Entrepreneurship 101

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This is an introduction to the basics of entrepreneurship, lean startup methodology, and effectuation principles. It is preparatory viewing for the first session of a course on entrepreneurship taught by global cleantech entrepreneur and Entrepreneur In Residence at Rice University, Bryan Guido Hassin. The full video is available at http://youtu.be/JYUJP3hxBn4

Published in: Business

Entrepreneurship 101

  1. 1. Entrepreneurship 1012013-05-27Bryan Guido HassinEntrepreneur In Residence
  2. 2. This is how people believeentrepreneurship happens2Wunderkindhas divineinspiration• Or MBA hasgenius insightRaise hugeVC $$$• With detailedbusiness planIPO, retire• Preceded byhockey stickgrowth
  3. 3. But this is not howentrepreneurship usually happens3Wunderkindhas divineinspiration• Or MBA hasgenius insightRaise hugeVC $$$• With detailedbusiness planIPO, retire• Preceded byhockey stickgrowth• First timefoundersaverage 40years old• Venturesrapidly evolvefrom originalvision• < 2% ofventures everraise VC $$$• < 27% of Inc.500 ever hada biz plan• < 1% ofventures IPO
  4. 4. I am a global cleantech entrepreneur /professor of entrepreneurship at Rice4• Founded/led four startups– Plug-and-play office energy savings– Web environmental compliance– Digital social business card– Mobile/wireless disaster response• Educated at Rice (computer science) and IMD(business)
  5. 5. Entrepreneurship Roadmap5The BasicsLean StartupEffectuation
  6. 6. Entrepreneurship 101: who/whatare entrepreneurs?6
  7. 7. Is this an entrepreneur?Mike YangOwner, Fast Food Franchise7
  8. 8. Is this an entrepreneur?Eric FavreInventor,Nespresso 1976Jean-Paul GaillardCommercializer,Nespresso 19888
  9. 9. Is this an entrepreneur?Jesper HornbergFounder, GIVEWATTS9
  10. 10. Is this an entrepreneur?Dan EcklundPerpetrator, Stem Cell Fraud10
  11. 11. Entrepreneurship 101: What areentrepreneurs like (and why)?11
  12. 12. Average first time entrepreneur:Source: http://www.entrepreneur.com1240 yearsoldMarriedHaschildrenMiddleclassBachelor’sdegree
  13. 13. Mythbusters: entrepreneurs don’twork for themselves13Investors Clients RegulatorsEmployees
  14. 14. Mythbusters: entrepreneurs earnless than corporate peers14
  15. 15. Mythbusters: entrepreneurs aremore risk averse than average15
  16. 16. Entrepreneurship is…• A mindset– Seeking solutions to problems– Aligning resources to sustain solutions– Creating value16
  17. 17. There are 5 canonical venturetypes• Small business (feed the family)• Large business sustaining innovation• Large business disruptive innovation• Social enterprise• Scalable startupSource: Four Steps to the EpiphanyOur Focus17
  18. 18. A startup is…―a temporary organization used to search for arepeatable and scalable business model” – SteveBlankLarge CompaniesExecute KnownBusiness ModelsVentures Search forUnknown BusinessModels18
  19. 19. Startups are not small versions oflarge businessesLarge CompaniesExecute KnownBusiness ModelsVentures Search forUnknown BusinessModels19
  20. 20. Entrepreneurship Roadmap20The BasicsLean StartupEffectuation
  21. 21. What does this entrepreneurialsearch process look like?
  22. 22. A business model starts withhypothesesGuess GuessGuessGuessGuessGuessGuessGuessGuess
  23. 23. Hypotheses become facts through rapiditerations of customer developmentCompanyBuildingCustomerDiscoveryCustomerValidationCustomerCreationPivotSource: Four Steps to the Epiphany23
  24. 24. Get out of the building and testhypotheses with real clients• Stop selling, start listening• Test your hypotheses• Continuous Discovery• Done by foundersCustomerDiscoveryCustomerValidationCompanyBuildingCustomerCreationSource: Four Steps to the Epiphany24
  25. 25. When hypotheses are not verifiedby customers, pivot• The heart of Customer Development• Iteration without crisis• Fast, agile and opportunisticSource: Four Steps to the Epiphany25
  26. 26. Goal to exit Customer Validation:the MVP•MVP: The Minimum Viable Product•Smallest feature set that gets you the most …orders, learning, feedback, failure…Source: Four Steps to the Epiphany26
  27. 27. Sounds easy – yet so manyentrepreneurs still failNew research on consistently successful entrepreneurs
  28. 28. Entrepreneurship Roadmap28The BasicsLean StartupEffectuation
  29. 29. Expert entrepreneurs start withmeans and create opportunitiesFixedEndMeans1Means2Means3StartingMeansNewEnd1NewEnd3NewEnd2Source: Effectual Entrepreneurship29
  30. 30. Expert entrepreneurs expand theirmeans with partnershipsSource: Effectual Entrepreneurship30YourMeansOriginalEnd4OriginalEnd6OriginalEnd5MyMeansOriginalEnd1OriginalEnd3OriginalEnd2NewEnd3
  31. 31. Expert entrepreneurs embracefailure and leverage surpriseSource: Effectual Entrepreneurship31
  32. 32. Expert entrepreneurs setaffordable loss and control returnsSource: Effectual Entrepreneurship32EntrepreneursFor a given level of risk, entrepreneurs feeltheycan expand the problem space andincrease returnsFor a given level of return, bankers feelthey canreduce the problem space and decreaserisk.Step 2Push creativelyto increase returnStep 2Try to reduce riskthrough insurance, etc.Step 1Pick a comfortablelevel of riskStep 1Pick a target returnRiskReturnHigh HighLowLowLow Low HighHighBankersRiskReturn
  33. 33. Expert entrepreneurs control theunpredictable futureSource: Effectual Entrepreneurship33Biz PlanEntrepreneurship
  34. 34. Effectual principles can beillustrated with jars of marbles?1: Predictable 2: Risky 3: UnknowableYou win the game by selecting a red marbleEntrepreneurship is like Jar 3
  35. 35. Expert entrepreneurs add asmany red marbles as they can3: UnknowableAnd they make friends who have more red marbles to addYou win the game by selecting a red marble
  36. 36. Or else they create a new gamewhere blue marbles win3: UnknowableYou win the game by selecting a blue marbleIf they and their friends only have blue marbles
  37. 37. Innovation happens throughoutthe business system6. Product systemextended system that surrounds an offeringProductperformanceOfferingProductsystemService7. Servicehow you service your customers5. Product performancebasic features, performance and functionalityCoreprocessProcess.Enablingprocess3. Enabling processEnabling new connections,interactions, and transactions4. Core processproprietary processes that add valueSource: Doblin GroupBusinessmodelFinanceNetworking2. Networkingenterprise’s structure/value chain1. Business modelhow the enterprise makes moneyChannelDeliveryBrand Customerexperience10. Customer experienceThe overall experience forcustomers8. Channelhow you connect your offeringsto your customers9. Brandhow you express your offering’sbenefit to customers37
  38. 38. Source: Doblin GroupHiLoVolume of innovation effortsLast 10 yearsCoreprocessProcess.EnablingprocessBusinessmodelFinanceNetworking ProductperformanceOfferingProductsystemService ChannelDeliveryBrand CustomerexperienceStartups tend to focus on productopportunities38
  39. 39. But the best opportunities areoften elsewhereSource: Doblin GroupHiLoCumulative value creation—Last 10 yearsCoreprocessProcess.EnablingprocessBusinessmodelFinanceNetworking ProductperformanceOfferingProductsystemService ChannelDeliveryBrand Customerexperience39
  40. 40. The innovation ―piano:‖ the bestopportunities are ―chords‖Source: Doblin GroupChannelDeliveryBrand Customerexperience10. Customer experienceThe overall experience forcustomers8. Channelhow you connect your offeringsto your customers9. Brandhow you express your offering’sbenefit to customers6. Product systemextended system that surrounds an offeringProductperformanceOfferingProductsystemService7. Servicehow you service your customers5. Product performancebasic features, performance and functionalityCoreprocessProcess.Enablingprocess3. Enabling processEnabling new connections,interactions, and transactions4. Core processproprietary processes that add valueBusinessmodelFinanceNetworking2. Networkingenterprise’s structure/value chain1. Business modelhow the enterprise makes money40
  41. 41. Example: Apple’s iPod/iTunes ―chords‖have captured huge opportunityChannelDeliveryBrand CustomerexperienceProductperformanceOfferingProductsystemServiceCoreprocessProcess.EnablingprocessBusinessmodelFinanceNetworking41
  42. 42. Breakout• What are your means?• What is your affordable loss?• What can you do to control the futureinstead of predict it?• Which areas of non-product innovationcan you explore?
  43. 43. Entrepreneurship 1012013-05-27Bryan Guido HassinEntrepreneur In Residence

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