back to Entrepreneurship Overview - a Framework
This section will detail the questions the entrepreneur should be asking as he/she pulls together a strategy. The following diagram outlines some of the relationships between the various pieces.
1) Target customersThe analysis at this stage should result in
- Segments: Are there important differences among potential customers (i.e., relative to the need/problem you have identified)? Is there a basis for classifying potential customers
- Target customer: The choice of a particular subset of potential customer as the “target customer.” There may be a small number of customer subsets identified with a priority order stated. There should be a comprehensive characterization of the target customer.
- Whole product: A description of a solution of the problem or need as it exists for the target customer. (This description should be along the lines of Geoffrey Moore’s “whole product” concept.)
- Addressable opportunity: A quantification of the opportunity represented by the target customers – the “addressable opportunity.”.
- Value: A quantification of the value of the solution to the target customer as well as an analysis of the basis of that value.
2) Business modelThe business model is a description of how the new venture plans to make money. It involves two parts: what the company will provide and how much and how the customer will pay.
Product analysis: The description of the “whole product” provides the starting point for this step. The goal is to come up with a model of how the deliver a product or service in response to the customer’s need. The elements of this analysis are:
Value / price analysis: This analysis begins with the description of value of the solution to the target customer.
- What are the elements of the whole product and how will the customer get them? If there is an integration step required, who will perform that?
- What is the company’s proposed piece of the solution – its product?
- Does the company need partnerships or other business relationships in order to enable the whole product for the target customer?
- What will be the company’s anticipated cost to produce its proposed product?
A further step in this analysis forms the basis for the company’s marketing and distribution plans. This involves understanding how the company can most efficiently gain access to the customer. We break this into three questions:
- What costs will the customer incur in order to adopt the company’s solution? If the customer already has an alternative in place, what are the switching costs?
- What is the permissible price for the company’s product?
- Are there any constraints on how the customer will pay for the product?
- What are the elements of demand creation and how are they best achieved?
- How can demand be fulfilled in the most convenient way for the target customer?
- Are there barriers to adoption that need to be addressed and what would be required to address them?
3) Competitive positionWe break this analysis into three main (somewhat overlapping) components.
Positioning: Positioning is about creating a statement of how the company wants to differentiate itself and its products. At this stage, the company needs to develop and test positioning statements both for the company and for the product.
Intellectual Property / core assets:
- What are the main competitive companies and products?
- What are the dimensions of product comparison that are most important to the target customers? How does the company’s product compare to its competition on these dimensions?
- Are there reasonable alternatives available to the customers that may not be direct competitors? How much of a risk is presented by any such alternatives?
- What is the company’s core intellectual property?
- What is the best way to protect that IP? How defensible is it?
- Are there IP assets that could be used to circumvent the company’s IP? How strong an IP position does the company have?
- Is there IP of other companies that could stand in the company’s way? Does the company have freedom to operate and pursue its business?
- Are there other keys assets of the company that form part of the foundation of its competitive position?
4) Company objectivesThe objectives form the framework for the operating plan and also determine its financing needs and strategy. There are two main sets of objectives:
- The major milestones for company’s planning horizon (most likely somewhere between two and five years depending on the nature of the business). Milestones will normally include prototype, product, clinical milestones, first customer acceptance, major partnerships, etc. These will be the major events or achievements that mark important steps in the development and significant reductions in the risk of the company.
- Share or penetration into the chosen market or addressable opportunity.