray (50?), and some are better than others, but you should strive to find the shade that is right for your venture, and that enables you to focus as well as maintain your maneuverability.

 

Real Options for Real Startups

Real Options for Real Startups

Understanding and Leveraging Real Options in 3 Clear Steps

Investors, professionals, and amateurs will surely agree that real options are quite popular in finance. Real options relate to small investments that you currently make to guarantee your ability to capitalize on them in the future, if desired. Real options don’t belong only to investors. Researchers in strategy and entrepreneurship commonly adopt this term with the same idea in mind. They claim that ventures should build a portfolio of real options through current small investments in business opportunities that may potentially become worthwhile in the future. This enables them to manage high levels of uncertainty inherent to today’s innovative environment, and to maintain their adaptability.

While this all sounds reasonable, here’s a surprising fact: entrepreneurs are often not familiar with real options. In fact, throughout our own research, we confronted hundreds of founders, and almost none of them heard about real options, let alone attempted to apply them. Why is that?  Well, there is only one likely explanation: real options are sound in theory, but difficult in practice. The entrepreneurial community has not caught on to the phrase because they simply don’t know how to apply it. How can a startup – which is so limited in resources build a portfolio of real options and enjoy its value? Is it at all viable/feasible? While this is surely not a trivial question, there is in fact a clear answer. Studying the market opportunity strategy of hundreds of startups, we found that not only is it possible to implement real options into your strategy, but also that it has clear performance benefits over time. Here is how you can embrace real options into your strategy, in 3 clear steps:

  1. Identify additional market opportunities that could be suitable as your backup or growth options. In case your current opportunity proves to be unsuccessful, you will want to pursue a backup option. A growth option is a market opportunity that you will want to pursue once you are successful with your current opportunity.
  2. Evaluate the relatedness of these possible options to your current market opportunities. Relatedness means that developing and delivering the product, for both markets, require relatively similar resources and capabilities. The more related an option is, the more you can leverage your existing competencies to succeed in it, and this is exactly what we want.
  3. Pick at least one backup and one growth option to keep open. Keeping an option open means that you invest very little resources and management attention in it, just to make sure not to lock yourself out of it. So, when you develop your technology, write your patents, or even set your branding strategy, you keep these options in mind. This is exactly what real options mean! You invest a little bit of effort now, to make your options possible in the future.

By acknowledging and keeping in mind these future options, you get the benefits of real options, and better prepare your venture for dealing with uncertainty, without losing the necessary focus that is so critical for startups. In conclusion, real options should be widely embraced by real startups, its completely viable and truly valuable!

Market Needs and Companies’ Abilities

Market Needs and Companies’ Abilities

The Yin and Yang of Startups’ Strategy

Before entering the entrepreneurial race, entrepreneurs must first discover a real market need. In fact, the global movement of the Lean Startup approach, initiated by Steve Blank and Eric Reis, is based on engaging in customer discovery and validation, prior to any investment in product development.

Great tools and excellent books on the subject can help entrepreneurs as they strive to uncover real unmet needs in the market. For example, Value Proposition Design (by Alex Osterwalder and Yves Pigneur) explains how to observe the jobs, pains and gains of customers; Running Lean (by Ash Maurya) emphasizes how to capture customers’ problems; and Talking to Humans (Giff Constable) or The Mom Test ( Rob Fitzpatrick) offer invaluable tips on how to interview customers in order to fully understand what they need and want.

However, there is an important parameter that often overlooked: the unique abilities of the firm. A real market need is only relevant if we can address it with a set of unique abilities or core technologies that we currently possess or that we plan to develop. In other words, a compelling strategy emerges only when the company can create a unique knowhow to fulfill an unmet need in the market.

The market need and the company’s abilities are two necessary ends of a startup strategy. In fact, they are just like the Yin and Yang: a whole is created when two parts complement and connect with each other. You will need both ends to create a winning strategy!

But…which part should come first?

The common assumption by entrepreneurs is to begin with a clear need from the customers, as mentioned above. This approach is typically called ‘market pull’, as you pull your opportunity from the market. Alternatively, your business opportunity can be initiated by a unique knowhow or innovative technology. This approach is termed ‘tech push’, as you search how to push it into the market.

Seeing as a winning strategy requires both ends, it doesn’t really matter which one you begin with, or which part sparks the trigger for your entrepreneurial opportunity. Eventually, they will both need to be completely aligned and interrelated, just like the Yin and Yang.

In fact, in the early steps of most entrepreneurial journeys, founders zig-zag between the two, pivot and adapt continuously, until this ‘fit’ is achieved to create a winning strategy.

So remember, finding and validating a real unmet need is fundamental, but forms only one part of the equation. Understanding your unique abilities, and how you can utilize them is just as important.