1

The Entrepreneurial Process & How to Evaluate my Business Idea

Sharon Itzkovitch – Technion

Workshop 1: Idea Management

Agenda

• The high-tech entrepreneurial process

• Criteria for opportunity evaluation

• Tools for evaluating industry and idea

• Innovating in existing markets

The Entrepreneurial Process in High Tech

OpportunitySource

NewTechnology/Innovation

OpportunityDiscovery

OpportunityEvaluation

Expectedvalue

Assemblingresources

Opportunityexploitation

Performance:• Exit value

• Sales/Growth• Profits

The entrepreneurial team

Business Plan

1. Technology Changes/Inventions

2. In-efficiencies and incongruity between reality as it is and as it ought to be

3. Changes in the way we live, learn, work, etc

4. Demographic trends

5. Market changes-value chain disruption, deregulation

OpportunitySources

OpportunityDiscovery

Sources ofOpportunities

Technology as a Source of Opportunity

Incremental

Radical

- Extension of existing product

- Demand-side market / customer pull

- New technology creates new market

- Supply-side market / technology push

Can you shortly describe:• The product or service you want to offer• Your customers (in very specific terms)• The unique value proposition to these

customers- something that will make a difference to them

• Why are you better than competitors

OpportunitySources

OpportunityDiscoveryAn opportunity

OpportunitySource

NewTechnology/Innovation

OpportunityDiscovery

OpportunityEvaluation

Expectedvalue

Assemblingresources

Opportunityexploitation

Performance:• Exit value

• Sales/Growth• Profits

The entrepreneurial team

Business Plan• Sufficient expected value to go for it and to recruit resources• Sufficient expected capability to execute

The Entrepreneurial Process in High Tech

Opportunity Discovery• Industry domain know-how• Understanding customer’s need• Specific expertise in at least one area

Opportunity Evaluation

• Industry domain expertise• Understanding the process from a technology to a manufacturable and sellable product• Understanding market access and its costs

Issues Facing Young Entrepreneurs

Expectedvalue

Assemblingresources

• Establishing company as legal entity

• Recruiting personnel

• Raising money

• Renting a place

• Selecting service providers

• Choosing partners

Assembling Resources

Assemblingresources The entrepreneurial team

Founder Teams are preferable:• Complementary skills and capabilities• Emotional support• Wider network• Higher rate of success, therefore investors like teams

However, be ready for conflicts in team:• Make a founder’s agreement• Have a trusted third party• Remember- conflicts could be good for the venture

The Entrepreneurial Team

Opportunityexploitation

Performance:• Exit value

• Sales/Growth• Profits• An iterative process with continuous

adaptation of product/service offering

and business model

• Balancing fire fighting and long term planning

• In parallel: build marketing & sales; R&D; HR

policies; build alliances and do fund raising

• Hard work, persistency, self-confidence

Opportunity Exploitation

Criteria for Opportunity Evaluation

1. Unique Value proposition: Do we fulfill and important customer need? Who has this need- who is our target market? Do we do it in an unique way? How will we

differentiate our company from what is already out there?

Value Appropriated

Value Created

Examples of Delta betweenValue created and Value appropriated:-Search engines-Music downloads-Some medical treatments

Criteria for Opportunity Evaluation

2. Revenue Model: How are we going to make money?

Criteria for Opportunity Evaluation

3. Are we in the right industry/ market?

Is the industry growing / mature?

How big is your market in dollars (market size) ? How fast is it growing (market growth)?

How many competitors do you have and of what quality are they? What are the barriers to entry?

Electric cars

Industry Life Cycles and Business Opportunities

Time

Marketsize

Blue Oceans:-New market space; value innovation -Starbucks, SW Airlines

Mini TV’S

TV in mobile phone

• Fast growth• Fragmented markets• Many players• No standards

Criteria for Opportunity Evaluation

4. Do we know the risks and the time and money needed to become profitable?

Time, money and risk to product (Pharma versus Internet)

Time, money and risk to market

Time , money and risk to money

Criteria for opportunity evaluation

5. Can we as team do it?

- Self confidence essential

- Over confidence often necessary

otherwise you would never start but listen to

team members and advisors

- If you do not passionately believe in your idea and

capabilities nobody else will, but if you are the only

one you may have a problem…

Social traffic and navigation app

• Customer value proposition?• Revenue Model ?• Right Industry ?• Risks and time to money?• Can they do it ?

Example(1): Opportunity Evaluation

Glasses for developing countriesThe amount of liquid in lens can be adjusted with a pump.

Universal Glasses developed by Prof. Joshua Silver , nuclear scientist of Oxford

• Customer value proposition?• Revenue Model ?• Right industry ?• Risks and time to money ?• Can he do it ?

Example(2): Opportunity Evaluation

www.israeltoremet.org

To connect between small donors and NGO’s in Israel. Entrepreneur: Yonatan Ben DorOpportunity : 27,000 NGO’s in Israel looking for donations

• Customer value proposition?• Revenue model ?• Right business ?• Risks and time to money ?• Can he do it?

Example(3): Opportunity Evaluation

מחקר שוק- מטרות הכרת הענף, המתחרים ושרשרת הערך

זיהוי לקוחות והבנת הדרישות שלהם

הערכת הביקוש הנוכחי ופוטנציאל השוק

זיהוי הזדמנויות וסיכונים

תחזיות של מכירות ונתחי שוק

Tools for Evaluating Industry and Idea

מחקר שוק- מה בודקים?

הענף והתחרות:הכרת המתחרים כולל פתרונות / טכנולוגיות חלופיות שחקנים ומוצרים לאורך שרשרת הערך תחרות פוטנציאלית מתעשיות אחרות היקף וגודל השוק

זיהוי פלחי לקוחותהצורך והכאב דרישות רגישות למחיר

פתיחות / התנגדויות בשוק

גישה ללקוחות

מקבלי ההחלטות בארגון

סקר שוק- מקורות בעלות נמוכה

לקוחות פוטנציאליים תערוכות וכנסים :אינטרנט Crunchbase; patent search; Google... פרסומים מקצועיים חוקרים ומובילי דעה בתחום ...מקורות ממשלתיים: משרד התמ"ת, מכון היצוא מחקרי שוק שנעשו ע"י חברות מחקר (כגון IDC ,

D&B(

Threat of New Potential Entrants

Bargaining Power of Suppliers

Bargaining Power of Buyers

Threat of Substitutes

Industry Competitors

Rivalry

“The Five Forces”

TechnologicalChange

EcologicalChange

ChangingBusiness Practices

Macroeconomicdevelopment

PoliticalSituation

RegulationDe-regulationRe-regulation

Changes inCustomers’Customers

Demographic/Psychographic

Changes

Adapted from Porter, Michael (1980), Competitive Strategy, Free Press

Industry Analysis

Competitors Analysis

Competitor’s offer to customers

Competitor’s strategy

Competitor’s assumptionsabout the industry

Competitor’s keystrengths and weaknesses

How will you be different than competitors?

How will the competitorrespond to your initiatives?

Who are your direct and indirect competitors?

PetSmart.comDrsFosterSmith.

comPetMeds.com

Products on home page

Yes Yes Yes

Retail store locator

Yes No No

Expedited shipping options

Yes Yes Yes

Non-pet-type categories

No Yes Yes

Presenting the Competitive Analysis

1. Simple Yes-No Value

Presenting the Competitive Analysis

Key industry success factors

weightComp #1Comp#2Us

Product Innovation

Extensive distribution

Customer service

Price

Total Score

2. Competitive Array

Presenting the Competitive Analysis

3. Two by Two

Analysis S.W.O.T

ניתוח הסביבה הפנימית

strengthSחוזקות

weaknessesWחולשות

ניתוח הסביבה החיצונית

opportunitiesOהזדמנויות

threatsTאיומים

Analysis S.W.O.T

Strengths -Weaknesses -

Opportunities -Threats-

לדוגמא: חוסר במשאבים כספיים- חוסר ניסיון- תאימות נמוכה- לא ניתן להתנסות במוצר לפני -

הרכישה

לדוגמא: טכנולוגיה מתקדמת- פטנט- מוצר פשוט לשימוש, יתרונות ברורים-)advisory board צוות יועצים (-

לדוגמא: מתחרה חזק- ספק חזק- משבר כלכלי-

לדוגמא: תחום חם- סטנדרט טכנולוגי חדש- שינויים רגולטורים-

Questions ?