Learn how data-driven decision-making can help dodge opportunity myopia in entrepreneurship. Explore how Anthroware uses data to ensure business success.
Table of Contents:
- Overcoming Opportunity Myopia through Data-Driven Decisions
- Unpacking Steve's Pitch: A Case Study of Opportunity Myopia
- Evaluating Jenny's App Idea: A Data-Driven Approach
- Determining the ROI: Is the Juice Worth the Squeeze?
- Making Data-Driven Choices: Ensuring Profitability
Overcoming Opportunity Myopia through Data-Driven Decisions
Opportunity Myopia is a condition entrepreneurs have when they believe everyone sees the same value in their ideas that they do. Full disclosure: we are total data geeks, we user-test everything, we don’t make decisions based solely on our guts, and we learn before investing. We even did a Matching-and-Liking test for one line of copy on our website. We challenge every assumption. We track every change. Data is our lifeblood.
Translating Data-Backed Decisions into Practical Applications
When you hear making a “data-backed decision” you might think of user-testing a function or feature set and analyzing results. Do users want to have a menu on the top or bottom? Does a user slide their thumb from the edge of the screen to the center to reveal more capabilities? What elements of the app should send push notifications? Which landing page version increases conversions?
Obviously, these are important decisions to make; they should be tested with real end-users, and they will generate data to drive product direction. But there is a good chance you’ve already made significant decisions prior to product details and features that likely are not data-backed. Opportunity myopia may be the cause.
Understanding Opportunity Myopia
Opportunity myopia is a condition entrepreneurs have when, based on their own convictions and personal experience, they believe everyone sees the same value in their ideas that they do. It’s a term we’ve coined here at Anthroware and a condition we seek to strike out. The cure, of course, is data-driven decision-making.
For simplicity, we’ll illustrate opportunity myopia on a comically-stereotypical entrepreneur. Just think of any episode of Shark Tank – you’ll find a passionate founder with that uniquely deadly combination of deep industry knowledge and opportunity myopia. After all, entrepreneurs need to be tough, need to be resilient, and are taught they need to get used to hearing “no”. It’s not surprising they grow stubborn.
Unpacking Steve's Pitch: A Case Study of Opportunity Myopia
Back to our founder on Shark Tank, here’s a pitch I just dreamt up (and by dreamt up I mean stored in my idea journal):
Steve's Pitch and the Need for a Solution
"Hi Sharks, my name is Steve and I’m from Asheville, North Carolina. Like lots of Western Carolinians, I drive a pick-up truck. And this truck is great, it can get up mountains, out of hollers, and over rivers. It’ll haul gear, parts, dogs, bikes, kayaks, and everything in between. But all that changed when we had our first child. Suddenly I found myself swimming in baby gear! I knew I was done when I received a camo-themed diaper bag for men as a gift from my coworkers.
Now any parent can tell you, in vivid detail, what it’s like to learn how to change diapers, and even how to change them in wild places - bathrooms, airports, parks, and even cars. But what about trucks? Hatchbacks, minivans, and SUVs have it easy. You open the back and the big gullwing rear hatch swings open, providing you with shade, privacy, and an area to change your baby.
I searched and searched but couldn’t find anything on the market resembling a changing table with privacy for my truck. So, I decided to make my own!
The Pick-up Changing Table™ is a device that stores in your flatbed. When you need it, simply open your tailgate and unclip the PCT™. A weather-resistant and UV-blocking shade pops up on tension rods, just like a camping tent, and will give you plenty of privacy and comfort while you change your baby. But wait, there’s more! The base is a soft cushion with a removable waterproof cover that is machine-washable!"
Understanding Opportunity Myopia and the Need for Data
This pitch has all the hallmarks of opportunity myopia – yes, this is a valid pain point for Steve and yes, he’s thought of everything that goes into a quality product. That removable cover, for example, that’s a nice touch. But Steve’s passion and conviction aren’t data-backed. It isn’t even based on a test set greater than 1 user!
His product might be appealing on a personal level, but without a broader market analysis, its success remains uncertain. The vital role of data in guiding business decisions and validating product feasibility cannot be overstated.
Critical Questions for Identifying Valid Business Opportunities
Not that we’re in the physical product space, we make custom digital tools/products, but if we were and Steve came to us with this product, we would ask some basic product research questions that inform a decision:
- What is the market size for pick-up truck drivers with children in diapers?
- What other travel-based changing tables are on the market?
- How do pick-up truck drivers with children in diapers currently solve this problem?
- How much money would go into developing this product?
- How will you make a profit?
- How many other pick-up truck drivers with children in diapers have you spoken to?
The Perils of Opportunity Myopia
If you have opportunity myopia you’ll know it because you’ll be jumping out of your skin to start building a product before performing any testing or design work. Personal conviction will do that to you. Tests, designs, users, and data won’t matter because you’ll believe you know better than your users, just like Steve Jobs did… so the legend goes.
It’s not so different than falling in love with someone. You can’t see their faults and the idiosyncrasies are charming. That’s why you’re “falling” – it doesn’t make sense to anyone but you. Only much later, or too late, do you realize what you couldn’t see prior. Don’t worry, we’ve all been there. Interestingly, the strongest relationships become strong by overcoming challenges together, essentially validating an idea or user-testing for a product.
Data Collection: Where to Start?
Assuming you’ll collect data, where do you start? Not all data is a number, conversion rate, Likert scale, or time on page. Data can be interviews, free text responses, multiple choices, and so on. No matter what, each source is still a valuable data point that will inform your decisions.
But there’s another data point you need to determine early, and we use it with every client, enterprise, or startup. We need to know, is the juice worth the squeeze?
Evaluating Jenny's App Idea: A Data-Driven Approach
Let’s leave Steve alone for this next one. Instead, let’s think of a local baker. We’ll call this baker Jenny. So, Jenny has a bakery and has an idea for an app. Jenny wants people to be able to preorder cakes, loaves, cookies, and specialty items. It’s a good engagement tool, seems like a trendy idea, and can help sell products. Customers can order their items, pay through the app, and just show up at the bakery to pick up their order. Simple concept, and a pretty straightforward app. Let’s make a basic punch list of major requirements:
- Item management - a way for Jenny to upload inventory, images, and descriptions
- Order management – a way for users to order, place an item in a shopping cart, pay, and receive a confirmation email
- This will need user provisioning and roles
- And Jenny needs admin roles
- Analytic tools
- Jenny will want to know how often people use the app, how many items they look at, average purchase price, re-orders, etc.
- Support links, about the app, terms, and conditions - basic standards pages
Building the MVP: Costs, Considerations, and Potential Revenue Streams
Future versions may have specials, coupons, location-based incentives, etc. but this is plenty for a Minimum Viable Product (MVP). The good news is – most of these engineering pieces will be 3rd party tools like App Annie for analytics and WooCommerce or Shopify for the items. Jenny will need a custom UI from the design side and the engineering side will be focused on a seamless experience that isn’t buggy, is engaging, and is delightful. Our UX team can test the user experience, to make sure the user path from logging in to shopping cart is frictionless, easy, and fast. Now if you’ve met us or read our blog, you’ll know we don’t do ballpark estimates. However, based on this quick description, I’d say this app could cost Jenny anywhere between $75,000 and $150,000.
Great, we have our first data point. Any software platform has a lifespan of 5 to 8 years – let’s go with 5. The app amortizes to between $15,000 and $30,000 per year. Our test to see if this is a good business decision for Jenny is to ask how much revenue she projects to earn in the app. Your projected revenue and the cost to develop the app is the first data-backed decision you need to make.
Determining the ROI: Is the Juice Worth the Squeeze?
If there isn’t a minimum 3-5x return on the cost of the app – this is a no-go. If the app can bring Jenny an extra $100k/year then this is an easy decision. The juice is worth the squeeze - let’s make this app! But if Jenny is just going to break even, we would in all honesty recommend not building an app. Or dedicating those funds in another direction with a higher return, AKA where you get the most juice from the same squeeze.
Continuing our data-driven approach, we consider other potential benefits an app could bring to Jenny's business. This includes boosting customer engagement, expanding brand visibility, and opening up new marketing channels. However, all of these benefits should ideally lead to a substantial increase in revenue. Thus, the key takeaway here is that your app should serve as a reliable vehicle for growth, not just a flashy piece of tech.
Making Data-Driven Choices: Ensuring Profitability
The squeeze is the cost to develop, the juice is the revenue (new or reclaimed through lowering overhead). The squeeze can also be your time, or cash you could use to grow the business in other ways. Instead of $125k in app development, maybe Jenny could spend that money on a new brand and website, or digital marketing campaign, or even a new location. Each of these are data points that infer how much juice she’ll get from the squeeze.
Our goal is to help clients make good business decisions.
We have a responsibility to help you make sure you get the right bang for your buck in a truly impactful way. We typically measure the juice by saved time, better user experience (leading to more revenue or higher customer flow), or lower costs. We also have a responsibility to tell people when they are suffering from opportunity myopia by letting the data speak for itself. We don’t claim to have all the answers, but we do have the methods and experience to get them for you by using data-backed decision-making.