Workshop #4 – Market Evaluation
The NEF program motored on with a couple more days of workshops from the guys at UCL. We were in our usual spot, except for the second day when we had a juggle in locations as the PM had shotgunned our workspace for the morning.
The content of these two days provided a rich methodology for how evaluate whether the market one might wish to enter is attractive.
As with a lot of what we’ve learned, the academic study of entrepreneurship shines a light over what has done by others businesses, and what can be gleaned as best practices. Each startup will have it’s own path, but discernible points can be picked up from the study of past behaviour.
My opinion is that it is definitely valid to devote some time learning these fundamentals because, at the very least, one can appreciate the sorts of ideas and practices that have worked before.
By no means are they meant as a letter-by-letter guide, but rather knowledge that startups which enter an industry at x level of maturity perform best when they behave in this manner, is an invaluable guide.
Now, the content of Workshop #4 was a condensed form of a Management degree. Chris gave us a few frameworks to work through which gave clarity to how feasible our ideas might be.
The thread that ran throughout was Mullins’ 7 Domains for analysing business opportunities. It is designed to be used before writing a
business plan business model canvas (see below). This stressed how one must evaluate whether the macro market is attractive, then the micro market, and finally whether you have the skills within your team to execute.
Within this, Porters’ Five Forces was used as a stick in the sand. It provides a solid appraisal for what to consider when finding appropriate markets. Interestingly the author of these forces went on to become a multi-millionaire through utilising this technique through his own firm Monitor (since taken over by Deloitte).
We then moved to another insight that Porter developed around the way in which firms can be profitable. In short, there are just three: Cost Leadership, Differentiator or Focus.
A firm can focus on having the lowest costs, and therefore earning more on each unit sold, or create enough differentiation that the consumer is willing to pay a higher price. This can also happen in a more narrow sense, with smaller firms choosing a particular vertical to work within.
- Primark: cost leadership
- Selfridges: differentiator
- Corner shop: Focus
When a firm tries to do more than this, they get “stuck in the middle” – trying to offer high quality for low prices. What happens is that they then become unprofitable
- Debenhams: stuck in the middle
The second half of the workshop involved taking these frameworks we had learned, and creating a business out of them. For this we utilised a growing practice among the entrepreneurship world of a Business Model Canvas
The crux of this, is that rather than having reams and reams of a Business Plan that are unlikely to be read, and referenced, it is better to have a working document to update every week or so.
The canvas is broken up into 9 sections that, more or less, cover the main elements of your business. Dave advised getting post-it notes for each section that you work on. Mine is above.
We departed with some thoughts on how to undertake customer development. From writing out the key threads within the business, it is possible to identify, and then test, certain hypotheses that exist within the business.
By exposing these potential pitfalls, it is possible to measure and test what are the linchpins in your business model, and trial them before expending a large amount of resource.
In my case it is:
“Will people willingly undertake an action that will force them to change their future behaviour at that time”
As you can tell, I’m not yet able to summarise it in a user-friendly manner. This is likely to be the subject of future posts.
After a quick check of other people’s canvases, the room of NEFers were then on our way, with yet more methodologies in our arsenals to try and organise the ideas that we had.
This post is a little sparse on the content that was covered in the workshops. If you’d like more information on these, then send me an email.