Opportunity selection model

Source: David Rae, Entrepreneurship, published 2007 [PALGRAVE MACMILLAN] reproduced with permission of Palgrave MacMillan.

High-value Opportunity	Market	Low-value opportunity	High-value opportunity	Innovation	Low-value opportunity
Able to access market of growing size and value	Market growth	Limited growth potential in smaller markets	Able to lead the market using prior experience	Innovation leadership	Learn as you go along to catch up
Known, identifiable customers in defined market sector	Customer base	Limited or non-specific customer base	Application solves a problem informed by customers’ needs	Innovation related to customer needs	Application does not solve customers’ real problem
Customer reliance on product increasing over time	Customer reliance and convergence	Customer not reliant on product, divergent from their needs	Differentiated technology; optimal performance and cost benefits	Technology differentiation	Undifferentiated technology; marginal performance and cost improvement
Trust and open rela-tionships with clients; compatible practices	Customer interaction	Adversarial customer relation-ships; lack of fit	Strong IP protection with clear ownership and control, hard to copy	Intellectual property	Weak or no IP protection – can be copied
Long-term partner-ship within strong supplier and technology networks	Partnering and networks	One-off relation-ships within weak networks	Opportunity to be first to market	Speed to market	Follower to market
Unique advantages and strengths apparent in relation to competitors	Competition	Undifferentiated from competitors, forced to compete on price	Implementation feasible; challenges can be overcome	Feasibility of implementation	Difficult to implement with many obstacles

Opportunity selection model

High-value Opportunity	Strategy	Low-value opportunity	High-value opportunity	People	Low-value opportunity
Have a strategy to create and grow business	Business growth	Limited purpose and scope to build a business	CEO shows leader-ship in innovation	CEO leadership	CEO not an innovative leader
Multiple strategic and exit options	Strategic options	Single or limited exploitation options	Management team skilled, compatible and motivated to achieve	Management team effectiveness	Team lack management skills fit and motivation
High value creation from high profit margin and cash generation	Value creation	Low perceived value and profit margin	Able to use prior experience and knowledge of industry	Contextual experi-ence	No pre-knowledge of industries or technology
Superior business model	Innovation business model	No advantage over existing business models	Able to recruit experienced people from within industry	Staff capability	Experienced and capable staff not available

Opportunity selection model

High-value Opportunity	Investment	Low-value opportunity	High-value opportunity	Learning	Low-value opportunity
High return and profitability in rela-tion to investment	Investment reward	Low financial return for investment	Independent control of business	Independent control	Not in full control of the business
Attractive to potential investors with growing equity value	Investor attraction	Unattractive to investors offering limited increase in equity value	Personal vision and confidence in busi-ness potential	Personal vision	Self doubt and lack of scope to succeed
Acceptable risk of loss in worst case scenario	Risk	Unacceptably high downside risk	Able to reduce margin between success and failure	Incremental learning	Unable to reduce margin of effectiveness
Commercially viable with predictable break-even and cash flow	Viability and cash flow	Unpredictable cash flow, unlikely to achieve viability	Intuition, knowing the right thing to do	Intuition	Does not feel right - bad past experience
Long-term opportunity and income stream	Timescale	Short-term time-frame and rapid exit strategy	Able to practise ethical framework and values	Ethics	Non-ethical exploitation

Opportunity selection model

Scoring

Mark an X in the box on each factor (paired set of statements) which most closely matches your business opportunity.
Under each cluster (group of four or six factors), count how many factors have been marked in the left-hand (high-value) box.
Give each 1 point.
Give no points for factors marked in the right-hand (low-value) box.
Write the number in the box below.

Market	Inovation
6 factors total:	6 factors total:
Strategy	People
4 factors total:	4 factors total:
Investment	Learning
5 factors total:	5 factors total:
30 factors Total for all 6 clusters

Scoring guideline

Score

0-7	Likely to be a low-value opportunity with limited return, if all have aspects been explored suggest disregarding it.
8-15	Moderate-value opportunity, can aspects with growth potential be developed?
16-24	Worthwhile opportunity; needs careful analysis to improve weak areas and raise the value potential.
25-30	Strong potential for a high-value opportunity; beware of over-optimism. Explore in detail the weak areas, potential competition and feasibility; plan to implement

Whatever the score, look carefully at the low-value clusters (scoring half or less) and explore how these could be increased.

Write the cluster score on the diagram overleaf:

Ways of increasing opportunity value:

Market

Innovation

Strategy

People

Investment

Learning