January 2003
Idea Generation and Evaluation
for New Venture Creation
Douglas Abrams - Parallax Capital Management
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Idea generation and evaluation
 Identifying and evaluating new ideas
 Avoiding the wrong ideas
 Some interesting trends and ideas
 Using brainstorming to generate ideas
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Sources of new business ideas
 Forces, trends and mega-trends tech, macro, social, political
 Changing market structures and needs
 Market inefficiencies
 Products in the market
 Personal experience, hobbies and pastimes, personal passions
 Cross regional, discipline or industry
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Characteristics of successful new business ideas
 Not necessarily a new invention
 Not necessarily a new idea
 Notion that is poised to be taken seriously in the market place
 Idea that is a tiny push away from general acceptance
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Evaluating new ideas
 Original?
 Feasible?
 Marketable?
 Profitable?
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Assessing feasibility of a new venture
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Analyze strengths and weaknesses
1. Is the venture proprietary?
2. Are the initial production costs realistic?
3. Are the initial marketing costs realistic?
4. Does the product have potential for high margins?
5. Is the time required to get to the market and to reach the breakeven point realistic?
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Look at both internal and external factors
 Is the potential market large?
 Is the product the first of a growing family?
 Does an initial customer exist?
 Are the development costs and calendar times realistic?
 Is this a growing industry?
 Can the product and the need for it be understood by the financial
community?
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Evaluate technical feasibility
• Functional design and attractiveness
• Flexibility, durability, reliability
• Product safety
• Ease and low cost of maintenance
• Ease of processing and manufacturing
• User friendliness
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Evaluate marketability
• Investigate the full market potential and identifying customers
• Analyzing the extent to which the potential market can be exploited
• Determine opportunities and risks
• Information sources include
-
General economic trends
Market data
Pricing data
Competitive data
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Use an idea checklist
 Basic Feasibility
- Will it work? Is it legal?
 Competitive Advantage
- Advantages, competitors
 Buyer Decisions
- Who are the likely customers?
- How will they be serviced?
 Marketing of Goods & Services
- How much budget for
advertising and selling?
Pricing? Distribution?
 Production of Goods & Services
- Make or buy or both? QA?
 Staffing Decisions
– Who, when and competence?
 Financing
– How much is needed, where
will it come from, ROE, exit
strategy?
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Do you have these critical success factors?
 Uniqueness
– Amount of innovation required
during pre-start-up
– Length of time a non-routine
venture remain non-routine
 Investment
– Capital investment varies from
industries
– Extent and timing of funds needed
 Sales Growth
– Growth pattern anticipated for newventure sales and profits
 Product Availability
– Product and service still in
development?
– Products released too soon be
have to be recalled for further
modifications, affecting company’s
image
 Customer Availability
– Critical consideration to determine
who the customers are and what
their buying habits are.
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Ask the right 10 questions about your idea
1. Is the product or service idea
new?
6. Has market research been
conducted?
2. What are its weak points?
7. What sales and distribution
methods will be used?
3. What reaction has it received
from the public?
4. Is it easily understood?
5. Can the product penetrate
different market segments?
8. How will the product be made?
9. Will the business concept be
developed and licensed to
others or sold away?
10. Can the company get or does
it already have the necessary
skills to operate?
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Idea generation and evaluation
 Identifying and evaluating new ideas
 Avoiding the wrong ideas
 Some interesting trends and ideas
 Using brainstorming to generate ideas
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Pitfalls in selecting new ventures
Pitfalls
Ways to avoid
 Lack of objective evaluation
 Subject all ideas to rigorous
study and investigation
 No real insight into the
market
 Inadequate understanding of
technical requirements
 Project the life cycle of the
product; timing is critical
 Study the project thoroughly
before initiating it
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More pitfalls in selecting new ventures
Pitfalls
Ways to avoid
 Poor financial understanding
• Do not underestimate
 Lack of venture uniqueness
 Ignorance of legal issues
development costs
• Ensure customer awareness
of product superiority
through product
differentiation
• Patents, trademarks and
copyrights to protect one’s
inventions
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Some big-name new venture ideas that failed
 RCA’s Videodisc
– Superior image quality, but lack
of recording capability lost out to
videotape. Loss: $500 million
 IBM’s PC Jr
– The awkward Chiclet keyboard,
slow microprocessor, unattractive
price and a late launch cost IBM
$40 million
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It’s not just high-tech ideas that fail
 Coca-Cola’s New Coke
– This “answer” to Pepsi’s new
fomula provoked a national
uproar; later led to Coke Light
 RJ Reynold’s Premier
– Smoke-less cigarette with a
terrible taste; cost to develop:
$800 million
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Why do new ventures fail?
 Product / Market Problems
– Poor timing, product design problems, inappropriate distribution
strategy
– Unclear business definition, over-reliance on one customer
 Financial Difficulties
– Initial under-capitalization, assuming debt too early, VC
relationship problems
 Managerial problems
– Concept of a team approach
– HR problems
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Internal problems experienced by entrepreneurs
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External problems experienced by entrepreneurs
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Determinants of new venture failures
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Idea generation and evaluation
 Identifying and evaluating new ideas
 Avoiding the wrong ideas
 Some interesting trends and ideas
 Using brainstorming to generate ideas
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Past and present trends and mega-trends
P re -in d u s tria l
In d u s tria l
N ew E conom y
Labor
P ro d u ctio n o f p rim a ry
p ro d u c ts
T e c h n ic a l e ffic ie n c y
S o c ie ta l o rg a n iz a tio n
L o c a tio n o f
p ro d u c tio n
T ra n s p o rta tio n
speed
S o c ia l c la s s
d e te rm in e d b y
N a tio n a l w e a lth
d e te rm in e d b y
Low
R u ra l
F a m ilie s o r m a n o rs
P ro d u ctio n o f
m a n u fa ctu re d g o o d s
a n d se rvice s
H ig h e r
U rb a n
F irm s a n d e n te rp ris e s
P ro d u ctio n o f
in fo rm a tio n a n d
se rvic e s
M u c h h ig h e r
G lo b a l
A n yw h e re
5 m ph
60 m ph
1 8 6 M /m ile s/se c
B irth
O w n e rsh ip o f
p ro d u c tio n
A ccu m u la tio n o f
ca p ita l a n d la b o r
K n o w le d g e a n d sk ills
A b u n d a n ce o f n a tu ra l
re so u rc e s a n d
co n q u e st
In te lle ctu a l c a p ita l;
k n o w le d g e a n d sk ills
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Past and present trends and mega-trends
P re -in d u s tria l
In d u s tria l
N ew E conom y
Q u a lit y o f life
Illite ra te , n o b o o k s , n o
s c h o o lin g , n o tra v e l
L ite ra te , b o o k s ,
s c h o o ls , tra v e l
W o rk
B a c k -b re a k in g w o rk in
th e fie ld s
F a c to ry o r o ffic e w o rk
E n te r ta in m e n t
N one
T V , R a d io , M o v ie s
H e a lth
W id e s p re a d h u n g e r,
d e b ilita tin g d is e a s e
H u n g e r a n d d is e a s e
re d u c e d b y m a c h in e s
a n d m e d ic in e
L ife e x p e c ta n c y
A v g life e x p e c ta n c y 3 0
ye a rs ; h ig h le v e ls o f
c h ild m o rta lity
A v g life e x p e c ta n c y 7 0
ye a rs
A c c e s s to a ll o f h u m a n
k n o w le d g e , v irtu a l
tra v e l
T e d io u s o r d a n g e ro u s
w o rk p e rfo rm e d b y
m a c h in e s ; h u m a n s
fo c u s o n c re a tiv ity
In te ra c tiv e m u ltim e d ia , v irtu a l re a lity
H u n g e r a n d g e n e tic
d is e a s e s v irtu a lly
e lim in a te d th ro u g h
n a n o te c h n o lo g y
1 0 0 + ye a r life
e xp e c ta n c y; e n d o f
a g in g th ro u g h g e n e tic
e n g in e e rin g
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Examples of current tech trends and megatrends
Technology will become ubiquitous
 Broadband and wireless broadband
 Convergence, Integration and interoperability
 Worldwide, instant, always-on connectivity with no external devices
 Mobile computing, PC no longer sole computing device, speech and
voice recognition
 Experience-based transactions (VR) Automation
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Examples of current tech trends and megatrends
Computers will move beyond silicon chips
 20-ghz nano-silicon chips with 1 billion transistors
 3-dimensional chips
 Optical computers
 DNA computers
 Nanotube computers
 Quantum computing
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Examples of current tech trends and megatrends
Technology and biology will merge
• Micro-machines and Nano-technology
• Biometric security
• Bio-informatics
• Exponential growth of machine intelligence leads to intelligent,
conscious (?) machines
• Neural implants to extend human intellectual capability
• Merging of human and machine intelligence creates substrateindependent minds
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Products that could be
 Blind data
– A tiny transmitter, worn on a key ring or pendant. It can be
programmed with the vital statistics of both you and the kind of
soul mate you're seeking. When your transmitter vibrates, it
means that somebody else's is vibrating, too. Somebody less
than 30 feet away is looking for someone just like you.
 Tivocorder
– A tiny, pen-shaped digital audio recorder. Once in your shirt
pocket, it would continuously record the sound around you. At
any time, while continuing to record, you could play back the
last 20 minutes of whatever you've just heard
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Products that could be
 MP3-toothbrush
– An MP3-playing toothbrush for use during a hygiene moment.
 Intercom-Puter
– An inexpensive U.S.B. intercom that connects to each computer
and exploits your network wiring. It would be quick, convenient
and simpler than software-based intercom systems, which
require microphone and speakers for each PC.
 FLUMAPPER.COM
– Tracks the various flu strains that float across the country.
Color-coded clouds would show us exactly which types of miniepidemics are sweeping through, what symptoms you're in for
and which kinds of places to avoid.
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Products that could be
 SnapFlat screen
– A detachable, interchangeable flat panel that you can move
from gadget to gadget.
 The I-Podule
– A digital camera with an iPod slot: you could take thousands of
pictures without running out of film and slip the iPod into your
computer to transfer them. Then you'd snap the iPod into a
camcorder for capturing video, from there to your cellphone to
send files or photos to a friend, and maybe even into a cash
machine for a quick download of your statement.
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Attaching good genes to bad virus
 A special strain of virus, made up of equal parts Ebola and H.I.V
can be used to cure genetic disorders - gene therapy
 Use of gene therapy which works by replacing flawed genes with
fully functional genes
Eg. cystic fibrosis
–The inability to produce a certain
crucial protein, causing our lungs to fill
up with mucus
–When a working gene is put into its
place, the cells can now produce the
needed proteins
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BattleSwarm - handheld device
 Large armies are split up
and spread out into small,
stinging mini-group
 Use hand-held digital
communication tools
 Possess electronic warfare
skills
 There is “information domination” of the “battlespace”
 Can learn about the enemy much faster than the enemy can
learn about them due to global positioning systems
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Distroboto- vending machine
 Retrofitting of cigarette machines into coin-operated delivery
services for art, literature and music
 All items sold are packed in recycled
cigarette packs
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Positive asymmetry - 911
 The challenge is to fight an asymmetrical foe asymmetrically by
using those US assets that can best undermine the social, cultural
and economic factors
– The use of differences to gain an advantage
 Nonmilitary assets that could play a significant role
– Food
– Wealth
 Enlisting not just armed soldiers but also a broad cross section of
America’s best and brightest to contribute to the war on terrorism
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Simputer- simple portable computer
 Small hand-held device designed for rough
conditions of rural India
 Operates - without a keyboard - through touch,
sound and simple visual icons
 Translates English-language web sites into
local Indian languages, reading the content
aloud to illiterate users
 Expected to be owned by village cooperatives
and each user has a very cheap “smart card”
which will hold all his settings and data
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Tele-immersion - teleconferencing
Creates an illusion that people
separated by distance are together
in the same room
Scans a person’s face and body
and creates a kind of living statue
that other tele-immersion
participants see displayed on a large
screen
Overall effect is like talking face to
face to another person
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The video-game workout
 Dance Dance Revolution (DDR)
– Like a juke box equipped to judge one’s dancing prowess
Players are awarded points for their
ability to perform the high-speed technotap-dance routine that DDR dictates step
by step on screen
Significant weight loss might result to the
workout it provides
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Weather-forecasting toast
 The slice of bread pops up with a simple icon of the day’s outlook:
a shining sun, a cloud or raindrops
 A step towards integration of a modern household with internet
technology
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Your very own breakfast cereal
 Through a website, users are able to

mix and match more than 100 different
ingredients to create and name their
own breakfast cereals, and have them
delivered to their homes in singleserving portions
 Creative solution to the problem of
serving people with non-mainstream
tastes or specific health needs
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Idea generation and evaluation
 Identifying and evaluating new ideas
 Avoiding the wrong ideas
 Some interesting trends and ideas
 Using brainstorming to generate ideas
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Brainstorming - no criticism
 Designed to produce as many ideas as possible
 Key ground rule: Postpone all criticism and evaluation of ideas
 Invent ideas with no fear of looking foolish
 Wild ideas are explicitly encouraged
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Before brainstorming
 Define your purpose
 Choose the right number of participants
 Change the environment
 Design an informal atmosphere
 Choose a facilitator
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During brainstorming
 Seat the participants side by side facing the problem
 Clarify the ground rules, especially the no-criticism rule
 Brainstorm
 Record the ideas in full view
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After brainstorming
 Star the most promising ideas
 Invent improvements for promising ideas
 Set up a time to evaluate ideas and decide
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Brainstorming tips
 Allow enough time to get below the surface of your thinking
 20-30 participants are ideal. Large but not too large group
 Divide the group into teams of four to six people for more diverse
thought and to dilute the impact of those who know all the answers
 Invite a wide variety of people to participate and go outside the
core group
 Do a warm-up mental exercise to break the ice
 Brainstorm in bursts
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Brainstorming tips
 Have everyone write their own ideas on sticky notes
 People should stand while ideating
 Push for quantity and you will get quality
 Distill the output periodically
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Contact us
 Douglas Abrams
 Managing Director
 Parallax Capital Management
 [email protected]
 www.parallaxcapital.com
 65-6238-3492, 65-9780-5381 (hp)
 390 Orchard Road, #11-01 Palais
Renaissance, Singapore 238871
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