Appendix
Research methodology
As a three-time entrepreneur with a win, a loss and a draw to my name, I’ve long been curious about what was for me a burning question: what is it that makes the difference between new ventures that succeed and those that fail? Eventually, I grew curious enough about this question that I moved on from my 20-year business career, went back to school to earn a PhD and began teaching and learning about entrepreneurship in a more systematic way. Not having to fight the daily fires I’d fought as an entrepreneur gave me the time to think carefully about this question, and working with bright MBA students and entrepreneurs still in the trenches challenged my thinking further.
In 2000, while on sabbatical at the London Business School, one of the world’s top-ranked (among the world’s top seven, according to BusinessWeek1) institutions in the teaching, research and practice of entrepreneurship and a remarkably entrepreneurial place in its own right, and amid the unravelling of the dot.com boom, I undertook an extensive effort to shed new light on my question. I began my research with a careful read- ing of the varied literature that has something to say about opportunity assessment – literature in entrepreneurship, strategic management, mar- keting, finance and economics. What had the world’s best academic minds learned about what makes an opportunity a good one? I then formulated a series of open-ended questions that I would ask of experienced venture capital investors and serial entrepreneurs, people who, in my judgement, must be skilled at the opportunity assessment task out of necessity. In their lines of work, assessing opportunity poorly would lead quickly to failure. Their real-world perspective was essential, I knew.
I then conducted a series of qualitative interviews – typically ranging in duration between one and two hours and based on the research methodology described in Chapter 11 – with 24 serial entrepreneurs and venture capital investors in the USA and the UK – from Cambridge and London to Silicon Valley in California. My research assistants and I prepared transcripts of the interviews and analyzed the results. As a final check, I then discussed and debated the results with my London Business School colleagues and others. Finally, I provided a draft of my conclusions to a subset of those I had interviewed, and asked two questions: ‘What’s wrong, inaccurate or incomplete here?’ and ‘What, if anything, do my findings add to what people who start or fund new ventures already know?’
The key result of this research was the seven domains model that comprises the intellectual and pragmatic core of this book. To make the seven domains come alive, I worked with a talented former student – now a promising businesswoman in her own right – to identify examples of companies whose stories would show how the seven domains play out in practice. Researching these companies completed the analysis. These case studies bring the seven domains to life far better than my own words ever could.
My colleagues and I – and an ever-larger number of faculty around the world – have since used the seven domains model in our business school classrooms, most notably in the Entrepreneurship Summer School at the London Business School. There we help an average of 50 aspiring entrepreneurs each summer put their ideas through the seven domains tests, under the guidance of mentors from the school’s global entrepreneurial community (see www.london.edu/summer_school for more information). We’ve also used the model in executive programmes in the venture capital industry, the pharmaceutical industry and elsewhere, and found that it consistently opens eyes. Markets and industries really are different, and that difference matters. Both macro and micro levels merit careful scrutiny. Entrepreneurs can’t be assessed adequately by simply reading their CVs or examining their character and entrepreneurial drive. The model is comprehensive, yet simple and parsimonious. It is straightforward to understand and apply. It captures the key elements of attractive opportunities. And it works to answer the aspiring entrepreneur’s most fundamental question: why will or won’t this work?
Entrepreneurs and others who’ve used the seven domains framework have also discovered that it serves as a useful diagnostic check-up at virtually any point in a growing company’s history, not just at start-up. It’s a good way to see what’s changed in the environment in which the business operates, what hasn’t, and whether any of the assumptions that have guided the business need to be altered or updated.
As luck would have it, the model also works to provide new insights into investors’ own portfolios and the patterns inherent in their portfolios’ successes and failures. Are angel investors and venture capitalists serial mistake-makers, the victims of recurring patterns of errors that make their overall success dependent on the one or two in 10 investments that hit the big time or are other patterns at work? There’s much yet to learn!