Entrepreneurship: New Value Creation Midterm

Corporate Entrepreneurship

The process of creating new products, ventures, and processes. Corporate entrepreneurs see opportunities and create something of value.

Entrepreneurship Inside

Consists of employees who think and act entrepreneurially. Inside entrepreneurs and other entrepreneurs both wish to create something of value.

Franchising

A license purchased by an entrepreneur from an existing business.

Buying a Small Business

Buying out the existing owner and taking over operations. Often purchases an existing business and then rebrand, or reorganize the organization.

Social Entrepreneurship

A global movement with initiatives launched every year to improve social problems. A process of sourcing innovative solutions to social and environmental problems (Regular Entrepreneurship + Social Missions).

Family Enterprising

Each generation has an opportunity to bring the organization forward in new, innovative ways. This is considered more stable because they take a long-term view.

Serial Entrepreneurship

People who start several businesses. They look out for the next big thing and explore ways to implement their diverse range of ideas.

Hybrid Entrepreneurs

Maintaining full time jobs while experimenting with entrepreneurship. This is good for risk-averse individuals that lack confidence for full entry.

Entrepreneurship Methods

Thinking, acting, identifying opportunities, and approaching problems.

Entrepreneurship Characteristics

Entrepreneurship is a method (systematic way of approaching a task), not a process. Means: Embracing and confronts uncertainty through action (fog metaphor). Method to be learnt and repeated. Offers a few powerful assurances. The practice includes prediction and creation.

Assumptions Underlying the Entrepreneurship Method

-Applied to novices and experts

-Is inclusive

-Requires continuous practice

-Works in an unpredictable environment

-Changes how we think, and we change during the process

-Entrepreneurship needs to be viewed as a method

Mindset

The established set of attitudes held by someone. Mindsets can change or be altered.

Fixed Mindset → Performance Goals

Growth Mindset → Learning Goals

Entrepreneurial Mindset

Has the ability to alter one's way of thinking to see the endless possibilities (promotion versus prevention focus). Entrepreneurs need emotional maturity to quickly sense, take action, and get organized under uncertain conditions. Requires the capacity to control our impulses (emotional intelligence). Entrepreneurial mindset has the element of passion, it is connected to the desired impact/tasks.

Implicit Theories

People's beliefs about the nature of human attributes. People differ substantially and meaningfully in the beliefs they hold about human characteristics.

Regulatory Focus Theory

Notion that entrepreneurs orient their behavior either through prevention or promotion focus.

Deliberate Practice

Engaging in deliberate practice shapes the brain and improves performance. Regular practice without focused effort only reinforces mindless, automatic habits.

Neuroplasticity

Neurons that fire together wire together. Practicing incorrectly will ingrain incorrect habits.

Self-Leadership

Process where people can influence and control their own behavior.

Self-Leadership Key Habits

1. Behavior-Focused Strategies: Self-observation, self-goal setting, and self-punishment.

2. Natural Reward Strategies: Finding the greater purpose in a task or focusing on the pleasant aspects.

3. Constructive Thought Pattern Strategies: Identify negative beliefs and reframe those beliefs.

Entrepreneurial Passion

Passion is an intense positive emotion. Dysfunction side to passion (harmonious versus obsessive passion). The problem with the "find your passion" adage is that people are less likely to try new things. You won't always "feel like" doing entrepreneurial tasks. You are more likely to act yourself into feeling well than to feel yourself into acting well. Develop your passion into more effective means.

Creativity

Capacity to produce new ideas. A developed skill and not something that we are born with. Personal creativity is higher in students who enroll in entrepreneurship programs.

Improvisation

The art of spontaneously creating something with preparation. There is always the possibility of obstacles.

-Obstacles such as limited resources, unforeseen market conditions, or even conflict with team members can prevent them from executing their initial plans.

-Need to find a way to quickly adapt to circumstances.

-People who engage in improvisation are more tolerant of failure. Better to ask for forgiveness than permission.

-Improvisation and the Brain: Musicians tend to switch off the self-censoring part of the brain, which gives them the ability to freely express themselves without restriction.

Mental Contrasting with Implementation Intentions

Envision the best, plan for the worst.

-Entails mentally contrasting a desired future with relevant obstacles of reality and forming implementation intentions (if-then plans) specifying when and where to overcome those obstacles. This can reduce uneasiness and increase resilience.

-"If I encounter negative feedback, then I will..."

Habit Formation

1. Start with the small habit

2. Increase the habit 1% over time

3. Learning goals

4. Consistently practice the habit

Characteristics of an Opportunity

1. Positional economic value

2. Novelty or newness

3. Perceived desirability

Opportunity

A way of generating value through unique, novel, or desirable products, services, and event processes that have not been previously exploited in a particular context (or exploit current products, services in new ways), must have a large enough market.

Pathways to Opportunity Identification

1. Find: I saw a clear problem and developed a solution.

2. Search: I knew I wanted to start a business but was unsure what business to start. I intentionally searched for different opportunities.

3. Effectuate: I thought about what I knew, my skills, experiences, and abilities, and developed an idea that matched "me". I created something and just started testing it.

4. Design: I wanted to create something innovative. I started looking around, observed, and talked to some people and identified new, unmet needs. Then I created something to meet those needs.

Theories of Opportunity Recognition

Alertness: Discoveries are made by those entrepreneurs who have alertness. Often based on prior experience.

Some entrepreneurs are more adept at spotting opportunities because:

-They have access to more information

-They are risk takers

-They may possess different cognitive styles from those non-entrepreneurs

IDEO

Global Design Company "thinking like a designer can transform the ways organizations develop products, services, process, and strategy".

Phases of the IDEO Design Thinking Process

1. Inspiration (Emphathize): Discover user challenges and needs

2. Ideation (Create): Potential solutions to meet needs

3. Implementation (Test): Prototyping and testing solutions

Divergent Thinking

Generates many ideas via creative thinking, non-traditional problem-solving methods.

Convergent Thinking

Narrow down ideas generated through divergent thinking to identify which ones have the greatest potential.

Design Thinking

A toolkit to solve problems (under conditions of uncertainty-driving in fog).

Business Model

A business model is a set of hypotheses. This is used to provide evidence that your customers are about how your products and/or services kill pains and create "gains" (ex: benefits, great experience, etc.). Entrepreneurs will start creating hypotheses using the business model canvas and testing these hypotheses.

The Offering

Identifies what you are offering to a particular customer segment. Customer value proposition describes what products your business offers. The "value" part of the CVP: how much your product or service is worth to customers.

Customers

Individuals or businesses willing to pay for what you are offering.

Infrastructure

Inclusive of all the resources an entrepreneur must have to deliver the CVP.

Financial Viability

Defines the revenue and cost structures a business needs to meet its operation expenses. A business model is more than a financial model.

Innovation

A unique strategy that a company uses to streamline its operations.

Disruption

A business practice that is engineered to disrupt a market.

Differentiation

A strategy that involves offering a unique product or service that is different from the competitor.

Imitation

When a business creates a new concept or business model by copying or adapting an existing one.

Unbundling Business Model

-The unbundled business model splits a company's operations into distinct categories, each with unique driving factors, rules, and procedures.

-Unbundling can be done for several reasons, but the main goal is always to improve the company's efficiency.

-An example of an unbundled business model is a large corporation like General Electric (GE) that operates across various distinct business units, such as aviation, healthcare, and energy.

Red Oceans

Represents all the industries in existence today (the known market space). Industry boundaries are defined and accepted. Competitive rules of the game are well understood. Companies try to outperform their rivals to grab more demand ("fish"), which makes the water bloody. As the space gets more and more crowded, growth and profits reduce.

Blue Oceans

Blue ocean strategy, in contrast, is about doing business where there is no competitor. It's about creating new land, not dividing up existing land. Blue oceans represent all industries not in existence today - the unknown market space, untainted by the competition. Demand is created rather than fought over. Ample opportunity for growth that is rapid and profitable. No uncommon for new industries to be created (ex: eBay - online auction industry). Most often created within a red ocean; a company alters the boundaries of an industry.

Lean Startup

The Lean Startup methodology is based on the principles of lean manufacturing. Entrepreneurs do NOT know what customers will actually buy, and for how much. The goal is to minimize waste in the learning process (investing a little bit at a time). Build → Measure → Learn

-Rather than engaging in months of planning and research, entrepreneurs accept that all they have on day one is a series of untested hypotheses - basically, good guesses. So instead of writing an intricate business plan, founders summarize their hypotheses in a framework called a business model canvas.

-Lean start-ups use a "get out of the building" approach called customer development to test their hypotheses.

-Lean start-ups practice something called agile development, which eliminates wasted time and resources by developing the product iteratively and incrementally. It's the process by which startups measure the minimum viable products that they test.

Stages of a Lean Startup

-Build: A minimum viable product

-Measure: Customers' (early adopters') responses

*Qualitative: Talking to them

*Quantitative: Measure what they do

-Learn: Continue to experiment/improve or pivot

Challenges with Traditional Business Planning

1. Business plans rarely survive first contact with customers. As the boxer Mike Tyson once said about his opponents' pre-fight strategies: "Everybody has a plan until they get punched in the mouth."

2. No one besides venture capitalists and the late Soviet Union requires five-year plans to forecast complete unknowns. These plans are generally fiction, and dreaming them up is almost always a waste of time.

3. Start-ups are not smaller versions of large companies. They do not unfold in accordance with master plans. The ones that ultimately succeed go quickly from failure to failure, all the while adapting, iterating on, and improving their initial ideas as they continually learn from customers. Blue ocean strategy is based on driving down cost while increasing (perceived) value. Cost savings are made from eliminating or reducing factors an industry competes on. Buyer value is increased by raising and creating elements the industry has never offered (first mover advantage).

Customers Versus Consumers

A customer is someone who purchases your product/service and a consumer is the person who uses the product/service.

Customer Segments

Demographic, geographic, psychographic, and behavioral

Subgroups of a Market

-Total Available Market

-Serviceable Available Market

-Share of Market

End-User Profile

Demographics, psychographics, proxy product, watering holes, day in the life, and biggest fears/motivators

Market

Place where people can sell goods and services. Supply refers to the sellers and demand is the desire held by prospective customers for goods and services.

Market Components

1. A set of customers for products or services who have needs or wants, and who reference each other when making a buying decision.

2. Market Opportunity: Market demand

3. Product Application: Goods and services

4. Importance of market research

"Crossing the Chasm"

Transition between early adopters and the early majority. Crossing the chasm involves focusing your resources on the beachhead market. It is key to generating a larger following.

Truth Curve

Effort (x-values) positively correlates to the believability of the information (y-values) coming out.

Minimum Viable Product

The first functional and working version of your product ready for release to actual customers.

Rapid Prototypes

Quickly created models used to visualize a product or service; they could be made out of crude paper models or storyboards.

Pilots

A small-scale study conducted to assess the feasibility of a product or service.

Storyboards

Provides a high-level view of thoughts and ideas arranged in sequence in the form of drawings, sketches, or illustrations.

Process of Experimentation

1. Ask questions related to market problems

2. Carrying out background research to better understand the problem

3. Developing hypotheses about how to solve the problem

4. Test the hypotheses by running experiments (ex: interviews, prototypes, etc.)

5. Analyze the data

6. Assess the results and either iterate/pivot or derive new hypotheses