OPPORTUNITY ANALYSIS

OPPORTUNITIES AND UNCERTAINTY

If I want to take a leap of faith, how do I know it will succeed?
My opportunity kingdom of Heaven
Others havent spotted it
I need to take advantage of uncertainty but I can reduce it by
o Planning: Strategy
o 3 types of uncertainty;
What is known
Uncertainty
Unknown risks
o Planning reduces uncertainty. There is a lot more
uncertainty.
o In a conventional strategy, there is a past record and
there are some knowns.
o In entrepreneurial strategy, you know very little
customers, pitch, funding, market, customer, legal
problems.
o Startups need to learn as they go
o Changes in direction (pivots are normal) Startups that
change direction a lot have the same or better survival
rates than those who dont. This would be a problem in
established companies
o The key is to test often and early and update
assumptions
Methods for planning a startup:
o The Lean Startup Methodology
o The Business Model Canvas
o Discovery-Driven Growth
There is no best way

PUSH, PULL AND THE SOURCES OF INNOVATION

Where does advantage come from? Its the source of profits
o Illegal or regulated monopoly e.g. National broadcasting
in China
o Cost advantages from scale e.g. Dangote
o Doing something valuable, better and different
Different service
Rare capabilities e.g. cost efficiency
Innovation = a new match between a solution and a need
Conditions for value creation in innovation:
o The need must be real
o The solution must meet the need
o The customer has to be willing to pay more for the
solution than it takes to create it
How to find a match between solution and need
 o Pull (Textbook Model) Product Design:
Start with a need. Ask How do I solve this
problem?
Which solution best meets the needs at an
attractive cost?
Afreecon
o Push
Start with a solution and ask what you can do with
it
Kleos Change
Risk what would a rival do, taking the pull
approach? That logic would probably lead to a
superior solution
o Another Flavor of Push
An acknowledged need
A solution is pushed onto the world without
application

CUSTOMERS AS SOURCES OF OPPORTUNITIES

Client at the Core study the LBSAA Directory. Classify them
by:
o Industry banks, oil companies, small businesses
o Function change managers, project managers, CEOs
How to limit uncertainty of business ventures:
o Explore and nurture multiple alternatives
o Test with multiple opportunities to identify exceptional
opportunities
o Invest and develop
I can use prospective customers to source opportunities and
ideas worth pursuing
o Crowdsourcing votes on platforms can be a proxy for
demand. For it to work, you need to incentivize
customers with:
Monetary incentives
Get a company to address their needs and solve
their problem
Opportunity to develop their skills
o Market research?
o To get customers:
Incentivize
Provide value to even those that dont win
Encourage a sense of community
Indirect sources of customer feedback:
o Online product reviews and social media posts
For startups: Reach out to prospective customers
o Reviews
o Social media posts LinkedIn?
THE IMPORTANCE OF THE IDEA (VIDE MODEL)
What explains success the idea?
The idea must be important
Others say it must be the team
Value is a function of the idea, development and exogenous
factors
o Idea = Business model. Are there customers with this
pain point?
o Development = Team; hard work
o Exogenous = Economy; outside your control
How much of the variance in outcomes is explained by the
variance in the quality of the raw ideas?
o Quality of ideas can be measured by a purchase intent
survey would you buy or would you not buy? Findings:
Experts are not very good at measuring the
quality of an idea consumers are
o Many ideas are available publicly and are not available
publicly
Pick the best idea which is received by consumers
Dont impute wild success to your brilliance or failure to your
incompetence. Exogenous factors matter a lot. The race is not
to the swift but time and chance happen to all men.

ASSESSING OPPORTUNITIES
Which of several opportunities should I pursue? Assess against
these criteria:
o How significant is the need? Number of potential
customers? Depth of pain?
o How effective is the solution at addressing the need?
o Will there be a large gross margin?
o How hard will it be to acquire customers?
o Are we the best team to go after this opportunity?
Criteria:
o Big market
o Big gross margins
o Strong recurring revenue streams
o Take advantage of my unique product development
capabilities
o Utilize our sourcing connections
o Flow through supply chain capabilities
o Leverage sales capabilities
o Will resonate with our friends in the press
o In markets with large, obvious potential acquirers
(good exit possibilities) Return on Investment
TO DO: Assess Kleos HR, Kleos Change, Afreecon, YEAP and
CIA using the tournament approach
THE TOURNAMENT APPROACH

More details in his book.

I can only minimize uncertainty but can mitigate it by diversifying

across several opportunities and delay commitment until more
information is obtained about the promise of the opportunity.

Cast your bread upon many waters and you will know which
shall grow
I need to run my own tournament. Consider 5 10
opportunities, invest a little in exploring and nurturing each
and then invest and develop 1.
Any problem with the business can be viewed as a tournament
the name, the logo etc. I can develop 20, 20, 3, and select
one. I need to test everything with consumers to get the best
opportunity

DECISION: For Afreecon:

My unfair advantage is the LBS/EDC community
My strategy is the pull strategy

TO DO:
1. Decide: Push or pull innovation?
2. Source for opportunities from customers
3. Assess my opportunities against the relevant criteria. Consider
5 10 opportunities, invest a little in exploring and nurturing
each and then invest and develop 1.