Part III. ACTING
ENTREPRENEURIALLY
Value Innovation
Opportunity Identification
77
With an understanding of entrepreneurial mindset, motivation, and behaviors,
and insights into market and industry forces, aspiring entrepreneurs are well
prepared to develop their entrepreneurial ideas. The following chapters on the
value innovation and opportunity identification outline an approach for
developing the opportunity into actionable next steps.
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79
9 VALUE INNOVATION
We didn’t reinvent the circus.
We repackaged it in a much more modern way.
Guy Laliberté
Founder of Cirque de Soliel
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With big ideas and scarce resources, entrepreneurs must be both efficient in their
decisions and discerning in their time and financial management. The concept of
value innovation is well suited to evaluating how to compete and where to invest.
Value innovation and value curves are linked, as discussed in Charting Your
Company’s Future (Chan Kim & Mauborgne, 2002). The value curve uses a
diagram to compare products or services on a range of factors by rating each
factor on a scale from low to high. These factors may be features, benefits,
pricing, or any other factor of importance to the business. Diagramming each
competitor on a single graphic can identify gaps and highlight opportunities for
entrepreneurs. This can also identify possible changes in the value proposition
that entrepreneurs can create.
To deliver value innovation and diagram value curves, focus on four questions
that align with what to eliminate, reduce, raise, and create within the venture
(Kim & Mauborgne, 2005).
The Opportunity Analysis CanvasTM
Emphasis on Value Innovation
81
What existing factors can you eliminate?
Where can you reduce factors and not reduce value?
Which factors can you raise above competitors?
What new factors can you create?
Eliminate
experience worldwide. They
A first step in determining what
reinvented the structurally
value innovation is best for a new
unattractive circus industry by
venture is to identify opportunities
creating a new market space.
to eliminate factors.
Through challenging conventional
assumptions about how to enter and
Are there factors offered by
competitors that are not valuable for
compete, the definition of a circus
was transformed.
your target customers? How can you
develop and deliver the best product
or service for customers? Do you
have a faster, better, and/or cheaper
solution that makes competitors’
features, relationships, locations,
etc. less valuable?
Value innovations started by
changing the target customer,
shifting from children (as the enduser traditional circuses) to adults
(purchasers of the traditional
circus). Focusing on adults instead
If you are able to identify factors to
of children created a new set of
eliminate, you can save the expenses
wants and needs for Cirque de Soleil
of money and time. You can then
to explore.
redirect these resources into the
factors that are truly valuable to
With the customer shift towards
customers.
adults, Cirque de Soleil eliminated
traditional elements including
Cirque du Soleil’s application of the
animals, candy and beverage
principles of value innovation has
concessionaires in the aisles, and
created an innovative entertainment
feature performers. These
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eliminations allowed Cirque de
that abandoned the conventional
Soleil to invest their money and time
keypad controller in favor of a new
in new elements targeted to more
motion-based approach. They
mature and higher spending
abandoned the traditional game
customers. Next, they integrated the
console developer’s emphasis of
best elements of popular
better graphics, faster computing
entertainment for adults including
power, and complex game strategies
live theatre, opera and popular
and storylines. In this way, they
music concerts, and Broadway
reduced selected factors and
shows. The result is a highly
emphasized others to compete in a
successful series of unrivaled Cirque
new way with Sony’s Playstation and
du Soleil performances seen in
Microsoft’s X-box.
person by over fifteen million people
annually.
Nintendo’s success with the Wii
illustrates how companies can create
Reduce
new customer demand by engaging
While select factors may be
customers previously unserved in
eliminated, others may be
their product category. For
preserved, albeit reduced. These
Nintendo, these noncustomers were
reductions present an opportunity
older non-gamers, parents who
to be more efficient and effective
desired their children to be more
than competitors. Deprioritizing
active, and very young children. This
these less essential factors enables
lead to a console based on fun,
you to focus on the high value
simplicity, and interactivity. This
factors.
reduced the need to invest in
consoles that were expensive to
Competing directly with existing
build, expensive to sell, and
competitors is a challenge for small
expensive to develop games for.
and large companies alike. Nintendo
developed a new vision for their Wii,
Nintendo did not seek a better
a new interactive game play format
solution for an existing problem.
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Instead, they created new demand
profit, and people propositions
from new customers by focusing on
based on product differentiation and
new wants and needs. There are
low cost delivered new value
always far more noncustomers than
innovations. This online resource
current customers. Nintendo’s
created new value for users and
ability to look across existing
motivated the general public to
boundaries of competition and
embrace and assist in implementing
rethink buyer value allowed them to
the new strategy of collaboratively
create a new market space where a
developing the written content of
new type of demand could be
the Wikipedia encyclopedia.
developed. With this insight,
Nintendo could effectively
By engaging its readers and the
determine what to reduce, what to
public in developing Wikipedia’s
raise, and what to create.
content, the company raised the
timeliness and the breadth of its
Raise
content. This approach presented a
Once the elimination and reduction
sustainable advantage in cost and in
of factors are made, attention can
value versus Encyclopedia
turn to raising select factors.
Britannica, Microsoft’s failed
Encarta.com offering, and existing
What factors can elevate the values
and future competitors.
that truly matter for customers?
Work to exceed customer desires in
Create
these areas.
Lastly, are there opportunities to
create new factors that will satisfy
Raising these high-value factors
customers in new ways?
differentiates you from competitors
and improves your competitive
If entirely new features or benefits
advantage.
can be delivered by your product or
service, and you are unique in this
Wikipedia’s alignment of value,
way, you are highly valuable to
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customers.
With these customer insights, your
Skype’s online audio and video
solution to the customers’ problem,
conferencing capabilities
or fulfilling their desires, enhances
revolutionized the market. This
the value of your offering and
global voice and video offering for
elevates your competitiveness.
business and personal
communications challenged longdistance calling and traditional
video conferencing.
Skype’s free product offering, with
optional paid add-on services,
presents sustainable cost advantages
versus alternative communications.
Skype’s internet-based tool creates
an easier experience for video
conference users who do not need to
setup and manage equipment,
software, and networking systems.
Tips and techniques for
managing the value innovation
To develop an innovative value
curve, explore the benefits that
matter most to customers.
Understanding your customers’
values enables you to focus on what
matters to them, and empowers you
to eliminate or reduce less valuable
factors.
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Entrepreneur Spotlight on Julie Uhrman
Founder and CEO of Ouya
Julie Uhrman saw opportunity in the hyper competitive video gaming space
dominated by industry titans. She recalls that, “The consoles are still incredibly
expensive. The business model hasn’t changed. We offer something very
different. We really carved out our own space.” (Molina, 2013). In July 2012, she
entered her Ouya concept into the Kickstarter crowd-funding site, and in one
month reached pre-sales of $8.5 million.
By leveraging the Android software platform, and emphasizing low cost for the
consumer instead of the high technology focus of the new Microsoft’s Xbox One
and Sony’s PlayStation 4, Ouya offered a different unique selling proposition than
the established competitors. With this model, new versions of Ouya will launch
annually, while traditional game consoles cycle between four to six years.
Ouya’s $99 price is far lower than that the $200-$500 traditional game consoles.
Its cube size is only a few inches in size, and includes HDMI inputs for highdefinition TVs and a controller similar to that of a PlayStation 3 or Xbox 360.
A major differentiator from incumbents is its open platform, enabling
independent developers (and even game players) to easily make and post new
games, and requiring only a screwdriver to make hardware modification and addons. With all systems thereby being a development kit by design, any Ouya owner
can be a developer without licensing fees. All games are required to have a freeto-play aspect, be it completely free, a trial, or purchasable upgrades.
Julie’s innovative product reduces or eliminates realistic graphics and superior
processing power while raising and creating new values in democratizing video
gaming, and is now selling in major online and offline retailers in the U.S. and
abroad.
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Ideas in Action: Value Innovation
What factors are competitors offering that you can eliminate or reduce, without
sacrificing value for customers?
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Which factors can you raise to exceed customer expectations?
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What new factors can you create that will bring new values in new ways to
customers?
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[References]
Kim, W.C. & Mauborgne, R. (2005).
“Creating New Market Space.”
Blue Ocean Strategy. Harvard
Harvard Business Review, January -
Business School Press.
February 1999.
Kim, W.C. & Mauborgne, R. (2002,
Molina, B. (2013). “Ouya seeks to
June). “Charting your company’s
shake up video-game console
future.” Harvard Business Review.
business.” USA TODAY. June 24,
2013.
Kim, W.C. & Mauborgne, R. (1999).
88
10 OPPORTUNITY IDENTIFICATION
Older people sit down and ask, “What is it?” but the boy asks,
“What can I do with it?”
Steve Jobs
89
Entrepreneurial opportunities become real when you have a solution that
leverages your advantages to solve an important problem for others. This chapter
examines how to translate the approaches and tools of this book to identify and
act on real entrepreneurial opportunities. The key elements of opportunity
identification are defining the problem, crafting a competitive solution, building
your advantage, and forming the right team.
The Opportunity Analysis CanvasTM
Emphasis on Opportunity Identification
90
Is the problem real?
Does your solution create value for your stakeholders?
Is your advantage superior and sustainable?
Can you build the right team at the right time?
Problem
Solution
Who is your customer? This is the
Based on the identified problem,
first step to defining your market
what are the fundamentals of your
and understanding the problem or
solution? What are the key values
desire. With this knowledge, you can
realized by customers? This requires
focus on assessing their needs.
an understanding of the customers’
Focus on customer value first. Why
perceptions of value.
do they need your product? What
benefits will they gain? Can they
Solutions are not about the
make money or save money with
technology or the features. Solutions
your product? These are all
focus on customer value. Features,
questions to consider in
functions, and technologies are
understanding the problem that you
simply vehicles for value creation.
aim to solve.
Beyond measuring solutions in
Once this first round of problem-
terms of customer value, it’s
related questions are answered, the
necessary to assess the competitive
next questions are: How many
environment as well. How are these
people experience these problems
customer values met by current and
now? In the future? How many
expected competitors?
buyers are there? Are there enough
people who care about this problem
Study direct competitors, those who
for you to be financially successful
provide a comparable solution in a
by solving the problem?
similar way. Also examine indirect
competitors who provide similar
91
value, but in a different way. For
example, airlines directly compete
Avoid exclusive focus on the
with other airlines, but they also
“served” market. Excessive focus on
compete indirectly with trains,
serving your competitors’ customers
driving, and other modes of
presents the challenge of converting
transportation.
customers. Consider serving a
market that is not well served by
Recognize that anything that keeps a
existing competitors. You may be
customer from buying your solution
able to acquire those customers
is competition for you.
faster and at a lower cost of
acquisition.
While studying the competition, also
consider your key market segments.
Advantage
Based on the customer that you
To understand your advantage
identified in your problem
versus competitors, consider the
statement, how can you segment
degree of the advantage and the
this group of customers into smaller
sustainability of that advantage.
sub-groups?
To the question of degree, consider
By segmenting your market based
the superiority of your advantage
on their needs, geography,
versus others. This is influenced by:
demographics, psychographics, and
(1) a product or service with better
other factors, you can determine
features or functions; (2) a lower
who is most desirable to serve first.
price for the customer based on the
value created for them (due to your
Identifying key market segments
operations or other cost control
allows you to focus your limited
strategies); and (3) a rareness factor,
time and resources rather than
meaning that competitors cannot
diluting yourself across multiple
offer the same set of values to this
segments and spreading yourself too
customer.
thin.
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The sustainability of the advantage
a company, and allows for
determines the likelihood of
continuity in the event of one
competitors replicating or
person’s absence due to illness,
surpassing your venture. How easily
vacation, or unforeseen events.
can a competitor copy or exceed
your resources, know-how,
In selecting who to join your team,
operations, and relationships?
as a co-founder, advisor, or
collaborator, ask the questions that
Team
investors ask when evaluating the
Which is best? The talented
team.
individual acting alone or a wellcomprised team? This depends on
Beyond the choice of individual
the goals and skills of the individual
versus team, there is the question of
and the team.
your preferred role within a team.
Your role or roles may include
As an individual founder, you can
focusing the team on its objectives,
keep all of the profits, have all of the
giving and seeking information,
glory, make fast decisions, and focus
cultivating and expanding ideas,
on your needs and interests. As long
defining and coordinating activities,
as your customers and investors
and summarizing the discussion or
agree, you can do exactly what you
analyzing results.
want, when you want, and how you
want.
A free online tool for assessing your
teaming preferences and preferred
A complementary team brings
roles is available at
increased competencies and greater
www.opportunityanalysiscanvas.com/
knowledge than a single individual.
self-assessments.
A team offers an expanded network
of potential investors, partners,
The assessment is based on Steven
advisors, and customers. A team
L. McShane’s “Team Role
also delivers improved legitimacy as
Preferences Scale” and Benne and
93
Sheats (1948).

What are their
motivations?

How committed are they
to this venture?

How realistic are they
about the venture’s risks
and rewards?

What skills, abilities, and
knowledge do they have?
engaging and supporting the

What is their reputation?
members of the team.

Where have they worked?

Where have they been
educated?

What have they
accomplished?

Who else needs to be on
the team?
The Team Roles Preferences Scale
calculates your preferences for five
team roles: encourager, gatekeeper,
harmonizer, initiator, and
summarizer.
 Encourager - Strong tendency to
praise and support ideas, thereby
 Gatekeeper - Strong tendency to
encourage all team members to
participate in the discussions of
the team.
 Harmonizer - Strong tendency to
settle conflicts among team
members and reduce tensions
within the group.
 Initiator - Strong tendency to
Tips and techniques for
identify and promote the goals of
opportunity identification
the team, including ways to realize
To validate your ideas about the
these goals.
problem and candidate solutions,
 Summarizer - Strong tendency to
talk with prospective customers very
track the discussions, decisions,
early in the product development
and next steps.
process. Engaging with customers

Understand the qualities of
each individual team member:
before you have a prototype
provides you with insights on what
features and values are most
important to customers. Interacting
94
with customers early is also critical
affordability and access to
to understanding what they are
entrepreneurs with limited budgets
willing to pay for the product that
who need to hire skilled
you envision.
professionals.
With a clear, customer-validated
With a strong team working to solve
perspective on the problem for your
a real problem, your venture is well
planned solution, you can invest
positioned for success.
time and resources into developing a
superior and sustainable advantage.
One key advantage to build is your
team.
While the team may exist among the
co-founders and executive
management of the new venture,
there should also be an extended
team. The extended team may
include the board of directors or
board of advisors, attorneys,
accountants, and other service
providers.
The use of virtual, temporary teams
is also gaining momentum with
startups. Through tools like
elance.com and odesk.com, among
others, entrepreneurs can find
specific talents from individuals and
small companies worldwide. This
can introduce a new level of
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Entrepreneur Spotlight on YOU!
Write a one-page Entrepreneur Spotlight on where you aim to see your venture
within the next five years.
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Ideas in Action: Opportunity Identification
What evidence can you provide that your proposed problem is significant?
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What key customer values does your solution offer?
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How will you make your company and product advantage superior and
sustainable?
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What steps will you take to build the right team at the right time?
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[References]
Benne, K.D., & Sheats, P. (1948).
“Functional roles of group
members,” Journal of Social Issues.
Vol 4, pp. 41-49.
McShane, S.L., & Steen, S. (2011).
Canadian Organizational Behavior.
McGraw-Hill Ryerson. Whitby, ON.
Canada
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11 NEXT STEPS
Let the future tell the truth, and evaluate each one according to
his work and accomplishments. The present is theirs; the future,
for which I have really worked, is mine.
Nikola Tesla
Prolific inventor and father of the modern electronics industry
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With this journey now complete,
As the next step in your
you are ready to use the Opportunity
entrepreneurial activities, you are
Analysis Canvas to identify and
better equipped to explore business
analyze entrepreneurial ideas.
models for your new venture ideas.
By studying this book, your
awareness of entrepreneurial
mindset, motivation, and behavior
has expanded. You appreciate the
roles of markets and industries in
entrepreneurial opportunities. You
recognize the value curve and the
fundamentals of opportunity
identification as key elements of
entrepreneurial action.
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101
Develop the Business Model
a full business plan.
As a preliminary step to writing the
business plan, the business model
Write the Business Plan
describes the logic of how an
This experience of hearing your
organization creates, delivers, and
customers’ needs and wants in
captures value sustainably.
reaction to the business model
allows you to write a dramatically
While the term business model is
better business plan. With a well-
very popular today, the concept
researched business plan, you can
dates to the earliest days of
raise financial capital (if needed)
business, and simply defines how an
and proceed with launching the
organization will make money.
venture.
A comprehensive model defines the
Now, get to work! Best wishes in
how the products or services of a
fulfilling your entrepreneurial goals.
business serve customer needs, at
what price, through what
manufacturing and distribution
channels, and at what financial costs
to the business.
With a well-developed business
model, you can test your
assumptions and strategy by talking
to prospective customers. They may
affirm parts of the business model
and reject other parts. This early
customer feedback is valuable to
adapting the business model, and
perhaps the fundamental product or
service idea itself, before authoring
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An idea that is developed and put into action is more important
than an idea that exists only as an idea.
Edward de Bono
Physician, author, and inventor
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