Assessing opportunity assessment

From Jon Chambers

December 27, 2008 21:38

4 comments

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Not long ago, I went to watch the final presentations for MIT’s Product Engineering Processes course (2.009). The presentations were quite good, but it was clear that one of the requirements was something along the lines of “describe the market opportunity and business plan for your product.” All of the presentations choked on that point, and generally in the same ways.

Let me be very clear here that I don’t mean this as a dig at MIT students. Drew and I both went to Olin College, and we agree that virtually every presentation from Olin on business plans and market opportunities had the same problems. That’s particularly fascinating since Olin officially aspires to “redefine engineering as a profession of innovation encompassing… the creation of value through entrepreneurial effort and philanthropy.” Given that both institutions are working to introduce their engineering students to the challenges of bringing ideas to market, why are students’ presentations about opportunity assessment so uniformly weak?

In my experience, presentations about opportunity assessment from undergraduate engineering students follow the same formula:

  1. Spend the first 75%-90% of the presentation on solid engineering and design content full of thoughtful analysis and honest self-assessment.
  2. Hand the microphone off to your “business person.”
  3. Assert the size of the market is so many billions of dollars annually.
  4. Assert that, as a seemingly stochastic process, the new venture will secure a certain percentage of that market simply by existing.
  5. Immediately discard the implied revenue projection from (4).
  6. Present a cost/revenue projection that shows a minor loss for the first few years, but explosive growth somewhere between year 3 and 5. At no point should these projections have anything to do with the number from (4).
  7. Cite “volume discounts” as a reason costs will go down after the first few years.
  8. Present cost/revenue charts that imply far more detail than exists in the underlying analysis.
  9. Display some numbers about ratios and internal financial metrics.
  10. Conclude that there is an opportunity for success. Assert millions in future profit.
  11. Awkwardly open the floor for questions from the audience.

I don’t want to spend too much time on why these presentations are unrealistic or inaccurate because, again, my point isn’t to direct grief toward students who worked hard and produced a semester’s worth of otherwise solid engineering and design. What I do want to drive home is that the pattern is so surprisingly predictable and uniform. All these teams were working on different problems in product design; the engineering and design portions of the presentations were all diverse and well-suited to the specifics of the problems they were addressing. Why shouldn’t the business-oriented parts of the presentation be equally diverse?

Here’s the part where I start speculating. I think the students’ engagement of business topics closely mirrors their course’s engagement of the same. In the case of MIT’s 2.009, the students lived and breathed product design and engineering for a full semester. It’s not until near the end of the course that opportunity assessment appears on the 2.009 syllabus, and then it appears to be contained in a single lecture (and most of the business topics in the 2.009 presentations closely followed the outline of the in-class presentation on business matters). Though my sample size is extremely small, this is also how opportunity assessment appeared in engineering courses at Olin, too. That, I suspect, sends a message that “though we are making an effort to introduce you to business concepts, it’s really not something you need to worry about.” And they don’t.

The other really huge problem is that addressing opportunity assessment after real engineering work is underway puts students in a position where they have to assess the entire path they’ve committed with regard to an entirely new set of criteria. The odds are good that the students are constantly self-assessing their engineering work; if something isn’t strong enough or is too expensive or too big, their recourse is to redesign a part of the system. All of the pieces are means to the end of designing a working system. When engineering work is put into the context of pursuing a business opportunity, though, engineering the whole system suddenly becomes a means to an end rather than the end itself. In that context, if the opportunity is deemed to be a poor one, the only recourse is to think of something new to pursue — but that means throwing away most or all of the engineering work to date. At the end of a semester, that’s simply not an option. Under those circumstances, opportunity assessment shifts from “figure out if this is a good idea” to “explain why this is a good idea.”

When there’s an implicit requirement that any assessment have a certain outcome, it’s not an assessment at all. Students are forced to begin with the conclusion and then invent numbers to support it. As long as engineering students are forced to conduct opportunity assessments for their own imminently-due work, I don’t think they can be blamed for weak opportunity assessment; they’re doing exactly what they think is required of them (and they may be right). The net result is that engineering students (a) don’t learn much about opportunity assessment and (b) come to think of opportunity assessment as that hand-waving that happens at the end of projects to fulfill requirements but never means anything real. I’m afraid that may be worse than not addressing it at all since it breeds distrust (rather than understanding) of this all this “business” voodoo that those crazy Wall Street people use to make the economy explode.

We need engineering graduates to have a fundamentally different understanding of business and entrepreneurship, and to do that we need a fundamentally different approach to introducing engineering students to opportunity assessment and business skills. To that end, I propose the following:

  • Give students a chance to pull apart business plans in a context where there’s no penalty — real or perceived — for concluding that an opportunity isn’t very good. This may mean that students need to assess ideas that are not their own.
  • Don’t let students get bitter about opportunity assessment by forcing them to defend ideas they know aren’t viable in the marketplace. At the very least try to foster a culture where it’s acceptable to state that an opportunity isn’t worth pursuing. Making things a competition — whether explicitly or by pitting one team’s profit projections against another — does not foster that kind of culture.
  • Consider offering a course where engineering students start with a product that is not their own and spend an entire semester working through a business plan in very high detail. Engineering undergraduates live and breathe engineering and design, but only ever get to speculate about building a business. Giving them a chance to spend as much hands-on time working through the details and mechanisms of running a business and bringing something to a market will deepen their understanding and respect of business as a concept.

I think there’s plenty to do beyond these things in terms of instilling an entrepreneurial spirit and skill set in engineering undergraduates, but I also think these changes would go a long way toward fixing what I see as problems with opportunity assessment in undergraduate engineering education today. I think we have a real opportunity to do better and change things for millions of engineering students.

So, um… questions?


Comments

from Gui

December 31, 2008 16:27

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Actually, this is exactly why I loved the New Technology Ventures class, held as a joint Babson/Olin class. There was a half-semester long project that was devoted entirely to writing, evaluating, rewriting, re-evaluating (and so on) a business plan for a core technological concept students picked at the start. The professors (Steve Schiffman and Ernie Parizeau of Babson) made a habit of tearing teams apart on financial feasibility and opportunity assessment during each review, and as a result all of the business plans were triaged 3 or 4 times until the end products were basically workable, simple technologies that capitalized on existing opportunities. Our product, for instance, was triaged from a networked, automated medical diagnosis product to be deployed to major hospitals nationwide, to a drug/herbal supplement interaction checker that would be developed for smartphones in one of our basements. It was a little depressing to see so many babies slaughtered all the time, but it was really helpful in how to think about how technology-driven business opportunities succeed. It really helped that we had people come in to talk about how they started Bose, Solidworks and Boston Scientific.

I’d be interested in talking to you about the idea of design ownership. I’m finding more and more cases where designs or businesses suffer and fail because individual designers are unwilling to change designs simply because the design (or business plan) is “theirs.” In your example, it’s certainly hard to change a semester’s worth of work, but there’s probably an element of “we worked hard on this, therefore it’s a good idea.”

That’s all the cohesive thought I can manage for right now, but I’d be interested in talking to you more about this.

from Kimble

January 3, 2009 04:33

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I wholeheartedly agree with your theory, but also wonder about the other side - how are business people taught to think about product feasibility. It seems like the flip side to your argument that engineers should know opportunity assessment is that business people should know something about product design. I, as an engineer, often lament that the business people don’t understand the product, and would love it if they did. On the other hand, if we both know each other’s job, isn’t one of these superfluous? Could the solution lie more in interdisciplinary teams that are truly integrated instead?

Related to this topic, but not to my above comments: How long does it take to teach opportunity assessment? It feels like MBA programs are spending multiple semesters teaching it, so it might not be completely “cram-able” into an engineering degree.

I don’t really claim to be an expert in either product design or opportunity assessment, so I may be misinterpreting your ideas.

from Jon Chambers

January 5, 2009 22:59

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I’m certainly not an expert in product design or opportunity assessment, either. I hear what you’re saying about the engineering/marketing crossover, but I think it’s more about respecting what happens on the other side rather than knowing everything the other side knows. I guess my point is that giving engineers the idea the opportunity assessment is just fiction-driving hand-waving erodes that trust.

from Grant Hutchins

January 7, 2009 04:57

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Another possible compromise is to let students continue to work on their engineering late into a course and do a short version of the iterative triage Gui recommends, with no penalty for showing that your project is not economically feasible.

I’m cautiously optimistic that with the proper teaching style this could be achieved.

The idea is that if an opportunity is shown to not be business-worthy, the students can still continue on the engineering work purely because it interests them. The major risk is that students become demotivated after seeing why their idea is not feasible, but it could be argued that this could be a major part of the lesson.

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