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Chapter Five
Results Expected
Upon completion of this chapter, you will be able to
1. Discuss the importance of think big enough and the realities that accompany most
new ventures.
2. Describe how the most successful higher-potential ventures track a circle of ecstasy
and match investors appetites in the food chain for ventures.
3. Define the differences between an idea and an opportunity.
4. Assess opportunity via a zoom lens on the criteria used by successful entrepreneurs,
angels, and venture capital investors in evaluating potential ventures.
5. Explain the roles that ideas, pattern recognition, and the creative process play in
entrepreneurship.
6. Identify sources of information for finding and screening venture opportunities.
7. Generate some new venture ideas and your personal criteria using the three idea
generation exercises.
8. Conceive of the next sea changes related to recent advances in technology and societal, demographic, and environmental trends.
9. Provide insights into and analysis of the Storyplanet case study.
Since its inception, New Venture Creation has attempted to inspire aspiring entrepreneurs to think big
enough. Time and again the authors have observed
the classic small business owner who, almost like a
dairy farmer, is enslaved by and wedded to the business. Extremely long hours of 70, 80, or even 100 hours
a week, and rare vacations, are often the rule rather
than the exception. And these hardworking owners
rarely build equity, other than in the real estate they
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most knowledgeable, and most sophisticated investors in the world miss opportunities such as those
presented by Alibaba and Geely, we can conclude
that the journey from idea to high-potential opportunity is illusive, contradictory, and perilous. Think of
this journey as a sort of road trip through varied terrain and weather conditions. At times the journey
consists of full sunshine and straight, smooth superhighways, as well as twisting, turning, narrow onelane passages that can lead to breathtaking views.
Along the way you also will unexpectedly encounter
tornadoes, dust storms, hurricanes, and volcanoes.
All too often you seem to run out of gas with none in
sight, and flat tires come when you least expect them.
This is the entrepreneurs journey.
Transforming Caterpillars
into Butterflies
This chapter is dedicated to making that journey
friendlier by focusing a zoom lens on the opportunity. It shares the road maps and benchmarks used
by successful entrepreneurs, venture capitalists, angels, and other private equity investors in their quest
to transform the often shapeless caterpillar of an
idea into a spectacularly handsome butterfly of a
venture. These criteria comprise the core of their
due diligence to ascertain the viability and profit potential of the proposed business, and therefore the
balance of risk and reward. We will examine the role
of ideas and pattern recognition in the creative
process of entrepreneurship.
You will come to see the criteria used to identify
higher-potential ventures as jumping-off points at
this rarefied end of the opportunity continuum,
rather than mere end points. Only about 5 percent of
entrepreneurs create ventures that emerge from the
pack. Examined through a zoom lens, these ventures
reveal a highly dynamic, constantly molding, shaping, and changing work of art, rather than a product
of a formula or a meeting of certain items on a
checklist. This highly organic and situational character of the entrepreneurial process underscores the
criticality of determining fit and balancing risk and
reward. As the authors have argued for three
decades: The business plan is obsolete as soon as it
comes off the printer! It is in this shaping process
that the best entrepreneurial leaders and investors
add the greatest value to the enterprise and creatively transform an idea into a venture.
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Exhibit 5.1 shows that the key to creating a company with the highest value (e.g., market capitalization) begins with identifying an opportunity in the
best technology and market space, which creates
the attraction for the best management team.
Speed and agility to move quickly attract the best venture capitalists, board members, and other mentors
and advisers who can add value to the venture.
Exhibit 5.2 captures the food chain concept,
which will be discussed again in greater detail in Chapter 13. Different players in the food chain have very
different capacities and preferences for the kind of
venture in which they want to invest. The vast majority
of start-up entrepreneurs spend inordinate amounts of
time chasing the wrong sources with the wrong venture. One goal in this chapter, and again in Chapter 13,
is to provide a clear picture of what those criteria are
and to grasp what think big enough means to the
players in the food chain. This is a critical early step to
avoid wasting time chasing venture capitalists, angels,
and others when there is a misfit from the outset. As
one CEO put it, There are so many investors out
there that you could spend the rest of your career
meeting with them and still not get to all of them. In
fact, the problem is compounded when seeking angel
or informal investors because there are a hundred
times more of them than there are venture capitalists.
Why waste time thinking too small and on ventures
for which there is no appetite in the financial marketplace? Knowing how capital suppliers and entrepreneurs think about the opportunity creation and recognition process, their search and evaluation strategies,
and what they look for is a key frame of reference.
EXHIBIT 5.1
Circle of Venture Capital Ecstasy
Highest market
capitalization
Best
underwriters
Best venture
capitalists, board,
brain trust advisors
Best speed of
attack
Best technology
and market space
Best management
teams
EXHIBIT 5.2
The Capital Markets Food Chain for Entrepreneurial Ventures
Stage of Venture
R&D
Seed
Launch
High Growth
Company enterprise
Value at stage
Sources
$1 million$5 million
$1$50 million
Founders
High net worth
individuals
FFF*
SBIR**
FFF*
Angel funds
Seed funds
SBIR
IPOs
Strategic acquirers
Private equity
Up to $200,000
10%25%
$10,000$500,000
5%15%
$.01$.50
15 million
$.50$1.00
13 million
$1.00$8.00/
510 million
$12$18
35 million
$10$50 million
15%25% by public
At postIPO.
**Small Business Innovation Research, a N&F Program. The SBA provides a number of financial assistance programs for small businesses,
including 7(a) loan guarantees, 504 long-term finance loans, and disaster assistance loans.
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The window of opportunity is defined as the period of revenue growth in the life cycle of the target industry when the slope of the revenue curve is increasing.
The window of opportunity begins to close as that revenue curve levels off.
See J. A. Timmons, New Business Opportunities (Acton, MA: Brick House, 1989).
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http://en.wikipedia.org/wiki/Huawei#Competitive_position.
Leifer, McDermott, OConnor, Peters, Rice, and Veryzer, Radical Innovation: How Mature Companies Can Outsmart Upstarts (Boston: Harvard Business
School Press, 2000).
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EXHIBIT 5.3
Summary of Opportunity Spawners and Drivers
Root of Change/Chaos/Discontinuity
Opportunity Creation
Regulatory changes
Entrepreneurial leadership
Market leaders are customer obsessed or customer blind
Exhibit 5.3 summarizes the major types of discontinuities, asymmetries, and changes that can result in
high-potential opportunities. Creating such changes
through technical innovation (PCs, wireless telecommunications, Internet servers, software), influencing
and creating the new rules of the game (airlines,
telecommunications, financial services and banking,
medical products, music and video), and anticipating
the various impacts of such changes are central to
recognizing opportunities.
nology, and the Internet have had on the past generation. The great new ventures of the next generation
will come about by the same process and will define
these next great sea changes. Exhibit 5.4 summarizes
some categories for thinking about such changes.
These include technology, market and societal
shifts, and even opportunities spawned from the excesses produced by the Internet boom. Moores
law (the computing power of a chip doubles every
18 months) has been a gigantic driver of much of our
technological revolution over the past 30 years.
Breakthroughs in gene mapping and cloning,
biotechnology, and nanotechnology and changes
brought about by the Internet will continue to create
huge opportunities for the next generation. Beyond
the macro view of sea changes, how can one think
about opportunities in a more practical, less abstract
sense? What are some parameters of business/revenue models that increase the odds of thinking big
enough and therefore appeal to the food chain? At
the end of this chapter is the sea change exercise,
which will challenge you to think creatively and expansively about how new technology discoveries will
drive the next new industries. This pattern continues
to this day.
Desirable Business/Revenue
Model Metrics
We will emphasize time and again in New Venture
Creation that happiness is a positive cash flow!but
think cash last. You dont have an entry strategy until
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EXHIBIT 5.4
Ideas versus Opportunities:
Search for Sea Changes
Where are opportunities born?
Technology sea change
Moore's law
Metcalf's law
Disruption
Core
spawning
grounds
seen from
50,000
feet
Brontosaurus factor
Arrogance
Loss of peripheral vision
Deadened reflexesturning
the tanker
Examples: IBM 1970s1980s;
U.S. automakers 1960s1970s;
large steel companies
Irrational exuberance
Undervalued assets
P. R. Nayak and J. M. Ketterman, Breakthroughs: How the Vision and Drive of Innovators in Sixteen Companies Created Commercial Breakthroughs That
Swept the World (New York: Rawson Associates, 1986), chapter. 3.
T. Corrigan, Far More Than the Viagra Company: Essential Guide to William Steere, Financial Times (London), August 31, 1998, p. 7.
7
J. Godfrey, Our Wildest Dreams: Women Entrepreneurs, Making Money, Having Fun, Doing Good (New York: Harper Business, 1992), p. 27.
6
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This example was provided by Harvard Business School professor William A. Sahlman during a session of the 2004 Symposium for Entrepreneurship Educators
(SEE) at Babson College.
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Pattern Recognition
The Experience Factor
One cannot build a successful business without ideas,
just as one could not build a house without a hammer.
In this regard, experience is vital in looking at new
venture ideas.
Time after time, experienced entrepreneurs exhibit an ability to recognize quickly a patternand an
opportunitywhile it is still taking shape. The late
Herbert Simon, Nobel laureate and Richard King,
Mellon University Professor of Computer Science
and Psychology at Carnegie-Mellon University, wrote
extensively about pattern recognition. He described
the recognition of patterns as a creative process that is
not simply logical, linear, and additive but intuitive
and inductive as well. It involves, he said, the creative
linking, or cross-association, of two or more in-depth
chunks of experience, know-how, and contacts.9
Simon contended that it takes 10 years or more for people to accumulate what he called the 50,000 chunks
of experience that enable them to be highly creative
and recognize patternsfamiliar circumstances that
can be translated from one place to another.
Thus the process of sorting through ideas and recognizing a pattern can also be compared to the process
of fitting pieces into a three-dimensional jigsaw puzzle.
It is impossible to assemble such a puzzle by looking at
it as a whole unit. Rather, one needs to see the relationships between the pieces and be able to fit together some that are seemingly unrelated before the
whole is visible.
Recognizing ideas that can become entrepreneurial
opportunities stems from a capacity to see what others
do notthat one plus one equals three. Consider the
following examples of the common thread of pattern
recognition and new business creation by linking
knowledge in one field or marketplace with quite different technical, business, or market know-how:
9
H. A. Simon, What We Know about the Creative Process in Frontiers in Creative and Innovative Management ed. R. L. Kuhn, (Cambridge, MA: Ballinger,
1985), pp. 320.
From company profile on: http://www.tsmc.com.
10
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EXHIBIT 5.5
Comparison of Left-Mode and Right-Mode Brain Characteristics
L-Mode
R-Mode
Source: A Comparison of Left-Mode and Right-Mode Characteristics, from Drawing on the Right Side of the Brain by Betty Edwards, copyright
1979, 1989, 1999 by Betty Edwards. Used by permission of Jeremy P. Tarcher, an imprint of Penguin Group (USA) Inc.
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1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
The Opportunity
Team Creativity
Teams of people can generate creativity that may not
exist in a single individual. The creativity of a team
of people is impressive, and comparable or better creative solutions to problems evolving from the collective interaction of a small group of people have been
observed.
A good example of the creativity generated by using more than one head is that of a company founded
by a Babson College graduate with little technical
training. He teamed up with a talented inventor, and
the entrepreneurial and business know-how of the
founder complemented the creative and technical
skills of the inventor. The result has been a rapidly
growing multimillion-dollar venture in the field of
video-based surgical equipment.
Students interested in exploring this further may
want to do the creative squares exercise at the end of
the chapter.
Further, the primary source of capital was overwhelmingly personal savings (74 percent)
rather than outside investors with deep
pockets.12 This pattern of frugality in start-ups
is as true today as it was then.
George Yen (
) started his trading company at the age of 30 by buying up a branch of
the company which was heavily in debt when
he served as VP of that company in the United
States. It was an opportunity out of a crisis
he acquired the company for only US$1 and
renamed it Sequoia International. From the
day of the acquisition, George started turning
it around, and his company made profits
within the very first year. Georges former
company took only one day to decide to sell
the branch to him, with the condition that
George also had to pay back pretaxed profit for
the first 5 years of at least half a million dollars,
and this was agreed simply based on Georges
integrity and reputation built up in that
company.
Putting their talents (cartooning and finance)
together, Roy and Walt Disney moved to
California and started their own film studio
with $290 in 1923. By mid-2007, the Walt
Disney Co. had a market capitalization exceeding $67.5 billion.13
While working for a Chicago insurance company, a 24-year-old sent out 20,000 inquiries for
a black newsletter. With 3,000 positive responses and $500, John Harold Johnson published Jet for the first time in 1942. In the
1990s, Johnson Publishing publishes various
magazines, including Ebony.14
With $100 Nicholas Graham, age 24, went to a
local fabric store, picked out some fabrics, and
made $100 worth of ties. Having sold the ties to
specialty shops, Graham was approached by
Macys to place his patterns on mens underwear. So Joe Boxer Corporation was born, and
six months into Joe Boxers second year, sales
had already topped $1 million.15
Cabletron founders Craig Benson and Bob
Levine literally started their company in a
garage and grew it to over $1.4 billion in
revenue in under 10 years.
Vineyard Vines is a creative necktie company
that was started on Marthas Vineyard with
$40,000 of credit card debt.
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Real Time
Opportunities exist or are created in real time and
have what we call a window of opportunity. For an
entrepreneur to seize an opportunity, the window
must be open and remain open long enough to
achieve market-required returns.
Exhibit 5.6 illustrates a window of opportunity for
a generalized market. Markets grow at different
rates over time, and as a market quickly becomes
larger, more and more opportunities are possible. As
the market becomes established, conditions are not
as favorable. Thus at the point where a market starts
to become sufficiently large and structured (e.g., at
five years in Exhibit 5.6), the window opens; the window begins to close as the market matures (e.g., at
1213 years in the exhibit).
The curve shown describes the rapid growth pattern typical of such new industries as microcomputers and software, cellular phones, quick oil changes,
and biotechnology. For example, in the cellular
phone industry, most major cities began service
between 1983 and 1984. By 1989, there were more
than 2 million subscribers in the United States, and
the industry continued to experience significant
growth. In other industries where growth is not so
rapid, the slope of a curve would be less steep and
the possibilities for opportunities fewer.
In considering the window of opportunity, the
length of time the window will be open is important.
It takes a considerable length of time to determine
whether a new venture is a success or a failure. And
if it is to be a success, the benefits of that success
need to be harvested.
Exhibit 5.7 shows that for venture-capital-backed
firms, the lemons (i.e., the losers) ripen in about
two and a half years, while the pearls (i.e., the
winners) take seven or eight years. An extreme example of the length of time it can take for a pearl to be
harvested is the experience of a Silicon Valley venture
capital firm that invested in a new firm in 1966 and
was finally able to realize a capital gain in early 1984.
Another way to think of the process of creating
and seizing an opportunity in real time is to think of
it as a process of selecting objects (opportunities)
from a conveyor belt moving through an open windowthe window of opportunity. The speed of the
conveyor belt changes, and the window through
which it moves is constantly opening and closing.
The continually opening and closing window and the
constantly changing speed of the conveyor belt represent the volatile nature of the marketplace and the
16
161
importance of timing. For an opportunity to be created and seized, it needs to be selected from the conveyor belt before the window closes.
The ability to recognize a potential opportunity
when it appears and the sense of timing to seize that
opportunity as the window is opening, rather than
slamming shut, are critical. That opportunities are a
function of real time is illustrated in a statement
made by Ken Olsen, then president and founder of
Digital Equipment Corporation, in 1977: There is no
reason for any individual to have a computer in their
home. It is not easy for even the worlds leading
experts to predict just which innovative ideas and
concepts for new business will evolve into the major
industries of tomorrow. This is vividly illustrated by
several quotations from very famous innovators. In
1901, two years before the famous flight, Wilbert
Wright said, Man will not fly for 50 years. In 1910
Thomas Edison said, The nickel-iron battery will put
the gasoline buggy . . . out of existence in no time.
And in 1932 Albert Einstein made it clear: [There]
is not the slightest indication that nuclear energy will
ever be obtainable. It would mean that the atom
would have to be shattered at will.
When Taobao.com, now Chinas biggest C2C
online bazaar, was founded in 2003, eBay and its
Chinese partner Eachnet was already controlling
90 percent of the online shopping business, and so
didnt see Taobao as a threat. While eBays Eachnet
charged listing and transaction fees, Taobao was free
to use. eBay once ridiculed Taobaos strategy, saying
that free is not a business model. However,
Taobaos free model quickly attracted a large group
of buyers and sellers. With this free model, combined with its deep understanding of the local market, Taobao now commands 80 percent of Chinas
C2C market, while eBay was totally defeated and
pulled out of China in 2006.16
David Barboza, An Online Market Flourishes in China, August 9, 2009, www.nytimes.com/2009/08/10/technology/startups/10taobao.html?pagewanted=1&_r=1; Helen H. Wang, How eBay Failled in China, September 12, 2010 10:56 pm,
blogs.forbes.com/china/2010/09/12/how-ebay-failed-in-china/; Thomas Crampton, How Taobao beats eBay in China, www.thomascrampton.com/china/
taobao-china-ecommerce/.
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EXHIBIT 5.6
Changes in the Placement of the Window of Opportunity
Market
Market size
$1 billion
$500 million
$250 million
Window of
opportunity
$100 million
10
20
Time (years)
EXHIBIT 5.7
Lemons and Pearls
Number of investments
20
19
18
17
16
15
14
13
12
11
10
9
8
7
6
5
4
3
2
1
0
Less than 3 years
Winners
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To understand how the entrepreneurial vision relates to the analytical framework, it may be useful to
look at an opportunity as a three-dimensional relief
map with its valleys, mountains, and so on, all represented. Each opportunity has three or four critical
factors (e.g., proprietary license, patented innovation, sole distribution rights, an all-star management
team, breakthrough technology). These elements
pop out at the observer; they indicate huge possibilities where others might see obstacles. Thus it is
easy to see why there are thousands of exceptional
opportunities that will fit with a wide variety of entrepreneurs but that might not fit neatly into the
framework outlines in Exhibit 5.8.
Screening Opportunities
Opportunity Focus
Opportunity focus is the most fruitful point of
departure for screening opportunities. The screening process should not begin with strategy (which
derives from the nature of the opportunity), nor
with financial and spreadsheet analysis (which flow
from the former), nor with estimations of how much
the company is worth and who will own what
shares.17
These starting points, and others, usually place
the cart before the horse. Perhaps the best evidence
of this phenomenon comes from the tens of thousands of tax-sheltered investments that turned sour
in the mid-1980s. Also, many entrepreneurs who
start businessesparticularly those for whom the
ventures are their firstrun out of cash faster than
they bring in customers and profitable sales. There
are lots of reasons why this happens, but one thing is
certain: These entrepreneurs have not focused on
the right opportunity.
Over the years, those with experience in business
and in specific market areas have developed rules
to guide them in screening opportunities. For example, during the initial stages of the irrational exuberance about the dot.com phenomenon, number of
clicks changed to attracting eyeballs, which
changed to page view. Many investors got caught
up in false metrics. Those who survived the
NASDAQ crash of 20002001 understood that
dot.com survivors would be the ones who executed
transactions. Number of customers, amounts of the
transactions, and repeat transactions became the
recognized standards.18
17
18
163
See J. A. Timmons, D. F. Muzyka, H. H. Stevenson, and W. D. Bygrave, Opportunity Recognition: The Core of Entrepreneurship in Frontiers of Entrepreneurship Research: 1987, ed. Neil Churchill et al. (Babson Park, MA: Babson College, 1987), p. 409.
E. Parizeau, partner, Norwest Venture Partners, in a speech to Babson College MBAs, December 2000.
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EXHIBIT 5.8
Criteria for Evaluating Venture Opportunities
Attractiveness
Criteria
Highest Potential
Lowest Potential
Highest
Weak
Customers
User benefits
Value added
Product life
Market structure
Market size
Growth rate
Market capacity
Market share attainable (Year 5)
Cost structure
Economics
Time to breakeven/positive cash flow
ROI potential
Capital requirements
Internal rate of return potential
Free cash flow characteristics:
Sales growth
Asset intensity
Spontaneous working capital
R&D/capital expenditures
Gross margins
After-tax profits
Time to break-even profit and loss
Harvest Issues
Value-added potential
Valuation multiples and comparables
None
Unable to gain edge
None
Crude; limited
B or C team
(continued)
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Highest Potential
Lowest Potential
Management Team
Entrepreneurial team
Industry and technical experience
Integrity
Intellectual honesty
Nonexistent
One or more
High
Best in class; excellent free agents
Superior service concept
Rowing with the tide
Groundbreaking; one of a kind
Able to adapt; commit and decommit quickly
Always searching for opportunities
At or near leader
Accessible; networks in place
Forgiving and resilient strategy
Low
B team; no free agents
Perceived as unimportant
Rowing against the tide
Many substitutes or competitors
Slow; stubborn
Operating in a vacuum; napping
Undercut competitor; low prices
Unknown; inaccessible
Unforgiving, rigid strategy
about industry and market issues, competitive advantage issues, economic and harvest issues, management team issues, and fatal flaw issues and whether
these add up to a compelling opportunity. For example, dominant strength in any one of these criteria
can readily translate into a winning entry, whereas a
flaw in any one can be fatal.
Entrepreneurs contemplating opportunities that
will yield attractive companies, not high-potential
ventures, can also benefit from paying attention to
these criteria. These entrepreneurs will then be in a
better position to decide how these criteria can be
compromised. As outlined in Exhibit 5.8, business
opportunities with the greatest potential will possess
many of the following, or they will dominate in one or
a few for which the competition cannot come close.
Industry and Market Issues
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Economics
Profits after Tax. High and durable gross margins usually translate into strong and durable after-tax
profits. Attractive opportunities have potential for
durable profits of at least 10 percent to 15 percent
and often 20 percent or more. Those generating after-tax profits of less than 5 percent are quite fragile.
Time to Breakeven and Positive Cash
Flow. As mentioned previously, breakeven and positive cash flow for attractive companies are possible
within two years. Once the time to breakeven and positive cash flow is greater than three years, the attractiveness of the opportunity diminishes accordingly.
ROI Potential. An important corollary to forgiving economics is reward. Very attractive opportunities have the potential to yield a return on investment
S. W. Kunkel and C. W. Hofer, The Impact of Industry Structure on New Venture Performance, Frontiers of Entrepreneurship Research: 1993 (Babson
Park, MA: Babson College, 1993).
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J. A. Timmons, W. Bygrave, and N. Fast, The Flow of Venture Capital to Highly Innovative Technology Ventures, a study for the National Science Foundation, reported in Frontiers of Entrepreneurship Research: 1984 (Babson Park, MA: Babson College, 1984).
22
For a more detailed description of free cash flow, see Note on Free Cash Flow Valuation Models by W. Sahlman, HBS 9-288-023, Harvard Business School, 1987.
23
W. A. Sahlman, Sustainable Growth Analysis, HBS 9-284-059, Harvard Business School, 1984.
24
R. D. Kahn, president, Interactive Images, Inc., speaking at Babson College about his experiences as international marketing director at McCormack & Dodge
from 1978 through 1983.
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Variable and Fixed Costs. An attractive opportunity has the potential for being the lowest-cost
producer and for having the lowest marketing and
distribution costs. For example, Bowmar was unable
to remain competitive in the market for electronic
calculators after the producers of large-scale integrated circuits, such as Hewlett-Packard, entered the
business. Being unable to achieve and sustain a position as a low-cost producer shortens the life expectancy of a new venture.
Degree of Control. Attractive opportunities
have potential for moderate to strong control over
prices, costs, and channels of distribution. Fragmented
markets where there is no dominant competitorno
IBMhave this potential. These markets usually
have a market leader with a 20 percent market share
or less. For example, sole control of the source of
supply of a critical component for a product or of
channels of distribution can give a new venture
market dominance even if other areas are weak.
Lack of control over such factors as product development and component prices can make an opportunity unattractive. For example, in the case of
Viatron, its suppliers were unable to produce several
of the semiconductors the company needed at low
enough prices to permit Viatron to make the inexpensive computer terminal that it had publicized
extensively.
data.book.163.com/book/section/0000NPfV/0000NPfV1.html; news.xinhuanet.com/world/2004-12/19/content_2353771.htm.
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Entrepreneurial Team. Attractive opportunities have existing teams that are strong and contain
industry superstars. The team has proven profit and
loss experience in the same technology, market, and
service area, and members have complementary
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venture is greater than his or her net worththe resources he or she can reasonably draw upon, and his
or her alternative disposable earnings stream if it
does not work outthe deal may be too big. While
todays bankruptcy laws are generous, the psychological burdens of living through such an ordeal are infinitely more painful than the financial consequences.
An existing business needs to consider if a failure will
be too demeaning to the firms reputation and future
credibility, aside from the obvious financial consequences.26
171
Stress Tolerance. Another important dimension of the fit concept is the stressful requirements of
a fast-growth high-stakes venture. Or as President
Harry Truman said so well, If you cant stand the
heat, get out of the kitchen.
Strategic Differentiation
This point was made by J. Willard Marriott, Jr., at Founders Day at Babson College, 1988.
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Technology. A breakthrough, proprietary product is no guarantee of success, but it creates a formidable competitive advantage.
Flexibility. Maintaining the capacity to commit
and uncommit quickly, to adapt, and to abandon if
necessary is a major strategic weapon, particularly
when competing with larger organizations. Larger
firms can typically take 6 years or more to change basic strategy and 10 to 20 years or more to change their
culture.
Opportunity Orientation. To what extent is
there a constant alertness to the marketplace? A continual search for opportunities? As one insightful entrepreneur put it, Any opportunity that just comes in
the door to us, we do not consider an opportunity.
And we do not have a strategy until we are saying no
to lots of opportunities.
Pricing. One common mistake of new companies
with high-value-added products or services in a growing market is to underprice. A price slightly below to as
much as 20 percent below competitors is rationalized
as necessary to gain market entry. In a 30 percent gross
margin business, a 10 percent price increase results in
a 20 percent to 36 percent increase in gross margin
and will lower the break-even sales level for a company
with $900,000 in fixed costs to $2.5 million from $3
million. At the $3-million sales level, the company
would realize an extra $180,000 in pretax profits.
Distribution Channels. Having access to the
distribution channels is sometimes overlooked or
taken for granted. New channels of distribution can
leapfrog and demolish traditional channelsfor example, direct mail, home shopping networks, infomercials, and the coming revolution in interactive
television in your own home.
Room for Error. How forgiving is the business
and the financial strategy? How wrong can the team be
in estimates of revenue costs, cash flow, timing, and
capital requirements? How bad can things get with the
firm still able to survive? If some single-engine planes
are more prone to accidents by 10 or more times,
which plane do you want to fly in? High leverage,lower
gross margins, and lower operating margins are the signals in a small company of flights destined for fatality.
Gathering Information
Finding Ideas
Factors suggest that finding a potential opportunity is
most often a matter of being the right person, in the
27
See also Economic Impact of Franchised Businesses, International Franchise Association, IFA Educational Foundation, 2004.
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Product Licensing A good way to obtain exposure to many product ideas available from universities,
corporations, and independent investors is to subscribe to information services such as the American
Bulletin of International Technology, Selected Business
Ventures (published by General Electric), Technology
Mart, Patent Licensing Gazette, and the National
Technical Information Service. In addition, corporations, not-for-profit research institutions, and universities are sources of ideas.
173
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L. M. Fuld, Competitor Intelligence: How to Get It: How to Use It (New York: John Wiley & Sons, 1985), p. 9.
Ibid. See also How to Snoop on Your Competitors, Fortune, May 14, 1984, pp. 2833; and also information published by accounting firms such as Sources
of Industry Data, published by Ernst & Young.
30
Fuld, Competitor Intelligence, pp. 1217.
31
Ibid., p. 325.
29
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Published Sources
The first step is a complete search of materials in libraries and on the Internet. You can find a huge
amount of published information, databases, and other
sources about industries, markets, competitors, and
personnel. Some of this information will have been uncovered when you search for ideas. Listed here are additional sources that should help get you started.
175
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Other Intelligence
Everything entrepreneurs need to know will not be
found in libraries because this information needs to
be highly specific and current. This information is
most likely available from peopleindustry experts,
suppliers, and the like (see box). Summarized next
are some useful sources of intelligence.
Trade Associations Trade associations, especially the editors of their publications and information officers, are good sources of information.32
Trade shows and conferences are prime places to discover the latest activities of competitors.
Employees Employees who have left a competitors company often can provide information
about the competitor, especially if the employee
departed on bad terms. Also, a firm can hire people
away from a competitor. While consideration of
ethics in this situation is important, the number of
experienced people in any industry is limited, and
competitors must prove that a company hired a
person intentionally to get specific trade secrets in
order to challenge any hiring legally. Students who
have worked for competitors are another source of
information.
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Chapter Summary
Ideas are a dime a dozen. Perhaps one out of a hundred becomes a truly great business, and one in 10 to
15 becomes a higher-potential business. The complex
transformation of an idea into a true opportunity is
akin to a caterpillar becoming a butterfly.
High-potential opportunities invariably solve an important problem, want, or need that someone is willing to pay for now. In renowned venture capitalist
Arthur Rocks words, I look for ideas that will
change the way people live and work.
There are decided patterns in superior opportunities,
and recognizing these patterns is an entrepreneurial
skill aspiring entrepreneurs need to develop.
Rapid changes and disruptions in technology, regulation, information flows, and the like cause opportunity creation. The journey from idea to high-potential
opportunity requires navigating an undulating, constantly changing, three-dimensional relief map
while inventing the vehicle and road map along
the way.
Study Questions
1. What is the difference between an idea and a good
opportunity?
2. Why is it said that ideas are a dime a dozen?
3. What role does experience play in the opportunity
creation process, and where do most good opportunities come from? Why is trial-and-error learning not
good enough?
4. List the sources of ideas that are most relevant to
your personal interests, and conduct a search using
the Internet.
5. What conditions and changes that may occur in
society and the economy spawn and drive future
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MIND STRETCHERS
Have You Considered?
1. Steve Jobs, founder of Apple Computer, was 10 years
old when he built his first computer. Colonel Sanders
was 65 years old when he started Kentucky Fried
Chicken. What is an opportunity for whom?
2. Most successful existing businesses are totally preoccupied with their most important, existing customers and
therefore lack the peripheral opportunity vision to spot
new products and services. How is this happening
where you work? Is this an opportunity for you?
3. The most successful ventures have leadership and
people as their most important competitive advan-
tage. How does this change the way you think about
opportunities?
4. Whom can you work with during the next few years
to learn a business and have the chance to spot new
opportunities outside the weak peripheral vision of
an established business?
5. Barriers to entry can create opportunities for those
with the right knowledge and experience. Why is this
so? Can you find some examples?
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Exercise 1
Purpose
The purpose of this exercise is to provide a pathway for exploring this question. We hope to broaden your horizon of
technological literacy and enrich your vision of the next
quarter centurythe window of your life when you have the
best chance of creating and seizing the mega-opportunities
that lie ahead.
We ask you to do some research and thinking about the
future directions of technology and how scientific inquiries
which are under way today can lead to knowledge breakthroughs. This new scientific knowledge will, in turn, lead to
innovations. When fueled, ignited, and driven by entrepreneurship, some of these innovations will become commercialized and in the process create entirely new industries.
The following steps will assist you in this research task,
but you should not confine your efforts to these steps alone.
You also need to pursue as many other sources as possible
using Google and other resources. Be sure to follow the
data and your gut instinct. If you find an area of science and
technology that excites youor which you instinctively believe can change the way people will live, work, learn, or
relaxthen pursue it.
STEP 1
Go to the National Science Foundation summary of the 50
discoveries that the NSF believes have had the most impact
on every Americans life (www.nsf.gov/about/history
/nifty50/index.jsp). You will find such breakthrough discoveries as bar codes, CAD/CAM, genomics, speech recognition, computer visualization techniques, and Web browsers.
All of these are examples of sea changesthe spawners
and drivers of new industries that we discussed in this chapter and in Chapter 3.
STEP 2
Select one or two of the nifty 50 that interest you the most.
Now examine number 10 on the list: computer visualiza-
STEP 3
Meet with two to five of your classmates over breakfast,
lunch, dinner, and share what you have learned, your observations and insights about how industries are born, and
what potential new fields might arise.
What patterns and common characteristics did you
find? What are the lead times and early indicators?
What technologies have the most future potential impact on the way people live, work, learn?
Who are the entrepreneurs who create the technologybased firms that utilize these discoveries? What are
their background, preparation, skills, experience, and
so forth? Any common denominators?
Have any of your ideas, assumptions, and beliefs been
altered about where and when the next biggest opportunities will emerge?
STEP 4
Visit the NSF home page (www.nsf.gov) and find the list of
11 different program areas, including geosciences, environmental research, and engineering. Select one that interests you the most and you know the least about. Go into the
Web site and identify the research grants awarded to this
topic over the past few years.
What topics and problems are attracting the most
money and activity? Why is this so?
What new scientific knowledge and/or breakthroughs
might be expected, and what are some of the potential
sea change impacts?
What potential commercial applications can be envisioned from these new technologies?
What existing technologies, products, and services are
most likely to be disrupted and replaced by these innovations?
What societal trends can be combined with these
future technologies to create entire new industries?
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STEP 5
In class, or in informal groups, discuss and explore the implications of your findings from the exercise.
What are two or three future sea changes you anticipate?
What implications do you see for your personal entrepreneurial strategy, which you began to develop in
Chapter 2especially with regard to projects to work
on, next education and work experience, and brain
trust and mentor additions?
Exercise 2
Opportunity-Creating
Concepts and the Quest
for Breakthrough Ideas
After you have fully digested the discussions in this chapter,
you should aim to prepare an industry analysis utilizing the
criteria listed in Exhibit 5.8. This should be a first cut analysis, not an overly exhaustive effort. Your value chain should
be mapped out on one to two pages maximum, with the
other questions/issues answered in bullet points on one to
two pages maximum. Rather than an exhaustive effort,
this exercise is designed to get you to a specific way of
thinking.
Your task is to complete a simple, clear, and articulate
value chain analysis of an industry that is of interest to you.
Analyze the value chain as it currently exists. Next complete an information flow analysis of that value chain, overlaying an analysis of the flow of information through the
various stages of the value chain. Then broaden your thinking to create a value cluster of that industry. Make sure you
are thinking multidimensionally, not just linearly. Describe
or visually depict the impact of these multiple dimensions
on the flow of both goods/services and information. Explain how this value cluster expansion adds or intensifies
value for that industry, as compared to the linear chain. Finally, provide a succinct analysis of the margins in this
value cluster, with particular emphasis on the extremes
(highs/lows).
Also consider the following:
What are the deconstructors and reconstructors that
drive the value chain and opportunity in this industry?
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Exercise 3
Creative Squares
STEP 1
Divide Your Group by (a) Separating into a Number of Groups of Three or More People Each and (b)
Having at Least Five Individuals Work Alone.
STEP 2
Show the Following Figure to Everyone and Ask the Groups and the Individuals to Count the Total Number of Squares in the Figure. Assume that the figure is a square box on a single flat plane. In counting, angles of any
square must be right angles, and the sides must be of equal length.
STEP 3
Discuss the Creative Processes by Which the Groups and the Individuals Reached Their Answers.
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Exercise 4
Date:
STEP 1
Generate a List of as Many New Venture Ideas as Possible. As a consumer or paid user, think of the biggest,
most frustrating, and painful task or situation you continually must take, and one which would be worth a lot to eliminate or
minimize. These are often the seeds of real opportunities. Thinking about any unmet or poorly filled customer needs you know
of that have resulted from regulatory changes, technological changes, knowledge and information gaps, lags, asymmetries,
inconsistencies, and so forth will help you generate such a list. Also think about various products and services (and their substitutes) and the providers of these products or services. If you know of any weaknesses or vulnerabilities, you may discover
new venture ideas.
STEP 2
Expand Your List if Possible. Think about your personal interests, your desired lifestyle, your values, what you feel you
are likely to do very well, and contributions you would like to make.
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STEP 3
Ask at Least Three People Who Know You Well to Look at Your List, and Revise Your List to Reflect Any
New Ideas Emerging from This Exchange. See the discussion about getting feedback in Chapter 2.
STEP 4
Jot Down Insights, Observations, and Conclusions That Have Emerged about Your Business Ideas or
Your Personal Preferences. Which ones solve the greatest pain point/aggravation/frustration for which you (and others you have spoken with) would pay a significant premium to eliminate?
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Part I
Case
Storyplanet
Preparation Questions
1.
2.
3.
4.
Introduction
This paper addresses the tasks assigned by the Storyplanet
team. It analyzes the digital storytelling industry and
shows how Storyplanet is positioned as a market leader,
recommends improvements to the product, introduces
new marketing strategies, and explains what entry strategy Storyplanet should adopt to enter the Asian market.
Tasks Assigned
Product Perception
Storyplanet tasked the team with identifying areas where
the product appeals only to a Western market and to
suggest what can be adapted so that the product will appeal more to an Asian audience. The team will suggest
changes as well as discuss possible cultural differences
that may affect the attractiveness of the product.
Target Audience
Storyplanet would like the team to profile its potential
users in Asia. This will enable the company to target its
initial marketing efforts at this group of people to get the
company off the ground in Asia.
The team will look at Storyplanets current target market in the West and attempt to identify a similar group of
people in the Asian context who will want to and be
able to pay for the product. We will then suggest a marketing plan to promote the product to this group of people. This will ensure the product is not only well received
but the companys cash flow is protected.
rate as well as present the advantages and disadvantages of entering each identified cluster/country.
Company Background
Team
Bjarke Myrthu, founder and chief executive officer of
Storyplanet, is a serial entrepreneur1 with two successful
ventures, Magnum in Motion and NewClearMedia, in
the digital storytelling industry.
Jakob Kahlen, creative director of Storyplanet, has a
background in advertising. He is responsible for developing the designs and concepts of the products including
Storyplanets visual identity, user experience and workflow.
Mr. Pete Barr Watson, chief technical officer (CTO)
and previously with Microsoft Silverlight, is in charge of
technical development.
Joi Ito is the angel investor voted as one of the 25
most influential people on the Web by Businessweek in
2008. He shares the teams belief in the idea but is worried about the execution of the project.
Vision
We create new possibilities with visual stories by connecting storytellers all over the world and giving them
tools to edit, share, and collaborate.
Storyplanets mission is to explore new storytelling
concepts, explore new business models, and to bring social awareness to social media.
Market
Storyplanet is engaged in the digital storytelling market,
a rather mature market with a developed ecosystem of
service providers and educated consumers. Digital
storytelling uses technology to enhance the oral tradition. A combination of photographs, video, and narration is widely used to create stories.
The medium has caught on, especially in the education sector, where it is used to enhance engagement and
multimedia awareness.
Competitors in the market include small players, such
as Storybox and Digital Storyteller, who currently have
noninteractive products, and the giants, such as Adobe
and Apple, who have the capability to create a similar
product in a shorter time.
Revenue Model
Storyplanet currently does not charge for its services.
It is provided free for all beta users.
1
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185
Storyplanet turns photographs and videos into interactive stories to be published on any Web page for
free. This provides consumers with a simplified product
where they do not need to have technical knowledge
to create interactive stories.
The platform allows the mixing of an owners
content with the content available in shared folders.
It also allows users to integrate different media, including text pages, wikis, maps, and interactive
components.
This helps storytellers to unlock the possibilities of
online media without incurring time spent on learning
technical skills.
Storyplanet hopes to use this platform to promote a
free media world where people can share stories
about their cultures and discuss current issues in a new
and innovative way.
SWOT Analysis
Proposed Changes
Description
Strengths
Weaknesses
Opportunities
1. Untapped Education
Services Industry
Storyplanet has not explored white-labeling the
platform to offer it to this
industry.
2. Social Networking
The spread of social networking can be used to
Storyplanets advantage,
especially in marketing the
product and educating
consumers on a new product.
Threats
1. Consumer Preference
Fluctuations
The timing of entry into the
market needs to be apt as
should the market not be
mature enough for the
product, there might not
be significant traction in
the market for the product.
2. Constant Emergence of
New Products
Software giants such as
Apple and Adobe are
always on the lookout for
the next big thing. Should
3. Mobile Internet
they be interested in the
There is an increasing numinteractive storytelling marber of people who use the
ket, they would be able to
Internet on their mobile
develop a similar platform
phones. Should Storyplanet
in a shorter time, with
be able to ride this wave,
their available resources.
a lot of content can be captured and many stories can
be generated.
Record Direct
With every laptop having a built-in Webcam and every
mobile phone having a video record function, it will be
useful if consumers are able to record videos of themselves directly into their storyboard. This will definitely
make the process of integrating different media more
seamless.
Widgets
Widgets are what make Storyplanet interactive and
hence a differentiated product. Therefore, we recommend a rebranding of this function by coming up with a
new name. This should be something that people identify only with Storyplanet, such as the I naming series
of Apple products.
Also, to get consumers more familiar with the idea of
using widgets, there should be a search function for the
library of widgets. Developers of widgets should also
name widgets well to describe their functionality. Widgets should also be able to be previewed before downloading and customizable to a certain extent.
Forum Page
Storyplanet should develop a forum, wiki or community
page for users to interact and share ideas. This will also
create an avenue where users are able to help one another or source out content that they need for their stories. Through the forum, Storyplanet will be able to get
direct feedback on what is good, what needs to be improved, and what is on its users wish list.
Tags
By making tags a compulsory field, it will help to organize the content in the shared folders so as to make it easier for users to find the files of particular content types.
Not only so, it will increase the ranking of Storyplanet
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Target Market
Current Target Market
Storyplanet currently targets three very broad groups of
people.
1.
2.
3.
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Storyplanet can also branch into the mass market, pushing the interactivity that its platform provides as a selling
point, to people who want to develop their personal
stories.
The market is infinite and Storyplanet only has to employ general marketing tools. The market is monetizable
but the product will be more difficult to price. Also,
brand dilution may occur which would be detrimental.
Promotion Strategies
Online Forum
Immediate
Marketing Material
Marketing material should be developed as soon as
Version 2 of the product is ready so that it can be easily
distributed to potential clients. This would be especially
EXHIBIT 1
Increasing Search Engine Rankings
17 Highly Effective Strategies to Increase Search Engine Rankings
Copyright 2002 Herman Drost
3. Page Title
Search engines are still one of the most effective ways to drive
traffic to your Web site. This is because it is highly targeted traffic. A person searching for a particular phrase on a search engine gets taken to your Web site.
It makes sense, then, to make your site as attractive as possible to the search engines, so your rankings will improve, giving you more visitors which leads to more salesyour ultimate
goal.
1. Keyword Density
Some search engines will include this below your title. Choose
20 of your most important keywords and write a 200 to 250
character sentence about your site. Dont repeat your title description but write a different one with different keywords.
Some search engines will just take this description meta tag,
some will use both the title and description tags.
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The Opportunity
(concluded)
Source: http://www.clickfire.com/archives/seo.php.
Short Term
Short-term promotional strategies can only be achieved
once Version 2 of the platform is developed and further
technical work will be required to tap on these strategies. The short-term strategies capitalize on the interactivity of the platform as a differentiating factor.
Social Networking
Storyplanet can tap onto the growth of social networking sites such as Facebook and Myspace by offer-
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Social Media
Well-developed stories can be uploaded onto social media sites such as YouTube and Twitter. This is especially
important to promote the social awareness brand of the
company. These stories created by socially conscious
Storyplanet users would come up in keyword searches
on these social media sites. There are many people
looking to forward social agendas on these sites and
they will be the best place to seek out more prosumers.
Also, short films on social media sites have quite a following, well-developed videos picked by the Storyplanet team can also enjoy similar popularity. The interactivity of the Storyplanet platform will then be able to
gain face time and possibly create a viral effect, directing those interested to the Web site.
189
Long Term
Long-term strategies are based on developing relationships and strategic partnerships with stakeholders that
capitalize on a companys brand image as a socially
aware company.
For scalability, Storyplanet should have strategic
partnerships with different educational service organizations. This will ensure that it receives constant updates
on what consumers would like to see in the product
and constantly have a stream of income. Storyplanet
can keep in close partnership with non-governmental
organizations (NGOs) and organizations with a social
agenda by either doing projects for them via the
Storyplanet platform or providing Storyplanet as a
platform to educate the public on social issues. This
will allow them to be close to the ground on current
buzz issues.
Storyplanet should also explore partnerships with socially aware hardware producers, such as mobile
phone producers, bundling the Storyplanet platform as
a part of the suite of services available. This will allow
Storyplanet to reach its aim of having the whole media
sector as a target market. Such partnerships will be
mutually advantageous as hardware producers are
always looking for the newest most relevant gadgetry
to add to their toolkit to provide better services to their
consumers. This will also allow Storyplanet to gain
mass-market traction.
Price Strategies
In terms of pricing strategy, our team recommends that
Storyplanet offer differentiated services to match the
purchasing power (see Exhibit 2).
The following recommendations have been benchmarked with market leader competitors in each sector.
For the education industry, the product that should
be white-labeled and promoted is the platform with instruction manuals and regular updates at US$20 to
US$30 per year akin to premium services that Flickr
Photobucket provide.
Advantages
Broadband Quality and Infrastructure Readiness
Japan has the worlds highest quality broadband and is
the third largest broadband country in the world after
the United States and China. South Korea is also one of
the more wired countries in the world with developed
technology infrastructures. In Korea, the reason for the
high penetration rate is the strong support of the government body in fostering competition and encouraging innovation. Storyplanet has already secured hosting in
Japan, which makes technical sense for the company.
Also, with Storyplanets platform being one with large
content, the speed at which it can be accessed is of utmost importance.
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EXHIBIT 2
Pricing Strategy: Comparisons of Software
Type of Software
Vimeo Plus
Flickr Pro
Photobucket
Pro
Memoryminer
Digital Story
Teller
Video
Photo
Uploading
Photo Sharing,
Video Sharing
Image Sharing,
Editing,
Collating
$24.95/year or
$47.95/2 years
$24.95/year
$45
$39.95
Price
$59.95/year
Original Storage
500 MB/week
5 GB/Week
unlimited storage
25 GB of storage
high video
quality
high resolution
images
no banner ads
ad-free browsing
sharing
no ads in album
Upload Speed
priority
uploading
Upload Volume
unlimited HD
uploading
unlimited uploads
Quality of Files
HD embedding
HD playback for
high-definition
video uploads
SWF/Flash file
support
Customize Profile
full customization
Number of Collections
unlimited groups/
channels/albums
unlimited sets
and collections
domain privacy
source file
downloads
access to original
files
permanently
active links
statistics on
account
more statistics
4000 3000
from 1024 768
New Storage
Quality of images/Videos
Adverts
Privacy
Original Files
Statistics
Image Size
Pricing Strategy: Comparisons of Add-ons
1) MapleStory
Mode (i) Credit Card through Paypal
(ii) Prepaid Cards
Credit Card
A-Cash
A-Cash
A-Cash
A-Cash
2) Second Life
L$570 for US$2.50
3) Second Life
US$1.99 for a song
Value
Value
Value
Value
5,000
10,000
20,000
30,000
SGD$5.35
SGD$10.70
SGD$21.40
SGD$32.10
RM12.00
RM24.00
RM48.00
RM72.00
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EXHIBIT 3
Asia Internet Usage and Penetration Rates
Countries
Population
(2009 Est.)
Afghanistan
28,395,716
Armenia
2,967,004
Azerbaijan
8,238,672
Bangladesh
156,050,883
Bhutan
691,141
Brunei Darussalam
388,190
Cambodia
14,494,293
China *
1,338,612,968
Georgia
4,615,807
Hong Kong *
7,055,071
India
1,156,897,766
Indonesia
240,271,522
Japan
127,078,679
Kazakhstan
15,399,437
Korea, North
22,665,345
Korea, South
48,508,972
Kyrgyzstan
5,431,747
Laos
6,834,345
Macau *
559,846
Malaysia
25,715,819
Maldives
396,334
Mongolia
3,041,142
Myanmar
48,137,741
Nepal
28,563,377
Pakistan
174,578,558
Philippines
97,976,603
Singapore
4,657,542
Sri Lanka
21,324,791
Taiwan
22,974,347
Tajikistan
7,349,145
Thailand
65,998,436
Timor-Leste
1,131,612
Turkmenistan
4,884,887
Uzbekistan
27,606,007
Vietnam
88,576,758
TOTAL ASIA
3,808,070,503
Internet
Users
(Year 2000)
1,000
30,000
12,000
100,000
500
30,000
6,000
22,500,000
20,000
2,283,000
5,000,000
2,000,000
47,080,000
70,000
19,040,000
51,600
6,000
60,000
3,700,000
6,000
30,000
1,000
50,000
133,900
2,000,000
1,200,000
121,500
6,260,000
2,000
2,300,000
2,000
7,500
200,000
114,304,000
Internet
Users
(Latest Data)
Penetration
(% Population)
500,000
172,800
1,500,000
500,000
40,000
187,900
70,000
338,000,000
360,000
4,878,713
81,000,000
25,000,000
94,000,000
1,900,600
37,475,800
750,000
100,000
238,000
16,902,600
71,700
320,000
40,000
397,500
18,500,000
24,000,000
3,104,900
1,148,300
15,143,000
484,200
13,416,000
1,500
70,000
2,416,000
21,524,417
704,213,930
1.80%
5.80%
18.20%
0.30%
5.80%
48.40%
0.50%
25.30%
7.80%
69.20%
7.00%
10.40%
74.00%
12.30%
77.30%
13.80%
1.50%
42.50%
65.70%
18.10%
10.50%
0.10%
1.40%
10.60%
21.10%
66.70%
5.40%
65.90%
6.60%
20.30%
0.10%
1.40%
8.80%
24.30%
18.50%
User Growth
(20002009)
49,900.00%
476.00%
12,400.00%
400.00%
7,900.00%
526.30%
1,066.70%
1,402.20%
1,700.00%
113.70%
1,520.00%
1,150.00%
99.70%
2,615.10%
96.80%
1,353.50%
1,566.70%
296.70%
356.80%
1,095.00%
966.70%
3,900.00%
695.00%
1,3716.30%
932.50%
158.70%
845.10%
141.90%
24,110.00%
483.30%
0.00%
3,400.00%
32,113.30%
10,662.20%
516.10%
Users (%)
in Asia
0.10%
0.00%
0.20%
0.10%
0.00%
0.00%
0.00%
48.20%
0.10%
0.70%
11.60%
3.60%
13.40%
0.30%
0.00%
5.30%
0.10%
0.00%
0.00%
2.40%
0.00%
0.00%
0.00%
0.10%
2.60%
2.90%
0.40%
0.20%
2.20%
0.10%
1.90%
0.00%
0.00%
0.30%
3.10%
100.00%
Notes: (1) The Asian Internet Statistics were updated on 30 June 2009. (2) CLICK on each country name to see detailed data for individual
countries and regions. (3) The demographic (population) numbers are based on data contained in Census Bureau. (4) The usage numbers come from various sources, mainly from data published by Nielsen Online, ITU, and other trustworthy sources. (5) Data may be
cited, giving due credit and establishing an active link to Internet World Stats. (6) For definitions and help, see the site surfing guide .
(*) For statistical purposes, China figures do not include SAR Hong Kong and SAR Macau which are reported separately. Copyright
2009, www.miniwatts.com, Miniwatts Marketing Group. All rights reserved.
Source: http://www.internetworldstats.com/stats3.htm.
Countries
Korea, South
Japan
Countries
China *
Hong Kong *
Internet
Users
Rank
Internet
Users
(Latest Data)
Penetration
Rank
Penetration
(% Population)
4
2
37,475,800
94,000,000
1
2
77.30%
74.00%
Population
(2009 Est.)
Internet
Users
Rank
Internet
Users
(Latest Data)
Penetration
Rank
Penetration
(% Population)
1,338,612,968
7,055,071
1
12
338,000,000
4,878,713
9
3
25.30%
69.20%
Population
(2009 Est.)
48,508,972
127,078,679
Users (%)
in Asia
5.30%
13.40%
Users (%)
in Asia
48.20%
0.70%
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Part II
The Opportunity
owns cameras and mobile phones. With increased affluence, the Japanese and Koreans are also fairly well
traveled and will have the content to contribute to the
platform.
Censorship
With Joi Ito being the angel investor, it also means that
Storyplanet has substantial access to the Japanese market. With a very inward-looking community, having a
door open to the New York-based company through a
well-respected personality will be beneficial.
Entrance into the China and Hong Kong market is restricted due to the strict censorship by the Chinese government. In a bid to enter and satisfy this fast-growing
market, companies like Google and Yahoo have had to
meet these content censorship demands. This will be the
largest obstacle should Storyplanet enter the Chinese
market, as the censorship body will be constantly regulating the content on the site and limiting any flow of information that they deem inappropriate. This defeats
the main purpose of Storyplanet as the platform for connecting storytellers worldwide with the freedom to collaborate, share materials, and edit content with any
other user. The aim of Storyplanet is to give a voice
to people, create communities, and raise awareness
of issues the users feel are valuable to the rest of the
community.
Disadvantages
Relative Asian Market Size
The Korean and Japanese markets constitute only 5.3
percent and 13.4 percent of the Asian market respectively, hence, there is a need to do a cost-benefit analysis to weigh the amount of revenue or the audience
reach the translated sites can attain against the cost of
producing a translated version of the sites.
Copycat Products
There is always the risk that the idea of interactive storytelling might be poached and developed within the
Japanese and South Korean markets. The creative and
innovative culture of the people would also mean that
they are always looking into ways to improve products.
Hence, there is a need to take appropriate measures to
protect the intellectual property or look into ways that
will enable Storyplanet to stay competitive.
Advantages
Disdvantages
Conclusion
We believe that Storyplanet having found its blue
ocean with a platform that is really innovative is ready
to position itself as a market leader in the industry.
The platform will definitely have to be evolved in
Version 2 before it is ready for the market. Meanwhile
the team should develop Storyplanets brand equity in
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