ECON 125 Midterm

4 Core Models of Entrepreneurship

1. Opportunity Identification

2. Prototyping, Testing, and Iterating

3. Feasibility and Viability

4. Art of the Pitch

Entrepreneurship Foundational Underpinings

1. customer centered

2. learning and entrepreneurial mindset

4. high performing teams

Being an Entrepreneur

thinking and doing something that you have not done before, in order to achieve a desirable goal or outcome

- think and act innovatively

- ex: new job, moving, getting a degree, pitching your boss

Ethical Condition

maximize your happiness without harming others

Human Centered Design Thinking

foundation for developing ideas

Iterate and Pivot early and often

test assumptions/hypotheses (adjust)

Value Proposition

clear, compelling, unique, meets a customer need

why does a customer pick your solution over every other option

Feasibility vs. Viability

feasible = can it work

viable = does it work as a venture

Druckers 7 Areas of Opportunity

1. The Unexpected

2. Incongruities

3. Process Needs

4. Changes in Industry Growth

5. Demographics

6. Changes in Perception

7. New Knowledge

Druckers - The Unexpected

- Inside Source (need inside knowledge of an industry)

- more of less demand than anticipated

Druckers - Incongruity

- inside source

- gaps between reality as it is and as it out to be

- look for customer complaints

- ex: entry level jobs requiring years of experience

Druckers - Process Needs

- inside source

- updating an established process with new/necessary information

Druckers - Industry and Market Structure Change

- inside source

- market growth, maturing, convergence

Druckers - Demographics

- outside source

- population, age, education, income

Druckers - Perception

- outside source

- societies assumptions, attitudes, and beliefs shift

- what do people life/dislike

Druckers - New Knowledge

- outside source

- innovation through invention

What does Drucker say about Change

entrepreneurs don't create change, they exploit it

core idea: where there is change there is opportunity

Biggest Mistake in Entrepreneurship

People fall in love with a solution before they understand the problem

(DO NOT jump to a solution)

- should view the world as unsolved problems, not a canvas for ideas

Tony Fadell - Habituation

turning knowledge into habitats in order to free up brain space and learn new things

When is Habituation Bad

when it does not allow you to notice problems in everyday life

- become blind to problems

How to fight Habituation

see the world with fresh eyes

- beginners mindset

- look past obvious problems

- look at the broader context

- need to think younger

Reading: Entrepreneurship Stats - Who starts businesses

- younger adults

- men outnumber woman in early stages (closing gender gap would contribute significantly to global GDP)

Reading: Entrepreneurship Stats - Industries Created

- 75% are consumer or businesses services

- service based businesses are most likely to survive compared to product-based

Reading: Entrepreneurship Stats - Funding

most US businesses rely on personal funds

Reading: Entrepreneurship Stats - Risk and Challenges

- fear of failure stop a large amount of potential entrepreneurs

- 65% of start ups fail within 10 years

- inflation is a huge challenge

- lack of resources

- limited access to technology

Reading: Entrepreneurship Stats - Trends

- most entrepreneurs value social and environmental sustainability over profit

- most entrepreneurs do NOT see AI as a vital tool (but AI and technology are increasing in importance)

Reading: Entrepreneurship Stats - Big Takeaways

- new businesses operate with limited resources and inadequate infrastructure

- most new companies are created by young people

- persistent gaps in implementation and uneven pace of progress

- entrepreneurship increases economic growth

Reading: Institute of Sustainability Studies - Big Takeaway

transparency and leadership on sustainability = competitive advantage

- sustainability is a strategic business strategy

Reading: Institute of Sustainability Studies - Economies

Circular - reduce, reuse, repair, recycle (reducing waster)

traditional - take - make - use - throw away

Reading: Institute of Sustainability Studies - Increasing Stability

- can increase business value

- customer loyalty

- brand reputation

- competitive advantage

Reading: WRI State of Climate Action

- real progress on climate solutions are being made but change/progress is not happening fast enough

- maintaining current growth rates is not enough (less progress today means more needed acceleration later)

- more urgency in this decade is needed

Psychological Safety (most important factor of teamwork)

a shared belief held by members of a team that the team is safe from interpersonal risk taking

- a sense of confidence that the team will not embarrass, reject, or punish someone for speaking up

situational humility + curiosity = psychological safety

Bruce Tuckman Model

Stage 1: Forming

Stage 2: Storming

Stage 3: Norming

Stage 4: Performing

Bruce Tuckman - Forming

- teammates are all positive and excited

- no real growth is made as no topics that could lead to conflict are brought up

Bruce Tuckman - Storming

- stage where many teams fail

- tensions, struggle, arguments

- people push against boundaries

want: to be able to share views without feeling judged and resolve differences

Bruce Tuckman - Norming

- disagreements resolved

- cooperation and shared responsibility

- members accept each other

Danger: could lapse back to storming stage (backwards of progress) or teammates will avoid topics that will lead to storming stage

Bruce Tuckman - Performing

- focus on achieving common goals

- motivation and knowledge

- often unexpectedly high success

- people joining or leaving do not disrupt performance

Bruce Tuckman Big Idea

- problems can help a team grow and bond just as much as success

- it is common for teams to revert to earlier stages (go through stages multiple times)

Empathy Interviews - Definition

a human centered conversation to understand someone's feelings, motivations, and needs

uncover the qualitative, emotional, and human elements of user experience (understand the user not to confirm your idea)

requires active listening and hearing

Empathy Interviews - Preparing

interview average users, middle users, and extremes (people who give uncommon insights)

- should immerse, observe, and engage

- leverage the power of why (dig deeper)

Empathy Interviews - Should NOTS

- DO NOT insert your own thoughts or values

- avoid binary questions (questions that can be answered in one word)

Design Thinking

Is a process and a mindset

Design Thinking Mindset

1. human values (understand consumer wants and needs)

2. Showing not Telling (create tangible things)

3. Bias Towards Action (learn by doing)

4. Learning Mindset (embrace learning, it is okay to fail)

Design Thinking Process

1. Empathize

2. Define

3. Ideate

4. Prototype

5. Test

6. Implement

Design Thinking Process - Empathize

- observe and understand user's needs and problems

Design Thinking Process - Define

- analyze observations

- gain insights

- make sense of data from empathize

Design Thinking Process - Ideate

- think of creative solutions for each aspect of the problem

Design Thinking Process - Prototype

- prioritize ideas (1 or 2)

- building something tangible to show people

- low resolution prototyping

Design Thinking Process - Test

- identify assumptions and hypotheses that you're testing

- get feedback

Design Thinking Process - Implement

- check feasibility

- build a viable business model

Design Thinking Key Points

- process is a cycle (should constantly be refining/going back through stages)

- customer should always be at the center of everything

MIT Sloan: Design Thinking, Explained

- human centered (involve users from the start)

- problem before solution (set aside assumptions)

- suspend judgement early (generate many ideas before critiquing)

- iterate (learn though repeated build test refine cycles)

Empathy Map

- removes bias and aligns the team on a shared understanding of the user

- reveals weakness in research

- uncovers needs user aren't aware of

- shows what drives behavior

- guides toward meaningful innovation

use these maps after interviews to help organize information

7 elements of Empathy Map

1. user (who are you designing for)

2. see (what is their environment)

3. think/feel (what emotions do they show, their motivations, goals, needs)

4. hear (what do they hear from people)

5. say/do (statements made/actions observed)

6. pain (fears, frustrations, anxieties)

7. gain (wants, needs, hopes, dreams)

Point of View (POV)

1. define your user

2. identify needs (most essential ones)

3. express key insights

user + need = insight

POVs do NOT propose a solution

Design Challenge Statement

_______ is a challenge for _______ because _________.

- should explore users, needs, insights first

How might we statements (HMW)

- NO solutions going into the process

- need to explore ideas with no bias

How - answer not yet known

Might - one POSSIBLE solution

We - collaboration

Affinity Clustering

- use interview insights and secondary research to identify observations, frustrations, or insights

- compare and combine insights with others and clump similar observations

- used to identify common themes

Creativity

- a skill that everyone has and can practice

- creativity drastically decreases as age increases

Why does creativity increase

- as people learn to accept others opinions, evaluations, and beliefs

- judgement reduces creativity

Convergent Thinking

- Rational thinking

- conscious thinking

- where we judge ideas, criticize them, refine them, combine and improve them

Divergent Thinking

- Imaginative Thinking

- subconscious thinking

- imagine new ideas

Which type of thinking should you do

- Need both divergent and convergent thinking

- but doing them both at once kills originality

Creativity Sabotage

stress

trauma

self criticism

censorship

How to Build Creativity

- let your mind wander

- create a judgement free zone

- generate many ideas

- pick the right environment

Brainstorming

generating many ideas for a clearly defined design problem

- use how might we questions

- encourage free thinking

- collaborate with a group

- ideation phase

8 Rules to Brainstorming

- time limit

- specific problem

- no judgement

- welcome odd ideas

- quantity over quality

- stay visual

- one conversation at a time (only constraint)

- build on ideas

Shared Core for Brainstorming

- Diverge first

- converge later

Using AI or an App for Prototype

- venture idea should NOT only be an app of AI

- should not be easily replicable by competitors once it is released

What does a good venture idea (Prototype) have

- need a unique value proposition and product market fit

Product Market Fit

people want it badly enough to give up their current habit or tool and give you something of value (pay)

- will a customer change and pay for it

Prototype

- anything a user can interact with

- bias towards something a user can experience

combines early testing and experimentation

- unready tangible ideas is the fastest way to receive feedback

Why Prototype

- ideate and problem solve

- to communicate

- start conversations (talk with users)

- fail quickly and cheaply

- test possibilities (don't commit too early)

How to Prototype

- start building

- don't spend too long on one (avoid emotional attachment)

- ID what you are testing

(prototypes should answer a particular question)

- build with user in mind

Plus Acumen: Prototyping in Design Process - Why Prototype

- great ideas do not appear in a vacuum

- can't work backwards

- prototyping is a way to think (makes something tangible)

How prototypes evolve

- first design the right thing and then design the thing right

- early prototypes are low cost, low fidelity

- prototypes will become more high fidelity as you learn and test

4 Step Process to Prototyping

1. Determine what to prototype (which questions and assumptions are the most crucial, is there any constraints)

2. Make it real

(more variations, faster iteration = better)

3. Get Feedback

( test multiple alternatives, increase the amount of feedback you get)

4. Iterate and repeat

(positive feedback = increase complexity, negative feedback = back to the drawing board)

6 Prototyping Pitfalls

1. diving into the first good idea

(should explore many approaches)

2. Falling in love with your prototype

(endowment effect = overvaluing what you own)

3. wasting time explaining and pitching

(show do not tell)

4. Prototyping without a purpose

(need to have a defined goal)

5. Feeling discouraged by failure

(what have you learned)

6. Seeing prototyping as a waste of time

(prevent costly mistakes later)

A prototype is

NOT a MVP or solution

Prototype Loop

prototype -> share -> get feedback -> refine

Prototypes must be

tangible and testable

Giving Feedback

- include self disclosure (how has what the teammates actions affected you and the team)

- do not criticize

- acknowledge strengths and opportunities for improvement

- be specific, genuine, and useful

- make sure there is no discrimination or bias

Receiving Feedback

- take a breath

- be an active listener

- ask questions for clarity

- show appreciation

remember: the worst feedback is no feedback

HubSpot Fleishman: How to give negative feedback

- give feedback in the moment or closer to (do NOT wait)

- make it about the WHAT not the WHO

- treat it as a coaching moment

- make it a two way street

Entrepreneur: Radical Candor

radical candor = blunt but caring feedback (works well in startups)

benefits = trust, faster growth for inexperience employees, immediate correction

risk = can become bulling

feedback should always be done in private

be specific and actionable

Testing

- getting feedback from target users about the prototypes you created

- want to validate or invalidate assumptions that you have made

- want additional insights

- do NOT sell or ask if they like your solution

- want to learn and improve

4 Step Process

build -> run test sessions -> organize and synthesize -> integrate and iterate

I like / I wish

appears in both the team feedback section and the interaction design foundation testing methods

do not defend or justify (applies to both receiving teammate feedback and hearing user feedback on your prototype)

Before Testing

- test on the right people

- test on right context

- prepare questions in advance

During Testing

- listen more than you talk

- stay neutral and flexible

- avoid binary questions

- you are NOT selling

- test like your prototype is wrong from the start

Strategy

being different in a way that is hard to replicate in order to have sustainable competitive advantage

- should focus on what NOT to do

choose who your customers will be, who they won't be, and deciding how you will attract and keep these customers

Porters 5 Forces

1. threat of new entry

2. bargaining power of buyers

3. bargaining powers of supplies

4. threat of substitutes

5. rivalry amongst existing competitors

Porter - Threat of New Entry

- how easy is it for competitors to enter your market

- focus on barriers to entry (economies of scale (rapid growth) and product differentiation)

Porter - Bargaining Power of Buyers

- if customers have upper hand it is hard for sustainable competition

- customers who can dictate terms, who can find easy substitutes, whose cost structure is dependent on your service

Porter - Bargaining Power of Supplies

- can your suppliers raise the prices of your materials

- limits strategic options

Porter - Threat of Substitutes

- not the same product but can perform the same function making it easy to switch

Porter - Rivalry amongst existing competitors

- price competitions

- limits ability for strategic strategies

SWOT Analysis

Internal

- strengths

- weaknesses

External

- opportunities

- threats

helps you identify advantages and vulnerabilities

Planning Action: Developing Strategic Position

- competitive strengths

- address weaknesses

- identify strategic initiatives (no more than 4)

- monitor initiatives over time

Biggest Strategic Weakness

a lack of a truly compelling offering to the target customer