aps 1015 class 6 - market validation

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APS 1015: Social Entrepreneurship Class 6: Validation of Market- Based Solutions Tuesday, May 27, 2014 1 Instructors: Norm Tasevski ([email protected]) Alex Kjorven ([email protected])

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Students will be exposed to methods for screening entrepreneurial ideas and evaluating its “business potential”. Students will be introduced to data collection methodologies and evaluate some of the challenges associated with synthesizing market data and applying this data to business decisions.

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Page 1: APS 1015  Class 6 - Market Validation

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APS 1015: Social Entrepreneurship

Class 6: Validation of Market-Based Solutions

Tuesday, May 27, 2014Instructors:Norm Tasevski ([email protected]) Alex Kjorven ([email protected])

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© Norm Tasevski

Agenda

• Recap of Business Modeling (Class 5)• Screening Entrepreneurial Ideas• Break• Validation Techniques• Tomorrow

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Recap: Business Modelling

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Screening Social Enterprise Ideas

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The Idea Funnel

Idea Brainstorm

Internal Screen

External Screen

Validated Solution

# Ideas = Dozens

# Ideas < 10

# Ideas = 1 to 3

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Step 1: Idea Brainstorming

• Our idea jam…

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Step 2: Internal Screen

• Goal: assess the quality of the entrepreneurial idea before conducting market research

• Why screen internally first?

• 2 Parts:– Assessment of Business Potential– Assessment of Social “Fit”

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Business Potential

• Evaluate based on:– Potential financial performance/sustainability of the

venture (and scalability)– External need/want of the product/service– Market barriers

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Business Potential

MeasureRating

0 1 2 3Level of Customer Need Not a significant need

Need that is addressed by others reasonably well

Unmet need and strong customer base willing to pay for it

High level of unmet need amongst people with the ability to pay

Competitive Advantage

Competitive disadvantage – many other competitors are serving needs well

No significant difference from competitors

Good value proposition but could easily be matched

No other competitors, and sustainable unique solution for niche

Profit/Surplus Potential Likely loss $0 - $50,000 $50,000 - $100,000 $100,000 +

Additional Investment Required

Major investment required (>$20,000)

Moderate investment required ($10,000-20,000)

Little investment required (<$10,000)

Could be done with existing resources

Return on Investment Timeframe

Long payback period not justified by return

Reasonable ROI over 2 or 3 years

First year profit = first year investment

Strong positive return on investment in first year

Access to Required Start-Up Funds

Not fundableCould be fundable but unsure of sources and or %; funding difficult to attain

Relatively easy to find funding for start-up costs, but for a smaller proportion

Very easy to get funding for start-up costs

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Social “Fit”

• Evaluate based on:– Desired social outcomes– Internal capacity to deliver value

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Social “Fit”

MeasureRating

0 1 2 3Fit with Desired Mission/Vision

Does not fit with mission and values

Minimal link to mission and vision

Some fit with mission and values

Strong fit with mission and values

Ability to Generate Social Benefit

None Low Medium High

Existence of Skills and Capacity

Large amount of skills missing

Skills available from partners and/or consultants

Minimal training necessary

Current team already has the necessary skills

Risk High risk Moderate risk Manageable risk (strategies to address) No risk

Partnership/Collaboration Opportunity

No probable partners exist

No partnership needed, or probable partners exist and are interested

Advances Our Name/Reputation/Values

Potential for negative impact

Slight increase in awareness of org

Moderate increase in awareness of org

Direct significant increase in awareness of org

Other Barriers Significant cultural or other changes required

Some barriers which may be difficult to address

Some barriers, but likely to be able to address No significant barriers

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Screening MatrixBu

sine

ss

Pote

ntia

l

Social “Fit”

Low social impact/internal

capacity

High social impact/internal

capacity

HighFinancial &

Market Potential

LowFinancial &

Market Potential

Consider Second Top Priority

Not StrategicDo Not Consider

FurtherPossible Quick

Win

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Now…

• Screen your initial ideas according to social fit and business potential

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Initial Reactions

• What assumptions did you make that drove either high or low ratings of your ideas?

• Were any ideas ranked artificially high or low due to a misperception of the opportunity? If so, would a change in perception change your rating?

• What info do we not know now that are important in confirming the potential of the idea?

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Break

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Validation Techniques

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Data Sources

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Call key industry players(suppliers, competitors, etc) Search databases

(industry, scholastic, etc)

Conduct web search(Google, etc)

Ask people!!!(friends, potential customers, etc)

Primary

Sources

SecondarySources

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Primary Research Methods

Step 1: Identify people to speak with– Create a spectrum of participants based on desired

criteria (e.g. gender, age, socio-economic status)– Identify sources/places to meet participants– Identify community contacts to arrange meetings with

participants

Tip: identify participants on the “extremes”– E.g. if spectrum is based on “adoption of technology”,

pick the quickest technology adopters and those who are resistant to new technology

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Primary Research Methods

Step 2: Determine your method– Individual interview– Group interview– In-context immersion– Self-documentation– Community-driven discovery– Expert Interviews

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Primary Research MethodsIndividual Interview: one-on-one gathering of rich/deep information on the behaviours, reasoning and daily realities of the interviewee

Group interview: one-to-many gathering of information focused on understanding group dynamics/community life

In-context immersion: meeting people where they live/work/socialize (i.e. observing their context directly, walking “in their shoes”)

Self-documentation: empowering the participants to document their own experience (e.g. through journal writing, note taking)

Community-driven discovery: empowering participants to also be researchers (e.g. have them conduct interviews)

Expert Interviews: one-on-one gathering of info with academics, industry experts, other researchers, etc

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The Interview Guide

• A semi-structured set of questions that allow for dialogue while retaining focus on a specific topic

• What to ask?– Start by listing the assumptions you’ve made in your idea screen. Turn these

assumptions into research questions– Categorize the questions by topic. For instance, you may want to ask

participants several questions on “livelihood” or on “cultural dynamics”

• How to ask?– Start specific (e.g. “yes/no”, simple-answer questions)– Then ask broader questions (e.g. “how”, “what” questions)– Then probe deeper (e.g. “why” questions)

• Tips:– Avoid “abstract” questions (e.g. “how much would you pay for…”). Instead,

create a scenario (e.g. “you have a choice between A & B…”)

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Some other Techniques

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A Point on Asking People…There are…

Lovers Don’t give a %&$#ers

Haters

Listen to HALF of what they say!!!

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What did we learn?