“Pathways to New Ventures: Identifying and Exploiting New Business Opportunities”
Dr. Jill Kickul Elizabeth J. McCandless Professor of Entrepreneurship Simmons School of Management Office Hours: by appointment Jill.kickul@simmons.edu (617) 521-3877
Required and Recommended Text and Readings Taking an Idea to Market: How to Turn Your Idea into a Successful Business Venture. Molly Tschida Brown (National Association of Women Business Owners) www.babosites.com. Handouts given in class and linked articles on Web CT, posted as class progresses. Course Description This course provides an overview of the opportunity recognition/evaluation process by examining how people, the industry, and the social environment interact as an individual identifies or creates and shapes entrepreneurial and organizational opportunities. Entrepreneurial strategies for information gathering and analysis are introduced as well as strategies for developing the entrepreneur's network of intellectual and financial support. Learning Objectives The learning objectives are focused on investigating the critical factors involved in the conception, initiation, and development of new business ventures and opportunities, including: Identification of characteristics of prospective entrepreneurs and intrapreneurs. Opportunity identification and recognition process. Analysis of the different sources of entrepreneurial opportunities (personal, economic, industry). Market and industry analysis for products/services (new or improvement of existing). Overall feasibility and planning process within new or existing organizations. Initial support and financing essential to the implementation of the identified opportunity.
1
The course model includes:
Opportunity Recognition
Opportunity Evaluation
Industry Needs
Asymmetries in Knowledge, Awareness, & Information
Opportunity Surplus and Resource Scarcity
2
Course Requirements: Successful completion of this class includes the following five deliverables and performance measures: Deliverable #1 - Knowledge of Industry Check (KIC) 30% of final grade - 10% presentation, 20% written plan This assignment is the beginning of understanding an industry and the opportunities within it… A complete industrial analysis (KIC) usually includes a review of an industry's recent performance, its current status, and the outlook for the future. Many analyses include a combination of text and statistical data. More details about the KIC will be discussed in class. There are many sources of industry analysis: investment firms, business and trade periodicals, trade associations, and government agencies. To conduct a thorough industry analysis, include a variety of sources (resources to get you started). MultexNET: Provides real-time and full-text investment, corporate, and industry reports supplied by over 700 brokerage firms, investment banks, and independent research providers. Examples include Merrill Lynch, Morgan Stanley, and Salomon Smith Barney. You can limit searches to "industry reports only" and use the pull-down menu for industry types, or enter keywords. The advanced search page provides additional options. Most of the reports are in PDF format. For emerging market reports, see also ISI Emerging Markets. Standard & Poor's Industry Surveys U.S. Industry and Trade Outlook Hoover's Industry Group Snapshots Internet Intelligence Index: Created by the Fuld & Company Library, this site provides "links to nearly 600 intelligence-related Internet sites, covering everything from macro-economic data to individual patent and stock quote information." Notice the sections on "Industry-Specific Internet Resources" and "International Internet Resources" further down the page. Fuld & Company offers management consulting in competitive intelligence. Business.com: Covers over 28 industries, from accounting to utilities. Business.com provides a directory of industry web sites. Deliverable #2: Opportunity Organizational Proposal (OOPs!) 30% of final grade - 10% presentation, 20% written plan If you plan to start or enhance an existing business, every business professional and investor you meet - lawyers, bankers, accountants, other entrepreneurs, business "angels" of all types - will ask the same thing, "Is it feasible?" The OOPs and a business plan defines the essence of entrepreneurship or small business as taught in America's business schools today. Thus, a central component of this course is the opportunity for the students to develop a written venture OOPs which will be
3
presented for evaluation in front of the class. Each OOPs should contain (at the minimum): 1. 2. 3. 4. 5. Executive Summary Company Description (the management team, key roles) Market and Competitor Analysis (stems from the KIC) Market, product, and manufacturing description Financial Analysis (e.g., start-up costs; possible financing alternatives)
In assisting you with your OOPs, the attached Appendix has additional information that can be used to organize the feasibility of your opportunity. Deliverable #3: “Living” Start-Up Class Discussions 10% of final grade In this class, we will be analyzing several different cases (all based on an entrepreneur's experience in starting and/or growing their business). The anatomy of a start-up case approach provides you the opportunity to become immersed in the complex, ill-structured, and sometimes chaotic circumstances in which organizations operate. The following is a list of issues you may want to consider as you learn about the companies and entrepreneurs we will engage with: 1. The main issue(s) of the new venture The trends within the industry The company and its founder(s): overall strengths and weaknesses Recent company performance 2-3 key problems 2. Entrepreneurial analysis The Competitive Arena Major Changes in the Market Significant Socio/economic trends Changes in production and marketing technologies The financial posture of the firm 3. Strategic Recommendations (2-3) Identification of activities Timing of activities 4. Finally. "What Can Be Learned From this Entrepreneur's Experience?" (i.e., key issues that can be taken away and applied to your own venture or organization) Result of past marketing strategies Production capabilities Planning and control systems Organizational and leadership style (TOWS analysis)
4
Presenting the Case: Your class will break into three groups for student-led case discussions which will take place during the following classes 3, 8, and 9. Time will be given during Class #1 to determine who is in your group and for what class your group will lead the discussion. I encourage you to form groups with people you have not worked with previously to expand your own personal network here at Simmons. The Discussant Group is responsible for leading a one hour class discussion of the case (with my assistance, as necessary). The entrepreneur from your “living case” will be present for your discussion and will follow your class discussion with brief commentary and to answer questions. In addition to leading the case, your group is responsible for providing your classmates with a preparation assignment. This assignment should include briefing information and links about the case you will be leading the following week. For example, if you were leading living case #2, your preparation packet would need to be handed out for the class the week before. Some ideas about preparation materials include: Basic information provided by case company on the web including bios of company founders, company history and press releases Links to relevant articles about the industry Links to competitors (local, nationally and internationally) At least two specific questions for classmates to consider which connect the case with topics for discussion of the upcoming class.
The preparation assignments can be anything you think would enhance the class experience of the entrepreneur and their company. The goal is to inform your classmates, not overwhelm them with information (I am anticipating a page of links and instructions). You should e-mail me your preparation information eight days before your class which I will then post on Web CT for the class. This preparation should not require you to contact the entrepreneur or company in advance. If you think you need to do this, please contact me before doing so. Some Recommendations for Discussant Groups Each “Discussant Group” will be asked to lead the discussion of the cases and bring in their own unique perspective to the situation. Since it is assumed that everyone has read the cases, the discussants should focus their questions for the class on the strengths and weaknesses of: (1) the characteristic(s) of the founder(s)—from the article, what kind of entrepreneurial personalities do they possess? (2) the idea (product/service concept)—what do you think of their overall business idea? How can they “add value” to their existing product/service line?
5
(3) financing used in this start-up—what type of financing do they use? Why? How do you believe they were able to attract the amount of capital they did? Would you invest in this type of business? (4) the market opportunity—is this a true market opportunity, or just a fad? How can the business position itself so that they always have the ability to seize the opportunities in the marketplace? (5) other issues that the discussant feels are relevant to entrepreneurship and new venture management (e.g., the risks and rewards of the start-up).
Each group should feel free to pose questions directly to the class in order to generate discussion, alternative viewpoints and perspectives, and feedback. Deliverable #4: Journaling 5% of final grade Each week before class, you will have the opportunity to journal your own thoughts and ideas on specific topics related to opportunity identification and evaluation. Topics will be different each week. These are not formal writings, but rather an opportunity for you to thoughtfully reflect on the subjects being presented in class and brainstorm new variations of your ideas/opportunities. These reflections should be posted on Web CT by 5 p.m. Sunday before class. You should also bring a hard copy or have the files available on your laptop (if you bring one to class) to the following class. Deliverable #5: The Entrepreneurial Interview 15% of final grade While you are working on your KIC, you will also have the chance to interview an entrepreneur within your chosen industry and then write-up your experience. This entrepreneur expert can give you insight into how they entered the market, identified the opportunity, and implemented their ideas within their own businesses. Each interview write-up should contain the following elements (may differ based on the entrepreneur and industry field, so feel free to consult with me): Overview of opportunity and description of business Market, product/service description Market and competitor information (relevance in the exploitation of the opportunity) Initial financing strategies Expansion strategies and exit strategies Management roles and resources used (psychic capital and social networks used) The write-up should be no more than five pages, double-spaced in 12 point font. You should also interview your entrepreneur to our all-day “Entrepreneurial Showcase” on Saturday, April 9. This is an opportunity to hear and learn from entrepreneurs across a broad spectrum of industries and businesses about how they leverage their own resources, talents, and capital to start a new venture.
6
Deliverable #6: Small Group and Class Participation 10% of final grade The success of this course depends not only on your attendance, but also on your participation. The more you participate, the more fun and valuable the course will be for all of us. Participation is measured using several criteria. These include actively participating individually during the "discussion" part of our sessions, in small group meetings, and in group presentations. Evaluation of your participation will be based on the following criteria: When questions or cases were presented to the class, how active (as opposed to inactive) was your participation? When you answered questions or commented on reading-related or discussion-related material in class, how accurately (as opposed to inaccurately) did you use concepts previously discussed? When you asked questions or commented on reading-related or discussionrelated material in class, how creative (as opposed to redundant or repetitive) was your thinking? When you were asked to answer case questions to solve organizational problems (a career as an organizational consultant offers big buck ($$$!), by the way), how specific, hence implementable (as opposed to vague, hence useless), were your suggested remedies to problems raised in class? When you criticized others' ideas (including the instructor's), how constructively (as opposed to destructively) did you state your criticism? How many times were you absent when your small group was working on inclass and live case (so that your group missed your contributions)? One group absence may not adversely affect your participation grade; more class absences will lower your final grade.
BREAKDOWN OF COURSE REQUIREMENTS: Requirements KIC Analysis KIC Presentation (feedback from all) Anatomy of a “Living” Case (Discussants role) OOPs Plan OOPs Presentation Journaling Entrepreneurial Interview Class Participation Percentage of Final Grade 20% 10% 10% 20% 10% 5% 15% 10%
7
GRADING: A 92-100 A90-91 B+ 88-89 B 82-87 B80-81 C+ 78-79 C 72-77 C70-71 D+ 68-69 D 60-67 F 59 and below
8
APPENDIX
THE FEASIBIILTY STUDY OUTLINE Guidelines for Your OOPs I. Description of Your Business What business are you really in? Describe your product or service in the most concise way you can, and think beyond the characteristics of the product or service to the experience that you hope the customer receives from buying the product or service. II. The Product/Service Unique Features: Benefits What are the unique features of the product or service? How do these features meet your customers’ needs or preferences? What are the benefits of this product or service compared to the competition? Describe your product or service very simply, and use photos or drawings to illustrate how it works. Unique Features: Limitations What are the specific shortcomings of the product or service? Can it become obsolete soon? Is it perishable, difficult to use or install, or are there legal restrictions? An honest assessment of your product or service is extremely important during this analysis. You do yourself no favor by being in denial, or failing to see the disadvantages before you go into business. Noting them now will help you prepare solutions or ways to minimize these issues. Stage of Development Is the product still in the idea stage, or is there a model or working prototype available? Have any samples been manufactured? If it is still in the idea or prototype stage, what is the time frame for getting it ready for production? Legal restrictions and rights List any patents, copyrights, trademarks, or licenses that apply to your product or service. If you are entering into a franchise agreement, partnerships, distributorships, etc., these should be discussed in this section. Seek the assistance of patent attorneys or intellectual copyright specialists for assistance. Also list the government regulations you must adhere to, including any approvals such as FDA, EOA, OSHA, IRS, Secretary of State, etc., and research zoning restrictions carefully. If you will be home-based and your clients will be coming to your house, will this be impacted by your neighborhood’s zoning restrictions? Insurance Requirements Research the liability of your product or service and consult an insurance specialist to be sure you are protected adequately. This will depend on the nature of your business. A flower shop that sells floral arrangements is in a different liability situation than a pet grooming business, for example. If you have employees, you will need insurance to protect them from harm also, along with any insurance benefits you want to provide your staff. Trends related to the product or service
9
How will you keep your finger on the pulse of change in your product or service area. What trends are likely to occur in the way the product is used, or what features it offers, for example? Production or service delivery costs Will you be producing or sub-contracting out the manufacturing or delivery of your product or service? List all the costs, including labor, supplies, shipping, repairs, etc. III. The Industry and Market Current Industry Describe the industry as specifically as you can. There are some excellent sources in your college or public library that can help you determine the size of the industry, location of the industry (local, regional, national or global), and average sales and profitability for the industry. For example, the Risk Management Association provides industry-specific data based on the SIC (Standard Industry Classification Code) that can tell you what the average revenues are for a particular industry, and what profits you might expect to earn. Market Potential for this Industry Is the industry in a period of decline, stability, or growth? What is the market demand likely to be for the next 1 to 3 years? Talk to people in the industry as well as potential customers for their ideas about where the industry might be headed. Consider how technology, or the global economy might affect the market potential for the business. Research trends in the industry. The Competition Who are your primary competitors, and what their distinct advantages and disadvantages. Consider not only your direct competitors, but also your indirect ones that might be selling a substitute for your product or service, or bundling your product with something else they provide. Your Customers Who are your customers? Demographic information tells you all about your customers’ personal characteristics, such as where they live, how much household income they have, and how many children they have. You can find very specific information in your library or on-line using zip codes for communities. What are your customers’ preferences, values, attitudes that relate to your business? How will you find out what your customers think or intend to buy? How can you find out what problems they have, what they need, or what they want that they don’t know yet! Use your creativity to learn as much as you can about your potential customers. If you have more than one target market, do this for each market segment. It’s important to note the different benefits and limitations for each customer group. Market Penetration How will you reach your target customers? What forms of distribution or selling will you use? How will your potential customers become aware of your business? How will you advertise?
10
IV. Financial Projections Pricing How much will you charge for your product or service? Do a break-even analysis, and list all the assumptions behind your pricing? Sales Revenue Forecast How much of your product or service will you expect to sell? What will your gross revenues be? What percentage of market share do you think you will reach in one year? Three years? Cost Forecast What does it cost to produce, distribute, deliver etc. your product or service? If you plan to manufacture goods, consider the cost of raw materials, labor, and delivery of goods. If you plan to retail or wholesale goods and services, consider mark-up, inventory costs, and freight. Refer to the RMA (Risk Management Association) studies for more information to help you compute these costs. See www.rmahq.org Gross Profit What is your net sales minus cost of goods sold? Do this for each product or service and compare to industry averages. Operating Expenses What marketing expenses (advertising, etc.), administrative (clerical and management), and general expenses you expect to incur? Be sure to state your assumptions about these figures. Profitability What is your expected net profit? After you have derived your gross profit above, subtract other expenses you expect to incur, such as rent, insurance, and salaries. This will help you determine your net profit. V. Future Action Plan Start-up Capital How much money do you need to start the business? In addition to the cost of goods sold you calculated, and your marketing expenses and administrative expenses, what additional costs do you have, such as renting space, utility expenses, and salaries? Sources of Start-up Capital Where can you obtain the money you need to start the business? Consider all the sources available to you, such as personal savings, family and friends, bank loans, investors, etc. Further Information Needed What are you uncertain about? Whom could you ask? Where can you find this information? Your analysis is incomplete if you haven’t considered what it is you don’t yet know.
11
Writing a Business Plan The feasibility analysis will help you get started writing your business plan. You will have the information you need to address the competitive advantages and disadvantages of your business, and the strategies you will use to meet your goals. Support Needed List the individuals or groups you could consult for advice. Consider developing an advisory board consisting of people with experience in your industry, and professionals from other industries who might be expert marketers, for example. Do you have an attorney, accountant, web site designer, etc. who could help you when needed? Make a list of all the supporting actors your business may need in the future.
12