TUM Entrepreneurship Lecture Notes 2024 PDF

Introduction to Entrepreneurship Prof. Dr. Miriam Bird Professor of Entrepreneurship & Family Enterprises TUM School of Management TUM Campus Heilbronn Global Center for Family Enterprise Entrepreneurship | Global Center for Family Enterprise (GCFE) Agenda 1 Introduction 2 De...

Introduction to Entrepreneurship Prof. Dr. Miriam Bird Professor of Entrepreneurship & Family Enterprises TUM School of Management TUM Campus Heilbronn Global Center for Family Enterprise Entrepreneurship | Global Center for Family Enterprise (GCFE) Agenda 1 Introduction 2 Design Thinking 3 Prototyping 4 Scientific Lean Start Up 5 Outlook © Prof. Dr. Miriam Bird 2 Entrepreneurship | Global Center for Family Enterprise (GCFE) Recap Open questions regarding our last session’s content? © Prof. Dr. Miriam Bird 3 Entrepreneurship | Global Center for Family Enterprise (GCFE) Mutual role adjustment of incumbent & successor along succession process Incumbent Leader/Chief Monarch Overseer/Delegator Consultant Successor No role Helper Manager Leader/Chief Handler, 1994 © Prof. Dr. Miriam Bird | TUM School of Management 4 Entrepreneurship | Global Center for Family Enterprise (GCFE) Book Recommendation Gino, F., Grant, A. M., Catmull, E., & Amabile, T.M. (2021). HBR's 10 Must Reads on Creativity. Harvard Business Review Press (ISBN 9781633699977) © Prof. Dr. Miriam Bird 5 Entrepreneurship | Global Center for Family Enterprise (GCFE) Our course at a glance Session 1: Session 3: Session 5: Session 7: Introduction; What is Family Firms Decision Making & Social and Sustainable Entrepreneurship? Business Model Entrepreneurship; Canvas information on the exam Session 2: Session 4: Session 6: Exam Opportunity Design Thinking & Entrepreneurial Recognition and Prototyping Teams, Growth & Effectuation Entrepreneurial Finance © Prof. Dr. Miriam Bird 6 Entrepreneurship | Global Center for Family Enterprise (GCFE) Lecture dates & content On Campus Learning Selection of session‘s content and highlights 23.10.2024  Introduction and how will we work this semester? I 10:15 am – 1:45 pm  What is Entrepreneurship and who is an Entrepreneur?  Guest-Speaker: Ben Scheidt (Redstone Capital) 06.11.2024  Opportunity Recognition II  Effectuation Principles 10:15 am – 1:45 pm  Guest-Speaker: Jan Mittendorf (TUM Venture Labs) 20.11.2024 III  Family Firms 10:15 am – 1:45 pm  Guest speaker: Gunther Wobser (Lauda) 11.12.2024 IV  Design Thinking 10:15 am – 1:45 pm  Prototyping 08.01.2025  Decision Making V 10:15 am – 1:45 pm  Business Model Canvas  Guest speaker: Johannes Schnabel (Campus Founders) VI 15.01.2025  Entrepreneurial Teams 10:15 am – 1:45 pm  Growth of new ventures & Entrepreneurial Finance  Guest speaker: Alexander Belcredi (BioNTech) 22.01.2025 VII  Social and sustainable Entrepreneurship 10:15 am – 1:45 pm  Information on the exam & Time for your questions © Prof. Dr. Miriam Bird 7 Entrepreneurship | Global Center for Family Enterprise (GCFE) In this session you will learn:  Why people often do not buy the products entrepreneurs develop  How entrepreneurs can better understand people‘s needs  Why paper and pencil are perfect to start your prototyping journey  Why failing more often is better than failing less often  That a swing is not a swing is not a swing  What the lean start up approach is about  How to add a „scientific element“ to the lean start up approach © Prof. Dr. Miriam Bird 8 Entrepreneurship | Global Center for Family Enterprise (GCFE) Agenda 1 Introduction 2 Design Thinking 3 Prototyping 4 Scientific Lean Start Up 5 Outlook © Prof. Dr. Miriam Bird 9 Entrepreneurship | Global Center for Family Enterprise (GCFE) “Everyone designs who devises a course of action aimed at changing existing situations into preferred ones.” Simon (1988: 68) © Prof. Dr. Miriam Bird 10 Entrepreneurship | Global Center for Family Enterprise (GCFE) Example 1 © Prof. Dr. Miriam Bird 11 Entrepreneurship | Global Center for Family Enterprise (GCFE) Example 2 © Prof. Dr. Miriam Bird 12 Entrepreneurship | Global Center for Family Enterprise (GCFE) Defining: Design Thinking “A human-centered approach to innovation that draws from the designer's toolkit to integrate the needs of people, the possibilities of technology, and the requirements for business success.” Tim Brown, president and CEO of IDEO © Prof. Dr. Miriam Bird 13 Entrepreneurship | Global Center for Family Enterprise (GCFE) A human-centered approach Brown (2009) © Prof. Dr. Miriam Bird 14 Entrepreneurship | Global Center for Family Enterprise (GCFE) Design Thinking comprises 3 key-elements Interdisciplinary Teams Iterative Process Variable Space Source: HPI (2021) © Prof. Dr. Miriam Bird 15 Entrepreneurship | Global Center for Family Enterprise (GCFE) Design Thinking Mindset  Curiosity  Reframing  Collaboration  Mindfulness of process  Bias towards action © Prof. Dr. Miriam Bird 16 Entrepreneurship | Global Center for Family Enterprise (GCFE) A Model of the Design Thinking Process EMPATHIZE IDEATE PROTO- DEFINE TYPE TEST © Prof. Dr. Miriam Bird 17 Entrepreneurship | Global Center for Family Enterprise (GCFE) Design Thinking is iterative EMPATHIZE IDEATE DEFINE PROTOTYPE TEST © Prof. Dr. Miriam Bird 18 Entrepreneurship | Global Center for Family Enterprise (GCFE) Design Thinking – Empathize The Empathize mode is the work you do to understand people, within the context of your design challenge. It is your effort to understand - the way they do things and why, - their physical and emotional needs, - how they think about world, - and what is meaningful to them. -> Observe -> Engage -> Watch & listen! © Prof. Dr. Miriam Bird 19 Entrepreneurship | Global Center for Family Enterprise (GCFE) Design Thinking – Define The Define mode is all about bringing clarity and focus to the design space.  making sense of the widespread information you have gathered.  becoming an expert on the subject  gaining invaluable empathy for the person you are designing for Goal of the Define mode: A meaningful and actionable problem statement © Prof. Dr. Miriam Bird 20 Entrepreneurship | Global Center for Family Enterprise (GCFE) Design Thinking – Ideate Ideation mode is a mental process of “going wide” in terms of concepts and outcomes, to create fluency (volume) and flexibility (variety) in your innovation options …in order to transition from identifying problems to creating solutions that are both novel and useful…. …by using your imagination to understand the problem space and the people you are designing for © Prof. Dr. Miriam Bird 21 Entrepreneurship | Global Center for Family Enterprise (GCFE) Design Thinking - Ideation https://www.youtube.com/watch?v=mtn31hh6kU4&ab_channel=TEDArchive © Prof. Dr. Miriam Bird 22 Entrepreneurship | Global Center for Family Enterprise (GCFE) Design Thinking – Prototype “Ideas only become great when they are challenged and tested” (Ed Catmull, co-founder of PIXAR) A prototype is something that you create with the explicit understanding that it is not the finished product/service/experience but instead is intended to be a stepping stone along the way to the finished product/service/experience. © Prof. Dr. Miriam Bird 23 Entrepreneurship | Global Center for Family Enterprise (GCFE) Design Thinking – Test The testing mode. Don’t assume you can simply put a prototype in front of a user to test it! The most informative results are achieved if you test in a way that will let users give you the most natural and honest feedback. © Prof. Dr. Miriam Bird 24 Entrepreneurship | Global Center for Family Enterprise (GCFE) Summary: Design Thinking  Human-centered vs. engineering centered product design  Design thinking is an iterative process  Design thinking as a human centered approach of solving problems  Design thinking as a five-step iterative process © Prof. Dr. Miriam Bird 25 Entrepreneurship | Global Center for Family Enterprise (GCFE) Agenda 1 Introduction 2 Design Thinking 3 Prototyping 4 Scientific Lean Start Up 5 Outlook © Prof. Dr. Miriam Bird 26 Entrepreneurship | Global Center for Family Enterprise (GCFE) What is a Prototype? A prototype is something that you create with the explicit understanding that it is not the finished product/service/experience but instead is intended to be a stepping stone along the way to the finished product/service/experience. —Our Definition © Prof. Dr. Miriam Bird 27 Entrepreneurship | Global Center for Family Enterprise (GCFE) Prototyping is a key part of Design Thinking EMPATHIZE IDEATE DEFINE PROTOTYPE TEST © Prof. Dr. Miriam Bird 28 Entrepreneurship | Global Center for Family Enterprise (GCFE) Communicating ideas © Prof. Dr. Miriam Bird 29 Entrepreneurship | Global Center for Family Enterprise (GCFE) A software example for UX prototypes © Prof. Dr. Miriam Bird 31 Entrepreneurship | Global Center for Family Enterprise (GCFE) What are prototypes for? (1/2)  Trying out an idea.  Learning about what the important issues are.  Failing quickly and cheaply.  Communicating ideas to others.  Bringing a team together. © Prof. Dr. Miriam Bird 32 Entrepreneurship | Global Center for Family Enterprise (GCFE) What are prototypes for? (2/2) Accuracy: Prototyping helps eliminate ambiguities, if there is any doubt, this is the time to get that resolved. Ergonomics: With a prototype you get to see if it fits well in your hands, on your body or in a space. Aesthetics: A prototype can help you define the colors, textures and the materials needed. Survey: A prototype is ideal to collect data. With it you can survey people to get feedback. Pitch: If you plan on showcasing your idea to potential investors or a company a prototype is a great way to introduce your idea. Testing: A prototype helps you test your idea, if it really works or if it needs mechanical tweaks. © Prof. Dr. Miriam Bird 33 Entrepreneurship | Global Center for Family Enterprise (GCFE) Stages of Prototyping INSPIRE EVOLVE # of Embrace failure Prototypes Build to think Expect changes VALIDATE Manage Low resolution Experiment changes Targeted Improve specif. models feature Integrated models Stages © Prof. Dr. Miriam Bird 34 Entrepreneurship | Global Center for Family Enterprise (GCFE) How does prototyping work?  Sketch your idea  It can focus on a single part of functionality or cover all the functionalities  So, this can be a dirty paper prototype. Or a cardboard model… or a working prototype made out of old stuff  “Thinking with your hands” © Prof. Dr. Miriam Bird 35 Entrepreneurship | Global Center for Family Enterprise (GCFE) Forms of prototypes Physical – Tangible, Analytic – Virtual, Experiential – Behavioral © Prof. Dr. Miriam Bird 36 Entrepreneurship | Global Center for Family Enterprise (GCFE) Prototyping – Google glasses https://ed.ted.com/lessons/rapid-prototyping-google-glass-tom-chi © Prof. Dr. Miriam Bird 37 Entrepreneurship | Global Center for Family Enterprise (GCFE) Inspire using trash, paper, items from D.I.Y. store © Prof. Dr. Miriam Bird 38 Entrepreneurship | Global Center for Family Enterprise (GCFE) From idea to reality © Prof. Dr. Miriam Bird 39 Entrepreneurship | Global Center for Family Enterprise (GCFE) A hardware example - NapCabs © Prof. Dr. Miriam Bird 40 Entrepreneurship | Global Center for Family Enterprise (GCFE) Not just for products Interactions Spaces © Prof. Dr. Miriam Bird 41 Entrepreneurship | Global Center for Family Enterprise (GCFE) Software app © Prof. Dr. Miriam Bird 42 Entrepreneurship | Global Center for Family Enterprise (GCFE) Prototype appearance makes a difference - BUT Prototyping should be “quick and dirty” © Prof. Dr. Miriam Bird 43 Entrepreneurship | Global Center for Family Enterprise (GCFE) Fail early and often (cost of failure vs. project time) (project risk vs. iteration curve) Source: Chen (2017) © Prof. Dr. Miriam Bird 44 Entrepreneurship | Global Center for Family Enterprise (GCFE) Summary: Prototyping  Prototypes are not finished products  Prototyping is a key part of design thinking  You can prototype (almost) everything  Fail early and frequently (and cheap)  Prototypes are key for communicating ideas © Prof. Dr. Miriam Bird 45 Entrepreneurship | Global Center for Family Enterprise (GCFE) Agenda 1 Introduction 2 Design Thinking 3 Prototyping 4 Scientific Lean Start Up 5 Outlook © Prof. Dr. Miriam Bird 46 Entrepreneurship | Global Center for Family Enterprise (GCFE) The story behind Lean Startup  American entrepreneur and author, born in 1978  Founded Catalyst Recruiting during his time at Yale – the company failed MADE Kein Bild VERSUS BORN  Moved to Silicon Valley as software engineer  Ries left to co-found IMVU Inc., a social network verfügbar  After leaving IMVU, Ries joined Kleiner Perkins as a VC advisor to consult start-ups Eric Ries  Published the Lean Startup in 2011 Founder of: Source: Wharton.upenn.edu (2011) © Prof. Dr. Miriam Bird 47 Entrepreneurship | Global Center for Family Enterprise (GCFE) Deep Dive: Build Measure Learn Loop Source: Zincir (2017) | © Eric Ries, THE LEAN STARTUP (2011) © Prof. Dr. Miriam Bird 48 Entrepreneurship | Global Center for Family Enterprise (GCFE) Get ahead! – The scientific approach A Scientific Approach to Entrepreneurial Decision Making: Evidence from a Randomized Control Trial Arnaldo Camuffo, Alessandro Cordova , Alfonso Gambardella, Chiara Spina (Bocconi University, Milan) Published in Management Science How should startups make entrepreneurial decisions? Sources: Camuffo et al. (2019) © Prof. Dr. Miriam Bird 49 Entrepreneurship | Global Center for Family Enterprise (GCFE) Training program and experimental design - A randomized control trial with 116 Italian startups and 16 data points over a period of about one year - Both the treatment and control groups received 10 sessions of general training on how to obtain feedback from the market and gauge the feasibility of their idea. - The Treatment group is also teached the “scientific” approach Sources: Camuffo et al. (2019) © Prof. Dr. Miriam Bird 50 Entrepreneurship | Global Center for Family Enterprise (GCFE) Deep dive: The scientific approach The treatment consists of training to:  identify the problem,  articulate theories,  define clear hypotheses,  conduct rigorous tests to “prove” or disprove them,  measure the results of the tests, and  make decisions based on these tools “In particular, because most entrepreneurial ideas eventually fail, entrepreneurs are more likely to face false positive than false negative ideas.” “As a result, a scientific approach to entrepreneurial decision making is more likely to encourage exits from current business ideas or pivots to new ideas.” Sources: Camuffo et al. (2019) © Prof. Dr. Miriam Bird 51 Entrepreneurship | Global Center for Family Enterprise (GCFE) Overview of training outcomes between groups Sources: Camuffo et al. (2019) © Prof. Dr. Miriam Bird 52 Entrepreneurship | Global Center for Family Enterprise (GCFE) Example: Inkdome’s validation (treatment group) Control Group Inkdome Often online questionnaires on their personal 1. Developed a framework that helped to identify the social media accounts for their contacts to key areas requiring validation, e.g. four clear respond. hypotheses: (i) tattooed people do not always use  Drawback: sampling not representative the same tattooist, (ii) they choose new tattooists of the population of customers. online,.... Questions are often direct, e.g. “Did you 2. Open questions: “When was the last time that you have problems finding tattooists online?” were tattooed? Did you know the tattooist? How did you choose him/her?”  Leads to confirmation bias: 3. Clear metrics, e. g., “Reject a hypothesis if less 1. Some respondents were friends and than 60% of interviews did not provide do not want to disappoint their peers corroborating evidence (sample size of 50)”. 2. It was a fictitious market setting where 4. Clear decision rules: pursue original idea if all four respondents do not use the service; hypotheses are corroborated; else, abandon the therefore, it is not costly to respond idea of launching a startup or investigate affirmatively alternative solutions (pivot). Sources: Camuffo et al. (2019) © Prof. Dr. Miriam Bird 53 Entrepreneurship | Global Center for Family Enterprise (GCFE) Conclusion “We have shown that entrepreneurial decision making can benefit from the use of a scientific approach. This approach increases firm performance, because entrepreneurs can recognize when their projects exhibit low or high returns or when it is profitable to pivot to alternative ideas. In other words, entrepreneurs with thoroughly considered, validated theories of their business and hypotheses about what customers want that are then soundly tested through experiments can better mitigate their biases or imprecisions when they analyze market signals (Hayward et al. 2006, Shepherd et al. 2014), reducing the likelihood of incurring false positives and false negatives.” Sources: Camuffo et al. (2019) © Prof. Dr. Miriam Bird 54 Entrepreneurship | Global Center for Family Enterprise (GCFE) Agenda 1 Introduction 2 Design Thinking 3 Prototyping 4 Scientific Lean Start Up 5 Outlook © Prof. Dr. Miriam Bird 55 Entrepreneurship | Global Center for Family Enterprise (GCFE) Our course at a glance Session 1: Session 3: Session 5: Session 7: Introduction; What is Family Firms Decision Making & Social and Sustainable Entrepreneurship? Business Model Entrepreneurship; Canvas information on the exam Session 2: Session 4: Session 6: Exam Opportunity Design Thinking & Entrepreneurial Recognition and Prototyping Teams, Growth & Effectuation Entrepreneurial Finance © Prof. Dr. Miriam Bird 56 Thank you, and see you next week!