Meet & Spuds: Market Sizing

A very important step in predicted future demand for a business, product, or service is estimating market size – or the population of people you will serve or provide for. In developing our Business Plan for Meet & Spuds, my business plan group followed a basic formula for estimating the market size: (1) Determine demand; (2) Identify the Addressable Market; (3) Segregate Realistic Opportunities vs. Competition; and (4) Target a Selection of “Winnable” Market Opportunities. The theory is illustrated with the graphic below.

Before analyzing the market sizing, the group had to determine the optimal startup location for our pilot restaurant. We utilized an adapted Data Envelopment Analysis (DEA) Model for this approach. The steps for this approach were:

1.    Business partners arbitrarily selected eleven main criteria for the optimal location and rated these from most to least important. Based on the priority, each parameter was assigned a weight.

2.    Business partners arbitrarily selected seven cities around USA as potential location sites.

The seven cities selected were: (1) Boston, MA, (2) NYC, NY, (3) Chicago, IL, (4) Seattle, WA, (5) Washington, D.C., (6) Dallas, TX, and (7) Providence, RI.

3.    Collected data was populated into an adapted DEA model to help determine the optimal location. Information was collected from various sources: U.S. 2010 Census, City-Data.com, and more.

4.    Each parameter value was ranked and given a score of 1-7 based on highest = 7 and lowest = 1. These scores were multiplied by its assigned parameter weight to determine the overall ranking. The highest ranking was the first startup location preference.

The model resulted with a pilot location of Boston, MA. The next step was to determine Boston demand. NRA (National Restaurant Association) released a 2012 Restaurant Forecast that projected $631.8 billion industry for 2012. Furthermore, Projected Sales are expected to increase as follows: 2.9 % Full-service; 5.6% Social Caterers; 3.1% Eating & Drinking Places.

We targeted the Boylston St. neighborhood of Boston, MA, as our addressable market based on its central location and proximity to surrounding public transportation options, businesses, and area schools.

The group decided that our target market would be comprised of Single, Professional Males
ages 21 – 35. Since males account for 47.9% of Boston Population and the majority of Back Bay residents are ages 20 – 50 yrs, we would be able to address this market in our location.  The group also learned the following information from the 2010 Census.

FACTS ABOUT BOSTON

·         617,594 Residents
·         200,000 MALE (18 – 65 yrs)
·         33% Married Residents
·         54.1% of Workers = Residents
·         Boston saw 21.2 mi Tourist Visitors in 2011 (3.9%+)
·        We would suggest that there are at least 140,000 are single men.

The group then needed to segregate our realistic opportunities from competition. The location is populated with many other restaurants: Back Bay Restaurants (click this link to learn more). However, the niche function positions Meet & Spuds to have limited competition in terms of atmosphere and menu. We have yet to identify any social steak restaurant despite some competitiors calling themselves either Social Restaurants or Steak Restaurants. We can win over realistic opportunities through marketing and sales by creating parallels between our services & those of comparable, ‘cheaper’ restaurants to draw in initial customers.

·         Our meal is $20 with 14 oz. steak and 7 oz. potatoes.

·        Their meal is $22 with 8 oz. steak, 3 oz. potatoes, 2 oz vegetable, & salad.

Finally we can drill down to our target market size. Based on the calculations before, we estimate our target market to be 150,000 people. This figure accounts for the estimate of single men in Boston plus added fringe for tourists.

---

[1] Map Image

Inbound vs. Outbound Marketing: Who Wins?

Marketing is essential to promote any sort of business, product, or service. Naturally, the marketing landscape begins to change as the general population’s abilities and paradigms shift. In today’s social-networking dominated world, companies are starting to rely more and more heavily on the tactics of inbound vs. outbound marketing for their marketing survival. But which technique is optimal? Can a company survive on inbound marketing alone?

Before answering those questions, I want to clearly describe how I understand inbound and outbound marketing. Inbound marketing relies on consumers coming TO the business (INBOUND) via interactive services. This makes me think of PULL from the customer who wants to pull information from the marketer. Inbound marketing pitches usually tend to impress or teach the consumer about the business, product, service at hand. Outbound marketing, on the other hand, relies on information going TO the customer (OUTBOUND). This is similar to the marketer PUSHING information onto the consumer in a one-side, often dry approach that is rarely well received. In doing some research on the topic, I came across the following infographic describing the differences between the two marketing styles.

 

Infographic from: http://mashable.com/2011/10/30/inbound-outbound-marketing/

It would seem as though that inbound marketing dominates in this technology driven world, but can a business survive on inbound alone? YES, but only with a receptive consumer market. If customers are looking for your business, inbound marketing will be less successful, In these cases, I personally think a combination of initial outbound marketing techniques followed by intense inbound marketing is the optimal approach.

Consumers have shifted their paradigm to be information hungry, independent, and in control of what advertising or marketing they subject themselves to. Consumers today – unlike those of the past – are more aware of the plethora of businesses offering the same services and use their own developed product knowledge (through inbound marketing) to develop opinions about these businesses. This shift in consumer paradigm can be attributed as the cause of inbound marketing’s fame. Social-networking and search engines only escalate this change as it helps consumers get better and more accurate marketing information more quickly. The theme of instant gratification has translated in consumer marketing in the form of consumer inbound marketing.

The infographic describes why outbound marketing has been unsuccessful with the images below. Even with expertly crafted outbound marketing techniques, consumer will continue to ignore sources of information that are non-value added to them.

 

Inbound does not just include social-networking sites and search engines. In fact, inbound marketing is any form of marketing where the consumer comes to you (the business). The various forms of inbound marketing include: blogs, ebooks, white pages, infographics, podcasts and other content marketing techniques.

What is so interesting to me is that with all of the advantages of inbound marketing, which companies are still using outbound techniques to gain market share?  The statistics below will have you questioning as well with inbound marketing proving financial wins as well as generating leads and revenue with a single marketing source.

Why Big Companies Can't Innovate?

Maxwell Wessel explains “Why Big Companies Can’t Innovate” in his September 2012 blog post on HBR Blog Network. In fact, Wessel articulates that big companies are designed to fail at innovation. I found there were three main criteria describing why big companies fail at innovation.

I would agree with Wessel’s analysis that differing success metrics between entrepreneurs and mature corporations provide the number one reason for failed innovation attempts in big corporations. In my research, I found several examples of real companies’ examples of both failed and successful innovation attempts.

Failed Innovation Attempts at Large Corporations

Most of the failed attempts summarized below failed due to a late-to-market approach to innovation and a lack of standardized and continuous improvement methods rather than a one-time fix. In all three cases, these companies were subject to the technological revolution of the internet and the ever-expanding product offerings available online.

Successful Innovation Attempts at Large Corporations

A common theme from successfully innovated companies is a financially supported innovation plan from the top-down. These corporations prioritize innovation and value the input of their employees, empowering innovation from within.

I read an interesting article on Fast Company called “4 Innovation Strategies From Big Companies That Act Like Startups” by Soren Kaplan (http://www.fastcodesign.com/1670960/4-innovation-strategies-from-big-companies-that-act-like-startups). Like Wessel, Kaplan suggests that successful corporations think like start-ups. This parallel illustrates the paradigm shift to entrepreneurial thinking for innovative success. The four strategies highlighted by Kaplan are summarized below.

Meet & Spuds

Meet & Spuds is a unique new dining experience providing quality cuts of meat and various preparations of potatoes in a relaxed, inviting, and social atmosphere. My business team is pursuing a restaurant (Meet & Spuds) aimed at providing young, single men with only the food they want to pay for in a setting that offers a chance to eat alongside new people each visit. No vegetables or desserts or fancy side dishes will be served only meat and potatoes are offered. In this way, we hope to attract young, single male (and female) guests to dine on meat and spuds, drink some great beer or spirits, and relax watching the game.

The persona I chose to explore is 26 year old Bill White. Bill is a full-time financial analyst working in the city. Bill is single and trying to save up money to buy a new car. Bill works from 9-5 each day downtime and then heads out to grab a beer with his coworkers or get dinner before heading home for the evening. He wishes that there was a place that was quick (not fast food) that offered an appropriate price tag. Bill often sacrifices big bucks to get a steak downtown but wants to start cutting his spending. Not only do these steakhouses charge big bucks, but the closed off restaurant setting makes Bill feel self-conscious about eating on his own and wishing he had other single diners around to eat his meal with.

Bill has tried various restaurants but found that those offering great meat also offer side dishes he is not interested in and cost too much. Bill is not willing to sacrifice his culinary desires but is looking to reduce his total restaurant spending. Bill is also looking for a dining setting where he feels included and social.

Lucky for Bill, Meet & Spuds is the perfect combination of value-pricing and quality food. This restaurant offers a ‘meet’-ing place for single diners to be paired into larger parties to eat together. Bill can reduce his overall spending and gain a great, new social environment where he can get some good food, too.

Toyota's A3 Report

I am familiar with the Toyota A3 Report as I have had to use this a few times at my current job as an Industrial Engineer. Like many of my peers from class have stated, the Toyota Production System (TPS) is an excellent example of lean manufacturing studied by many professors over many courses at Worcester Polytechnic Institute. As the article points out, while many have studies the best practices for Toyota manufacturing, little has been discovered about the cultural influence of Toyota production environments.

In addition to the A3 report, I often rely on the Deming Cycle & DMAIC methodologies for optimized problem solving. In fact, I sense a clear relationship between PDCA and A3; so much so that I often combine these methodologies in my own practice. The Deming Cycle, created by Edward Deming, is a problem solving approach based on a four letter acronym, PDCA: Plan, Do, Check, Adjust.

 PLAN

- Discover the current condition of your problem: Who/What/When/Where/Why? 

- Get BEFORE Metrics in order to measure success of problem solving methodology.

- Analyze the current condition as basis for setting improvement goals.

- Set SMART Goals meaning set goals that are Specific, Measureable, Achievable, Relevant, and Timely to the Business Setting

DO

- Introduce countermeasures to solve the original problem and achieve goals.

- Complete action plans for countermeasure development and/or implementation.

- Engage operators for increased buy-in. 

CHECK

- Analyze the results of the actions against original goals and problem.

ADJUST

- Revise countermeasures when needed for optimal problem solving.

- Standardize best practices to ensure learning and operator buy-in long term.

- Complete all follow-up actions.

- Repeat cycle for continuous improvement.

The biggest lesson we can learn from Toyota’s A3 Report is that engaging all levels of the work force with simple, transparent communication increases organizational buy-in and sustainable improvements.

Peter Drucker's Seven Sources of Innovation

This post will focus on the “Seven Sources of Innovation” derived from Peter Drucker’s Innovation and Entrepreneurship (1987). Drucker classified seven specific opportunities which came to be known as the “Seven Sources of Innovation”.  Drucker theorized that systematic innovation was achieved through monitoring the seven sources to identify opportunities for innovation. The sources are organized in order of importance: the first four describe sources WITHIN the organization whereas the final three represent external changes OUTSIDE the organization.

1. The Unexpected: This describes unexpected successes, failures, or external events that shift business. Competitive advantage is obtained through analysis of why competitors achieve unexpected success in a certain market sector.
   
   $  Example: Marriott Restaurant Chain
   Originally, Marriott operated as a restaurant chain owning such companies as Big Boy Burgers and A&W Root Beer before finding success as a hotel chain. Management observed an unexpected success in terms of total monthly revenue observed from a Washington, D.C. franchise. Upon further investigation, Marriott equated the National Airport across the street from the franchise as the root cause of high profit margins. The company approached Eastern Airlines leading to collaboration for the first airline catering business in 1937 (Swaim, 2011). With cuts in hospitality budgets, many airlines removed catering as a standard passenger service. It is because of these budget cuts that the New York Times reports Marriott was forced to sell this catering business in 1989. At this time, Marriott refocused its strategy on hotel business and acquired franchise opportunities.
   http://www.nytimes.com/1989/07/12/business/company-news-marriott-to-sell-air-catering-unit.html
   
   
2. The Incongruity: Is the variance between actual reality and perceived/assumed reality. Competitive advantage can be developed by identifying gaps of missing information in how a customer should use a product.

    $  Example: Scotts Snap Spreader

   
   
   The Scotts Company was able to capitalize upon the incongruity that consumers did not know the right techniques for a perfectly even fertilizer application. As a result, Scotts began to manufacture Spreader systems which easily and mechanically released a specified amount of fertilizer in the exact preferred location of the consumer. Recent innovations of the system have led to the Scotts Snap Spreader which is equipped with Edge Guard technology for a more direct spreading stream and a Snap in place mating relationship with a new fertilizer line. Not only did Scotts create the Spreader equipment, the new fertilizer line specially manufactured for the equipment offers unique SKUs. The exclusivity of the mating brand allows for steeper profit margins with selling price markups.
   http://www.scotts.com/smg/templates/index.jsp?pageUrl=snap1pg
   
   
3.  Innovation based on Process Need: Based on specific tasks within a business rather than overall operating strategy. This identifies the missing link in an existing process. In lean manufacturing this is usually described as a Kaizen Event, Japanese for “for good”.
   $  Example: Groupon
   Groupon showed innovation in the process of getting consumers competitive deals and coupons. With the easy and friendly user-interface of the website, Groupon has revolutionized the way businesses think about advertising and the way customers retrieve deals. I personally partake in far more coupons and deals, which amounts to spending more money at local businesses, since joining the Groupon community.
   http://blog.thansys.com/2011/06/14/innovation-process-vs-product/
   
   
4. Changes in Industry Structure or Market Structure: These changes are supposed to catch the market and industry unaware in order to inflict a large impact. This can describe a shift in marketing towards a specific subgroup of your consumer base as well.
   $  Example: McDonalds
   Recently, McDonalds has announced a market shift away from the fat-laden image of the past to more health-aware campaign to raise market advantage and stock value. The new campaign “Favorites under 400 calories” highlights the more health-conscious choices of the Value Menu and from the general menu at large that fall at or below 400 total calories. McDonalds hopes this marketing campaign will help to expand it customer base. Previously, McDonalds used this strategy to focus advertising on inner-city consumers with the launch of their Dollar Menu years ago. Convenient, fast, and cheap offerings began to outnumber the meal options at all fast food chains, specifically McDonalds. Shifting to lower price points allowed McDonalds to become the leader in fast food revenue as well as the probable cause of the rise in American obesity rates in inner-city communities nation-wide.
   http://www.foodservice.csnews.com/top-story-mcdonald_s_to_shift_focus_to_value_menu-1265.html
   http://magazine.foxnews.com/sites/magazine.foxnews.com/files/styles/1600_image/public/menu_raw.jpg
   
   
5. Demographics: This pertains to changes in the population’s size, age, employment, education, location, income, occupation, etc.
   $  Example: Proctor & Gamble
   Proctor & Gamble is using demographic innovations are a core mantra for their marketing and product development strategies. Specifically the company focuses on three main consumer groups for innovative R&D: (1) aging consumers; (2) wellness-focused population; (3) direct consumers managing personal health. P&G states that these three demographic super-groups are prevalent to both developed and developing markets offering a breadth of potential consumers. The company will monopolize marketing efforts towards these groups in hopes to optimize market shares and position versus competitors.
   http://www.pg.com/en_US/downloads/company/purpose_people/touching_lives_improving_life.pdf
   
   
6. Changes in Perception, Mood and Meaning: In lean manufacturing, this is described as the paradigm-shifting culture change that occurs when trying to obtain organizational buy-in.
   $  Example: Wegman’s Stores
   Wegman’s Supermarkets offer a new type of experience for the regular grocery shopper. These stores are equipped with an in-house hot food service area, full wine and beer emporium, organic and natural foods along with all your normal grocery needs. The exclusivity of few locations along with excellent service level and added customer amenities allow the company to charge a certain surcharge on products. The extra value for consumers translates into higher revenue in terms of hot take-out food sales for example. For classmates around WPI, there is a new Wegman’s location in Northboro, MA, that was featured on the Phantom Gourmet for its take-out food just to paint the picture of exclusive consumer charms. I’d recommend taking a shopping trip in Northboro if you haven’t checked it out yet! In addition, Wegman’s was ranked at #4 on the 100 Best Companies to Work at in 2012 by CNN (see link below) adding to the new view of grocery shopping.
   http://www.wegmans.com/webapp/wcs/stores/servlet/StoreDetailView?langId=-1&storeId=10052&catalogId=10002&productId=718491
   http://money.cnn.com/magazines/fortune/best-companies/2012/snapshots/4.html
7. New Knowledge: Technology and Scientific Findings are included in this category. Recent innovations in the nanotechnology and biotechnology fields are mostly due to innovations in new knowledge.
   $  Example: Google
   With the innovation of the new search algorithm (PageRank) which ranked results based on citation theory, Google offered an innovative approach for consumer input search. Simplicity and user-friendly design quickly propelled Google and its new technology to the top of the list of all search engines. This consumer base growth allowed Google to expand into a wide variety web services provider today with such application as Music, Photos, News, Magazines, Mobile Phone Firmware, Calendars, Forums, Web Site Design, Social Networking and much more.
   http://innovationsimple.com/web-marketing/search-engine-marketing/google-pagerank/

The examples offered are my deductions from recent research. I am curious to learn what my fellow classmates provide as evidence from current culture. A lot can – and should – be learned from past business. Best practices as well as examples of failure can help to offer a set of operating parameter to avoid or strive for when starting a new business. One thing has been highlighted as an important theme so far in our readings: it is vitally important to follow through and complete due diligence in research before embarking on a new entrepreneurial journey. Learning how to monitor and optimize Drucker’s “Seven Sources of Innovation” would help to set a new venture up for successful systematic improvement for long term business sustainmen

If anyone is looking for more research, I found the follow sources useful in preparing this post:

Peter Drucker's Seven Sources of Innovation. (2006, April 30). Retrieved September 09, 2012, from Snake Coffee Blog: http://snakecoffee.wordpress.com/2006/04/30/peter-druckers-seven-sources-of-innovation/

7 Sources of Innovation (Peter Drucker). (2007, July 31). Retrieved September 09, 2012, from Innovation Management:http://www.innovationmanagement.org/Wiki/index.php?title=7_Sources_of_Innovation_(Peter_Drucker)

Seven Sources of Innovation. (2010, October 11). Retrieved September 09, 2012, from Startupwithme.com: http://startupwithme.wordpress.com/2010/10/11/seven-sources-of-innovation/

Drucker's Seven Sources for Innovative Opportunities. (2012). Retrieved September 09, 2012, from Frances Hesselbein Leadership Institute: 

http://www.hesselbeininstitute.org/knowledgecenter/seven_sources.html

Daniel Lock Consulting. (2010, March 02). 7 Sources of Innovation. Retrieved September 09, 2012, from Strategic Innovation Newsletter: http://daniellock.com/newsletters/strategic-innovation-newsletter-march-2010-7-sources-of-innovation/

Swaim, R. W. (2011, February 01). Failure and the Seven Sources of Innovation. Retrieved September 09, 2012, from The Drucker Perspective from Process Excellence Network.: http://www.processexcellencenetwork.com/organizational-strategies-for-innovation-continuou/columns/failure-and-the-seven-sources-of-innovation/

Tetem, D. (2012). Peter Drucker on the Seven Sources of Systematic Innovation. Retrieved September 09, 2012, from Tetem.com Blog: http://www.teten.com/blog/2010/01/13/peter-drucker-on-the-seven-sources-of-systematic-innovation-2/

Google SWOT Analysis

I am a self-proclaimed Google-a-holic and avid Android user. I was very excited for a chance to perform a SWOT analysis on the company.

Interesting Articles about Corporate America

Hello, Entrepreneurs!

While I have an eventual career goal of owning my own business, I am currently starting my career as an Engineer at Philips Lighting. I was scrolling through some articles about surviving corporate America and have posted them below.

In this article, Fast Company describes the benefits of humor in the work place. This is worth a read. I find the parallels between workplace humor and innovation striking as the author seems to suggest that as one becomes more open to humor, he/she also become more flexible and entrepreneurial.

TAG LINE: "Drew Tarvin of Humor That Works believes that bringing humor into the workplace increases productivity. Also: Funny people make more money."
http://www.fastcompany.com/3000692/being-funny-can-get-you-raise?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+fastcompany%2Fheadlines+%28Fast+Company%29


The next article from Forbes focuses on building a $10 billion Business Plan. I am interested to see the overlap between this article and the methodology we apply in ETR 500 when we get around to creating our own business plans. The author, Alan Hall, follows his list of ten steps for the perfect business plan with commentary on his top recommendations.

TAG LINE: "There are ten critical steps in the creation of a billion dollar business plan."
http://www.forbes.com/sites/alanhall/2012/08/26/how-to-build-a-billion-dollar-business-plan-10-top-points-2/

I hope you enjoy the reading and I look forward to any comments or questions!
Amanda

Test

First blog post.