Many startups nowadays are assessing new opportunities no matter if their current business is disrupted or growing at a high pace. Not many are assessing also the cost related to them.
The dilemma many startups are facing is related to what opportunities to focus on, how to rank and prioritise opportunities, which will be business outcome generated and what resources are needed to pursue an opportunity. While these are some obvious questions many are taking into account, there are others which may not come naturally in the minds of founders such us fit with business strategy they currently have, if still relevant, if they are able to sustain a competitive advantage, which is the impact on the current business by de-focusing on it to pursue new opportunities and which is the cost these opportunities are holding.
Here is a simple tool to be used to assess opportunities and related costs.
How big is the opportunity?
The starting point in assessing this is to understand the consumer or customer needs that have changed. Once you understand this, is key to understand how big is the opportunity (number of customers, estimated revenue or cost saving, etc) and wether it makes business logic to focus on it or not as it may imply change of focus in the organisation and additional resources.
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Can be exploited it sustainably?
Assuming the size of opportunity is big enough to pursue it, the next assessment is to understand which is the value proposition you want to bring to the changing needs of your customers and wether those needs may be better satisfied than your competitors. The assessment of the sustainability of the value proposition is key as it may imply deployment of important resources and re-focusing of the organisation of it.
Does it fit with your strategy?
A new opportunity may not fit with your current strategy especially in business which are severely distressed by the current pandemic. The degree to which may fit or not fit is of high importance as it will or will not create synergies with the current business.
Which is the impact on the current business ?
An assessment of the opportunity impact in the current business is needed as this may influence the way you acquire customers (e.g. a different go to market strategy is used to enterprise customers vs SMEs), the focus of your team from different functions and the development of your roadmap. The impact in the current business of a re-prioritisation of the features & technical road map of a tech startup is key to understand as it will impact the current business and will help understand the cost of opportunity. A complete turnaround of startup to new opportunities will create additional distress to its team and chances to survival are reduced significantly.
What resources are needed ?
New headcount, bringing new skills and financial resources are usually needed when pursuing new opportunities. All will imply a certain cost related to each opportunity.
At the end of this assessment a startup should be able to assess and understand the cost of opportunity and therefore prioritise between the different opportunities they will investigate.
