Entrepreneurship Chapters 10-12 and 1-4

entrepreneurship

Entrepreneurship is a way of thinking, acting, and being that combines the ability to find or create new opportunities with the courage to act on them.

Components of a Business Plan

1. Cover 2. Table of Contents 3. Executive Summary (2-3 pages) • Brief introduction and description of the opportunity • Company overview • Product or service description • Industry overview • Marketplace and target market • Competitive advantage • Business model (with summary of financials) • Management team • Offering 4. Company Overview (1-2 pages) • Company description • History and current status (stage of development) • Products and service description • Competitive advantages • Entry, growth, and exit strategies 5. Industry, Marketplace, and Competitor Analyses (3-6 pages) • Industry analysis • Marketplace analysis • Competitor analysis 6. Marketing Plan (1-4 pages) • Target market strategy • Product/service strategy • Pricing strategy • Distribution strategy • Advertising and promotion strategy • Sales strategy • Marketing and sales forecasts • Marketing expenses 7. Operations Plan (2 pages) • Operations strategy • Scope of operations • Ongoing operations • Operations expenses 8. Development Plan (1-2 pages) • Development strategy • Development timeline (milestones) • Development expenses 9. Management (1-2 pages) • Company organization • Management team • Ownership and compensation • Administrative expenses 10. Critical Risks (1-2 pages) • Market, customer, financial risks • Competitor retaliation • Contingency plans 11. Offering (up to 1 page) • Investment requirements • Offer 12. Financial Plan (up to 2 text pages, including financial statements) • Detailed financial assumptions • Pro forma financial statements • Breakeven analysis and other calculations • Do include statement within this section; do not place statements in the appendix. 13. Appendices (no maximum) • Customer survey and results • Other items to include may be menus, product specifications, team résumés, sample promotions, product pictures.

Explain the different types of plans used by entrepreneurs.

Different types of plans include the Business Model Canvas, the business brief, the feasibility study, the pitch deck, and the business plan.

Connect idea generation to opportunity recognition.

IDEATE (identify, discover, enhance, anticipate, target, and evaluate) is an empirically proven method for identifying and selecting high-potential ideas that can be converted to new opportunities.

feedback interview

It's very common for entrepreneurs to interview customers after they have purchased a product or service. This is called a feedback interview.

Business Model Canvas' Nine Blocks

Key partners Key activities Value proposition Customer relationships Customer segments Key resources Channels Cost structure Revenue streams

Understand Your Distribution Channels

Make sure you know how your product or service will be delivered to your target customers. Any vagueness around your distribution channels will cause investors to second guess you and your business.

Sample Feasibility Study Template

Need Identification Describe why there is a need for your business to exist Venture Concept Have a clear, concise description in 2-3 sentences. Value Propositions What makes you unique and why is this valuable for the customer? Prove that the customer wants what you are providing. Market Discuss the market size, potential market size, and target market size. Is the market large enough to meet your goals? Discuss trends and growth estimates. Competitive Environment Identify and compare your venture against the competition. By understanding the competition, you will have a better understanding of the dynamics of the industry in which you are competing and how you are differentiated. Are there specific laws or regulations you should be aware of? Revenue Model Describe your revenue model in terms of the revenue streams and the key factors that will influence those streams. You will also need to examine your cost model and determine the key drivers of your costs. Overall, you are assessing your potential profitability. Provide a simple income statement. Startup Requirements Identify the resources needed to start the business. What is absolutely essential before a sale can be made? What don't you have, but need? Team Critically assess your current team, its fit with the venture, and your ability to act (or not). Decision Based on the analysis laid out in the feasibility study, do you want to move forward? Why or why not?

Be Realistic

Outline the challenges ahead, potential risks, lessons you have learned, and opportunities to progress. A strong idea will stand on its merit when you are realistic about it. Everything you write or present must be based in fact or well-researched assumptions.

Describe the questions to ask during planning.

Regardless of what type of plan you are working on, you must ask the following questions: What is your business and how does it add value? Who is your customer? How big is the market? How will you enter the market? What do you know about the industry? Who is your competition and why are you better? Who is on your team and what do they bring to the table? And, what are your financial projections?

deliberate practice

Researchers have found that it all depends on how you practice. To achieve high levels of performance, high performers engage in deliberate practice, which involves carrying out carefully focused efforts to improve current performance.42 The Mindshift features throughout this text are a useful way of deliberately practicing entrepreneurship.

ideation

The second phase of the design-thinking process is ideation, which involves generating and developing new ideas to address needs (or latent needs), based on observations made during the inspiration process. Ideation is where empathy and creativity interact to generate solutions!

Focus on Your Competition

There is no such thing as no competition, regardless of how unique you think your business is. Focus on what your business does, but explain what differentiates your product or service from the competition and how you plan to compete now and in the future.

How Big Is the Market?

This involves describing the needs your product or service fulfills for your customer, the problems you are solving for them, and any evidence you have to show that your potential customers will want to buy your offering.

analytical strategies

[Page 63]Analytical strategies involve taking time to think carefully about a problem by breaking it up into parts, or looking at it in a more general way, to generate ideas about how certain products or services can be improved or made more innovative. In some cases, you may see very little correlation between problems until you think about them analytically. For example, in one study, a group was asked to think about different ways of stacking certain items. The ideas they came up with were then considered as ways to park cars. In another study, researchers found that artists who carried out critical analysis before they started their work, as well as during the task, were more successful than those who did not use the same analysis.

equity crowdfunding

a form of crowdfunding that gives backers the opportunity to become shareholders in a company

sweat equity

a non-monetary investment that increases the value or ownership interest created by the investment of hard work for no compensation. For example, if you have decided to renovate houses for a living, you might save on the cost of hiring laborers by doing some of the work yourself and adding value to the properties at the same time.

Lean Stack

a paid service that compresses the essential parts of your business down to one page to send to investors who have little time to read through a large document

social entrepreneurship

as the process of sourcing innovative solutions to social and environmental problems

find pathway

assumes that opportunities exist independent of entrepreneurs and are waiting to be found. Generally, an opportunity is found when the entrepreneur sees a clear problem and develops a solution. The problem is known to most, but the entrepreneur is the one who acts on the potential solution

patronage model

describes the financial support given by backers without any expectation of a direct return for their donations. Crowdfunding platform Patreon allows its patrons to fund illustrators, authors, podcasters, musicians, and other independent creators

the 3 fs

entrepreneurs will turn to friends, families, and fools

planning

process of envisioning the future for your business, including what you plan to do and how you plan to do it.

Lack of Ability

the entrepreneur is overextended and lacks the skillset to get the job done. He or she may have been good at the start, but as the business grew, more skills were needed.

pattern recognition

the process of identifying links or connections between apparently unrelated things or events. Pattern recognition takes place when people "connect the dots" in order to identify and then build on opportunities

LeanLaunchLab

which allows you to test hypotheses and refine your business model

A traditional business plan usually consists of

f 20 to 40 pages, plus additional pages for appendices. It also includes the organization's mission, strategy, tactics, goals, financials, and objectives, together with a 5-year forecast for income, profits, and cash flow.6 This information is divided into three main parts.7

The IDEATE Model for Opportunity Recognition

-Identify Identifying problems that customers are currently trying to solve, are spending money to solve, but are still not solved to the customers' satisfaction. Also identifying the underlying causes of the problem. -Discover Actively searching for ideas in problem-rich environments where there is social and demographic change, technological change, political and regulatory change, and/or change in industry structure. -Enhance Taking the ideas and expanding to new applications or adding innovative twists. Or simply enhancing existing ideas. Anticipate Studying change and analyzing future scenarios as they relate to social, technological, and other global changes and trends. -Target Defining and understanding a particular target market, validating new ideas with early adopters. -Evaluate Evaluating whether the solution solves a problem, size of target market, degree of personal interest by the entrepreneur, and skills and abilities of the entrepreneur

As just mentioned, it can take 200 hours to write a comprehensive business plan

...

The General Self-Efficacy Scale (GSES)

1 I can always manage to solve difficult problems if I try hard enough. 2 If someone opposes me, I can find the means and ways to get what I want. 3 It is easy for me to stick to my aims and accomplish my goals. 4 I am confident that I could deal efficiently with unexpected events. 5 Thanks to my resourcefulness, I know how to handle unforeseen situations. 6 I can solve most problems if I invest the necessary effort. 7 I can remain calm when facing difficulties because I can rely on my coping abilities. 8 When I am confronted with a problem, I can usually find several solutions. 9 If I am in trouble, I can usually think of a solution. 10

Eight Components of the Entrepreneurship Method

1) Identify your desired impact on the world 2)Start with the means at hand.39 Answer the following questions: Who am I? What do I know? Whom do I know? The composite answer will help you understand your current resource base—the resources you have available today that you can use for immediate action. 3)Describe the idea today. The idea is identified by connecting your means to your impact statement. What can you start to do today with what you have today? 4)Calculate affordable loss.40 Leaving one's comfort zone is always perceived as risky, but risk is relative. What is considered high risk to one may not seem high risk to another; therefore, it can be quite difficult to calculate risk and use it as a valid decision-making criterion. Rather than calculating risk, think about taking action in terms of what you are willing to lose. What are you truly willing to give up in terms of money, reputation, time, and opportunity cost? By answering these questions, you take control rather than allowing yourself to be controlled by risk or the fear of failure. 5)Take small action. Nothing drastic . . . the first action is just a small start to get you going. No excuses here. You can do it. Once you calculate your affordable loss, you control all the risk. 6)Network and enroll others in your journey. The Entrepreneurship Method is about collaboration and cocreation rather than competition. Sharing your ideas and enrolling others in your journey will increase your resource base, expand the possibilities available, and validate your idea. 7)Build on what you learn. Assess performance of your action. Keep in mind that assessment is not about "killing" your new idea; it's about making the idea better. There is no right or wrong answer at this stage, just better. Expect and embrace setbacks, and celebrate the learning. When Thomas Watson, the founder of IBM, was asked about the key to success he responded, "Increase the rate of failure." 8)Reflect and be honest with yourself. One question always arises: How do I know when I should stop or keep going? The answer is easy. Quit only if you no longer have the desire inherent in your impact statement or if you have exceeded your affordable loss. Otherwise, the real question you have to answer now is "What are you going to do next?"

types of observation

1. Complete Observer A complete observer is someone who is either hidden from view or is observing in plain sight but is not noticed by participants. For instance, you might go to a shopping mall to observe people's shopping habits. Other public places for this type of observation include airports, subway stations, or even public bathrooms. Although this observation technique is useful for noting how people behave—they are more likely to act naturally when they don't know they are being observed—consider the ethical implications of this approach. After all, how would you feel if you found out you were being watched without your consent? 2. Observer as Participant In this case, the observer is known to the participants but maintains a neutral stance throughout. This type of observation may be useful to understand how people carry out certain activities, for instance, observing how people use certain software to achieve their goals. 3. Participant as Observer Here, researchers are not only known by the participants, but considered more of a friend or a colleague. This method is often used when researchers visit remote indigenous populations or inner-city cultures to gather information on different cultural habits. 4. Complete Participant A complete participant is almost like an undercover spy. The researcher fully engages with the participants and joins in with their activities, but they have no idea they are being observed. This technique is often used in customer research, such as the secret shopper role in the show Undercover Boss. It is a useful way to gather firsthand experience of how consumers operate.

10 Signs You Might Have a Fear of Failure

1. Failing makes you worry about what other people think about you. 2. Failing makes you worry about your ability to pursue the future you desire. 3. Failing makes you worry that people will lose interest in you. 4. Failing makes you worry about how smart or capable you are. 5. Failing makes you worry about disappointing people whose opinion you value. 6. You tend to tell people beforehand that you don't expect to succeed in order to lower their expectations. 7. Once you fail at something, you have trouble imagining what you could have done differently to succeed. 8. You often get last-minute headaches, stomach aches, or other physical symptoms that prevent you from completing your preparation. 9. You often get distracted by tasks that prevent you from completing your preparation, which, in hindsight, were not as urgent as they seemed at the time.

Seven Skills of Designers That Entrepreneurs Should Have

1. Observation Designers are curious. They observe, always looking at the world through different lenses and making notes of things others overlook. 2. Listening Designers develop active listening skills so they are able to identify what really matters to others. The best designers never assume they know what is best for the user. 3. Desire Change Designers seek to solve problems and improve upon what may already exist. New products, services, and processes lead to change. 4. Context and Integration Designers design in context. Context helps us create meaning and understanding. Attention to context brings more relevance to a solution. For example, you design a chair for a room; a room for a house; a house for a neighborhood. 5. Solution-driven The goal of any designer is to solve a problem that was identified through observing and listening. 6. Consideration Good designers consider their impact of their work on people, the environment, and economies. 7. Unbound Great designers are unbound by the past and are open to the less-than-obvious solutions to problems. They ask "Why not?" when other people say it can't be done

family enterprising

A family enterprise is a business that is owned and managed by multiple family members, typically for more than one generation. What makes family enterprising part of the portfolio of entrepreneurship types is that each generation has an opportunity to bring the organization forward in new, innovative ways. Family-owned businesses are hugely important for the U.S. economy and account for 60% of employment, 78% of new jobs, and 65% of total wages

franchise

A franchise is a type of license purchased by an individual (franchisee) from an existing business (franchisor) that allows the franchisee to trade under the name of that business.17 In this type of entrepreneurship, both the franchisor (the founder of the original business) and the franchisee are entrepreneurs. Franchising can be a beneficial way for entrepreneurs to get a head start in launching their own businesses, as they do not have to spend the same amount of time on marketing, building the brand, developing processes, and sourcing product.

habit

A good approach is to consider developing new habits. A habit is a sometimes unconscious pattern of behavior that is carried out often and regularly. Good habits can be learned through a "habit loop"—a process by which our brain decides whether or not a certain behavior should be stored and repeated. If we feel rewarded for our behavior, then we are more likely to continue doing it. For example, toothpaste companies instigate a habit loop in consumers by not just advertising the hygiene benefits of brushing teeth, but also the "tingling, clean feeling" we get afterwards—the reward. People are more likely to get into a toothbrushing habit loop as a result

Avoid the Hockey Stick Projection

A hockey stick projection is one that shows very few sales in Year 1, then suddenly, perhaps in Year 3 or 4, sales skyrocket. When you graph the growth in sales from Year 1 to Year 5, the line looks like a hockey stick, and it's typically unrealistic. E

benefit corporation or b corp

A subcategory of social entrepreneurship is the benefit corporation, or B Corp. This is a form of organization certified by the nonprofit B Lab that ensures that strict standards of social and environmental performance, accountability, and transparency are met.24 The voluntary certification is designed for for-profit companies aiming to achieve social goals alongside business ones. To be certified as a B Corp, the organization is rated on how its employees are treated, its impact on the environment, and how it benefits the community in which it operates.25 B Corp certification ensures that the for-profit company fulfills its social mission, and the certification protects it from lawsuits from stakeholders that may claim that the company is spending more time or resources on social issues rather than maximizing profit.

AEIOU framework

Activities are goal-directed sets of actions—pathways toward things that people want to accomplish. What activities and actions do people engage in when carrying out tasks? Environments include the entire arena where activities take place. What is the function of the individual, shared, and overall space? Taking photographs or drawing sketches of the environment is also a useful way to record environmental cues. Interactions take place between a person and something or someone else. What is the nature of these exchanges? Can you observe what the person enjoys the most or the least? Objects are the building blocks or physical items that people interact with. What are the objects and devices that people use, and how do they relate to their activities? Users are the people whose behaviors, needs, and preferences are being observed. What are their goals, values, motivations, roles, prejudices, and relationships? Who are they?

Explain vision as an important part of planning.

All planning starts with a vision. The vivid vision exercise is a good way to present your vison in writing or as sketch or video. It should describe what the future looks like rather than detailing how you're going to get there.

Demonstrate how to observe and convert observation data to insights.

An insight, in this sense, is an interpretation of an event or observation that, importantly, provides new information or meaning. There are four different types of observation, and, like entrepreneurship, the ability to discern trends and patterns from each dimension is a skill that can be practiced and improved.

Demonstrate design thinking as a human-centered process focusing on customers and their needs.

Before business feasibility and economic sustainability are considered in the design process, entrepreneurs discover what people need. Products that achieve all three are bound to be the most successful, but the product or service must first be designed to provide a desired solution, or fulfill a need, for the design process to be considered human centered.

behavior-focused strategies

Behavior-focused strategies help increase self-awareness to manage behaviors, particularly when dealing with necessary but unpleasant tasks. These strategies include self-observation, self-goal setting, self-reward, self-punishment, and self-cueing (see Figure 2.4).

need-finding interview

But it's also common to use interviewing much earlier in the process to develop insights and identify needs. This is called a need-finding interview. Both follow similar protocols but their purposes are different. Regardless of the type of interview you are conducting, the following sections will help you develop your interviewing skills for maximum impact.

Common Crowdfunding Mistakes

Choosing the wrong crowdfunding platform • Setting an unrealistic funding goal • Not having enough presence on social media • Lack of updates or communication with your backers • Failure to get feedback and advice from the "crowd" and other crowdfunders • Insufficient media coverage • Failure to deliver product or rewards post-campaign

Corporate Entrepreneurship

Corporate entrepreneurship (also known as intrapreneurship) is a process of creating new products, ventures, processes, or renewal within large corporations.13 It is typically carried out by employees working in units separate from the mainstream areas of the corporation who create and test innovations that are then assimilated into the broader corporation.

1.3 Compare and contrast the different forms of entrepreneurship in practice today.

Corporate entrepreneurship (or intrapreneurship) is entrepreneurship within large corporations. Inside entrepreneurs are similar to corporate entrepreneurs, but they can be found in any type of organization, large or small, nonprofit or for-profit, and even among governing bodies. Franchising and buy-outs are popular ways to start relatively near the ground level. Social entrepreneurship—entrepreneurship focused on making the world a better place—is manifested in nonprofit and large, for-profit firms alike. A form of social entrepreneurship is the Benefit Corporation, or B Corp, which designates for-profit firms that meet high standards of corporate social responsibility. Family enterprises, entrepreneurship started within the family, remain a dominant form of business development in the United States and abroad. Serial entrepreneurs are so committed to entrepreneurship that they're constantly on the move creating new businesses.

Grit incorporates several different attributes

Courage Conscientiousness Perseverance Resilience Excellence

Explain the difference between crowdsourcing and crowdfunding.

Crowdfunding involves raising funds from a large audience, typically through the Internet. Crowdsourcing involves using the Internet to attract and manage low-cost or free labor generated by enthusiasm for the product or service

Define the four contexts for crowdfunding.

Crowdfunding largely falls into one of four types: patronage model, lending model, reward-based model, and investor model. There are many benefits to crowdfunding for entrepreneurs: It provides you with the money you need to get your business off the ground, enables you to attract early customers, and allows you to test your ideas at very little cost.

Remove the Fluff

Decorative language can sound nice, but do not be tempted to use it in a business plan. Too much wordiness or jargon can detract from the main message.

Points to Include in a Business Brief

Description of the business idea (company overview) • Value proposition that highlights the problem being solved or need being met • Customer profile and market size • Proof of market demand and future growth • Description of the entrepreneur/team • Actions taken to date and future actions planned • Simple pro forma income statement (up to 3 years)

development strategies

Development strategies are employed to enhance and modify existing ideas in order to create better alternatives and new possibilities. A common exercise in idea enhancement is to gather a group of four to six people together. Each person writes down three ideas, which are then passed around the group. Then every member spends 5 minutes suggesting improvements to the ideas to make them more feasible and effective. Group brainstorming is a good example of a development strategy.

Critical Elements of Feasibility Study

Does the idea fulfill a need or solve a big problem? • Is there both short- and long-term market potential? • Who are the customers, and what are they willing to pay? • Does the opportunity provide competitive uniqueness? • Is the business model feasible (can it be done) and viable (can it be sustainable)

Entrepreneurship Inside

Entrepreneurs inside are employees who think and act entrepreneurially within different types of organizations. Although this sounds similar to corporate entrepreneurs (employees who work for large corporations), there is an important difference: Entrepreneurs inside can exist and function in any type of organization, big or small, including government agencies, nonprofits, religious entities, self-organizing entities, [Page 11]and cooperatives.15 These types of entrepreneurs often need inside support from senior managers or other team members for their initiatives, which can be difficult if those people tend to resist new ideas or are keen to simply "stick to the company brief" rather than push boundaries. Building a tribe of willing supporters is essential for getting buy-in to their ideas and proving there is a market for them.

Define bootstrapping and illustrate how it applies to entrepreneurs

Entrepreneurs use their own sweat equity in combination with other bootstrapping strategies to make enough progress to get in a better position to attract more formal types of funding.

Be Honest About Your Weaknesses

Every business has its weaknesses, but it's better to be upfront about them rather than hide them. You don't need to go into too much detail about weaknesses, but you do need to include a well-thought-out strategy explaining how you plan to address these issues.

Explain the different ways entrepreneurs can learn from failure

Failure often goes hand-in-hand with experimentation, with each iteration bringing a product or service nearer to the state necessary for market success. Something can be learned from any failure, and it's important that the firm and its founders establish a blame-free climate in which learning can be maximized.

Identify several reasons for failure.

Failures come in all shapes and sizes. Common types of failure include deviance, inattention, lack of ability, process inadequacy, poor business process flow, communication uncertainty, and exploratory experimentation.

Describe the consequences of fear of failure for entrepreneurs.

Fear of failure makes the entrepreneur less likely to pursue and achieve the transformative power of learning from failure.

self-cueing

Finally, we can use certain environmental cues as a way to encourage constructive behaviors and reduce or eliminate destructive ones through the process of self-cueing. These cues might take the form of making lists or notes or having motivational posters on your wall. They act as a reminder of your desired goals and keep your attention on what you are trying to achieve.

Describe the significance of "grit" and its role in building tolerance for failure.

Grit is that "special something" that enables people to persevere though prolonged hardship to maintain commitment and achieve long-term goals.

self-punishment

Ideally, self-punishment or self-correcting feedback is a process that allows us to examine our mistakes before making a conscious effort not to repeat them. However, many of us have the tendency to beat ourselves up over perceived mistakes or failures; indeed, excessive self-punishment involving guilt and self-criticism can be very harmful to our performance.

8 components of the entrepreneurship method

Identify your desired impact on the world. Start with the means at hand. Describe the idea today. Calculate affordable loss. Take small action. Network and enroll others in your journey. 7. Build on what you learn. 8. Reflect and be honest with yourself.

imagination based strategies

Imagination-based strategies involve suspending disbelief and dropping constraints in order to create unrealistic states or fantasies. For example, the Gillette team used imagination to come up with a new shampoo by imagining themselves as human hairs. Though playful and even absurd, such freeing behavior allows our minds to think in ways we never thought possible.

implementation

Implementation seeks to answer the questions, "I have an idea, so how do I get feedback, how do I test it, how do I iterate, and how do I learn as quickly as possible whether there is a potential market?" During the implementation phase, ideas generated in the ideation phase are transformed into concrete actions that require user interaction. Note that the inspiration phase requires human interaction, but so does this phase. Again, design thinking is human centered and obsessed with users!

metacognition

In Chapter 1 we touched on the concept of metacognition, which is our ability to understand and be aware of how we think and the processes we use to think (see Figure 2.3). For example, say you are reading through a complex legal document; you might notice that you don't understand some of it. You might go back and re-read it, pause to think it through, note the elements that don't make sense to you, and then either come back to it later or find a way to clarify the parts you don't understand. In this example, you are using your metacognitive skills to monitor your own understanding of the text, rather than simply plowing through the document without having much comprehension at all.

fixed mindset

In a fixed mindset, people perceive their talents and abilities as set traits. They believe that brains and talent alone are enough for success, and they go through life with the goal of looking smart all the time. They take any constructive criticism of their capabilities very personally and tend to attribute others' success to luck (see Research at Work, below, for a study about luck) or some sort of unfair advantage. People with a fixed mindset will tell themselves they are no good at something to avoid challenge, failure, or looking dumb.

self-leadership

In the context of entrepreneurship, self-leadership is a process whereby people can influence and control their own behavior, actions, and thinking to achieve the self-direction and self-motivation necessary to build their entrepreneurial business ventures.18 Entrepreneurship requires a deep understanding of self and an ability to motivate oneself to act. You cannot rely on someone else to manage you, get you up in the morning, or force you to get the work done. It can be lonely, and often no one is around to give you feedback, reprimand you, or reward you! As a result, self-leadership is required. It consists of three main strategies: behavior-focused strategies; natural reward strategies; and constructive thought pattern strategies.

interpersonal strategies

Interpersonal strategies require group interaction; ideas are generated as a group and the group builds on each other's ideas. Brainstorming is a very common interpersonal tool for generating ideas that emphasize the creativity of the group over the individual.

Demonstrate how to interview potential customers in order to better understand their needs.

Interviews should be done for two reasons: (1) to develop a better understanding of user needs during the inspiration phase of design thinking and (2) to get feedback on ideas during the implementation phase. The interview must be well-prepared, the customer must be listened to and intelligent questions asked, and the interview must be evaluated when it is over.

improviasation

Let's explore the third of the key habits for developing an entrepreneurial mindset: improvisation. Improvisation is the art of spontaneously creating something without preparation. Improvisation is connected to the entrepreneurial mindset because it helps us develop the cognitive ability to rapidly sense and act as well as change direction quickly.

4.1 Differentiate between design and design thinking.

Many types of design are related to fashion, graphic, architectural design, or industrial design. Similar to the Entrepreneurship Method in many ways, design thinking is ultimately a constructive and collaborative process that merges the power of observation, synthesis, searching and generating alternatives, critical thinking, feedback, visual representation, creativity, problem solving, and value creation. There are seven design skills relevant to entrepreneurs: observation, listening, desire change, context and integration, solution-driven, consideration, and unbound.

Exploratory Experimentation

Market tests are conducted to get early feedback and acquire important learning and information. Some of these tests may fail miserably, but exploratory experimentation is crucial for learning.

needs

Needs are a lack of something desirable, useful, or required that are uncovered through the design thinking process. Entrepreneurs who succeed in identifying and satisfying the needs of customers have a better chance of gaining traction in a market. Don't fall into the trap of "if you build it they will come." It's better to create something that people need because they are more likely to pay for something they need! Fashion entrepreneur Shaymaa Gaafar, featured in Entrepreneurship in Action, used design thinking to create a brand that encourages women to express themselves while staying true to their personal values.

Key Crowdfunding Statistics

Number of U.S. crowdfunding platforms 191 Number of jobs created by crowdfunding 270,000 Amount that crowdfunding has added to the global economy $65 billion Average global success rate for crowdfunding campaigns 50% Amount raised by average successful crowdfunding campaign $7,000 Length of time it takes to prepare a successful campaign 11 days Duration of average campaign 9 weeks Average campaign donation $88

growth mindset

On the other hand, in a growth mindset, people believe that their abilities can be developed through dedication, effort, and hard work. They think brains and talent are not the key to lifelong success, but merely the starting point. People with a growth mindset are eager to enhance their qualities through lifelong learning, training, and practice. Unlike people with fixed mindsets, they see failure as an opportunity to improve their performance and to learn from their mistakes. Despite setbacks, they tend to persevere rather than give up.

Signs of fear of failure

Overall, studies show that individuals who are raised to believe that failure is unacceptable and has negative consequences will go out of their way to avoid failure. This means that rather than seeing mistakes as opportunities to learn and improve skills, or to compete against others, they will view them as threatening and judgment-oriented experiences.

Entrepreneurs Share Their Reasons for Failure

PSYCHE "MISTAKES" "Fear." —Philip Rosedale, founder, High Fidelity, Inc., and Second Life "Letting opinions cloud your purpose." —Scott Lewallen, founder, Grindr "Trusting by default." —Jay Adelson, chair and founder, Opsmatic "Not believing in myself was the biggest mistake I made as an entrepreneur." —Sam Shank, cofounder/CEO, HotelTonight "Spending too much time worrying about competition and not enough time making what I'm building amazing." —Brenden Mulligan, founder/CEO, Cluster Labs "Thinking that entrepreneurship was the most meaningful part of my life." —Mick Hagen, founder, Zinch.com, Spatch, Undrip.com, and Mainframe WAITING TOO LONG MISTAKES "My biggest mistake as an entrepreneur was waiting too long to start." —Jason Nazar, founder, Docstoc.com "Not pivoting soon enough." —Peter Kazanjy, founder, TalentBin "Waiting to see if a problem would resolve itself." —Joshua Forman, cofounder, Inkling HIRING MISTAKES "Hiring too fast and firing too slow." —Dan Yates, cofounder/CEO, OPOWER "Hiring bad fits." —John Battelle, cofounder/CEO, NewCo, Federated Media, Web 2.0 Summit, Wired "Getting the wrong people on the bus was the biggest mistake I made as an entrepreneur." —Hooman Radfar, partner, Expa, and founder, AddThis

Pivot

Pivots for entrepreneurs include changing directions on such things as the product, customer segment, revenue model, or distribution channel.3 A small fail is an event—an obstacle to overcome to get through the other side—whereas a big fail like the collapse of a business is a process that unfolds over time; it is more personal and can be more difficult to recover from

1.7 Assess the role of deliberate practice in achieving mastery.

Practice doesn't make perfect; rather, deliberate practice makes perfect. Starting with specific goals, deliberate practice involves consistent, targeted efforts for improvement. Feedback and self-reflection are necessary for meaningful improvement, and repetition is required to achieve lasting results.

North American entrepreneurs can join the Kickstarter community for free and start their own campaign by pitching ideas directly to a huge worldwide audience of potential online backers. There are three basic rules:

Projects must create something to share with others. Projects must be honest and clearly presented. Projects can't fundraise for charity, offer financial incentives, or involve prohibited items.

relationship seeking strategies

Relationship-seeking strategies involve consciously making links between concepts or ideas that are not normally associated with each other. For example, you could make a list of words that are completely unrelated to the problem you are trying to solve, then list the characteristics of each item on the list. Next, apply those characteristics to the problem in order to come up with ideas to solve the problem. The purpose of this exercise is to stimulate the mind into making connections that would otherwise have gone unnoticed.

natural reward strategies

Rewarding ourselves is a beneficial way to boost our spirits and keep us committed to attaining our goals. Natural reward strategies endeavor to make aspects of a task or activity more enjoyable by building in certain features or by reshaping perceptions to focus on the most positive aspects of the task and the value it holds. For example, if you are working on a particularly difficult or boring task, you could build in a break to listen to some music or take a short walk outside. In addition, rather than dreading the nature of the work, you could refocus on the benefits of what you are doing and how good it will feel when it is done.

search strategies

Search strategies involve using a stimulus to retrieve memories in order to make links or connections based on personal experience that are relevant to the current problem. For example, say you were asked to design a door hinge. Here, the door hinge is a stimulus—a starting point for searching for solutions to the problem. Although you may not have any prior experience of designing door hinges, you could search your memory to see if you can think of anything that you can associate with a door hinge to support the design process. For example, the search process may stimulate your memory of the opening and closing of a clam shell. By drawing on this memory, you could use your knowledge of the clam shell and apply it to the hinge design. This strategy illustrates our ability to be resourceful in generating associations between objects that at first appear to have no apparent relationship with each other.

self-observation

Self-observation raises our awareness of how, when, and why we behave the way we do in certain circumstances. For example, twice a day, you could stop and deliberately ask yourself questions about what you are accomplishing; what you are not accomplishing; what is standing in your way; and how you feel about what is happening. This is the first step toward addressing unhelpful or unproductive behaviors in order to devise ways of altering them to enhance performance.

Serial Entrepreneurship

Serial entrepreneurs, also known as habitual entrepreneurs, are people who start several businesses, either simultaneously or consecutively. Not satisfied with just focusing on one business, serial entrepreneurs are constantly looking out for the next big thing or [Page 14]exploring ways to implement their diverse range of ideas. Natalie Campbell is a good example of a serial entrepreneur. While at university, she started her first venture running a franchise of fashion chain Morgan de Toi before going on to cofound social innovation agency A Very Good Company.30

1.6 Illustrate the key components of the Entrepreneurship Method.

The Entrepreneurship Method is designed so entrepreneurs can embrace and confront uncertainty rather than avoid it. The eight components are identify your desired impact on the world; start with the means at hand; describe the idea today; calculate affordable loss; take small action; network and enroll others in your journey; build on what you learn; and reflect and be honest with yourself.

1.4 Distinguish between entrepreneurship as a method and as a process.

The Entrepreneurship Method outlines the tools and practices necessary to take action. Entrepreneurship as a process, instead, guides would-be creators along a thorough but static path from inception to exit.

Global Fear of Failure

The Global Entrepreneurship Monitor report (GEM) measures fear of failure by country.24 When you look at this on a map, you can also recognize regional differences (see Figure 11.3). The GEM failure rate is based on those who admit to perceiving opportunities to start a business but feel prevented from acting on those opportunities due to fear of failure. The lower the percentage shown on the map, the lower the fear.

Identify and describe other approaches to design thinking.

The authors of Designing for Growth suggest four questions that are useful to ask during the design-thinking process, all of which have periods of divergence and convergence: What is? What if? What wows? What works?33 Another variation on the design-thinking process is from the Stanford Design School, which uses five phases: empathy, define, ideate, prototype, and test. Finally, the Google Design Sprint method draws on design thinking by using its tools to develop hypotheses, prototype ideas, and run low-cost tests in a real environment.

Describe the effects of crowdfunding on entrepreneurship

The crowdfunding movement has provided a democratic means of funding that has never before existed on the scale it exists today. Equity crowdfunding has emerged as a popular crowdfunding alternative, where ownership stakes (stock) are issued in exchange for funding.

Illustrate the key phases of the design-thinking process.

The design-thinking process consists of three main overlapping phases: inspiration, ideation, and implementation.

divergent thinking

The design-thinking process is based on two main types of thinking: divergence and convergence. Divergent thinking allows us to expand our view of the world to generate as many ideas as possible without being trapped by traditional problem-solving methods or predetermined constraints. This is a concept similar to the practice of play, which frees the imagination, opens up our minds to a wealth of opportunities and possibilities, and helps us to become more innovative. In fact, IDEO builds its whole culture around play and creating a fun environment for people to work in.13

Apply the four pathways to opportunity identification.

The four pathways (design, effectuate, search, and find) are useful for explaining how entrepreneurs identify and exploit opportunities.

entrepreneurial mindset

The growth mindset is essential to a mindset for entrepreneurship. In Chapter 1, we discussed the Entrepreneurship Method and how it requires a specific mindset so that entrepreneurs have the ability to see the endless possibilities in the world. Although there is no single definition of mindset and how it relates to entrepreneurs, we believe the most accurate meaning of an entrepreneurial mindset is the ability to quickly sense opportunities, take action, and get organized under uncertain conditions.9 This also includes the ability to persevere, accept and learn from failure, and get comfortable with a high level of discomfort!

Identify common bootstrapping strategies used by entrepreneurs

The list of common bootstrapping techniques is extensive. It includes ideas like using the home as the office, renting or leasing before buying, minimizing personal salary initially, developing and reaching out to contacts, offering equity reimbursement, and maintaining low operating inventories.

convergent thinking

The second type of thinking, convergent thinking, allows us to narrow down the number of ideas generated through divergent thinking in an effort to identify which ones have the most potential. These ways of thinking allow us to move from openness to understanding, from abstract to concrete, and from what is to what can be. Figure 4.2 incorporates these two types of thinking with the three phases of design thinking.

Compare and contrast the prediction and creation approaches to entrepreneurship.

The two main perspectives on entrepreneurship are the predictive logic, the older and more traditional view; and the creation logic, which has been developed through recent advances in the field. Prediction is the opposite of creation. Whereas prediction thinking is used in situations of certainty, the creation view is used when the future is unpredictable.

entrepreneurial self-efficacy (ESE)

There have been an increasing number of studies on entrepreneurial self-efficacy (ESE), which is the belief entrepreneurs have in their ability to begin new ventures. Self-efficacy is an essential part of the entrepreneurial mindset, and it is thought to be a good indicator of entrepreneurial intentions as well as a strong precursor to action.36 In fact, recent research suggests that entrepreneurial self-efficacy can enable the entrepreneur to more effectively confront demands or stressors and thus improve entrepreneurial performance.37 In other words, the research suggests that when we believe in our ability to succeed in something, we are more likely to actively take the steps to make it happen.

Describe the role of empathy in the design-thinking process.

To create meaningful ideas and innovations, we need to know and care about the people who are using them. Developing our empathic ability enables us to better understand the way people do things and the reasons why; their physical and emotional needs; the way they think and feel; and what is important to them.

habit breaking strategies

To think creatively, our mind needs to break out of its usual response patterns. Habit-breaking strategies are techniques that help to break our minds out of mental fixedness in order to bring about creative insights. One strategy is to think about the opposite of something you believe, in order to explore a new perspective. Another method focuses on taking the viewpoint of someone who may or may not be involved in the situation. A popular habit-breaking strategy is to take the role of a famous or admired individual and think about how he or she would perceive the situation. This is sometimes called the Napoleon technique, as in "What would Napoleon do?"

The Truths About Entrepreneurship

Truth 1 Entrepreneurship is not reserved for startups. Truth 2 Entrepreneurs do not have a special set of personality traits. Truth 3 Entrepreneurship can be taught (it's a method that requires practice). Truth 4 Entrepreneurs are not extreme risk takers. Truth 5 Entrepreneurs collaborate more than they compete. Truth 6 Entrepreneurs act more than they plan. Truth 7 Entrepreneurship is a life skill

Summary of Different Types of Plans

Type of Plan Primary Audience Purpose Output Business Model Canvas Team members, advisors Identify gaps and critically evaluate each part of the business and how the components integrate Completed and tested business model canvas Business Brief Friends and family, investors, advisors, other interested stakeholders To have something in writing to show anybody interested in the business; also good practice for describing the business in a concise way 2- to 3-page typed document that is well formatted and professional looking Feasibility Study Team members, maybe early investors Assess the potential of a new concept; can act as proof that the venture has market potential 10-page typed document that is well formatted and professional looking Pitch Deck Early investors, judges of venture competitions, incubators, accelerators To get the next meeting with a potential investor; to apply to an incubator program; win a competition; get funding 10 to 20 slides, depending on length and purpose of the presentation Business Plan Banks, investors Get funding 25+ page document plus appendices

Common Bootstrapping Strategies

Work from home to save on renting an office; or if you need an office, use coworking spaces instead. • Never buy new what you can borrow, lease, or get for free; for example, borrow or lease office equipment such as computers, printers, and so on. • Take as little salary for yourself for as long as possible. • Use your network of friends and family to get what you need at a reduced rate or for free. • Educate yourself on basic legal and accountancy matters before paying high fees to a lawyer or accountant. • Reimburse advisors and consultants with equity and goodwill where possible. • Be frugal with your travel—drive rather than fly, and choose cheap accommodation. • Hire help if you need it, but keep in mind that some employees may agree to work temporarily for an equity share in the business rather than a cash payment. • Attend every possible networking event to make connections and get introductions to people who may be able to contribute to or enhance your business. • Offer discounts to early customers to ensure a consistent cash flow. Not only will this help to cover overhead, but it will also help you build a loyal customer base. • Negotiate payment terms with suppliers (if you have them), and explain how they will benefit when your business takes off. • Outsource some tasks if you are struggling to keep up with the workload. For example, 99designs and Elance are good examples of websites that can provide you with the services you need, allowing you more time to focus on the parts of the business that generate the most income

Who Is Your Customer?

Write down who your target customers are (end users, distributors, retailers), their defining characteristics, and why they will buy your product or service.

constructive thought patterns

[Page 41]Much of our behavior is influenced by the way we think, and the habit of thinking in a certain way is derived from our assumptions and beliefs. Constructive thought patterns help us to form positive and productive ways of thinking that can benefit our performance. Constructive thought pattern strategies include identifying destructive beliefs and assumptions and reframing those thoughts by practicing self-talk and mental imagery.

The business brief

a business brief is a two- to three-page document outlining the company overview, value proposition, customers, and milestones. It's something you can easily send to stakeholders that will give them an at-a-glance understanding of who you are, the business, and its potential.

Plan Cruncher

a free tool that, like Lean Stack, allows you to summarize your idea in one page.

startup

a temporary organization in search of a scalable business model.1 In the traditional view of startups, anyone who starts a business is called an entrepreneur. The entrepreneur creates a business based on research to assess the validity of an idea or business model. The business may be partially funded by seed money from family members or investors, but usually the majority is funded by the entrepreneurs themselves.

feasibility study

an essential planning tool that enables entrepreneurs to test the possibilities of an initial idea to see if it is worth pursuing. It serves as a solid foundation for developing a business plan when the time comes. The feasibility study focuses on the size of the market, the suppliers, distributors, and the skills of the entrepreneur. Every entrepreneur should conduct a feasibility study because it determines whether your idea is workable and profitable. It is typically created to assess the viability of a business concept

passion

can be defined as an intense positive emotion, which is usually related to entrepreneurs who are engaged in meaningful ventures, or tasks and activities, and which has the effect of motivating and stimulating entrepreneurs to overcome obstacles and remain focused on their goals

Vivid vision

challenges the entrepreneur to imagine what a business could be 3 years into the future. Three years is a reasonable amount of time to "nail down" specific, measurable goals

lending model

funds are offered as loans with the expectation that the money will be repaid. Lending models can take different forms; for example, some backers will expect interest to be paid on the loan, while other backers might expect to be reimbursed only if and when the project starts generating revenue, or if it begins to make a profit.

Intelligent failures

good failures that provide valuable new knowledge that can help a startup overcome hurdles and roadblocks (see Figure 11.5). Intelligent failures take place when experimentation is deemed necessary in order to find answers in situations that have never been explored before.

investor model

involves giving backers an equity stake in the business in return for their funding. This model takes a few different forms; for example, investors can either buy shares in the company, which means they would be given a degree of ownership or certain rights in a project, or investors can take a share of the future revenue or profits of a company without taking ownership.

reward-based crowdfunding

involves rewarding backers for supporting a project. As in the example of Kickstarter, this is the most popular form of crowdfunding today. Rather than giving away precious equity or a large share in the profits, entrepreneurs give [Page 294]rewards to their backers, which can often take the form of more unique offerings such as product samples or experiences.

crowdsourcing

involves using the Internet to attract, aggregate, and manage ostensibly inexpensive or even free labor from enthusiastic customers and like-minded people. Thus, crowdfunding is a resource for money, and crowdsourcing is a resource for talent and labor.

design thinking

is a human-centered approach to innovation that brings together what people need with what is technologically feasible and economically viable. It also allows people who aren't trained as designers to use creative tools to address a vast range of challenges. Today, design thinking has taken a prominent role in entrepreneurship education. However, use caution! Design thinking is a tool of entrepreneurs. Design thinking is not entrepreneurship.

The pitch deck

is a presentation of varying lengths highlighting many of the essential elements found in a feasibility study and a business plan. Some call this the launch plan.

The business plan

is considered the most formal of planning tools. It is typically a lengthy written document discussing the business concept, product mix, marketing plan, operations plan, development plan, and financial forecast.

prior knowledge

is information gained from a combination of life and work experience. Many studies indicate that entrepreneurs with knowledge of an industry or market, together with a broad network, are more likely to recognize opportunities than those who have less experience or fewer contacts.25 Successful entrepreneurs often have prior knowledge with respect to a market, industry, or customers, which they can then apply to their own ventures

effectuate pathway

is more about creating opportunities rather than simply uncovering them. To identify opportunities, this approach advocates using what you know, whom you know, and who you are. Your role as an entrepreneur is to take action and see how the market responds, recognize patterns, and learn from iteration to define the opportunity as it evolves

design pathway

is one of the most complex, yet it can be the most value-creating approach. It can uncover high-value opportunities because the entrepreneur is focusing on unmet needs of customers—specifically, latent needs (needs we have but don't know we have). Design is at the top of the staircase in Figure 3.3 and is considered the most complicated pathway because of the practice and imagination it takes to uncover true unmet needs. As a matter of fact, we devote an entire chapter (Chapter 4) to this pathway! Design is another way to create opportunities because by identifying unmet needs

bootstrapping

is the process of building or starting a business with no outside investment, funding, or support.4 Bootstrapping is all about finding creative ways to access every resource you have available to launch your venture while minimizing the amount of cash you spend.

self-goal setting

is the process of setting individual goals for ourselves. This is especially effective when it is accompanied by self-reward—ways in which we compensate ourselves when we achieve our goals. These rewards can be tangible or intangible; for example, you might mentally congratulate yourself when you have achieved your goal (intangible), or you might go out for a celebratory meal or buy yourself a new pair of shoes (tangible). Setting rewards motivates us to accomplish our goals.

Grit

is the quality that enables people to work hard and sustain interest in their long-term goals. Grit is also related to resilience, not just in the face of failure, but in perseverance to stick to long-term commitments and goals

search pathway

is used when entrepreneurs are not quite sure what type of venture they want to start, so they engage in an active search to discover new opportunities.16 We all possess certain information sets or knowledge By actively searching these sets, we can access a wealth of information and uncover new opportunities. Typically, entrepreneurs find an area that they are interested in and then start searching for business opportunities.

Process Inadequacy

means the wrong processes are set up in the organization, so communication breaks down among employees and things begin to fall through the cracks.

Uncertainty

or lack of clarity about future events can cause entrepreneurs to take unreasonable actions. Keith B. Nowak, founder of social media instant messaging company Imercive, believes that company failed because it stuck to the wrong strategy for far too long.

Define Your Target Audience

specify your target market, present how and why you have drawn these conclusions, and explain how you intend to target that particular customer segment.

crowdfunding

the process of raising cash for a new venture from a large audience (the "crowd"), typically through the Internet—has been a new pathway for many entrepreneurs.

To produce a feasibility study

there must be action, testing, information gathering, and analysis in order to reduce uncertainty and gain greater confidence about the opportunity and your approach

royalties

which are calculated as a percentage of monthly sales revenue. According to results of Entrepreneur magazine's annual Franchise 500, announced in 2017, 7-Eleven, McDonald's, Dunkin' Donuts, and the UPS Store are among the most popular franchises in the United States.18 Today there are more than 740,000 franchise establishments in the United States. Table 1.2 describes the pros and cons of owning a franchise.19

concept statement

which is a one sentence to one paragraph description of your vision for your product or service. The statement should include all the features of your product or service, potential problems that it solves, and the target market

effectuation

which is the idea that the future is unpredictable yet controllable. Entrepreneurs create and obtain control by taking actions to learn, collecting information, and reducing risk and uncertainty, and they are able to take action with resources that are available at a particular point in time.3 In other words, it's about starting small with what you have, rather than what you think [Page 7]you need. As the entrepreneur starts, very small actions lead to other actions and new resources. See Research at Work for more on effectuation theory.

The Stanford Design School Five Phases of Design Thinking

• Empathy is getting out and talking to your customers directly • Define is defining a problem statement from that empathy work • Ideate is brainstorming lots of ideas that could help you solve the problem you identified • Prototype is building a crude version of the solution that you want to test with users • Test is getting out and testing with users

Improvisation Guidelines

• Improvisation is not just for actors or musicians. • There's no such thing as being wrong. • Nothing suggested is questioned or rejected (no matter how crazy it might sound!). • Ideas are taken on board, expanded, and passed on for further input. • Everything is important. • It is a group activity—you will have the support of the group. • You can trust that the group will solve a certain problem. • It's about listening closely and accepting what you're given. • It's about being spontaneous, imaginative, and dealing with the unexpected

components of deliberate practice

• Requires high levels of focus, attention, and concentration. • Strengthens performance by identifying weaknesses and improving on them. • Must be consistent and be maintained for long periods of time. • Must be repeated to produce lasting results. • Requires continuous feedback on outcomes. • Involves setting goals beforehand. • Involves self-observation and self-reflection after practice sessions are completed.