2 Flashcards
How Managers deal with uncertainty
- no personal financial risk
- much information available (e.g. market research)
- operating under low uncertainty
- data available -> scenario forecast -> plan (decide between scenarios)
focus: planning and prediction
How Entrepreneurs deal with uncertainty
- bears all financial risk
- new risky products in highly dynamic environments
- little information about decision alternatives
focus: skills, knowledge, resources
Types of uncertainty Risks
1-4
1 Market risk
2 product risk
3 regulatory risk
4 financial risk
1 Market risk
- risk that market will not accept product/service after launch
- every business has some degree of market risk
2 product risk
- product that product is not delivered within the available resources (time, money)
- product may not solve the problem exactly as hoped/promised
3 regulatory risk
- change in regulations/laws that effect industry or business
- can change framework of an industry/cost-structure, etc.
4 financial risk
- chance of business cash flows are not enough to pay creditors and fulfill financial responsibilities
Strategies to cope with uncertainty
- work towards goals?
- try to predict the future?
- outperform their competition?
Think Aloud experiments, Saras D. Sarasvathy
- is there a difference between expert entrepreneurs vs. non-expert entrepreneurs as concern how they would deal with risks & returns in highly uncertain situations?
- 27 Expert Entrepreneurs
- comparison between normal people to other groups
Entrepreneurial process vs. non-entrepreneur
Entrepreneur:
1 Define resources
2 Decisions based on resources
3 create best possible output
Non-Entrepreneur:
1 Define goals
2 Decision based on goals
3 Define Resources
The Entrepreneurial Process
Questions to assess your means
1-3
- Who am i?
- What do i know?
- Whom do i know?
Process of assessing your means
1-3
1 Asses
- what are your strengths?
- what are you good at?
2 Reflect
- in which context did you use your strengths?
- which skills and knowledge were required in this situations?
3 Transfer
- in which context do I want to apply my skills & knowledge?
- which is the closest context for me to use my skills & knowledge?
Risk and Return (non-entrepreneurs vs entrepreneurs)
non:
Step 1: pick a target return
Step 2: reduce risk using insurances etc.
- e.g. return is 25% on equity (Deutsche Bank)
entrepreneurs:
Step 1: pick a comfortable level of risk
Step 2: creatively increase return
- don’t like risks
- starting company is already risky
- seeks to eliminate risk step by step
Contingencies
Unvorhergesehenes, Eventualitäten
- non-entrepreneurs avoid contingencies
- entrepreneurs use them to create new opportunities
- Bsp: Potato chip = guest complained about potato being to thick; post-it = glue developed that isn’t sticky
The Golden Circle
1-3
1 Why
- reason why they exist
- very few organizations know why they do it
- “change the market, save the planet”
2 How
- that’s what makes them special
- some know it, some dont
- “good car design, good specifications”
3 What
- products or services they sell
- “cars”
Simon Sinek
Start with Why: People dont buy what you do, they buy why you do it
Personality can developed via
1-4
- Education
- Social Networks
- Cultural influence
- Coaching
Idea Generation
1-3
1 Space Ideas:
crazy, laughable, whacky, absurd
Students don’t like long case studies: „teleport to mangers bodies“
2 Blue sky ideas:
Forward looking, novel, different, unique
Students don’t like long case studies: create a management online game
3 Grounded ideas:
safe, incremental, obvious
Students don’t like long case studies: create videos of case studies
From Idea to opportunity
1-2
1 Serve a need: Pain of customer
- biggest frustrations
- major obstacles
- needs
- fears
2 Create a need: Gain of customer
- needs
- desires
- goals and successes
- customers strategies of achieving goals
Analysis of Market & competition
Factors 1-5
- Market size & structure
- market growth
- market entry barriers
- customer
- competitive advantage
Analysis of Financials
1-4
- gross margin
- time to break-even
- capital intensity
- R&D expenses
