PowerPoint Template - 840145.72116.30la.com.cn840145.72116.30la.com.cn/wenjian/2-Identify entrepreneurial... · The invention of jeans ... canvas, Levi's cleaned these old tents and

2014-6-9

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清华大学经济管理学院高级培训中心

Entrepreneurial Opportunity

Zhiyang Liu

上海财经大学刘志阳讲义

Essential feature of entrepreneurial opportunity

Generating process of entrepreneurial opportunity

content Identification method of entrepreneurial opportunity

Test entrepreneurial opportunity

Screening method of entrepreneurial opportunity


The invention of jeans

The knee part of pants particularly easily to worn out, whereas in the mining area, a lot of people abandon the canvas, Levi's cleaned these old tents and collected to make pants, then sold to workers, and the sales is very good.

Case study

http://edu.people.com.cn/GB/8216/47717/47727/3629743.html

2014-6-9

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Levi’s took the problem as an opportunity, finally

realize the dream of getting rich, this is because he

has an optimistic, cheerful positive mental attitude.

All success, all wealth, began in mind.

--Famous success master Nabo Lun Hill

The interpretation of the success


The interpretation of the entrepreneurship

Why Levi’s instead of others generated the idea of new

product? How to transform the idea to entrepreneurial

opportunity?

Two key factors:

（1）Better access to information—Information can help to

develop new ideas

Influencing factors: knowledge? entrepreneurial alertness ?

Family?

（2）Developing information better-- information can become

a business opportunity

Idea Creativity Entrepreneurial

opportunity


Idea

Opportunity

Attractive

Availability, timeliness,

durability

Creativity

Can it be done?

Can I do it?

Is it worth doing?

Do I want to do it?

Convenience of information

acquisition

（Entrepreneurial intention,

alertness, cognitive ability,

resources endowment, prior

knowledge）

Ability to develop information

（Creativity, learning ability）

Resources analysis,

Motivation confirmation

1、Generating process of entrepreneurial opportunity

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Entrepreneurial motivation

Cognitive ability

Alertness

Resource endowment

(Social network)

Learning ability

Creativity

Convenience of

information

acquisition

Ability to develop

information

Enhance the

ability to identify

opportunity with

potential value Priori knowledge


1、Priori knowledge

Previous experience in specific industries can help

entrepreneurs to identify opportunities. This is called

“Corridor Principle”. It refers that once a entrepreneur

establish an enterprise, he began a journey. In this journey,

the "corridor" to entrepreneurial opportunities will become

visible. This principle also provides insights that someone

involved in one industry will find the new opportunity within

this industry more easily than those observe this industry

from outside.


2、Cognitive factors

Opportunity identification may be an innate skill

or a cognitive process.

Most entrepreneurs think they are more alert

than others

To a large extent, alert is a kind of learned skills;

Who has more knowledge in some area tends to

be more alert to the opportunity in this field than

others.

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3、Social network

The depth and breadth of personal relationship

network affects the opportunity identification.

Strong ties and weak ties

Strong ties help to strengthen the maintenance

entrepreneurial opportunity, weak ties helps

individual to identify the destructive

entrepreneurial opportunity.


4、Creativity

Opportunity identification is a process to create, is

the repeated creative thought process. On the

basis of hearing many interesting things, you can

easily see creativity in the formation of products,

services, and business process.

For an individual, creative process can be divided

into five stages, respectively are preparation,

incubation, insight, evaluation, and elaboration.


2、Feature of entrepreneurial opportunity

Entrepreneurial opportunity(or business opportunity) is

attractive, more durable, and timely space of a business, is a

possibility to meet the unmet needs effectively. It finally

reflected in can create value for customers /clients or

increase the value of a product or service.

Austrian economists think the fundament

difference between entrepreneurial

opportunity and business opportunity is

the profit/value creation potential.

Entrepreneurial opportunity has the

potential to create excess economic

profits, but business opportunity can only

improve existing profit levels.

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Attractive, represent a future state of customer

desire.

Availability, attached to the product/service which

can create/increase value for buyer or end-user.

Timeliness, must seize the opportunity.

Durability, must be in a continuously zooming

window of opportunity.


Window of opportunity model

O A, incubation stage

A C, window of opportunity

After C, market becomes mature, window of opportunity is closed

O C, little people realizes it is a good market opportunity.


E-stamps and Stamps.com are two start-up Internet

companies, they allows customers to buy stamps in

the Internet and print it at home.

But both of them failed. Since the idea failed to

create enough value for the buyer..

Case study

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Inside the restaurant, the guests can experience the pleasure of eating dark, enjoy the special food (mainly package, the lowest price 168 yuan), can also enjoy the creative "dark drama“ prepared by the restaurant for the guests. In addition to this, the founder adds more features to the restaurant, such as providing wedding banquet and conference services, etc.

But some customers said: It is not convenient to have dinner in darkness.

Question: can you tell me the dark restaurant can

be creative entrepreneurial opportunities? The

reason?

Evaluate the business model

Darkness restaurant


3、Identification method of entrepreneurial

opportunity

In essence, successful entrepreneurs are people

who identify entrepreneurial opportunity, and transform

it into successful enterprise.

Opportunity identification is a combination of art and

science. Entrepreneurs must rely on intuition, makes it

become an art; also must rely on purposeful action and

analytical skills, makes it become a science.


3.1 Generating method of idea

市场细分工具

(Focus Groups)

头脑风暴法

(Brainstorming)

强迫关系法

(Forced Relationship)

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市场细分 (STP)

Segment a large market into several

small market, and customer in each

small market has similar demand,

buying mentality, consumption pattern,

means of purchase. Then enterprises

can select targeted customer base, to

understand the status of competitors,

and make the corresponding

management strategy he tactics to

achieve the goal of enterprise.

STP: 市场细分（market segmentation）

目标市场（market targeting）

市场定位（market positioning）

sweet

cold hot

salty


Market segmentation in clothing industry

application

Suit Ancillary

products

casual

clothing

Chinese-

wear

sportswear Work

clothes

Old man

Young and

middle-aged

man

Boy

Girl

Young and

middle-aged

woman

Old woman

industry


Brainstorm

Group discussion there is no clear limit

theme, beneficial to stimulate new ideas.

Principle：

（1）Don’t comment any opinion

（2）Encourage arbitrary

（3）Hope to have a lot of ideas

（4）Encourage to combine and improve others’ ideas

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Forced Relationship

Paper and soap ?

Book and tea leaf ?


Example

Format Relationship/Combination

Design/Type

Adjective

Like-paper soap Like-soap paper

Slice Help to clean and dry in travel

Noun

Paper soap

Stiff paper impregnated with soap,

which is used to clean appearance Adverb

Soap coated

paper Soap wet paper

towels Soap clean paper

Soap customized into a book In the process of spreading and

dipping Goods used to clean wallpaper


3.2 The method to increase creativity

Entrepreneurial opportunity is the

interactive process between

entrepreneur and external environment

(the source of opportunity).

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Environmental

change Economy

Social demography

Technology

Political & institutional

industrial structure

Characteristics of

entrepreneurs previous experience

cognitive factors

Social network

Creativity

•Gap and defects in

product, service, material

and organizational ways

•Find the possibility to

improve/create the

relationship between

objective and means

New product, new

service, new

material and new

organizational ways


（1）Observe the trend

The first way is to observe the trend and study how do they create opportunity for entrepreneur. The trend related economy, social, technology, political and institutional, industrial structure are most important.

Two ways to master these trends:

（1）Carefully study and observe these trends.

（2）Buy customized forecasts and market

analysis from independent research company.


Find entrepreneurial opportunity from the change

——Opportunities never favor people without preparation

Famous management gurus Peter drucker defined

entrepreneur as those who can "looking for changes, and

positively response, treat it as an opportunity,then make full

use of it ".

Sometimes, identify opportunities can through more simple

ways, such as intuition, chance, etc. They often can cause

business ideas

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The process of identifying opportunity is rarely

considered. At the beginning, someone just aims to

solve a practical problem. But in the process of

problem solving, he realizes the solution will have a

bigger market appeal.

The founder of “Common instutions” said,“every

problem is a chance to be skillfully hide。”

（2）Solve the problem


（3）function analysis method A：combine a variety of functions

“Southeast freeca” which is launced in March

2000, combines the function of traditional car,

tourist bus and SUV.


B：Increase some new funcitions

Toshiba Carrier air conditioning can discharge

"anion".

A porcelain lamp can be developed into voice, touch and time control lamp after added induction system, and the price changes from 27 to 98,but average cost is only 7.

After adding a loose-leaf notebook and ball-point pen, the telephone set sold well.

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C: Try to subtract some functions

IKEA sells furniture components instead of complete furniture. And sales reaches 1.7 billion dollars.


D：Change the original function

Culture rubbish comes from the

refurbishment of Statue of Liberty


Hourglass becomes the calculagraph of

public telephone.

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Opportunity may knock only once, but

temptation leans on the

doorbell.


Type of entrepreneurial opportunity

According to the source entrepreneurial

opportunity：

Problem-opportunity

Trend-opportunity

Cinbination-opportunity


4、Screening method of entrepreneurial opportunity

Market assessment criteria

Profit-seeking assessment criteria

TIMMONS screening method of

entrepreneurial opportunity

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4.1 Market assessment criteria

1、Market positioning：

A good entrepreneurial opportunity must have

specific market positioning, focuses on meet these

customers’ needs and bring customers value-added

effect.

When assessing the entrepreneurial opportunities,

we can check whether the market positioning, the

customer demand analysis is clear ? Whether

customer contact channel is smooth? etc. Then to

determine the market value of entrepreneurial

opportunity may create.

Differentiation can create blue ocean


2、Market structure：

Do five forces analysis for the selected market,

including entry barriers, bargaining power of

suppliers, bargaining power of customers, threat

of substitute products and existing competition.

Through this analysis, we can know the position

of new enterprise in the market and the possible

reactions of competitors.

Low cost to overcome the entry barriers


3、Market size：

The size and growth rate of market is also the

important factors affect the success of new

enterprise. Generally, if the market size is large,

entry barriers are relatively if you want to enter a

mature market, though the market size is large,

the profit margin is very small due to market

saturation.

Conversely, in a growing market, usually is a full

of business opportunities market, as long as the

timing of enter is right, must have profit space.

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4、Market penetration：

The strength of the market penetration means

the speed of new product to be accepted by the

consumers and the acceptant depth of degree.

Smart entrepreneurs choose the right time to

enter the market, that is the market demand is

about to grow sharply, and you are ready to wait

for the order.


5、Marker share：

From the expected market share objective of the

entrepreneurial opportunity, we can see the future

market competitiveness of the start-up company

>20%, can become the market leader

<5%, has low market competitiveness, may affect the

future listed value of the enterprise

Especially in the high-tech industry which has the feature

of winner-take-all, new enterprise must have high market

share if they want to be invested.


6、Cost structure of the product：

Cost of the product structure, also can reflect the

prospects of a new enterprise. For example,

from the proportion of material and labor costs,

the proportion of variable cost and fixed cost, we

can judged the ability to create additional value

and future possible profit space.

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4.2 Profit-seeking assessment criteria

1、Reasonable after-tax profit：

>15%, an attractive entrepreneurial opportunity

<5%, not good entrepreneurial opportunity


2、The time required to achieve break-even：

Generally,

<2 years, reasonable;

>3 years, not good entrepreneurial opportunity

Exceptionally,

Some entrepreneurial opportunities do need go through

a long time. By these upfront investment, it can create

entry barriers and ensure sustained profitability.


3、Return on investment：

Generally,

>25%, good

<15%，bad

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4、 Capital demand：

Investors will welcome entrepreneurial opportunity

whose capital demand is low.

Generally, the more knowledge intensive entrepreneurial

opportunities, the lower the demand for capital, and

return on investment will be higher. So at the beginning,

do not raise too much money. The best way to create

capital is e surplus accumulation. And lower capital, will

help improve the EPS, and also can improve the future

listed price.


5、 Gross profit rate：

If the of entrepreneurial opportunity has high gross profit

margin, then the risk is relatively low, also it is easier to

achieve break-even.

Generally,

>40%,good;

<20%, bad.

The gross profit rate of software industry is often very

high.


6、 Strategic value：

Whether a new enterprise can create strategic value in

the market is also an important evaluation index.

Strategic value is closely related to the industrial network

scale, benefit mechanism, degree of competition. And

the added value effect entrepreneurial opportunities

create for the industry value chain is also closely related

to the business strategy and business model.

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7、The vigor of capital market ：

Generally, new enterprises are easily to create

value-added effect in active capital markets, so

the vigor of capital market is also an external

environment index to evaluate entrepreneurial

opportunities.


8、 Exit mechanism and strategy：

All investment aims to recycle, so exit

mechanism and strategy is an important index to

evaluate entrepreneurial opportunities.

The value of enterprise should be decided by

trade market, and the trading mechanism will

affect the elasticity of exit mechanism. Since the

difficulty of exit is generally higher than enter, so

an attractive entrepreneurial opportunity should

have a good exit mechanism and strategy.


4.3 Timmons screening method of entrepreneurial opportunity

Divided into eight categories, 40 indexs. 1. Industry and market

2. Economic factors

3. Conditions of the return

4. Competitive advantage

5. Management team

6. Fatal defects

7. Entrepreneur's personal standards

8. Strategic differences between ideal and reality

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Standard Highest potential Lowest potential

（一）Industry and market

1 Market

（1）Demand Decided Uncertain

（2）Consumer Can accept ,willing to pay Not easy to be accepted

（3）Return to customer <1 year >3 years

（4）Value added High Low

（5）Product life cycle Long Short

2 Market structure Emerging industry or

imperfectly competitive

industries

Perfect competition, highly

concentrated or maturity &

recession industry

3 Market size Big, sales can reach $10

millions to $10 billions

Uncertain or sales $<10

millions

4 Market growth rate 30%-50%, or even higher Very low or <10%

5 Market capacity Production capacity of existing

vendors is almost completely

saturated.

Not enough capacity

6 Expected market share Can be leader in this market in

5 years, >20%

<5%

7 Cost structure Has cost advantage Declining cost



（二）Economic factors

8 Time to achieve break-even 1.5-2 years >4 years

9 Time for positive cash flow Breakeven point will not increase

gradually

>4 years

10 Return on investment >25% <15-20%

11 Capital requirement

Low, can obtain finance High

12 Internal rate of return potential Annual growth rate of sales >25% <15%

13 Free cash flow characteristics Accounts for sales >20-30% <10%

（1）Growth of sales 中等到高（15%-20 %） <10%

（2）Asset intensity Low proportion to sales High

（3）Spontaneous flow of capital Operating funds is not much, demand

is gradually increasing

High

（4）R&D/capital expenditure Low High

（5）Gross profit rate Lasting,>40% <20%

（6）After-tax profits Lasting,>10% Low



（三）Conditions of the return

14 Value-added potential High strategic value Low

15 Exit mechanism and strategy Exist good ones Undefined

16 Capital market environment Beneficial，good flow Adverse, credit crunch

（四）Competitive advantage

17 Fixed and variable costs Low High

18To control the cost, price and distribution Strong Weak

19 Entry barriers

（1）Ownership protection High Low

（2）competitor response time Slow Fast

（3）Advantage of laws and contracts Has Not has

（4）Relationship & network Good Limited

（5）Key personnel Outstanding team(Level A） Level B or C

（五）Management team

20 Entrepreneurial Team Combination of good managers Weak/individual entrepreneurs

21 Industry and technology experience Reached the highest level in the

industry.

Undeveloped

22 Integrity High Suspicious

23 Cognitive honesty Know lack of what Don’t want to know

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（六）Fatal defects

24 Fatal defects Not exist More than one

（七）Entrepreneur's personal standards

25Match with goal Match well Not match well

26 good/bad aspects Can succeed under limited risk Linear

27 Opportunity costs Entrepreneurs can bear loss of salary Meet the status quo

28 vision not just to make money Just to make money

29 Risk/return permit degrees Calculate the risk Risk aversion or gambling

30 Stress tolerance Behave well under stress Collapse under stress

（八）Strategic differences between ideal and reality

31 Match degree Match well Not match well

32 Team Best Level B

33 Service management Have a good service concept Think it unimportant

34 Timing Go with the stream Upstream

35 Technology Breakthrough technology, no competition

Many substitutes or competitors

36 Flexibility Good adaptability Slowly, stubborn

37 Business oriented Always looking for new opportunities

Regardless of the environment and

business chance

38 Pricing Same with market leader Exists competitors sell cheaply

39 Distribution channel Can acquire, or already has Unknown, or can’t acquire

40 Fault-tolerant space Allow to fail Intolerance, rigid strategy


Please screen the entrepreneurial

opportunity rapidly according to the solar

compression dustbin

How to test the opportunity?


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Can these indexes adapt to China?

Three most important factors:

(1)Entrepreneurial experience；

(2)Work experience，only people has more than 10

years work experience can identify all kinds of

business behaviors and get the ability to forecast

and capture business

(3)Management experience, prior knowledge

structure of entrepreneur is very important when

identifying and evaluating opportunity.


Avoid and protect against fatal defects of entrepreneurial opportunity

Why exists fatal defects？

• Technology and products are not mature

• Concept deviation, opportunity transient

• Low entry barriers, the competitors are

more and stronger

• Large investment and high cost, profit time

is long, slow turnover

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Common mistakes made by entrepreneurs

Develop customer demand from products,

instead of developing products from

customer demand

IBM requires Seagate not to change the size of drive

Estimate the time to achieve breakeven and

spending mistakenly

NVCA research showed:

If innovation opportunity window shorter than 3 years, the

failure rate is 80% or above. If it is longer than 7 years,

the success rate of innovation enterprise is as high as

80% above.


Case

In 1991, a young engineers developed the "Web" (World

Wide Web, WWW), Microsoft did not cause enough

attention, Bill Gates said: "in 1993 saw the product,

imagine all the company's advertising will attach your own

Web site, I think it must be crazy"

Netscape (Netscape) was founded in 1994, launch a web

browser. Gates woke up in 1995, he took the risk of having

lawsuit with netscape and meet the U.S. justice

department antitrust lawsuit to launch add Internet explorer

in Windows95,and provide their own "Microsoft Network”.

Comment: Choose to do business in the growing industry

has high profit margins, the chance of success is much

bigger than in a narrow industry.


Technology

strategy

Market

strategy

New entrants:

promote new

markets

Incumbent:

Block the destructive

strategies of new

entrants

New entrants: push

low-end damage

Incumbent: set up

branches to

innovate Incumbent:

have no choice but to

promote the

maintenance

innovation

New

technology

Secondary

market

Mainstream

market

Christensen: "vision: the industry predicted using theory of change the future",

the commercial press, 2006

Old

technology

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Test entrepreneurial opportunity

Interest and

attractiveness of

target market

Sustainable

advantage

Team

Mission, and

personal

aspirations

and tend to

take risks

Ability to perform critical success factors

Social

network

Macroscopic

Microcosmic

Market Industry

Market

attractiveness

Industry

attractiveness

清华大学经济管理学院高级培训中心

http://edu.people.com.cn/GB/8216/47717/47727/3629743.html

Documents

PowerPoint Template - 840145.72116.30la.com.cn840145.72116.30la.com.cn/wenjian/2-Identify entrepreneurial... · The invention of jeans ... canvas, Levi's cleaned these old tents and