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The Product Opportunity Evaluation Matrix (POEM) is a conceptual framework used in the ideation stage of entrepreneurship and product development, to compare business opportunities and to determine the best relative opportunities for to focus on. The framework was devised by Neal Cabage and Sonya Zhang, PhD to assisting young Internet startups with identifying their best opportunities for success, though the framework is broadly relevant to product development overall and was debuted at the Southern California Product Camp conference in November 2012, to an audience of Product Managers and Product Marketing Managers.

The fundamental supposition of the framework is that it can be difficult to define a model for generating unknown creative output, particularly in a dynamic and ever-changing market place. Thus the goal of the framework is not to define a model for a business opportunity. Rather, it is to aggregate a number of accepted truisms regarding business opportunities, and to systematically test each opportunity against these truisms, to determine relative strengths and weaknesses. While one cannot presume to know precisely where opportunity is, one can approximate it by testing successive ideas against such a framework, to eliminate places where opportunity is not, and thus through process of elimination, identify the relative best opportunity compared to others that have been tested. The concept and intended purpose is reminiscent of SWOT analysis but provides a more structured and opinionated framework that is specifically intended for assisting the ideation phase of new product development.

Method of operation

The framework is a 5x5 matrix composed of 5 sequential filters, each filter containing 5 truisms to test against. It is a subjective assessment tool in which the entrepreneur is suppose to provide a letter grade (A-F) for each of the truisms, to reflect his own perception of the quality of that idea for each truism, inside of each filter. The entrepreneur will first provide an A-F grade for each truism in a given filter and then deduce an overall letter grade for that filter, based upon the grades for the 5 associated truisms.

Letter grades rather than numbers are use intentionally to abstract the judgement of the user across these truisms rather than taking them too literally. There is after all no weighting to reflect relative importance of one truism versus another. Truisms could also theoretically be rotated in or out of the framework as well, underscoring the importance of not becoming too precise with scores.

The five filters in the framework are sequential and begin with the customer filter to reflect the importance of focusing upon demand-side economics, rather than supply side. Entrepreneurs need to focus upon the stated needs of a prospective customer, not simply what problem they would like to solve. And for similar philosophical reasons, the filters then progress sequentially through Product, Financing, Timing, and Competition. Finally the overall letter grade for each filter is tabulated for one overall A-F grade for that entire idea having been scored against all 5 filters. Once this has been done for a number of different opportunities, the overall score can be compared for relative strength of one idea versus another. And by reviewing the scores across the truisms, it is easy to then identify the apparent strengths and weaknesses of one opportunity versus another.

Truisms

There are five truisms for each of the five sequential filters. Each truism is graded A-F based upon the personal assessment of the entrepreneur as to the ideas relative strength or weakness in facilitating that truism. They are as follows:

i. Customer filter

  • Clearly Identifiable Customer
  • Clear Value Proposition
  • Segment-able market
  • Low Touch Customer
  • Lifetime Customer Value

ii. Product filter

  • Tight Niche Focus
  • No Network Effect
  • Lean Method Viable
  • Team-to-Market Fit
  • Inherent Story or Virality

iii. Financing filter

  • Healthy Margins
  • Demand Constraints
  • Supply Constraints
  • Sunk Costs
  • Cashflow Requirements

iv. Timing filter

  • Secular Trend Alignment
  • Recent Innovation Enabler
  • Market Inefficiency
  • Recent Competition Surge
  • Signs of Commoditization

v. Competition filter

  • Limited Competition
  • Competitor Fitness
  • Team Fitness
  • Defensible Position
  • Barriers to Entry
This article uses material from the Wikipedia article Product Opportunity Evaluation Matrix (POEM), that was deleted or is being discussed for deletion, which is released under the Creative Commons Attribution-ShareAlike 3.0 Unported License.
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