entrepreneurship exam 2, definitions only

Business Model

describes how a venture creates, delivers, and captures value.

value

can be generated in many ways

• fulfill needs of existing market

• needs of new market

Differentiation

meeting a unique needs

Innovation

introducing new products, services, or processes to present something new, novel and useful

Crowdsourcing (innovation)

use of the internet to attract, aggregate, and manage inexpensive or free labor from customers and like minded people.

Disruption

smaller companies enter a market and outcompete larger players. Sharing economy has created many disruptive business models

Sharing economy (disruption)

allows people to rent or borrow goods and services from private individuals typically through the internet

Evidence Based Entrepreneurship

scientific method of collecting data and testing ideas to validate that an opportunity is worth pursuing

The Four Parts of a Business Model (BMC)

1. the offering

2. the customers

3. the infrastructure

4. financial viability

1. the offering (The Four Parts of a Business Model)

identifies that customer offering and value generated. value proposition

2. the customers (The Four Parts of a Business Model)

people who populate the segments of a market that your offering is serving. customer segements, channels and relationships

3. The infrastructure (The Four Parts of a Business Model)

includes all resources needed to deliver the CVP. includes people, tech, products, suppliers, partners etc. key activities, resources and partners

3. financial viability (The Four Parts of a Business Model)

revenue and cost structures needed to meet expenses and obligations. cost structure and revenue streams

The Customer Value Proposition (CVP)

the most important part of the business model. Focus is always to be on the value generated for customers.

Four Problems Experienced By Customers

1. Lack of time: improve service, reduce wait time

2. Lack of money: deliver unaffordable products for less

3. Lack of skills: convert complex tools into products

4. Lack of access: innovate and experiment to increase satisfaction.

1. The all-benefits approach (type of value proposition)

least impactful, promotes product or service to customer, little regard for competition, little consideration for what customer wants

2. The points-of-difference approach (type of value proposition)

better, focuses on product relative to competitor, does NOT focus on if customer values differences

3. The resonating approach (type of value proposition)

gold standard, focuses on what customer wants and product-market fit.

types of customer segments 

1. mass market

2. niche market

3. segmented market

4. diversified market

5. multisided market

Mass market

large group, similar needs

Niche market

small group, specific needs

Segmented markets

group of people divided by needs

Diversified markets

variety of services offered to two or more customer segments with different needs

Multisided market

market with two or more customer segments, linked but independent of each other. 

Market

where products and services are sold to people who wish to buy them

Market Opportunity

degree of customer demand for a specific product application

Market demand

whether there are enough customers willing to buy

Product application

refers to the goods or services created to meet demand

Customer psychology

study of a customer

• customers wants or needs

• thoughts and emotions

• outside influences

Actors in buying process

• end users

• influencers

• recommenders

• economic buyers (large scale purchasers)

• decision makers

• sabatuers

Customer Personas

profiles of ideal customers based on market information and research

Elements of a Customer Journey Map

1. Discovery

2. Research

3. Purchase

4. Delivery

5. After sales

Target Customers

1. Innovators: first testers

2. Early adopters: second group to adopt

• Must cross the chasm to early majority. Hardest to do

• Step to cross the chasm: create, position, distribute

3. Early majority: mass market appeal

4. Late majority: typically skeptical, pessimistic and risk averse

5. Laggards: last to adopt, have a negative attitude towards innovations. 

Market Sizing

• Estimating number of potential customers

• Top down analysis

1. Total available market (TAM): total market demand for a product or service

2. Serviceable Available market (SAM): section of the TAM that your product or service intends to target

3. Share of Market (SOM): portion of SAM that your company can realistically reach.

Market Validation

process of interacting with potential customers to acquire reasonable evidence.

Experiment

test designed to help you prove or disprove the validity of a hypothesis. 

Hypothesis

assumption that is tested through research and experimentation

Characteristics of Good Experiments

1. Structured and follows a template

2. Focused and do not try to test too many things at the same time

3. Believable, so you can trust what you learn

4. Flexible, so you can make changes if needed

5. Compact, so we can learn quickly

Types of Experiments

1. Interviews: gain insight before experiments

2. Paper testing: outline vision

3. Advertising: assess level of response

4. Button to nowhere: gauge interest on a website or app. 

5. Landing page: with call to action such as click here for more info

6. Task completion: usability testing involves watching someone use product to see what works and what doesn't

7. Prototyping: creating an early version of the product. 

8. Preselling: the product before the development

Low fidelity protypes

rapid, user driven, usually a mock up or story board

medium fidelity prototype

3D, shows visual and good idea of product

high fidelity prototype

most accurate representation of idea, small scare study

Six Steps of the Scientific Method

1. Identify a question

2. Gather background info

3. Form a hypothesis

4. Test it

5. Analyze results

6. Form a conclusion

Unconscious Bias

tendency to make unfair judgements about others based on deeply ingrained patterns

Confirmation Bias

tendency to only use positive information and ignore info that contradicts your data. 

Two Sources of Personal Differentiation

• Human capital is our skills and knowledge

• Social capital comprises people who are willing to cooperate, exchange info, and build trusting relationships.

Three Dimensions of Social Capital

1. Structural components: Degree to which social ties are formal or informal

2. Regional contracts: level of trust in your relationships

3. Cognitive aspects: norms and visions and values you may share with others. 

Three varieties of Social Capital

1. Bonds with similar people, or those with same background

2. Bridges that go further than similarities

3. Linkages to people regardless of their position in an organization or society

Benefits to Social Capital

sense of shared value, and emotional/social support

Cons to Social Capital

strong ties can be restrictive, prevention of open mind, too much loyalty

Advantages to networks

• private information

• Access to diverse skillsets

• Power

Implicit Bias

refers to attitudes or stereotypes that affect our understanding, actions, and decisions in an unconscious way

Self-Selected Stakeholder

self selects into an entrepreneurs network to offer some type of short term or long term commitment

Incubator

organization that helps early stage entrepreneurs refine ideas

Startup Accelerator

provides tailored support to startups with MVPs to help scale business

Founding team

group of people with complementary skills that come together in founding an enterprise

Homogenous Teams

have members who possess the same or similar characteristics such as age, gender, ethnicity

Heterogenous teams

have people with a mix of knowledge, backgrounds, skill 

Cognitive comprehensiveness

process in which team members examine critical issues using diverse approaches

Groupthink

phenomenon in which people share too similar a mindset, which can inhibit the ability to spot gaps and errors. 

demographics

gender, age, socioeconomic status

proxy products

what are your potential customers using now

biggest fears and motivators

what keeps potential customers awake at night

psychographics

attitudes, values, and fears

day in the life

what does the day in the life of a potential customer look like

challenges and pain points

what issues can you potentially resolve