Entrepreneurship: SMEs, IDEs and Thinking

• Entrepreneurship motivations vary, including profit, social impact, and personal fulfillment.
• Intrapreneurship involves creating value within a larger company through internal startups.

Main Forms of Entrepreneurship

• Small and Medium Enterprises (SME) are managed through stable sales/profit growth, focus on local and regional markets, innovation may not be essential, and exhibit a linear growth trend.
• Innovation Driven Entrepreneurs (IDE) focus on profitability and sustainable growth, address global markets, rely on innovation and potential competitive advantage, and often show a parabolic growth trend with an initial decrease.
• Additional forms include small businesses and lifestyle ventures like content creation.

Entrepreneurial Thinking

• Entrepreneurs are made, not born, and tend to share common thinking patterns and behaviors.
• Effectuation is a way of thinking in uncertain situations, where business plans are considered tools of the past.
• Causal reasoning involves planning execution based on a desired outcome.
• Effectual reasoning considers available means to determine possible outcomes, is inductive rather than deductive, and is more successful in uncertain environments.
• Sarasvathy's 3 core principles:
  • Affordable loss involves operating within what one can afford to lose, which takes precedence over expected returns.
  • Strategic partnerships prioritize partnerships over competitive analyses.
  • Leveraging contingencies includes embracing surprises and adapting to unexpected advantages or setbacks.

Effectuation Process

• The effectuation process starts with identifying available means, including who we are, what we know, and who we know.
• It also involves determining goals/courses of possible action, interacting with others, securing effectual stakeholder commitment, and stakeholders becoming part of new means and goals.

Iteration and Newness

• Iteration involves testing and learning to gain information, gradually increasing knowledge through the ABEL cycle of Ask, Build, Experiment, and Learn.
• Entrepreneurs overcome the liability of newness by convincing others of the validity of their idea and building/deploying their network around their vision.

Dwayne Spradlin's Problem-Definition Process

• Establish the need for a solution by articulating the problem and its importance, as well as who benefits.
• Justify the need by explaining why solving the problem is worthwhile.
• Contextualize the problem by researching past attempts to avoid mistakes and constraints.
• Write a problem statement that provides a detailed, clear description of the problem and outlines the requirements for a solution.

Opportunity Identification

• Opportunities exist and need to be identified by "alert" entrepreneurs, or they are created by entrepreneurs through their process, holdings, and relationships via effectuation.

Sources of New Venture Ideas

• Trends, including societal shifts, technology (AI), economic factors (higher incomes), and government (new leadership)
• Work experience, with over 50% of venture ideas emerging from industry experience
• Hobbies
• Chance
• Perceptual changes
• Education and expertise
• Time

Lean Startup Method

• The Lean startup method focuses on developing a product using customer validation to find a product-market fit.
• It favors experimentation, feedback, and iterative design.
• Lean Definition: "A temporary organization designed to search for a repeatable and scalable business model".

Design Thinking

• Design thinking is a human-centered exploration process for creative problem-solving, rather than just being tactical.
• It includes the following steps:
  • Empathizing with and understanding the needs of the target market.
  • Defining the market goals
  • Rapid iteration
  • Prototyping
  • Testing to determine a source of differentiation in sample markets.

Business Model Elements

• Three components of a business model include value identification, value delivery, and value capture.
• Central component: value proposition (everything else comes from it, “what”)

Business Model Canvas

-Tool used to make the implicit assumption of your business model more explicit

• Consists of:
  • Value proposition addresses unmet needs, product differentiation, and an MVP (Minimum Viable Product) at launch.
  • Right side focuses on the "who," that is, who value is being create for, how to manage relationships, and how to transmit value.
  • Customer segments, customer relationships, and channels
  • Key activities, Key resources, Key Partnerships
  • Bottom: Financial viability including Cost structure and revenue streams

Minimum Viable Product (MVP)

• An MVP is the easiest and cheapest way to test business model hypothesis and collect maximum validated learning about customers with minimal effort.
• It allows for maximizing business model iterations to reduce potential failure and testing one model component at a time, starting with the riskiest aspects.

Constraints of New Ventures

• High customer acquisition costs
• Lengthy tech development cycles
• Scarcity of individuals with an appetite for risks

Lean Startup and Associated Tools

• Lean startup and associated tools (BMC/MVP) address these concerns by making startups “worst case” fall within a larger range of ENT's “affordable loss"

Scaling a Business

• Business does not have to grow.
• Transition to Growth: scaling your existing business, which involves penetrating existing markets and increasing sales, leveraging existing capabilities to build new capabilities, and leaders must manage increased complexity.
• Expanding the scope of the business involves expanding into new markets or product categories or new businesses, which requires leaders with different market expertise.

Unsuccessful Dimensions of Scaling

• Customer: spending too much on acquisition before product-market fit
• Product: building a product without the problem-solution fit
• Team: hiring too many people too early
• Financials: raising too little money early on
• Business Model: focusing on profit too early on, too much planning without feedback, not adapting

Building a Network (Uzzi & Dunlap)

• Creating and managing personal networks for career success
• Advantages include access to unique information and diverse skills.
• Diagnosing diversity network with:
  • Diversity, avoid chambers from self-similarity and proximity principle
  • Shared activities principle: strong ties are forged through high-stakes activities that connect u to diverse others.
  • Think of how you can GIVE to your network, in addition to your TAKING
• Brokerage: shape of your network, relations with ppl who link clusters
• Trust: quality of relationship between ppl, trust requires strong ties

Social Network

• Social network: ppl connected by relationships, allowing info or resources to flow
• Access to resources depends on:
  • Set of network clusters you have
  • Nature of relations between clusters
  • Pattern of these relations

Pitch Assessment

• Passion is overrated; preparedness is ideal
• Trust beats competence
• Coachability matters
• Gender stereotypes
• Ethnic stereotypes

Pitch Types

• Visionary: distinctive, minimize competition, positive position
• Pragmatic: legit, understood, plausible

Pitch Techniques

• Analogy: connections to other kinds of businesses
• Classification: classify the idea in broader set of topics
• Authority: who can i quote, reference, give validity from
• Symbolic Action: symbols to prove legitimacy

Opportunity Evaluation

• Will the new venture work? Will it become a good business? Explore:
  • People behind the idea (my team and our attributes)
  • Resources available to carry out the idea (equity/debt, capital, network)
  • Knowledge of industry and market (of the venture concept + industry analysis)
  • Profit Potential (generate revenue and cost efficiency)

Criteria for Assessing Opportunities

• How significant is the need to be satisfied?
• Solution effectiveness
• Potential gross margin
• Customer acquisition ease
• Are we the best team to go after this opportunity?