entrepreneurship & innov. · this week today & tomorrow - entrepreneurship & innovation...
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Entrepreneurship & Innov.
tisdag den 22 september 2009
This Week
Today & Tomorrow - Entrepreneurship & Innovation (chapter 5,6, and some extra)
tisdag den 22 september 2009
What is Entrepreneurship?
• The activities undertaken for the introduction of new elements to the set of products and services offered to a market.
• “It is the process of recognizing, seizing, pursuing and exploiting opportunities without regard of the resources you currently control”
• Webster’s –someone who runs a business at his or her own financial risk
• (They don’t only dream.. they do)tisdag den 22 september 2009
History of entrepreneurship
Schumpeter: Creative Destructoin
Growth and wealth comes from small business
The theory of opportunity - a need in the market
We need innovations
Makes the economy grow
Makes our lives better
Anyone can (and should?) be an entrepreneur!
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The downside...
Almost 40 % of new ventures fails during the first two years...
Some figures say that 90 % of all ventures fail..
Ergo.. Fail fast, fail often! Fail forward, fail cheap...
But patience is one of the virtues of the entrepreneur..
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Ent. not the same as small business
Common misunderstandning (actually, no firm agreement here)
Many entrepreneurs starts out small
Som edefinitions require radical innovations (the car, the first search engine, the computer, etc.)
Others say that that yet another starbucks is entrepreneurial.
But the traditional defenition implies that we build a new business, with the goal of “world domination”
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Inventor vs. Entrepreneur
Inventor creates something new.
Entrepreneurs puts together all the resources needed to transform an invention into a viable busines
Money
People
Strategy
Risk
Only a few inventions becomes successfull innovations.
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Types of new firms
Salary/substitute firms
Be your own consultant
Level of income similiar to convetnaional jobs
Restaurants, dry cleaners, hairstyle saloons, lecturers(?) etc.
Lifestyle firms
Ski instructurs, tour guides
Entrepreneurial firms
Brings new products and services to a market by seizing opportunities.
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Reasons for becomming one?
Be your own boss
Try your own idea
Make a lot of money
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Characteristics of sucessful ones
Passion for the business
Product/Customer focus
Persistance - keeps going despite initial failure
Great execution
A fair share of luck!
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Most business is copycats..
“The most sucessful innovators are creative imitators.” - Peter Drucker
“First we observe and digest a new product. Then we imitate it. In the end, we understand it well enough to design a new product independently.” - CEO of Haier, Chinese Manufacturer of Refrigerators.
Reverse engineering is a way of building knowledge. (In some cases illegal - DMCA)
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Hard to study entrepreneurs
We never know why they fail...
Or why thecy succeed..
If someone have trouble, should we tell them to be persistant or to fail faster?
Or simply to have more luck?
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Not even the experts..
„The phonograph ... is not of any commercial value. (Thomas Alva Edison Edison, inventor of the phonograph, 1880. ) „Who the hell wants to hear actors talk?“(H. M. Warner, Warner Brothers, 1927. )„I think there is a world market for about five computers.“ (Thomas J. Watson, chairman of IBM, 1943.) „640K ought to be enough for anybody.“ (Bill Gates, Microsoft, 1981. ) „There is no reason for any individual to have a computer in their home.“ (Ken Olsen, Digital Equipment Corp. )
• „Man will not fly for 50 years.“ (Wilbur Wright in 1901, two years before the famous flight).
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Myths about entreprenurship
A person is, or isn’t born entrepreneurial
Entrepreneurs are gamblers?
Entrepreneurs are motivated primariliy by money
Entrepreneurs are young and energetic (actually, avg. 35-34 years old, with eperience)
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No ventures are the same
Starting your own consulting business
Starting a new shoe factory
Global ideas vs. Nisched ideas
Time to profiability? (How quick to the market? How quick profit?)
Hobby growing into a business or a planned venture requiring cash?
Risk to reward ratio?
How long will the opportunity persist? (Selling Bear Stearn souvernirs?)
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Not only commercial...
Entrepreneur
Intrapreneur / Corporate entreprenurship
Trying to create an entrepreneurial environment within an organization.
Social entrepreneur
Trying to make the world better
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Innovation!
What is innovation?
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4
Worlds First Innovation!
The
Stick
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To innovate, we need creativity!
Looking at things in a different way - finding new solutions
Seldom a genious working alone
Newton had no apple, but 20 years of resarch
Organizational routines and procedures often act harmful on creativity
(Today: Everybody can be creative, it’s just a matter of training!)
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Organizations based on continuous development, on systematic research of efficiency
Successful organizations High rate of innovations
Few innovations, just imitations
Low rate of innovations, sometimes radical, based on entrepreneurial spirit of individuals
Organizational Creativity
High
LowIndividual Creativity High
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Organizational Creativity Vs Individual Creativity
Organizations based on continuous development, on systematic research of efficiency
Successful organizations High rate of innovations
Few innovations, just imitations
Low rate of innovations, sometimes radical, based on entrepreneurial spirit of individuals
Organizational Creativity
High
LowIndividual Creativity High
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Process of Innovation
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Process of Innovation
The Innovation process can be depicted as a series of funnels each getting progressively smaller.
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Process of Innovation
The Innovation process can be depicted as a series of funnels each getting progressively smaller. Typically sixty ideas into the top funnel only produces just one innovation.
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Process of Innovation
The Innovation process can be depicted as a series of funnels each getting progressively smaller. Typically sixty ideas into the top funnel only produces just one innovation. The funnels are labeled as the four phases in the process - idea generation, idea screening, feasibility and implementation.
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Innovation
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InnovationInnovation is a process of taking new ideas to satisfied customers. It is the conversion of new knowledge into new products and services.
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InnovationInnovation is a process of taking new ideas to satisfied customers. It is the conversion of new knowledge into new products and services.
Innovation is about creating value and increasing efficiency, and therefore growing your business.
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Innovation
"Without innovation, new products, new services, and new ways of doing business would never emerge, and most organizations would be forever stuck doing the same old things the same old way."
Innovation is a process of taking new ideas to satisfied customers. It is the conversion of new knowledge into new products and services.
Innovation is about creating value and increasing efficiency, and therefore growing your business.
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Forms of Business Ownership
Sole Proprietor• + Easiest form• - Not always limited
liability• + All earnings to you• - All work from you• - One person must
know everything• - Limited life-span
Partnership• - Harder to manage
partnership• - Disagreement among
partners• - Difficulty of
termination• - Division of profits• + More resources• + More competence
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Corporations
LLC, Inc., AB, GmbH• + Limited in liability• + Possiblity to sell ownership (stocks)• + Separated from person (can live on!)• - Extensive paperwork (Registration,
Accounting, Reporting)
• Owners->Board of Directors->Officers-> Managers ->Employees
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Forms of Business Ownership
American• Sole Proprietor• Partnerships• Limited Liability
Partnership• Corporation• Cooperatives
Swedish• Eget företag• Handelsbolag• Kommanditbolag
• Aktiebolag• Ekonomisk förening
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Forms of Business Ownership
SWEDEN:
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Forms of Business Ownership
USA:
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Franchise
• (pre-packaded entrepreneurship!)• Marketing and management assistance• Personal ownership (still your store, even
though you have to follow rules).• Recognized name and trademark• Financial assistance, education• But:
– Shared profit– Strictly regulated
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Entrepreneurship
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Entrepreneurship
Why?
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Entrepreneurship
Why?
Challenge
Independence
Opportunity
Profit
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Entrepreneurship
Why?
Challenge
Independence
Opportunity
ProfitWhat does it take?
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Entrepreneurship
Why?
Challenge
Independence
Opportunity
ProfitWhat does it take?
Action-oriented
Self-nurturing
Self-directed
Energetic
Tolerant of uncertainty
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Entrepreneurship
Why?
Challenge
Independence
Opportunity
ProfitWhat does it take?
Action-oriented
Self-nurturing
Self-directed
Energetic
Tolerant of uncertainty
Money
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Entrepreneurship
Why?
Challenge
Independence
Opportunity
ProfitWhat does it take?
Action-oriented
Self-nurturing
Self-directed
Energetic
Tolerant of uncertainty
Money
Own money
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Entrepreneurship
Why?
Challenge
Independence
Opportunity
ProfitWhat does it take?
Action-oriented
Self-nurturing
Self-directed
Energetic
Tolerant of uncertainty
Money
Venture capitalistsOwn money
tisdag den 22 september 2009
Entrepreneurship
Why?
Challenge
Independence
Opportunity
ProfitWhat does it take?
Action-oriented
Self-nurturing
Self-directed
Energetic
Tolerant of uncertainty
Money
Venture capitalistsOwn money
Angel investors
tisdag den 22 september 2009
Entrepreneurship
Why?
Challenge
Independence
Opportunity
ProfitWhat does it take?
Action-oriented
Self-nurturing
Self-directed
Energetic
Tolerant of uncertainty
Money
Venture capitalistsOwn money
Angel investors
Intrapreneurs
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New stuff on homepage
New slides and more info at http://www.gorling.se/ME1000
Poll on what to do with the rest of the lectures
Seminar reports should be mailed to me evening before presentation.
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Where to begin – the traditional modelWhere to begin – the traditional model
Identify
Opportunity
Identify
OpportunityDevelop
Plan
Develop
PlanAssemble
Team
Assemble
TeamFunding
& Support
Funding
& Support
• general market
research
• market
segmentation
• segment
research
• pricing models
• competitive
research
• financial models
• business plan
• attract and retain
the best talent
• complementary
skills and
personalities
• term sheets
• make sure you
have more than
enough resources
to pursue your
vision!
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Finding the idea!
Most ideas seem obvious in reflection.
It doesn’t mean that they’re easy to find
“Every good work of software starts by scratching a developer's personal itch” - Solution to a problem
“The three chief virtues of a programmer are: Laziness, Impatience and Hubris. Larry Wall. “
Imitating
Spotting a trend (what does new technology enable us to do?)
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Opportunity findnig
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Key concepts
Idea
Opportunity
Initial assessment
Finding people, capital and other resources
Develop and implement a business plan
Manage cash-flow
Plan for the future directin
tisdag den 22 september 2009
Where to begin – the traditional modelWhere to begin – the traditional model
Identify
Opportunity
Identify
OpportunityDevelop
Plan
Develop
PlanAssemble
Team
Assemble
TeamFunding
& Support
Funding
& Support
• general market
research
• market
segmentation
• segment
research
• pricing models
• competitive
research
• financial models
• business plan
• attract and retain
the best talent
• complementary
skills and
personalities
• term sheets
• make sure you
have more than
enough resources
to pursue your
vision!
tisdag den 22 september 2009
Finding the idea!
Most ideas seem obvious in reflection.
It doesn’t mean that they’re easy to find
“Every good work of software starts by scratching a developer's personal itch” - Solution to a problem
“The three chief virtues of a programmer are: Laziness, Impatience and Hubris. Larry Wall. “
Imitating
Spotting a trend (what does new technology enable us to do?)
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tisdag den 22 september 2009
Opportunity findnig
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Evaluating an idea
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Timing is important
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I tried selling these....
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I tried selling this..
But it wasn’t legal...tisdag den 22 september 2009
Where to begin – the traditional modelWhere to begin – the traditional model
Identify
Opportunity
Identify
OpportunityDevelop
Plan
Develop
PlanAssemble
Team
Assemble
TeamFunding
& Support
Funding
& Support
• general market
research
• market
segmentation
• segment
research
• pricing models
• competitive
research
• financial models
• business plan
• attract and retain
the best talent
• complementary
skills and
personalities
• term sheets
• make sure you
have more than
enough resources
to pursue your
vision!
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Simple business plan
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Outline of a business plan
Executive summary (1-3 pages)
Industry analysis
Customer analysis
Competetive analysis
Company analysis
Marketing plan
Operations plan / business milestones
Description of management team
Financial plan
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There’s always competitionNever think that you have no competition
There are often substitutes.
People don’t always (or ever) choose the best product.
Some competition is good
It validates the market
It generates awareness
Makes buyers more secure
You can steal their customers.. if you’re better...
You have something to compare with.
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Purpose of a business plan
Plan your strategy
Attract investors
Attract personell
Forcing you to think through your idea. - organize and scrutinize your thoughts
It’s your high-level plan of the venture..
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Protecting your business
Patents
Secrecy
Copyright
Design pattern protection
Brand name protection
(Can it be copied? Will it be copied? Does it matter?)
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Project Minerva
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Estimating market size
There’s 7 billion people in the world..
How many would be using our product?
(If only 1% choose our product...)
“Drowning is a growing business”
“People are getting older”
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Value proposition?
What do we offer?
New-product?
Re-invention?
What is great about it?
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Where to begin – the traditional modelWhere to begin – the traditional model
Identify
Opportunity
Identify
OpportunityDevelop
Plan
Develop
PlanAssemble
Team
Assemble
TeamFunding
& Support
Funding
& Support
• general market
research
• market
segmentation
• segment
research
• pricing models
• competitive
research
• financial models
• business plan
• attract and retain
the best talent
• complementary
skills and
personalities
• term sheets
• make sure you
have more than
enough resources
to pursue your
vision!
tisdag den 22 september 2009
Where to begin – the traditional modelWhere to begin – the traditional model
Identify
Opportunity
Identify
OpportunityDevelop
Plan
Develop
PlanAssemble
Team
Assemble
TeamFunding
& Support
Funding
& Support
• general market
research
• market
segmentation
• segment
research
• pricing models
• competitive
research
• financial models
• business plan
• attract and retain
the best talent
• complementary
skills and
personalities
• term sheets
• make sure you
have more than
enough resources
to pursue your
vision!
tisdag den 22 september 2009
tisdag den 22 september 2009
The role of VC-firms?
Not only cash..
Venture Capital
Angel investors
Business partners
Incubators
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Start-up Process
Development&
Evaluation
BusinessConcept
Development& Testing
Discovery
Detected(outside-in)
Created(inside-out)
Opportunity
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Value ChainDevelopment
NewValuePrototype
Start-up Process
Development&
Evaluation
BusinessConcept
Development& Testing
Discovery
Detected(outside-in)
Created(inside-out)
Opportunity
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Value ChainDevelopment
NewValuePrototype
Start-up Process“Text book” financing:
Development&
Evaluation
BusinessConcept
Development& Testing
Discovery
Detected(outside-in)
Created(inside-out)
Opportunity
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Value ChainDevelopment
NewValuePrototype
Start-up Process“Text book” financing:
Development&
Evaluation
BusinessConcept
Development& Testing
Discovery
Detected(outside-in)
Created(inside-out)
Savings Seed Money
Venture Capital
ExpansionCapital
Opportunity
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Value ChainDevelopment
NewValuePrototype
Start-up Process“Text book” financing:
Development&
Evaluation
BusinessConcept
Development& Testing
Discovery
Detected(outside-in)
Created(inside-out)
Savings Seed Money
Venture Capital
ExpansionCapital
“Real-life” financing:
Opportunity
tisdag den 22 september 2009
Value ChainDevelopment
NewValuePrototype
Start-up Process“Text book” financing:
Development&
Evaluation
BusinessConcept
Development& Testing
Discovery
Detected(outside-in)
Created(inside-out)
Savings Seed Money
Venture Capital
ExpansionCapital
Savings FFF Start-up Loan
Loan & Pre-order
Revenues, Partners& Loans
“Real-life” financing:
Opportunity
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Product Life cycle
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But plans are mostly theoretical
Many companies are started without a business plan.
Many change their along the way
And some are pure accidents..
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Success factors
Team: Personalities: what are your personality types (values, style, etc.)?
Interests: what are you interested in?
Experience: what experience do you have?
Resources
IP and goods: what does the business own?
Cash: how much cash do you have?
Network: what connections support the organization?
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Success factors (2)
Strategy Plan: what is your plan for establishing and growing the business? Competition: how will you address the competitive challenges?
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Summing up
Planning is important
Execution too..
Find the right balance.
Learn from others
Get some experience
Start thinking about it
Prepare to fail, prepare to find new ways
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Corporate Consolidation
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Corporate Consolidation
Merger
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Corporate Consolidation
Acquisition
Merger
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Corporate Consolidation
AcquisitionVertical
Merger
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Corporate Consolidation
AcquisitionVertical
Horizontal
Merger
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Corporate Consolidation
AcquisitionVertical
Horizontal
MergerConglomerate
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See you next week!
tisdag den 22 september 2009