JWI 575, NBVE, Week10, Wrap Up, 9/3/13
It is so hard to believe that we are in the last week of class. Nearly ten weeks have gone by and we have learned a great deal about
starting new ventures and what it means to be entrepreneurial.
Here is a synthesis of everything I have learned through this fantastic
course. This is exactly my learning inventory that I am hauling away gainfully into the future. While I
cannot say I have mastered any of these insights, I do feel I have
internalized these principles very well.
1. What have you mastered about New Business Ventures and Entrepreneurship?
1. Attitude is everything.
********************
Always
be open to new possibilities under any circumstance eg. even during a
recession or when losing a job. Be open to learning.Not being open to
learning is the reason why entrepreneurs don't scale (Hamm, 2002).
2. Essence of entrepreneurship
*************************
The
essence of entrepreneurship is coming up with original ideas, launching
a new product, entering a new market, improving operations in parent
company by encouraging people to think like entrepreneurs, seeing
disruption before the upstarts do and staying a step ahead of a possibly
disrupting competitor (JWI 575, W9L2).
3. Six stages of companies (JWI 975, W10 L1)
**************************************
1. Idea stage - A lone visionary has nothing more than some slides to pitch.
2. Start-up stage - A small founding team takes shape.
3. Develop product or service - Prototype or customers are identified.
4. Ship to customers - Early User products created in minimal quantities, leading to a small revenue.
5. Ship at scale - Revenues come in.
6. Large-scale operations - significant revenues come in and a quest for new growth begins.
4. Management styles
******************
Start-ups
tend to be scrappy, improvising and constantly mutating. Mature giants
have a corporate style. They are fact-based with well-understood
products.
5. Spot the market opportunities
**************************
Understand
the historic reasons that lead up to the current market situation.
Think of a new product or service to fill the market need. Invent a
solution. Encourage others to try new ideas. Initiate novel actions and
own the outcomes (Kaplan & Warren, 2010).
6. Start with a big idea
*******************
Ideas
spark a business. Create a product or service that is original, new ,
superior and compelling to customers. Interact with the environment and
colleagues to collectively weave together resources and create an
opportunity. Define a core purpose statement and a vision.
Think Big. Think Fast. Think Ahead
****************************
Ideas
are no one's monopoly (Dhirubhai Ambani,
http://www.ril.com/html/aboutus/quotes.html). To be effective, think
effectually rather than causally (Sarasvathy, 2001). Use a means-driven
approach rather than a goal-driven approach.
7. Have an outsized resilience
************************
Have the stamina to hear no over and over again and keep smiling.
8. Uncertainty and ambiguity are our friends
***********************************
Become comfortable with uncertainty.Improvise.
9. Create an extraordinary Team
**************************
Attract and retain bright people to chase the dream together.
10. Develop a plan by asking the right questions
****************************************
Create
a value proposition so compelling that the customer will find it easy
to make the buy decison (Welch & Welch, podcast W4).
Determine burn rate and start-up capital needed to fund the venture (W6L1).
11. Create unique value for the customer (JWI 575, W4L1)
***********************************************
(i) Start with the customer interest, problem and need: understand what the buyer is looking for
(ii) Know sources of value to customer: product or service; market pull or product push
(iii) Craft a unique value proposition
(iv) Understand where the firm sits in the value chain
(v) Identify a repeatable business model to capture significant value
(vi)
Price it right based on: cost, demand, value, competion, profit and
pricing objectives such as revenue, operations and patronage
12. Create a tight pitch
*******************
For
[customer portrait] who [description of problem he or she faces], we
offer [solution], which unlike [competitor/substitutions], offers
[unique selling proposition].
I’m building this venture with [amazing team]. [Here’s why you would make a great collaborator.]
13. Win with disruptive technology (JWI 575, W4L2)
******************************************
Find
new ways of solving customers' problems and doing business. First, find
a technology that existing firms do not understand or appreciate fully
yet. Second, find a sector where the market share is not yet dominated
by established firms.
14.Create a unique business model (Kaplan & Warren, 2010)
*************************************************
Rigorous
business analysis must be done to cover five vital elements: Value
proposition, market segment, structure of the value chain, cost
structure and profit potential, competitive strategy
Analyze business model rigorously (Hamermesh et al, HBS 2002)
*****************************************************
How
likely is the business to turn cash flow positive? How much time is
required to ramp-up the revenue in order to turn cash flow positive? How
large an investment is required to pursue the business model ? What are
the critical success factors and associated risks? What is the
projected revenue over time for the company? What is the gross margin?
15. Build a winning team
*********************
Early
members of the team are vital to success and so it is absolutely
important to put the best and the brightest people into new ventures
(JWI 575, Welch, W5 video).
Essential qualities of a winning team
includes sales ability, drive, humility, a knack for hiring up, domain
knowledge, solid track record, formal credentials, creative skills,
record of past collaborations and good instincts (JWI 575, WK5 L1).
16. Create a winning culture
************************
Elements
of a winning start up culture include execution and accountability,
transparency in decision making, wealth sharing, conflict resolution,
work-life balance and
clear metrics of progress (JWI 575, W5 L2). It
is important to keep asking the dumb questions but there is no need to
micromanage every little detail
(JWI 575, David Calhoun, W5 video).
17. Choose the right legal structure for the business
******************************************
(i)
Depending on the short term and long term needs of the company, pick a
legal form of the business: Proprietorship, C-corp, S-corp, Partnership,
LLC (Kaplan & Warren, 2010)
(ii) Nondisclosure agreements,
employment agreements and stock option agreements (JWI 575, W7L1) are
key to enter into proper contracts with employees.
18. Build IP for sustainable competitive advantage and profitability
****************************************************
Develop,
protect, enforce, and prosecute Intellectual Property (IP) rights. The
four forms of IP protection are Trademark, Copyright, Patent and Trade
Secret.
Basic questions to ask in protecting IP are: What are the IPs
used in the business? What is their value (and hence level of risk)?
Who owns it (could I sue or could someone sue me)? How may it be better
exploited (e.g. licensing in or out of technology)? At what level do I
need to insure the IP risk?
19. Sell, Sell, Sell to sustain a business
********************************
Without
a sale the fanciest ideas cannot lead to a sustainable business. With
strong sales, profits can be driven and sustainable businesses can be
created. "It all begins with a sale", said TJ Watson Sr, founder of
IBM.
Know how to sell
**************
The basic principles
of selling include persistence, prospecting, knowing not only the
features of the product but also what problem the customer is trying to
solve
and how the features of the product can help the customer,
enthusiasm, positive attitude, refusing to hear no and working around
objections, creating account maps,
following-up and asking for the
order (JWI 575, W9L1). A combination of direct and indirect sales
channels such as direct sales force, websites, social media, phone,
sales
representatives, distributors, trade shows and viral marketing (Kaplan
& Warren, 2010) should be used to reach customers and drive up
sales.
20.Grow a small business (Welch, video, JWI 575, WK9)
*************************
Advantages
of small startups are ownership, involvement, speed and transparency
ie. no bureaucratic non-sense. Problem in start ups is an entitlement
culture and some people who may no longer contribute effectively.
Winners, people with passion and fire in their eyes are critical. The
firm will need greater rigor in maintaining quality of the team. The
firm needs a disciplined and organized manager with a focus on learning.
21. Understand the VC framework in evaluating projects (Roberts & Barley, 2004)
******************************************************
(i) Opportunity: Is the idea unique and exciting ?
(ii) Competitive Advantage: Is there a moat to stay ahead of rivals?
(iii) Prototype: is there a working prototype?
(iv) Market size & growth potential: is the market big enough? is the sector fast growing?
(v) Customer: is there a customer willing to pay ?
(vi) Team: does founder understand the business side and the technical side of the company?
Is the interest of founder compatible with interest of the VC firm ?
(vii) What is the Risk vs Reward ? What are the technical, competitive and market risks ?
22. Understand VC motivation to pick the right investor
*******************************************
Money - is the VC looking for immediate returns or is the VC supportive of building long term value ?
Non-monetary
benefits - does the VC bring domain expertise, network of connections,
adult supervision, track record of success and compatible working styles
?
23. Compete to Win
****************
As CEO and GM,
connect everything you do with the financial metrics that matter.
Balance short term needs with future positioning.
24. Expect things to change as company grows
**************************************
Ownership
evolves from sole owner to equity-owning employees, board members and
investors. Board membership shifts. New product evolutions drives growth
plan: Product design, labor requirements, brand awareness, customer
loyalty, competitive environment, changing culture
25. Distribute decision making through management layers
***********************************************
At
some point you cannot effectively manage your direct reports and will
need layers of managers. When great engineers are asked to move from
reporting to you, the CEO, to reporting to a lower level manager they
could be alienated. Get key early employees to be on board with the way
the management team must evolve.
26. Culture is a big issue
********************
Key
questions to ask would be: how does it feel to work at this company?
how does work get done? how do decisions get made? Rituals that worked
before may not scale.
27. Drive entrepreneurship in a big company
************************************
The
job of a big company is to stay agile, keep innovating, finding niches
to sell in and keep growing (Welch, JWI 975, Staying Agile video).
Leaders of the company should create an entrepreneurial atmosphere
within the company where employees feel encouraged to pursue good ideas
and take chances (Welch, JWI 975, Entrepreneurship in a Big Company
video).
Leaders must never forget that they get the behavior that
is rewarded. Recognizing that growing a business from ground up in a
growth market could be hundred times harder than simply keeping an
existing business running, leaders should place the best and brightest
people for growth market assignments and give them the resources and
freedom they need to get the job done.In this process, leaders should
differentiate among the options they have for investment and be willing
to say no to some and yes to others.
There could be a hundred
other entrepreneurs working hard to destroy the business. Getting some
of them to work for the company is one way to protect and grow the
business. Entrepreneurs should find an enthusiastic champion among the
leaders of the organization, get the right resources in advance and
create an independent culture.
28. Spin off a new venture
**********************
A
better balance of resources, encouragement and control may be achieved
in an spin-off that is independent of the parent company. This is
particularly true when a disruption can be identified that the existing
company cannot properly seize upon. Ventures may evolve to a point where
it's successful but no longer aligned with the parent company's focus.
Making the venture thrive outside the corporate nest may be a better way
forward.
30. When stuck, get a CEO from outside for help (Welch, video JWI 575, WK10)
***************************************
Only
some can take a family owned company to a new development stage. Get an
outside hire for the CEO. Go after real talent. Steal a star. Give
authority for operating daily, strategic planning, whom to put in what
job and equity - a real piece of the action to get him or her going.
Retain majority control.
If things get crazy, and the CEO proves
to be a bad choice, move on and get another one. Remember that the new
person's job is not to obey the founders but to save them.
31. Let Go
***********
(i) You will decide to step aside from the business you built
************************************************
There
may be several reasons that trigger the exit: venture may have outgrown
you; you may be an entrepreneur who likes creating new businesses; VCs
and board members may take you "out for a long walk" to explain it is in
company's best interest if you move on to other pursuits; there may be
other compelling personal reasons.
(ii) Handle the transition, Grow Up & Make a clean break from the company.
************************************************************
Let others take over your vision. Give up your identity. Make it known that new management is in charge.
Culture
may be intertwined with you as the founder. Your presence may be key
for success of team. Carefully implement the transition. Move CEO to
board chairman or product strategy role that fits the skills or move out
of the company altogether.
Your company has reached a new level of maturity and responsibilities. Turn the page. Move on to something new and exciting.
2. What do you now understand but may want to learn more about?
I
would like to know more about forums where new ideas - the next big
things - are being discussed and debated. Masschallenge.com is a great
forum and I would like to learn more about such forums.
3.
What questions can you now articulate about New Business Ventures and
Entrepreneurship based on what you have learned in this course?
The following represents an excellent set of questions to ask about any new venture.
Ask Top10 Questions when pursuing a new idea (JWI 575, W1L1)
*****************************************************
(1) What is the big idea? what is the ability of your product or service?
What are you replacing ? Articulate clearly to capture people's imagination
(2) Who cares? Why ? How big is the problem? Tell a story. Measure and segment the markets to reach.
(3)
Who is the competition ? What is the competitive landscape? Who are the
rivals to watch? What move can you anticipate? How will they react?
(4) What is your product ? What makes it unique? Does it work yet ? Can you protect it?
(5)
Who makes up your team ? What skills and experiences do you bring to
the table? Who else do you need? What are your complementary skill sets ?
(6) How will you make money ? Of the many business models, which is right for your new venture ?
(7)
Why will you succeeed ? Map out scenarios. How will the market respond
to your product ? how will you respond to meet demand ?
(8) Why you could fail ? Risk factors; how will you minimize cost of failure ?
(9)
What are key milestones to validate the business? What tests along the
way will you look for to test if you're on the right course and you have
a winning idea ?
(10) How much money will you need and when ? Where can you get it? what are pros and cons of different sources ?
I
am deeply grateful to have had this opportunity to learn in this
outstanding JWMI forum. I truly do feel a change in my DNA ! Life looks a lot
more exciting now.
Dr DP
