The whole idea of using an opportunity evaluation screening process is to stretch one’s thinking away from just looking at starting up any kind of business based on a “gut instinct” or “terrific idea”. How often have we heard this rationalisation?More likely than not, the entrepreneur’s instinct is correct but that comes with deep experience and learning from the “hard knocks” of failures.
The question is whether it is possible to take such experience another step further by employing evaluative tools and putting an idea into an opportunity evaluation framework to assess its viability. It is like having a “road side evaluation” of an idea as a potential opportunity but done objectively rather than subjectively and without the huge price tag from a consultant or merchant banker!
Entrepreneurs see ideas all the time, however, not every idea is an opportunity for commercial or social exploitation. To be an opportunity capable of reaping sustainable rewards, it really requires one to look for a “problem” and preferably a “big problem” within an industry. The more familiar one is with the industry, the clearer the picture is likely to be.
Take for example the beef industry. What is the “big problem” there? It is one thing to say that there is a shortage of beef. Anyone might be able to see that, but it is another to actually identify a problem caused by the shortage or identify the problem causing the shortage. Is it because we cannot rear cattle fast enough (supply and demand issue) or the beef is really of poor grade (quality control issue). A possible solution (depending on the problem identified) might be to find a genetic solution to rear cattle at half the time thereby increasing production but maintaining quality.
The first question to ask, however, is: what is the problem that requires a solution that might give rise to a sustainable opportunity?
This question might lead one to investigate the external environmental and market conditions using tools like PEST ; the strength and weaknesses of the players in the industry using a tool like SWOT or an action plan to be taken using another tool like TOWS ; the existing competition using a tool like Porters Five Forces . One might even look at the industry’s value chain; its life cycle; its need for continuing improvement; its growth potential; its financial ratios; etc.
However, by definition a “road side evaluation” process must be quick and simple but yet effective. It must also be applied in the context of the possible value chain of the industry in which the problem arise. Without necessarily using every tool or model to pull out the critical data for an evaluative process, the simplified approach of asking the following critical questions (mentally or otherwise) will support the “gut instinct” approach and ought to then lead to investing time for further research and investigation.
These questions include but not limited to:
- Who are the principal players in the industry?
- Is there a problem or a “big problem” within the industry?
- What is the compelling need?
- Can there be a solution which will meet that compelling need?
- Will it cause detriment (physically, psychologically, financially) not to have that need met?
- Are there choices or alternatives which will lessen the requirements for such a solution?
- What are the products or services currently on offer that might solve that need?
- What are the products or services not currently on offer that would solve that need?
- Who are the likely buyers or customers that could be identified by name?
- What is the value proposition for these buyers or customers to buy the solution?
- What is the price of such a solution that buyers or customers will pay?
- How will buyers or customers get hold of the solution?
- Who will the channel of distributors be?
- What is the competitive advantage of the solution?
- Is the solution legally protected?
- Why am I able to deliver the solution?
- Is the solution scalable?
- Is the solution sustainable over a period at least 3 to 5 years?
- Who are the potential purchasers (identified by name) of my solution after I have built the business within 3 to 5 years time?
A quick mental check down such a list (which could easily be condensed to an eight point list) would greatly shed light to potential gaps in the industry and even possible “blue ocean” areas for deeper analysis.
The key in such an opportunity evaluation process is to focus on identifying the compelling need for buyers or customers. The fewer alternatives there are, other than your offering of the solution, the greater the compelling need. In other words, if buyers or customers have no choice but to buy your solution, the need is compelling. The next question then is whether or not you could find a solution and create a value chain for implementation.
Of course, this ideal opportunity is often difficult to find as there are likely to be very few “blue ocean” opportunities.
However, if you cannot identify a compelling need, there could still be intrinsic value in an opportunity if you have identified the correct problem.
Let me give you an example
The Problem
Large quantities of ash residues are produced each year from coal fired power stations, cement factories, mills, etc.
In 2000, there were 349 Million tonnes of ash produced worldwide (WCI 2000). USA had 11.6% of the world’s ash production (ACAA 2000). Australia had 3.1% (12 Million tonnes) – worth between $65-70 M (ADAA 2000) Total ash production for 2005 in Australia = 12.5 Million Tonnes (ADAA 2005) re-used or sold). Bottom ash and boiler slag (under utilised ash) (~10—20%) have been of very little use and typically disposed of in landfills at a significant cost.
Industrial wastes = toxic = pollution.
Presently, there is a lack of efficient routes for ash disposal and utilisation (compelling need), and therefore a bulk of the under utilised ash is dumped, causing environmental problems.
The opportunity is to address this problem by assisting <buyers or customers> to remove the under utilised ash; reuse it and convert them to another useful product.
The Solution
Adopting the concepts of redirect, recover, reduce, reuse, recycle and rethink, an effective utilisation process could be introduced to deal with surplus ash materials.
By redirecting the surplus ash from landfills and holding ponds, it would significantly reduce the costs for ash producers in dealing with ash residues, and recover much needed land banks which would otherwise be used for landfills.
By reusing the surplus ash, it would bring together geo polymer technology thereby effectively creating an alternative product for the construction industry.
By recycling the ash surplus, it would provide a sustainable waste management practice for ash producers.
By rethinking of how to handle ash surpluses, it would benefit th e environment thereby reducing the amount of pollution and emission to the ozone.
Once you have actually identified a problem, you are more likely to piece together a workable business concept to solve it. In the above example, there might not be any “new” technology but it might be a process driven approach, thereby creating intrinsic value.
The objective approach based on positively answering the above questions might lead one to further research and validate certain assumptions not otherwise available on a “road side evaluation” process of the opportunity.
Subjectively, the entrepreneur might have had a “gut instinct” about such an idea but when you are seriously putting your money at risk, taking an objective approach by employing simple evaluative tools would likely minimise the investment of time to be spent on looking at a multitude of useless ideas or opportunities.
There is no one way of doing things but there is always a better way of finding a solution rather than merely an answer.