This is a guest post by Tim Berry, GBR Editorial Review Board member and President of Palo Alto Software
Ideas are a dime a dozen. Opportunities are much more important. An opportunity is an idea that’s passed the test of planning. It has potential. You can implement it. An opportunity has some of the following elements:
- Industry and market potential: look at market structure, industry structure, growth rate, margins, costs, etc.
- Economics: capital requirements, fixed costs, cash flow, return on investment, risk.
- Competitive advantage: degree of control, barriers to entry, availability of sufficient resources.
- Management team: people who know the industry, the market, the operations, the logistics, the road to market.
The business planning process is about filtering the opportunities—a precious few, requiring focus, and planning—from the ideas.
Whether you’re working on a new start-up business or growing an existing business, you need to encourage lots of ideas and then use your planning to filter them down into the real opportunities.
Remember displacement… recognize that you can’t do everything. You want your plan to help you focus in on the best opportunities among your longer list of ideas.
There is no external meter of good and bad opportunities. What you’re looking for is the right mix between business potential and your ability to reach that potential, given your position, core competence, strengths, weaknesses, and resources.
This post originally appeared in Tim’s blog, Planning Startups Stories, on July 8, 2007.
Related in the Graziadio Business Report
Build Value in a Small Business by Darrol J. Stanley, DBA, and James R. Hull
Manage Innovation through Corporate Venturing by Charles Morrissey, PhD (a look at new organizational models that can help a firm commercialize ideas)