Identifying and Selecting Valuable Opportunities in Technology Entrepreneurship

1. Technology Entrepreneurship:Curiosity, Opportunity, Risk, and MoneyL07. Opportunity and the Business Summary August & September, 2013T. Russell Hsing National ChiaoTung University, TaiwanEmail: thsing@ieee.org

2. What Problems Do You See • As Important to Address and Why? • References: • “Technology Ventures: From Idea to Enterprise” By Prof. Richard C. Dorf and Prof. Thomas H. Byers, McGraw Hill, 3rd edition, 2011

3. This lecturer is about “How can an entrepreneur identify and select a valuable opportunity?”-Entrepreneurs identify and evaluate opportunities while striving to find the right one that fits their vision, capabilities, interest, and resource.-The choice of an opportunity and the decision to act is a critical juncture in the life of an entrepreneur. -Once decision was made to act, the entrepreneur needs to prepare a business summary to the venture

4. 1 Outline • Opportunity Identification • Trends, Convergence, and Opportunities • The Entrepreneur and Opportunity • Evaluating the Opportunity • The Decision to Act or Continue Looking Elsewhere • The New Venture Story • Summary

5. 1 1. Opportunity Identification • Ideas >> Opportunities >> Evaluate (Difficulty!) • An opportunity is a timely and favorable juncture of circumstances providing a good chance for a successful venture (e.g. Apple Computer (1976), Polaroid (1947), and Cisco (1984)) • Youtube_Sandy Lerner & Len Bosack firm (7 minutes) • SixSteps to Acting as an entrepreneur: • Identifying the “right” opportunity >> • 2. Determining the capability and Interests >> • Evaluating the opportunity >> • Deciding to act on the opportunity or look elsewhere • Writing a summary of the concept • Testing the summary and the concept with potential customers and investors

6. Opportunity Pull < > Capability Push • Opportunity Pull ? Capability Push? • Good Opportunity = Right Line of Business + Right Time + Right Place • The Founders of new industries capitalize on opportunity pull to create disruptive innovations that lead to new products and then solve significant problems. • New organizational firms and industries are founded by individuals who recognize big opportunities as a result of technological change (e.g. Apple Computer, Broadcom) • Customer’s Pain >> Business Opportunity >> New Market • Creating Innovations >> Open Up Huge Markets >> Creat a gap between “Demand” & “Supply” (i.e. called Jobs Un-equilibrium Relationship!!!)

7. Nine Categories of Opportunity • Increasing the value of a product or service • New applications of existing technologies (credit card stripe) • Creating mass markets (Disposal 35-mm camera) • Customization for individuals (Dell Computer) • Increasing reach (on-line reach) • Managing the supply chain (Wal Mart) • Convergence of change (E-Trade) • Process innovation (Fed Exp) • Increasing the scale of the firm (M & A consolidation) • The identification of opportunity depends on preparation, experience, observation & Curiosity

8. Power of Serendipity • The power of “serendipity”- making surprised but useful discoveries by accident- can lead to great opportunities • Example 1: Microwave Oven (by Percy Spencer) • Example 2: Birdseye (flash freezing process) (by Clarence Birdseye)

9. How to Find a Good Opportunity ? (1/2) • Often we could be surprised to find a good opportunity through looking for a discontinuity in culture, society, or markets • Potential Sources of Discontinuities • Aging Society • Lifelong education • Food and population • Regulation • Innovation • Disruptive technologies • New knowledge • Deregulation • Supply chair disruption • Globalization

10. How to Find a Good Opportunity ? (2/2) • A Specific Business Opportunity will be happened with a combinations of “Customer’s Needs”, “Technologies & Competencies”, and “Applications” at the right time, the right place and the right technology The Right Business Opportunity = Technologies & Competencies + Applications + Customer Needs

11. 2. Trends, Convergence, and Opportunities • Trends in demographics and technologies can lead to huge opportunities in many areas (such as ICT, Transpiration, e-Healthcare, Energy, Social Networking, Education, etc) • The tread of “Business Globalization” is based on the negation of time and distance with the emerging technologies and Services of Internet and overnight shipping. (eg. doing business with Asia)

12. e.g. A List of Trends and Opportunities in ICT Area • Information & Communication Technologies (ICT) • Internet of Vehicle (IoV) and Health IT • Big Data and Data Center Services • Cloud Computing Services • Internet Security • Smart Data Pricing • Video Gaming, e-Learning, Entertainment • Security Devices and Systems • App. Applications in Mobile Communications • Life Science • Material Devices (e.g. Nano Technology) • Energy • Food Science

13. Social and Cultural Trends >> Create Opportunities • Aging of the baby-boom generation (>>Healthcare) • Rising middle class of developing countries • Two-working-parent families (>> tiny robots) • Increasing diversity of the people in US • Growth of the Latino population in US • Changing role of women in society • Privacy, security and safety of personal information • Convergence of various technologies or industries is coming together to create huge marketing opportunities (e.g. GPS = handheld computer + satellite imaging & data) • Convergence of various services (e.g. smart card)

14. Convergence>> Create Opportunities>> New Market For Example: • Convergence of various technologies or industries is coming together to create huge marketing opportunities (e.g. GPS = handheld computer + satellite imaging & data) • Convergence of various services (e.g. smart card) • Convergence of Different Technologies >> Huge New Marketing Size: e.g. Communication + Computing + Storage + Display + HMI (Human-Machine-Interface) >> Smart Phone (iPhone)

15. 3. The Entrepreneur and Opportunity • “Innovation is the specific tool of entrepreneurs, the means by which they exploit change as an opportunity for a different business or a different service” (Peter Drucker, 1993) • Entrepreneurs work toward needing shorter time periods to decide on an appropriate strategy and seize opportunities. They usually are creative, internally motivated and attracted to new, big ideas or opportunities • Entrepreneurs should be able to accomplish the necessary tasks, meet goals, inspire others to help with these tasks, and do so with the sustained effort required.

16. Required Capabilities of the Entrepreneurial Team • Skilled at selling ideas and also have a wide network of potential partners • Committed to long working hours • Able to accommodate uncertainty and ambiguity • Flexibly adapts to changing circumstances and competitors • Has the talent, knowledge and experience within the industry where the opportunity occurs • Able to look for an opportunity in a short period of time • Able to convert an opportunity into a workable and marketable enterprise • Others……

17. Factor People use to act as Entrepreneurs (1/2) Positive factors or benefits: • Independence: flexibility and autonomy • Financial success: Income, financial security • Self-realization: recognition, achievement, status • Innovation: Creating something new • Roles: Fulfilling family tradition, acting as leader

18. Factor People use to act as Entrepreneurs (2/2) Negative factors: • Risk: Potential for loss of income and wealth • Work effort and stress: Level of work effort required. Long working hours, constant anxiety

19. Entrepreneurial Attractiveness (EA) Index • Utility Function (U) for Satisfaction: U = f (Y, I, W, R, O) where: Y = Income, I = Independence W = Work effort, R = Risk O = Other working conditions • The actual utility is achieved over a period of N year, so the Entrepreneurial Attractiveness (EA) can be calculated as: Where W1 + W2 + W3 + W4 = 1 EA

20. 4. Evaluating the Opportunity • The entrepreneur needs to find and then thoroughly analyze THE best opportunity. • The entrepreneurs try: (1) to find an opportunity with solid long-term potential in an industry they understand, (2) to put together a strong management team, and (3) to ensure that their firm will be profitable (reason: need :Oxygen!) • The major goal is to invest in a firm for which you pay less than it is worth (reason: needs cushion for unforeseen challenges • Example: Staples (founded by Tom Stemberg in 1985, at the age of 36 )

21. Basic Five-Step Process of Evaluating Opportunity The opportunity cost of an action is the value (cost) of the forgone alternative action > Selecting one opportunity will involve rejecting others • Capability: Is the venture opp. Consistent with the capabilities, knowledge, and experiences of the team? • Novelty: Does the product have the significant novel, proprietary, or differentiating qualities? • Resources: Enough funding ($$), human capital? • Return: Is the expected return of the venture consistent with the risk of the venture? (No Risk, No Reward!) • Commitment: Fully commit with passion to the venture? • Example: Story for The iPod Opportunity (Tony Fadell)

22. Review an Opportunity: Fit or Not? • Characteristics of The Opportunity (0% ~ 100%) • Characteristics of entrepreneurial teams (0%~100%) • Resources (0% ~ 100%) • Characteristics of the context (0% ~ 100%) • Example case: Electric Automobile

23. 5. Final Decision: Act or Continue Looking Elsewhere? • Opportunity Evaluation >> Final Decion: Act or not? • Life is about choices, and the best case is when we choose to act and it turns out we are “right”! Decision Matrix Actual Quality of Opportunity (Poor, or Very Good) Versus Decision (Act, or Not Act)

24. Critical Assets of an Entrepreneur • Investors are always looking for the entrepreneur whom they can trust, and the management team for this enterprise ~ Critical Assets of an entrepreneur ~ • Competencies required; Charming Personality (??) • Knowledge of the marketplace and industry • Can take pressure and risk while acting prudently • Decisive and Flexible (willing to change directions as needed) • Willingness to accept and mitigate small failures and setbacks • Others (?)

25. Key Advices to My Students • Entrepreneurs need constantly adjust their strategy in response to market change or demands • Entrepreneurs should know how to negotiate and close a deal. They can finalize deals under pressure • Entrepreneurs must be able make decisions and deals with incomplete information • You can learn to excel in all necessary skills by first working in the industry in which you intend to develop a start • You can find a mentor who can help you gain skills and confidence required • You should find a partner so that between two of you, you have all the skills (e.g. Bill Gates & Paul Allen in Microsoft, and Steve Jobs & Steve Wozniak (Ronald Wayne?) in Apple)

26. Five Key Questions for Potential Entrepreneurs • Are you comfortable stretching the rules and conventional wisdom? • Are you decisive and also a good deal closer? • Are you willing and able to shift strategies quickly? • Are you prepared to take on powerful competitors (e.g. Apple and Samsung if you are the CEO/President of a high-tech start-up in ICT area)? • Do you have the perseverance to start small and then grow slowly?

27. 6. The New Venture Story and Summary • A Good Business Story >> Communicate Verbally the Business Idea and the Profitable Solution of the problem >> Attract Investors and New Team Members ~ Element of A Concept Summary ~ • Explain the need or Problem, and identify customers • Explain the proposed solution and its uniqueness • Explain the reason of “Why customers will pay for the soulution ~ Elements of the Business Summary ~ • Background • Challenge • Addressable Market for your venture • Resolution

28. Elements of An Executive Summary • Business Concept: Problem and Solution • Market, Customer, and Industry • Sales and Marketing Strategy • Organization and Management Team • Financial Plan: Five Years of Summary Results • Financing and Key Partners required

29. Elements of The Presentation • Explain the concept and give the story. Emphasize the customer and their pain (i.e. Need Your Solution!) • Cleary explain the problem and the solution >> Why the customer cares • Describe the competencies of the team >> Passion and Skills of the team • Provide a picture of the competition and name a few competitors >> How you are different and better

30. 7. Summary The capable entrepreneur knows how to: • identify • select • describe • communicate An opportunity that has great potential to become a successful venture.

31. Thanks !