Dr. Sean Wise, Professor of Entrepreneurship & Seed Stage VC
You may be wondering what an author of a book subtitled “Know When to Quit Your Day Job” would have to tell CEOs. But in truth, it is the book’s main title that you need to focus on, Startup Opportunities. My co-author, Brad Feld, the investor behind Techstars, Fitbit and Makerbot and I have collectively seen more than 20,000 startup opportunities pitched for investment. That’s more than 10 times the number of deals that have appeared on America’s hit show Shark Tank. Just like the founders that pitch us, Brad and I are constantly in the process of opportunity evaluation.
As CEOs, you are no stranger to the combination of science and art of opportunity evaluation. On a weekly basis, you likely make decisions regarding the application of scarce resources in the search for market share, exponential innovation and incremental efficiency. Here are three tips for CEOs gleaned from the pages of Startup Opportunities:
Founders don’t just need to be passionate about the domain they are working in, they need to be obsessed. The best founders generate meaningful insight from fully immersing themselves in the field they wish to innovate in. Passion is for the bedroom; obsession is for the boardroom. So when evaluating business opportunities, CEOs should look to the innovation’s internal champion to ensure they are fanatical about bringing this innovation to market. Only then will they have the necessary willingness, resilience and insight to succeed.
Need not Want
New product adoption is difficult. People don’t like change. Incumbent market leaders are often 800 pound gorillas. None of these circumstances are easy to overcome. That’s why top founders and smart CEOs focus on their customers’ needs not wants. Needs have a smaller elasticity of demand, and therefore can often generate more revenue for a solution as compared to a product that is nice to have. In the startup world, this is often paraphrased as: build aspirin not vitamins. CEOs should always pursue creating products and services which solve real problems for their customer base.
The 10x Solution
To displace incumbent market leaders (e.g. Amazon, Google, Facebook, Netflix) new solutions must be exponentially, instead of incrementally, better. If an innovation isn’t 10x better, then it is unlikely that you will be able to overcome the momentum that market leaders have. After all, customers won’t abandon sunk costs and accepted realities for something that is just a little better. So CEOs should focus on innovations that are 10x faster, cheaper, more secure, and stronger if they wish to displace the market leaders in their business domain. However, if you are the market leader, this still applies. If Blockbuster had embraced broadband streaming technology, it might have survived the arrival of Netflix.
Being a CEO isn’t that different than being a startup founder when it comes to opportunity evaluation. Both are searching for success, managing scarce resources, trolling through market uncertainty, all in chase of sustainable profit and growing market share. So before you say no to that next innovation, or yes to that new solution, take another moment and evaluate opportunities through three lenses: internal advocacy, customer need, and market disruption potential.
About the Author
Dr. Sean Wise, BA LLB MBA Phd is a Professor of Entrepreneurship at Ryerson University. He has 19 years in the seed startup industry, including 5 Seasons on Dragons’ Den (Shark Tank). His latest book: Startup Opportunities: Know When to Quit Your Day Job hit #1 on Amazon in its’ first four weeks.