aps 1015 class 6 - market validation
DESCRIPTION
Students will be exposed to methods for screening entrepreneurial ideas and evaluating its “business potential”. Students will be introduced to data collection methodologies and evaluate some of the challenges associated with synthesizing market data and applying this data to business decisions.TRANSCRIPT
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APS 1015: Social Entrepreneurship
Class 6: Validation of Market-Based Solutions
Tuesday, May 27, 2014Instructors:Norm Tasevski ([email protected]) Alex Kjorven ([email protected])
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Agenda
• Recap of Business Modeling (Class 5)• Screening Entrepreneurial Ideas• Break• Validation Techniques• Tomorrow
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Recap: Business Modelling
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Screening Social Enterprise Ideas
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The Idea Funnel
Idea Brainstorm
Internal Screen
External Screen
Validated Solution
# Ideas = Dozens
# Ideas < 10
# Ideas = 1 to 3
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Step 1: Idea Brainstorming
• Our idea jam…
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Step 2: Internal Screen
• Goal: assess the quality of the entrepreneurial idea before conducting market research
• Why screen internally first?
• 2 Parts:– Assessment of Business Potential– Assessment of Social “Fit”
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Business Potential
• Evaluate based on:– Potential financial performance/sustainability of the
venture (and scalability)– External need/want of the product/service– Market barriers
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Business Potential
MeasureRating
0 1 2 3Level of Customer Need Not a significant need
Need that is addressed by others reasonably well
Unmet need and strong customer base willing to pay for it
High level of unmet need amongst people with the ability to pay
Competitive Advantage
Competitive disadvantage – many other competitors are serving needs well
No significant difference from competitors
Good value proposition but could easily be matched
No other competitors, and sustainable unique solution for niche
Profit/Surplus Potential Likely loss $0 - $50,000 $50,000 - $100,000 $100,000 +
Additional Investment Required
Major investment required (>$20,000)
Moderate investment required ($10,000-20,000)
Little investment required (<$10,000)
Could be done with existing resources
Return on Investment Timeframe
Long payback period not justified by return
Reasonable ROI over 2 or 3 years
First year profit = first year investment
Strong positive return on investment in first year
Access to Required Start-Up Funds
Not fundableCould be fundable but unsure of sources and or %; funding difficult to attain
Relatively easy to find funding for start-up costs, but for a smaller proportion
Very easy to get funding for start-up costs
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Social “Fit”
• Evaluate based on:– Desired social outcomes– Internal capacity to deliver value
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Social “Fit”
MeasureRating
0 1 2 3Fit with Desired Mission/Vision
Does not fit with mission and values
Minimal link to mission and vision
Some fit with mission and values
Strong fit with mission and values
Ability to Generate Social Benefit
None Low Medium High
Existence of Skills and Capacity
Large amount of skills missing
Skills available from partners and/or consultants
Minimal training necessary
Current team already has the necessary skills
Risk High risk Moderate risk Manageable risk (strategies to address) No risk
Partnership/Collaboration Opportunity
No probable partners exist
No partnership needed, or probable partners exist and are interested
Advances Our Name/Reputation/Values
Potential for negative impact
Slight increase in awareness of org
Moderate increase in awareness of org
Direct significant increase in awareness of org
Other Barriers Significant cultural or other changes required
Some barriers which may be difficult to address
Some barriers, but likely to be able to address No significant barriers
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Screening MatrixBu
sine
ss
Pote
ntia
l
Social “Fit”
Low social impact/internal
capacity
High social impact/internal
capacity
HighFinancial &
Market Potential
LowFinancial &
Market Potential
Consider Second Top Priority
Not StrategicDo Not Consider
FurtherPossible Quick
Win
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Now…
• Screen your initial ideas according to social fit and business potential
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Initial Reactions
• What assumptions did you make that drove either high or low ratings of your ideas?
• Were any ideas ranked artificially high or low due to a misperception of the opportunity? If so, would a change in perception change your rating?
• What info do we not know now that are important in confirming the potential of the idea?
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Break
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Validation Techniques
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Data Sources
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Call key industry players(suppliers, competitors, etc) Search databases
(industry, scholastic, etc)
Conduct web search(Google, etc)
Ask people!!!(friends, potential customers, etc)
Primary
Sources
SecondarySources
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Primary Research Methods
Step 1: Identify people to speak with– Create a spectrum of participants based on desired
criteria (e.g. gender, age, socio-economic status)– Identify sources/places to meet participants– Identify community contacts to arrange meetings with
participants
Tip: identify participants on the “extremes”– E.g. if spectrum is based on “adoption of technology”,
pick the quickest technology adopters and those who are resistant to new technology
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Primary Research Methods
Step 2: Determine your method– Individual interview– Group interview– In-context immersion– Self-documentation– Community-driven discovery– Expert Interviews
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Primary Research MethodsIndividual Interview: one-on-one gathering of rich/deep information on the behaviours, reasoning and daily realities of the interviewee
Group interview: one-to-many gathering of information focused on understanding group dynamics/community life
In-context immersion: meeting people where they live/work/socialize (i.e. observing their context directly, walking “in their shoes”)
Self-documentation: empowering the participants to document their own experience (e.g. through journal writing, note taking)
Community-driven discovery: empowering participants to also be researchers (e.g. have them conduct interviews)
Expert Interviews: one-on-one gathering of info with academics, industry experts, other researchers, etc
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The Interview Guide
• A semi-structured set of questions that allow for dialogue while retaining focus on a specific topic
• What to ask?– Start by listing the assumptions you’ve made in your idea screen. Turn these
assumptions into research questions– Categorize the questions by topic. For instance, you may want to ask
participants several questions on “livelihood” or on “cultural dynamics”
• How to ask?– Start specific (e.g. “yes/no”, simple-answer questions)– Then ask broader questions (e.g. “how”, “what” questions)– Then probe deeper (e.g. “why” questions)
• Tips:– Avoid “abstract” questions (e.g. “how much would you pay for…”). Instead,
create a scenario (e.g. “you have a choice between A & B…”)
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Some other Techniques
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A Point on Asking People…There are…
Lovers Don’t give a %&$#ers
Haters
Listen to HALF of what they say!!!
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What did we learn?