What to Teach Before Your Business Plan Course. John Mullins London Business School

Transcription

1 What to Teach Before Your Business Plan Course John Mullins London Business School 1

2 The Problem: Turkeys Don t Fly! 2

3 The Problem: Turkeys Don t Fly! Occurs for many student teams part way through the business plan course Too late to turn back and write a plan for a better opportunity Students are faced with convincing your panel of judges why their turkey will fly (when really it won t) 3

4 The Solution Create a preceding course to focus on opportunity assessment and development Market, industry, team dimensions Deliverable: a feasibility study, based on actual primary and secondary research Either conclusion is welcomed Feed the best opportunities into the business plan course 4

5 The Genesis of the Course When a business with a reputation for poor fundamentals meets a management team with a reputation for brilliance, it s the reputation of the former that remains intact. Warren Buffett 5

6 How might such a course be Let s consider it experientially! structured? Your task: read the Marston Venture Management caselet (10 minutes) Confer with your neighbors in twos and threes (10 minutes) Case questions to answer Which ONE of the four ventures is worth further due diligence? Which is the worst, to put straight into the trash? 6

7 Marston Venture Management: What happened? John Mullins London Business School 7

8 ProCom Bootstrapped the business with money from 3Fs to prove the model Raised $4 million from GE Capital when e-learning was all the rage Have treaded water since, no exit, but still around: the living dead 8

9 Oxiden Raised 5 million from 3i Took two years to get product to market Then, a very lengthy sales cycle followed There was another solution Died after 4 years 9

10 Darian Holdings Raised small amount of angel money An opportunity arose to buy a competitor at a very attractive price Having considerable success: ranked among UK TechTrack 100 for

11 Glencoren Turned down by several investors, but did eventually raise a small amount for proof of concept Raised the next round in 2006 A very long lead time play changing surgeons behavior takes a long time 11

12 Research Question How do successful entrepreneurs (and investors, too) assess market opportunities? 12

13 Point of Confusion #1: The Market / Industry Distinction What s a market? What s an industry? These are frequently confused! 13

14 The Seven Domains of Attractive Opportunities Market Domains Industry Domains Market Attractiveness Industry Attractiveness 14

15 Point of Confusion #2: The Macro / Micro Distinction Large and growing markets are important, but Structurally attractive industries (in a five forces sense) are also important, but 15

16 The Seven Domains of Attractive Opportunities Market Domains Industry Domains Macro Level Market Attractiveness Industry Attractiveness Micro Level Target Segment Benefits and Attractiveness Sustainable Advantage 16

17 Point of Confusion #3: What s Crucial about Entrepreneurs and Their It s not found on their CVs Teams Not simply about chemistry or character or entrepreneurial drive 17

18 The Seven Domains of Attractive Opportunities Market Domains Industry Domains Macro Level Micro Level Market Attractiveness Mission, Aspirations, Propensity for Risk Team Domains Ability to Execute on CSFs Connectedness up and down Value Chain Industry Attractiveness Target Segment Benefits and Attractiveness Sustainable Advantage 18

19 Putting the Seven Domains to Work No opportunity is perfect all have significant question marks or negatives at the outset Thus, the opportunity development challenge: Reshape: turn question marks or minuses into pluses (different market, industry, or team) Mitigate: weaknesses are offset by compensating strengths 19

20 The Seven Domains Identify key weaknesses Questions to be answered Suggest avenues for reshaping the opportunity Identify key strengths, jump-start business planning Crucial in telling the story to resource providers Integrate and bring to life material seen (but learned?) in the core 20

21 For the seven domains A Final Note Scores are not additive: summing the scores across the seven domains is meaningless Strong scores at the micro level can mitigate poor macro-level scores 21

22 But don t just take it from me When a business with a reputation for poor fundamentals meets a management team with a reputation for brilliance, it s the reputation of the former that remains intact. Warren Buffett 22

23 How might an opportunity assessment course be structured? Around the seven domains A week per domain Plus some material on primary and secondary research skills and forecasting Grade the work, not the opportunity Give prizes for the best work on an opportunity judged feasible AND the best that s judged not feasible 23

24 If You Need a Textbook The New Business Road Test 24

25 If You Need a Case for a Workshop or to Kick Off This Material Marston Venture Management LBS CS Indo US Ventures LBS CS ECCH has them Teaching guides, too: me 25

26 For More Materials To Download NBRT Chapter 1 for Your Business Plan Course: For cases and other teaching materials on opportunity assessment: 26

27 Need Material for Teaching about Business Models? Getting to Plan B Number 1 Best-seller: Best Books for Business Owners, 2009 Inc. Magazine

28 Questions?