Seminar in Business Plan Development Instructor: Dr. William J. Tsai, Ph.D. The Entrepreneurial Process

Definition of an Entrepreneur An Entrepreneur is someone who relentlessly pursues and opportunity without regard to resources currently under his/her control.

Perspectives on the Nature of Entrepreneurship Creation of Wealth: Assuming of the risks associated with the facilitation of production in exchange for profit. Creation of Enterprise: Founding a new business venture where none existed before. Creation of Innovation: Combining unique resources that make existing methods or products obsolete. Creation of Change: Adapting one ’ s personal repertoire, approaches, and skills to meet different opportunity sets. Creation of Employment: Employing, managing and developing the factors of production, including the labor force. Creation of Value: Creating value for customers by exploiting untapped opportunities. Creation of Growth: Having a strong and positive orientation towards growth sales, income, assets, and employment.

The Entrepreneurial Process Identify an Opportunity Develop and Refine the Concept Assess and Acquire the Necessary Resources Implementation Manage and Harvest the Venture

Entrepreneurship 〝 The reasonable man (woman) adapts himself/herself to the world; the unreasonable one persists in trying to adapt the world to himself (herself). Therefore all progress depends on unreasonable men (and women) 〞 George Bernard Shaw Men and Supermen 〝 The role of the entrepreneur is to stand up to all, to stand up to ridicule 〞 - Tom Peters Thriving on Chaos

Inputs to the Entrepreneurial Process Environmental Opportunities Entrepreneurial individual (s) An organizational context Unique business concepts Resources

Outputs of the Entrepreneurial Process A going venture Value creation New products, services and processes Profit and/or personal benefits Employment, asset and revenue growth Failure/Loss

Lifestyle Ventures Business built around lifestyle of founders Generating income to support desired lifestyle Controlled growth to maintain desired lifestyle Harvest concerns focus on retirement issues Usually self-funded; or family and friends Not conducive to angel or VC financing

Entrepreneurial Ventures Business designed to yield capital gains Short-term income is of a lesser concern Focus is on value creation Harvest concerns focus on ROI Self-funding; followed by equity-funding Attractive to angel or VC financing

Seminar in Business Plan Development Instructor: Dr. William J. Tsai Opportunities and Concepts

Opportunity Favorable circumstances pointing to a need Ability to improve something at a profit Better, faster, cheaper / Brave new world Existence of 〝 pain 〞 that can be removed Fixing an unsatisfactory situation Timing is critical

Types of Opportunities Perennial Cheaper, quicker, higher, quality, more reliable, incrementally better Occasional Supply withdrawn, demand surge, new market segment, market holes Multiple Cause More elderly with more income and more time on their hands Multiple Effect Increased longevity creates need for …, domestic terrorism creates need for …,

Finding Opportunity Deliberate or active search, or A 〝 discovery 〞 process as one pursues everyday life or a business idea

Examples of sources of Opportunity Rule change Demographic change Underserved markets Poorly served markets Social trends New customers to a market Increasing usage rates Shortages New technologies to address unmet needs or change ways needs are met

Why would something not be a good opportunity? No market need Customers not dissatisfied Customer loyalty very strong Customer 〝 switching costs 〞 Customers hard to reach Intense competition Easy for people to enter after you Customers too demanding relative to what they ’ ll pay Window not open

Business Concept or Idea Specific value-creating method for capitalizing on the opportunity New product, new service or new process The 〝 unique combination 〞 that defines how much value a customer is getting-- -can include price, distribution, packaging, etc.

Concept statement should be: Concise and to the point CNN ’ s concept might be stated a 〝 instant information, anytime, from anywhere 〞

Where do business concepts/ ideas come from? Geographic transfer Prior employment Teaming with inventors Hobbies Social encounters Everyday observation Aha experience Obtaining rights Daydreams Customer requests Invitation Deliberate search Necessity (mother of invention)

What is a good concept? Many criteria exist (e.g., profit potential, leads to stream of products, barriers to entry, comprehensive, internally consistent) But let ’ s focus on three core criteria Overt benefit New and different Reason to believe

Opportunity versus Concept/Idea Opportunity Labor shortage in fast food industry (unskilled services in general) High employee turnover in fast food restaurants Lousy/inconsistent service Business Concept: Hire and train high school students; act as outsourced labor supply to local Burger King franchisees

Opportunity versus Concept/Idea Opportunity Business Concept: On-line business that does customized greeting cards for all of your customers Salespeople need to build relationships that are one to one: need ways to do so at a reasonable cost

The opportunity Matrix Highly Competitive Most small Small Business Enterprises HIGH POTENTIAL VENTURES The Black Holes Known Concept Novel Concept BIG SMALL REVENUE POTENTIAL

Qualities of an Opportunity Durable Timely Creative or adds value Offers sustainable competitive advantage Economics are rewarding and forgiving

Criteria for Evaluating Venture Opportunities Industry and market Economics Harvest issues Competitive advantage issues Management team Fatal Flaw issues Strategic Differentiation

Seminar in Business Plan Development Business Model and Revenue Streams

The Core Components of a Business Model How do we create value? Who do we create value for? What is our source of competence / advantage How do we differentiate ourselves? How we make money? What are our time, scope and size ambitions?

How do we create value? (Factors related to the offering) Primarily products/primarily services/heavy mix Standardized/some customization/high customization Broad line/medium breadth/narrow line Access to product/product itself/product bundled with other firm ’ s products / services Internal manufacturing or service delivery/outsourcing / licensing reselling / value added reselling Direct distribution / indirect distribution (single or multiple channel)

Who do we create value for? (market factors) Type of organization Local/regional/national/international Where in value chain; upstream supplier/downstream supplier/ wholesale/retail/ serve Broad or general market niche

What is our source of competence advantage? (Internal capability factors) Production / operating systems Selling / marketing Information management / mining / info. Packaging Technology / R&D / creative or innovative capability/ intellectual Financial transactions Supply chain management Networking / resource leveraging

How do we differentiate ourselves? (Competitive strategy factors) Image of operational excellence / consistency / dependability Product or service quality / selection / features / availability Innovation leadership Low cost / efficiency Intimate customer relationship/ experience

How we make money (economic factors) Pricing & revenue sources: fixed / mixed / flexible Operating leverage: high / medium / low Volumes: high / medium / low Margins: high / medium / low

What are our time, scope and size ambitions? (Personal / investor factors) Subsistence model Income model Growth model Speculative model