How people behave under different situations?

The post is about how people behave under different contextual settings. The reactions are most extreme when the onus of any mishap doesn't lie within. The Milgram experiment conforms to this behavior. It showed how far the people are ready to go, beyond their personal threshold level, to justify the expected behavior. In general, people are more committed towards the outcome of the assignment than its objectives and its impact.. A similar experiment, the Prison Experiment, delves into the extremities of role-playing by the volunteers even when it was just a mock environment. The experiment poses a very serious question, "How to behave rationally and responsibly when you are in an authoritative position but are expected to act against your judgmental bases". 

The idea to explore is how an organization culture is shaped to guide the behavior of people. Example of Disneyland is probably the one of the best examples that show how the organization's culture is deeply ingrained within the psyche of its employees that they remain in their character even when nobody is watching. This understanding also provides an insight into our child life bringing up. The way we structured our understanding of different situations and shaped our mannerisms to act and judge in atypical situations. 

In a corporate setting, we often come across situations where taking decisions is tough especially when the decisions have an impact on others' life. The cultural setting where good behavior can emerge in the same way as the undesirable behavior can amplify and overcome the internal voices. In my personal experience the culture of the organization dictated that the client deliverable's have to submitted on time no matter what. Although it was the organization's duty to fulfill the contractual obligations, it's not true that the system will fail if one deliverable is not submitted on time. 

Although the negative aspects of human behavior are more discusses, it is also important to analyze if there are any positives. One such positive behavior is the extent to which the people are willing to go for ensuring that the objectives are met. As a leader we'd often come across situations where the support from the team would be far more important than anything else. Most often the team cease to perform well because of the repercussions of failure would be very high. In such situations it is important that we try to take away the onus of responsibility from the sub-ordinates. Another positive I can think of is the way trust is built in the system. So as we saw the regular people had faith in the professor that the experiment is being conducted for the greater good of the organization or the society. This trust is important from the organization's point of view. This is probably the reason why we as child experimented because there was always a home leader backing our efforts and absorbing the accidental fatalities.

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The big Idea: How to measure the potential of your business?

This is just an example to illustrate how a business can be evaluated. You can evaluate your business idea similarly.

The Idea
"The idea is to bring people closer and enhance their network"

In today's age of information and pace, networking is of paramount importance. Although the technological spurt has ensured wider connections, most of the ties are weak in nature as they hardly meet in person. "Meet-Ups" is an attempt to fill this gap by bringing people on a single platform and network based on the common interest expressed. 

Set of considerations  :

• Tier 1 cities would be the most active in this kind of structure
• Age-group of 16-40 would be more interested in expanding their network
• The realistic conversion rate would be 1% of the potential targets as understood from the above two assumptions
• The target market is India

Yearly demand: About 10% of 50 million population in the target age group residing in Tier1 cities can be addressed i.e. a population of 5 Million.

Addressable market (A)= 0.5 Million

Willingness to pay: The business model is to charge the creator of the meet-up group an annual fee of Rs.500 and the members an amount of Rs. 100. About 5% of the people would be creating groups and rest of them would join a group member. Total revenue collection per year hence would be 500*0.05*0.5M+100*0.95*0.5M = 12.5M+47.5M= Rs. 60Million. The charges are normal and comfortably below the "willingness-to-pay" bar.

Surplus (B)= Rs. 6 Crores

Cost to manufacture or provide service: There is almost zero fixed cost involved. The costs would mainly be variable in terms of human capital responsible for managing the meet-ups and related operational issues. One person every 20 groups is what is fairly manageable. About 2000 groups is targeted and expected and hence the annual operational cost would be equal to approx. 4L*100= Rs. 4 Crores.

Total Cost (C) = Rs. 4 Crores

Value of the opportunity every year (O)= Rs. 2 Crores

Expected monopoly life of the idea (D)= 5 years

Total (monopoly) value of the opportunity (X=O X D = 10 Crores)

Rivalry and competition: Currently none. And given the unique nature of the idea not many competitors would pitch in. Expected competitive life of the idea (E) is about 3-4 years. Average market share (F) would be around 50% of the data presented above. Total (competitive) value of the opportunity (Y = F X O X E = Rs. 3.5 Crores

Total value of the opportunity = X + Y = 13.5 Crores

Enter or not:

The porters five forces would help in determining the market forces as presented below:

As clearly visible from the porters framework, the entry barrier is not strong. However the early entry advantage is immense. Networkers would prefer not to leave their groups once formed as the networking worth is expected to be quite high.

Given the assumptions how the business model would be implemented, the following reasons support the decision to enter the market    

• Gap in networking opportunities for people sharing common interest not yet addressed
• A trend in developed countries for the last few decades do tell stories about the validity of the idea
• Competitors are minimum and hence the risk of failure is also low on that front
• The upfront/fixed costs are very low and hence a chance can always be taken. Operational leverage
• The yearly revenue generation is around 10 Crores even when the estimates have been conservatively taken. As compared to the opportunity cost, this is quite a lucrative business
• The strength would be to build a common brand

Reasons that discourage market entry

• Difficult to break in early. It is important to make the ball roll at the very early stage
• Unexpected consumer behavior may deter the plan
• Legal hurdles of forming groups under the Indian law
• The social platforms may deter people to step out
• Frequency of meetings and participation can be a major issue in many of the groups

The analysis presented above indicates that the probability of not being able to scale up is not very low. However given the value of the opportunity and other reasons as stated above it is an exciting opportunity and the market should be entered.

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