Chapter 1 Innopreneurship: Entrepreneurship + Innovation Entrepreneurs: Innovators or creative minds that can make things happen. “Making things happen is not the same as making new things happen.” - An owner of a business who invests his/her resources to bring idea to life, setting the direction that transforms that idea into reality, thus providing and gaining value that balances effort, purposes and profit. - Different from a corporate entrepreneur who does everything like an entrepreneur but does not have a financial stake in the business. 5 Components of an entrepreneur 1. Owner who invests resources – risk taking 2. Brings an idea to life – idea may or may not come from the entrepreneur, but turning an idea into revenue maximization entails defining the best options. 3. Setting direction – getting quality information and making choices from these pieces of information 4. Making things happen – ensure all the interdependent elements are in harmony 5. Adding value – entails financial understanding Who is an Innovator? - A person who introduces a new process, product, services or a business model to the marketplace that becomes commercially successful. 2 Elements 1. New 2. Commercial success – requires customer acceptance Different from an inventor who creates something new but has not attained commercial success. Business + Personal Plan A firm need to have a business plan a. Written document (for outside inventors) b. Simpler outline of a business model ( for internal guidance) - It provides the direction where the firm is going. Prosperity for All Profit is a requisite for a business. 3 elements to create profit for a business idea: 1. Cash 2. Inventories 3. Receivables Wealth Conversion Principle Cash o o o Receiv ables Invent ories o Business starts with an idea (based on the vision of the proponent). Then, investment of cash (or the equivalent of cash) is needed to bring the idea to life. The cash is used to buy Inventories Inventories are sold, often with some credit terms, and when these Receivables are collected, they are converted back to cash. It is a cycle with each cycle adding greater value to the firm. 3 S’s Requisites to prosperity - To make the wealth conversion principle come alive 1. Squad - form a team, which includes your choice of business partners. 2. Spread – need to ensure that products are sold are priced higher than the cost. 3. Speed – create a system to manage account receivables effectively. Key Factors to Successful Entrepreneurship 1. Commitment – a strong drive to achieve goals and objectives through focus and pro-active follow-through 2. Coordination – the organization of different people or groups coming from various functions to attain efficiency, effectiveness and/or impact. 3. Competency – having a combination of ability, attitude and behavior to do particular role or job repetitively well. 4-Gate Model to Prosperity (House of Prosperity) 1. Preparation Gate 2. Marketing Gate 3. Execution Gate 4. Self-leadership Gate Gatekeepers – screens the potential entrants along the way. CEO (Customers, Employees and Owners) – he/she needs to find a good balance of all three constituents and ensure each of these three parties gets a compelling based on what is valuable to them. Gates Preparation Marketing Execution Self-Leadership Interest and Expectations Profit and Dividends Quality and Good Price High Pay and Work-Life Harmony Fulfillment Gatekeepers Owners and Stockholders Customers Employees Self 12 M’s to Successful Entrepreneurship Gate 1: Preparation (IQ - Intelligence quotient: capacity to think and reason) a. Money – cash component Success Story: Butch Salvador was broke and had Php10 left, just enough to make photocopies of his business leaflet. He knew a car repairman and uses the parking lot of a mall for prospecting and left his marketing leaflets on windshields of ten cars with dents, which clearly needed some repair. He decided on this strategy due to lack of resources. One out of ten came and the next customer saw them repairing car dents outside the car owner’s house. From this, Car Magic was born. b. Model – the business model or the big picture plan to generate sales revenue profit, cash flow, growth, and how to scale up. c. Mentors – are the experienced advisers who can add value to the entrepreneur by giving sound guidance to increase the competency, lessen the risks, and help open more opportunities for the entrepreneur to succeed. Example: International furniture designer Kenneth Cobonpue was encourage by his mother (who was already in the furniture business) to build his own toys when he was a child. Gate 2: Marketing (CQ- Creativity quotient: the capacity to innovate) a. Mindset – is about beliefs. That being an innopreneur is better than being just an entrepreneur. -one must have a mindset to find a novel differentiation or Unique Selling Proposition (USP) that solves a real problem, by not selling the same thing as everybody else. -That it is possible to earn dollars not just as an OFW but as an exporter. b. Market – a set of buyers that an entrepreneur focuses attention on. -it also includes the channel where the target market can see what is being offered. Example: AHEAD tutorial focused on students doing well instead of students having low grades when they started. To change the negative perception to tutorials as a last resort for students who were failing in school. By focusing on achievers, they were able to change perception, gained status and made tutorials something students looked forward to. c. Message - brand positioning that will be communicated to persuade a target customer to buy. (Example: Iphone vs Myphone) Gate 3: Execution (EQ- Emotional Quotient: the capacity to sense and to emphatize) a. Machinery- it is about an organization structure that can deliver the value planned; hence, the organizational structure can only be identified after the value proposition is formulated. b. Methods – are about systems and processes that allow the entrepreneur information and control. c. Management Skills – about the ability to carry out the plans through people, rewards and leadership. Gate 4: Self-Leadership (AQ- Adversity Quotient: the capacity to recover and make progress) -it is needed when problems and obstacles are experienced because of the nature of entrepreneurship, where risks and uncertainty is expected. Example: Billionaire Jack Ma, founder of Alibaba. - Started from when he failed a key primary test twice, and failed three times while in middle school. - He also applied to study in Harvard and rejected ten times. - Got rejected 30 times in applying for a job. - 25 people applied in KFC and they accepted 24 except him. - Five people applied for a police job and they accepted four except him. But he persisted, not giving up on himself. When faced with adversity, stop giving excuses and start finding solutions to keep improving. Not just leadership in business but also in one’s personal life. a. Moving forward – having the grit to continue the business despite obstacles. b. Mission – about purpose or the reason why the business exists beyond making a profit. Example: USLT providing hundreds of scholarships to students c. Mastery – building capabilities, knowing the self, the environment as well as the operations. Entrepreneurship Key Factors Matrix Key Factors for Success / 4-Gate Model Commitment Coordination Competency Preparation Money Model Mentors Marketing Mindset Market Message Execution Machinery Methods Management Skills Self – Leadership Moving Forward Mission Mastery An entrepreneur needs four different types of commitment: 1. Money – Commitment to maximize return on investment. 2. Mindset – Commitment to have an innovation mindset. 3. Machinery – Commitment to create an effective organization. 4. Moving Forward – Commitment to keep iterating toward objectives and goals. An entrepreneur needs four different tasks of coordination: 1. Model – Coordinate the interdependency of a business model. 2. Market – Coordinate choice and penetration of the target market. 3. Methods – Coordinate processes needed to routinize operations. 4. Mission – Coordinate the establishment and fulfillment of a company’s mission. An entrepreneur needs four different groups of competencies: 1. Mentors – Competency related to sense making and risk assessment that can be provided or guided mentors. 2. Message – Competency related to customer-focused communication, expressed in terms of a positioning or a message. 3. Management Skills – Competency related to initiative and resource management and influencing people skills as part of critical management tasks. 4. Mastery – Competency related to adaptability and grit resulting to mastery of strategy and change, as well as customer understanding and self-transformation. Is Entrepreneurship for Everyone? - It can be learned but it is not for everybody. - Passion is not enough. A person needs an eye to satisfy unmet needs of a group of prospects that can be large enough to have a differentiated, growing, profitable, scalable and sustainable operation. 7 competencies of an Entrepreneur Competencies – combination of abilities (technical skills like knowledge and expertise) and behavior (like people skills or motivational level) 1. Risk appetite – sees rewards for taking on opportunities that have potential positive (or negative) consequences. 2. Sensemaking – scanning the environment to detect and interpret what is happening today in order to connect and take actions on potential future outcomes. 3. Customer-Focus – choosing, initiating and sustaining relationships with customers. 4. Initiative – being proactive in taking prompt actions to attain objectives. 5. Influence – ability to use personal branding and interpersonal styles to gain buy-in from constituents. 6. Adaptability – adjusting to external changes while initiating internal changes to attain objectives. 7. Grit – persistency to attain long-term goals despite adversity. 4 Competencies of an Innovator 1. Creativity – forming a mental image or new idea about the future. 2. Critical Thinking – offering unique ways to solve defined problems 3. Collaboration – developing relationships with the right partners to attain objectives. (benchmarking) 4. Communication – engaging constituents to make them understand and accept your message. Chapter 2: Gate-1 Preparation: Money, Model and Mentors An entrepreneur must be aware of the important task of doing a feasibility study. What’s your big idea? Elements of a good idea. 1. Money 2. Model 3. Mentors 4 basic questions that is important to investors. 1. Who is your target market? – gives an indicator of how big the markets. 2. What is being offered? – this answer what’s in it for the target market, addressing the pain points of the consumer. Pain points can be conscious (actual demand) or unconscious (latent demand) that can be pointed out by the seller. 3. Why is the offer relevant or unique? – this answer why the offer is compelling to the target market. 4. How will this make money for the firm? – this answer how the firm can win in the marketplace and what’s in it for the investors. 3 Levels of Strategy 1. Corporate Level: What industry do we enter / exit and why? What’s the potential value capture? 2. Business Level: What is (or could be) our competitive advantage? 3. Functional Level: What is the compelling reason for consumers and customers to buy our products and/or services and prefer us over competition? Understand and be realistic about two things: a. Value chain cycle b. Consumer’s path to purchase or the sales cycle PERSONAL BRANDING - a tern use to describe the image of one’s self in the public’s mind from previous choices made that will affect the future level of personal influence, which is part of self-awareness and self-mastery. - Before investing make sure that your personal branding is credit-worthy and funding-worthy. The first step to building your personal brand is knowing yourself and your personality. Personal branding makes others feel good and feel right working and dealing with the entrepreneur. Lack of good personal branding will not attract talent and resources so entrepreneurs must therefore not underestimate its importance, as every act they make is a rehearsal for the future. RAISIING FUNDS Basic Ways and Simplest Ways to Raise Capital 1. Savings – discretionary funds from unspent money earned previously by the entrepreneur. 2. Partnership – includes investment from relatives, friends and acquaintances. 3. Loans – money advances, which may be sourced from individual informal channel or financial intermediaries like banks. 4. Customer’s Advances – terms of sales advantageous to the seller, such as cash with order (CWO), asking for down payment (DP), cash on delivery (COD, or collecting franchise fee upfront. More advanced ways to raised funds Sources of Funding from Outsiders 1. Angel investor – money invested by an outside individual to a firm. 2. Super angel – big amount of money invested by an outside individual to a firm. 3. Venture capital – amount of money invested by outside investors, typically over 10 individuals with none owning over 10% of investment pool forming themselves as a venture investing company. 4. Private equities – amount of money invested by outside investors, typically over 10 individuals, forming themselves as a private equity investment company, focusing on firms that already have revenues and profit. 5. Going public – amount of money invested via initial public offering (IPO) from the stock market. Note: entrepreneurs must therefore not limit their expansion on internally generated funds, or borrowing money from bank, or asking partners to put in more money. On a bigger scale, the company may be attractive to public investors in the stock market. Question: WHY PARTNERS ARE NEEDED? Success Story: when Jollibee bought 70% of Mang Inasal in 2010, it took over a functional department of Mang Inasal every six months starting from the treasury group. In five years’, time, sales of Mang Inasal went up to 2.4 times despite increasing the number of stores by only 30%, creating much productive Mang Inasal in the process. THREE SERIES OF INVESTMENT SERIES REVENUE PROFIT A No No B Yes No C Yes Yes DESCRIPTION Product or Service exists but no business operation. Nosiness exists with revenue generation but lack either revenue sources or productivity scale to be profitable. Company is operating with both revenue and profit increasing. RISK LEVEL High INESTEMENT PREMIUM None of lowest Moderate but can be Case-to-Case attractive if investment will leapfrog volume way beyond breakeven point. Low Highest Note: A is not yet a business only an idea. Example: The Facebook, decision making in economics Choosing Mentors - A mentor is a trusted and experience adviser who is interested in the success of the mentee. - He/She does this by investing time to be a sounding board, to listen and understand context, ask questions, give sound advice, offer alternative opinions, opening windows of opportunities and lessening risks of the mentee. 4 Different Types of Mentors Needed by Entrepreneurs Types of Mentors Needed Operational Functional Personal Strategic Role of Mentor for the entrepreneurs Guides on matters related to present operations, especially key factors for success that the firm should do exceptionally well Guides on matters related to support functional areas on which the entrepreneur may need some advice Guides on matters related to personal growth Guides on matters related to the future vision of the entrepreneur Examples for a Start-Up Advertising Agency Client acquisition, presentation, execution Accounting tax, human resource Work-life harmony Consulting, service Part 2: Development of the Business Plan via a Business Model An important task in starting a new venture is to develop a business plan, which is a "road map" to guide the future of a business or venture. CHAPTER 3: The Business Model What is a Business Model? - A description of the means and methods a firm employs to generate sales revenue, profit, and cash flow, while providing a template for the business to scale up. - It has 10 building blocks subdivided into two parts – the offering model and the operating model, with the definition of terms of each building block. A business model helps shape a company's marketing and sales plans, its growth potential, and its ability to attract investors. Investors use business models to assess a company’s profit potential while entrepreneurs use them to shape their ideas into a sound business structure. A business model provides a framework for a company's monetization strategies. It focuses on defining the audience (customer segment), unique selling proposition, brand positioning, method of delivery, and distribution channels to create a profit-making formula. Business models shape all aspects of a company's development and growth. Therefore, they may change over time to adapt to new marketplace opportunities, technologies, or distribution channels. The offering model is composed of what people in the marketing and sales departments typically handle – target market, value proposition, channel, customer bonding strategy and revenue model. ∞ Target Market – The intended recipients of a firm’s products or services. ∞ Value Proposition – The relevant and unique benefit that the consumer gets from buying or owning the firm’s product or services. ∞ Channel – The distribution system where products or services will be made available to the customers. ∞ Customer Bonding Strategy – The relationship as well as the solution that will be established with buyers and end users. ∞ Revenue Model – The compensation a firm will get for providing its value proposition to support its intended profit. The operating model, on the other hand, is what people in the operations department t, like supply chain and customer fulfillment. Oversee – value chain, resources and processes, complementors, configuration and cost. ∞ Value Network – The strategic linkage of extended supply chain for the firm to provide specific products or services to the customers. ∞ Resources and Processes o Resources: The hard and soft assets deployed by the firm to carry out its value proposition for the customers. o Processes: The critical repetitive activities that are routinized by the company to deliver the value to the customers and to the company in a sustainable way. ∞ Complementors – People or groups who will help both directly and indirectly, to enhance the value proposition. ∞ Configuration – Rearrangement of resources, processes, activities and offerings that can help enhance the profit goal of the company. ∞ Cost – The monetary consequences of the means to carry out the value proposition. NOTE: To improve a firm’s profit, the entrepreneur looks at maximizing his revenue in the offering model while minimizing cost in the operating model. KEY QUESTIONS TO ASK ABOUT YOUR BUSINESS MODEL Offering model ∞ Target Market Market Space – Who is the target market that has the greatest potential for the firm? ∞ Value Proposition Novelty – What are the biggest unmet needs we should satisfy in a novel way? ∞ Channel Go-to-market – Where do we make our products conveniently available consistent with the target market’s buying pattern? ∞ Customer Bonding Strategy Organization – How do we have a customer-centric organization that can engage, deliver solutions and build positive relationships with customers better than competition? ∞ Revenue Model Price – What will be the most attractive pricing scheme that can leapfrog demand and meet our objectives (revenue, profit or social cause)? Operating model ∞ Value Network Linkage Structure – How are activities linked & sequenced? ∞ Resources and Processes Capabilities – What assets should we leverage & what activities should we perform well to unlock value? ∞ Complementors Lock-in – What will make it appealing to start and stay as complementors or partners? ∞ Configuration Efficiency – How do we reorganize to provide value without over- or under-spending? ∞ Cost Infrastructure – What is the infrastructure cost that will carry out value propostion? |CHAPTER 4: Opportunity Seeking: Market – Product Fit What is Opportunity Seeking? It is the process of spotting, evaluating and pursuing relevant and sustainable revenue and profit generating activities in the marketplace. The ongoing process of considering, evaluating, and pursuing market-based activities that are believed to be advantageous for the firm. Prior experience informs the process, but it may also limit it: opportunity seeking calls for continuous reconsideration and adaptive learning. Opportunity-seeking and initiative - Entrepreneurs seek opportunities and take the initiative to transform them into business situations. How to spot opportunities? Voice of Customers (VOC) Voice of Enterprise (VOE) Voice of Customers (VOC) - Is a research process used to capture needs of consumers (end users) and customers (channels). A key to voice customers is identifying and understanding pain points, barriers and its root causes to trigger greater demand in an industry. Pain Point Process Step 1: PAIN HUNTING Step 2: PAIN POINTS IDENTIFICATION Step 3: PAIN POINTS UNDERSTANDING Step 4: PAIN POINTS HEALING Step 1: PAIN HUNTING - Entrepreneurs must choose a specific group of people as their target market. - The group must behave in a homogenous way like having common traits and seeking common benefits. Types of Benefits a. Functional Benefit – benefit related to the performance of the product or service. b. Economic Benefit – benefit related to the price of the product or service. c. Emotional Benefit – benefit related to how the owner feels when owning or using the product or service. d. Social Benefit – benefit related to how others will perceive the owner of the product or service. - When entrepreneurs have chosen a target market for pain hunting, the target group becomes his/her focus, looking for their unmet needs along the consumer decision journey. Without pain hunting, blind spots may happen and the entrepreneur might leave out critical details. Step 2: PAIN POINTS IDENTIFICATION - To know consumer pain points, the target market can be asked what they dislike about a particular brand or product. Examples: o o o o o o Lack of area coverage Unsupervised placement and merchandising Sporadic availability of stocks Low margin Transactional approach, not relational or strategic in account development Unprofessional salespeople - While most benefit segmentation is based on consumer’s functional needs, another way to do segmentation is via emotive needs, called “Needscope” by market research firm Kantar. - This includes: o Expressive (how one looks) – used by fashion and personal care o Gratification (how one feels) – used by food and pharmaceutical products o Combination of expressive and gratification ( how one looks and feels) – used by automotive and telecom industries. Step 3: PAIN POINTS UNDERSTANDING - Not all pain points have the same level of importance. Entrepreneurs must understand the frequency and depth then choose the key pain point priorities that must be solved due to relative higher impact that cab be felt by the customer. Step 4: PAIN POINTS HEALING - It is important for entrepreneurs to have empathy and not just understand pain points, but also accept that change is needed, and that speed of change by external factors may leave them obsolete in their industry. Lifestyle Trends Another practical way to spot opportunity via voice of customers is by looking at lifestyle trends of how people live, how people work, how people play, how people die and how people invest. Voice of Enterprise (VOE) - It is the process to articulate the needs of the entrepreneur or his/her company. Opportunity-Seeking Process Ideation Discovery Phase Incubation Opportunity starts with ideation that have specific problems identified, and rough solutions proposed. It is followed by the discovery phase where the entrepreneur wants to spend a little but learn a lot. This evaluation and redirection stage narrows the knowledge gaps of the entrepreneur, revealing potential risks, validating or unveiling faulty assumptions about the business, finally leading to incubation by building the actual solution, doing rapid testing, prototyping and validating to ensure it is feasible to execute the idea.
