Chapter 4:

Business opportunities analysis

• Lecturer: MBA. Tran Minh Thu

• Email: thutm@ftu.edu.vn
 Objectives
• Source of business ideas
• Lean start up
• Innovation vs Creativity
• Feasibility analysis
 Where are the business ideas
from?
• 3 Popular sources:
• - environment trend’s changes
• - unsolved problems
• - the gap in the market
 Where are the business ideas
from?
• Environment trend’s changes:
• - economic trends
• - social trends
• - technological development
• - legal and political changes
 Where are the business ideas
from?
• Unsolved problems:
• - People face to a difficulty in their life and
then they find the solutions. This become a
business opportunity.
 Where are the business ideas
from?
• The gap in the market:
• -The customers want to buy some goods or
services that are not in the current market.
 Business Ideas

Lean Startup Model

How creative
are you?
 Lean startup method
• Most startups fail..
– Which means a lot of wasted money, relationships…
• But it doesn’t have to be this way..

• The traditional startup method:

– Start a company with a long-term vision
– Raise lots of capital to start and grow
– Hire the best and brightest workers to grow faster!
– Find a management team with loooots of
experience
– Focus on quality – test the product many times
before you release it
– Begin marketing before you release your product so
that there is a lot of demand for the product!

• What’s wrong with this idea?

 Lean startup method
• Before the lean startup method:
– Start a company with a long-term vision
– Raise lots of capital to start and grow
– Hire the best and brightest workers to grow faster!
– Find a management team with loooots of experience
– Focus on quality – test the product many times before you
release it
– Begin marketing before you release your product so that there
is a lot of demand for the product!

• What’s wrong with this idea?

– You don’t know exactly what customers want
• You are risking everything by not understanding how your
customers will “like” your products
– You are spending way too much money!!!
– You are wasting time!
 Starting a business
is easy and fast, right?
• NO!!!
• How did Air BnB do it differently?
 Air bnb – lean startup
• “Actually startups take off because the
founders make them take off.”
– Paul Graham

• Air BnB struggled from the start..

 Air bnb – lean startup
• How it started..
– Hotels were booked up because of a tech
conference
– Rented out rooms in their house to people who
couldn’t get rooms
 Air bnb – lean startup

• They released the product as

quickly as possible
– It wasn’t a perfect product, but it
satisfied the needs of the people
going to the conference
– The idea had potential, but the
idea was not yet scalable.. People
didn’t want strangers in their
place
 Air bnb – lean startup
• They tried everything to build up their idea
– Obama breakfast cereal..
– Anything to get people to talk to their friends and
get people to stay again
– Earned about $30,000 USD, but it wasn’t enough
to grow!
– Everyone told
them that it
was a bad idea
– A few investors
liked the idea..
 Air bnb – lean startup

• Their startup launched outside of San Francisco

– People were using their app!!!
– Postings were being put up all across America!!
– But there were still not making any money!
– They tried everything again!
– And realized…
– That…
– The…
– Pictures…
– That…
– People…
– Were…
– Posting were awful!!!
 Air bnb – lean startup

• They had to do something

– So they solved the problem…
– They packed their suitcases,
contacted the people who posted
their apartments, and asked to visit
– They helped these people fix up
their apartments
– Take nice pictures
– Rewrite their descriptions
– Make the postings look really
nice!!!
 Air bnb – lean startup
• They couldn’t do this forever.. Not scalable!
– So, they hired teams around the country to help
– Air BnB carefully tracked the quality of their
postings
• It became their key metric to track success!

– They also tracked:

• Monthly active users sending invites
• Invitees per inviter
• Conversion rate to new user
• Conversion rate to new guest
• Conversion rate to new host

– This helped them identify ways to improve

• Helped them understand their customers better..
 Air bnb – lean startup
• Each problem identified was fixed
– They operated the business out of their home
– They learned what they needed to learn and cut
costs anywhere they could
 Air bnb – lean startup
• They invited their customers to be
part of their growth
– They individually called and emailed
each new customer posting a room
– They gave each user a way to do their
own marketing
– They made their website a
market place

– They built personal relationships with

their customers and made them
excited to be part of the company
 Air bnb – lean startup
• They helped their users see the real potential
– People can earn more using Air Bnb than renting
their place other ways
– Some users used it as their full-time job
 Air bnb – lean startup

• Air BnB had succeeded!

– Air BnB grew 800%!
– Air BnB expanded to 89
countries!!
 Air bnb – lean startup
• How did Air BnB build into the successful
company that it is?
– They used the lean startup method

• Lean Startup Method

– Get a product out quickly
– Don’t focus on testing, focus on getting it out and selling

– Track metrics that show problems

• And then solve those problems!!

– Operate with extremely little resources

• Don’t invest in expensive offices, equipment, inventory, etc

– Keep it scalable!
• Focus on the future, never think short-term
• Failure is expected.. It’s how you grow!
 Lean startup method
• Lean Startup Method
– Speed = minimize the total time
through the loop
 Lean startup method
• Lean Startup Method
– Continuous deployment

– Split-test (A/B) experimentation

– Five why’s
 Lean startup method
• Lean Startup Method
– Continuous deployment
• Put out the product quickly
• Focus on making changes quickly
• Work in small batches
• Break down projects into small batches

– Split-test (A/B) experimentation

– Five why’s
 Lean startup method
• Lean Startup Method
– Continuous deployment
– Split-test (A/B) experimentation

– Five why’s
 Lean startup method
• Lean Startup Method
– Continuous deployment
– Split-test (A/B) experimentation
• Keep your testing simple
• Try various versions of the product to see what
your customers respond to
• Measure the results of each

– Five why’s
 Lean startup method
• Lean Startup Method
– Continuous deployment
– Split-test (A/B) experimentation
– Five why’s
 Lean startup method
• Lean Startup Method
– Continuous deployment
– Split-test (A/B) experimentation
– Five why’s
• Ask “Why” 5 times to get to the root cause of
the problem
• At each “why”, put a fix in to correct the
problem
• Fix the cause, not just the symptom
Lean startup method
 Air BnB questions

• What was the opportunity? How did they find the

opportunity?
• How did the company save money during their
development? Why was this important to their
success?
• How did the lean startup method allow the company to
better understand their customers?
• Why was it important for the company to track
metrics?
• How did the company involve its customers in its
growth?
 Lean vs traditional

LEAN TRADITIONAL
Organization - Teams focus on - Teams focus on
learning, tracking, departments: accounting,
fixing, improving finance, marketing, etc
- Work together - Work separately

Financial Reporting - Only track the metrics - Focus on accounting

that show problems reporting: income, cash flow

Failure - Expected! - Exception: often the end

- Used to identify - Fix by firing employees
problems to solve

Speed - Rapid! - Measured

- Operating on good- - Operating on complete data
enough data
Lean vs traditional
HOW CREATIVE ARE
YOU?
 Creativity Test 1

• Finish the drawing

– Who has the most interesting?
 Creativity Test 2

• 4 minutes to think of as many

uses as you can for these items
BUSINESS IDEAS
 Discovery: Idea
generation
• How to generate business ideas
– Both entrepreneurs and
intrapreneurs

– What do you think?

– Passion
– Problem inventory analysis
– Focus groups
– Brainstorming
– Ideas just come to you!
 Discovery: Idea
generation
• How to generate business ideas

– Problem inventory analysis

• Consider a problem that needs to
be solved
• Understand the root causes of that
issue
• Create solutions to those problems:
products/services
4 P’S OF INNOVATION
 Creativity vs innovation
• Creation
– Unleashing the potential of the mind to come up
with new ideas
– Subjective: Hard to measure

• Innovation
– Introducing change into a relatively stable system
– Objective: Totally measurable
 Creativity vs innovation
• Creation
– Unleashing the potential of the mind to come up
with new ideas
– Subjective: Hard to measure

• Innovation
– Introducing change into a relatively stable system
– Objective: Totally measurable
 4 p’s of innovation

• Does every innovative idea need to be a new one?

• 4P’s of innovation:
– Product
• Changes the product

– Process
• Changes to how the product is made and delivered

– Position
• Changes to the context in which the products/services are
introduced

– Paradigm
• Changes to the way people think about the product
 4 P’s of innovation (types)
• 4P’s:
– Product
• Changes the product
– Process
• Changes to how the product is made
– Position
• Changes to the purpose of the company
– Paradigm
• Changes to how the product is consumed
 4 P’s of innovation

• Team 1
– Comic books

• Team 2
– Sneakers / casual shoes

• Team 3
– lipstick

• Team 4
– Hair combs

• Team 5
– Coffee beans
 4 P’s of innovation
• Example of a Product Innovation
– Medicine
– Kids don’t like to take medicine!
– Buy.. What do kids like?
• CANDY!
– Kids are happy to take medicine if it is also candy
 4 P’s of innovation

• Example of a Process Innovation

– How many of you have ever
forgotten to pay your bills?
– So did he
– Luckily, he found a startup company
that can facilitate automatic bill pay
– Now he is happy
 4 P’s of innovation

• Example of a Position Innovation

– What are these?
– Who wears these?
• Tell me about these people…
– Who originally wore those jeans?
• Tell me about these people..
 4 P’s of innovation

• Example of a Paradigm
Innovation
– Henry Ford
• “If I asked people what they wanted,
they would have asked for a five-
legged horse”

– Steve Jobs
• “Customers don’t know what they
want until we’ve shown them”
 Dimensions of innovation
• Innovations run a spectrum
– Sustaining vs Disruptive
 Dimensions of innovation
Sustaining innovation
• Builds upon existing
knowledge and resources
• Competence-enhancing
• Relatively small changes in
performance/utility
• Can build towards
something big!
Disruptive innovation
• Requires new knowledge or
resources
• Existing competence loses
value
• Step changes in
performance
• Opens new markets for
more startups
• Relatively rare
 Dimensions of innovation
Innovation Type Sustaining
Product •Windows 7 and 8 replace
Vista and XP
•CDs replaced vinyl records
Process •Improved banking services
at physical banks
•Improved retail shopping
experience at malls
Position •Changing the target
market for icecream from
children to adults
Paradigm •Dyson redefining the home
appliance market with high
performance engineered
products
Disruptive
•First speech recognition
software
•Spotify streams music across
multiple devices
•Mpesa in Kenya changed the
way people bank
•Online shopping websites
allow people to shop in their
underwear
•Selling the Tata Nano car to
poor people in India for
$2,000 per car
•Amazon, Google and Skype
redefining whole industries:
retail, advertising,
telecommunications online
 Dimensions of innovation
Disruptive innovation
• A smaller company with fewer resources is
able to successfully challenge established
existing businesses
– Pulling away customers
– Moving faster to serve customers than bigger
companies are able to move
– Starting with an underserved market, but carving
off bigger pieces very quickly
 Feasibility Analysis/
Process of business planning

Step 2: checking Step 3: analysing

Step 1: making
preliminary comprehensive
business idea
feasibility of idea feasibility

Step 4: preparing
Step 5: preseting
to write business
the business idea
plan
 Feasibility analysis of business idea

• The businessman do not shorten creative ideas but …

• If a specific idea is a based foundation to set a successful
business?
• Feasibility analysis can help us answer the question
“ Should we implement this business idea?”
 Feasibility analysis of business idea
Feasibility analysis:
•Not like a business plan
• Play a role as a filter in order to reject unfeasible ideas in
making a successful business before a businessman uses
necessary resources to implement that business plan
• Be a investigative tool
 Comprehensive feasibility analysis
Introduction:
•Enterprise’s name
• Founders’ name
•A paragraph to introduce about the enterprise
Part 1: Feasibility of goods/ services.
•Customers’ wants, needs about the goods/ services
• Customers’ demands about goods/ services
 Comprehensive feasibility analysis
Part 2: Feasibility about target market/ sector
•Sector ‘s attraction
•Target market ‘s attraction
•Opportunist of market
Part 3: Feasibility about organization
•Management skills
•Necessary resources
Part 4: Feasibility about finance
• Total initial capital
• Financial result of similar enterprises
•Financial attraction of this business plan
 Comprehensive feasibility analysis
Feasibility Unfeasible Uncertain Feasible
about
goods/services
Feasibility Unfeasible Uncertain Feasible
about
market/sector
Feasibility Unfeasible Uncertain Feasible
about
organization
Feasibility Unfeasible Uncertain Feasible
about finance

Overall Unfeasible Uncertain Feasible

evaluation
Propound the Unfeasible Uncertain Feasible
feasibility of 1
 Factors in feasibility analysis

Feasibility about
goods/services

Feasibility
Feasibility
about
about finance
market/sector

Feasibility about
organization
 Feasibility about goods/ services
• Determine the attraction of a idea about good/ service to
the target customers and collect the necessary resources
to produce it
• 2 questions:
– 1. Are the customers willing to buy our goods/
services?
– 2. Can we get profit when supplying these
goods/services?
 Feasibility about goods/ services
• Products:
– Goods/ services description
– Expected Target market
– Advantages of goods/services
– Describe how to locate the goods/services in comparison
with competitors
– Describe how to the goods/services
– Describe the management team
 Feasibility about goods/ services
• Primary analysis:
– Collect data directly and analyze
– Examine customers and questionnaire
– Limit at some specific groups
• Secondary analysis: Take into account the collected and
analyzed data
• Prototype
• Test at home
 Feasibility analysis of market/sector

we need to focus on 2 fields:

•Determine the attraction of sector to a new enterprise
•Determine the suitable market in which a small enterprise
can earn profit
Michael Porter’s five forces competition model
a. Customers
• People who consume goods/ services of the enterprise.
Customers are decisive factor for the output of products.
• Customers are:….
• Pressure of customers to the business:
Customers’ demands always change
Customers have right to bargain
When customers purchase a large amount of products,
they require enough supply and discount, sale off, …
Customers can buy the similar products from
competitors
The sector includes many small enterprises; and the
quantitiy of buyer is small
b. Suppliers
• Individuals or organizations that supply the input factors:
raw materials, machines, capital, labors, semi-products
or services( information, management, market research
…) for the enterprise
• The pressure depends on some following factors:
Products are vital
Lack of substitutes
Products are different from other suppliers
Lack of similar suppliers
Have to pay high cost to move to another supplier
c. Competitors:
• Individuals or organizations who can meet the
target customers’ demand of a enterprise with the
same goods/ services or substitutes.
• Competitors are:
Current competitors
Competitors in the same sector/ Direct
competitors
Competitors supply the substitute products
Potential competitors
c. Competitors:
• Competition among enterprises in the same sector:
Sector ‘s structure: quantity and scale of enterprises in
the same sector
Sector ‘s growth rate
Demand ‘s growth rate
Structure of fixed costs
Variety level of products
Surplus: Supply > Demand
High barriers to entry, low barriers to retreat
c. Competitors:
• Barriers for potential competitors:
Government’s policies about entering into a sector
High initial capital
Advantages because of big scale production
Products with a lot of differences
High cost to change the kind of product
Difficulty in finding the stable market
Customers’ loyalty
Price advantages that the competitors can not create
(monopoly technology, favorable raw material
resources )
Strong resistance of existing enterprises
c. Competitors:
• Competitors who supply the substitute goods/services
Most of substitutes are the result of technology
development
Pressures from substitutes restrict the potential profit
of the sector because the highest price is limited
 Feasibility about organization

• Human resources and management capability

• Necessary resources
 Feasibility about finance

• Capital: Initial capital that required to implement a

business plan
• Expected profit
• Rate of return