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Agility Matters

At the early stages of a new enterprise there is an idea in a sea of risk and uncertainty. Although it is not possible to make decisions with perfect information, we take a structured approach to systematically eliminating and reducing risk and uncertainty.

To do this we use tools that are well proven in the Selective Iterative Risk Elimination (SIRE) framework.

SIRE Framework

SIRE is an agile process for evaluating market opportunities. It is agile in that it allows the entrepreneur to quickly change direction or terminate the entire exercise as data becomes available or as risks are eliminated. The advantage of this approach is that you do not have to commit to conducting a comprehensive study, with a detailed polished report whose conclusion might be that you should really be evaluating a related but different application or market.
SIRE consists of quick iteration over the following steps:
  • Assess State of Knowledge
  • Identify Risks and Uncertainties
  • Choose immediate risks and/or uncertainties to attack
  • Formulate action plan
  • Execute action plan
  • If necessary - summarize results and findings

SIRE is embedded inside a larger process that achieves a well defined goal for example during the process of preparing a funding pitch for venture fundraising there are many unknown items that need to be investigated. SIRE can be used to evaluate these in order of importance. For example we have the list of unknowns that includes the following:
  • What is the competition?
  • What are the current substitutes?
  • What are the potential business models?
  • Is it feasible for one of these business models to achieve profitability?
  • etc.

In discussion with the Entrepreneur we decide to formulate some potential business models for the invention. The outcome of this is 2 business models that look promising. The next logical decision would be to determine whether there are existing competitors with a similar product. This investigation might reveal a company with the exact same product and a patent that would be difficult to avoid infringing. The Entrepreneur could now break off the entire project, potentially investigate ways to avoid the patent or forge ahead. But the approach has saved potentially wasteful research on many other issues.

SIRE has its roots in Real Options. Real Options theory says that in the face of high risk, breaking the investment into a series of options, each of which eliminates risk, can turn a project with a negative or zero NPV into an option that has significant value.
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