Starting a new venture – have you done your research?
Sri Lanka witnesses hundreds of new business ventures every day, in both product and service industries. While some of them bloom and blossom, others do not succeed and close shop. At the end the best performers survive.
Although many new business ideas may seem lucrative and profitable to entrepreneurs, it is wise to assess whether they have done the preliminary research, and whether or not they have all the facts and data in place that support the decision towards this new venture?
The preliminary research that should precede business decisions may be conducted following the Scientific Research Process.
Why use the scientific research process?
Involuntarily, all of us use the scientific research process for most of the decisions we take in our day-to-day life. The application of this process in a structured manner could bring about great benefits to a business in terms of profitability as well as cost–savings. It will help you to answer only the questions you need to answer, enabling more efficient problem solving. The scientific research process used for problem solving involves the following steps.
A example of each step applied to the a person wanting to start their own coffee shop;
|
Brainstorming The initial stage of the new business ideation process would be to brainstorm. Brainstorming involves the accumulation and assimilation of ideas by the involvement of a group of people. This is a great method for gathering insight into any decision.This session should ideally involve mapping of all the aspects of the new venture, the need for it and the availability of resources. |
§ Is secondary data available on the hospitality industry relating to coffee shops? § What are the sources for gathering information? § How up to date is the information? |
|
Scan Information This stage involves the scanning of the information generated through brainstorming. A brief look over at the content would help to pick out the most important bits to read. This stage is important for the key decision maker/s to get the initial idea of the decision they have to take and all the facts involved.Without an initial scanning, approaching the entire topic at one go would be overwhelming and exhaustive. |
§ Find online research reports on the hospitality industry § Obtain primary information via conducting Interviews / Focus Groups / Questionnaires to get most up-to date data on the patterns of consumption in the coffee shop industry |
|
Developing Issue Tree/Mind Map This stage involves creating an issue tree that consists of all the issues we need to answer in order to arrive into the final conclusion. Presenting the information in an issue tree (mind map) is greatly helpful to organize the information in one’s brain. Theses issues should be mutually exclusive and collectively exhaustive. The outcomes of exercising or not exercising a business decision can be best presented using mind maps. A person can directly relate to each option and the consequences that follow, in a very precise and straightforward manner. |
§ Mindmap with the key issues we want to address § Leave out the issues that do not need to be addressed |
|
Define Hypothesis & Analysis The need for a new business and how profitable it is can be assessed with a clear hypothesis in mind. For example, a hypothesis would be “My new business would be successful if I deploy X amount of capital or if I break even at the end of the first year”Although not officially stated most decision makers have such hypotheses at the back of their minds. But clearly instating it would invite further comments and viewpoints that would greatly affect the decision of whether or not to make the decision |
§ Build an assumption: “There is a market for coffee shops in Colombo” |
|
Conduct Analysis This could be termed as the most important stage of the scientific process. This is where all the ideas and the hypotheses are tested.The analysis could be done in several ways: § Resources: An assessment about the resources that would be needed to set up the business (focus on the non-financial resources as a financial analysis will be conducted) and how likely it is for the firm to obtain those resources. § Promotional Plan: What is the target audience and how best to reach them should be identified initially. § Financial Analysis: A typical Cost-Benefit analysis, break-even point calculation etc. with forecasted values. |
Using the information, attempt to answer the issues constructed in the issue tree. Answers thus obtained could be in the form of: § There are over X number of competitors in Colombo § The total value of the market is Rs. Y million § The amount an average person would spend per week on coffee is Rs Z |
|
Distil Findings By distilling/filtering the findings of the analysis stage, one of 4 courses of action could be selected. 1. Starting the new business Venture 2. Not starting the new business 3. Postponing the new business venture till adequate capital/resources can be generated or for when a market develops 4. Modifying the initial hypothesis or the line of thought and re-doing the analysis |
Prove the hypothesis right or wrong by submitting the overall conclusions and the supporting arguments: For example: § There is a market § The market value is X § To be profitable we need to sell at minimum Rs. XYZ per person |
Therefore it can be concluded that all decisions are best made when made following the steps of the scientific research process and decision makers should invest time in it to make the best business decisions.
Created: September 20th, 2013
