Chapter 5 Flashcards
What is Entrepreneurship
is a way of thinking, acting, and being that combines the ability to find or create new opportunities with courage to act on them
what makes something plausible?
is it economically feasible?
* can we do it
is it viable?
* can we make money doing it
use evidence-based entrepreneurship:
hypothesising, testing, and validating to create a business model
business model:
the rationale of how new venture creates, delivers, and captures values
what are the 4 parts of the business model
Imitation
- Existing customer, Existing Products and services
* Should avoid
* Imitation without differentiation is the biggest form of flattery
* Ex; just because Starbucks in your town does not mean a new coffee shop would fail
o Do not try to be Starbucks, be uniquely you
o Should move from imitation to differentiation by trying to better met customers needs
Differentiation
- New customers, Existing product
* Fulfilling unmet needs of customers using an existing product
* Ex; toothbrush called Quip
Disruption
- Existing customers, New products and services
* Disrupt existing markets by creating something new for customers
* Ex; MOOC’s (massive open online course) disrupt higher education
Innovation
- New customers, New products and services
* ex: Facebook
where 4 parts of business model fall on chard
- Existing customers New customers
Existing Product Imitation Differentiation
New Product Disruption Innovation
What is the key to success in a business model
-focusing on what customers want and where they are going
The 4 parts of a business model
- The offering
- The Customers
- The infrastructure
- The financial viability
Offering part of business model
- The Offering
a. : what you are offering to a particular customer segment, the value generated for those customers, and how you reach and communicate with them
b. Includes a customer value proposition (CVP)
i. : Statement that describes why a customer should buy and use your product or service
ii. Value part = how much your product is worth to customers even if more then the price actually costs
The customer part of business model
people who populate the segments of a market served by the offering
b. Individuals or business willing to pay for what you are offering
c. Target audience
The infrastructure part of business model
a. : the resources (people, tech, suppliers, patterns, facilities) that entrepreneur must have in order to deliver the CVP
The financial viability part of business model
a. : defines the revenue and cost structures a business needs to meet its operating expenses and financial obligations
b. How much does it cost to deliver our offering to our customers and how much revenue can we generate
c. Is more then how you intend to make money but rather why would customer give you money (CVP)
Customer Value Proposition (CVP)
i. : Statement that describes why a customer should buy and use your product or service
ii. Value part = how much your product is worth to customers even if more then the price actually costs
* Most important part of business model
* Focus should always be on the value created for customer and how this value is captured by business to create profit
What do you need for CVP to be effective?
o Better value than competition
o Be measurable in monetary terms
o Must be sustainable
Must be able to execute for long time
overt benefits
o : the one big benefit for your customer
Business need to answer 3 questions to customer to survive (overt 3 benefits)
o What is in it for me
o Why should I believe you
o Why should I care
4 problems for customers that entrepreneurs should try to solve and why should they do so?
If you can find a way to solve one of these on your way to creating strong CVP
o Lack of time
o Lack of money
o Lack of Skill
o Lack of access
3 types of value propositions from worst to best
- all-benefits
- points of differences
- resonating focus approaches
All-benefits
: identifying and promoting all the benefits of your product or service to customer segments with little regard for competition or any really insights into that the customer wants or needs
Points-of-differences
: focuses on the product or service relative to competition and how the offering is different from others on the market
Better then all-benefits as shows better then competitor
Issue is does not tell why your customer will find valuable
Resonating-focus approaches
Describes why people will really like your product and focuses on the customers and what they really need and value
Gold standard
5 Types of customer segments
Mass market
: large group of customer with very similar needs and problems
Ex: computers, soaps, coke and Pepsi, insurance
Niche market
: small market segment that consists of customer with specific needs and requirements
Segmented market
: market divided into groups according to customers different needs and problems
Ex: Bank has different services for wealthier clients
Diversified market
Two + market customer segments with different needs and problems that bear no relationship to each other
Ex: Amazon
Multisided market
Markets with 2 + customer segments that are mutually independent of another
Ex: Newspaper has customer who get it and them the advertisers on the paper
Business model Canvas and the 9 steps
: a one page plane that divides the business model into nine components in order to provide a more through overview
1. Customer Value propositions (the offering)
a. What value do we deliver
b. What product services are we offering
c. What are we helping customer achieve
2. Customer segments (customers relate to)
a. Who is most important customer
3. Channels
a. What are all the ways you can reach your customer
4. Customer relationships
a. How do you establish and maintain relationships with customers
5. Key activates (infrastructure)
a. Most important activities to get the job done
6. key resources
a. what resources do you need
7. Key partners
8. Cost structure (financial viability)
a. What are the most important costs associate to business model and the most expensive
9. Revenue streams
a. How much are customers willing to pay
b. How many customers do I need
Lean Canvas business model difference from business model canvas
- Less emphasis on customer segments and more on likely first adopters
- Begins with a problem rather then value proposition
- Addresses key metrics to track how a business is doing
- Addresses competitive advantage called unfair advantage
