Luck is what happens when preparation meets opportunity. Seneca, Roman philosopher.
Macroeconomics deals with the performance of a large economy and its vast number of influencing factors. For entrepreneurs, it's valuable to understand how the needs and wants of yor target audience are influenced by the world around them.
This chapter explores this complex world, with an emphasis on demographic and psychographic changes. Changes in technology, society, politics, and regulations are also examined, as these are central to entrepreneurs' understanding of their customers' buying behaviors.
Retrieved from: The Opportunity Analysis Canvas - Edition 2.0
What demographic changes are creating new market opportunities?
Demographic changes can present a host of opportunities for new ventures. Our definition of demographic changes is simply the observable characteristics of populations. It provides insights into where opportunities exist within markets. It also gives us insights on how to develop appropiate business and marketing strategies to target those customers.
We may be able to gain insights on the demographics of our target customers by examining research on our competition. For example, a recent report examined Pinterest, a popular online platform for sharing photos. Within the Pinterest user base, the annual household income is over $100,000, 50% of its users have children, and 68% are female. By age, the highest concentration is between 25 and 34, with a secondary concentration between 35 and 44.
If we were creating a competitor to Pinterest, this type of data would assist us understanding our customer, hot to serve them effectively, and how to market to them.
There are many demographic changes going on within the U.S.: an aging population, increasing ethnic diversity, and a society challenged by obesity. All are opportunities for entrepreneurs. There are opportunities in developing assited living centers. There are opportunities in foreign language media. There are opportunities in weight control tools, as we've seen with the rise of fitness and diet-related apps and gadgets.
Entrepreneurs should know the income and purchasing power of their target customers, as well as their age, family status, residential status, gender, and education. These are all things that are important to know and understand as you are either exploring opportunities, or trying to understand the audiences that you'll serve.
There are a number of databases with demographics data. American FactFinder and the State and County Quick Facts are U.S.-based resources. There are comparable resources in other regions of the world. These are often developed by the government and/or organizations.
For example, with American FactFinder I can examine Bethesda, Maryland. I can examine the population density. I can examine age, race, households, housing tenure and a variety of different factors, as well as the percentage distribution of those factors across these populations. I can do this for every sizeable city in the U.S.
I can explore education, and graduation rates at various levels, and within certain ages and poverty levels, and the median earnings at different levels of education.
You can assess data individually, or you can cross-filter data where you can examine by race, by population age, by degree, by income. This will help you identify opportunities and understand your target audiences.
I can also assess employment within the area. I can see what industries individuals are employed within, in sheer numbers as well as percentage distribution. I can examine the median earnings per industry and see who makes what, based on the category of employment that they're with in. A wealth of data is available.
Government generated data is also abundant. The Center for American Progress is one of many data centers in the U.S. For example, I found a report on the workplace wage gap that examined health, educational attainment, political leadership, and other factors. Based on their reporting, the population of women in the U.S. is 50.8%, approximately half. Nearly 36% of that group are women of color. They've also looked at poverty; between 10% and 26% of women are living in poverty. They've diversified it based on ethnicity as well. They've looked at education. They've looked at income. They've looked at health insurance and a variety of other factors. This provides us with insight into understanding the customer, and understanding the market, and understanding demographics within that market.
As entrepreneurs, we are not examining demographics only for general knowledge. Where are the opportunities? Is there an opportunity to do training, workforce development, education, or other activities? Where can we bring new solutions to the problems that exist?
In summary, understand that demographics provide insights into where opportunities exist now, and even more importantly, where they may exist in the future. With demographics, we're better equipped to develop appropiate business and marketing strategies to target the customers that we want to focus on.
What psychographics changes are creating new market opportunitites?
While many of us are familiar with demographics, the concept of psychographics is new to most. We will explore psychographics as it's related to macroeconomic change, and we can do with this knowledge to be better entrepreneurs. This is the second element we're examining within our discussion of macroeconomic change.
Our definition of psychographics is the attitudes, values, opinions, interests, and related personal factors of markets. It’s contrasted with demographics in that psychographics involve how people think, how they feel, and their interests and values. It’s influenced by their social class, lifestyle, and personality.
Most of us, as individuals, are primarily concerned with basic health and wellness—the food and shelter elements. We go from there into safety, esteem, and on up through actualization and transcendence. There’s a pattern that we see of human behavior and human needs and wants.
To understand psychographics, there are a variety of resources. One of the better ones is Nielsen’s MyBestSegments, which provides dozens of audience profiles. You may find profile 04, which is a Wealthy Younger Family Mix, and Nielsen has categorized this group as tech-savvy, fashionable, urban fringe, relatively affluent, highly educated, and ethnically mixed. These are communities with trendy apartments and condos, fitness clubs, boutiques, casual restaurants and bars from juice to coffee to microbrews. This characterization tends to be centered on urban areas—New York, Philadelphia, D.C., Chicago, L.A., San Francisco, and other pockets as well. The top five densest counties include Arlington and Alexandria in Virginia, New York City, D.C., and San Francisco, and when we dive deeper to understand the statistics of this psychographic, we see U.S. households represent 1.5 million; average household income is $90,000. We can learn about where they shop, where they travel, what they read, what they watch, and what they drive.
Psychographics help us understand how and where to position our product or service. Where do we need to advertise? As we build our brand, are there other brands that are having success with our target audience? What are the characteristics and personalities of those brands? What inspiration may we draw from them?
Experiences are becoming the predominant economic offering of many innovative ventures. It’s not only the item you buy. It’s not only the service. It’s the customization and personalization that’s desirable.
In summary, understanding psychographics, in addition to demographics, provides insights into how prospective customers think and feel, and what influences their buying preferences. By examining psychographics, you can gain valuable insight into the evolving needs and wants of your target customers. It also gives you insights on how to build and market your offerings effectively and efficiently.
What technical advancements are creating new market opportunities?
Technical advancements are a great source of opportunity as well. We’re exploring this at a macroeconomic level as the third element of macroeconomic change.
With technical advancements, we’re addressing improvements in technical processes, methods, or knowledge. It’s one of the most important triggers of change for entrepreneurship. New technology enables limitless opportunities for derivative innovations.
For example, the Apple iPhone brought great value not only as a communications device and as a revenue opportunity for Apple, but for carriers such as AT&T, Verizon, and others. It also brought tremendous opportunities to the app developers who could place their apps on the iPhone. While there are many large competitors that are in the apps space, there are also countless entrepreneurs and small companies that are bringing successful apps to market. The creation of the iPhone has driven the success of many entrepreneurs and small companies through the apps that have been built for the iPhone.
As illustrated here, technical advances are great opportunities for entrepreneurs. The magnitude of the change is important, and significant change can create entirely new markets.
We also want to think about different uses for technology. We may find technologies that can be applied in many different ways.
Technical advancements can change industry dynamics and open new markets. When you have an app platform that entrepreneurs can sell into, you can work directly with Apple. Or you can even build your own independent site; sell directly to customers.
As of this writing, when we look what’s the next big thing, people believe it will be Google Glass. The basic device can be fitted to the existing glasses that you may wear, or conversely, it could have an additional add-on with a nosepiece and the elements that wrap around your brow. Perhaps it will be the smartphone replacement.
We can do a variety of tasks via voice command. Wearing your Google Glass, you can look at a product. You can speak a command to scan the bar code. Within your field of vision, Google Glass can display the product description, product reviews, and competing price points online and in local stores. You can even place your order for the product, if you wish, and pay for the product via Google Glass.
I would not suggest that most of us have the expertise or the resources to build a competitor to Google Glass. But if you’re interested in how to participate in that growth, the app market could be a mode of entry in developing apps for Google Glass, and trying to ride that growth curve.
You may even be too late. We see that the fitness gadgets really hit the market and grew in a big way in recent years. And Google Glass is not necessarily news anymore. It’s something that’s been out since May 2014. And it’s something for which more products are coming to market—complementary products and complementary apps. And the big companies like Ebay and others are developing things for it as well. We may need to even think a step ahead.
The Apple Watch is something that, again, has been talked about for a while. Announced by Tim Cook on September 9, 2014, it has fitness tracking and health-oriented capabilities, as well as integration with iOS and existing Apple products and services. The Apple Watch is scheduled to be available in three models, with a wide variety of case and band options. The Apple Watch is compatible with the iPhone 5 and later iPhone models running iOS 8.2. The device is scheduled for release in early 2015.
The Apple Watch uses Apple’s new S1 processor, advertised as “an entire computer architecture on a single chip.” It also uses a linear actuator called the Taptic Engine to provide haptic feedback when an alert or a notification is received. The watch is equipped with a built-in heart rate sensor, which uses infrared and visible-light LEDs and photodiodes.
Incidentally, it’s not the original smart watch. That would be the 1977 HP that came to market and was an early calculator watch. It was priced at $600. Now, it’s a collector’s item. On Ebay, the price is upwards of $14,000.
There are often new products that come to market that we think are new, but they are actually evolutions of past products.
Review patent applications to gain insights, and read blogs and rumor sites to see what’s next.
It’s valuable to think towards the future as you’re exploring entrepreneurial ideas. Seek to understand trends, and try and predict what’s going to happen. Think about opportunities, and begin acting on opportunities before they’re late news or common knowledge. How can you shape inventions and innovations, and be at the forefront of new products and services?
Alternatively, we may be left behind. We may be left chasing existing markets. We may be left battling against industries or markets that are being dominated by others that are incumbents or that acted with better foresight. By being more proactive and by thinking about the future, we can leverage these technical advancements and be early movers.
What societal changes are creating new market opportunities?
Societal changes are a rich source of entrepreneurial opportunities as well. This is the fourth element that we’re going to examine within macroeconomic change in the Opportunity Analysis Canvas.
As we define societal changes, we’re exploring the social and cultural aspects of the macro-environment that affect customer needs and market sizes. This includes issues like health consciousness, career attitudes, and an emphasis on safety.
In a study by The Atlantic, they looked at the increasing longevity in the U.S., and that the number of Americans over 60 will increase by 70% by 2025. They looked at technology in smart machines, and how workplace automation is killing repetitive jobs and may even replace more skilled jobs, including accounting and law. When we look at the computational world, we recognize that data gives us the ability to see things on a scale that’s been impossible before. When we look at new media ecology, we want to recognize visual communication as becoming a new vernacular. We want to look at super structured organizations and social tools that allow organizations to work at extreme scales. And we want to recognize the global connectivity of the world, and that job creation and innovation and political power is going far beyond the U.S. and Europe.
What this means for work skills, and where the opportunities may be for us as entrepreneurs, involves things like sense making and social intelligence, and novel and adaptive thinking. We need to build our competencies cross-culturally in computational thinking and new media literacy. We want to leverage virtual collaboration, transdisciplinary thinking, and a design mindsight, and manage an increasingly larger and more complex cognitive load.
As we think about entrepreneurs and those that will follow us, we ask, why aren’t more young Americans seeking careers in innovation? In a study by MIT and the Lemelson Foundation in 2012, they examined a variety of factors. They found that 22% of the polled 16 to 25 year-olds said they’d be motivated by jobs that would give them a chance to change the world, and that 47% believe that a lack of innovation will hurt the U.S. economy.
When you dive into what types of innovations they would want to contribute to, they show a high interest in consumer products and health sciences. In web-based innovations there’s high interest. We see interest in environmental invention. There’s high interest in the performing arts as well.
When they assess their preparedness for careers in innovation, 45% of the respondents believed that STEM (science, technology, engineering and math) is not given enough attention in their schooling. Nearly 34% felt unfamiliar with the career opportunities in STEM. Approximately 30% thought that STEM careers were too difficult; perhaps they’re influenced by the other factors of limited awareness and limited knowledge.
What can entrepreneurs do about it? These students shared an interest in having more invention and innovation projects in their education. There was interest in a place for innovation, a place to work on projects, a laboratory-like environment for ideas and innovation. There was a call for courses that would help them develop their innovation skills and creativity. Perhaps new online courses can assist them. Perhaps hands-on training and mentoring with STEM professionals is a solution. There are a variety of new venture opportunities to serve these students.
In summary, when we think about societal changes, recognize that the customer’s needs and wants evolve. With that evolution there is an opportunity for the emergence of new ventures started by entrepreneurs. We also want to anticipate societal change. We want to recognize that entrepreneurs who anticipate such changes are going to play a more successful role in entering and growing and scaling their new ventures in these spaces.
What political and regulatory forces are creating new market opportunities?
When we look at political and regulatory forces, we’ll find that they can be a hurdle, or they may present opportunities for us as entrepreneurs. We’re going to look at these two forces in the context of macroeconomic change and think about how we can use these to our advantage in the creation, launch, and growth of our new ventures. Political and regulatory forces conclude our discussion of the macroeconomic change section of the Opportunity Analysis Canvas.
We’ll examine how the government, including local, state, federal, and international laws and policies, influence economies, industries, and markets. Examples of these include tax policy and fiscal policy, laws regarding business law and labor law and environmental laws, as well as trade control and tariffs, and political stability or instability.
An example of these laws is crowdfunding, which is something that’s attracting a lot of attention in the U.S., Europe, and other areas as well. You may be familiar with crowdfunding as applied to Kickstarter, IndieGoGo, and other platforms that are not really investment in nature. What happens with Kickstarter, if you’re not familiar, is that you may go on and pre-buy a product. Companies engage in pre-sales, meaning they’re going to sell a product, but it may take six months to deliver that product. They may give you as a buyer a discount as an incentive for you to be patient with that delivery, and they may need that funding that you’ve contributed for them to build the product.
What we’re calling crowdfunding is different. We’re discussing investment, where a contribution of money results in receiving equity, stock, or ownership in the company. The element that makes that different from Kickstarter is that in most countries it’s illegal to go online and raise money from individuals, unless you have the proper vetting and certification from the government.
Today, companies like CircleUp and others present opportunities for the accredited investor – a high net worth individual – to invest in entrepreneurs. As an accredited investor, I can review the companies that are soliciting investors. I can learn about the company and their technology, and what their successes and ambitions are. I can make contact and certify that I am accredited.
There are thoughts on how you evolve that and expand it, and go beyond accredited investors? In the U.S., an accredited investor is an individual who has a net worth of over one million dollars, excluding equity in their primary residence, or one who has annual income in excess of $200,000 for two consecutive years.
The 2012 Jobs Act suggests there are thoughts on changing those laws. There are laws that are already beginning to take effect, such as raising the number of individuals who can participate in funding a startup from 500 to 2,000. But the bigger piece of the Jobs Act is lifting the general solicitation ban tied to accredited investors. And what that means, if enacted, is that you and I as individuals, even if we’re not high net worth, can invest in startups. We may be able to buy a small percentage of that startup, maybe it’s a tenth of 1%, for a few hundred dollars.
When we research equity crowdfunding, and efforts to increase the number of individuals who can participate in funding companies, there is level of skepticism and concern about the idea. The primary concern is what’s to stop entrepreneurs from fraudulently raising money. What’s to stop someone from making false claims, and collecting money with no real desire or expectation to use that money as intended? There are concerns for consumer protection – the protection of the individuals who are funding these new ventures.
In Europe and other areas, there are various examinations or certifications or credentials that are investor qualifiers, and unrelated to the worth of an individual. They educate prospective investors on the risks that they are taking. For individuals who pass these certifications or have these credentials, they are able to invest in startups even if they don’t meet the net worth criteria that we have here in the U.S.
In the U.S., I expect there’ll be a measure of certification and examination of investors to make them fully aware that investing in a startup is a risky proposition. It’s riskier than the stock market and riskier than most investments they’ve made.
Another view of political and regulatory factors is to see government as a customer. In the Washington, D.C. area, where I live, this is a very common activity. The government buys goods and services, and they promote the opportunity for companies, to include small companies, to sell them these goods and services. There are various federal agencies that post these opportunities online in the U.S., and I expect in other regions of the world as well, that let entrepreneurs share in being a product or service provider to the government.
For example, the U.S. Department of Education offers a variety of supplier opportunities, many of which may have set aside funding—meaning reserved funding—for small businesses, women-owned businesses, minority businesses, and other special categories.
In summary, we want to understand political and regulatory factors from a few different perspectives. We want to know how the laws impact the businesses that we’re in, or that we may enter. We want to build an awareness of these political and regulatory changes and forces. We want to think about government as a customer and where opportunities may emerge. This allows us to prepare, anticipate, and position ourselves to be successful, and to think differently about what we’re doing, rather than falling victim to something that we may read in the newspaper or that we may learn about after the fact.
There are many demographic changes going on within the U.S.: an aging population, increasing ethnic diversity, and a society challenged by obesity. All are opportunities for entrepreneurs. There are opportunities in developing assited living centers. There are opportunities in foreign language media. There are opportunities in weight control tools, as we've seen with the rise of fitness and diet-related apps and gadgets.
Entrepreneurs should know the income and purchasing power of their target customers, as well as their age, family status, residential status, gender, and education. These are all things that are important to know and understand as you are either exploring opportunities, or trying to understand the audiences that you'll serve.
There are a number of databases with demographics data. American FactFinder and the State and County Quick Facts are U.S.-based resources. There are comparable resources in other regions of the world. These are often developed by the government and/or organizations.
For example, with American FactFinder I can examine Bethesda, Maryland. I can examine the population density. I can examine age, race, households, housing tenure and a variety of different factors, as well as the percentage distribution of those factors across these populations. I can do this for every sizeable city in the U.S.
I can explore education, and graduation rates at various levels, and within certain ages and poverty levels, and the median earnings at different levels of education.
You can assess data individually, or you can cross-filter data where you can examine by race, by population age, by degree, by income. This will help you identify opportunities and understand your target audiences.
I can also assess employment within the area. I can see what industries individuals are employed within, in sheer numbers as well as percentage distribution. I can examine the median earnings per industry and see who makes what, based on the category of employment that they're with in. A wealth of data is available.
Government generated data is also abundant. The Center for American Progress is one of many data centers in the U.S. For example, I found a report on the workplace wage gap that examined health, educational attainment, political leadership, and other factors. Based on their reporting, the population of women in the U.S. is 50.8%, approximately half. Nearly 36% of that group are women of color. They've also looked at poverty; between 10% and 26% of women are living in poverty. They've diversified it based on ethnicity as well. They've looked at education. They've looked at income. They've looked at health insurance and a variety of other factors. This provides us with insight into understanding the customer, and understanding the market, and understanding demographics within that market.
As entrepreneurs, we are not examining demographics only for general knowledge. Where are the opportunities? Is there an opportunity to do training, workforce development, education, or other activities? Where can we bring new solutions to the problems that exist?
In summary, understand that demographics provide insights into where opportunities exist now, and even more importantly, where they may exist in the future. With demographics, we're better equipped to develop appropiate business and marketing strategies to target the customers that we want to focus on.
What psychographics changes are creating new market opportunitites?
While many of us are familiar with demographics, the concept of psychographics is new to most. We will explore psychographics as it's related to macroeconomic change, and we can do with this knowledge to be better entrepreneurs. This is the second element we're examining within our discussion of macroeconomic change.
Our definition of psychographics is the attitudes, values, opinions, interests, and related personal factors of markets. It’s contrasted with demographics in that psychographics involve how people think, how they feel, and their interests and values. It’s influenced by their social class, lifestyle, and personality.
Most of us, as individuals, are primarily concerned with basic health and wellness—the food and shelter elements. We go from there into safety, esteem, and on up through actualization and transcendence. There’s a pattern that we see of human behavior and human needs and wants.
To understand psychographics, there are a variety of resources. One of the better ones is Nielsen’s MyBestSegments, which provides dozens of audience profiles. You may find profile 04, which is a Wealthy Younger Family Mix, and Nielsen has categorized this group as tech-savvy, fashionable, urban fringe, relatively affluent, highly educated, and ethnically mixed. These are communities with trendy apartments and condos, fitness clubs, boutiques, casual restaurants and bars from juice to coffee to microbrews. This characterization tends to be centered on urban areas—New York, Philadelphia, D.C., Chicago, L.A., San Francisco, and other pockets as well. The top five densest counties include Arlington and Alexandria in Virginia, New York City, D.C., and San Francisco, and when we dive deeper to understand the statistics of this psychographic, we see U.S. households represent 1.5 million; average household income is $90,000. We can learn about where they shop, where they travel, what they read, what they watch, and what they drive.
Psychographics help us understand how and where to position our product or service. Where do we need to advertise? As we build our brand, are there other brands that are having success with our target audience? What are the characteristics and personalities of those brands? What inspiration may we draw from them?
Experiences are becoming the predominant economic offering of many innovative ventures. It’s not only the item you buy. It’s not only the service. It’s the customization and personalization that’s desirable.
In summary, understanding psychographics, in addition to demographics, provides insights into how prospective customers think and feel, and what influences their buying preferences. By examining psychographics, you can gain valuable insight into the evolving needs and wants of your target customers. It also gives you insights on how to build and market your offerings effectively and efficiently.
What technical advancements are creating new market opportunities?
Technical advancements are a great source of opportunity as well. We’re exploring this at a macroeconomic level as the third element of macroeconomic change.
With technical advancements, we’re addressing improvements in technical processes, methods, or knowledge. It’s one of the most important triggers of change for entrepreneurship. New technology enables limitless opportunities for derivative innovations.
For example, the Apple iPhone brought great value not only as a communications device and as a revenue opportunity for Apple, but for carriers such as AT&T, Verizon, and others. It also brought tremendous opportunities to the app developers who could place their apps on the iPhone. While there are many large competitors that are in the apps space, there are also countless entrepreneurs and small companies that are bringing successful apps to market. The creation of the iPhone has driven the success of many entrepreneurs and small companies through the apps that have been built for the iPhone.
As illustrated here, technical advances are great opportunities for entrepreneurs. The magnitude of the change is important, and significant change can create entirely new markets.
We also want to think about different uses for technology. We may find technologies that can be applied in many different ways.
Technical advancements can change industry dynamics and open new markets. When you have an app platform that entrepreneurs can sell into, you can work directly with Apple. Or you can even build your own independent site; sell directly to customers.
As of this writing, when we look what’s the next big thing, people believe it will be Google Glass. The basic device can be fitted to the existing glasses that you may wear, or conversely, it could have an additional add-on with a nosepiece and the elements that wrap around your brow. Perhaps it will be the smartphone replacement.
We can do a variety of tasks via voice command. Wearing your Google Glass, you can look at a product. You can speak a command to scan the bar code. Within your field of vision, Google Glass can display the product description, product reviews, and competing price points online and in local stores. You can even place your order for the product, if you wish, and pay for the product via Google Glass.
I would not suggest that most of us have the expertise or the resources to build a competitor to Google Glass. But if you’re interested in how to participate in that growth, the app market could be a mode of entry in developing apps for Google Glass, and trying to ride that growth curve.
You may even be too late. We see that the fitness gadgets really hit the market and grew in a big way in recent years. And Google Glass is not necessarily news anymore. It’s something that’s been out since May 2014. And it’s something for which more products are coming to market—complementary products and complementary apps. And the big companies like Ebay and others are developing things for it as well. We may need to even think a step ahead.
The Apple Watch is something that, again, has been talked about for a while. Announced by Tim Cook on September 9, 2014, it has fitness tracking and health-oriented capabilities, as well as integration with iOS and existing Apple products and services. The Apple Watch is scheduled to be available in three models, with a wide variety of case and band options. The Apple Watch is compatible with the iPhone 5 and later iPhone models running iOS 8.2. The device is scheduled for release in early 2015.
The Apple Watch uses Apple’s new S1 processor, advertised as “an entire computer architecture on a single chip.” It also uses a linear actuator called the Taptic Engine to provide haptic feedback when an alert or a notification is received. The watch is equipped with a built-in heart rate sensor, which uses infrared and visible-light LEDs and photodiodes.
Incidentally, it’s not the original smart watch. That would be the 1977 HP that came to market and was an early calculator watch. It was priced at $600. Now, it’s a collector’s item. On Ebay, the price is upwards of $14,000.
There are often new products that come to market that we think are new, but they are actually evolutions of past products.
Review patent applications to gain insights, and read blogs and rumor sites to see what’s next.
It’s valuable to think towards the future as you’re exploring entrepreneurial ideas. Seek to understand trends, and try and predict what’s going to happen. Think about opportunities, and begin acting on opportunities before they’re late news or common knowledge. How can you shape inventions and innovations, and be at the forefront of new products and services?
Alternatively, we may be left behind. We may be left chasing existing markets. We may be left battling against industries or markets that are being dominated by others that are incumbents or that acted with better foresight. By being more proactive and by thinking about the future, we can leverage these technical advancements and be early movers.
What societal changes are creating new market opportunities?
Societal changes are a rich source of entrepreneurial opportunities as well. This is the fourth element that we’re going to examine within macroeconomic change in the Opportunity Analysis Canvas.
As we define societal changes, we’re exploring the social and cultural aspects of the macro-environment that affect customer needs and market sizes. This includes issues like health consciousness, career attitudes, and an emphasis on safety.
In a study by The Atlantic, they looked at the increasing longevity in the U.S., and that the number of Americans over 60 will increase by 70% by 2025. They looked at technology in smart machines, and how workplace automation is killing repetitive jobs and may even replace more skilled jobs, including accounting and law. When we look at the computational world, we recognize that data gives us the ability to see things on a scale that’s been impossible before. When we look at new media ecology, we want to recognize visual communication as becoming a new vernacular. We want to look at super structured organizations and social tools that allow organizations to work at extreme scales. And we want to recognize the global connectivity of the world, and that job creation and innovation and political power is going far beyond the U.S. and Europe.
What this means for work skills, and where the opportunities may be for us as entrepreneurs, involves things like sense making and social intelligence, and novel and adaptive thinking. We need to build our competencies cross-culturally in computational thinking and new media literacy. We want to leverage virtual collaboration, transdisciplinary thinking, and a design mindsight, and manage an increasingly larger and more complex cognitive load.
As we think about entrepreneurs and those that will follow us, we ask, why aren’t more young Americans seeking careers in innovation? In a study by MIT and the Lemelson Foundation in 2012, they examined a variety of factors. They found that 22% of the polled 16 to 25 year-olds said they’d be motivated by jobs that would give them a chance to change the world, and that 47% believe that a lack of innovation will hurt the U.S. economy.
When you dive into what types of innovations they would want to contribute to, they show a high interest in consumer products and health sciences. In web-based innovations there’s high interest. We see interest in environmental invention. There’s high interest in the performing arts as well.
When they assess their preparedness for careers in innovation, 45% of the respondents believed that STEM (science, technology, engineering and math) is not given enough attention in their schooling. Nearly 34% felt unfamiliar with the career opportunities in STEM. Approximately 30% thought that STEM careers were too difficult; perhaps they’re influenced by the other factors of limited awareness and limited knowledge.
What can entrepreneurs do about it? These students shared an interest in having more invention and innovation projects in their education. There was interest in a place for innovation, a place to work on projects, a laboratory-like environment for ideas and innovation. There was a call for courses that would help them develop their innovation skills and creativity. Perhaps new online courses can assist them. Perhaps hands-on training and mentoring with STEM professionals is a solution. There are a variety of new venture opportunities to serve these students.
In summary, when we think about societal changes, recognize that the customer’s needs and wants evolve. With that evolution there is an opportunity for the emergence of new ventures started by entrepreneurs. We also want to anticipate societal change. We want to recognize that entrepreneurs who anticipate such changes are going to play a more successful role in entering and growing and scaling their new ventures in these spaces.
What political and regulatory forces are creating new market opportunities?
When we look at political and regulatory forces, we’ll find that they can be a hurdle, or they may present opportunities for us as entrepreneurs. We’re going to look at these two forces in the context of macroeconomic change and think about how we can use these to our advantage in the creation, launch, and growth of our new ventures. Political and regulatory forces conclude our discussion of the macroeconomic change section of the Opportunity Analysis Canvas.
We’ll examine how the government, including local, state, federal, and international laws and policies, influence economies, industries, and markets. Examples of these include tax policy and fiscal policy, laws regarding business law and labor law and environmental laws, as well as trade control and tariffs, and political stability or instability.
An example of these laws is crowdfunding, which is something that’s attracting a lot of attention in the U.S., Europe, and other areas as well. You may be familiar with crowdfunding as applied to Kickstarter, IndieGoGo, and other platforms that are not really investment in nature. What happens with Kickstarter, if you’re not familiar, is that you may go on and pre-buy a product. Companies engage in pre-sales, meaning they’re going to sell a product, but it may take six months to deliver that product. They may give you as a buyer a discount as an incentive for you to be patient with that delivery, and they may need that funding that you’ve contributed for them to build the product.
What we’re calling crowdfunding is different. We’re discussing investment, where a contribution of money results in receiving equity, stock, or ownership in the company. The element that makes that different from Kickstarter is that in most countries it’s illegal to go online and raise money from individuals, unless you have the proper vetting and certification from the government.
Today, companies like CircleUp and others present opportunities for the accredited investor – a high net worth individual – to invest in entrepreneurs. As an accredited investor, I can review the companies that are soliciting investors. I can learn about the company and their technology, and what their successes and ambitions are. I can make contact and certify that I am accredited.
There are thoughts on how you evolve that and expand it, and go beyond accredited investors? In the U.S., an accredited investor is an individual who has a net worth of over one million dollars, excluding equity in their primary residence, or one who has annual income in excess of $200,000 for two consecutive years.
The 2012 Jobs Act suggests there are thoughts on changing those laws. There are laws that are already beginning to take effect, such as raising the number of individuals who can participate in funding a startup from 500 to 2,000. But the bigger piece of the Jobs Act is lifting the general solicitation ban tied to accredited investors. And what that means, if enacted, is that you and I as individuals, even if we’re not high net worth, can invest in startups. We may be able to buy a small percentage of that startup, maybe it’s a tenth of 1%, for a few hundred dollars.
When we research equity crowdfunding, and efforts to increase the number of individuals who can participate in funding companies, there is level of skepticism and concern about the idea. The primary concern is what’s to stop entrepreneurs from fraudulently raising money. What’s to stop someone from making false claims, and collecting money with no real desire or expectation to use that money as intended? There are concerns for consumer protection – the protection of the individuals who are funding these new ventures.
In Europe and other areas, there are various examinations or certifications or credentials that are investor qualifiers, and unrelated to the worth of an individual. They educate prospective investors on the risks that they are taking. For individuals who pass these certifications or have these credentials, they are able to invest in startups even if they don’t meet the net worth criteria that we have here in the U.S.
In the U.S., I expect there’ll be a measure of certification and examination of investors to make them fully aware that investing in a startup is a risky proposition. It’s riskier than the stock market and riskier than most investments they’ve made.
Another view of political and regulatory factors is to see government as a customer. In the Washington, D.C. area, where I live, this is a very common activity. The government buys goods and services, and they promote the opportunity for companies, to include small companies, to sell them these goods and services. There are various federal agencies that post these opportunities online in the U.S., and I expect in other regions of the world as well, that let entrepreneurs share in being a product or service provider to the government.
For example, the U.S. Department of Education offers a variety of supplier opportunities, many of which may have set aside funding—meaning reserved funding—for small businesses, women-owned businesses, minority businesses, and other special categories.
In summary, we want to understand political and regulatory factors from a few different perspectives. We want to know how the laws impact the businesses that we’re in, or that we may enter. We want to build an awareness of these political and regulatory changes and forces. We want to think about government as a customer and where opportunities may emerge. This allows us to prepare, anticipate, and position ourselves to be successful, and to think differently about what we’re doing, rather than falling victim to something that we may read in the newspaper or that we may learn about after the fact.
Entrepreneur Spotlight on Richard Lowenthal, Founder and Chief Technical Officer of ChargePoint
The rapid rise of electric vehicles is at the intersection of multiple macroeconomic changes. Consumer demand for fuel cost savings is augmented by early adopters’ interest in environmentally friendly vehicles. Many governments are providing tax incentives for electric vehicles purchases, and cities are beginning to create traffic zones that prohibit vehicles unless they are electric.
In 2007, Richard Lowenthal recognized this emerging shift in transportation and the critical need for fast, reliable charging stations. He believed that a comprehensive network of charging stations was a vital prerequisite to consumer adoption of electric vehicle and a cornerstone of the electric vehicle ecosystem.
After a successful career in high tech at StrataCom and Stardent Computers, Lowenthal attributes an early visit to electric vehicle pioneer Tesla Motors as the inspiration for him to launch ChargePoint. With a $15 million grant from the U.S. Department of Energy and $80 million in venture capital, ChargePoint has grown from offering single, home-based charging stations into a gas station model that serves multiple vehicles simultaneously from a single circuit.13
With over 12,000 charge spots and a 70% market share of networked public charging stations, ChargePoint is a market leader in this growing space. Nearly 40% of all electric vehicle drivers are ChargePoint members. By hosting over 2.5 million charging sessions, consumers have saved 3 million gallons of gas and avoided 46 million pounds of carbon dioxide.14
Ideas in Action: Macroeconomic Change
- What demographic and psychographic changes are creating business opportunities for new ventures?
- How can you stay current on technical advancements and societal changes that are emerging?
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