Selecting a Beachhead

1.

Selecting a
Beachhead
Market and
Opportunities
Identification/
Creation
NVC-Session 3
Tim Perkov

2.

• Identifying Beachhead Market
• Conditions of Beachhead Markets
• Criteria to select when selecting Beachhead
• Where to beachhead?
Agenda
• The Timmons Model
• Opportunity Spawners and Drivers
• Criteria for Evaluating Venture Opportunities
• Exercises

3.

Have you
ever
considered?

4.

Why only one market?
MIT professor Dan Ariely (Predictably
Irrational)
• When people are given what appear to be
multiple paths to success, they will try to
retain all the paths as options
• Even though selecting one specific path
would have guaranteed them the most
success

5.

Beachhead
Traditionally a military term
Army lands a force on beach in
enemy territory, gains control of
that area to land more
troops/bring more supplies, and
then launches more attacks
For your startup
Gain dominant market share.
Then you will have strength,
experience, knowledge, and
capital to go after other markets

6.

Who was
Facebook’s
beachhead
market?
Answer: Students at Harvard who were
socially active.

7.

Who was the
beachhead
market for the
first
cell phones?
Answer: Traveling
salespeople who spent a
lot of time in cars.

8.

What would be beachhead
market for 5G Technology
• Answer: The technology enthusiasts who want to
have stable connectivity and high bandwidth for
AR & AI Applications

9.

Customers purchase similar products• A business should go into a market where the potential
customers are already purchasing a similar product to that which
the business intends to offer.
Conditions
that define a
beachhead
market
Customers have similar sales cycles
• The customers within the potential market should have similar
sales cycles, and they should expect to get the product value in
similar ways. Sales cycles are predictable phases when a
company expects to sell its products or services to customers in a
specific market segment.
Word of mouth communication between customers
• A market where customers frequently spread information or
ideas by word of mouth is potentially a good market for
implementing the beachhead strategy. The customers can belong
to specific communities or regions where they share information
with other potential customers. These markets, where existing
customers serve as references for potential customers, serve as
ideal hubs where new businesses can create dominance.

10.

Criteria to Consider when Selecting Beachhead
1.
Is the target customer well-funded?
2.
Is the target customer readily accessible to your sales force?
3.
Does the target customer have a compelling reason to buy?
4.
Can you today, with the help of partners, deliver a whole product?
5.
Is there entrenched competition that could block you?
6.
If you win this segment, can you leverage it to enter additional segments?
7.
Is the market consistent with the values, passions, and goals of the founding team?

11.

Don’t get stuck in analysis paralysis!
• There are multiple paths to success
• Eliminate the options with the lowest chances of
success
• Start doing, interviewing, experimenting, etc.
• Your actions will tell you whether or not it is a viable
market

12.

How to beachhead to markets
BHM → Submarket Segmentation → More FOCUS
Office Workers
Families
Remember:
■ Same product
■ Same sales process
■ Word of mouth
Students
Families who want hygenic food

13.

Better to be small
($100m/year or less)
Where to
beachhead?
Allow you to get to be
cashflow positive
You can dominate in
One-sided vs. Two
sided markets
• Uber - drivers & consumers
• Amazon - buyers &
suppliers

14.

Exercise
• Try to make Beachhead Market for
Starbucks that is entering Uzbekistan

15.

Market Opportunities Development

16.

The
Timmons
Model

17.

THEMES OF NEW VENTURE CREATION—THE
TIMMONS MODEL:
opportunity driven;
driven by a lead
entrepreneur and an
entrepreneurial team;
resource parsimonious
and creative;
dependent on the fit
and balance among
these;
integrated and holistic.

18.

When Idea becomes an
opportunity?
Real business opportunities have the following attributes:
1.
They create or add significant value to a customer or end
user.
2.
They address a true market problem with some form of
competitive advantage.
3.
The need for the product or service is pervasive, the
customer has a high sense of urgency, and is willing to pay
for a solution.
4.
They have robust market, growth, margin, and profitability
characteristics that can be proven.
5.
The founders and management team have collective domain
experience that matches the opportunity.

19.

Opportunity Spawners and Drivers
Regulatory changes - Cellular, airlines, insurance,
telecommunications, medical, pension fund management,
financial services, banking, tax and SEC laws, new societal
and/or environmental standards and expectations
10-fold change in 10 years or less - Moore’s law—
computer chips double productivity every 18 months:
financial services, private equity, consulting, Internet,
biotech, information age, publishing

20.

Opportunity Spawners and Drivers
Reconstruction of value chain and channels of
distribution - Superstores—Staples, Home Depot; all
publishing; autos; Internet sales and distribution of all
services
Proprietary or contractual advantage - Technological
innovation: patent, license, contract, franchise, copyrights,
distributorship

21.

Opportunity Spawners and Drivers
Entrepreneurial leadership - New vision and strategy, new team equals secret weapon; organization
thinks, acts like owners
Existing management/investors burned out/undermanaged - Turnaround, new capital structure,
new breakeven, new free cash flow, new team, new strategy; owners’ desires for liquidity, exit;
telecom, waste management service, retail businesses
Market leaders are customer obsessed or customer blind - New, small customers are low priority or
ignored: hard disk drives, paper, chemicals, mainframe computers, centralized data processing,
desktop computers, corporate venturing, office superstores, automobiles, software, most services

22.

Criteria for Evaluating Venture Opportunities – Market
Related Factors
Criteria
Highest Potential
Lowest Potential
Market
Changes way people live, work, learn, etc.
Market driven; identified; recurring
revenue niche
Incremental improvement only. Unfocused;
onetime revenue
Customers
Reachable; purchase orders Remove serious pain Loyal to others or unreachable
point
User benefits
Less than one-year payback
Three years plus payback
Value added
High; advance payments
Low; minimal impact on market
Product life
Durable
Perishable
Market structure
Imperfect, fragmented competition or emerging
industry
Highly concentrated or mature or declining
industry
Market size
$100 million to $11 billion sales potential
Unknown, less than $20 million or
multibillion-dollar sales
Growth rate
Growth at 30%–50% or more
Contracting or less than 10%
Market share attainable (Year 5)
20% or more; leader
Less than 5%
Cost structure
Cost advantages
Declining cost

23.

Criteria for Evaluating Venture Opportunities –
Economics
Criteria
Highest Potential
Lowest Potential
Time to breakeven/
Positive cash flow
Under 1-5–2 years
More than 4 years
ROI potential
25% or more; high value
Less than 15%–20%; low
value
Capital requirements
Low to moderate; fundable/bankable
Very High; unfundable or
unbankable
Sales growth
Moderate to high (+15% to +20%)
Less than 10%
Spontaneous working
capital
Low, incremental requirements
High requirements
Gross margins
Exceeding 40% and durable
Under 20%

24.

Criteria for Evaluating Venture Opportunities – Exit /
Competitive Advantage Issues
Criteria
Highest Potential
Lowest Potential
Exit mechanism and strategy
Present or envisioned options
Undefined; illiquid investment
Capital market context
Favorable valuations, timing, capital
available; realizable liquidity
Unfavorable; credit crunch
Fixed and variable costs
Lowest; high operating leverage
Highest
Fixed and variable costs
Moderate to strong
Control over costs, prices, and distribution
Weak
Proprietary protection
Have or can gain
None
Response/lead time
Competition slow; napping
Unable to gain edge
Legal, contractual advantage
Proprietary or exclusivity
None
Contracts and networks
Well-developed; accessible
Crude; limited
Human Resources
Top talent
B or C team

25.

Criteria for Evaluating Venture Opportunities –
Management Team / Personal
Criteria
Highest Potential
Lowest Potential
Entrepreneurial team
All-star combination; free agents
Weak or solo entrepreneur;
not free
Industry and technical experience
Top of the field; super track record
Underdeveloped
Integrity
Highest standards
Questionable
Intellectual honesty
Know what they do not know
Do not want to know what
they do not know
Goals and fit
Getting what you want; but wanting
what you get
Surprises; only making money
Desirability
Fits with lifestyle
Simply pursuing big money
Risk/reward tolerance
Calculated risk; low risk/reward ratio Risk averse or gambler
Stress tolerance
Thrives under pressure
Cracks under pressure

26.

Criteria for Evaluating Venture Opportunities – Strategic
Differentiation
Criteria
Highest Potential
Lowest Potential
Degree of fit
High
Low
Service management
Superior service concept
Perceived as unimportant
Timing
Rowing with the tide
Rowing against the tide
Technology
Groundbreaking; one of a kind
Many substitutes or
competitors
Flexibility
Able to adapt; commit and
decommit quickly
Slow; stubborn
Opportunity orientation
Always searching for opportunities
Operating in a vacuum
Room for error
Forgiving and resilient strategy
Unforgiving, rigid strategy