MGMT 160
Seven steps of hypothesis driven entrepreneurship.
1. Develop a Vision 2. Translate vision into falsifiable hypothesis 3. Specify MVP Tests 4. Prioritize Tests 5. Run Tests and learn from them 6. Preserve, Pivot, or Perish 7. Scaling and ongoing optimization
7 Steps of Testing Process
1. Extract Hypotheses 2. Prioritize Hypotheses 3. Design Tests 4. Prioritize Tests 5. Run Tests 6. Capture Learning 7. Make Progress
Pro Forma Accounting
A financial statement that excludes unusual and non-recurring transactions when stating how much money the company actually made. Helps a company assess future prospects.
Products and Services
A list of what you offer. It is an enumeration of all the products and services your value proposition builds on. (Physical, Intangible, Digital, Financial)
What is a "strategy canvas"? How is a "strategy canvas" to be used? What does the horizontal axis (i.e. "x-axis") represent on the strategy canvas? What does the vertical axis (i.e. "y-axis") represent on the strategy canvas? What is the "line" connecting the dots on the strategy canvas called and what does it stand for?
A strategy canvas is both a diagnostic and an action framework for building a compelling blue ocean strategy. Used to capture the current state of play in the known market space. The horizontal axis captures the range of factors the industry competes on and invests in. The vertical axis captures the offering levels that buyers receive across all key factors. Value Curve connects the dots representing a graphical depiction of a company's relative performance across its industry's factors of competition.
Basic Accounting Equation
Assets = Liabilities + Shareholders' Equity
Define Balance Sheet, Cash Flow, Income Statement, their relationship with each other.
Balance Sheet: Snapshot of investing and financing activities at a moment in time. Cash Flows: Where firms obtain or generate cash and where they spend or use it. Income Statement: Results of the operating activities of a firm for a specific time period. Income Statement links beginning balance sheet with ending balance sheet.
What are barriers to entry? List 3.
Barriers to Entry are what keeps competition from joining an industry and preserves profitability. Customer switching costs, Capital costs, incumbency advantage, unequal access to distribution channels, restrictive government policy.
Two ways MVPs are minimal.
Constrained product functionality - customers experience only a subset of the features envisioned for later versions of the product. Constrained operational capability - technology used to deliver the MVPs functionality is often temporary and makeshift relative to whats needed for scaling.
"Customer Development" process as proposed by Steve Blank for hypothesis-driven entrepreneurship. Please fill in all the blanks
Customer Discovery > Customer Validation PIVOT SEARCH >>Customer Creation > Company Building EXECUTION
9 blocks of Business Model Canvas
Customer Segments, Customer Relationships, Channels, Value Propositions, Key Activities, Key Resources, Key Partnerships, Cost Structure, Revenue Streams.
Pain Relievers
Describe how exactly your products and services alleviate specific customer pains. They explicitly outline how you intend to eliminate or reduce some of the things that annoy your customers before, during, or after they are trying to complete a job or that prevent them from doing so.
Gain Creators
Describe how your products and services create customer gains. They explicitly outline how you intend to produce outcomes and benefits that your customer expects, desires, or would be surprised by.
According to Osterwalder & Pigneur, what is the definition of a "business model"?
Describes the rationale of how an organization creates, delivers, and captures value.
When referring to the VPC, what do we mean when we use the terms "design" and "observe"?
Design refers to a set of value proposition benefits that you create to attract customers. Observe refers to assessing a set of customer characteristics that you assume and verify in the market.
Two historical definitions of entrepreneurship, what is the major flaw of each.
Economic Function: entrepreneurship is defined as an economic function and entrepreneur is defined by the role in society. Flaw: doesn't make sense to decide what economic functions are "entrepreneurial". Entrepreneurs have a common set of individual traits. Flaw: single psychological profile of an entrepreneur doesn't exist.
Define "Entrepreneurship" according to Stevenson.
Entrepreneurship is the pursuit of opportunity without regard to the resources currently controlled.
What is Falsifiability, why is it relevant?
Falsifiability is the ability of a hypothesis to be verified and proved wrong. It is relevant because if you simply state broad hypotheses, it is impossible to prove or disprove them using MVPs without quantifying them any making it falsifiable.
Customer Gains
Gains describe the outcomes and benefits your customers want. Some gains are required, expected, or designed by customers, and some would surprise them.
How to find interview subjects.
Get Creative Find the Moment of Pain Make Referrals Happen Conferences & Meetups Enterprise Customers Advice vs Selling Benefiting from Gatekeepers Students and Researchers Fish Where the Fish Are
Concerns with launching early and often with MVPs
Idea theft - if they conduct early launch MVPs, competitors will steal their idea. Reputational Risk - launching MVP that will have limited features and/or problems that may hurt brand.
What is a pivot?
If the MVP test invalidates an aspect of the business model hypothesis, change some business model elements while retaining others.
What are Porters Six forces?
Industry Competitors: rivalry among existing firms. Potential Entrants: threat of new entrants. Suppliers: bargaining power of suppliers. Buyers: bargaining power of buyers. Substitutes: threat of substitute products or services. Complements: opportunity of complementary products or services
Criticisms of the Porter's Forces Framework.
Industry based, doesn't apply to revolutionary changes. Doesn't explain multi industry giants Ignores firm specific factors
6 Stakeholders
Influencers Reccomenders Economic Buyers Decision Makers End Users Saboteurs
What is intellectual property?
Intellectual property is property of the mind.
Customer Job
Jobs describe the things your customers are trying to get done in their work or in their life. A customer job could be the tasks they are trying to perform and complete, the problems they are trying to solve, or the needs they are trying to satisfy.
Describe a limited partnership and how it differs from a regular partnership.
Limited Partnerships have both limited and general partners. The general partner assumes the management responsibility and unlimited liability with at least a 1% interest in profits and loses. Limited partner has no voice in management and is legally liable only for the amount of capital contributed plus any other debt specifically accepted. The general partner may be a corporation, and profits and losses can be distributed unevenly but only deductible to the amount of capital and risk--common in venture capital, creative structuring.
Does industry analysis explain competitive advantage?
No, industry analysis recognizes that profit potential is affected by firm specific factors--but it doesn't explain why some firms perform better than others.
What are the three common tests that an innovation must meet to be considered for a utility patent?
Novel - must not be known or used by others, patented, or described in a printed publication. Non-obvious - must not be easily deductible from the current body of knowledge, nor obvious to one skilled in the art" Useful - must have a legal and moral use
List and describe in a few sentences each of the three types of "fit" discussed in the text.
On Paper: Problem-Solution Fit: This is when you strive to identify the jobs, pains, and gains that are most relevant to customers and design value propositions accordingly. The fit you achieve is not yet proven and exists mainly on paper. In the Market: Product-Market Fit: Have evidence that your products and services, pain relievers, and gain creators are actually creating customer value and getting traction in the market. In the Bank: Business Model Fit: Have evidence that your value proposition can be embedded in a profitable and scalable business model. Achieved only when you generate more revenue with your value proposition that it costs to create and deliver it.
Four Cognitive Biases
Optimism bias - tendency to overestimate likelihood of positive events and underestimate negative Planning Fallacy - overestimate benefits of a task while underestimating duration, costs, and risks (even with prior experience) Confirmation bias - disproportionately look for information that validates hypothesis Sunk-cost Fallacy - should not consider expenses that have been incurred and can't be recovered when making decisions
Customer Pains
Pains describe anything that annoys your customers before, during, and after trying to get a job done or simply prevents them from getting a job done. Pains also describe risks, potential bad outcomes, related to getting a job done badly or not at all.
What are the four common forms of intellectual property, length of exclusivity, common use, financial cost?
Patents - 20 years, inventions - 10-20K Copyrights - Author life+70 years, or 95 years from commissioned publication, used for writings - free Trade Secrets - until you are careless or you patent, used for proprietary technology - not costly Trademarks - 10 years but may be renewed indefinitely, used for slogans - $325 filing fee
In the article, Prof. Stevenson discussed strategic orientation as a continuum from "________________" (nickname) to "_____________"
Promoter to Trustee
In addition to "Strategic Orientation", there were five additional critical dimensions of business practice as defined by Stevenson. List the four of the five additional dimensions.
Strategic Orientation, Commitment to Opportunity, Resource Commitment Process, Control of Resources, Management Structure, Reward Philosophy
What is the Progress Board as discussed in the text?
Strategic management tool to manage and monitor the business model and value proposition design process and track progress toward a successful value proposition and business model.
The VPC text describes six techniques to gain customer insights. These techniques help you understand the customer's perspective when designing value proposition's. Name four of the techniques and in a few sentences describe each.
The Data Detective - build on existing work with desk research. Secondary research reports and customer data that you might already have provide a great foundation for getting started. The Journalist - Talking to potential customers as an easy way to gain customer insights. The Anthropologists - Observe potential customers in the real world to get good insights into how they really behave. The Impersonator - "be your customer" and actively use products and services. Spend a day or more in your customers shoes. The Co-Creator - Integrate customers into the process of value creation to learn with them. Work with customers to explore and develop new ideas. The Scientists - Get customers to participate in an experiment. Learn from outcome.
What is an S corp and how does it differ from a C corp?
The S corporation is afforded the tax status of a partnership but the protection from legal liability of a corporation. The shareholders must be individuals, estates, or US trusts, must have no more than 100 shareholders with 1 class of stock, but may differ in voting rights.
If I am awarded a patent and still own the exclusive rights to my patent, under what circumstance could I still not use my own innovation.
The circumstance in which a component of your design was already patented, you would need to license that portion before being able to manufacture and sell your product.
What does the "environment map" represent? Briefly list the four "bubbles" on the environment map and in a section describe them. What are the four key areas, and briefly describe each in a sentence or two.
The environment map helps you understand the context in which you create--the ecosystem in which you are designing and making choices about what prototypes to pursue. Industry Forces - Key actors in your space such as competitors,value chain actors, technology providers Key Trends - Key Trends shaping your space such as technology innovations, regulatory constraints, social trends Macroeconomic Forces - Macrotrends such as global market conditions,access to resources, competitive prices Market Forces - Key customer issues in your space, such as growing segments, customer switching costs, changing jobs
What are minimum viable products?
The smallest set of features and/or activities needed to test a business model hypothesis.
What is the easiest type of organization to form in the United States and why?
The sole proprietorship is the easiest type of organization to form; the individual and the business are one and the same for tax and legal liability purposes. The individual reports all income and deductible expenses for the business on schedule C of the personal income tax return.
Dominant issues that influence which form of legal entity to choose.
The two most basic differences between these various legal forms of organization are the tax status each is afforded, and the protection from liabilities each form offers to the owners. Tax status is very important in a business as it can affect profitability and the ability to pass through losses from a business. Protection from liability may become the difference between a company going bankrupt versus the founder.
Kim & Mauborgne argue that "creators of blue oceans never use the competition as their benchmark", yet typically when a consumer purchases an item they are comparing similar items. How, then, do they justify the statement "creators of blue oceans never use the competition as their benchmark"?
They make it irrelevant by creating a leap in value for both buyers and the company itself.
Define TAM, TSM, and Target Market. How are they related.
Total Addressable Market: 100% of market for the type of product you sell Total Serviceable Market: 100% of the market you can actually sell to TBM: Initial most likely buyers TAM >/ TSM >/ TARGET
Sections of the "Value Proposition Canvas".
Value Map: Products and Services, Gain Creators, Pain Relievers Customer Profile: Customer Jobs, Gains, Pains
Sketch industry life cycle and label the regions
X axis: intro > growth > Shake out > Maturity > Decline > Death or Retirement Y axis: # of firms
Cost Structure
all costs incurred to operate a business model
Key Activites
describes the most important things a company must do to make its business model work
Customer Segments
different groups of people or organizations an enterprise aims to reach and serve
Channels
how a company communicates with and reaches its customer segments to deliver a value proposition
Revenue Streams
represents the cash a company generates from each customer segment
Value Propositions
the bundle of products and services that create value for a specific customer segment
Key Resources
the most important assets required to make a business model work
Key Partnerships
the network of suppliers and partners that make the business model work
Customer Relationships
types of relationships a company establishes with specific customer segments
What is the goal of an industry analysis?
understanding how profits are distributed among market participants. Also helps a company understand how its industry structure influences profits.
Define the terms "red oceans" and "blue oceans" according to Kim & Mauborgne.
• Red Oceans: represent all the industries in existence today. This is the known market space • Blue Oceans: all the industries not in existence today. This is the unknown market space
