Sunstone Business School Dr. Bennett McClellan August 17, 2012What is Strategy for aEntrepreneurial Startup?
WHAT ARE WE GOING TO COVER TODAY? Three topics on entrepreneurial strategy: 1. How do I get the money? 2. How do I present my story? 3. How to I develop my business?
HOW DO I GET MY MONEY? What’s a VC Look for?* Entrepreneurial Chops – person, passion, past performance, potential Customer need – problem(s) the customer needs/wants to solve Value proposition – what the customer will pay for, defines as value Unique resources – Material, people, organization, installed base Market attractiveness – unit economics, scalability, share potential Competitive intensity – current competitors, emerging competitors Ecosystem setting – those helping push the market, those impeding it External context and enabling factors – PEST, macroeconomics Defensible discontinuity – IP, processes, aggregations, platforms, legal *Interpreted with apologies from talk by Alok Mital, Canaan Partners – 11-2-12 Sunstone Business School http://www.canaan.com/companies/india
HOW DO I GET PAID FOR MY IDEAS? Full extraction of value Rs Limited € upside $ £ ¥ Product Channel Transactio Competitive Differentiation Cost Cost n Cost Profit Premium
NAME OF THE GAME IS WHERE’S THE PAIN? “It’s about finding a pain. It’s the difference between a painkiller and a vitamin. Make sure what you have is a painkiller. To have a painkiller, you have to have a pain. When you find a pain, jump in. The more personally you feel the pain, the better you will build your product.” Subinder Khurana, VC 1.What is it? 2.Who has it? 3.How much will they pay to get rid of it?
USER PAIN? I’m going to tell you a story. It begins with a Hero – someone with a burning need to do or accomplish something. But standing in the way of the Hero and his goal is something that comes in his way – an obstacle or an opponent. Not being able to achieve his goal causes our Hero great pain…pain we hope is shared with others. This the PROBLEM you must solve.
INTELLECTUAL PROPERTY? The story continues with our Hero making a plan: It involves training It involves enlisting allies It involves hard work and self-sacrifice Eventually our Hero develops what he believes he needs to overcome his opponent – the plan. The plan is what you need to overcome the pain. It is your INTELLECTUAL PROPERTY – that which enables you to take away the pain.
ECONOMIC PAYOUT? But plans must be tested against opponents. Sometimes the plan works perfectly. More often it does not work as hoped – defeat? No! But the Hero must learn from his failure, do something differently, make a new plan, and train again for meeting the opponent. At some point the Hero defeats the opponent. He then celebrates victory! This is the ECONOMIC PAYOUT.
WHAT DO I NEED TO DO TODAY? Focus on answering the following questions: 1. What is the User Pain = UP? 2. What is your Intellectual Property = IP? 3. What is the likely Economic Payout = EP? When your understanding of the pain is compelling enough, your plan for addressing the pain convincing enough, you will get the funds you need to test your plan in the market.
HOW DO ENTREPRENEURS MAKE STRATEGY? Entrepreneur Professional Strategist vs. It’s a matter of dis-order: Shoot! Ready? Aim…
ARE THERE LOGICAL STEPS IN DETERMININGSTRATEGY?Your Next Job: Find the gold under the Strategy Rainbow 1. Customer perceived needs 2. Drivers of market potential 3. Required and unique resources 4. Organization of value chain 5. Relevant competitive dynamics 6. Structure of ecosystem 7. PEST/contextual factors
HOW DOES STRATEGY LINK TO BUSINESS PLAN? 7. Financial Summaries 6. Operating Model 5. Design & Development 4. Competitive Dynamics 3. Marketing Strategy 2. Market Assessment 1. Business Description Executive Summary Business Plan Income statement Cash flow Balance sheet Supporting schedules Summary analysis Elements of a Business Plan – from http://www.entrepreneur.com/startingabusiness/businessplans
TAKEAWAYS FROM TODAY? 1. Don’t focus on the money, focus on the pain 2. Find the pain, tell the story 3. Business Plan is your story unfolding