Entrepreneurship

Session 1: Introduction

Four P’s problem based leaning

​ Preparation, Presence, Punctuality, Participation

Three key discussion points

​ Major insights
​ Some controversial statements
​ Your personal thoughts and experiences

Key outcomes

​ entrepreneurial opportunities
​ business plans/feasibility studies
​ business model
​ financial needs

Content

1. Entrepreneurial Process
2. Idea Generation & Opportunity Recognition
3. Industry and Market Analysis
4. Strategy in the context of Entrepreneurial Ventures
5. Business Model Analysis
6. Finance: preparing financial projections and assessing the financial needs to the venture
7. Entrepreneur and Entrepreneurial Team
8. Preparing a business plan and pitching your idea

Sources (Books)

• Essentials of Entrepreneurship
• Business Model Generation
• The Lean Start-up
• The Business Plan Workbook
• The New Business Road Test
• How to Write A Great Business Plan
• Entrepreneurship And Small Business

Entrepreneurship Process

1. Opportunity Identification
   • Idea generation
   • Opportunity recognition
2. Opportunity Evaluation
   • Markets & Industries
3. Opportunity Exploitation
   • Strategy & business models
   • IP protection
   • Business planning
   • Financing, teams

Economic of Entrepreneurship

Additional

The Questions Every Entrepreneur Must Answer

The full text of this article is available via EBSCO. Please search using this reference:

The Questions Every Entrepreneur Must Answer. Bhide, Amar. Harvard Business Review Volume: 74 Issue 6 (1996) ISSN: 0017-8012

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Session 2: Idea Generation & Opportunity Recognition

Readings:

• Baron and Hmieleski, 2018, Chapter 3*

• The discipline of innovation

  The full text of this article is available via EBSCO. Please search using this reference:

  The discipline of innovation. Drucker, Peter. Harvard Business Review Volume: 63 Issue 3 (1985) ISSN: 0017-8012

Tool: Passion Cube –Confused

Self-Understanding and Entrepreneurial Opportunities

Def. Opportunity

An opportunity is a favourable set of circumstances that creates the need for a new product, service, or a business (Barringer and Ireland, “Entrepreneurship”)

Def. Idea

An idea is “something imagined or pictured in the mind”

Distinguishing ideas, innovation and opportunity

Opportunity Identification

• Yourself
• Trends & changes in external environment

Exercises： Self-understanding Exercise: Accomplishments

As a basis for developing an entrepreneurial idea

1. Significant personal accomplishments
2. Rank based on significance

Knowledge, Skills & Abilities

	Accomplishment	KSA needed
	1.
	2.
	3.
	4.
	5.

Reflections for KSA

Don’t forget PASSION

Video: Paul Tasener: How I became an entrepreneur at 66

Future Trends and Entrepreneurial Opportunities

Some interesting trends

• Hyper-personalization of everything
• Last-mile delivery gets automated
• Retail

Case

​ CloudKitchens

Drucker’s 7 Sources of innovation opportunities

​ Changes within the enterprise or industry

• The unexpected (success, failure and events)
• The incongruity (between reality and ‘ought to be’)
  • Discrepancy or dissonance between what is and what ‘ought to be’
  • Understand the customers’ needs and wants
• Innovation based upon process needs
• Changes in industry structure or market structure (that catch everyone unaware)

​ Changes outside the enterprise or industry

• Demographics

• Changes in perception, mood and meaning

• New knowledge (scientific and non- scientific)

Exercise: Trends & Entrepreneurial Opportunities

List -> Select -> Report

Consider:

1. consumer, design, processes
2. demands in future
3. will opportunities?

Lateral Thinking Exercise: The Six Thinking Hats

1. Blue - Process Control
   • Organizing the thinking, making decisions and conclusions, planning for actions
2. White - Facts, Figures and Information
   • Purely facts, neutral and objective
3. Green - Creativity and Alternatives
   • Stands for creativity, everything goes, idea generation, alternatives
4. Yellow - Benefits
   • Optimistic viewpoint, logical positive view of things
5. Black - Caution, Devil’s advocate
   • Critical thinking, spot fatal flaws, make plans ‘tougher’ and more resilient, judges robe, logical reasons are given
6. Red - Intuition and Emotions
   • Emotional thinking, gut instinct, hunches
7. Blue 2 - Process Control
   • Organising the thinking, making decisions and conclusions, planning for actions

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Session 3: Industry & Market analysis and Customer Validation

RECOMMENDED READING:

Chapter 4 from the Baron and Hmielski book. It is called “Feasibility analysis: look before you leap”.

Industry Analysis

Key Questions

• Is the industry accessible? Can a new venture easily enter?
• Ripe for innovation / Underserved segments?
• Are there attractive niches?

Techniques to assess Industry Attractiveness

• Porter’s 5 Force Model

Disruption

• Types:
  Low-End disruption
  New Market Creation

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Session 4: Business Model

Feasibility

• Compelling need
• Relevant Market segments
• Unique value and advantages
• Viable Business Model
• Capable Team

Strategy

Strategy formation process - hierarchy

• Vision - What do we aspire to
• Mission - What do we do? Who do we do it for?
• Goals - What do we want to achieve?
• Strategy - Plan of action

Entrepreneur’s big questions

• Are my goals well defined?
• Do I have the right strategy?
• Can I execute the strategy?

Sources of Superior Profitability

• Corporate Strategy
  Industry Attractiveness
• Business Strategy
  Competitive Advantage

Traditional competitive strategies:

• Cost leadership
• Differentiation
• Focus

Perspectives on strategy

• Competitive Position
• Resource-based
• Strategic Innovation

Strategy Formation in Entrepreneurial Organizations

• Distributed & decentralized (as a response to turbulence)
• Emergent & deliberate (at different times)
• Continuous strategizing
• Non-linear & adaptive
• Generating multiple strategic options

Effectuation vs Causation

Key Effectuation principles

1. “Bird in Hand”
2. “Affordable loss”
3. “Lemonade principle”
4. Forming partnerships “crazy quilt”

Business Models

The Lean Start-up: Build – Measure - Learn

• Application
  • Hypothesis testing
  • Design Simple Experiments
  • MVP: Minimum Viable Product
  • Pivot – a change of direction
    • Methods

What is a Business Model

• Customer Value Proposition
  • Value proposition canvas
• Go-to-market Strategy
• Profit Formula
• Technology / Operations management

Types of Revenue Models (by their feature/decisions)

• Producing goods or services
• Sovietisation
• Distributor/customization Licensing
• Subscription
• Razor & blade
• the major cost is buying into an ecosystem
• Long Tail

Tool: Business Model Canvas

• Key Partners
• Key Activities
• Key Resources
• Value Proposition
• Customer Relationships
• Channels
• Customer Segments
• Cost Structure
• Revenue Streams

Tool: Value proposition canvas

Case: Dropbox

Key Elements of Dropbox’s business model:

• Customer Value Proposition (CVP):
  • Offering:
    • Sharing
    • Storage
    • Synchronization
  • Problems-Solutions:
  • Customer Persona / Customer Segment
    • Individual(B2c)
    • Business (B2B)
• Technology / Operations Management
  • Data centre (on Amazon)
  • Secret sauce
• Go-to-market
  • Demo
  • A/B test
  • Ad
  • Word of mouth
• Freemium model: Keys to sucess
  • Free user support cost
  • Customer axquisition
  • Conversion
  • Profit
• Freemium model: Metrics
  • Customer acquisition costs
    • paying/free
    • marketing spend/new customers
  • Fixed costs
  • Variable costs
  • Life Time Value (LTV) of a customer

How business is affected by the environment

• Key Trends
• Market Forces
• Industry Forces
• Macro-economic Forces

Value proposition in more detail

(video: Strategyzer’s Value Proposition Canvas Explained)
Link between Pitches and VP canvas

• our
• helps
• who want to
• by
• unlike

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Session 5: Platforms as a business model

Multi-sided platform

• Key feature
  • Enable direct interactions
  • Distinct services in different sides
• Platforms vs. Linear models
  • infrastructure
  • rules
• Network effects
  • Positive vs. Negative
• Key issues to Consider
  • Critical mass
  • Reduction in
    • Transaction Costs
    • Search Costs

Core Interaction

Design the Core Interaction

• Creation
  • core value unit
• Consumption
• Curation

Improve the Core Interaction

• Customization
• Behaviour Design

Choosing Pricing Structures: Cross-subsidising

Key operating metrics – CAC & LTV

• Customer Acquisition Cost
• Life Time Value per customer
  $$LTV=\frac{c}{g+k}$$
  c: contribution per customer
  g: discount rate
  k: churn rate

Mechanisms that underpin promeration of platforms
De-linking assets from value - increases asset utilisation
Re-intermediation
Market aggregation
Key issues to consider
Magnet
Toolbox
Potential Pitfalls - low switching costs
www.macrotrends.net/stocks/charts/GRPN
Designing the Core Interaction
key elements:
Creation
core value unit
Consumption
Curation
Improving
Customization
Growing a platform: the chicken and egg problem
Choosing Pricing structures: Cross-subsidising

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Session 6 Finance

Statements

• Balance Sheet
• Profit & Loss Statement (Income Statement)
• Cash Flow Statement

Types of activities

• Operating
• Investing
• Financing

Cash Flow Drivers

• Revenues
• Costs and Expenses
• Capital Expenditures
• Working Capital
• Financial Charges

Constructing Cash Flow

• Direct
• Indirect

Key operating metrics for a (tech) start-up

• Revenue growth rates
• Margins
• CAC - Customer Acquisition Cost
• Retention rates
• Retention rates
• Customer Lifetime Revenues

Cash conversion cycle

Operating leverage – measure of scalability

• $\text{Operating Leverage Ratio}=\frac{\text{Sales Operating Profit − Variable Expenses}}{\text{Operating Profit}}$

The burn rate & the financing need

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Session 7 Risk

Summary

• Operating environment
• Strategy & competitive position
• Marketing
• Operations
• Financial Management
• Contingencies & contracts

Risk Components

• Macro (operating environment)
• Market
• “Make-it” – Technology and Operations
• Management (ability, governance)
• Concentration (on one supplier, buyer…)
• Contingency (license renewal, regulatory change in the future)

Tool: Fish-bone Technique

VC – Lots of info

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Session 8 Entrepreneur & Team

Entrepreneur

Conditions faced

• complex
• time pressure
• uncertainty
  Effectuation: Entrepreneurs manage by
• relationships & networks
• information and knowledge
• strong vision

Mindset

Dimensions

• Goal Orientation
• Meta-cognitive Knowledge
• Meta-cognitive Experience
• Meta-cognitive Choice
  Entrepreneurial mindset – key cognitive characteristics
• Need for autonomy
• Risk taking
• Tolerance for uncertainty
• Need for Achievement
• Internal Locus of Control
• Self Efficacy
  Cognitive and personality factors associated with creativity

Creativity

Entrepreneur alertness

• Alert scanning & search
• Alert association and connection
• Evaluation and judgment

Cognitive biases (errors)

Entrepreneurial leadership

Key roles in a start-up
Founder, CEO, CFO, CTO/CSO, Marketing director
Issues

• Relationships
• Rewards
• Roles

Equity split - when

Building a team: Vesting

Board of directors and board of advisors

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Session 9 Pitching

The beginning

Short intro - the concept statement

Problem and Solution

Problem

• What, and whose, problem are you trying to solve.
  I.e. what is the opportunity – the unmet need?

• How big is the problem?

  • Market size and growth rates- market research, statistics on trends, examples, etc. Size:

    • Top down (TAM, SAM, SOM)

    • Bottom up: # customers x average price x # purchases

Needs

• What are the generic needs in the market place
• What are the more specific needs of identified customers

Solution

• This can be the technology, product, a process etc.,
• Unique selling points:
  • Advantages over competition, i.e. faster, cheaper, novel etc
  • Why is it unique and for whom?

Market & Venture

Competition

• Competitor analysis (grid plus narrative articulating your VP)
  • What underpins your USP
    • Superior resource and capabilities (great sales and marketing, product / business development, experienced team, etc.)
    • Positioning (e.g. niche market, high barriers to entry (including understanding the customer, distribution agreements, etc.)
    • Secured (“defensible”) IP (e.g. through patents)?
    • Exclusive partnerships
    • Can you protect yourself from copycats / large incumbents in other ways?

What kind of business model will you use

• Go to Market
  • SEO, direct sales, referrals, awards, affiliate programmes – chose most appropriate to reach your customer and explain your choice
• Monetisation (how will you generate revenues – subscriptions, % commission, etc). Explain your choice
• People: Ability to execute, complementarity, set of skills and abilities required

Funds:

• What is the call for action – money, advice, etc

• What is the next milestone and how will the money you seek get us there. how will an investor make money?

Ending

Your next steps

• Feasibility – market entry

• Clarify routes to market

• Prototypes, business development etc.,

• Cash flow forecast and funding plans

• Hire key people – when

N.b. for a pitch in class – a brief statement that further work would need to be done to crystallize the opportunity including market analysis, clarifying the routes to market, etc.

Call to action (depending on the audience)

• Funding

• Advice

• Team

• Resources

Tips

	Do	Don’t
	Connect and tell a story	Be defensive
	Know your numbers	Lie / Bluff
	Show you understand your customer	Underestimate the competition
	Clearly address the competition	Go in unprepared
	Evidence credibility	Rely on notes
	Know your business model	Leave risks unaddressed
	Be realistic

Advice on Presenting

Make it easy to contact you or mention you:

• Include your e-mails on the front page of your document

• When asking someone to make a connection, consider including a self contained paragraph for your contacts to forward (typically concept statement)

Pack to have at the ready:

• 1-pager (pdf)

• A slide deck (pdf, 10 slides) 15 – 20 page business plan document

• 2 minute elevator pitch (the shorter, the better)

• 7-10 minutes presentation + extra slides for Q+A

Slidedecks

• 30 Legendary Startup Pitch Decks and What You Can Learn From Them
• The Only 10 Slides You Need in Your Pitch
• [How To Create A Great Investor Pitch Deck For Startups Seeking Financing](https://www.forbes.com/sites/allbusiness/2017/03/04/how-to-create-agreat-investor-pitch-deck-for-startups-seekingfinancing/#fe978aa2003e)
• pitchdeckexamples