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The Entrepreneur's Journey
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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

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Entrepreneurship 101

  1. 1. Entrepreneurship 101 2013-05-27 Bryan Guido Hassin Entrepreneur In Residence
  2. 2. This is how people believe entrepreneurship happens 2 Wunderkind has divine inspiration • Or MBA has genius insight Raise huge VC $$$ • With detailed business plan IPO, retire • Preceded by hockey stick growth
  3. 3. But this is not how entrepreneurship usually happens 3 Wunderkind has divine inspiration • Or MBA has genius insight Raise huge VC $$$ • With detailed business plan IPO, retire • Preceded by hockey stick growth • First time founders average 40 years old • Ventures rapidly evolve from original vision • < 2% of ventures ever raise VC $$$ • < 27% of Inc. 500 ever had a biz plan • < 1% of ventures IPO
  4. 4. I am a global cleantech entrepreneur / professor of entrepreneurship at Rice 4 • 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 Roadmap 5 The Basics Lean Startup Effectuation
  6. 6. Entrepreneurship 101: who/what are entrepreneurs? 6
  7. 7. Is this an entrepreneur? Mike Yang Owner, Fast Food Franchise 7
  8. 8. Is this an entrepreneur? Eric Favre Inventor, Nespresso 1976 Jean-Paul Gaillard Commercializer, Nespresso 1988 8
  9. 9. Is this an entrepreneur? Jesper Hornberg Founder, GIVEWATTS 9
  10. 10. Is this an entrepreneur? Dan Ecklund Perpetrator, Stem Cell Fraud 10
  11. 11. Entrepreneurship 101: What are entrepreneurs like (and why)? 11
  12. 12. Average first time entrepreneur: Source: http://www.entrepreneur.com 12 40 years old Married Has children Middle class Bachelor’s degree
  13. 13. Mythbusters: entrepreneurs don’t work for themselves 13 Investors Clients Regulators Employees
  14. 14. Mythbusters: entrepreneurs earn less than corporate peers 14
  15. 15. Mythbusters: entrepreneurs are more risk averse than average 15
  16. 16. Entrepreneurship is… • A mindset – Seeking solutions to problems – Aligning resources to sustain solutions – Creating value 16
  17. 17. There are 5 canonical venture types • Small business (feed the family) • Large business sustaining innovation • Large business disruptive innovation • Social enterprise • Scalable startup Source: Four Steps to the Epiphany Our Focus 17
  18. 18. A startup is… ―a temporary organization used to search for a repeatable and scalable business model” – Steve Blank Large Companies Execute Known Business Models Ventures Search for Unknown Business Models 18
  19. 19. Startups are not small versions of large businesses Large Companies Execute Known Business Models Ventures Search for Unknown Business Models 19
  20. 20. Entrepreneurship Roadmap 20 The Basics Lean Startup Effectuation
  21. 21. What does this entrepreneurial search process look like?
  22. 22. A business model starts with hypotheses Guess Guess Guess Guess Guess Guess Guess GuessGuess
  23. 23. Hypotheses become facts through rapid iterations of customer development Company Building Customer Discovery Customer Validation Customer Creation Pivot Source: Four Steps to the Epiphany 23
  24. 24. Get out of the building and test hypotheses with real clients • Stop selling, start listening • Test your hypotheses • Continuous Discovery • Done by founders Customer Discovery Customer Validation Company Building Customer Creation Source: Four Steps to the Epiphany 24
  25. 25. When hypotheses are not verified by customers, pivot • The heart of Customer Development • Iteration without crisis • Fast, agile and opportunistic Source: Four Steps to the Epiphany 25
  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 Epiphany 26
  27. 27. Sounds easy – yet so many entrepreneurs still fail New research on consistently successful entrepreneurs
  28. 28. Entrepreneurship Roadmap 28 The Basics Lean Startup Effectuation
  29. 29. Expert entrepreneurs start with means and create opportunities Fixed End Means 1 Means 2 Means 3 Starting Means New End 1 New End 3 New End 2 Source: Effectual Entrepreneurship 29
  30. 30. Expert entrepreneurs expand their means with partnerships Source: Effectual Entrepreneurship 30 Your Means Original End 4 Original End 6 Original End 5 My Means Original End 1 Original End 3 Original End 2 New End 3
  31. 31. Expert entrepreneurs embrace failure and leverage surprise Source: Effectual Entrepreneurship 31
  32. 32. Expert entrepreneurs set affordable loss and control returns Source: Effectual Entrepreneurship 32 Entrepreneurs For a given level of risk, entrepreneurs feel they can expand the problem space and increase returns For a given level of return, bankers feel they can reduce the problem space and decrease risk. Step 2 Push creatively to increase return Step 2 Try to reduce risk through insurance, etc. Step 1 Pick a comfortable level of risk Step 1 Pick a target return Risk Return High High LowLow Low Low HighHigh Bankers Risk Return
  33. 33. Expert entrepreneurs control the unpredictable future Source: Effectual Entrepreneurship 33 Biz Plan Entrepreneurship
  34. 34. Effectual principles can be illustrated with jars of marbles ? 1: Predictable 2: Risky 3: Unknowable You win the game by selecting a red marble Entrepreneurship is like Jar 3
  35. 35. Expert entrepreneurs add as many red marbles as they can 3: Unknowable And they make friends who have more red marbles to add You win the game by selecting a red marble
  36. 36. Or else they create a new game where blue marbles win 3: Unknowable You win the game by selecting a blue marble If they and their friends only have blue marbles
  37. 37. Innovation happens throughout the business system 6. Product system extended system that surrounds an offering Product performance Offering Product system Service 7. Service how you service your customers 5. Product performance basic features, performance and functionality Core process Process. Enabling process 3. Enabling process Enabling new connections, interactions, and transactions 4. Core process proprietary processes that add value Source: Doblin Group Business model Finance Networking 2. Networking enterprise’s structure/ value chain 1. Business model how the enterprise makes money Channel Delivery Brand Customer experience 10. Customer experience The overall experience for customers 8. Channel how you connect your offerings to your customers 9. Brand how you express your offering’s benefit to customers 37
  38. 38. Source: Doblin Group Hi Lo Volume of innovation efforts Last 10 years Core process Process. Enabling process Business model Finance Networking Product performance Offering Product system Service Channel Delivery Brand Customer experience Startups tend to focus on product opportunities 38
  39. 39. But the best opportunities are often elsewhere Source: Doblin Group Hi Lo Cumulative value creation— Last 10 years Core process Process. Enabling process Business model Finance Networking Product performance Offering Product system Service Channel Delivery Brand Customer experience 39
  40. 40. The innovation ―piano:‖ the best opportunities are ―chords‖ Source: Doblin Group Channel Delivery Brand Customer experience 10. Customer experience The overall experience for customers 8. Channel how you connect your offerings to your customers 9. Brand how you express your offering’s benefit to customers 6. Product system extended system that surrounds an offering Product performance Offering Product system Service 7. Service how you service your customers 5. Product performance basic features, performance and functionality Core process Process. Enabling process 3. Enabling process Enabling new connections, interactions, and transactions 4. Core process proprietary processes that add value Business model Finance Networking 2. Networking enterprise’s structure/ value chain 1. Business model how the enterprise makes money 40
  41. 41. Example: Apple’s iPod/iTunes ―chords‖ have captured huge opportunity Channel Delivery Brand Customer experience Product performance Offering Product system ServiceCore process Process. Enabling process Business model Finance Networking 41
  42. 42. Breakout • What are your means? • What is your affordable loss? • What can you do to control the future instead of predict it? • Which areas of non-product innovation can you explore?
  43. 43. Entrepreneurship 101 2013-05-27 Bryan Guido Hassin Entrepreneur In Residence

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