Anyone have advice on how to pick a target industry?
May 29, 2019
by a searcher from Columbia University - Columbia Business School in New York, NY, USA
May 29, 2019
by a searcher from Columbia University - Columbia Business School in New York, NY, USA
from Sri Chandrasekharendra Saraswathi Viswa Mahavidyalaya in Hyderabad, Telangana, India
I have had one principle that I repeat to tell myself each day at work. In god I believe, In data I put my trust.
On the question you have posed, I think the search is so much dependant on multiple factors. All expert who have commented have given excellent insights. I will like to add a bit more. we understand certain industries better and we tend to understand the nuances naturally. While some industries seem clear at the phase of it, but are difficult to get a grasp of. Choosing from a blank state to arriving at a list of informed possibilities is itself an exercise and needs to be both a qualitative and Quantitative Exercise. To find the objective target industry to work on as a use case is no less than a complex Maze riddle to solve. If I am solving a problem like this, I work an a method called 4QM ( 4 quadrant method) . I will tell you what I do and may be it helps you. Pl first make a list of few target industries that comes to your mind based on your liking or based on your audit/dd experience or based on some hearsay. The ones you have done DD/audit will give you more probability of correctness on any data that you will analyse as you have a direct experience in that industry. On the others you will rely on thumb rule to begin with and then funnel it deep to have the pointed data inputs for analysis. But choosing an area that you have no knowledge of will make it an extremely complex use case and the probability of success lies in the probability of you being able to get better data about that industry.
Lets do this . Let us chose 5 or more different target industries to study. List all Qualitative /Subjective attributes that you want to find/unearth. Then list out all quantitative attributes pertaining to the industry. Remember the list can be as exhaustive as you want. The more the items on the list, the more time it takes to analyse and of course the probability of analysis will be better to give you good data set to work on. On the contrary, the less the list of items ,the less is the data accumulated and the probability of an informed decisions making will be hampered.
Lets then start with the first one chosen at random/or based on your preferred pick, Lets then make 4 quadrants based on Knowns and unknowns. Lets write down all the 4 combinations of Known Knowns , Known Unknowns, Unknown Knowns and Unknown Unknown. The Objective and the subjective attributes are obtained. The exhaustive list now details. You are now going to see that if the number of items in unknown Unknown are high then there are two things to be decided based on your personality. If you like solving the unsolvable and are motivated then try to unearth the unknown unknown of each industry to analyse. This can cost you from days to weeks to years if the problems are unheard of. On the contrary of you think you need to keep the cost of your entire search to reasonable and manageable then chose to postpone your temptations and deep desire to solve the unsolved mysteries and you should chose to simply avoid the problems and try not venturing into the unknown unknowns.
The second and the third quadrant is where the trick of your success lies. Unknown knowns are good and happy problems with defined possibilities!. . The Known unknowns are an assumptive list and if you are sure that your assumptions are correct then you are close to a higher probability of success.
Do this exercise for the 5-6 industry types you may consider.
Finally, my practical experience is we end up with an un-awarded Phd on too much analysis. We either have lots of data that naturally red-flags our brains from working on it due to the risk we ascertain on it from our study and those green flags are where the competition is enormous -meaning we are doing what all others are doing. Better ways of finding is to talk to real people and get insights. Destiny will land your way. Cash is king. My pick will be the industry which has good cash conversion cycle ( raw material to sales and realisation must be the fastest ) . Working capital is oxygen no matter what other parameters indicate, I will stick to companies that clearly have manageable working capital. Fianlly I will be hoppy to work with you on every individual case as I am motivated to bring to use my experience and also find for myself an opportunity. I hope this post gives you some help as in a practical approach to your problem solving.
from University of Melbourne in Melbourne VIC, Australia