SPMA 4P10 Midterm

Myths & Realities of Being an Entrepreneur

• Born not made - MYTH

• Anyone can start a Biz - REALITY

• Entrepreneurs are gamblers - MYTH

• Entrepreneurs are Independent - MYTH

• Entrepreneurs work more - MYTH

• Entrepreneurs are more stressed - MYTH (could be reality)

• Without $$$ you can’t have a start up - MYTH

• Money drives entrepreneurs - MYTH

• Venture Capital easy with an idea - MYTH

• Need an A+ Average - MYTH

• Need the spotlight/glory - MYTH

Innovation is 3 Different Things - Kenneth B. Kahn

• Innovation is an outcome

• Innovation is a process

• Innovation is a mindset

Innovation is an outcome

• Emphasizes Output

  • Product innovation (i.e., New to the world, Product improvements, Product extensions (features), Cost reduction, New markets, New uses)

  • Process(es) Innovation

  • Marketing Innovation

  • Business Model Innovation

  • Supply Chain Innovation

  • Organizational Innovation (work from home)

Innovation is a process

• The way in which innovation is and should be organized so that theses outcomes can come to fruition

  • Discover

    • Potential Opportunities

  • Develop

    • Technical specifications and design

  • Deliver

    • Offering is introduced and sold

Innovation is a mindset

• Innovation as a mindset addresses the internalization of innovation by individual members of the organization and advancement of a supportive culture throughout the organization 

• Mindset consideration is the incorporation of design thinking, a human-centred approach to innovation

• While design thinking encompasses a design process, there is emphasis on embracing an empathetic mindset, which stresses the needs of the end user (buyer).

4 Types of Innovation

1. Technological Innovation

2. Product/Services Innovation

3. Strategic Innovation

4. Cultural Innovation

Levers of the Seadoo Case

• Weeks at the cottage

• Seadoo fill-ups (how many)

• Duration of ownership

• Boat fill-ups (how many?

• Will never use marina services

• Buy a new boat?

• Other services?

Recency, Frequency, Monetary Value (RFM)

• It is a ranking system of each customer

• Score depends on the optimum purchase behaviour

• RFM Scoring System

  • Buy Interval

  • # of Purchases

  • $ Purchase

Industry Structure

• Industry structure can be linked directly to the income statements and balance sheets of every company in an industry

• An industry is a group of companies that are related based on their primary business activities

• …Classified based on their largest sources of revenue

• Dozens of industry classifications

Industry classifications are grouped into larger categories call sectors

PESTLE

• Political

• Economic

• Social

• Technological

• Legal

• Environmental

Market

• The easiest way to find a customer is to define who they are (defining your market)

  • Market segmentation 

  • Demographic (Who?)

  • Geographic (Where?)

  • Psychographic (Why are they into it?)

Market Acronyms

• TAM? - Total Available Market

• SAM? - Serviceable Available Market

• SOM? - Share of the Serviceable Obtainable Market

• CAGR - Compound Annual Growth Rate

3 Principles of Financing

1. More cash is preferred to less cash

2. Cash now is preferred to cash later

3. Less risky cash is preferred to more risky cash

Loans (Secured vs. Unsecured)

• Secured

  • Secured debts are those for which the borrower puts up some asset as surety or collateral for the loan 

• Unsecured - Debenture

  • Lenders issue funds in an unsecured loan based solely on the borrower’s creditworthiness and promise to repay

Family & Friends Funding (FFF)

• Fast and easy

• Borrowing costs minimal

• Terms favourable

• Slack when you need it

• “Know you” - less convincing 

• Relational risk/cost

• May not be savvy

• Blurred lines (family dinner)

• Panel of critics - Best/Worst

Angel Investor vs VC

Both venture capitalists and angel investors invest money in businesses in exchange for equity - but

• angel investors tend to invest lower amounts earlier in the fundraising process,

• while venture capitalists invest more money (require more equity) later in the fundraising process.

Debt Financing

• Bank Loans

  • Banks are rarely comfortable with brand new start-ups

  • Often willing to lend if you don’t need the money

  • Lines of credit;

  • Credit cards;

  • Mortgages; and

  • Equipment loans

Equity Financing

• Angel Investors

• Valuation Key

• Venture Capitalist

• Initial Public Offering

• ART & SCIENCE

Bootstrapping

In a bootstrapped financing model, the business founders use their own savings, investments, resources, and yearning to finance their business

Mezzanine Financing

• Between debt and equity financing

• It is senior to pure equity but subordinate to pure debt

• No mandatory payments… more capital

• High interests on maturity (12%-20%)

• Often WARRANTS used...gives lender right to acquire equity

  • Set price (exercise price or strike price)

  • Set time

Crowdfunding

• Process of funding a project or venture by raising money from a large number of people who each contribute a relatively small amount, typically by the internet

  • 1) Donations

  • 2) Reward

  • 3) Debt

• Pros

  • Low financial risk

  • You keep your equity (typically)

  • Enhanced visibility

• Cons

  • Limited time

  • You campaign may be unsuccessful 

  • Your idea can be stolen

Journey Mapping

• Pre-purchase

  • Mail-drop

• Purchase

  • In-store (online) purchasing

• Post-purchase

Brand Advice

• Products are created in the factory. Brands are created in the mind

• Brand is not what you say it is. It is what they say it is

Brand Concept

“Capitalized value of trust between company and its consumers”

Brand’s Image

Brand identity is verbal and visual expression of a brand

Brand Iceberg

• 10% is viewed at surface level

• 90% is under the surface work

Brand (5 Factors)

• 1) Names

• 2) Brand MARKS

• 3) Taglines

• 4) Brand Promise

• 5) Characters

1) Brand Names

• Founders - Dick’s Ben & Jerry’s, Ralph Lauren

• Descriptive - Shred-it, Under Armour, Heeley’s, Sher-wood

• Metaphor - Nike, Patagonia

• Acronym - IEG, IMG, IBM

• Combinations of above

• Some Stats:

  • 72% of consumers make purchases based on brand names

  • 74% of people between the ages of 21 and 35 would pay more for a product with a brand name they like and trust

2) Brand Marks

• VIsual representations

  • 1) Woodmarks - name, acronym

  • 2) Emblems/logos

3) Brand Taglines

• “A short phrase that captures the company’s essence, personality, and positioning”

  • 1) Imperative (Commands action)

    • Call to action:

      • “Just do it”

      • “Think Different”

  • 2) Descriptive

    • Describes functionality:

      • Expect more… pay less

  • 3) Superlative

    • Positions as best in class:

      • “Ultimate Driving Machine” - BMW

  • 4) Provocative (provokes thought)

    • Often a question…

      • “Got Milk?”

4) Brand Promise

• Sometimes confused with a tagline

• More of an internal focus

• The brand promise is not a public statement

• Not to be communicated to the customer

  • It’s not some deep, dark secret; would be fine if it got out

  • It is not designed for public consumption

• It is only to align people’s efforts within the organization (top to bottom)

• “Promise to customers from the organization members”

5) Brand Characters

• Designed to bring brand life through association

• Best ones become icons

  • Linked to brand

PISH

• Perishable

• Intangible

• Simultaneous

  Heterogenous

Pushes

• Limited opportunity

• No mentorship

• No WFH

• Limited benefits

• Bored

• Bad PR for Business

• Boring city

Pulls

• Salary

• Promotion

• Weather

• Friends

• Dream job

• Authority

Why people leave jobs?

75% of workers voluntarily left their jobs because of their bosses and not the position itself

3 Ps of Sustainability

• People

• Planet

• Profits

Triple Bottom Line

The triple bottom line maintains that companies should commit to focusing as much on social environmental concerns as they do on profits

Design Thinking

• Empathise - understanding people

  • This step includes the work you do to understand people (and various stakeholders) within the context of your design challenge. Why people do things and what is meaningful to them

• Define - figuring out the problem

  • Seeks to bring clarity to the design problem you are facing

• Test - refining the product

• Ideate - generating your ideas

• Prototype - creation and experimentation

Customer Equity Components

• Value Equity

  • Quality, price, and convenience 

• Brand Equity

  • Awareness, attitudes, and perceptions

• Retention Equity

  • Relationship building

Brand Loyalty

• Ability to attract & retain customers

• The emphasis is on customer satisfaction

• Serve the customer in a satisfactory way

Brand Association

• Any mental connection a consumer will make with a particular brand

• Brand-as-a-person is valuable

• Brands are bought for who they are as well as what they are

• Like any other interpersonal relationship, the brand must represent values that are meaningful to the customer

Perceived Quality

• Relates to a consumer’s judgment of a product’s overall excellence relative to its intended purpose

• All about expectations…

• Ability of a team to achieve preconceived expectations for wins and progression into post-season play

• It is usually at the heart of what the customers are buying

Brand Awareness Measures

• 1) Recognition

• 2) Re-call

• 3) Top-of-mind

• 4) Knowledge

• 5) Opinion

Marketing Mix Decision (4 Ps)

1. Product

2. Price

3. Place

4. Promotion

Employer of Choice

Employer of choice means that individuals, even though they are presented with alternative choices of employment, choose to work for that organization

FAB

• Features

• Attributes

• Benefits

Revenue Model (how to make money)

• Sources of revenue - WHAT you charge

• Revenue From - HOW you charge (cash, e-deposit, etc…)

• Cash Flow - WHEN you get paid

Product/Service/Market Focus

• We sell [?] to [whom?] via [how?]

• Target Audience - Who is “Highest Valued Customer”

• Product/Service Offering - “Feature” mix

Business Model Canvas

• Key Partners

• Key Activities

• Key Resources

• Value Propositions

• Customer Relationships

• Channels

• Customer Segments

• Cost Structure

• Revenue Streams

Conjoint Analysis

• Provide consumers with 2 companies to provide feedback for

  • A utility score tells which company is more effective

Porter’s 5 Forces

• Bargaining Power of Suppliers

• Bargaining Power of Buyers

• Threat of New Entrants

• Threat of Substitutes

• Competitive Rivalry

What is Innovation>

innovation as an integral managerial competency that contributes to organizational effectiveness

Marketing Communication Mix

• Advertising

• Sales Promotion

• Personal Selling

• Public Relations

• Direct Marketing