Innovation

The seven domains assessment model for entrepreneurs

The seven domains model is a simple framework for entrepreneurs to use to make sure they have asked the key questions about their business idea before launching it

Many entrepreneurs launch their business ideas without first conducting extensive research. This is sometimes effective, but it can lead to very basic errors. The seven domains model is a simple framework for entrepreneurs to use before launching their business idea to ensure they have asked the key questions.

When to use it

● To evaluate your business concept before launching it.
● To identify the major flaws in your business plan so that you can address them.
● To comprehend why some new business ideas succeed while others fail.

Origins

John Mullins developed the seven domains assessment model at London Business School and described it in his 2003 book, The New Business Road Test. It was created as an integrative framework rather than a new theory in and of itself, and it thus draws directly on a number of other bodies of thought. It is widely used by entrepreneurs as they develop their ideas, as well as in the teaching of entrepreneurship at business schools.

The model of the seven domains is not a business plan. It is similar to a feasibility study in that it determines whether a new business idea is worth pursuing and where the biggest weaknesses are. If the analysis appears promising, the entrepreneur will typically create a full-fledged business plan in order to obtain funding from a venture capitalist or a bank. Alternatively, the entrepreneur may prefer to use a 'lean start-up' model, which involves starting small and looking for ways to generate revenue quickly so that the venture can self-fund.

What it is

According to the model, there are seven sets of factors that a potential entrepreneur should consider before proceeding with his or her venture:

● Macro-market attractiveness: Is the overall market for your product or service growing?

● Micro-market attractiveness: Do you have a niche of prospective customers who are interested in buying your product or service right now?

● Industry attractiveness: Is the structure of the industry you plan to operate in sufficiently attractive that you can make money out of your product or service?

● Sustainable advantage: Is there anything about your offering that will allow you to defend yourself from competitors?

● Mission, aspirations and propensity for risk: Is there a good fit between the proposed business idea and your management team’s interests?

● Ability to execute on the critical success factors: Do you and your team have the necessary capabilities to succeed?

● Connectedness up and down the value chain: Do you know people in this industry who can open doors for you and get you started?

How to use it

The seven domains model is intended to be used as a checklist, with you going through each domain in turn and evaluating how well-positioned you are on each one. This checklist has been condensed; for the full version, see The New Business Road Test by John Mullins (see ## Further reading).

Market domain/macro level – market attractiveness This is about determining the potential overall market size for your product or service. Its current size is significant in terms of things like customer count and sales value. But the prospect of future growth is even more important. Is the overall market growing significantly, or is it stagnant or even shrinking?

Market domain/micro level – sector market benefits and attractiveness This is the primary focus of your product or service. Successful entrepreneurs typically begin by identifying a small niche of customers who adore their product and then expand from there. 'Who are the likely initial customers?' and 'What is the problem or need you are addressing?' are some questions to ask. and 'What alternatives to these problems/needs do customers currently have?'

Industry domain/macro level – industry attractiveness This is essentially a five forces analysis of the industry in which you intend to operate. The point here is that even if you can find a market for your product or service, the industry's basic structure may be so unappealing that you won't be able to make much money. As a result, you must consider the threat of new entrants and substitute products, as well as the bargaining power of potential customers and suppliers, as well as the industry's internal rivalry.

Industry domain/micro level – sustainable advantage The emphasis here shifts to your ability to defend your company against imitators. A core competency/resource-based perspective, which states that a firm's resources should be rare, valuable, and difficult to imitate, is one way to approach this analysis. You should also consider intellectual property protection.

Team domain – mission, aspirations, propensity for risk You are analyzing your commitment as well as the interests of your team. You must ask yourself why you want to start this business, what drives you to do it, and how it fits into your medium- to long-term career plans. The same analysis should be performed on your team or business partners.

Team domain – ability to execute on critical success factors The emphasis is on your and your team's abilities. Although it appears obvious that you require capabilities that are aligned with the 'critical success factors' for your venture, many entrepreneurs launch businesses without the necessary skills. So consider carefully the types of decisions or activities that, if made incorrectly, will have a significant impact on the business, and ask yourself if you and your team have the experience, or distinct skills, to do these things correctly. If you notice a skill or capability gap, who can you bring on board to fill it?

Team domain – connectedness up, down, across value chain This final domain is more concerned with who you know than with what you know. Starting a business relies heavily on personal connections, so consider your contacts in key areas carefully: do you know people who can provide distribution or assist you in sourcing key components? Do you know any angel investors who could help with the initial funding? Do you have contacts in a foreign market who can help you get started?

seven domains

Top practical tip

When using the seven domains model, keep in mind that some domains are more important than others in the early stages of a venture. For example, the attractiveness of the'micro-market' is critical early on – unless you get those initial sales, all of the other analysis about the size of the market as a whole, and the sustainability of your advantage, is meaningless. It is also critical to consider the members of your team and the extent to which they have the right contacts up and down the value chain early on. Again, if these initial contacts are not made, the business is likely to fail at the first hurdle.

Top pitfall

It's easy to focus on the positive aspects of your responses to the questions in each of the seven domains. However, in order for this analysis to be effective, you must be extremely critical of yourself. It is often beneficial to have someone else evaluate your business idea on these dimensions, as they may notice gaps and shortfalls that you are unaware of.