New Venture Creation Exam 1 info

questions about your business model

"What is our mission?","Who is our customer?","What does our customer value?", "What is out plan?"

categories of new venture creation

1) The entrepreneur an what he/she brings to the process, 2) the environment, and 3) the organization.

Global economic turmoil

A worldwide period of economic difficulty experienced by markets and consumers. A global financial crisis is a difficult business environment to succeed in since potential consumers tend to reduce their purchases of goods and services until the economic situation improves. * The plus side, because it produces opportunities for entrepreneurs who are comfortable with instability and environmental factors not in their control.

Reinvent the business model

As a company's products become commodities, it may take an enormous shift in operations, culture, and business model to add new value to the company's offerings. Example: Apple reinvented itself with the introduction of the iPod and then again with the iPhone.

5 distinct phases of channels

Awareness, Evaluation, Purchase, Delivery, After sales

Creative Destruction

Breaking down old ways of doing things to create new value

identifying competition

By identifying exactly who the companies are and including their strength, weakness, and market strategies. There are usually 3 types direct, indirect or substitute, and emerging or potential.

Use existing core competencies to build new business models

Canadian manufacturer Bombardier originally focused on snowmobiles. Because it sold its products through credit, developed an expertise in financial services, which enabled the company to move into capital leasing. Its manufacturing expertise was leveraged into large-scale manufacturing for the aircraft industry.

nine building blocks

Customer segments, Value proposition, Channels,Relationships,Revenue streams,Key activities, Key resources, Key partners, Cost centers

trends in the 1980s

Decade of Entrepreneurship, lean and mean, takeovers, anti-diversification, small firm innovation

Green Power

Entrepreneurs can take advantage of several sub-trends within the green power sector. Consumers want to save on the costs of energy consumption and consume less of everything, and they are willing to buy green if they don't have to pay dollar for it. Example: eco-iconic marketing - ex. Crop to Cup Coffee; Green Irene- Green home makeovers

incorrect assumptions about the value chain

Entrepreneurs often assume that the value chain for their product or service is static, that is, that it will continue with the current players and with the current processes and information flow well into the future. This is a faulty assumption. Core competencies enable firms to move into new industries and new value chains unrelated to their current products and services. Example: UPS did this when they examined Toshibas lenghy and inefficient returns process for repairing laptops, so UPS cut out all the excess shipping by repairing Toshiba computers at the UPS facility.

Corporate Entrepreneur

Entrepreneurship can also occur inside an existing organization. Corporate ventures are distinct from other types of projects that these firms take on. They involve activities that are typically new to the company so the risk of failure is high and there is also a high degree of uncertainty around such projects, so they are often managed separately from the core business activities.

Take an existing model into new areas.

Example: Amazon.com known as a highly effective internet bookseller, began successful fulfillment process to market and sell everything from clothing to household goods.

Add new models via acquisition

Example: restaurant company might acquire a catering service

brain writing

Is use to make sure that everyone on the team feels comfortable offering up ideas.Getting ideas down on paper and then organizing the ideas and creating themes. Each person is given a stack of Post-It notes; each individual writes 3 ideas, one on each of the 3 Post-It. As everyone finishes, they place their Post-It in the center of the table. Then each one takes 3 Post-It they didn't create, looks at the ideas and once again writes 3 new ideas on each of 3 new Post-Its. It continues for 3 to 4 rounds

trends in the 1970s

Macroeconomic turmoil, International competition, technological revolution, Deregulation

home based entrepreneur

Many are entrepreneurial ventures that compete in the same arena as brand name business with large facilities. Technology has made it possible to do business from virtually anywhere, so entrepreneurs don't have to work in traditional office spaces to start or run a business.

targeting the first customer

Narrow the focus of the market and consider identifying two or three prototypes of a business that seems to be the most feasible. By narrowing the focus market research can be more targeted and more productive.

dealing with competition

Provide meaningful differentiation in their solutions to customer needs. Use a niche that Is not currently being used. Need to quickly focus on developing relationships with key people in the supply chain as well as key customers.

Birth

Stage 1 of the industry lifecycle: a new industry emerges, often with the introduction of disruptive technology such as the internet.

Growth and adoption

Stage 2 of the industry lifecycle:a new industry typically goes through a volatile and rapid stage of growth as companies and their perspective technologies jockey for position and the right to determine industry standards. This is an expensive period for most companies because they need to use extensive resources and develop critical partnerships to establish their position in the industry.

Differentiation and competition

Stage 3 of the industry lifecycle:ventures that enter at this point must either identify niches that have not been served or differentiate themselves sufficiently in order to attract enough customers to be successful.

Shakeout

Stage 4 of the industry lifecycle:this is when competition is MOST intense and those companies that are unable to compete leave.

Maturity and decline

Stage 5 of the industry lifecycle: industry reaches a mature state in which several major players dominate. If new R&D in the industry do not produce a resurgence of growth, the industry would face impending decline as earnings and sales growths slow and prospects deteriorate.

physical resources

Tangible physical pieces of capital, including warehouses and manufacturing plants

Non-profit entrepreneur

They generally seek tax-exempt status so that they can attract donations from companies and individuals who believe in their mission. They can make a profit, but that profit must stay within the company and they focus in educational, religious, or charitable goals.

importance of primary industry data

To access the timeliest information, it is extremely important to gather primary field data on the industry. Entrepreneurs need to talk to other people in the industry to validate what they have gathered with second hand knowledge. Sources to investigate consist of Industry observers who study particular industries and regularly report on them, suppliers and distributors who are in an excellent position to comment on the health of the industry in terms of demand and financial strength and market practices for major firms in the industry, customers who can clue to satisfaction with the industry, employees of key firms in the industry who are a good source of information about opinion leaders and competitors, professionals from service organizations such as lawyers and accountants who regularly work with a particular industry, and finally trade shows which give a good indication of who the opinion leaders are and who has the strongest market strategy.

Limited strategic choices

a business model addresses should reflect both the value creation and the value capture process. Satisfying only one of these will often lead to problems. During the dotcom era, many misguided entrpreneurs thought that the internet was the business model, so they invented businesses that had no compelling reason to exist beyond the fact that they were on the internet. For example: Pets.com thought it would be easier for people to buy dog food online, what they didn't realize was that most customers purchase dog food when they buy their own food eliminating the need for additional trips, buying online was actually an inconvenience for them.

platform/network

a key activity is used in software industries along with utilizing formats for creating a matrix and or understanding of matching sources

problem solving

a key activity related to coming up with new solutions to individual customer problems. Consultancies, hospitals, law firms and other service organizations are typically dominated by this activity

production

a key activity relating to designing, making and delivering product in substantial quantities and or of superior quality. these activities dominate the business models of manufacturing firms

Economies of scope

a proportionate saving gained by producing two or more distinct goods, when the cost of doing so is less than that of producing each separately. (think multiple products)

economies of scale

a proportionate saving in costs gained by an increased level of production. (think single product)

acquisition of particular resources

a type of key partnership: few companies own all the resources or perform all the activities described by their business model. This type of partnership allows ventures to extend its own capabilities by relying on other firms to furnish particular resources or perform certain activities

Reduction of risk and uncertainty

a type of key partnership: it is not usual for competitors to form strategic alliance in one area while competing in another

optimization of economies of scale

a type of key partnership: most basic form designed to optimize allocation of resources and activities. This type is usually performed to reduce costs and often involves outsourcing or sharing infrastructures

Human resources

all entures require this resource as they are crucial in knowledge intensive and creative industries

portfolio entrepreneur

an entrepreneur who owns a minority or majority stake in several ventures

serial entrepreneur

an entrepreneur who starts one business and then moves on to start another

Technological factors

are R&D activity and rate of technological change

Efficiency Driven Economies

are growing and in need of improving their production processes and quality of goods produced. Examples: Argentina, Russia, and South Africa

Innovative Driven Economies

are most advanced, are where businesses compete on innovation and entrepreneurship. Examples: Denmark, Israel United Arab Emirates and the USA

Performance

are you improving an existing product or service? Technology is the driving "tool" for this one

Newness

are you satisfying an entirely new set of needs that customers previously didn't perceive because there was no similar offering? (back up automobile cameras)

customization

are you tailoring products & services to the specific needs of individual customers? (monogrammed cell phone)

initiative

believing that the actions taken will make a difference.

trends in the 1960s

bigger is better, diversification, job security

Intellectual resources

brands, proprietary knowledge, patents/copyrights, partnerships and customer databases

Attribute Identification

breaking down a problem into its various elements and then generating new approaches or modifications for each of the elements.

Flawed logic

businesses are doomed to fail if the underlying logic and ideas about the future is incorrect (think about the Segway) For Example: Napster and their attempts to allow free music sharing with the assumption they would not be held accountable for copywright violations.

financial resources

cash, lines of credit, or a stock option pool for hiring key employees

social factors

consist of demographics and cultural aspects of the environment (age distribution, health conscious or attitudes toward the environment).

fixed costs

costs that remain the same despite the volume of goods and/or services produced

variable costs

costs that vary proportionally with the volume of goods and services produced

Economic factors

deal with the firm's cost of capital and customers purchasing power as well as inflation, employment rate, and economic prospects over time.

Entrepreneurship

defined as the process by which individuals—either on their own or inside organizations—pursue opportunities without regard to the resources they currently control.

steps to developing creative skills

design an environment to stimulate creativity, log ideas, put the familiar into a new context, take advantage of a personal network, return to childhood

weak ties

entrepreneurs acquaintances and business contacts

strong ties

entrepreneurs family and close friends, whom he or she know well

corporate interoperability

environment must encourage collaboration and give access to the knowledge and resources of all the company's functional areas, while at the same time allowing the entrepreneur a high degree of autonomy. They also need a way to measure progress and success that is not based on the corporation's benchmarks but rather on benchmarks appropriate to startup ventures with limited resources.

steps for preparing entrepreneurs

find a mentor, build a professional network, learn about entrepreneurs, understand personality and business preferences, improve on acquired knowledge and skills, study an industry

cost driven

focuses on minimizing costs where ever possible. this approach aims at creating and maintaining the leanest possible cost structure, using low price value propositions, maximizing automation, and extensive outsourcing.

value driven

focuses on value over costs, typically premium value propositions and high degree of personalized service

Revitalize an established model

give it new life and stave off competition. This can be accomplished by introducing new products and services to existing customers. Example: Starbucks selling CD's of the music it plays in its stores

Cost reduction

helping customers reduce coasts is an important source of value (landrum staffing)

risk reduction

helping customers reduce their risk provides value (insurance companies)

Restating the Problem

how and why; a problem statement can be reworked to get at the root problem that was not apparent from the original problem statement.

design

important, but very difficult element to measure. Most common in the fashion and consumer electronic industry (Guy's skinny leg jeans?)

trends in the 1990s

information age, no job security, fewer benefits, service firm growth, creative financing

Three characteristics of entrepreneurial ventures

innovative, value-creating, growth oriented

political factors

involve government regulation and various legal issues that affect business's operations in addition to the stability of the government trade agreement.

Spirit of entrepreneurship

is about opportunity, but it's also about failing sometimes

invention

is an original idea, where innovation is an ongoing process of taking a product and adjusting/adapting it to the market.

Creative Change

is found in industries where resources turn over frequently and must continually be replaced.

Intermediating change

is industry change that comes about when there are major shifts in the value chain in the form of backwards or forwards integration, strategic partnership, and new ways to transact business with customers.

The new venture creation process

is not linear, but fluid. The environment is not static, but dynamic and all variables are inter-related.

trends in the 2000s

knowledge economy, rebirth of the commercial internet, renewed interest in biotech/biomed, low transfer costs

customer matrix

lays out the benefits, distribution channel, product/service, and potential competition for each identified- customer segments. Once the customer segment is identified the entrepreneur must make a choice which customer to go after first.

Accessibility

making products & services available to customers who previously lacked access to them is another way to create value (normal phones in Africa)

clearly defined stages and metrics

need a timeline with stages at which decisions can be made about whether to proceed and whether additional or different resources are required

2 challenges of creativity

no time for creativity, no confidence

Radical change

occurs in industries when an innovation results in the obsolescence of previous technology and drives old line companies out of business.

price

offering similar value at a lower price is a common way to satisfy the needs of price-sensitive customer segments

Imperfect value creation and capture assumption

one of the biggest challenges for a business model is finding a new way to make money from the value being created. A poor assumption about the value created by a new venture will mean that there are no customers to pay for that value.

superior team

only the best people should be put in corporate entrepreneurship situations

Accountability

personal responsibility for actions taken and is component of a person's integrity.

Factor Driven Economies

rely on unskilled labor and the extraction of natural resources. Businesses here are created by necessity. Example Uganda, Guatemala and Algeria

Progressive change

takes place as companies in the industry grow geographically and increase profits through innovations in operations, processes, distribution, and technology.

Connecting Unrelated Concepts

the ability to connect things that don't normally go together.

networking

the exchange of information and resources among individuals, groups, or organizations whose common goals are to mutually benefit and create value for the members.

Incrementally Expand

the existing model geographically, enters new markets, modify pricing, or change product/service lines. Example: Kiyonna, an apparel manufacturer that moved from boutique to an online site that better served their young, plus size customers

brand/status

the value customer receive for just using and/or displaying a specific brand(Miss Me jeans)

convenience

things more convenient or easier to use (Apple)

champions

this person is the highest level who can open doors and make valuable contacts and who will lend credibility to the enterprise

Getting the job done

value can be created by simply helping a customer get certain jobs done (Rolls-Royces's jet engines)

hardest question to answer

what do our customers value?

Senior Management commitment

without the support, it will be difficult to move any entrepreneurial project forward fast enough and far enough to be successful

Women's Market

women ages 50-70 today are the healthiest, wealthiest, most educated and most active generation in history. Their workforce numbers have grown by 52% since 2000, women make 80% of the buying decisions for households that control 50% discretionary spending in the U.S., and they control 7% of financial assets

Collaboration

working with others and being able to count on each other.