See an Opportunity? Now What?
You have an idea and are excited to start a new venture. Now what? As you begin to formulate the concept, you will want to conduct a preliminary assessment of the potential opportunity. There are several issues to address to determine whether a new venture idea is worth pursuing. No matter how many times the entrepreneur has been through the journey, all new ventures take an incredible amount of energy and resources to move from idea to launch. So it is essential to take the necessary time to conduct the proper degree of due diligence on the opportunity. It is better to take the time upfront to assess its viability before forging ahead.
I break down the pre-screening process into three categories: 1) The Early Solution, 2) The Marketplace, and 3) The Founders. This post provides details to guide entrepreneurs and innovators through these early screening research activities.
Pre-Screen: The Early (Product) Solution
Most new ventures fail because they don’t provide the customer with a product or service that solves a real problem or need. Much of your early market research focuses on the customer, the problem they are trying to solve (or job to be done), and how they are currently solving it. You will discover the responses to these questions through primary market research—talking to customers—and secondary research, including extensive analysis of current solution providers and competitors.
While conducting your primary and secondary research, you will see signs that the customer is not satisfied with current solutions, and you may find that there is a gap in the marketplace. You will want to design your product or services to fill these gaps, hopefully in a new and original way. Part of your ongoing strategic efforts will focus on developing a solution that is currently unique and look for ways to protect and sustain its uniqueness into the future.
You will notice that I am purposely using the word solution over product. Founders should stay open to all possible ways to solve the customer’s problems and pain points at this early stage. When you have a specific solution in mind during the early screening, it restricts your search for information about the problem and how customers currently solve them. If you have an “App” in mind, then your search may very well be limited (unconsciously) to digital solutions. As you expand your understanding of the customer’s problem, you will transition to considering solutions with more product-like specificity.
As part of the early pre-screening of the customer problem and early solution ideas, I recommend looking across the following areas: Solution Positioning, Solution Feasibility, Solution Proprietary Status, and Solution Development. For each area, I have added some vital questions to consider. In all cases, some questions will be relevant to your specific problem-solution space, and others not so much. Additionally, there will be some overlapping issues to address in the Marketplace and Founders’ pre-screening sections. The point is to cover these critical considerations early in the process to build confidence that you are optimizing your time and energy as an entrepreneur.
Solution Positioning: This area always starts with the core question that all entrepreneurs must keep top of mind: What is the customer problem we are trying to solve? From this vital starting point, you can respond to the following questions as best you can for now.
- How do customers currently solve the problem?
- Will our solution be serving customers’ real, urgent needs?
- Does it create significant value for the customer— enough to want the product and pay for it?
Solution Feasibility: As you better understand the customer’s problem, you will consider various solutions. For every solution idea, you will want to look at its feasibility in three areas; financially, technically, and legally. Each of these areas can become a significant hurdle for a new product, and you will come back to each of these areas as your research and understanding of the product and market deepen.
- Financial: How much will the customer be willing to spend on a solution? Is the market large enough to be worth your investment in time and money? Can the solution be produced at a cost so that the venture is profitable?
- Technology: Is the solution technically feasible (and do you have access to people with the skills to develop/implement the technology)?
- Regulatory: Are there any legal or regulatory issues to be considered in the realization of the solution?
Solution Proprietary Status: Not all new ventures need to provide an innovative, new market solution. Many successful enterprises provide an existing solution to a new market segment. It works! There are advantages to entering the market with a solution that solves the customer’s problem better than any current offering.
- Does your solution idea have a novel, proprietary, or differentiating quality?
- Is it unique enough to achieve a significant head start on the competition?
- Is the solution patentable or copyrightable?
- Can the process be easily copied?
- Is the solution potentially licensable?
Solution Development: Designing, developing, testing, and delivering a new solution is challenging in any context. Limited resources always challenge entrepreneurs.
- Do you and your team members have the experience and skills to successfully develop and launch a new solution?
- Can you attract the necessary financial, physical, and human resources for solution realization?
Pre-Screen: The Marketplace
As part of your pre-screening activities, it is essential to identify the key players in your new venture’s industry and marketplace, sometimes referred to as your venture’s ecosystem. When developing a new venture, you will want to know the critical players in the market, industry, and overall ecosystem. Critical players include domain experts in your industry or technological field, organizations offering similar or related solutions, influencers who have the ear of the consumer, and essential supply chain players.
Experts: You should identify who the “experts” are in your industry or science and technology area. Knowing domain experts is especially important if your product is differentiating itself based on emerging technologies or evidence-based science. Many entrepreneurs create products that are designed to provide a specific benefit to consumers. It is crucial to validate your product’s efficacy by working with domain experts in the particular field in question.
Solution Providers: During the pre-screening stage, you can investigate which firms provide your target customer with problem solutions. It would be best if you always assumed that there are solutions out in the market. As you will see later, these “solution providers” may offer products similar to your venture concept or provide a completely alternative solution to the customer problem. The first step is to discover as many solution providers as possible through secondary research and any early discussions with your network.
At this stage, we suggest that you list all the competitors that offer products from three categories:
- The same product solution you may be considering.
- A similar solution offering.
- Solutions that use a different approach to solve the same or similar problem.
For each competitor, make sure to list the product name, a brief description, features/ attributes, and pricing information. Additionally, keep their website and other social media information readily available for future research and monitoring. We also categorize each competitor as either an established firm or a new entrant. This designation helps develop your overall go-to-market strategy later on in the process.
Influencers: Influencers are another group that contributes to your venture’s ecosystem. These are individuals or organizations that your customer looks to for information and advice. A question to ask: Who are the key influencers that your target customer listens to for advice to solve the problem or accomplish the job to be done?
Supply Chain: It is essential to look at other organizations and service providers that may play an integral role in your success. List important ecosystem players that you will need to partner with and leverage to be successful. Examples include; raw materials’ suppliers, manufacturers, distributors, support services, government agencies, universities, and industry networks.
Pre-Screen: The Founders
Of all the many questions entrepreneurs should ask themselves as they start the initial assessment of a new venture idea, someone is personal and require introspection. Such questions focus on interests, values, passions, domain knowledge, financial situation, and long-term goals. As an initial screen as to whether a particular venture idea is a good fit for you and your team, you can look at essential business model elements and the degree of knowledge and access available to support venture development and execution.
The Offer: Problem, Solution, & Value. The first place to start involves the customer problem you are attempting to solve and the potential value created for the customer. While this might sound like an odd place to begin your effort, it makes sense if you focus on creating customer value rather than a specific product or technology.
There are many questions entrepreneurs should ask themselves as they start the initial assessment of the customer problem, solution, and potential value. Beginning with the customer problem, how much do you know about the problem you believe your venture solves? Who experiences the pain points? How seriously do they perceive it to be? How much value will they achieve from your solution?
There is a great deal to know about the problem before you validate that you have the right solution, much of which you will learn later in the discovery process. However, it is vital to assess how much you and your team currently know about the problem your venture is attempting to solve.
You and the team need to ask how much you know about current competitors. Researching your competitors is a critical aspect of your market research. While you will need to do a much more in-depth analysis of each competitor, for now, it is essential to do a quick scan of the competitive landscape. Many of our students are totally surprised (and sometimes disappointed) to find a company similarly solving the customer’s problem. There is no need to consider this a deal-breaker, but you should have some early knowledge and evaluate any access you have to competitors.
Customer Experience: Segments, Channels, and Relationships. As you start this personal evaluation of your venture, don’t forget that you have a good deal of experience as a customer yourself. So ask yourself how much experience do you have personally as a customer of alternative solutions? If you have direct experience with the problem and optional solutions, what was your experience with the solution? How did you learn about the solution? Where did you gain access to the solution? And if you have not had direct experience, how many people do you know who have purchased and used the various solutions currently out in the marketplace?
Infrastructure: Activities, Resources, and Partnerships. During this early personal screen, you want to focus on the skills, capabilities, and resources you and your team bring to the venture. Think about the core tasks and activities that will be required to provide value to your customers. What is domain expertise required? Are there specific technical or marketing skills critical to developing and launching your product? Once identified, then ask whether you or the team have the requisite expertise and abilities? If not, do you know people that do, and can you hire or partner with them?
You should also be asking what resources you can access, whether through financial means or personal connections, or partnerships? If you need to manufacture your product, do you have the funds to pay for initial production runs? Or do you have family connections in manufacturing that can help with early, small production runs? May you need some early support from professionals such as legal or accounting? Do you know such professionals that might advise you early on for a lower cost? It is essential to examine all your social and professional connections to see if you can accumulate the necessary expertise and skills to support your business model’s operation.
Profit: Revenue and Costs. You will want to assess whether you have or can readily access customer purchasing behavior, competitors’ pricing, and other critical information that will support your assumptions about how your business will be profitable.
Personal Drivers: There are several personal questions that you should ask yourself before diving into the venture creation process. Is financial gain the primary driver? Does this venture align with your personal goals and passions? What is your ability to undertake this venture idea now? In the near term? Is it practical based on your current financial situation? How many months can you go without income, if necessary? Can you commit to this venture full or part-time? Any red flags or deal breakers?
The vast majority of new ventures take a long time to become viable, if at all. If financial gain is your main concern, you may become disenchanted early in the process. Having enough resources to maintain a comfortable standard of living is also essential. If you always have to worry about paying your rent or having enough money for meals, you should not undertake a new venture at this time. Much like any career transition, you should have at least one to two years’ worth of living expenses saved before taking a profound plunge into the world of venture creation.
Once you have completed these pre-screening activities, you will want to document what you have learned and consider how you want to move forward (or not) with your venture opportunity. You will discover that there are still many gaps in your knowledge. You will address these gaps as you engage potential customers and continue your overall market research efforts.
For more on this subject and other entrepreneurship topics, get a copy of Patterns of Entrepreneurship Management, 6th Edition.
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