eoincostello

Opportunity recognition – my rule of thumb for new start-up ‘opportunities’

In Advice for Start-ups on December 28, 2012 at 6:12 pm

How do you accesses whether your ‘opportunity’ has the potential to be a commercial venture or is it just a good ‘idea’

When I worked on the London Stock Exchange a key part of my role as fund manager was to rapidly assess whether a proposed business venture/diversification stacked up. My rule of thumb for my initial scan was based on a funnel similar to that used in Innovation processes, with a number of gates the opportunity must get through.

 

Also want to make sure it is a sector that has long term demand rather than a facilitating technology that has a finite life.

In terms of those start-ups that saw themselves as tackling a sector that they felt was ripe for dis-intermediation my heuristics for this were clear answers to the following questions:

1. The vendor, rather than the customer, is in control of the interaction due to knowledge asymmetry.
2. There is a cost layer of inefficiency and waste which keeps the cost base high and results in higher end prices.
3. There are variable outcomes for customers resulting in poor customer experiences.
4. Related technical innovations are taking place that traditional players are structurally slow to respond to.

A lot of my thinking on this is influenced by one of my favourite books – http://www.amazon.com/Innovators-Dilemma-Revolutionary-Change-Business/dp/0062060244

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