Entrepreneurship Notes

What is a business plan? Plan for the creation and management of the business with special attention to - marketing plan describing match of products and strategy to current and future markets. Operations plan assessing all revenues, costs, and financial requirements and sources. Business plan format generally includes: (Suggested format from US Small Business Administration) 1. Executive Summary 2. Company Description 3. Market Analysis 4. Organization and Management 5. Marketing and Sales 6. Service or Product Line 7. Funding Request 8. Financials 9. Appendix Pricing Pricing requires understanding current and future customer & competitor desires & plans. Customer oriented pricing considerations are critical to setting prices throughout the product lifecycle; starting at the R&D stage. Pricing strategies require constant evaluation & refinement as the market reacts & evolves. This blog post is based on my learnings from the course on ‘entrepreneurship’ offered b...

Key partnerships describe the network of suppliers and partners that make the business model work. Types of partnerships: 1. Strategic alliances between non-competitors 2. Joint ventures to develop new businesses 3. Buyer - supplier relationships 4. Competition: strategic partnership between competitors Motivations for creating partnerships: 1. Optimization and economy of scale: most basic form of partnership or buyer - supplier relationship designed to optimize resources and activities 2. Acquisition of particular resources and activities - extend capabilities relying on other firms to furnish particular resources or perform certain activities - motivated by needs to acquire knowledge, license, or access to customers 3. Reduction of risk and uncertainty This blog post is based on my learnings from the course on ‘entrepreneurship’ offered by Maryland Technology Enterprise Institute, University of Maryland through Coursera (2014).

Customer segmentation is the practice of dividing a customer base into groups of individuals that are similar in specific ways. Separate segments if: - needs require and justify distinct offer - reached through different channels - require different types of relationships - are willing to pay for different aspects - have different profitability Customer segment types: Mass market: one large group comprising only one segment Niche market: specific, specialized customer group Segmented: slightly different customer group Diversified: Multiple unrelated customer group Multi-sided markets This blog post is based on my learnings from the course on ‘entrepreneurship’ offered by Maryland Technology Enterprise Institute, University of Maryland through Coursera (2014).

A business model describes the rationale of how an organization creates, delivers, and captures value. Types of business models: 1. Sell a product: well defined, easy to scope and price, produce inventory with hope for sales 2. Sell a service: low startup costs, flexible to customer needs, tough to price 3. Sell a subscription: customer pay regularly, recurring fees and may receive regular product upgrades 4. License a technology: involve lower risk and lower reward 5. Advertising: works best when volume of users/viewers is large 6. Hybrids: sell products & offer services together This blog post is based on my learnings from the course on ‘entrepreneurship’ offered by Maryland Technology Enterprise Institute, University of Maryland through Coursera (2014).

Solutions are not about the technology or the features. Solutions focus on customer value. Features, functions and technologies are simply vehicles for value creation.  Competitors influence your relative value for customers. Is your advantage superior and sustainable? Degree of advantage: Better features or functions, lower price for the value delivered due to your operations or strategies, rareness - competitors cannot offer the same set of values to this customer. Sustainability of advantage: How easily can a competitor copy or exceed your resources, know how, relationships - determines the likelihood of competitors replicating or surpassing your venture. Build the team with attention to understanding: What are their motivations? How committed are they to this venture? How realistic are they about the venture's risk and rewards? What skills, abilities and knowledge do they have? What is their reputation? Where have they worked? Where have they been educated? What hav...

Value innovation examines the cost-value equation in search of new solutions. With big ideas and scarce resources, entrepreneurs must be efficient in their decisions and discerning in their time & financial management. To develop an innovative value curve, explore the benefits that matter most to customers: emphasize what matters to them - invest in exceeding customer desires and eliminate or reduce less valuable factors - redirect money and time into raising benefits and creating value. The key elements of opportunity identification are - defining the problem, crafting a competitive solution, building your advantage, and forming the right team. This blog post is based on my learnings from the course on ‘entrepreneurship’ offered by Maryland Technology Enterprise Institute, University of Maryland through Coursera (2014).

Strategic planning is the formulation of long-range plans for the effective management of environmental opportunities and threats in light of a venture’s strengths and weaknesses. Includes - defining the venture's mission, specifying achievable objectives, developing strategies, setting timelines and measures. Basic steps in strategic planning: 1. Examine the internal & external environments of the venture (SWOT) 2. Formulate the venture's long-range and short range strategies: mission, objectives, strategies, policies 3. Implement the strategic plan: programs, budgets, procedures 4. Evaluate the performance of the strategy 5. Take follow-up action through continuous feedback Benefits of strategic planning: cost savings, fewer cash flow problems, faster decision making, more efficient resource allocation, improved competitive position, more timely information, more accurate information, more accurate forecasts, reduced feelings of uncertainty. Some reasons for the ...

At general management’s core is strategy: defining a company's position, making trade-offs and forging fit among activities. Principle #1: Strategy is the creation of a unique and valuable position, involving a different set of activities - serving few needs of many customers & serving broad needs of few customers. Principle #2: Strategy requires you to make trade-offs in competing to choose what not to do - you cannot do all things to all people, focus on developing a solution and a brand that is meaningful and consistent to customers. Emphasize serving one market well and explore growth opportunities later. Principle #3: Strategy involves creating a 'fit' among a company's activities - company’s activities must reinforce one another. For example, Nordstrom’s higher cost matches with personalized service. Fit drives competitive advantage and sustainability. Competitors struggle to imitate well-developed activities. This blog post is based on my learnings from th...

Economic feasibility of producing your anticipated product or service: The best marketed products often outsell the best products if not marketed well. Focus on two very important concepts: understanding the process of personal selling and understanding the pricing of new products & services. Beware of overdesigning the product to the point that the price is beyond your customer. Keep production costs manageable and volume appropriately high. High development and low demand condition equals unprofitable opportunity. Costs include designing, producing, distributing, marketing & supporting the new product. Examine competitor’s financials to help scope your own financial forecasts and goals. Beware of underpricing your product. If offering a comparable level of features, price your product just under the price of competitors. See if your price is high enough to cover costs when fixed costs are large. This blog post is based on my learnings from the course on ‘entrepreneurship’ off...

Exploring and satisfying real market needs: To build a successful new company, you need to introduce a product or service that satisfies customer needs in a better way than competitors, and at a price that fits the business model for your venture. You do not need to meet every customer need imaginable. Focus on the products and services you can create & launch successfully. Understanding customer preferences: 1. Evaluate preferences for new products and services using focus groups & surveys 2. Examine forecast trends and potential adoption patterns to learn about customer preferences 3. When the product is truly new, the customer may not understand his or her own need for it Prime opportunities for new products are usually sources of pain or aggravation: best clue is a customer complaint and another clue is the expression of an unfulfilled wish. Identifying the need is only the start - after that, you need to develop a product or service that meets the need and consider the fut...

A first step in identifying a valuable opportunity is identifying the change or gap that makes the opportunity possible. Types of changes that increase new venture opportunities: Changes in technology: new technology allows for the expansion of new innovations, significant change can create entirely new markets. Changes in social and demographic factors: opens up opportunities for new technology businesses by altering people's preferences and creating demand for things where demand had not existed before, social trend can create new opportunities. Changes in political and regulatory rules: change creates opportunities because it is productivity enhancing. In other cases, changes generated are not productive, but merely shifts value from one set of economic factors to another. This blog post is based on my learnings from the course on ‘entrepreneurship’ offered by Maryland Technology Enterprise Institute, University of Maryland through Coursera (2014).

Reputation effects include brand awareness and perception. Customers often prefer to buy from companies with which they have had successful transaction in the past, or companies they know well via friends, family, or companies with effective branding effects. Focus on serving new customers in new ways to make the reputation of the existing competitors irrelevant. Marketing is everything from product design, development, advertising, promotion, distribution and pricing. The brand is what remains after the marketing has swept through the room. It is what sticks in your mind associated with a product, service, or organization. Dimensions of brand equity: 1. Brand awareness: familarity with the brand 2. Perceieved quality: based on desired features 3. Brand associations: connects the customer to the brand 4. Brand loyalty: bond or tie to the brand Ways to build brand equity: 1. Create and communicate your image 2. Build awarenness and familarity 3. Build associations: name, logo, de...

Complementary assets involve tangible (money, equipment, real estate etc.) and intangible (knowledge, relationships etc.) resources. Patents or brands may sit between the tangible and intangible categories. You have advantage over competitors when you have strong knowledge, relationships and financial capital. Beware of starting a company in an area where the company with the most money wins: a large companies with more money may enter a space later and dominate that market. Instead, compete where knowledge and relationships are key resources of competitive advantage. This blog post is based on my learnings from the course on ‘entrepreneurship’ offered by Maryland Technology Enterprise Institute, University of Maryland through Coursera (2014).

The learning curve refers to the speed of learning something new. What you know today, your interests, commitment and availability of resources to learn new things has influence on learning curve. As a novice entrepreneur, you may not start at the same point in the learning curve as an established company - due to their past operations, they've moved up the learning curve through trial and error, research, lessons learned etc. To minimize the gap between your knowledge and your your competitors' knowledge, pursue entrepreneurial ideas in new industries and seek new markets. This blog post is based on my learnings from the course on ‘entrepreneurship’ offered by Maryland Technology Enterprise Institute, University of Maryland through Coursera (2014).

Sustainable competitive advantage - is achieved when a venture has implemented a strategy that other companies do not duplicate. - can only be maintained until competitors are able to duplicate or develop a substitute. - requires a full complement of commitments, decisions, and actions by the entrepreneurs. The five competitive forces that determine industry profitability by Michael Porter: 1. Potential entrants: threat of new entrants 2. Bargaining power of suppliers 3. Bargaining power of buyers 4. Threat of substitute products or services 5. Rivalry among existing firms This blog post is based on my learnings from the course on ‘entrepreneurship’ offered by Maryland Technology Enterprise Institute, University of Maryland through Coursera (2014).

In the previous posts, we learned that industry conditions frame the knowledge and demand factors. Industry status addresses industry lifecycle and structure: Emphasizes growth opportunities Explores industry evolution Provides insights into an industry’s timeliness for new entrepreneurial entrant Industry Structure Industry structure refers to the nature of barriers to entry and competitive dynamics in the industry. Capital Intensity: Amount of money required to enter and compete in the industry Advertising Intensity: Addresses the importance of advertising and branding to the success of competitions in a specific industry Firm concentration: Concentration refers to number of competitors in the industry  Average company size : Size is about level of resources of competitors - money, employees etc. An industry with a small number of small sized competitors is good for new ventures. Good to compete with small competitors than with many large competitors. This blog post is based ...

In the previous two posts, we learned that industry conditions frame the knowledge and demand factors. Industry status addresses industry lifecycle and structure: Emphasizes growth opportunities Explores industry evolution Provides insights into an industry’s timeliness for new entrepreneurial entrants Industry Lifecycle Typically, industry goes through following four phases: birth, growth, sustain and die. Stage of development of the industry affects new ventures’ performance in the market. Dependent on customer adoption of new products and services: Beginning, middle, or end (causing a deceleration in market). New firms perform better in younger markets, as it is easier to attract customers when demand growth is high. Reasons why young industries are most favorable to new ventures: Less competition versus established industries. Competing companies are operating on a more level playing field. Little to no dominant design or technical standard. This blog post is based on my learnings ...

‘Industry’ is a type of economic activity. Understanding the knowledge conditions and demand conditions within industry provides: Insights into the attractiveness of an industry for new entrants Information on if and how to compete effectively within a chosen industry Demand conditions: Seek opportunities where market demand is sufficiently large and growing.  Segment your market into smaller subgroups based on needs and wants, location, demographics etc. Aim for success in one segment, and then grow to subsequent segments as your reputation and brand grows. Segments based on geography, age, gender, lifestyle, interests, income level. Define market that is addressable, specific and probably unmet. Three aspects of customer demand to examine: 1. Magnitude of customer demand 2. Rate of growth of that demand 3. Heterogeneity of that demand across customer segments Purpose of market segmentation: 1. To determine who to serve 2. And who not to serve – like segments that are – too expens...

‘Industry’ is a type of economic activity. Understanding the knowledge conditions and demand conditions within industry provides: Insights into the attractiveness of an industry for new entrants Information on if and how to compete effectively within a chosen industry Knowledge conditions: Explore ideas that leverage what you know and what you would like to know. Entrepreneurs who have knowledge see opportunities sooner and see opportunities that others do not see. Entrepreneurs who like to know seek opportunities to build knowledge of industries, markets, technologies etc. Seek ideas that intersect your know how, interests and social capital. Consider co-founder or team members that bring complimentary knowledge and adds social capital for the venture. Consider amount and type of knowledge creation that is required to generate the industry’s products or services. High knowledge industries favour entrepreneurs. When it is easy for you, it is easy for others also. Knowledge is difficult...

Stakeholders are people (individuals or group) who have an interest in a company’s or organization’s affairs. These are people who can affect or are affected by the achievement of the organizational objectives. E.g. customers, suppliers, investors etc. Involvement of stakeholders can reduce uncertainty and improve decision making by understanding their experiences, desires, constraints etc. When there is higher uncertainty, there is increased value of involving stakeholders in decision making. Select stakeholders: That are representative Have more power With legitimacy With urgency Methods to hear the voice of stakeholders: Interview: experts in the field, prospective customers, prospective investors Discussion with focused groups Surveys This blog post is based on my learnings from the course on ‘entrepreneurship’ offered by Maryland Technology Enterprise Institute, University of Maryland through Coursera (2014).