Entrepreneurial Mind Flashcards

Chapter 4: Building a Business Model

• A business model bridges the gap between laboratory success and marketplace success.
• It encompasses the product or service offering, target customers, and the economic engine needed to achieve profitability and growth.

What is a Business Model?

• Peter Drucker defines it as answering who the customer is, what value you create for them, and how you do it at reasonable costs.
• A business model defines the core value proposition, target customers, key resources, revenue streams, and how to overcome challenges.

The Business Model Canvas

• A visual tool for describing, challenging, designing, and inventing business models.

Traditional Types of Business Models

• Manufacturer: Creates finished products from raw materials to make a profit.
• Distributor: Buys non-competing products, stores them, and resells to retailers or directly to customers.
• Retailer: Purchases goods from wholesalers or manufacturers and sells them to consumers.
• Franchise: A franchisor provides access to their business knowledge, processes, system, and brand to a franchisee.
• Brick and Mortar: Traditional street-side business selling products/services face-to-face in a physical location.
• Bricks and Clicks: Combines online and physical presence.
• Direct Sales: Products are sold directly to customers.
• High Touch: Involves significant human interaction.

Modern Business Models

• Nickel and Dime: Uses the lowest price strategy for basic products/services.
• Freemium: Offers a combination of free and paid services, common in tech companies.
• E-Commerce: An upgrade of the brick-and-mortar model, utilizing online platforms.
• Subscription: Offers long-term contracts for a fixed monthly or annual fee.
• Aggregator: Acts as a middleman between two parties.
• Online Marketplace: A platform hosting multiple sellers.
• Agency Based: Partnering with companies specializing in non-core activities.
• Hidden Revenue: Offering services for free, generating revenue through advertisements paid by sponsors.
• Affiliate Marketing: Earning profit through commission by promoting partners’ products.
• Drop Shipping: Selling products without owning inventory, using an e-store.
• Network Marketing: Direct marketing and selling (multi-level marketing).
• Crowdsourcing: Soliciting user input for value-added concepts in the product/service.
• Blockchain: Decentralized digital ledger that is irreversible, allowing contributions from anyone.
• Low Touch: Minimal human assistance in selling.
• Razor and Blade: Selling one item at a low cost to increase sales of complementary goods.
• Consulting: Offering services based on the expertise of qualified professionals.
• Social Enterprise: A business model focused on creating positive change alongside profit.

Key Partners

• Key partners are the network of suppliers and partners that improve the business model's effectiveness.
• Partnerships can be with other businesses, governmental, or non-consumer entities.

Types of Partnerships

• Strategic Alliances: Agreements between non-competitors for mutual benefit while retaining independence.
  • Example: A cafeteria partnering with coffee bean suppliers.
• Coopetition: Agreements between competitors to share risks.
  • Example: Companies forming awareness for their shared industry.
• Joint Ventures: Two businesses form a completely new company.
  • Reasons: new market or geographic area.
• Buyer-Supplier Relationship: Ensuring a dependable supply chain.
  • Benefits: stable supply for the buyer, established customer for the supplier.

Key Activities

• Key activities are essential for achieving the value proposition and successful operation.

Categories of Key Activities

• Marketing: Promoting products/services to create awareness and demand.
• Sales: Selling products/services.
  • Example: Personal selling involves building customer relationships and providing solutions.
• Design: Creating designs for various items.
  • Example: An apparel company designs clothing lines.
• Development: Adding value through product and service development.
  • Example: A software company develops customizable software.
• Operations: Manufacturing and delivering products/services.
  • Includes designing, manufacturing, and ensuring high quality in large quantities.
• Distribution: Reaching out to customers for sales and delivery.
  • Example: Repair shops providing warranty services.

Key Resources

• Key resources are the most important assets required to make the business model work.
• They allow a company to create value for its customers, reach markets, maintain customer relationships, and earn revenue.

Importance of Key Resources

• Essential for producing products/services.
• Support distribution channels.
• Help maintain customer relationships.
• Drive revenue streams.
• Example: Apple’s key resources include patented technology, brand reputation, software engineers, and distribution networks.

Four Types of Key Resources

• Physical Resources: Tangible assets needed for production and operation.
  • Examples: buildings, vehicles, machines, distribution networks.
• Intellectual Resources: Intangible assets used to maintain competitive advantage.
  • Examples: brand names, patents, copyrights, proprietary knowledge, partnerships.
• Human Resources: Essential people, especially in creative, knowledge-based industries.
  • Examples: skilled employees, engineers, designers, sales personnel.
• Financial Resources: Funds available for business activities.
  • Examples: cash reserves, bank loans, investors’ capital.

Customer Value Proposition (CVP)

• A clear, concise statement explaining how a product/service solves customer problems, satisfies needs, and delivers value better than competitors.

Importance of Customer Value Proposition

• Communicates core benefits to the customer.
• Differentiates a business from its competitors.
• Helps businesses target the right customer segments.
• Drives marketing messages and sales strategies.

Key Elements of a CVP

1. Target Customer – Who you serve
2. Problem Solved – What issue you address
3. Benefits Delivered – What value you offer
4. Differentiation – Why you’re better than others

• Example: Uber’s CVP: "A tap on your phone gets you a ride — reliable, affordable, and everywhere."

Four Main Types of CVP

• All Benefits: Listing all benefits the product/service offers.
  • Example: New smartphone highlighting high-resolution camera, fast processor, long battery life, and large storage.
• Resonating Focus: Emphasizing the one or two things most important to the target customer.
  • Example: Volvo’s CVP: "The safest car you can drive."
• Favorable Points of Difference: Highlighting features/benefits that make the product/service superior.
  • Example: Dyson vacuum cleaners emphasizing stronger suction, bagless technology, and innovative design.
• Value-for-Money Proposition: Balancing price and benefits received.
  • Example: IKEA’s CVP: "Affordable, stylish, and functional furniture for everyone."

Customer Relationships

• Strategies and ways a business interacts with and manages its relationships with customers to attract, retain, and satisfy them.

Importance of Customer Relationships

• Increase customer loyalty
• Improve customer satisfaction
• Boost business reputation
• Encourage repeat business and referrals
• Support long-term profitability
• Example: Starbucks rewards program

Six Major Types of Customer Relationships

• Personal Assistance: Direct interaction between a customer and a company representative.
  • Example: Customer support hotline.
• Dedicated Personal Assistance: Specific representative assigned to a client.
  • Example: Private banking services.
• Self-Service: Customers perform services on their own without direct assistance.
  • Example: Amazon.
• Automated Services: Automated processes and systems providing services/information.
  • Example: Spotify’s personalized playlists.
• Communities: Platforms where customers share experiences and advice.
  • Example: Apple Support Communities.
• Co-Creation: Involving customers in product development or marketing content creation.
  • Example: LEGO Ideas.

Customer Segments

• Groups of customers sharing needs, behaviors, and other traits.
• Segmentation can be based on demographics or psychographics.
• A company may target a single group or several groups.

Various Types of Segments

• Mass: An unsegmented market with products appealing to everyone.
  • Example: Aspirin, orange juice.
• Niche: A customer segment with distinct characteristics and specific needs.
  • Example: Automobile parts suppliers.
• Segmented: Customer segments with small differences in their needs.
  • Example: Retail banking differentiating by customer net worth.
• Diversified: Companies serving customer segments with very diverse needs and wants.
  • Example: San Miguel Corporation.
• Multi-Sided Platforms: Customer segments reliant on each other.
  • Example: Credit cards needing both customers and accepting stores.

Channels

• Touch points through which a company communicates with its target customers.
• Channels play a big role in defining customer experience and providing value.

Five Phases of Channels

1. Awareness: Educating target customers about the product/service.
   • Examples: Google, YouTube, Instagram, Facebook.
2. Evaluation: Customers evaluating the product/service to form an opinion.
   • Examples: Google My Business, Social Media accounts.
3. Purchase: The actual sales process.
   • Examples: Stripe, PayPal.
4. Delivery: Reaching the customer and providing the promised value.
   • Examples: UPS, FedEx, USPS.
5. After Sales: Customer care and support after purchase.
   • Examples: Email, Facebook Messenger.

Different Channel Types

• Direct Channels: Owned or controlled by the entrepreneur.
  • Benefits: Strong relationships, higher profit margins, added costs.
• Indirect Channels: Using intermediaries or partner stores.
  • Benefits: quick market reach, less investment, lower margin.

Value Proposition

• Designed to address customers’ needs by focusing on their pains, gains, and jobs.

Key Components

• Gain Creators: How products/services provide added value.
• Pain Relievers: How products/services reduce customer frustrations.
• Products and Services: Meeting customer needs and alleviating pain.
• Customer Jobs: Tasks customers complete when engaging with offerings.
• Identified Pains: Common challenges customers encounter.

The Lean Canvas Model

• A problem-focused framework designed for small entrepreneurs and startups.
• Emphasizes understanding customer needs, actionable metrics, and rapid idea-to-product transitions.

Elements of the Lean Canvas Model

1. Problem: Identify three key problems the target customer segment faces.
2. Solution: Propose effective solutions to the identified problems.
3. Value Proposition: Present a clear and marketable promise to solve the identified problems.
4. Unfair Advantage: Highlight unique aspects of the business that competitors cannot replicate.
5. Customer Segments: Define the specific groups facing the problems and connect them to the solutions.
6. Channels: Outline how the business will reach its customer segments.
7. Revenue Streams: Detail how the business will generate income.
8. Cost Structure: List all operational expenses.
9. Key Metrics: Identify measurable indicators of success.

Chapter 5: Customers and Markets

• Market: Any place where sellers(manufacturers, distributors and retailers) and consumer meet to exchange products and/or services in exchange for value(money.)
• Markets are always dynamic, requiring businesses to constantly monitor trends and customer needs.
• Price of products and/or services are dictated by the market due mainly from demands and competition.

Things Customers Look For

• Price: Majority of customers consider price within their budget.
• Experience: Worthwhile experience in addition to good quality.
• Design: Appealing product design.
• Functionality: Serving its intended purpose.
• Convenience: Readily availability.
• Reliability: Meeting customer requirements and expectations.
• Compatibility: Well-matched with other products the customer is already consuming.

Types of Customers

• Potential Customer (Potential Pandoy): Needs convincing and assistance.
• New Customer (Netnot): First-time customer requiring a smooth adoption period.
• Impulsive Customer (Impulsive Icoy): Makes instant buying decisions based on mood.
• Discount Customer (Discount Daboy): Only buys on a discounted rate.
• Loyal Customer (Loyal Lando): Satisfied customer who keeps coming back.

Target Customer Group

• A group of potential consumers or organizational buyers to whom a company wants to sell its products/services.

Approaches to Describing the Perfect Customer

1. Customer or Business (B2B or B2C)
2. Geographic (Location)
3. Demographic (Age, gender, income, education)
4. Psychographic (Personality, lifestyle, attitudes)
5. Generation (Baby Boomers, Gen X, Millennials, Centennials)
6. Cohort (Shared experiences)
7. Life Stage (Infancy, childhood, adulthood, old age)
8. Behavioral (Customer loyalty, occasion-based purchase)

Customer Personas

• A short fictional profile of an ideal user or customer.

Steps to Create a Customer Persona

1. Create a Header (Fictitious name, photo, quote)
2. Include a Demographic Profile
   • Personal background (age, gender, etc.)
   • Professional background (occupation, income, etc.)
   • User environment (physical, social, technological context)
   • Psychographics (attitudes, interests, motivations)
3. Include End Goals
4. Include a Scenario (Everyday life interaction with the product/service)

Customer Journey Map

Key Components of a Journey Map

1. Actor (Persona or user viewpoint)
2. Scenario + Expectations (Situation in relation to the actor’s goals)
3. Journey Phases (High-level stages)
4. Actions, Mindsets, and Emotions (Behaviors, thoughts, feelings)
5. Opportunities (Insights from mapping)

Steps to Craft a Customer Journey Map

1. Set clear objectives for the map
2. Profile personas and define their goals
3. Emphasize the target customer personas
4. Write down all the touch points
5. Identify the elements of the map to show
6. Identify resources on hand and needed
7. Experience the customer journey
8. Create needed changes

Market Sizing

• The aggregate number of possible buyers and revenue potential.

Market Sizing Approaches

1. Potential Available Market (TAM) – Total possible global market value.
2. Total Addressable Market (TAM) – Potential value from a specific customer segment.
3. Serviceable Available Market (SAM) – The subject customer of the TAM.
4. Serviceable Obtainable Market (SOM) – The target the entrepreneur will primarily sell to.

Market Sizing Approaches

• Top Down: Uses demographics to estimate market size.
• Bottom Up: Extrapolation to reach an applicable scale when top-line demand estimates are unavailable.

Entrepreneurship Marketing

• A marketing spirit that distinguishes itself from traditional marketing practices.
• Uses new and non-traditional marketing practices.

Marketing Strategies

1. Relationship Marketing
2. Expeditionary Marketing
3. One-to-One Marketing
4. Real Time Marketing
5. Vital Marketing
6. Digital Marketing

Six Elements of Entrepreneurial Marketing

1. Customer Intensity
2. Continuous Innovation
3. Strategic Flexibility
4. Calculated Risk-taking
5. Proactiveness
6. Resource Leverage

Creating a Personal Brand

• Differentiates an entrepreneur from competitors.

Benefits of Personal Branding

1. Trust and Authority
2. Media Features
3. Build a Network
4. Attract More Customers
5. Premium Pricing
6. Create a Lasting Platform

Social Media Platforms for Personal Branding

1. LinkedIn
2. Twitter
3. Pinterest

Chapter 6: Networks and Founding Team

Networking

• Networking helps entrepreneurs build strong relationships, gain knowledge, attract new customers, and share their business ideas.
• Building a solid team is a non-stop progressive activity. Creative and innovative individuals are essential for small and large companies to thrive.
• Networking is a means of building mutually beneficial connections that support mutual business growth.

The Value of Networking to Entrepreneurs

• Builds mutually beneficial relationships.
• Attracts potential customers and increases revenue.

Advantages of Networking

1. Better Business Opportunities
2. Increased Status
3. Enhanced Knowledge
4. Positive Influences
5. Growing Confidence
6. Personal Satisfaction

Ways of Starting Networking

1. Enhancing the Profile
2. Offering Help First
3. Connections
4. Be a Resource on Social Media
5. Do Basic Press Outreach
6. Opportunities

Incubators and Accelerators

• The Philippines is a good location to start and grow startups because of low cost living, a growing number of young population, English language proficiency and an allowance for upgrades.
• An incubator is a business place that helps startup businesses and new entrepreneurs to develop their products and ideas by supporting them with services such as training, management support, intellectual property (IP) rights assistance, resources and even shared office and facility spaces.
• An accelerator is another business place that offers a program with a fixed term and includes mentorship and educational components that results in public pitch event.

Networking to Build the Founding Team

1. The Prima Donna Genius
2. The Superstar
3. The Leader
4. The Industry Veteran
5. The Sales Animal
6. The Financial Suits

Characteristics of a Great Founding Team

• Hungry for Knowledge
• Admit Mistakes
• Failing is Not Defeat
• All Members are Obsessed

Ways in Doing Networking

• Networking through Business Events
• Joining Local Business Groups