Thursday, May 31, 2012

Takeaways and Lessons from OAP

The Opportunity Assessment Project (OAP) is meant to serve several purposes but the primary one is to force the startup teams that you've formed to go through a process of brainstorming an entrepreneurial opportunity and then determining whether it is worth pursuing as a startup. Many of you appear to have actually found something that you want to continue building a business around, which is very exciting!

If you decide that it is not worth pursuing this particular idea, then the OAP project should have helped to shed light on which aspects of the idea should be change or what other big problems your potential customers have that they would like you to solve. This should have led you to some potential avenues for a more promising startup.

1. Approach potential customers and users face to face and ask them open-ended questions.

If you try to only survey customers (and do not talk to them face to face) then you gain significantly less insight into what their problems are and how they think about your potential product or service. Too often the students I ask to do surveys just end up with what I call "glory metrics" where they ask not very insightful questions and get not very insightful answers. They get to claim that 90% of the people they surveyed want their product, but how much do they really learn? I still asked you all to do a survey because it is important to determine whether it is only the few people that you spoke with face to face that have this problem or whether there are a broader set of people who also have this problem and really badly want it solved.

If you talk to potential customers but ask them closed-ended questions or quickly narrow them down on your particular product idea, then you get much less useful feedback.

2. After you've spoken with potential customers face to face, you want to incorporate what you learned and check whether there is a broader set of people who seem to have this problem and want your solution.

Here is where the guidance depends on your specific industry and product. If it's very cheap, easy and fast to build and distribute a basic version of your product/service then this is the best way to get real world feedback from a broader set of potential users.

However, in some cases (biotech, medical devices, physical products), it often requires a sizable investment. Here you may decide to gather more information via a survey before proceeding with building a prototype.

3. Entrepreneurs never have sufficient information.

Andrew Chen has an interesting post on the difference between being data-informed and data-driven.

  • In interviews people will sometimes be lead to certain answers or tell you what they think you want to hear.
  • A survey is imperfect because the sample size is going to be limited and potentially biased and people will act different than they respond.
  • Launching a beta version or building a prototype of the product gets you a little closer to real user behavior and response. However your beta version will be just that . . . beta and customer feedback will be diverse on what it needs exactly.
  • Yet, sitting and brainstorming or theorizing or trying to dream up a vision doesn't get you very far either.

This is the challenge of entrepreneurship. You have to act on extremely limited information. Yet, the best entrepreneurs will think through how closely they can get an approximation for the real user response at the cheapest cost to the firm in time and money.

4. It's very hard to calculate market size, especially for a new market. It's also very important to have an understanding of whether you're going after a potential $5M market or a potential $5B market.

Yet, many people think that they've created a brand new market when in fact they are in an existing or growth stage market.

5. When you get out and talk with potential customers, you're going to get feedback that what you had in mind initially isn't quite the right thing to pursue.

Part of the art of entrepreneurship is then knowing what to change. Whether to change part of the business model, go after a different, bigger problem that the customers have, or stick with it and alter the target customer.

Any other takeaways from the OAP? I'm interested to hear what you all learned?

Hopefully you're now testing the other aspects of your business models for the OEP project and also building out the site, prototype or product to actually launch and put in front of customers.

Update: Once again here are some great lessons learned from Spike Morelli.

Here are some of the submissions getting a lot of views so far on YouTube: