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1 © John Mullins 2011 What to Teach Before Your Business Plan Course John Mullins London Business School
1 © John Mullins 2011
What to Teach Before Your
Business Plan Course
John Mullins London Business School
The Problem:
Turkeys Don’t Fly!
2 © John Mullins 2011
3 © John Mullins 2011
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)
4 © John Mullins 2011
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
5 © John Mullins 2011
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
6 © John Mullins 2011
How might such a course be
structured?
„ Let’s consider it experientially! „ 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?
7 © John Mullins 2011
Marston Venture Management:
What happened?
John Mullins London Business School
8 © John Mullins 2011
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”
9 © John Mullins 2011
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
10 © John Mullins 2011
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 2005-2009
11 © John Mullins 2011
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
12 © John Mullins 2011
Research Question
How do successful entrepreneurs (and investors, too) assess market opportunities?
13 © John Mullins 2011
Point of Confusion #1:
The Market / Industry Distinction
„ What’s a market? „ What’s an industry? „ These are frequently confused!
14 © John Mullins 2011
The Seven Domains of Attractive Opportunities Market Domains Industry Domains
Market Attractiveness Industry Attractiveness
15 © John Mullins 2011
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…
16 © John Mullins 2011
The Seven Domains of
Attractive Opportunities
Macro
Level
Micro
Level
Market Domains Industry Domains
Market Attractiveness
Target Segment Benefits
and Attractiveness
Industry Attractiveness
Sustainable Advantage
17 © John Mullins 2011
Point of Confusion #3:
What’s Crucial about
Entrepreneurs and Their
Teams…
„ It’s not found on their CVs „ Not simply about “chemistry” or “character” or
“entrepreneurial drive”
18 © John Mullins 2011
The Seven Domains of
Attractive Opportunities
Macro
Level
Micro
Level
Market Domains Industry Domains
Mission, Ability to
Aspirations, Execute
Propensity on CSFs
for Risk
Connectedness up
and down Value Chain
Team
Domains
Market Attractiveness
Target Segment Benefits
and Attractiveness
Industry Attractiveness
Sustainable Advantage
19 © John Mullins 2011
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
20 © John Mullins 2011
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
21 © John Mullins 2011
A Final Note
„ For the seven domains… ‟ 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
22 © John Mullins 2011
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
23 © John Mullins 2011
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
If You Need a Textbook…
The New Business Road Test
24 © John Mullins 2011
25 © John Mullins 2011
If You Need a Case for a
Workshop or to Kick Off This
Material… „ Marston Venture Management
‟ LBS CS05 052 „ Indo US Ventures
‟ LBS CS09 009 „ ECCH has them „ Teaching guides, too: email me
For More Materials
• To Download NBRT Chapter 1 for Your
Business Plan Course: www.london.edu/faculty/jwmullins
• For cases and other teaching materials
on opportunity assessment: www.newbusinessroadtest.com/forinstructors.html
26 © John Mullins 2011
© John Mullins 2011
Need Material for Teaching
about Business Models?
Getting to Plan B Number 1
Best-seller:
“Best Books for
Business
Owners”, 2009
Inc. Magazine
© John Mullins 2011
Questions?
www.getting-to-plan-b.com
www.newbusinessroadtest.com
