entrepreneurship & innov. · this week today & tomorrow - entrepreneurship & innovation...

Entrepreneurship & Innov.

tisdag den 22 september 2009

This Week

Today & Tomorrow - Entrepreneurship & Innovation (chapter 5,6, and some extra)

What is Entrepreneurship?

• The activities undertaken for the introduction of new elements to the set of products and services offered to a market.

• “It is the process of recognizing, seizing, pursuing and exploiting opportunities without regard of the resources you currently control”

• Webster’s –someone who runs a business at his or her own financial risk

• (They don’t only dream.. they do)tisdag den 22 september 2009

History of entrepreneurship

Schumpeter: Creative Destructoin

Growth and wealth comes from small business

The theory of opportunity - a need in the market

We need innovations

Makes the economy grow

Makes our lives better

Anyone can (and should?) be an entrepreneur!

The downside...

Almost 40 % of new ventures fails during the first two years...

Some figures say that 90 % of all ventures fail..

Ergo.. Fail fast, fail often! Fail forward, fail cheap...

But patience is one of the virtues of the entrepreneur..

Ent. not the same as small business

Common misunderstandning (actually, no firm agreement here)

Many entrepreneurs starts out small

Som edefinitions require radical innovations (the car, the first search engine, the computer, etc.)

Others say that that yet another starbucks is entrepreneurial.

But the traditional defenition implies that we build a new business, with the goal of “world domination”

Inventor vs. Entrepreneur

Inventor creates something new.

Entrepreneurs puts together all the resources needed to transform an invention into a viable busines

People

Strategy

Only a few inventions becomes successfull innovations.

Types of new firms

Salary/substitute firms

Be your own consultant

Level of income similiar to convetnaional jobs

Restaurants, dry cleaners, hairstyle saloons, lecturers(?) etc.

Lifestyle firms

Ski instructurs, tour guides

Entrepreneurial firms

Brings new products and services to a market by seizing opportunities.

Reasons for becomming one?

Be your own boss

Try your own idea

Make a lot of money

Characteristics of sucessful ones

Passion for the business

Product/Customer focus

Persistance - keeps going despite initial failure

Great execution

A fair share of luck!

Most business is copycats..

“The most sucessful innovators are creative imitators.” - Peter Drucker

“First we observe and digest a new product. Then we imitate it. In the end, we understand it well enough to design a new product independently.” - CEO of Haier, Chinese Manufacturer of Refrigerators.

Reverse engineering is a way of building knowledge. (In some cases illegal - DMCA)

Hard to study entrepreneurs

We never know why they fail...

Or why thecy succeed..

If someone have trouble, should we tell them to be persistant or to fail faster?

Or simply to have more luck?

Not even the experts..

„The phonograph ... is not of any commercial value. (Thomas Alva Edison Edison, inventor of the phonograph, 1880. ) „Who the hell wants to hear actors talk?“(H. M. Warner, Warner Brothers, 1927. )„I think there is a world market for about five computers.“ (Thomas J. Watson, chairman of IBM, 1943.) „640K ought to be enough for anybody.“ (Bill Gates, Microsoft, 1981. ) „There is no reason for any individual to have a computer in their home.“ (Ken Olsen, Digital Equipment Corp. )

• „Man will not fly for 50 years.“ (Wilbur Wright in 1901, two years before the famous flight).

Myths about entreprenurship

A person is, or isn’t born entrepreneurial

Entrepreneurs are gamblers?

Entrepreneurs are motivated primariliy by money

Entrepreneurs are young and energetic (actually, avg. 35-34 years old, with eperience)

No ventures are the same

Starting your own consulting business

Starting a new shoe factory

Global ideas vs. Nisched ideas

Time to profiability? (How quick to the market? How quick profit?)

Hobby growing into a business or a planned venture requiring cash?

Risk to reward ratio?

How long will the opportunity persist? (Selling Bear Stearn souvernirs?)

Not only commercial...

Entrepreneur

Intrapreneur / Corporate entreprenurship

Trying to create an entrepreneurial environment within an organization.

Social entrepreneur

Trying to make the world better

Innovation!

What is innovation?

Worlds First Innovation!

To innovate, we need creativity!

Looking at things in a different way - finding new solutions

Seldom a genious working alone

Newton had no apple, but 20 years of resarch

Organizational routines and procedures often act harmful on creativity

(Today: Everybody can be creative, it’s just a matter of training!)

Organizations based on continuous development, on systematic research of efficiency

Successful organizations High rate of innovations

Few innovations, just imitations

Low rate of innovations, sometimes radical, based on entrepreneurial spirit of individuals

Organizational Creativity

LowIndividual Creativity High

Organizational Creativity Vs Individual Creativity

Organizations based on continuous development, on systematic research of efficiency

Successful organizations High rate of innovations

Few innovations, just imitations

Low rate of innovations, sometimes radical, based on entrepreneurial spirit of individuals

Organizational Creativity

LowIndividual Creativity High

Process of Innovation

The Innovation process can be depicted as a series of funnels each getting progressively smaller.

The Innovation process can be depicted as a series of funnels each getting progressively smaller. Typically sixty ideas into the top funnel only produces just one innovation.

The Innovation process can be depicted as a series of funnels each getting progressively smaller. Typically sixty ideas into the top funnel only produces just one innovation. The funnels are labeled as the four phases in the process - idea generation, idea screening, feasibility and implementation.

Innovation

InnovationInnovation is a process of taking new ideas to satisfied customers. It is the conversion of new knowledge into new products and services.

Innovation is about creating value and increasing efficiency, and therefore growing your business.

Innovation

"Without innovation, new products, new services, and new ways of doing business would never emerge, and most organizations would be forever stuck doing the same old things the same old way."

Innovation is a process of taking new ideas to satisfied customers. It is the conversion of new knowledge into new products and services.

Innovation is about creating value and increasing efficiency, and therefore growing your business.

Forms of Business Ownership

Sole Proprietor• + Easiest form• - Not always limited

liability• + All earnings to you• - All work from you• - One person must

know everything• - Limited life-span

Partnership• - Harder to manage

partnership• - Disagreement among

partners• - Difficulty of

termination• - Division of profits• + More resources• + More competence

Corporations

LLC, Inc., AB, GmbH• + Limited in liability• + Possiblity to sell ownership (stocks)• + Separated from person (can live on!)• - Extensive paperwork (Registration,

Accounting, Reporting)

• Owners->Board of Directors->Officers-> Managers ->Employees

American• Sole Proprietor• Partnerships• Limited Liability

Partnership• Corporation• Cooperatives

Swedish• Eget företag• Handelsbolag• Kommanditbolag

• Aktiebolag• Ekonomisk förening

SWEDEN:

Franchise

• (pre-packaded entrepreneurship!)• Marketing and management assistance• Personal ownership (still your store, even

though you have to follow rules).• Recognized name and trademark• Financial assistance, education• But:

– Shared profit– Strictly regulated

Entrepreneurship

Challenge

Independence

Opportunity

Profit

Entrepreneurship

Challenge

Independence

Opportunity

ProfitWhat does it take?

Entrepreneurship

Challenge

Independence

Opportunity

Action-oriented

Self-nurturing

Self-directed

Energetic

Tolerant of uncertainty

Entrepreneurship

Challenge

Independence

Opportunity

Action-oriented

Self-nurturing

Self-directed

Energetic

Entrepreneurship

Challenge

Independence

Opportunity

Action-oriented

Self-nurturing

Self-directed

Energetic

Own money

Entrepreneurship

Challenge

Independence

Opportunity

Action-oriented

Self-nurturing

Self-directed

Energetic

Venture capitalistsOwn money

Entrepreneurship

Challenge

Independence

Opportunity

Action-oriented

Self-nurturing

Self-directed

Energetic

Angel investors

Entrepreneurship

Challenge

Independence

Opportunity

Action-oriented

Self-nurturing

Self-directed

Energetic

Angel investors

Intrapreneurs

New stuff on homepage

New slides and more info at http://www.gorling.se/ME1000

Poll on what to do with the rest of the lectures

Seminar reports should be mailed to me evening before presentation.

Where to begin – the traditional modelWhere to begin – the traditional model

Identify

Opportunity

Identify

OpportunityDevelop

Develop

PlanAssemble

Assemble

TeamFunding

& Support

Funding

& Support

• general market

research

• market

segmentation

• segment

research

• pricing models

• competitive

research

• financial models

• business plan

• attract and retain

the best talent

• complementary

skills and

personalities

• term sheets

• make sure you

have more than

enough resources

to pursue your

vision!

Finding the idea!

Most ideas seem obvious in reflection.

It doesn’t mean that they’re easy to find

“Every good work of software starts by scratching a developer's personal itch” - Solution to a problem

“The three chief virtues of a programmer are: Laziness, Impatience and Hubris. Larry Wall. “

Imitating

Spotting a trend (what does new technology enable us to do?)

Opportunity findnig

Key concepts

Opportunity

Initial assessment

Finding people, capital and other resources

Develop and implement a business plan

Manage cash-flow

Plan for the future directin

Identify

Opportunity

Identify

OpportunityDevelop

Develop

PlanAssemble

Assemble

TeamFunding

& Support

Funding

& Support

• general market

research

• market

segmentation

• segment

research

• pricing models

• competitive

research

• business plan

the best talent

• complementary

skills and

personalities

• term sheets

• make sure you

have more than

enough resources

to pursue your

vision!

Finding the idea!

Most ideas seem obvious in reflection.

It doesn’t mean that they’re easy to find

“Every good work of software starts by scratching a developer's personal itch” - Solution to a problem

“The three chief virtues of a programmer are: Laziness, Impatience and Hubris. Larry Wall. “

Imitating

Spotting a trend (what does new technology enable us to do?)

Opportunity findnig

Evaluating an idea

Timing is important

I tried selling these....

I tried selling this..

But it wasn’t legal...tisdag den 22 september 2009

Identify

Opportunity

Identify

OpportunityDevelop

Develop

PlanAssemble

Assemble

TeamFunding

& Support

Funding

& Support

• general market

research

• market

segmentation

• segment

research

• pricing models

• competitive

research

• business plan

the best talent

• complementary

skills and

personalities

• term sheets

• make sure you

have more than

enough resources

to pursue your

vision!

Simple business plan

Outline of a business plan

Executive summary (1-3 pages)

Industry analysis

Customer analysis

Competetive analysis

Company analysis

Marketing plan

Operations plan / business milestones

Description of management team

Financial plan

There’s always competitionNever think that you have no competition

There are often substitutes.

People don’t always (or ever) choose the best product.

Some competition is good

It validates the market

It generates awareness

Makes buyers more secure

You can steal their customers.. if you’re better...

You have something to compare with.

Purpose of a business plan

Plan your strategy

Attract investors

Attract personell

Forcing you to think through your idea. - organize and scrutinize your thoughts

It’s your high-level plan of the venture..

Protecting your business

Patents

Secrecy

Copyright

Design pattern protection

Brand name protection

(Can it be copied? Will it be copied? Does it matter?)

Project Minerva

Estimating market size

There’s 7 billion people in the world..

How many would be using our product?

(If only 1% choose our product...)

“Drowning is a growing business”

“People are getting older”

Value proposition?

What do we offer?

New-product?

Re-invention?

What is great about it?

Identify

Opportunity

Identify

OpportunityDevelop

Develop

PlanAssemble

Assemble

TeamFunding

& Support

Funding

& Support

• general market

research

• market

segmentation

• segment

research

• pricing models

• competitive

research

• business plan

the best talent

• complementary

skills and

personalities

• term sheets

• make sure you

have more than

enough resources

to pursue your

vision!

Identify

Opportunity

Identify

OpportunityDevelop

Develop

PlanAssemble

Assemble

TeamFunding

& Support

Funding

& Support

• general market

research

• market

segmentation

• segment

research

• pricing models

• competitive

research

• business plan

the best talent

• complementary

skills and

personalities

• term sheets

• make sure you

have more than

enough resources

to pursue your

vision!

The role of VC-firms?

Not only cash..

Venture Capital

Angel investors

Business partners

Incubators

Start-up Process

Development&

Evaluation

BusinessConcept

Development& Testing

Discovery

Detected(outside-in)

Created(inside-out)

Opportunity

Value ChainDevelopment

NewValuePrototype

Start-up Process

Development&

Evaluation

BusinessConcept

Discovery

Created(inside-out)

Opportunity

NewValuePrototype

Start-up Process“Text book” financing:

Development&

Evaluation

BusinessConcept

Discovery

Created(inside-out)

Opportunity

NewValuePrototype

Development&

Evaluation

BusinessConcept

Discovery

Created(inside-out)

Savings Seed Money

Venture Capital

ExpansionCapital

Opportunity

NewValuePrototype

Development&

Evaluation

BusinessConcept

Discovery

Created(inside-out)

Savings Seed Money

Venture Capital

ExpansionCapital

“Real-life” financing:

Opportunity

NewValuePrototype

Development&

Evaluation

BusinessConcept

Discovery

Created(inside-out)

Savings Seed Money

Venture Capital

ExpansionCapital

Savings FFF Start-up Loan

Loan & Pre-order

Revenues, Partners& Loans

“Real-life” financing:

Opportunity

Product Life cycle

But plans are mostly theoretical

Many companies are started without a business plan.

Many change their along the way

And some are pure accidents..

Success factors

Team: Personalities: what are your personality types (values, style, etc.)?

Interests: what are you interested in?

Experience: what experience do you have?

Resources

IP and goods: what does the business own?

Cash: how much cash do you have?

Network: what connections support the organization?

Success factors (2)

Strategy Plan: what is your plan for establishing and growing the business? Competition: how will you address the competitive challenges?

Summing up

Planning is important

Execution too..

Find the right balance.

Learn from others

Get some experience

Start thinking about it

Prepare to fail, prepare to find new ways

Corporate Consolidation

Merger

Acquisition

Merger

AcquisitionVertical

Merger

AcquisitionVertical

Horizontal

Merger

AcquisitionVertical

Horizontal

MergerConglomerate

See you next week!

entrepreneurship & innov. · this week today & tomorrow - entrepreneurship & innovation...

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