Developing New Ideas for New Companies

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Developing New Ideas for New Companies by Mind Map: Developing New Ideas for New Companies

1. Week1: Entrepreneurship and Innovation

1.1. What is entrepreneurship?

1.1.1. Undertaking the creation of an enterprise or business that has the chance of profit or success- Dorf and Byers

1.1.2. Why study this?

1.1.2.1. Learn the motivation

1.1.2.2. "Make Money"

1.1.2.2.1. Helps the economy??

1.1.2.2.2. Chances are much higher in other profession

1.1.2.2.3. Risk are higher, but money returns are also higher

1.1.2.3. Creation

1.1.2.3.1. What do they create/make?

1.1.2.4. Independence

1.1.2.4.1. But now you answer to more people!

1.1.3. Why not Entrepreneurship?

1.1.3.1. very few (less than 5%) are entrepreneurs

1.1.3.2. Due to Risk of money and time

1.1.3.3. Failure -- stigma

1.1.3.3.1. peer pressure/embarassed

1.1.3.3.2. "Told you so" "Shouldnt have done it

1.1.3.3.3. Family pressure

1.1.3.4. Work life balance

1.1.3.4.1. Pressure from VCs/ Investors

1.1.4. What does it take to succeed as an Entrepreneur?

1.1.4.1. Opportunity Discovery

1.1.4.1.1. Primary research

1.1.4.1.2. Focus groups

1.1.4.2. thoughtful with decision making

1.2. Who is an entrepreneur?

1.2.1. Types of Entrepreneurs

1.2.1.1. Lifestyle vs Fast Growth

1.2.1.1.1. Single Restaurateur vs Online Food Retailer

1.2.1.2. Local Goal vs Global Goal?

1.2.1.2.1. One homeless shelter vs Global Education Program on ways to reduce homelessness

1.2.1.3. Low Tech vs High Tech?

1.2.1.3.1. Chocolate Shop vs Chocolate Fountain Mfg

1.2.1.4. Serial vs Multiple

1.2.1.4.1. Startups in Series vs Startups in Parallel

1.2.1.5. Startup, Inherit or Purchase

1.2.1.6. Franchisees?

1.2.2. Video of Squarespace.com

1.2.2.1. providing the tools to create your own site

1.2.2.2. Competitive-- lots of other providers

1.2.2.3. differentiate by targeting the premium niche

1.2.2.4. raised 38m USD to reinvest in the growth of the company.

1.2.3. Mowing Lawns website

1.2.3.1. Started by an accounting major in 2010

1.2.3.2. Started cutting grounds when he was 4, bought a truck at 14. that he can not legally buy. His employees drove the truck.

1.2.3.3. By the time he was an undergrad, he had 6 employees. He met them in the morning.

1.2.3.3.1. Managing employees that are twice your age/ same age as your parents

1.2.3.4. generate about 50K in profit mowing lawns

1.2.3.5. Expanded to "Dumpsters and MOre"

1.2.3.6. There is a need even if it is not glamorous or high tech.

1.2.4. Alert Beacon

1.2.4.1. started by a business and engineering major

1.2.4.2. Work management systems

1.2.4.2.1. tells people what to do via alerts based on the situation. INtegrated with Police/fire department. With displays in high traffic areas in Schools/campus. etc.

1.2.4.3. Funded by the University (angel investor)

1.2.4.3.1. Social program and timing as there were a lot of in campus shootings.

1.2.5. LookThink startups

1.2.5.1. solving real world challenges through user experience.

1.2.5.1.1. started out as a DJ

1.2.5.2. Video talks about their culture

1.2.6. One advantage is that you can get to pick who you work with

1.2.6.1. element of skills

1.2.6.2. need for different skillsets

1.2.6.2.1. marketing people build awareness / promote/ image/ creatives

1.2.6.2.2. lawyers manage risks

1.2.6.2.3. Finance people

1.2.6.3. mindful of?

1.2.6.3.1. emerging tech/future

1.2.7. What brings their ideas into actions/

1.2.7.1. opportunity canvass

1.2.7.2. business model canvass

1.2.7.3. validating markets

1.3. Entrepreneurship, creativity, and innovation

1.3.1. Creativity is the generation of ideas that result in the improved efficiency or effectiveness of a system

1.3.1.1. make things better?

1.3.1.2. make things more comfortable?

1.3.1.3. more efficient/ more effective?

1.3.1.4. Two important aspects

1.3.1.4.1. can use Process--designed to attain a solution

1.3.1.4.2. can hire People-resources for the solution

1.3.1.5. Nature of Creative process

1.3.1.5.1. Creativity is a process that can be developed and improved.

1.3.1.5.2. Some individuals have a greater aptitude for creativity than others.

1.3.1.5.3. All can learn to be creative

1.3.1.5.4. Typical Process

1.3.1.6. Developing your creativity

1.3.1.6.1. recognizing relationships

1.3.1.6.2. developing a functional perspective

1.3.1.6.3. Borders Case study

1.3.1.6.4. Using Your Brain

1.3.2. Creativity Ignites Innovation

1.3.2.1. It is the ability to use the imagination to develop new things

1.3.2.2. it is an iterative process of:

1.3.2.2.1. connecting disparate ideas

1.3.2.2.2. discovery of opportunities and possible solutions

1.3.2.2.3. invention as the application of discovery

1.3.2.2.4. application in the feasible adoption of solutions

1.4. The world's most innovative companies

1.4.1. Most Innovative Companies

1.4.1.1. sizeable revenues from new products

1.4.2. Why does google provide free meals, haircuts, car wash etc?

1.4.2.1. Happy=Productive=More creative?

1.4.2.2. employee satisfaction = retention= more motivated

1.4.3. Ideo: Cubicles?

1.4.3.1. Your absence will be documented!

1.4.3.2. Shared workspaces can fit more people without cubicles.

1.4.4. Sony is not innovative anymore

1.4.5. Characteristics of a creative climate

1.4.5.1. enjoyment in experimenting with new ideas

1.4.5.2. trustful management that does not over control

1.4.5.3. considerable communication with outsiders

1.4.5.4. open channels of communication

1.4.5.5. willingness to accept change

1.4.5.6. little fear of negative consequences for making a mistake

1.4.5.7. selection and promotion of employees based on merit

1.4.5.8. sufficient financial, managerial, human and time resources for accomplishing goals.

1.5. Types of innovations

1.5.1. Business Model Innovation

1.5.1.1. changing the way business is done in terms of capturing value example: Dell

1.5.1.1.1. dell was the first to offer custom built on order basis for PCs when IBM was selling stock brands.

1.5.2. Marketing Innovation

1.5.2.1. development of new marketing methods with improvement in product design or packaging,product promotion or pricing. NIke's Air Jordan

1.5.2.1.1. NIke set the concept of the celebrity endorser

1.5.3. Organizational Innovation

1.5.3.1. Avon, Tupperware

1.5.3.1.1. They recognized the need for women to work and not just be homebound

1.5.3.1.2. customer based salesforce

1.5.3.2. creation or alteration of business structures, practices, and models and may therefore include process, marketing, and business model innovation

1.5.4. Process Innovation

1.5.4.1. Movies-> Video Rental-> Mail Order(Netflix) -> Download model

1.5.4.2. implementation of a new or significantly improved production or delivery method

1.5.5. Product Innovations

1.5.5.1. introduction of a new goods or service that is new or substantially improved

1.5.5.2. may include improvements in functional characteristics, technical abilities, ease of use, or any other dimension ie. ipod.

1.5.6. Service Innovations

1.5.6.1. Zipcar vs Avis vs Uber

1.5.6.2. Zipcar devt agreements with the universities etc, to have cars placed in those locations. Providing ease of use.

1.5.6.3. Zipcar provides insurance as part of the fee. Electronic log for the user to report any Prior damage.

1.5.6.3.1. How they manage their risk of car damage

1.5.7. Supply Chain Innovation

1.5.7.1. example: Alibaba.

1.5.7.1.1. enables smaller retailers to find the manufacturers directly.

1.5.7.2. occur in the sourcing of iput products from suppliers and the delivery of output products to customers.

1.6. Entrepreneurs and strategic decisions

1.6.1. explores what is on the mindset of the entrepreneur and connect that to making smart decisions quickly

1.6.2. Objectives

1.6.2.1. discuss the fundamental elements of entreprenuerial decision making

1.6.2.2. connect cognition to the entreprenuerial process

1.6.2.3. examine strategic decision making as a unique and significant task for entrepreneurs

1.6.3. Cognition=thinking process

1.6.4. Decision making implies choice

1.6.4.1. exact outcomes are unknown , but estimated

1.6.5. Common elements in strategic decisions

1.6.5.1. recognizing a problem situation

1.6.5.2. generating alternatives

1.6.5.3. evaluating various alternatives

1.6.5.4. selecting the alternative that best satisfies our evaluation critieria

1.6.6. Study of Entrepreneurial decision making leads to better decisions

1.6.6.1. Managers, unlike entrepreneurs, operate with limited information

1.6.6.2. must be action oriented and decisive

1.6.6.3. accept risks

1.6.6.4. involve major consequences

1.6.7. Decision Making is a strategic Activity

1.6.7.1. set specific courses of action to reach strategic goals

1.6.7.2. revenues and profit goals

1.6.7.3. market share and competitive advantage

1.6.7.4. product superiority and technical advantage

1.6.7.5. Involves critical analysis , resource investments and company commitment

1.6.8. four fundamental characteristics of strategic decisions

1.6.8.1. complexity: facts, variables, and contingencies relevant for the decision

1.6.8.2. Uncertainty: all possible outcomes are not known and are difficult to predict

1.6.8.3. Rationality: specific goal is intended by making a decision

1.6.8.4. Control: intentional and deliberate actions are made by decision makers

1.7. The opportunity analysis canvas

1.7.1. Three central goals

1.7.1.1. help entrepreneurial mindset

1.7.1.1.1. Thinking Entrepreneurially

1.7.1.2. opportunity analysis skill set

1.7.1.2.1. Seeing Entrepreneurially

1.7.1.3. identify entrepreneurial opportunities

1.7.1.3.1. Acting Entrepreneurially

1.7.2. Opportunity analysis Canvas

1.7.2.1. Business Model Canvass

1.7.2.1.1. Business plan

1.7.3. Summary

1.7.3.1. Business models take shape AFTER an idea is conceived

1.7.3.2. without the idea, no business model nor customer discovery can begin

1.7.3.3. Idea generation is then followed by the Opportunity Analysis Canvas (innovative tool for identifying and analyzing entrepreneurial ideas)

1.8. Readings

1.8.1. Out of our Minds- Ken Robinson

1.8.1.1. Mind Map

1.8.2. The Innovators Dilemma

1.8.2.1. Mind Map

2. Week3: Industry Understanding

2.1. Industry Conditions: Knowledge Conditions

2.1.1. Industry is a type of economic activity

2.1.2. Selecting the Right Industry

2.1.2.1. Success depends a great deal on selecting the right industry in which to launch a new firm

2.1.2.2. Important to focus on identifying the attributes that make an industry favorable or unfavorable to new entrants

2.1.3. Knowledge and demand conditions

2.1.3.1. Understanding the knowledge condition and demand conditions within an industry provides

2.1.3.1.1. insights into the attractiveness of an industry for new entrants

2.1.3.1.2. information on if, and how, to compete effectively within a chosen industry

2.1.3.2. Knowledge Conditions

2.1.3.2.1. Amount of knowledge

2.1.3.2.2. Type of Knowledge

2.1.3.2.3. High Knowledge industries favor new entrepreneurs

2.1.4. To leverage your knowledge

2.1.4.1. explore ideas that align with your education and/or work experience

2.1.4.2. seek ideas that intersect with

2.1.4.2.1. your know how

2.1.4.2.2. your interest

2.1.4.2.3. your social capital

2.1.5. What do you know?

2.1.5.1. by considering new venture ideas that build on your existing knowledge, you can create favorable knowledge conditions for yourself.

2.1.5.1.1. example: new software platform: Node JS. (which is around for only a year)

2.1.5.1.2. Another Example: Coursera: April 2012. What does it meant to be teaching early in Coursera? You are a leading expert.

2.1.5.1.3. Real estate was easy initially, but as more people did it, it becomes progressively harder until the crash comes.

2.1.5.2. You may see opportunities that others do not (or see opportunities sooner than others)

2.1.5.2.1. and have unique ideas for solutions

2.1.5.2.2. stay out of things that you don't know about.

2.1.6. What would you like to know?

2.1.6.1. seek opportunities to build your knowledge of industries, markets, technologies etc

2.1.6.1.1. to expand your new venture creation opportunities and ideas

2.1.6.2. Partner with co-founder/ team members to expand knowledge

2.1.6.2.1. either know some ideas

2.1.6.2.2. either know some people

2.1.7. Summary

2.1.7.1. explore ideas that leverage what you know, and what you would like to know

2.1.7.1.1. and how to grow that knowledge further

2.1.7.2. consider co-founders or team members

2.1.7.2.1. bring complementary knowledge

2.1.7.2.2. adds social capital for the venture

2.2. Demand Conditions

2.2.1. Three aspects of demand conditions

2.2.1.1. Magnitude (size) of customer demand

2.2.1.2. Rate of Growth of Customer demand

2.2.1.2.1. Is it growing or declining?

2.2.1.3. Heterogeneity of that demand across customer segments

2.2.2. Dying Businesses?

2.2.2.1. Payphones

2.2.2.2. coin operated arcades

2.2.2.3. record stores

2.2.2.4. bookstores

2.2.2.5. Newspapers

2.2.2.6. Home Video Rentals

2.2.3. Top Industries to Start and grow a business by Inc Magazines

2.2.3.1. Mobile App Design

2.2.3.2. Exam preparation and tutoring

2.2.3.2.1. People invest in education even in hard times

2.2.3.2.2. big market

2.2.3.3. Home Healthcare

2.2.3.3.1. medical professional going to homes to provide care

2.2.3.4. Tea and healthy beverages

2.2.3.5. Safety and quality testing

2.2.3.6. Where are VCs putting their Money?

2.2.3.6.1. Online Education and assessment

2.2.3.6.2. They are focused on a specific need

2.2.3.6.3. doing one thing and doing that well

2.2.3.6.4. the competition for this niche will be narrower

2.2.4. Segmentation presents an opportunity for entrepreneurs to specialize

2.2.4.1. degree of segmentation

2.2.4.1.1. the degree to which the customer base of an industry wants different features in the products/services it demands

2.2.4.2. Market Segmentation

2.2.4.2.1. How the entrepreneur can carve out a niche that is sizeable enough to reach your goals, yet small enough to be unattractive to large companies.

2.2.5. What is your purpose for market segmentation

2.2.5.1. To determine who to serve

2.2.5.2. and who not to serve

2.2.5.2.1. too expensive

2.2.5.2.2. too time consuming

2.2.5.2.3. very ineffective to be all things to all people

2.2.5.3. In what order?

2.2.5.3.1. due to limited resources, you may not be able to serve all segments. so you need to prioritize which segments to do first.

2.2.5.3.2. as you have a MVP, you should have lessen the risk for your startup, and so the VC may accept less for the same amount of investment

2.2.5.4. How to market to them

2.2.6. Adopter Categories

2.2.6.1. iPhone example, where each successive versions are sold at the same price , but the older versions' prices are cut to be lower.

2.2.7. Segment markets by needs and wants

2.2.7.1. reduction in expenses

2.2.7.1.1. downsizing and/or in a mature stage of their lifecycle

2.2.7.2. improved cash flow

2.2.7.2.1. traditionally low profit margins and/or high inventory costs

2.2.7.3. Improved productivity

2.2.7.3.1. traditionally low profit margins and/or have experienced depressed earnings

2.2.7.4. Improved manufacturing quality

2.2.7.4.1. prospects might be business with complex, multi-discipline manufacturing processes

2.2.7.5. Improved service delivery

2.2.7.5.1. highly competitive markets

2.2.8. Other Ways to Segment the Market

2.2.8.1. Geography

2.2.8.2. Age

2.2.8.3. Gender

2.2.8.4. Lifestyle

2.2.8.5. Interests

2.2.8.6. Income Level

2.2.8.7. Life stage

2.2.9. Summary

2.2.9.1. Seek opportunities where market de3mand is sufficiently large and growing

2.2.9.2. Segment your market into smaller sub groups (based on needs and wants, location, demographics, etc)

2.3. Industry Lifecycle

2.3.1. The role of "Industry Status"

2.3.1.1. Industry conditions frame the knowledge and demand factors

2.3.1.2. Industry Status addresses industry lifecycle and Structure

2.3.1.2.1. emphasizes growth opportunities

2.3.1.2.2. explores industry evolution

2.3.1.2.3. provides insights into an industry's timeliness for new entrepreneurial entrants.

2.3.2. Industry Lifecyle

2.3.2.1. stage of development of the industry affects new ventures' performance in the market

2.3.2.2. dependent on customer adoption of new products and services

2.3.2.2.1. beginning, middle or end (causing a deceleration in the market)

2.3.2.3. New firms perform better in younger markets, as it's easier to attract customers when demand is high

2.3.2.3.1. no major player in that space

2.3.2.4. Gartner Lifecycle of Hype Emerging technologies

2.3.3. Young Industries favor new ventures

2.3.3.1. there is substantially less competition vs established industries

2.3.3.2. competing companies are operating on a more level playing field.

2.3.3.2.1. learning curve allows firms to use their experience operating in an industry to improve their efforts to meet customer demand

2.3.3.3. little to no dominant design or technical standard in place.

2.3.4. Summary

2.3.4.1. New ventures tend to perform better in younger industries

2.3.4.1.1. immature industry structures

2.3.4.1.2. less competition vs established industries

2.3.4.1.3. limited customer loyalties.

2.4. Industry Structure

2.4.1. Refers to the nature of barriers to entry and competitive dynamics in the industry

2.4.1.1. What is the capital intensity?

2.4.1.1.1. Amount of money required to enter and compete in the industry

2.4.1.1.2. an industry that is expensive to enter has high capital intensity

2.4.1.1.3. industry that is inexpensive to enter have LOW capital intensity

2.4.1.2. What is the advertising intensity?

2.4.1.2.1. addresses the importance of advertising and branding to the success of competitors in a specific industry

2.4.1.2.2. if customers in this industry prefer to buy from companies with which they have had successful transcations in the past

2.4.1.2.3. or companies that offer their preferred products or brands,

2.4.1.2.4. the advertising intensity is high

2.4.1.3. What is the concentration of firms?

2.4.1.3.1. number of competitors in the industry

2.4.1.3.2. level of resourcs (money, employees, etc) of competitors

2.4.1.3.3. competing with a small number of small sized competitors present the preferred scenario for new ventures

2.4.1.3.4. competing with a few small competitors is more advantageous for entrepreneurs vs competing with many large competitors.

2.4.1.4. Average company size?

2.4.2. Summary

2.4.2.1. Is the Industry at the right stage of the life cycle for a startup

2.4.2.2. Is the industry structure favorable for a startup?

2.5. Competitive Advantage

2.5.1. achieved when a venture has implemented a strategy that other companies do not duplicate

2.5.1.1. unique relationships, business models etc

2.5.2. can only be maintained until competitors are able to duplicate or develop a substitute

2.5.2.1. advantage is NEVER forever.

2.5.3. pursuit of a sustainable competitive advantage requires a full complement of commitments, decisions and actions by the entrepreneur.

2.5.4. Five competitive forces by Micheal Porter

2.5.4.1. Potential Entrants

2.5.4.1.1. economies of scale

2.5.4.1.2. proprietary product differences

2.5.4.1.3. brand identity

2.5.4.1.4. switching costs

2.5.4.1.5. capital requirements

2.5.4.1.6. access to distribution

2.5.4.1.7. absolute cost advantages

2.5.4.1.8. learning curve

2.5.4.1.9. access to necessary inputs

2.5.4.1.10. proprietary processes

2.5.4.1.11. government policies

2.5.4.1.12. expected retaliation

2.5.4.2. Industry Competitors

2.5.4.2.1. Industry growth

2.5.4.2.2. fixed costs

2.5.4.2.3. product differences

2.5.4.2.4. brand identity

2.5.4.2.5. switching costs

2.5.4.2.6. concentration and balance

2.5.4.2.7. diversity of competitor

2.5.4.2.8. exit barriers

2.5.4.3. Buyers

2.5.4.3.1. Bargaining Leverage

2.5.4.3.2. Price sensitivity

2.5.4.4. Suppliers

2.5.4.4.1. differentiation of inputs

2.5.4.4.2. switching costs of suppliers and firms in the industry

2.5.4.4.3. presence of substitute inputs

2.5.4.4.4. supplier concentration

2.5.4.4.5. importance of volume to the supplier

2.5.4.4.6. cost relative to total purchases in the industry

2.5.4.4.7. impact of inputs on cost or differentiation

2.5.4.5. Substitutes

2.5.4.5.1. relative price performance of substitutes

2.5.4.5.2. switching costs

2.5.4.5.3. buyer propensity to subsitute

2.5.5. Summary

2.5.5.1. developing a sustainable competitive advantage is a key success factor for new startups

2.5.5.2. environmental scanning provides valuable insights into the industry and the market

2.5.5.3. analyzing competitive forces within an industry is fundamental to positioning the new venture successfully

2.6. Learning Curve

2.6.1. refers to the speed of learning something new

2.6.1.1. depicted graphically as the relationship between the number of times something has been done on one axis vs the level of proficiency on the other axis.

2.6.2. Influences of your Learning Curve

2.6.2.1. what you know today

2.6.2.2. your interest

2.6.2.3. your commitment

2.6.2.4. you resource to learn new things

2.6.3. Challenges

2.6.3.1. as a novice entrepreneur, you may not start at the same point on the learning curve as an established company

2.6.3.2. due to their past operations, they've moved up the learning curve through trial and error, research, lessons learned, etc.

2.6.4. How to overcome disadvantages

2.6.4.1. minimize the learning gap

2.6.4.1.1. pursue entrepreneurial ideas in new industries

2.6.4.1.2. seek new markets (blue ocean strategy)

2.7. Complementary Assets (network effects?)

2.7.1. involves both tangible and intangible assets

2.7.1.1. tangible assets include money, equipment, real estate etc

2.7.1.2. intangible assets include knowledge, relationships etc

2.7.1.3. patents or brands may sit between the tangible and intangible categories

2.7.2. Consider where your advantages may lie

2.7.2.1. knowledge

2.7.2.2. relationships

2.7.2.2.1. more important as it can be a bridge to the other two advantages

2.7.2.3. financial capital

2.7.3. beware of starting a company in an area where the company with the most money wins

2.7.3.1. large companies with more money may enter a space later and dominate that market

2.7.3.2. instead, compete where knowledge and relationships are key sources of competitive advantage

2.8. Reputation Effects

2.8.1. include brand awareness and perception

2.8.1.1. customers often prefer to buy from

2.8.1.1.1. companies with which they had a successful transaction in the past

2.8.1.1.2. companies they know well via friends, family

2.8.1.1.3. companies with effective branding

2.8.2. be thoughtful on your investments of money and time in building your reputation

2.8.2.1. are best aligned with new ventures when new industries and/or new markets are being pursued

2.8.2.2. focus on serving new customers in new ways to make the reputation of existing competitors irrelevant

2.8.3. Dimensions of Brand Equity

2.8.3.1. brand awareness

2.8.3.1.1. familiarity with the brand

2.8.3.2. perceived quality

2.8.3.2.1. based on desired features

2.8.3.3. brand associations

2.8.3.3.1. connects the customer to the brand

2.8.3.4. Brand loyalty

2.8.3.4.1. bond or tie to the brand

2.8.4. Ways to build brand equity

2.8.4.1. create and communicate your image

2.8.4.2. build awareness and familiarity

2.8.4.3. Build associations

2.8.4.3.1. name, logo, design, packaging, colors etc

2.8.4.3.2. price 'right'

2.8.4.3.3. placement and affiliations

2.8.4.4. Build loyalty

2.8.4.4.1. rewards, special pricing

2.8.4.4.2. community, special benefits

2.8.5. Summary:

2.8.5.1. how can you make the reputation of your competitors irrelevant?

2.8.5.2. how can you build your reputation and brand affordably and quickly?

3. Week2: Entrepreneurial Mindset

3.1. Introduction to Entreprenuerial mindset, motivations and behaviors

3.1.1. Hinman CEos is a living entrepreneurship program

3.1.1.1. residential community

3.1.1.2. classmates from different courses

3.1.1.3. Student Teaming

3.1.1.4. Prototype labs.

3.2. Entreprenurial mindset

3.2.1. Reason for its importance

3.2.1.1. Market Opportunities, technology changes, and other factors influence entrpreneurship

3.2.1.2. Without the Entrepreneur, there is no entreprenuership

3.2.2. Understanding Entrepreneurs

3.2.2.1. Who are they?

3.2.2.2. What do they think?

3.2.2.3. How do they thnk?

3.2.2.4. What influences their decisions?

3.2.3. Opportunity Analysis Canvas

3.2.3.1. Achievement- what role does it play in your decisions?

3.2.3.1.1. recognition for accomplishments

3.2.3.1.2. Strive for success

3.2.3.1.3. defined as preference for challenge

3.2.3.1.4. acceptance of personal responsibility for outcomes

3.2.3.1.5. personal drive for accomplishment

3.2.3.2. Individualism: how does it influence your decision making?

3.2.3.2.1. Willingness and often a preference to go against the norm.

3.2.3.2.2. Results in entrepreneurs needing less usport or approval from others

3.2.3.2.3. High individualism is associated with an emphasis on individual intiative and achievement

3.2.3.2.4. Ted Turner example

3.2.3.3. Control: are you internal or external locus

3.2.3.3.1. believe that a person can (internal) or cannot (external) control their own destiny and influence outcomes

3.2.3.3.2. Enterpreneurs believe they can make the startup work.

3.2.3.3.3. What do you attribute outcomes to? YOurself or Others?

3.2.3.3.4. Internals are more alert and discover more opportunities than Externals.

3.2.3.3.5. Elon Musk case study

3.2.3.4. Focus: are you able to effectively focus yourself?

3.2.3.4.1. Attention and commitment

3.2.3.4.2. Entrepreneurs are able to focus attention on a single tasks

3.2.3.4.3. leads select individuals to react and to become successful entrepreneurs

3.2.3.4.4. To improve FOCUS set SMART goals

3.2.3.5. Optimism: can you be optimistic while managing the risk of overconfidence?

3.2.3.5.1. Leads entrepreneurs to frequently make judgments on subjective ositive factors

3.2.3.5.2. Moderate Optimism to improve success

3.3. Entrepreneurial motivations

3.3.1. How that influences the pursuit of new venture ideas

3.3.1.1. Self Assessments

3.3.1.1.1. Cognitive Motivation

3.3.1.1.2. Self Efficacy

3.3.1.1.3. Tolerance for ambiguity

3.3.2. Cognitive Biases and Heuristics common in entrepreneurship

3.3.2.1. Over confidence

3.3.2.1.1. recognize that there are both short term and long term opportunities

3.3.2.1.2. tendency to overestimate one's capcbilities, knowledge, and skills

3.3.2.1.3. helps entrepreneurs to successfully face multiple hurdles of starting and managing

3.3.2.1.4. valuable to persuading others

3.3.2.1.5. explains why most new ventures fail

3.3.2.2. representatitiveness

3.3.2.2.1. tendency of judging the probability of an event based on how representative that event is for a class or category of events-- stereo typing

3.3.2.2.2. willingness to generalize based on small sample of events

3.3.2.2.3. results in inaccurate perceptions of reality

3.3.2.3. counterfactual thinking

3.3.2.3.1. occurs with younger entrepreneurs

3.3.2.3.2. defined as the tendency to think about 'what might have been if"

3.3.2.3.3. often negative in nature- with a sense of regret or disappointments due to missed opportunities

3.3.2.3.4. can result in pursuing mediocre opportunities for new ventures

3.4. Entrepreneurial behaviors

3.4.1. Objectives

3.4.1.1. How it results from the entrepreneurial mindset and motivations

3.4.1.2. Four different areas

3.4.1.2.1. confidence

3.4.1.2.2. interpersonal relationship skills

3.4.1.2.3. social capital

3.4.1.2.4. risk tolerance

3.4.2. Confidence

3.4.2.1. important for entrepreneurs to believe in themselves and their abilities

3.4.2.1.1. balanced by the reality of the tasks at hand

3.4.2.2. may require going against the norm

3.4.2.2.1. vs popular opinion

3.4.2.2.2. advice of friends and family

3.4.2.3. self doubt can result in doubts from your team, partners, investors, customers, etc

3.4.3. Interpersonal Relationship Skills

3.4.3.1. driven by your likeability and communications skills

3.4.3.2. influences your ability to connect with individuals and to connect with their connections

3.4.3.3. May be a natural skill for you

3.4.3.3.1. or require a level of effort

3.4.3.3.2. and/or personal study and development

3.4.4. Social Capital

3.4.4.1. refers to the resources available in and through personal and professional networks- who you know, and who they know

3.4.4.1.1. Quality of your social circle

3.4.4.2. richness depends on the size, quality and diversity of your networks.

3.4.4.2.1. diversity of your social circle

3.4.4.2.2. get different points of view

3.4.4.2.3. strength of weak links

3.4.4.3. Why build social capital?

3.4.4.3.1. People with rich social capital are:

3.4.4.3.2. with the right networks, people:

3.4.5. Risk Tolerance

3.4.5.1. address your willingness to accept risk

3.4.5.1.1. which is different than a desire for risk

3.4.5.2. entrepreneurs are no more likely to take risks than non entrepreneurs

3.4.5.2.1. but entrepreneurs do perceive risk differently

3.4.5.2.2. risk is in the eye of the beholder

3.4.5.3. consider the risk reward balance, and your potential to return to the status quo

3.5. Risk taking in entrepreneurial decision making

3.5.1. Objectives

3.5.1.1. Understand the entreprenerus' tendencies to take risks

3.5.1.2. examine why entrepreneurs engage in risk

3.5.1.3. discuss keys for entrepreneurs to more accurately assess risk and improve decision making

3.5.2. Strategic and significant entrepreneurial decisions are inherently risky

3.5.2.1. rarely know all possible outcomes

3.5.2.2. difficult to apply probabilities to outcomes

3.5.2.3. inf information on the consequences of a decision is incomplete, uncertainty involves risk

3.5.2.4. risk is conceptualized based on the individual entrepreneur's assessment of risk and uncertainty in a decision

3.5.3. Do entrepreneurs show higher natural tendencies to take risks?

3.5.3.1. No, not consistently

3.5.3.1.1. growing consensus among researchers that mgrs and entrepreneurs do not show difference in natural tendencies to take risks- Buzenitz, 1999

3.5.3.2. Perceptions of risk may differ

3.5.3.3. Other motivating factors besides risk propensity

3.5.4. Why Do entrepreneurs engage in risk?

3.5.4.1. lack necessary information in a decision situation (Gibcus et al 2008)

3.5.4.1.1. We dont know any better.

3.5.4.1.2. we ignore the bad news and favor the good news

3.5.4.2. Develop an inside view of the decisions they face (Kahneman and Lovallo, 1993)

3.5.4.3. Ignore elements of past situations

3.5.4.4. favor positive possible outcomes.

3.5.5. Key Factors of Entrepreneurs accepting risk in their decisions

3.5.5.1. How high are the risks?

3.5.5.2. What are the rewards?

3.5.5.3. What are the consequences?

3.5.5.4. Were all of the complex elements of the decision considered?

3.5.5.5. Cyveillance case

3.5.5.5.1. killed by google image search

3.5.6. Cognitive complexity contributes to a better understanding of ESDM (entrepreneurial strategic decision making)

3.5.6.1. explores an individual's information processing capabilities

3.5.6.2. addresses the structural configuration of a decision maker's mental representation of a decision situation

3.5.6.3. how does the cognitive complexity of individual entrepreneurs relate to the their risk propentsity?

3.5.7. Industry Dynamism influences entrepreneurial decision making

3.5.7.1. relationship between cognitive complexity and risk taking behavior is negatively moderated by the dynamism of the industry in which the decision takes place.

3.5.7.1.1. entrepreneurs operating in highly dynamic industries see the necessity of taking risk

3.5.7.1.2. also more easily recognize when there is no need to take large strategic risks.

3.5.8. Keys for entrepreneurs to assess real risk and improve decision making

3.5.8.1. apply multiple perspectives to a decision situation

3.5.8.2. integrate these perspectives into the decision

3.5.8.3. use a complex cognitive framework regarding a decision situation

3.5.8.4. Broader and deeper view of the decision at hand may result in a more accurate assessment of risks

3.5.9. Summary

3.5.9.1. Entrepreneurs are not more likely to take on risk

3.5.9.2. they are instead influenced by what they perceive as relative risk and rewards

3.5.9.2.1. they pursue the risk that are worth it, important to them.

3.6. Risk, Uncertainty, and Stakeholder Involvement

3.6.1. Role of Stakeholders

3.6.2. Entrepreneurs differ from corporate managers based on decision making factors

3.6.2.1. Intuition

3.6.2.1.1. that 'gut feeling' first thought

3.6.2.2. individualistic view

3.6.2.3. high tolerance for ambiguity

3.6.2.4. confidence in skills, knowledge and expertise

3.6.2.5. drives the elements of perceived uncertainty or risks

3.6.3. Perceived vs Objective risks?

3.6.3.1. Objective is free of bias

3.6.3.1.1. reality

3.6.3.2. Perceive is subjective

3.6.3.2.1. personal belief

3.6.4. Experienced entrepreneurs mitigate risk in decision making

3.6.4.1. intuition improved through past experiences

3.6.4.1.1. gets better as you get older

3.6.4.2. individualist view complemented by relationships and team orientation

3.6.4.3. high tolerance for ambiguity based on comfort with making difficult choices with in complement informationin the past

3.6.4.4. confidence in skills, knowledge, and expertise enhanced based on past successes.

3.6.5. Role of stakeholders in decision making

3.6.5.1. stakeholders: individuals or groups who can affect or are affected by the achievement of the organizational objectives

3.6.5.2. involvement of stakeholders can reduce uncertainty and improve decision making

3.6.5.3. higher uncertainty increased value of involving stakeholders in decision making.

3.6.6. Which Stakeholders should entrepreneurs focus on?

3.6.6.1. representative

3.6.6.1.1. with limited resources, focus on deeply understanding a few stakeholders rather than getting a limited understanding of many

3.6.6.2. power

3.6.6.3. legitimacy

3.6.6.4. urgency

3.6.7. Methods to hear the voice of stakeholders

3.6.7.1. Conduct interviews with

3.6.7.1.1. experts in the field, to include faculty

3.6.7.1.2. prospective customers

3.6.7.1.3. prospective investors

3.6.7.2. focus groups

3.6.7.3. Surveys

3.6.7.3.1. consider twitter and facebook integration

3.6.7.3.2. survey monkey or zoomerang

3.6.7.4. conduct crowd funding campaigns!??

3.6.8. Points to consider:

3.6.8.1. Assess the impact of risk perception and uncertainty on the entrepreneurial decision making process

3.6.8.2. perception of risk and uncertainty benefit from the involvement of stakeholders in entrepreneurial strategic decision making

3.6.8.3. traits helpful for managing risk perception and uncertainty

3.6.8.3.1. intuition

3.6.8.3.2. individualistic

3.6.8.3.3. high tolerance for ambiguity

3.6.8.3.4. confidence

3.7. Readings

3.7.1. The Opportunity Analysis Canvas, Chapter 2, 3, 4

3.7.2. The Entrepreneurial Mindset: Strategies fo Continuously Creating Opportunity in an Age of Uncertainty

3.7.2.1. Rita Gunther McGrath

4. Goals

4.1. Explore how to identify and develop great ideas into great companies;

4.2. Examine how to identify opportunities based on real customer needs

4.3. Discuss methods for developing solid business models for the creation of successful companies

4.4. Dr. James V. Green Director of Entrepreneurship Education Maryland Technology Enterprise Institute (Mtech) University of Maryland

5. Week4: Customer Understanding

5.1. 4.2 Macro Changes that increase new venture opportunities

5.1.1. things that are happening outside of the venture (external factors)

5.1.1.1. Demographic

5.1.1.1.1. observable by people: age, gender, income etc

5.1.1.2. Pyschographic

5.1.1.3. Technical

5.1.1.3.1. Internet as an enabler

5.1.1.3.2. one of the most important triggers of change, because new technologies allows for the expansion of NEW technologies.

5.1.1.3.3. Significant technological change can create entirely new markets

5.1.1.4. Societal

5.1.1.5. Political

5.1.1.6. Regulatory

5.1.2. Objectives

5.1.2.1. examine the relationship between change and the creation of opportunity

5.1.2.2. recognize that a first step in identifying a valuable opportunity is identifying the CHANGE or GAP that makes the opportunity possible.

5.1.3. Commercialization potential is a key influencer for profitability

5.1.3.1. commercial viability of change

5.1.3.1.1. some new technologies have a large magnitude effect, but do not directly result in much commercial benefit

5.1.3.2. Effect of the technological change on industry dynamics

5.1.3.2.1. alters how firms compete with one another

5.1.3.2.2. capital intensive firm vs low capital firm

5.1.3.3. early technology is expensive but costs goes down over time.

5.1.4. Social and Demographic Change

5.1.4.1. opens up opportunities for new technology businesses by altering people's preferences and creating demand for things where demand had not existed before.

5.1.4.1.1. health care, smaller sized families means more income devoted to the single child.

5.1.4.1.2. use of deodorants etc

5.1.4.1.3. white teeth

5.1.4.2. aging population, increasing ethnic diversity, unhealthier society.

5.1.4.2.1. the US is not the most obese country anymore

5.1.4.2.2. assisted living centers, Spanish language, health foods/ organic

5.1.5. Political and Regulatory change

5.1.5.1. type of change creates opportunities because it is productivity enhancing

5.1.5.1.1. deregulation of Bell Telephone System, led to the creation of Nextel, T-Mobile and Alltel.

5.2. 4.3 Exploring real market Needs

5.2.1. Introduction

5.2.1.1. Introduce a product/service that satisfies customer needs in a BETTER way than competitors

5.2.1.2. at a PRICE that fits your business model

5.2.2. Key questions for identifying a real need

5.2.2.1. do customers have an unsolved problem?

5.2.2.2. Is there a significantly better way of solving a customer's problem?

5.2.2.3. Is there a sustainably better price for the product?

5.2.3. Study current products and customers to "see" needs and wants

5.2.3.1. For a real need to exist, the new product or service cannot just be a little bit better than the existing alternative.

5.2.3.2. It is much easier to find a new way to solve a known problem than an unknown one

5.2.4. Sources of Pain or Aggravation are prime opportunities for new products

5.2.4.1. Potential customers often provide clues to indicate the presence of an unsolved problem.

5.2.4.1.1. best clue is customer complaint

5.2.4.1.2. another clue is the expression of an unfulfilled wish.

5.2.4.1.3. user product reviews are good source of ideas.

5.2.5. Identifying the Need is only the START

5.2.5.1. you also need to develop a product or service that meets the need

5.2.5.2. consider the future of those needs

5.2.6. Gathering information about customer preferences

5.2.6.1. evaluate preferences for new products and services using focus groups and surveys

5.2.6.2. examine forecast trends and potential adoption patterns to learn about customer preferences

5.2.6.3. when the product is truly new, the customer may not understand his or her own needs for it.

5.2.7. Market Research Resources

5.2.7.1. first

5.2.7.2. second

5.2.7.2.1. Market Research Resources Online FindTheCompany - corporate and organization data IOS / Android Market Size - Installed base Crunchbase - tech company/people database Edsurge – educational software Facebook demographics - strategy labs Alexa – competitive website info SimilarWeb – discover traffic for any web site Silicon Valley Bank Analytics Compete – see competitive website traffic ChangeDetection – know when any web page changes SEC EDGAR – research on public U.S. firms MarketReseach.com – Retailer of private market research reports ZapData.com – Dun & Bradstreet offers free statistical industry data Thomas – find any company in any industry BizStats.com – free business statistics and financial ratios SBDC - National Information Clearinghouse of the U.S. Small Business Administration Encyclopedia of Associations U.S. Bureau of the Census EASI – estimated demographic statistics within a user-specified radii for any address Claritas – psychographic information and analysis of zip code areas Standard and Poors – Industry Surveys International Trade Statistics - NVCA – venture capital industry data PWC MoneyTree – more venture capital data Chemical Industry data FDA News – medical device and drug data/news Asymco – great market intelligence blog

5.2.7.3. Open Company Data /Stats

5.2.7.3.1. Open Company Data/Stats/API LendingClub - stats on funding and loans Prosper – Prosper funding data/API BBYOpen – Best Buy open product data/API EbayOdata – Ebay open data/API Yelp Academic Dataset – access 250 closest businesses for 30 universities for students Reuters/Thompson – API Yahoo – data for students/academics Uber – car cost of ownership FindtheCompany: BestBalanceSheets – compare company balance sheets FindtheCompany: BestIncomeStatements – compare company income statements FindtheCompany: BestIPOs – compare company IPOs FindtheData – general data

5.2.7.4. Research Data

5.2.7.4.1. Research Data Databib – research data repository Datacite – research data repository Figshare - research data repository Reddit Datasets - research data repository Datahub -CKN tool for managing and publishing collections of data

5.2.8. Focus, research creatively and use Intuition

5.2.8.1. you don't not need to meet every customer need imaginable!

5.2.8.2. focus on the products and services you can create and launch successfully

5.2.9. Fulfill the preferences that are necessities, then consider added features.

5.2.9.1. separate and rank preferences and costs for product attributes to prioritize customer needs

5.2.9.2. beware of producing multiple products and over segmentation

5.2.9.2.1. each segment may be too small to justify the cost of serving it.

5.3. 4.4 Satisfying Real market Needs

5.3.1. Objectives

5.3.1.1. why would customers need my product?

5.3.1.2. what is the best way to assess customer needs?

5.3.1.3. what features (size, durability, etc) ?

5.3.1.4. why does my product fit customer needs better than those of current and future competitors

5.3.1.5. what price should i charge?

5.3.2. Is it economically feasible to produce your anticipated product or service?

5.3.2.1. beware of overdesigning the product to the point that the price is beyond your customer

5.3.2.2. keep production costs manageable and volume appropriately high

5.3.2.3. high development + low demand = unprofitable company

5.3.3. be honest with yourself about competing products and how your product compares

5.3.3.1. if trying to convince yourself that your solution is better than the competitors, this may lead to over optimism.

5.3.3.2. Instead, engage in a fair evaluation of the strenghts and weaknesses of your solution to the customers' current and future needs.

5.3.4. Use relationships to explore new venture opportunities

5.3.4.1. user your social networks to gather information about competitors and their products

5.3.4.2. talk to friends, family, potential customers, competitors, and others in the field for feedback.

5.3.4.2.1. Use of LinkedIn to find these connections.

5.3.5. Understanding the marketing and selling process

5.3.5.1. to be successful, you also have to understand how to market and sell new products and services

5.3.5.1.1. the best marketed products often outsell the best products (that are not marketed well).

5.3.5.2. focus on two very impt concepts

5.3.5.2.1. understanding the process of personal selling

5.3.5.2.2. understanding the pricing of new products and services.

5.3.6. Success and Profit depend on pricing right

5.3.6.1. costs include designing , producing, distributing, marketing and supporting the new product.

5.3.6.2. know the fixed costs, the variable costs and the Hidden costs of producing/selling your product/service to the market.

5.3.6.3. examine competitors' financials

5.3.6.3.1. particiularly if they are a public traded company

5.3.6.3.2. helps scope your own financial forecasts and goals.

5.3.7. Beware of under pricing your product

5.3.7.1. you must estimate the volume of your sales to determine if your price is high enough to cover costs when fixed costs are large.

5.3.7.2. when you introduce a new product, you should be mindful of the price of competing products.

5.4. 4.5 Strategic Positioning

5.4.1. Objectives

5.4.1.1. define strategy

5.4.1.2. discuss the nature of strategic positioning

5.4.1.3. introduce the merits of strategic planning

5.4.2. What is strategy?

5.4.2.1. core management is strategy

5.4.2.1.1. defining a company's position

5.4.2.1.2. making trade-offs

5.4.2.1.3. forging fit among activities

5.4.3. 3 Key Principles of Strategic Planning

5.4.3.1. strategy is the creation of a unique and valuable position, involving a different set of activities

5.4.3.1.1. serving few needs of many customers

5.4.3.1.2. serving broad needs of few customers

5.4.3.2. strategy requires you to make trade-offs in competing to choose what NOT to do.

5.4.3.2.1. you can not be all things to all people

5.4.3.2.2. focus on developing a solution and a brand that is meaningful and consistent to customers

5.4.3.2.3. emphasize serving one market well and explore growth opportunities later.

5.4.3.2.4. case study: Amazon started with books (low price point made people comfortable try to buy it online). Books dont need to be tried on (fitting), low overhead of operations

5.4.3.3. strategy involves creating a 'fit' among company's activities.

5.4.3.3.1. company activities must reinforce one another

5.4.3.3.2. Fit Drives competitive advantage and sustainability

5.4.3.3.3. competitors struggle to imitate well-developed activities.

5.4.4. Strategic positioning should uncover new opportunities

5.4.4.1. strategic positions are often not obvious, and finding them requires creativity and insight

5.4.4.2. entrepreneurs often discover unique positions that have been available but simply overlooked by established competitors.

5.5. 4.6 Strategic Planning

5.5.1. Objective

5.5.1.1. Introduce the importance of strategic Planning

5.5.1.2. discuss the nature of strategic Planning

5.5.1.3. Explore how entrepreneurs can carry out effective strategic planning

5.5.2. What is Strategic Planning?

5.5.2.1. formulation of long range plans for the effective management of environmental opportunities and threats in light of a ventures' strengths and weaknesses

5.5.2.1.1. defining the venture's mission

5.5.2.1.2. specifying achievable objectives

5.5.2.1.3. developing strategies

5.5.2.1.4. setting timelines and measures

5.5.3. Benefits of Strategic Planning

5.5.3.1. Cost savings

5.5.3.2. fewer cash flow problems

5.5.3.3. faster decision making

5.5.3.4. more efficient resource allocations

5.5.3.5. improve competitive position

5.5.3.6. more timely information

5.5.3.7. more accurate forecasts

5.5.3.8. reduced feelings of uncertainty

5.5.4. Basic Steps in Strategic Planning

5.5.4.1. examine the internal and external environments of the venture (Do SWOT analysis)

5.5.4.2. formulate the venture's long range and short range strategies (mission,objectives, strategies, policies)

5.5.4.3. Evaluate the performance of the strategy

5.5.4.4. take follow-up action through continuous feedback

5.5.5. Fatal Mistakes that entrepreneurs fall prey to in their attempt to implement a strategy

5.5.5.1. misunderstanding industry attractiveness

5.5.5.2. no real competitive advantage

5.5.5.3. pursuing an unattainable competitive position

5.5.5.4. compromising strategy for growth

5.5.5.5. failure to explicitly communicate the ventures strategy to employees

5.5.6. Implementing a strategic Plan

5.5.6.1. use of incremental goal attainment that takes a new venture from startup through strategy reformulation -- use milestones.

5.5.6.2. advantages of milestone planning

5.5.6.2.1. use of logical and practical milestones

5.5.6.2.2. avoidance of costly mistakes caused by failure to consider key parts of a plan

5.5.6.2.3. methodology for re-planning, based on continuous feedback from the environment

5.5.7. NO Strategic Planning?

5.5.7.1. Reasons for lack of strategic Planning

5.5.7.1.1. time scarcity

5.5.7.1.2. lack of knowledge

5.5.7.1.3. lack of expertise/skills

5.5.7.1.4. lack of trust and openess

5.5.7.1.5. perception of high costs

6. Week5: Business Modelling

6.1. Lecture 5.2: Value Innovation

6.1.1. Red vs Blue Oceans

6.1.2. Value innovation examines the Cost-Value equation in search of new solutions

6.1.2.1. there is an intersection where you can add high value without incurring costs.

6.1.2.2. And also recognize that some features may not be valuable to the customers, and those things can be reduced/eliminated

6.1.3. Value Curves assist in evaluating how to compete, and where to invest. It use a diagram to compare products on a range of factors

6.1.3.1. Concepts of efficiency and Effectiveness

6.1.3.1.1. efficiency is tied to time. Doing something in a shorter amount of time.

6.1.3.1.2. effectiveness is when goals are met

6.1.3.2. list features, benefits, pricing etc

6.1.3.3. listing competitors on a single graphic identifies gaps and opportunities

6.1.3.4. identify changes in the value proposition that entrepreneurs can create.

6.1.3.5. Example Analysis for Circus

6.1.3.5.1. Value Curve for Circus

6.1.4. Four Actions Framework

6.1.4.1. which factors that the industry take for granted should be ELIMINATED?

6.1.4.2. Which factors should be REDUCED well below the industry standard?

6.1.4.3. Which factors should be RAISED well above the industry standard?

6.1.4.4. Which factor should be CREATED that the industry has never offered?

6.1.5. Summary

6.1.5.1. Emphasize what matters to target market and invest in exceeding customer desires

6.1.5.2. eliminate or reduce less valuable factors to redirect money and time into raising the benefits and creating value.

6.2. Lecture 5.3: Opportunity Identification

6.2.1. Entrepreneurial Opportunities become real when

6.2.1.1. You have a solution

6.2.1.2. that leverages your advantages

6.2.1.3. to solve an important problem for others

6.2.2. Translate approaches and tools into identifying and acting on REAL entrepreneurial Opportunities

6.2.2.1. defining the problem

6.2.2.2. crafting a competitive solution

6.2.2.3. building your advantage

6.2.2.4. forming the right team

6.2.3. Is the Problem Real?

6.2.3.1. Identify the real customer

6.2.3.2. why do they need your product/service?

6.2.3.3. what benefits will they gain?

6.2.3.3.1. Talk to people to find these answers!

6.2.3.4. can they make money or save money with your product/service?

6.2.3.4.1. Look at financials.

6.2.3.5. How many people experience these problems now? in the future?

6.2.3.6. how many buyers are there?

6.2.3.7. are there enough people who care about this problem for you to be successful by solving the problem?

6.2.4. Does the Solution create value for your stakeholders?

6.2.4.1. What are the fundamentals of your solution?

6.2.4.2. What are the key values realized by customers?

6.2.4.2.1. requires an understanding of the customers' perception of value

6.2.5. Solutions are not about the technology or the features

6.2.5.1. Solutions focus on customer value

6.2.5.1.1. talk about the benefits and not just the technologies

6.2.5.2. features, functions and technologies are simply vehicles for value creation

6.2.5.3. competitors influence your relative value for customers

6.2.6. To Validate your ideas and solutions

6.2.6.1. Talk with prospective customers very early in the product development process

6.2.6.1.1. this provides you with key insights on what features, values, and price are important to customers

6.2.7. Is your advantage superior and sustainable?

6.2.7.1. Consider the degree of the advantage and the sustainability of that advantage

6.2.7.2. Degree of advantage

6.2.7.2.1. Better features or functions

6.2.7.2.2. lower price for the value delivered

6.2.7.2.3. Rareness

6.2.7.3. Sustainability

6.2.7.3.1. How easily can a competitor copy or exceed your resources, know how , relationships etc?

6.2.7.3.2. Determines the likelihood of competitors

6.2.8. Build the Team with attention to understanding

6.2.8.1. What are their motivations

6.2.8.2. how committed are they to this venture?

6.2.8.2.1. Students that work on their own projects instead of doing internship with others

6.2.8.3. how realistic are they about the venture's risks and rewards?

6.2.8.4. what skills, abilities, and knowledge do they have?

6.2.8.5. what is their reputation?

6.2.8.6. where have they worked?

6.2.8.7. where have they been educated?

6.2.8.8. what have they accomplished?

6.2.8.8.1. Get sense of what they have done and their capability

6.2.8.9. who else needs to be on the team?

6.2.9. Summary

6.2.9.1. What evidence can yo provide that your proposed problem is real?

6.2.9.2. what key customer values does your solution offer?

6.2.9.3. how will you make your company and product advantage superior and sustainable.

6.2.9.4. What steps will you take to build the right team at the right time?

6.3. Lecture 5.4: Business Models

6.3.1. Describes the rationale of how an organization creates, delivers and captures value

6.3.2. types of business models

6.3.2.1. Sell a product

6.3.2.1.1. What are the benefits

6.3.2.1.2. What are the risks?

6.3.2.1.3. Standardized vs Customized?

6.3.2.2. sell a service

6.3.2.2.1. What are the benefits?

6.3.2.2.2. What are the risk?

6.3.2.3. sell a subscription

6.3.2.3.1. Customers pay regular, recurring fees and may receive regular product upgrades

6.3.2.4. license a technology

6.3.2.4.1. Involves lower risk but also comes with lower rewards

6.3.2.4.2. Licensing Vs Going All the Way

6.3.2.5. advertising

6.3.2.5.1. this is an extension of the traditional media broadcasting model.

6.3.2.5.2. broadcaster, in this case, a website, provides content (usually, but not necessarily, for free) and services (like videos, product reviews, blogs) mixed with advertising messages in the form of ads.

6.3.2.5.3. Works best when the volume of viewer traffic is large or highly specialized (often millions of users).

6.3.2.6. hybrid of the above

6.3.2.6.1. sell products and offer services together

6.3.2.6.2. retailers sell products (TV/Cellphone and services (warranty/mobile service)

6.3.2.6.3. movie theathers sell tickets with food/beverages

6.3.3. Choosing a business model

6.3.4. Summary

6.3.4.1. Selection of a business model shapes the entire plan

6.3.4.1.1. If you sell a product, will customers keep buying?

6.3.4.1.2. If you pursue a service model, will customers ultimately seek the equivalent product elsewhere (or develop internally)

6.3.4.2. Recurring revenues are the key to Growth

6.3.4.2.1. Product upgrades, service contracts, subscriptions etc.

6.3.4.2.2. sustaining a business with a "one hit wonder" is tough

6.4. Lecture5.5: Business Model Canvas I

6.4.1. Customer Segments

6.4.1.1. Defines the different groups of people or organizations to serve

6.4.1.1.1. Segment if:

6.4.1.2. May exist in different types

6.4.1.2.1. Mass Markets

6.4.1.2.2. Niche Markets

6.4.1.2.3. Segmented

6.4.1.2.4. Diversified

6.4.1.2.5. Multi sided markets

6.4.2. Value Propositions

6.4.2.1. describes the bundle of products or services that create value for a specific customer segment

6.4.2.1.1. What value do we deliver to the customer?

6.4.2.1.2. Which customer needs are we satisfying?

6.4.2.1.3. What are we offering to each customer segment?

6.4.2.2. Exist in quantitative and qualitative areas

6.4.2.2.1. Quantitative: Price, cost reduction, risk reduction, convenience, usability

6.4.2.2.2. Qualitiative: Newness, performance, design, brand, customization

6.4.3. Channels

6.4.3.1. Describes how a company communicates with and reaches its customer segments to deliver a value proposition

6.4.3.1.1. raising awareness of the products and services

6.4.3.1.2. helping customers evaluate the value proposition

6.4.3.1.3. allowing customers to purchase

6.4.3.1.4. delivering a value proposition

6.4.3.1.5. providing post-purchase customer support

6.4.3.2. Demands consideration of key questions

6.4.3.2.1. through which channels do our customer segments want to be reached?

6.4.3.2.2. how can we integrate our channels?

6.4.3.2.3. What measure define which channels work best?

6.4.4. Customer Relationships

6.4.4.1. describes the types of relationships a company establishes with specific customer segments

6.4.4.1.1. Driven by motivations to include

6.4.4.2. can allow for face to face interactions for feedback and research.

6.5. Lecture 5.6: Business Model Canvas II

6.5.1. Revenue Streams

6.5.1.1. represent the cash a company generates from each customer segment

6.5.1.1.1. revenues-cost=profits

6.5.1.2. Types of revenue streams

6.5.1.2.1. Transaction revenues resulting from one time customer payments

6.5.1.2.2. recurring revenues resulting from ongoing payments to either deliver a value proposition to customers and/or provide post-purchase customer support

6.5.1.3. revenue stream opportunities require you to ask several core questions

6.5.1.3.1. for what value are customers really willing to pay?

6.5.1.3.2. for what do they currently pay(competitors)?

6.5.1.3.3. How will this change in the future?

6.5.1.4. Ways to generate revenue streams

6.5.1.4.1. Buying (asset sale)

6.5.1.4.2. renting

6.5.1.4.3. subscription

6.5.1.4.4. licensing

6.5.1.4.5. advertising

6.5.2. Key Resources

6.5.2.1. describes the most important assets required to make a business model work

6.5.2.2. can be physical, financila, intellectual, or human

6.5.2.3. can be owned or leased by the company or acquired from key partners

6.5.3. Key Activities

6.5.3.1. Describes the most important things a company must do to make its business model work

6.5.3.1.1. For PC mfg DELL, key activities include supply chain management

6.5.3.1.2. For Consultancy firm McKinsey, key activities including problem solving.

6.5.3.2. Can be categorized

6.5.3.2.1. Production

6.5.3.2.2. Problem Solving

6.5.3.2.3. Platform/Network

6.5.4. Key Partnerships

6.5.4.1. describes the network of suppliers and partners that make the business model work

6.5.4.2. Types of partnerships

6.5.4.2.1. strategic alliances between non-competitors

6.5.4.2.2. joint ventures to develop new businesses

6.5.4.2.3. buyer supplier relationships

6.5.4.2.4. coopetition: strategic partnershps between competitors

6.5.4.3. Motivations for creating partnerships

6.5.4.3.1. Optimization and economy of scale

6.5.4.3.2. acquisition of particular resources and activities

6.5.4.3.3. reduction of risk and uncertainty

6.5.5. Cost Structure

6.5.5.1. describes all costs incurred to operate a business model

6.5.5.2. creating and delivering value, maintaining customer relationships, and generating revenue all incur costs.

6.5.5.3. costs can be calculated relatively easily after defining key resources, key activities, and key partnerships.

6.5.5.4. Value driven companies are less concerned with the cost implications, and instead focus on value creation.

6.5.5.4.1. premium value proposition and a high degree of personalized service usually characterize value-driven business model.

6.6. Lecture 5.7: Partnerships

6.6.1. Questions to Consdier

6.6.1.1. What are the reasons for partnerships?

6.6.1.2. What are the types of partnerships?

6.6.1.3. how can partnership risks be mitigated?

6.6.2. Reasons for Partnering

6.6.2.1. access to resources and skills

6.6.2.2. gain cost efficiencies

6.6.2.3. speed time to market

6.6.2.4. access new markets

6.6.2.5. define industry standards

6.6.2.6. develop innovations and new products

6.6.2.7. develop complementary products

6.6.2.8. gain market clout

6.6.2.9. maintain focus on core competencies

6.6.2.10. learn from partners

6.6.3. Types of Partnerships

6.6.3.1. Vertical Partnerships

6.6.3.1.1. formed between different levels of the supply chain

6.6.3.2. Horizontal Partnerships

6.6.3.2.1. formed between firms that operate at the same level of the supply chain

6.6.3.2.2. complementary alliances

6.6.3.2.3. competitive alliances

6.6.3.3. Affiliate Marketing

6.6.4. Risks in Partnering

6.6.4.1. Trust Issues

6.6.4.2. Loss of Trade Secrets

6.6.4.3. Loss of Autonomy and control

6.6.4.4. increase project complexity

6.6.4.5. lack of attention/resources in managing the relationship

6.6.4.6. incompatible cultures

6.6.5. Factors contributing to Partnership success

6.6.5.1. Interdependence

6.6.5.1.1. Shared mutual dependencies provide motivation for partnership success

6.6.5.1.2. asymmetrical dependence leads to vulnerability and possible exploitation

6.6.5.1.3. low levels of interdependence provide no motivation to relationship

6.6.5.2. Governance Structure

6.6.5.2.1. Terms, conditions, systems, and processes

6.6.5.2.2. Governance structure should match the partnership's risk level

6.6.5.3. Commitment

6.6.5.3.1. Desire to continue the relationship

6.6.5.3.2. committed members are less likely to

6.6.5.3.3. demonstrated by

6.6.5.4. Effective Communication

6.6.5.4.1. frequent sharing

6.6.5.4.2. credible and reliable

6.6.5.4.3. includes proprietary information

6.6.5.4.4. both structured and ad hoc communication

6.6.5.4.5. effective conflict resolution

6.6.5.4.6. judicious use of legal contracts

6.6.5.5. Trust

6.6.5.5.1. Belief that partner's decisions will serve best interests of the partnership

6.6.5.5.2. partner will act honestly and benevolently

6.6.5.5.3. trust i the partner's motives and intents

6.6.5.5.4. trust contributes to

6.7. Lecture 5.8: Outsourcing

6.7.1. High Risk/High Opportunity Vertical Partnership

6.7.2. transfer an entire business function to a partner

6.7.3. types of outsourcing

6.7.3.1. contract manufacturing

6.7.3.2. BPO: business process Outsourcing

6.7.3.3. ITO: Information Technology Outsourcing

6.7.3.4. Innovation Outsourcing

6.7.3.4.1. R&D, Product Development, Design

6.7.4. Benefits

6.7.4.1. Gain access to expert performance

6.7.4.1.1. provider has refined knowledge in a specific function

6.7.4.2. Scale economies

6.7.4.2.1. cost efficiencies

6.7.4.3. maintain focus on core competencies

6.7.5. How to find Outsourcers?

6.7.5.1. elance.com

6.7.5.2. odesk.com/ freelancer.com

6.7.6. Many Models for outsourcing

6.7.6.1. Offshoring

6.7.6.1.1. performing functions outside of client's home country

6.7.6.2. captive offshoring

6.7.6.2.1. origin company owns facilities in another country

6.7.6.3. reverse outsourcing

6.7.6.3.1. an outsourced company opens an office in origin country

6.7.6.4. Nearshore Outsourcing

6.7.6.4.1. Near company's own boundaries and time zone

6.7.6.5. Home shoring

6.7.6.5.1. domestic outsourcing

6.7.6.5.2. hiring domestic workers in their ownhome

6.7.6.6. Farm Shoring

6.7.6.6.1. outsourcing to domestic, rural areas.

6.7.7. Reasons

6.7.7.1. Cost Savings

6.7.7.1.1. contract manufacturing

6.7.7.1.2. economies of scale

6.7.7.1.3. volume discounts

6.7.7.1.4. supply chain efficiency

6.7.7.2. Hone Core competencies

6.7.7.2.1. outsource non-essential tasks

6.7.7.3. Capabilities of outsource providers

6.7.7.3.1. skilled low cost talent pool

6.7.7.4. technology developements

6.7.7.4.1. easier for companies to communicate with remote outsource providers

6.7.7.5. Mitigate HR Costs and management issues

6.7.7.5.1. overhead, pension plans, insurance

6.7.7.6. Other general trends

6.7.7.6.1. Globalization

6.7.7.6.2. competitive intensity

6.7.7.6.3. time/cost pressures

6.7.8. Risks

6.7.8.1. Cost savings dont materialize

6.7.8.1.1. difficult to calculate true costs in advance

6.7.8.1.2. do some progress reports

6.7.8.1.3. monitor activities/get timely reports

6.7.8.2. Quality concerns

6.7.8.2.1. confusion

6.7.8.2.2. suppliers dont understand customer's business

6.7.8.3. Dependence on Vendor

6.7.8.3.1. Switching costs

6.7.8.4. Dilution of Competitive Advantage

6.7.8.4.1. Less differentiation from competitor

6.7.8.5. Risk of fostering new competition

6.7.8.5.1. sharing of trade secret

6.7.8.6. public backlash

6.7.8.6.1. Political Issue

6.7.9. Contingency Approach

6.7.9.1. key Questions

6.7.9.1.1. Whether to outsource

6.7.9.1.2. degree of outsourcing

6.7.9.1.3. type of outsourcing

6.7.9.2. Contingency Factors

6.7.9.2.1. criticality of business function

6.7.9.2.2. Nature of the business process

6.7.9.2.3. Task Characteristics

6.7.9.2.4. Vendor Capabilties

6.7.9.2.5. Governance

7. Week6: Business Plans

7.1. Lecture 6.2: Defining the Business Plans

7.1.1. What is a business plan?

7.1.1.1. Plan fro the creation and management of the business

7.1.1.2. with special attention to:

7.1.1.2.1. Marketing Plan describing match of products and strategy to current and future markets

7.1.1.2.2. Operations Plan discussing processes

7.1.1.2.3. Financial Plan assessing all revenues, costs, and financial requirements and sources.

7.1.1.3. Details exactly ow the company will materialize from concept to maturity

7.1.1.4. explains the market size and the competitive environment with supporting evidence

7.1.1.5. Describes why your team is the right team to capitalize on this opportunity

7.1.1.6. serves as an "owner's manual" for the company

7.1.2. Why write a business Plan?

7.1.2.1. writing forces the prerson or team preparing the plan to look at all the business in an objective and critical manner

7.1.2.2. helps to focus ideas and serves as a feasibility study of the business's chances for success and growth

7.1.2.2.1. anything may change: market, competitors, technology etc.

7.1.2.3. finished plan serves as an operational tool to define the company's present status and future possibilities

7.1.2.4. Helps manage the business and prepare for success or adaptation

7.1.2.5. serves as a strong communication tool for the business

7.1.2.5.1. defines your purpose, your competition, your management, your financial goals, etc.

7.1.2.6. Provides the basis for your financing proposal

7.1.2.6.1. required by most banks and investors

7.1.2.7. Look at your Value Chain

7.1.2.7.1. Most companies do the 'shaded' activities..the rest are outsourced

7.1.3. Advantages and disadvantages of great business plans

7.1.3.1. Advantages of GREAT business Plans

7.1.3.1.1. Yardstick to measure performance

7.1.3.1.2. starting point for operations, marketing, and financial Plans.

7.1.3.1.3. Demonstrates focus and the plan for profits

7.1.3.1.4. connects all of the elements of the company

7.1.3.1.5. can assist in attracting management team and employees

7.1.3.1.6. greatly improves fundraising ability

7.1.3.2. Disadvantages of a GREAT business plans

7.1.3.2.1. requires significant research and thought

7.1.3.2.2. must stand up to criticism and challenges

7.1.3.2.3. requires your honest, critical appraisal

7.1.3.2.4. needs regular, recurring updates

7.1.3.2.5. demands acceptance by the management team

7.1.4. Resource LINK: http://articles.bplans.com/writing-a-business-plan/

7.2. Lecture 6.3:Authoring the Business Plan

7.2.1. NO single "right" format

7.2.1.1. Although business plans and investor presentations tend to cover the same topics, there's not a universally applicable format

7.2.1.2. Always check to see if there is a preferred format for a given audience (competitions, grant makers, investors, etc.)

7.2.1.3. Suggested format from US Small Business Administrations (SBA)

7.2.1.3.1. Exec Summary

7.2.1.3.2. Company description

7.2.1.3.3. Market analysis

7.2.1.3.4. Organization and Management

7.2.1.3.5. Marketing and Sales

7.2.1.3.6. Service or product line

7.2.1.3.7. funding request

7.2.1.3.8. financials

7.2.1.3.9. Appendix

7.2.1.3.10. Geared towards getting a loan from a bank.

7.2.1.4. Suggested format from Sequioa Capital

7.2.1.4.1. Company Purpose

7.2.1.4.2. Problem

7.2.1.4.3. Solution

7.2.1.4.4. Why now

7.2.1.4.5. Market Size

7.2.1.4.6. Competition

7.2.1.4.7. Product or Service

7.2.1.4.8. Business Model

7.2.1.4.9. Team

7.2.1.4.10. financials

7.2.1.4.11. closing

7.3. Lecture 6.4: Sales Forecasting

7.3.1. Objectives

7.3.1.1. Discuss the role of sales forecasting in business model and plan development

7.3.1.2. examine how to forecast sales and set revenue goals.

7.3.2. Sales forecasting is multi-staged and multi-purposed

7.3.2.1. plan your business

7.3.2.1.1. how much to sell?

7.3.2.1.2. how much inventory to buy?

7.3.2.1.3. how many people to hire?

7.3.2.2. convince investors and lenders

7.3.2.2.1. financial projections for the future

7.3.2.3. improve your business

7.3.2.3.1. trends in revenues

7.3.2.3.2. how can we improve profitability

7.3.2.4. Sales figures are typically your starting point in doing the forecasting

7.3.3. Use the income statements as a tool to develop revenue, costs, and profit forecast

7.3.3.1. while f/s can track past activities, f/s can also be used for forecasting

7.3.3.2. use bottom up forecasting

7.3.3.2.1. revenue forecasts: what can we sell, given the market, our pricing, and our capability?

7.3.3.2.2. Cost of Goods sold forecast: how will our CGS change as our revenues change?

7.3.3.2.3. SGA forecast: what marketing/sales effort do we need to reach our revenue goals?

7.3.3.2.4. What infrastructure do we need to support our business?

7.3.3.2.5. how much money do we need to accomplish growth?

7.3.4. Forecasting

7.3.4.1. When forecasting, start with the income statement: revenues-expenses= profits

7.3.4.2. Revenues= price per unit * units sold

7.3.4.3. expenses will be

7.3.4.3.1. Variable based on production

7.3.4.3.2. fixed : one time or at intervals.

7.3.5. Discovery Driven Planning -- McGrath and MacMillan

7.3.5.1. Reverse income statements are valuable in starting the company with an economic (profit) goal mind (but no idea what revenues to target)

7.3.5.1.1. build the vision for the company and strategy for growth from the bottom line (desired profit)

7.3.5.1.2. for example: if a 100K profit is the goal in year1, at an estimated 20% profit margin based on industry norms, Year1 revenues must be 500K

7.3.5.1.3. must incorporate assumptions and expense forecasts

7.3.5.2. researching profit margins for industry is helpful in calculating target revenues

7.3.5.3. Once the initial profit and revenue goals are stated, fill in the expenses to asses feasibility of these goals

7.3.5.3.1. if your idea is new, work from the bottom up by estimating costs based on resources and plans

7.3.5.3.2. if you have an established product, use competitors and industry data as well

7.3.5.3.3. develop the revenue forecasts prior to other cost forecast

7.4. Lecture 6.5: Managing the Sales Pipeline

7.4.1. Planning and Budgeting

7.4.1.1. Managing the sales pipeline

7.4.1.1.1. Leads to Sales Call %

7.4.1.1.2. Planning and Budgeting

7.4.1.2. building one to one relationships

7.4.1.2.1. customer data

7.4.1.2.2. regular, targeted communications

7.4.1.2.3. Maximize sales by picking the BEST customers

7.4.1.2.4. Collect customer information

7.4.1.2.5. Customize the sales approach

7.4.1.3. establishing a sales budget

7.4.1.3.1. Start with sales costs as a percentage of sales

7.4.1.3.2. Consider the lifetime value of the customer

7.4.1.3.3. Opportunity costs of various sales approaches

7.5. Lecture 6.6: developing the Market Mix

7.5.1. Objectives

7.5.1.1. Understand and act appropriately on your customer needs and wants

7.5.1.2. build a marketing plan that addresses these needs and wants

7.5.1.2.1. now and in the future

7.5.1.3. Define a marketing mix that works

7.5.1.3.1. and that is adaptable.

7.5.2. Customer and problem hypotheses

7.5.2.1. Who are the customers?

7.5.2.1.1. Willingness to pay?

7.5.2.2. What are their problems?

7.5.2.3. Confirm/revise your assumptions about

7.5.2.3.1. Types of customers

7.5.2.3.2. needs and wants

7.5.2.3.3. Day in the Life

7.5.2.3.4. ROI for customer

7.5.2.3.5. Minimum and desired feature sets

7.5.2.3.6. Willingness to pay

7.5.3. The Marketing Plan

7.5.3.1. Product/service description and features

7.5.3.2. Promotion and advertising details

7.5.3.3. Pricing Model and

7.5.3.3.1. Business Model

7.5.3.3.2. Prices

7.5.3.4. Placement/distribution and sales plan

7.5.3.4.1. Sales methods to include personal selling and/or sales channels,etc

7.5.4. Marketing Mix (4Ps)

7.5.4.1. Product

7.5.4.1.1. Brand, features, design, quality, packaging, warranties, returns policy

7.5.4.2. Price

7.5.4.2.1. List Price, discounts, credit terms, payment period

7.5.4.2.2. Key Considerations

7.5.4.2.3. Suggested Approach

7.5.4.3. Promotion

7.5.4.3.1. Public relations, advertising, sales force, direct messages

7.5.4.3.2. SEO? Print? Web Advertising?

7.5.4.4. Place

7.5.4.4.1. channels, locations, inventory, fulfillment

7.5.4.4.2. Where to promote? Where to sell?

7.6. Lecture 6.7: Developing the Market Mix II

7.6.1. Promitons

7.6.1.1. Public relations

7.6.1.1.1. Company Image and its management

7.6.1.1.2. Unlike advertising where you can dictate what goes in the ad, PR is what is written about your company.

7.6.1.1.3. It is more authentic than a paid ad

7.6.1.2. advertising

7.6.1.2.1. Print Advertising

7.6.1.2.2. some level of google ads and paid online ads

7.6.1.2.3. If you cant afford online google ads, try to go for SEO to keep the organic rankings high

7.6.1.2.4. email blast?

7.6.1.3. sales force

7.6.1.4. direct messages

7.6.2. Place

7.6.2.1. Channels

7.6.2.1.1. each channel attract different customer segments

7.6.2.2. locations

7.6.2.2.1. Online or Brick and Mortar stores?

7.6.2.3. Inventory

7.6.2.3.1. The flip Video

7.6.2.4. Fulfillment

7.7. Lecture 6.8: Pricing

7.7.1. Questions to Consider

7.7.1.1. What are the key issues of pricing in dynamic environments?

7.7.1.2. What are the key considerations prior to setting prices?

7.7.1.3. Why is the pricing of after-sales service crucial in high tech markets?

7.7.1.4. when should specific pricing strategies be used?

7.7.2. High Tech Pricing Environment

7.7.2.1. Need to recoup R&D investments in light of:

7.7.2.1.1. Rapid pace of change

7.7.2.1.2. short, volatile product life cycles

7.7.2.1.3. Pressure on Price/Performance Ratio: Moore's Law

7.7.2.1.4. Network Externalities

7.7.2.1.5. Unit one cost

7.7.3. Cost

7.7.3.1. Low Price Basis

7.7.3.1.1. sustainable, non-imitable cost advantage

7.7.3.1.2. Experience Curve

7.7.4. Competition

7.7.4.1. Benchmark against which to evaluate prices

7.7.4.2. even new innovations have competitors

7.7.4.2.1. Customer's may not choose to adopt the new technology

7.7.4.2.2. competitive substitutes

7.7.4.3. Cross-price elasticity of demand

7.7.4.3.1. % change in one product's sales due to a % change in price of another product

7.7.4.4. Increase in complementary competitors may increase prices

7.7.5. Customers

7.7.5.1. Price ceiling is determined by customer's perception of value and competitive options

7.7.5.2. Product Benefits

7.7.5.2.1. functional: attractive to users

7.7.5.2.2. Operational: reliability, durability , efficiency

7.7.5.2.3. financial: credit terms, leasing options

7.7.5.2.4. Personal: psychological satisfaction

7.7.5.3. Costs

7.7.5.3.1. Monetary: Price, transportation, installation

7.7.5.3.2. Non Monetary: product failure, obsolescence

7.7.5.4. reference price: Pricing standard used by customer

7.7.5.4.1. prior experience or current competitor's prices

7.7.5.4.2. current purchase environment

7.7.5.5. Total Cost of Ownership (Life cycle costing)

7.7.5.5.1. Important to company's value proposition

7.7.5.5.2. Monetary+ non monetary costs over the life of the product

7.7.6. Customer-Oriented Pricing

7.7.6.1. Understand customer use of the product

7.7.6.1.1. Each end use may have a different cost/benefit analysis

7.7.6.1.2. vertical markets: Price accordingly

7.7.6.2. Focus on the benefits customers receive from using the product/service

7.7.6.2.1. Customers buy benefits not features

7.7.6.3. Calculate customer costs

7.7.6.3.1. Monetary and nonmonetary costs

7.7.6.3.2. Understand customer cost/benefit trade-offs

7.7.6.4. Implications of Customer oriented pricing

7.7.6.4.1. Pricing decisions

7.7.6.4.2. Different segments value the product differently

7.7.6.4.3. Firms should track profitability of different customer accounts.

7.7.7. How is Product Cost estimated?

7.7.7.1. Find a provider and ask for quotes

7.7.7.2. Chamber or associations listed pricelists

7.7.7.3. Have manufacturing done overseas.

7.7.8. Pricing of After Sales Services: based on segmentation

7.7.8.1. Basic Needs

7.7.8.1.1. Want standard service with basic inspections and periodic maintenance

7.7.8.1.2. fixed price, well-defined, limited service contract

7.7.8.2. Risk Avoiders

7.7.8.2.1. want to avoid big bills but don't care about response time

7.7.8.2.2. combine fixed price plus time and materials add-on option

7.7.8.3. Hand Holders

7.7.8.3.1. Need high level of service and are willing to pay

7.7.8.3.2. full coverage contract

7.7.8.4. be careful of any implied pricing. Setting customer expectations.

7.7.9. Technology Paradox Solutions

7.7.9.1. Find new revenue streams

7.7.9.1.1. New uses for existing products

7.7.9.1.2. offer whole product(end to end solution

7.7.9.1.3. offer product bundles

7.7.9.1.4. new, less price-sensitve, segments

7.7.9.1.5. offer product derivatives under a price lining strategy

7.7.10. What degree of property rights should the customer have?

7.7.10.1. Outright sale vs licensing agreements

7.7.10.2. single vs multiple users

7.7.10.3. pay per use vs subscription(fixed or unlimited)

7.7.11. Price Promotions

7.7.11.1. sell at discounted price

7.7.11.2. offer temporary discounts (ie 30 day trail offer)

7.7.11.3. Mitigate negative impacts on brand equity

7.7.11.3.1. distinguish between prospective and existing customers

7.7.11.3.2. consider the long term impact of the promotions

7.7.11.4. Bundling prices too?

7.8. Lecture 6.9: Building Financial Statements

7.8.1. Objectives

7.8.1.1. while uncompetitive products, ill-suited strategies and poorly performing teams influence faiure, most companies fail due to :

7.8.1.1.1. Lack of money

7.8.1.1.2. lack of time

7.8.1.2. Managing finances effectively can help you from running out of money prematurely and from spending money at the wrong time.

7.8.2. How financial statements help

7.8.2.1. For investors to understand

7.8.2.1.1. the profit potential of your firm

7.8.2.1.2. how much money you need to get there , on what timeline and for what purpose

7.8.2.2. For Entrepreneurs to understand

7.8.2.2.1. Level of risk/reward for your venture

7.8.2.2.2. value of your company (and in turn, your percent ownership) when it's time to raise capital for the venture.

7.8.2.2.3. helps with Go or NO GO decisions on the venture

7.8.3. F/S typically exist in 3 general forms

7.8.3.1. Income Statement: summarizes revenues and expenses

7.8.3.1.1. Revenue (Sales)

7.8.3.1.2. COGS (Cost of goods sold)

7.8.3.1.3. Sales General and Administrative costs (SGA)

7.8.3.2. Cash Flow Statement: sum of retained earnings minus the depreciation provisions made by the firm

7.8.3.2.1. Reports cash receipts and payments

7.8.3.2.2. list all cash going in and out by category

7.8.3.2.3. Amount of money needed= revenues - startup expenses - operating expenses

7.8.3.3. Balance Sheet: summarizes the assets, liabilities and shareholder's equity at a specific point in time.

7.9. Lecture 6.10: Sources of financial capital

7.9.1. Sources of startup money?

7.9.1.1. 55% from Personal Savings

7.9.1.2. Family members

7.9.1.3. partners

7.9.1.4. personal charge cards

7.9.1.5. bank loans

7.9.1.6. venture capital

7.9.1.7. friends

7.9.1.8. angels

7.9.1.9. mortgaged property

7.9.1.10. others

7.9.2. Bootstrap (self funding) financing

7.9.2.1. advantages

7.9.2.1.1. Owned by founders

7.9.2.1.2. easy ownership terms

7.9.2.1.3. controlled by founders

7.9.2.1.4. lower pressure

7.9.2.1.5. little time spend on fundraising

7.9.2.1.6. dont have to share any profits

7.9.2.2. disadvantages

7.9.2.2.1. may constrain growth

7.9.2.2.2. lack of funding commitment for future

7.9.2.2.3. loss of advice and social capital from professional investors.

7.9.3. Right type of money your business needs depends on these questions

7.9.3.1. How much money do you need?

7.9.3.1.1. Financing Continuum

7.9.3.2. What will the money be used for?

7.9.3.2.1. BAnks like deals with hard assets- secures loan with collaterals.

7.9.3.2.2. Investors are the usual option when the money will be used to pay for the day to day operating expenses of the business or in the case of more risky activities such as new development and launch

7.9.3.3. At what stage is your business in ?

7.9.3.3.1. Earlier Stage businesses including startups have to rely upon more personal funds, competitions(contests), and grants.

7.9.3.3.2. Next are monies obtained through private investors(angels) then VCs, since they involve more risk than most banks want to assume

7.9.3.3.3. Later stage businesses that are in the growth phase are more bankable depending on what the money will be used for.

7.9.3.4. what is your capacity to repay the money?

7.9.3.4.1. Debt vs Equity

7.10. Lecture 6.11 Final Thoughts

7.10.1. Asssess business plans

7.10.1.1. http://www.bplans.com/sample_business_plans.php