IE 184 Notes PDF

MODULE 1 INTRODUCTION TO PROJECT DEVELOPMENT & MANAGEMENT STARTUP A newly established business or company, typically in its early PRO...

MODULE 1 INTRODUCTION TO PROJECT DEVELOPMENT & MANAGEMENT STARTUP A newly established business or company, typically in its early PROJECTS AND ENTREPRENEURSHIP stages of development and operation Characterized by their innovative ideas, potential for rapid growth, Project Project Management and a high degree of uncertainty Often seek to address a specific problem or market need with a A temporary endeavor with a defined The application of knowledge, skills, unique product, service, or technology. timeline for achieving specific tools, and techniques to achieve the objectives. objectives of the project. INNOVATION | SCALABILITY | HIGH-RISK | ENTREPRENEURIAL SPIRIT We oversee the development of a project over the phases of its life cycle. INNOVATION CORPORATE BUSINESS VS FACILITY/PRODUCT VS PROJECT LIFE CYCLE (Wideman, 1987) Opportunity Recognition Ideation Needs-driven Discovery-driven The start of pursuit of value is a need. I start with my idea Look at the problems to solve: Problems that matter to people Problems for which people will pay you for delivering solutions FOUR CRITERIA FOR AN OPPORTUNITY 1 The idea is durable. It is not a fad & will last long enough to allow for monetization. 2 The idea is timely. The market is ready to buy the solution. PROJECT BUSINESS CASE 3 The idea is attractive. The potential returns on investment far exceed A documented economic feasibility study used: the foreseeable costs to create the product. ○ To establish the validity of the benefits of a selected component lacking sufficient definition 4 The idea adds value. It must lead to a product that creates or adds ○ As a basis for the authorization of further project value for its end-user. management activities This report may outline the market, technical, financial, and organizational considerations of a project to be able to demonstrate its potential to successfully turn into a business enterprise. ENTREPRENEURSHIP The art and science of building value. ○ ART: dreams & ambitions – creativity, energy, insight ○ SCIENCE: analysis & discipline Entrepreneur: has the ability to find and act upon opportunities to turn an invention into a commercially viable innovation Technopreneurship: value creation with innovation HOW TO BEGIN INNOVATION? WHERE TO FIND INSPIRATION? 1. Remakes, Transformations, and Overlays Role of Entrepreneurs 2. Market shifts (Technological, Legal, Social) Entrepreneurs… 3. Harness big changes (aftershocks) 1. create new business Observe a change → Identify a second-order implication 2. provide jobs and validate → Define the opportunity 3. add to national income 4. Pick a target to disrupt 4. create social change 5. Your own frustrations, your own story 5. increase productivity 6. Spend time where the action is 6. generate foreign income 7. Observe people at the leading edge 7. develop communities 8. alleviate poverty Focus your search. Explore areas of interest. Share interests and skills. Research-centric Issues-centric People-centric TYPES OF INNOVATION Entrepreneurial Decision making TYPE DESCRIPTION EXAMPLES Invention Totally new product, service, or Edison - lightbulb process Extension New use or different application of Zuckerberg - FB Moderated by preferences and heuristics in risk and uncertainty. an already existing products, Heuristic: a ‘mental shortcut’ – reduces the number of operation to service, or process make a decision → can lead to suboptimal choices Duplication Creative replication of an existing WalMart - dep’t store Psychological Traps concept Entrepreneurs are often subject to uncertainty or ambiguity. Form beliefs and personal judgments about expected outcomes and Synthesis Combination of existing concepts Starbucks (coffee + and factors into a new formulation ambiance) probabilities. or use Heuristics and biases may best explain ‘unexplained’ business decisions. May lead to suboptimal decisions, e.g. the very decision to start a IDEATION business. To start… GESTALT. Seeing what we want to see. 1. Be a copycat. Nothing is purely original. Everything is based on something existing. BIASES AND BEHAVIORS OF ENTREPRENEURS Why make your own and start from scratch when you can copy the Probability Perception Biases. If it looks like one, it is one. “Judging a book by best of the best? its cover. 2. Piggy back. Build upon existing trends, technologies, and companies a. Availability heuristics - assessing the probability of an event by the Learn from the masters and then move on to the next level. ease of thinking of instances of an event 3. LeapFrog. Pushing boundaries of what is known, possible, and i. Assessing downside risk – thinking of unfavorable allowed. scenarios and difficulties Reinvent and re-imagine the world around you. ii. Assessing upside risk – thinking of successful entrepreneurs AN ENGINEER’S ENTREPRENEURIAL MARKET b. Representativeness heuristics - law of small numbers: Sets up a business within limited window of opportunity ENGINEERS’ MINDSET AS AN ENTREPRENEUR with the need to react quickly based on very limited information Fixed vs. Growth Mindset Fixed Growth Self Perception Biases a. Self-serving bias - external vs. internal causes of positive and Belief negative outcomes b. Illusion of control - Individuals believe they can influence a largely Skills, intelligence, and talents are You have the capacity to learn uncontrollable situation → makes them more optimistic about the natural. and grow your skills. expected outcome and more confident in their ability to correctly Failure is shameful and should be Failure is a valuable lesson. predict the outcome. avoided. People are good at something c. Overconfidence - overestimating chances of survival when most Some people are naturally good because they built that ability. new businesses fail. at things while others are not. You are in control of your abilities. You are not in control of your abilities Reference-dependent Behaviors a. Escalation of commitment. Entrepreneurs more committed to Effort continuing businesses after time and money investment even if prospects are no longer favorable. Not necessary or useful Important part of the process b. Anchoring and adjustment. Anchor = starting point: determines the Effort is a negative thing and Focused on the process of getting outcome of a problem, biased towards the initial value. something you do when you are better c. Aspiration level and reference dependence. Evaluating not that good. attractiveness of options not in terms of total wealth, but in terms of gains and losses compared to an aspiration level or status quo. Challenges d. Status quo bias. Stick with the current state even if better options are available. Back down, avoid challenges More likely to embrace challenges and persevere WORD OF CAUTION! Expected outcomes and probabilities of entrepreneurial decisions Mistakes are likely to be affected by heuristics and biases. It might help asses uncertain prospects, reacting quickly in uncertain Get discouraged when making See mistakes as learning environment, manage complex tasks. mistakes and avoid them opportunities and ways to improve It might lead to miscalibrated judgments and suboptimal entrepreneurial decisions. Feedback May explain high rate of new business failures. Get defensive, take it personally. Constructive: Appreciate feedback Ignores useful criticism/feedback. and use it. Learns from criticism.  MODULE 2 II. Value Creation CUSTOMER DISCOVERY & MARKET FEASIBILITY 𝐵𝑒𝑛𝑒𝑓𝑖𝑡𝑠 𝐹𝑢𝑛𝑐𝑡𝑖𝑜𝑛𝑎𝑙 𝑏𝑒𝑛𝑒𝑓𝑖𝑡𝑠 + 𝐸𝑚𝑜𝑡𝑖𝑜𝑛𝑎𝑙 𝑏𝑒𝑛𝑒𝑓𝑖𝑡𝑠 𝑉𝑎𝑙𝑢𝑒 = 𝐶𝑜𝑠𝑡𝑠 = 𝑀𝑜𝑛𝑒𝑡𝑎𝑟𝑦 𝑐𝑜𝑠𝑡𝑠 + 𝑇𝑖𝑚𝑒 𝑐𝑜𝑠𝑡𝑠 +𝐸𝑛𝑒𝑟𝑔𝑦 𝑐𝑜𝑠𝑡𝑠 + 𝑃𝑠𝑦𝑐ℎ𝑖𝑐 𝑐𝑜𝑠𝑡𝑠 CREATING CUSTOMER VALUE & SATISFACTION I. Marketing Perceived Customer Value Customer Satisfaction The process of identifying customer needs and satisfying them. Building strong customer relationships to capture value from The ratio between the customers perceived The extent to which a customers in return. benefits (economic, functional, psychological) product’s perceived and the resources (time, effort, monetary, performance matches a Generalized Marketing System psychological) used to obtain these benefits. buyer’s expectations. Visualizing exchanges in the marketplace or marketspace EXCHANGE A value-creating process The act of obtaining a desired object from someone by offering something in return When an agreement is reached, the result is the TRANSACTION. VALUE PROPOSITION CANVAS Customer Needs, Wants, Demands Needs Recognized at state of deprivation Physical (food, clothing, warmth, safety) Social (belonging and affection) Individual (knowledge, self-expression) Wants Needs shaped by culture and individual personality Demands Needs and wants backed by buying power a. Precisely define your customer profiles: i. Major Jobs-to-be-done The Marketing Environment ii. The pains they face when trying to accomplish their jobs 1. Economic - income groups, sources of income iii. The gains they perceive by getting their jobs done 2. Socio-cultural - lifestyles, beliefs, values b. Visualize the value you create: 3. Political / Legal - laws and regulations i. Most important components of your offering 4. Technology - medium, equipment, devices ii. How you relieve pain 5. Competition - other players iii. How you create gains for your customers c. Achieve Product-Market fit Marketing Management Adjust Value Proposition based on the insights gained The art and science of choosing target markets and building from customer evidence and achieve Product-Market fit. profitable relationships with them ○ What customers will we serve? VALUE PROPOSITION STATEMENT ○ How can we best serve these customers? Usually a block of text with a visual: a. Headline. What is the end-benefit you are offering, in 1 short ORIENTATIONS (PHILOSOPHIES) sentence. Can mention the product and/or the customer. Attention grabber. Production The idea that consumers will favor products that are available b. Sub-headline or a 2-3 sentence paragraph. A specific explanation concept or highly affordable. of what you do/offer, for whom, and why is it useful. Supply exceeds demand → focus on achieving high c. 3 bullet points. List the key benefits or features. production efficiency, low costs, and mass distribution. d. Visual. Images communicate much faster than words. Show the product, the hero shot, or an image reinforcing your main message. Product The idea that consumers will favor products that offer the concept most quality, performance, and features. Energy is devoted to making continuous product dev’t. CUSTOMER-DRIVEN MARKETING STRATEGIES Selling The idea that consumers will not buy enough of the firm’s concept products unless it undertakes a large scale selling and promotion effort. Marketing The idea that achieving organizational goals depends on concept knowing the needs and wants of the target markets and delivering the desired satisfactions better than competitors do Societal The idea that a company should make good marketing concept decisions by considering consumers’ wants, the company’s requirements, consumers’ long-term interests, and society’s long-run interests.  I. Segmentation ○ Mass customization Division of a market into distinct groups of buyers who have distinct needs, ○ Markets-of-one marketing characteristics, or behavior and who might require separate products or marketing mixes III. Differentiation Identifying a set of possible competitive advantages to build a position by MARKET SEGMENT - a group of consumers who respond in a similar way to a providing superior value from: set of marketing efforts Product differentiation Service differentiation a. Geographic segmentation - divide the market into different Channel differentiation geographical units (nations, regions, states, countries, or cities) People differentiation b. Demographic segmentation - divide the market into groups based Image differentiation on variables such as: i. Gender segmentation - based on sex (male or female) IV. Positioning ii. Age and life-cycle stage segmentation Arranging for a product to occupy a clear, distinctive, and desirable place iii. Income segmentation - affluent or low-income relative to competing products in the minds of the target consumer c. Psychographic segmentation - divides buyers into different groups based on social class, lifestyle, or personality traits PRODUCT POSITION d. Behavioral segmentation - divides buyers into groups based on the way the product is defined by consumers on important attributes their buying behavior, attitudes, uses, or responses to a product the place the product occupies in consumers’ minds relative to Benefits sought competing products Usage rate ○ perceptions Loyalty status ○ impressions ○ Feelings MULTIPLE SEGMENTATION - used to identify smaller, better-defined target grps COMPETITIVE ANALYSIS a. Competitive Set. Clearly define direct and indirect competition. II. Targeting 1 Direct competitors Solving the same problem for the same customer w/ a similar product TARGET MARKET - a set of buyers who share common needs or characteristics that the company decides to serve 2 Different solution Solving the same problem for the same customer, but in a diff. way CONSIDERATIONS FOR SELECTION Segment attractiveness 3 Different customer Solving the same problem in a Company objectives and resources similar way, but for customers in a different industry/vertical. CUSTOMER or BUYER PERSONA - a representation of your target customer Why is it important? ○ Identify needs and wants b. 2x2 Grid or Positioning Maps. Positioning based on 2 key criteria ○ Understand purchasing decisions for your marketspace – Show consumer perceptions of their brands ○ Provide behavioral insight versus competing products on important buying dimensions May include: demographics, bio, wants & needs, frustrations The standard view for most investors to see market landscape. MARKET TARGETING STRATEGIES Use market specific needs/benefits to arrive at the top of According to ??? the two product features. 1. Undifferentiated - markets the whole market with one offer Allows to clearly position offering against competition Mass marketing and illustrate market opportunity. Focuses on common needs rather than what’s different 2. Differentiated - targets several different market segments and c. Needs-Benefits Map. General needs and benefits prioritized and designs separate offers for each customized for your marketspace. Goal: to achieve higher sales and stronger position i. Create a basic list of needs for key customer segments, More expensive that undifferentiated marketing link them into specific product benefits. According to ??? ii. Agree which need/benefit combo is most important. 1. Micromarketing - the practice of tailoring products and marketing programs to suit the tastes of specific individuals and locations d. Features Comparison Grid. Deep product/service comparison and 2. Local marketing - involves tailoring brands and promotion to the analysis. Focus on direct competitors; limit to 10-15 features. needs and wants of local customer groups i. Feature analysis 3. Individual marketing - involves tailoring products and marketing ii. Benchmarking programs to suit the needs and preferences of individual customers Also known as: CHOOSING THE RIGHT COMPETITIVE ADVANTAGE (CORE COMPETENCY) ○ One-to-one marketing Valuable - a large revenue generator Rare - not easily found in other businesses  Non-substitutable - cannot be replaced by any of your other capabilities Costly to imitate - it will be expensive for your competitors to try to duplicate V. Integrated Marketing Plan and Program A comprehensive plan that communicates and delivers the intended value to chosen customers. Developing the Marketing Mix The set of tools (four Ps) the firm uses to implement its marketing strategy: Product/Market Expansion Grid Strategies Market Increasing sales to current market segments without Penetration changing the product Product Features, Style, Design, Quality, Branding, Packaging, Labels, Product Line, After-sale service PRODUCT AND SERVICES - anything that can be offered in a Market Idenitifes and develops new market segments for current market for attention, acquisition, use, or consumption that Development products might satisfy a need or want. EXPERIENCES represent what buying Product Offers new or modified products to existing market Development segments Price Pricing strategy, Discounts, Allowances, Payment Period Diversification For starting up or acquiring businesses outside the Promotion Advertising, Sales force, Public Relations company’s current products and markets Place Channels, Coverage, Locations, Inventory, Transport APPROACHES TO MARKET RESEARCH Market Research BUILDING CUSTOMER RELATIONSHIPS What information to look for? A way to discover market opportunities Customer Relationship Management Carefully evaluate opportunities and decide which markets to enter The overall process of building and maintaining profitable customer relationships Prepare sales forecasts based on estimates of demand by delivering superior customer value and satisfaction. Demand Forecasting Potential market - consumers with sufficient level of interest in product Available market (TAM) - those with interest, income, and access Target market (SAM) - the qualified, available market Penetrated market (SOM) - the actual buyers Customer Lifetime Value The value of the entire stream of purchases that the customer would make over a lifetime of patronage. Market Potential The limit approached by market demand as industry marketing expenditures approach infinity for a given marketing environment. Total market potential is the maximum amount of sales that might be available to all the firms in an industry during a given period under a given level of industry marketing effort and given environmental conditions 𝑇𝑜𝑡𝑎𝑙 𝑚𝑎𝑟𝑘𝑒𝑡 𝑝𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙 = (𝑝𝑜𝑡𝑒𝑛𝑡𝑖𝑎𝑙 𝑛𝑢𝑚𝑏𝑒𝑟 𝑜𝑓 𝑏𝑢𝑦𝑒𝑟𝑠) × (𝑎𝑣𝑒. 𝑞𝑢𝑎𝑛𝑡𝑖𝑡𝑦 𝑝𝑢𝑟𝑐ℎ𝑎𝑠𝑒𝑑 𝑏𝑦 𝑎 𝑏𝑢𝑦𝑒𝑟) × (𝑝𝑟𝑖𝑐𝑒) Chain-ratio Method Involves multiplying a base number by several adjusting percentages Joint vs. Marginal Probability 2. Need 3. Surprising Insight Setting the Sales Effort [User] needs to [need] because [surprising insight]. Convert POV statements to How-might-we (HMW) statements. SALES QUOTA SALES BUDGET Toolbox The sales goal set for a product line, A conservative estimate of the QUALITY FUNCTION DEPLOYMENT (QFD) company division, or sales represen- expected volume of sales. tative. Used primarily for making current A collection of matrices that are used to facilitate group discussions and Primarily a managerial device for purchasing, production, and decision-making. defining and stimulating sales effort. cashflow decisions. A systematic approach for translating consumer requirements into appropriate company requirements at each stage from research and product development to engineering and manufacturing to marketing/sales and distribution. Environment Market Concept QFD Matrices: constructed using affinity diagrams, brainstorming, decision matrices, and tree diagrams Economic Geographic Product ○ The House of Quality (HOQ) is the intial QFD matrix. Socio-cultural Demographic Promotion Technical importance (TI) Political/Legal Psychographic Price Completeness check Technological Behavioral Place Competition KANO MODEL Useful in gaining a thorough understanding of a customer’s needs MARKET RESEARCH - Research Approaches An integrative tool → Translate and transform the resulting verbatims OBSERVATIONAL RESEARCH using the Voice of the Customer that, subsequently, becomes an Fresh data gathered by observing the relevant actors and settings. excellent input as the whats in a Quality Function Development EXPERIMENTAL RESEARCH (QFD) and House of Quality (HOQ). Most scientifically valid research Purpose: to support product specifications that are made by the Selecting matched groups of subjects, subjecting them to different customer and promote discussion while engaging team members. treatments, controlling extraneous variables, and checking whether ○ Differentiates features of products rather than customer observed response differences are statistically significant. needs by understanding necessities and items that are SURVEYS not required. Best suited for descriptive research A methodology for mapping consumer responses with To learn about people’s knowledge, beliefs, preferences, and questionnaires that focused on attractive qualities through reverse satisfaction qualities. FOCUS GROUP DISCUSSIONS 3 QUALITY REQUIREMENTS ACROSS 2 DIMENSIONS A gathering of 6-10 people invited to spend a few hours with a This model involves two dimensions: skilled moderator to discuss a product, service, organization, or 1. Achievement (horizontal axis): “the supplier did not do it at all” to other marketing entity “the supplier did it very well” PAST-SALES ANALYSIS 2. Satisfaction (vertical axis): “total dissatisfaction” to “total a. TIME-SERIES ANALYSIS - breaking down past time series into four satisfaction” with the product or service components (trend, cycle, seasonal, erratic) and projecting these 3 LEVELS OF CUSTOMER EXPECTATIONS components into the future. What it takes to positively impact customer satisfaction? b. EXPONENTIAL SMOOTHING - projecting the next period’s sales by 1. Expected Needs combining an average of past sales ; the most recent sales, giving Fully satisfying the customer at this level simply gets a more weight to the latter. supplier into the market. c. STATISTICAL DEMAND ANALYSIS - measuring the impact level of The entry level expectations are the must level qualities, each of a set of causal factors (e.g., income, marketing expenditures, properties, or attributes. price) on the sales level. There expectations are also known as the dissatisfiers d. ECONOMETRIC ANALYSIS - building sets of equations that describe because by themselves they cannot fully satisfy a a system and proceeding to fit the parameters statistically customer. However, failure to provide these basic MARKET-TEST METHOD expectations will cause dissatisfaction. Desirable when buyers do not plan their purchases carefully or 2. Normal Needs experts are not available or reliable. These are the qualities, attributes, and characteristics Forecasting new-product sales or established product sales in a new that keep a supplier in the market. These higher level distribution channel or territory. expectations are known as the wants or the satisfiers EXPERT OPINION because they are the ones that customers will specify MYSTERY SHOPPERS (spoken expectations). They can either satisfy or dissatisfy the customer FROM MARKET TO DESIGN - Methods and Tools depending on their presence or absence. VOICE OF THE CUSTOMER (VOC) 3. Exciting Needs The in-depth process of capturing customer’s expectations, These are features and properties that make a supplier a preferences, and aversions. leader in the market. The highest level of customer A technique that produces a detailed set of customer wants and expectations is termed the wow level qualities, needs, organized into a hierarchical structure, and then prioritized in properties, or attributes. terms of relative importance and satisfaction with current alternatives These expectations are also known as the delighters or Actual customer descriptions in words for the functions and features exciters because they go well beyond anything the customers desire for goods and services. customer might imagine and ask for. Their absence does The key input for a Quality Function Deployment. nothing to hurt a possible sale, but their presence POINT OF VIEW (POV) STATEMENT improves the likelihood of purchase. Convert data from your interviews and observations into a POV / Problem Wows not only excite customers to make on-the-spot Statement → Three Key Components: purchases but make them return for future purchases. 1. User These are unspoken ways of delighting the customer. THE KANO ANALYSIS - Example on Home Buyer’s Needs THE QUESTION PAIR - Uncovering Customer Perceptions Used to uncover customer’s perceptions towards product’s attributes Consists of a pair of questions for each feature: ○ One asks customers how they fill IF THEY HAVE the feature (functional form) ○ The other asks how they feel IF THEY DID NOT HAVE the feature (dysfunctional form) FROM MARKET TO DESIGN - Consolidation