By John Mullins | Many entrepreneurs are launching using the lean startup approach – getting into the market quickly and testing hypotheses to determine what will work. Sadly, though, many of their ventures will never get off the ground. Of those that do, the majority will fail. Of those who seek funding from business angels or venture capital investors, less than one percent will get the money they’re after.
This picture of entrepreneurship – whether in nascent startups or in ventures hatched inside large companies – is not a pretty one. The entrepreneurial road is long and daunting. Why, then, are so many people actively pursuing entrepreneurial dreams? In a word, opportunity! Opportunity to develop an idea that, to its originator, seems a sure-fire success. Opportunity to be one’s own master – no more office politics, no more downsizing, no more working for others.
Unfortunately, most opportunities are not what they appear to be, as the business failure statistics demonstrate. Most new ventures fail for opportunity-related reasons:
▪ Market reasons: perhaps the target customer won’t buy
▪ Industry reasons: it’s too easy for your competitor to eat your lunch
▪ Entrepreneurial team reasons: your team may lack what it takes to cope with the wide array of forces that can bring a fledgling entrepreneurial venture to its knees.
Avoiding The Opportunity Trap
Opportunities are best understood in terms of three crucial elements: markets, industries, and the key people that make up the entrepreneurial team. The seven domains model brings these elements together to offer a clearer way to answer the crucial question: “Why will or won’t my idea work?”
The model offers a better toolkit for assessing and shaping market opportunities, and a better way for entrepreneurs to assess the adequacy of what they themselves bring to the table as individuals and as a group. It also provides the basis for what I call a customer-driven feasibility study that entrepreneurs might use to guide their assessments before beginning to write a business plan.
At first glance, the seven domains model appears to summarize simply what ‘everybody’ already knows about assessing opportunities. Indeed, it goes further to bring to light three subtle but crucial distinctions and observations that most entrepreneurs – not to mention many investors – overlook:
▪ Markets and industries are not the same things;
▪ Both macro- and micro-level considerations are necessary. Markets and industries must be examined at both levels;
▪ The keys to assessing entrepreneurs and entrepreneurial teams aren’t simply found on their resumes or in assessments of their entrepreneurial character or drive.
Moreover, the model’s seven domains are not equally important. Nor are they additive. A simple scoring sheet or checklist won’t do. Worse still, the wrong combinations can kill your venture. On the other hand, sufficient strength on some factors can mitigate weaknesses on others. Attractive opportunities can be found in not-so-attractive markets and industries.
These seven domains address the central elements in the assessment of any market opportunity:
▪ Are the market and industry attractive?
▪ Does the opportunity offer compelling customer benefits as well as a sustainable advantage over other solutions to the customer’s needs?
▪ Can the team deliver the results they seek and promise to others?
Before You Launch a Lean StartUp
So, take heart. Road test your entrepreneurial opportunity before you even think about launching a lean startup. If the seven domains road test looks positive, you will have jump-started your journey, and you will have gathered a body of evidence with which to guide your launch.
If you find those almost inevitable fatal flaws, you can redirect your precious entrepreneurial talent and energy to another opportunity with greater potential. Enjoy the drive!
About The Author
John Mullins is an Associate Professor of management practice in marketing and entrepreneurship at London Business School. An award-winning teacher and scholar, and one of the world’s foremost thought leaders in entrepreneurship, he is the author of “The New Business Road Test: What Entrepreneurs and Investors Should Do Before Launching a Lean Startup,” fifth edition, 2017.