Scenario Planning – The Business GPS

Isn’t driving much easier with GPS? If you find yourself in a pesky traffic jam, no problem! Searching for an alternate route is a breeze. Did you become lost on your way to a new place? Shoot. No problem again! Push a few buttons and let this magnificent device guide you.

If only we could consult a business map for the fires encountered throughout the year. While running a business of any size will never be as simple as using a GPS device, we can, as small business owners rather dramatically reduce the tasks complexity through annual scenario planning. The concept of scenario planning shouldn’t be terribly unfamiliar. As individuals, we incessantly assess and plan for potential what-ifs. The same planning should, no, must, be extended to running a business of any size.

Maximizing Collective Attention: The Digg Study

Successful viral marketing requires the attention of internet users. This is difficult when users are inundated daily with online content. As a result, there is an inherent competition for attention between pieces of content. Understanding how attention to items grows and fades across online groups (forums, social networks, social news sites) can provide an edge in this competition when the content is catered to the trends.

The Information Dynamics Laboratory at HP Labs conducted a study on this very concept by evaluating the growth and decay of the attention content receives as determined by the users of Digg.com. What they found was that novelty and popularity interact to determine the growth and saturation of collective attention.

The Bass Model & Forecasting Product Adoption (Part II)

This is a continuation of the previous post.

Estimating m, p, q
Accuracy of the Bass Model relies heavily upon the modeler’s estimation of m (the market size), p (the “coefficient of innovation” and q (the “coefficient of imitation”). Because determining these values is a rather arduous task, anyone constructing a Bass Model typically looks to analogous products. In the previous post we suggested that the iPod’s analogous products included portable radios, walkmans, and portable CD players. This is quite literally, prediction by analogy, and this is precisely why it fails for the truly novel. (personal note: for the hackers out there, this is a bit like proving a problem is NP-Complete by reducing it to another previously proven NP-Complete problem.)

The Bass Model & Forecasting Product Adoption (Part I)

Market Sizing & Analogous Products
In the previous post, we mentioned the difficulty of conducting market research for truly novel products and services. But what about those that can be compared with things that already exist? If years ago, you wanted to say introduce the iPod, a product that could, in some respects be compared with other portable music players, establishing market size wouldn’t be an entirely subjective a task. A quick literature search for the market size of analogous products such as portable radios, walkmans, and CD players, could have provided baseline figures.

The Bass Model
Beyond the support it lends to fund raising activities, defensible market size information is also and important business planning tool. Market size information is one of the key metrics used in “the Bass Model,” a highly cited model for forecasting the adoption of new products and services. Hey, if you are planning to sell a tangible good or even a subscription-based web service, you simply have to graph the adoption curve to project revenues and expenses, and to determine what resources will be needed.

The Catch-22 of Launching an Innovative Product

As entrepreneurs or small business owners, our decision to move forward with a new project is often driven by market research. While evaluating a particular idea, we spend a great deal of time digesting market trends, researching competitors, identifying potential customers, and determining the market size. The thought process isn’t particularly illogical is it? If we are going to invest our time and money in something, we, along with our potential investors, undoubtedly want to calculate the potential payoff before making a yes/no decision. If our market research suggests that the opportunity is either nonexistent or too small, we simply don’t proceed. However, market research may not always get it right.

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