Duke MEng 570 Midterm: Cheat Sheet #1
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Every business function can be placed in one of three buckets:
Solve the problem
Sell the problem
Manage the money
What business functions are involved in solve the problem?
Engineering, manufacturing
What business functions are involved in sell the problem?
Marketing, sales
What business functions are involved in manage the money?
Accounting, finance
There are two types of engineers:
Full-Cycle Engineer
Deep & Narrow Engineer
What is a full-cycle engineer interested in? Name an example.
How to solve the problem
How to sell the problem
How to manage the money
Example: Mary Barra, CEO of GM
What is a deep & narrow engineer interested in?
How to solve the problem → desire to go very deep in their understanding
Little interest in how to sell the problem or manage the money
What strengths do the two types of engineers (full-cycle and deep & narrow) have in common?
Solve problems
Methodical
Every company needs both kinds of engineers!!! They have common engineering strengths but they also have their own unique ones!!!!
!!!
What is differentiation?
The uniqueness of your business model that provides superior value to the customer
What are the components of the WIDGET framework?
Wonder
Invention
Discernment
Galvanizing
Enablement
Tenacity
Explain wonder in terms of the WIDGET framework.
The ability to ponder, to question assumptions and the current state, questions to push others to think big and think outside the box.
Explain invention in terms of the WIDGET framework.
Coming up with new ideas and inventions. Lots of them. “Idea people.” People gifted with invention frequently come up with many more ideas than can ever be acted upon.
Explain discernment in terms of the WIDGET framework.
Based on instinct, intuition and pattern recognition built up over time, this is the
ability to assess ideas and situations.
Explain galvanizing in terms of the WIDGET framework.
The ability to maintain a team’s momentum, direction and coordination by rallying
and provoking the troops.
Explain enablement in terms of the WIDGET framework.
The desire and willingness to provide support and assistance in any way that is
needed.
Explain tenacity in terms of the WIDGET framework.
The desire and satisfaction in finishing the job with the level of quality that is needed.
For people gifted with tenacity, stopping before a project is complete and completed well feels like a surgeon leaving the patient open on the operating table.
What is innovation?
Innovation is new/novel, useful, desirable & feasible. In business, innovation is key to creating differentiation, which is a unique and powerful advantage in the market.
Innovativeness is a skillset & a mindset. Businesses cannot thrive, nor can most even survive, without Innovation.
What is the innovation process framework?
Adopt Innovation Mindset & Innovation/Discovery Skillset ->
Gather Insights -> Challenge Assumptions & Combine Insights/Ideas (“Associating”) -> Innovative Ideas
What is the innovation mindset?
You cannot “think” your way into gathering insights or being innovative. Awe, curiosity, and openness to exploring without an agenda or rigid schedule open the door to gathering insights and putting them together in a way that is truly unique and powerful (i.e. Associating).
What are innovation/discovery skills?
These are the basic skills of innovators. About 2/3 of this is learnable.
What are the 5 discovery skills?
Questioning
Experimenting
Networking
Observing
Associating
Explain questioning in terms of the discovery skills.
“Asking questions to understand why or how things might be changed or disrupted.”
The best innovators in business are universally skilled at Questioning, as well as one of the other four innovation skills
Explain experimenting in terms of the discovery skills.
“Visit new places, try new things, seek new information, experiment to learn.”
Explain networking in terms of the discovery skills.
“Test ideas through a diverse network who vary wildly in backgrounds and perspectives.”
Explain observing in terms of the discovery skills.
“Carefully watching customers, products, services, companies to gain insights and ideas.”
Explain associating in terms of the discovery skills. List examples of some people who are good at this skill.
“Making connections across seemingly unrelated questions, problems or ideas.” Is the least learnable.
Examples: Jensen Huang (Nvidia), Steve Jobs (Apple), Bill Gates (Microsoft).
What are DELIVERY skills?
Planning
Analyzing
Executing
VERY different from discovery skills. Most businesses that struggle to be innovative are too focused on delivery skills and leave no room for discovery.
Every innovation starts with what?
an INSIGHT!
What are the two most common types of insight?
Customer insight
Technology insight
What is a customer insight?
A unique and nuanced understanding of the customer’s problem and pain points, what the customer really wants, and the tradeoffs they are willing (or not willing) to make.
What is the #1 reason startups fail?
Because they build something no one wants! Fail to consider customer insight!
What is a technology insight?
Frequently future-oriented and is an understanding of what the technology is capable of, the maturity & cost of the tech today and how that will change going forward, and the adoption rate of the technology
What are the types of business?
B2B (Business-to-Business)
B2C (Business-to-Consumer)
What is a B2B (Business-to-Business)?
A business model that intends to sell to a business and/or
government agencies, not consumers.
What is a B2C (Business-to-Consumer)?
A business model that intends to sell to the consumer, not to
businesses or government agencies.
What are the types of business model archetypes?
Direct model
Multi-sided model
Marketplace
What is a direct business model?
Single-actor model where users are the paying customers
What is a multi-sided business model?
Two-actor model where users and paying customers are different (e.g.
Facebook)
What is a marketplace business model?
Multi-actor model where you create a space to bring together buyers and sellers
(e.g. Airbnb).
What are the different founder roles?
Hustler
Hacker
Hipster
What is the hustler founder role?
chief salesperson & go-to business person driving the business forward (e.g. Steve Jobs and his product announcements)
What is the hacker founder role?
chief tech/product person & the indestructible backbone of the business (e.g. Steve Wozniak)
What is the hipster founder role?
makes the product look market-ready, sleek & cool (e.g. Steve Jobs and his attention to aesthetics like fan noise and font styles)
What is the core entrepreneurship process?
Gather Insights & Innovative Ideas (see “Innovation” above) -> Create Business Model (see “Elements of a Business Model” below) -> Stress Test your model -> Do Customer Discovery -> Create MVP & get it into the hands of Early Adopters -> learn & iterate...
What are the steps of stress testing?
Challenge the core: Is this a problem truly worth solving? Check yourself for Innovator’s Bias (see below).
Consider the larger picture: Is your timing right? How do trends and shifts in the market, with your customers and competitors, with technology align with your timing and approach?
Challenge your assumptions: Write down your assumptions about the problem, customer segments, UVP and solution. Challenge them.
Refine your model.
What is innovator’s bias?
Falling in love with the Solution can cause the entrepreneur to hold on too tightly to the Solution and be blind to the real Problem. The entrepreneur may only see problems that the favored Solution can solve, which represent a sub-optimal business opportunity (i.e. Problems that customers are not willing to pay to have solved).
What is the lean canvas?
9 elements with 3 sub-elements (I am calling components). We are using a modified Lean Canvas which also has 9 elements, but instead of Key Metrics, we are including Key External Risks.
What is the lean(er) canvas?
Includes only the first 4 elements which is the core of the business model:
Customer Segments, Problem, UVP and Solution.
When creating a business model, we start with the Lean(er) Canvas.
What is desirability?
Do the customers want this?
What is viability?
Can you monetize this business?
What is feasibility?
Can you build this business?
Which four elements are part of the leaner canvas?
Customer Segments
Problem
UVP
Solution
What are the full 9 elements of the lean canvas? What do each of them speak to (desirability/viability/feasibility)?
Customer Segments (desirability)
Problem (desirability)
UVP (desirability)
Solution (desirability)
Channels (desirability)
Unfair Advantage (viability)
Revenue Streams (viability)
Cost Structure (viability)
Key External Risks (subbed for Key Metrics) (feasibility)
What are customer segments (part of leaner canvas)?
Who are the customers who have this problem and who are most interested in your solution? Speaks to desirability.
What’s the first component of customer segments (customer 1)?
Customer segments. List your top 3-5 customer segments in prioritized order, formatted as a numbered list. Priorities should be set based on how motivated the customer segment is to solve this problem.
Rule of thumb: Describe each segment with enough detail so that you can direct a targeted marketing campaign at them (e.g. university students).
What’s the second component of customer segments (customer 2)?
Early adopter. These are your hair-on-fire customers who most need or desire your Solution, and are willing to take the risk of trying out a new Solution.
They are a specific subset of the #1 Customer Segment.
Describe this segment and explain why they are “hair-on-fire.”
What is problem (part of leaner canvas) ?
The Problem can be framed as a pain point or a desire.
Speaks to Desirability. There are three elements when describing the Problem
What is the first component of the problem (problem 1)? What’s an example?
Desired Finished Story. What is the customer’s desired end-state or finished story? What are they trying to achieve or experience? You might think of it as a “job to be done,” considering functional, emotional, and social aspects.
Example: Eat healthier meals that don’t take more than 30 minutes to prepare.
Common error: Finished-story description is not specific enough; it does not differ from a finished story description for the Existing Alternatives.
Common error: The description includes Solution features.
What is the second component of the problem (problem 2)?
Existing Alternatives. These are the other Solutions/methods that the prospects are most commonly using to address the Problem. List them out very specifically, including the name and brand.
Common error: Not doing enough research on Existing Alternatives. A thorough search of the internet is a good start.
Common error: Not listing each Existing Alternative specifically enough. Reminder: You will have to include these on your Positioning chart with a price for each.
Common error: Listing Existing Alternatives that are not commonly used while excluding ones that are commonly used.
What is the third component of the problem (problem 3)? What’s an example?
Problem to be Solved. What are the obstacles that are keeping the customer from achieving this desired state? Consider physical, social, and emotional obstacles. Get specific. Ask “why” until you get to the root cause or belief.
Example: Busy professionals don’t have time. Young professionals socialize at bars where food and drink are not healthy. There is a perception that healthy food tastes bad and is expensive.
Common error: The Problem to be Solved is not tightly aligned with where the Existing Alternatives specifically fall short in achieving the Desired Finished Story.
What is Unique Value Proposition (UVP) (part of leaner canvas)?
What should it speak to?
Provide an example
The UVP is the value (or benefit) to the finished story that your solution promises to deliver. Your solution’s finished-story-benefit. Must be clearly defined — it’s the key to motivating a prospect to switching from using an existing alternative to using your solution.
It should speak to how it is better than the existing alternatives. It is NOT a list of features.
Example: the finished-story benefit of a resume-writing app is the sought-after job, not the features of the app.
What is the first component of the UVP (UVP 1)?
A precise description of the promised value.
Should use keywords from the elements of value framework.
What is the elements of value framework?
Provides a structured list of 30 words that define unique customer values. POWER WORDS. Correlated to customer loyalty, customer advocacy, and financial growth of the company.
Common errors: Confusing the UVP with a Solution’s features.
Common errors: Not using the precise Elements of Value language to describe the UVP.
What are the core elements of the elements of value framework?
Social impact (self-transcendence)
Life changing (provides hope, self-actualization, motivation…)
Emotional (reduces anxiety, rewards me, nostalgia, badge value…)
Functional (saves time, simplifies, makes money, reduces risk,
Companies that scored high on at least 4 elements of value had a substantial and measured advantage in…
customer loyalty, customer advocacy, and recent revenue growth
What is the second component of the UVP (UVP 2)?
High-level Concept (HLC). The HLC is a simple, concise analogy or figurative language to simply and effectively communicate the essence of the solution/UVP, frequently comparing it to something that is readily familiar and understood.
This is a great communication tool!
What is the Solution (part of leaner canvas)?
Description of the actual, physical solution. Speaks to desirability.
What is the first component of the solution (Solution 1)?
A solution description starts with a one-sentence overview of what the solution is, followed by a list of 4-6 features. This is not a description of the value it brings (UVP). Format the features as a bulleted list.
(e.g. a mobile app, a web app, a VR app, a wearable sensor)
What is the second component of the solution (Solution 2)?
Describe what it (a high-level architecture diagram) should look like.
A Solution (full solution, that is) high-level architecture diagram (in slide format) depicts the key physical elements of the Solution as a box, a simple function description of each box/element, how the elements are connected via lines.
Include a list of your key features off to the side. In addition, a table to the side lists each box and describes who will create the element (e.g. you or a 3rd party), and a characterization of the technology maturity of each element. Note: A “cloud” should appear at the top of the slide, as a norm.
Common error: Depicting a single physical component or app as multiple elements (simple is good)
Common error: Interpreting tech maturity as solution status. (Note: Solution status is the current status of its mere existence, whereas tech maturity is the commercial readiness of the underlying technology.)
What are the 4 tech maturity levels of the high-level architecture diagram?
L1 - technology concept is formulated, but still in concept form
L2 - technology still in the lab
L3 - emerging tech (i.e. commercialized but still nascent and not well adopted)
L4 - tech is commercialized and quite mature
What is the third component of the solution (Solution 3)?
MVP (Minimum Viable Product)
The MVP is the smallest version of the solution that is usable by early adopters. The entrepreneur may need to work closely with the Early Adopter using an MVP, but they can use it and get value from it.
Since it is essentially a stripped-down version of the Solution created with minimal effort/time/money, it allows the entrepreneur to test their Solution with real Customers as quickly and efficiently as possible.
What is the best way to illustrate the MVP?
Start with the Solution high-level architecture diagram (slide) and modify it to show what is outside the scope of the MVP (that is, gray out any features and “boxes” that you will not include in the MVP).
What is Channels (part of lean canvas)?
How should you show this?
The path to the customer.
Show this as a bulleted list. Speaks to desirability
What is the first component of channels (Channels 1)?
Give some examples.
Marketing Channel.
How you will develop awareness and stimulate demand (e.g. digital advertising, print advertising, radio ads)
What is the second component of channels (Channels 2)?
Give some examples.
Sales Channel.
How you will facilitate the sales transaction, that is, the order taking and payment (e.g. online website, Apple app store)
What is the third component of channels (Channels 3)?
Give some examples.
Distribution Channel.
How you will deliver the product/service to the customer (e.g. download from the app store, UPS ship to home)
What is the fourth component of channels (Channels 4)?
Give some examples.
Service Channel.
How you will provide post-purchase support (e.g. 800 number, online chatbot)
What is Unfair Advantage (part of lean canvas)?
What is the classic approach?
The Unfair Advantage has nothing to do with how desirable the Solution is to the prospects, but rather, how to protect the business itself from being easily copied or bought by competitors.
The classic approach is a patent. Speaks to viability.
Protection so your UVP cannot be easily copied or bought. Your “barrier to entry.”
Common error: Confusing Unfair Advantage and UVP.
Provide some other examples of approaches to unfair advantage?
• Intellectual Property (e.g. patents)
• Move faster than the competition
• Network effect, community
• ”Sticky” existing customers (expanding what you sell to them)
• Insider insights
• Expertise that is a “rare talent”
• The “right” expert endorsements (e.g. Michael Phelps)
PICK ONE! DON’T MAKE STUFF UP!
What are Revenue Streams (part of lean canvas)?
Revenue (also called Sales) is the total amount of money a business brings in from its sales. So, if I sell a tamale from my food truck for $7.00, then my revenue for that sale is $7.00.
Speaks to Viability.
What is the first component of revenue streams (Revenue Streams 1)?
Give an example.
Revenue Streams. A description of how the business will generate sales/profit – may include one-time sales of a product, subscriptions, advertising, licensing, selling of user data, etc.
For example, Facebook generates sales from advertisers based on # of clicks, not from its users.
What is the second component of revenue streams (Revenue Streams 2)?
Price ($) per unit
Common error: Price is too low considering the value your solution provides. (Note: Revenue = price x unit sales.)
What are Cost Structure (part of lean canvas)?
Cost Structure includes COGS (Cost of Goods Sold) and operating expenses (e.g. marketing, R&D, tech infrastructure, operational staffing). Speaks to Viability.
What is the first component of cost structure (Cost Structure 1)?
Give an example.
COGS. All costs directly involved in producing a product or delivering a service (direct materials and direct labor).
For my tamale side hustle, this is all the ingredients that I bought to make the tamale. It also includes anyone I pay who is hands-on in making the tamales.
What is the second component of cost structure (Cost Structure 2)?
Give an example.
Operating expenses. All of the other costs of running a business outside of COGS, interest expense, taxes, and non-operating expenses (e.g. expenses that have nothing to do with running the business).
For my tamale side hustle, this is the food truck itself, any other employees, marketing, my accountant, etc.
What is the third component of cost structure (Cost Structure 3)?
Unit Cost. If your Solution is something that needs to be manufactured, estimate the cost to build one unit.
What are Key External Risks (part of lean canvas)?
Key Partners & Regulation - These are elements outside of the entrepreneur’s business model yet represent a critical dependency for success – only the critical ones. Speaks to Feasibility.
Common error: Including key partners or regulations that don’t represent a substantial risk. It is ok to leave this blank if you don’t have any substantial Key External Risks.
What is the first component of key external risks (Key External Risks 1)?
Give an example.
Key Partners that are a substantial risk.
For example, Uber drivers are key partners for Uber, not employees. Uber relies on attracting enough drivers who are not guaranteed a salary, which at the time of launch, was a substantial risk.
What is the second component of key external risks (Key External Risks 2)?
Give an example.
Regulation that is a substantial risk
example: FDA regulatory approval for pharmaceuticals
What is TAM?
Best practice?
Total Addressable Market. The “universe.” The larger market/industry, beyond the business’ target market but represents future potential opportunities. (This number is fact-based, and the source should be cited.)
Best Practice: Estimate units (e.g. Airbnb founders estimated # of trips) instead of $ sales
What is SAM?
Best practice?
Serviceable Addressable Market - This is the whole of the target markets. That is, the sum total that the entrepreneur aims to reach with their Channels and serve with their Solution. “
The piece of cake we want to eat.” (This number is fact-based, and the source should be cited.)
Best Practice: Continue to estimate units, not dollars
What is SOM?
Best practice?
Serviceable Obtainable Market - The entrepreneur’s projected share of SAM, frequently for years 1-3. These numbers are the foundation for Revenue estimates for years 1-3.
Best practice: Lay out two scenarios for year 1-3 SOM numbers: one optimistic scenario (reach out goal) and one realistic scenario.
How to calculate year 1-3 revenue estimates?
Year 1-3 revenue estimates = SOM (# of units) x price/unit
What is customer discovery?
What can/cannot be validated using it?
A qualitative customer observation & interview process focused on learning about your customers and validating/invalidating your hypotheses.
Solution cannot be validated using Customer Discovery.
Desirability boxes can be readily validated using Customer Discovery.
What is the customer discovery process (6 steps)?
Identify your riskiest hypotheses, what you most want to learn, and who you want to talk to.
Observe your customer, if possible.
Find interview candidates.
Write an interview script.
Conduct interviews
Synthesize learnings
Describe the interview in the customer discovery process?
Love the Problem. Ask: Desired End State, Existing Alternatives, and why they don’t work.
Don’t ask them to speculate about the future. We are lousy at predicting our future likes & dislikes.
Note 
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