Starting A Business*
MGMT453 - 001
Spring 2018
Introduction to Course
Introduction to Participants:
Syllabus
Name, preferred to be called.
- Learning materials
- Individual Work
What you study @Mason
(participation, HWK, paper, exam) - 60%
Experience with small business? Favorite small
business?
- Group Work - 40%
- Extra Credit?
Why here…
*please write down and turn in
Startup Mason
Wed 1/31 5:00 pm
Enterprise 278
All Welcome &
Encouraged
Mason Food
Innovators &
Patriot Pollinator
Coalition
COMING UP
Startup Mason - Semester Kickoff
Mason Food Innovators
Tuesday Feb 6 at 2 pm - Enterprise 278
Patriot Venture Fund Initiative
Weds Feb 7 at 1:30 pm - Enterprise 278
Startup Mason - The Making of a Unicorn
Wednesday Feb 14 from 12 - 1:30 pm - Enterprise 278
Peter Thiel
“Competition
is for losers”
Peter Thiel
Who is he?
What is his argument?
Finding a Problem
Worth Solving:
The Entrepreneurial Life
An Open Discussion
https://www.youtube.com/watch?v=8NooqQKrdGE
The Contributions of Small Business
1.1
Number of Firms with Fewer than 500 Employees by Industry (2009)
• Small Businesses:
➢ Represent 99.7% of all firms.
➢ Employ over 50% of employees in the private sector.
➢ Account for 43% of private payrolls.
➢ Outperform larger companies in net job creation.
➢ Hire 43% of high-tech employees
➢ Represent 97.3% of all exporters.
➢ Provide increased business ownership opportunities
for minorities and self-employed degreed individuals.
1–16
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1–17
Small Business Growth Potential and Profits
• High-Potential Venture (Gazelle)
➢ Has great prospects for growth
• Attractive Small Firm
➢ Provides substantial profits
to its owner
• Microbusiness
➢ Provides minimal profits
to its owner
• Lifestyle Business
➢ Permits the owner to follow
a desired pattern of living
1–18
Entrepreneurial Opportunities
Who Are Entrepreneurs?
• Founder (“Pure” Entrepreneur)
➢ A person who starts and/or operates a business.
• Entrepreneurial Opportunity
➢ An economically attractive and timely opportunity that
creates value for interested buyers or end users.
• Bootstrapping
➢ Doing more with less in terms of resources invested in
a business, and, where possible, controlling the
resources without owning them.
➢ A person who brings a new firm into existence
• “Second Stage” Entrepreneur
➢ Individuals who discover market needs and launch
➢ An administrative entrepreneur who overseas the operations of a
ongoing business
new firms to meet those needs.
➢ Risk takers who provide an impetus for change,
• Franchisee
innovation, and progress.
➢ An entrepreneur whose power is limited by the contractual relationship
with a franchising organization
➢ All active owner-managers
• Entrepreneurial Team
(founders and/or managers
of small businesses).
1–19
New Forms of Entrepreneurship
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
➢ Two or more people working together as entrepreneurs
➢ Is becoming more common
1–20
Women Entrepreneurs
• Social Entrepreneurship
➢ Is entrepreneurial activity whose goal is to find
innovative solutions to society’s most pressing needs,
problems, and opportunities.
• Social Entrepreneur
➢ Seeks ways to solve societal and environmental
problems that incorporate the triple bottom line of
people, profits, and the planet.
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Varieties of Entrepreneurship
• Entrepreneurs are:
1–22
• More Women Entrepreneurs
➢ More women than men are starting new businesses
➢ Many businesses are now majority female-owned
➢ Movement of women into nontraditional industries
• Problems Facing Female Entrepreneurs
➢ Discrimination and difficulties
related to gender
➢ Lack of access to credit
➢ Lack of networking connections
➢ Balancing work and family life
1–21
Your Motivations for Owning
a Business
• Being an entrepreneur:
➢ Is extremely challenging.
➢ Takes undying love and passion to keep going.
➢ Can run in a family.
➢ Can help make the world a better place.
➢ Can make meaning in your life.
1–23
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1–24
Artisan Entrepreneurs
Why People Become Entrepreneurs
Opportunistic Entrepreneurs
• Artisan Entrepreneur
• Reluctant Entrepreneur
➢ A person with primarily technical skills and little
➢ A person who becomes an entrepreneur
business knowledge who starts a business
as a result of some severe hardship.
• Characteristics:
• Refugee
➢ Take a paternalistic approach
➢ A person who becomes an entrepreneur
➢ Are reluctant to delegate
to escape an undesirable situation.
➢ Use few sources of capital
➢ Have a traditional marketing strategy
➢ Focus on personal sales effort
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
➢ Have a short planning horizon
1–25
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1–26
• Opportunistic Entrepreneur
➢ A person with both sophisticated managerial skills
and technical knowledge who starts a business
• Characteristics:
➢ Broad-based education
➢ Scientific approach to problems
➢ Willing to delegate
➢ Broad view of strategy
➢ Diversified marketing approach
➢ Longer planning horizon
➢ Sophisticated accounting and financial control
Schumpeter
Small business vs entrepreneurship
1–27
SOME DEFINITIONS OF
ENTREPRENEURSHIP
An entrepreneur is the person who destroys the existing economic
order by introducing new products and services, by introducing new
methods of production, by creating new forms of organization, or by
exploiting new raw materials.
Simpler
An entrepreneur is the person who perceives an opportunity and
creates an organization to pursue it.
BUSINESS IN THE U.S.
Small Business vs. High Growth
Replicating vs. Innovating
Small Business
Matters
Full-time
businesses
(14 million)
99.9% are small
businesses
(with 500 or
fewer
employees)
28 million
businesse
s
(high impact, or gazelles; Birch (1979 & 1987))
10-YEAR SURVIVAL RATES
Integrity & Ethics
An uncompromising adherence to the lofty values, beliefs
and principles that an individual claims to hold
1 YEAR
81%
survive
2
YEARS
65%
survive
5
YEARS
40%
survive
10
YEARS
25%
survive
Ethical Issues - from taxes and hiring to accounting and
marketing
Leadership, Code of Ethics
Yvon Chouinard - Patagonia
Part-time
businesses
(14 million)
33% are
incorporated
Cathy Hughes - Radio One
Legacy
Key Terms
attractive small firm
lifestyle business
bootstrapping
manager personality
corporate refugee
mentor
entrepreneur
microbusiness
entrepreneur personality
microloans
entrepreneurial legacy
niche market
entrepreneurial opportunity
paradigm shift
entrepreneurial team
reluctant entrepreneur
founder
small business
franchisee
social entrepreneurship
high-potential venture (gazelle)
technician personality
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as
permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
1–39
Today’s Roadmap
Updates? Items in the news, small business?
MGMT453-001
Spring 2018
Session #3
A Couple items (interview a small business owner / team project)
-- have you found a target
-- First HWK DUE NEXT WEEK (WILL BE POSTED IN BLACKBOARD IN AM)
-- Today Starting a new venture (Chapter 3)
Mason Food Innovators &
Patriot Pollinator Coalition
6 Feb 2018
2 pm - 3 pm
I-Corps Site at Mason
Students, faculty, staff and alumni
● interested in learning innovation management
& entrepreneurship;
● desire to explore viability of technology,
innovation or idea;
● ability to complete I-Corps curriculum; apply;
execute in 1-3 intense months ($1,000-$3,000)
Mason Innovation Lab Program
-
Uses lean methodology
Innovation Stipends
Community
Access to Workspace
8
2018 Maker Faire NoVa
EXHIBIT; VOLUNTEER; ATTEND
March 18, 2018
6,000 attendees
ANYONE A MAKER?
1.
Distinguish among the different types and
sources of startup ideas.
2.
Use innovative thinking to generate ideas
for high-potential startups.
3.
Describe external and internal analyses that might shape the
selection of venture opportunities.
4.
Explain broad-based strategy options and focus strategies.
5.
Know how to screen business ideas to identify those with the
greatest potential.
6.
Assess the feasibility of a startup idea.
3–10
Developing Startup Ideas
Creating a New Business from Scratch
★ Opportunity Recognition
To develop a
commercial
market for new
product
or service
○ Identification of potential new products or services that may lead to
promising businesses
★ Entrepreneurial Alertness
○ Readiness to act on unnoticed business opportunities and to pivot
quickly away from flawed initial ideas.
★ Which Product or Service?
Wanting the
challenge of
succeeding
(or failing)
on your own
○ Serves important consumer needs
○ Has readily recognized utility and user benefits
○ Is affordable to a large group of potential customers
○ A good idea is not the same as a good opportunity.
3–11
Motivations
To Start
a Business
To tap into
unique
resources
that are
available
To avoid
undesirable
features of
existing
companies
3–12
3.1
3.2
Types of Ideas That Develop into Startups
Common Sources of Startup Ideas
Prior work
experience
45%
5
5
3–13
Change-Based Sources of
Entrepreneurial Opportunities
Change Factor
Definition
Industry or Enterprise Factors
The unexpected
Unanticipated events lead to either enterprise success or failure.
The incongruous
What is expected is out of line with what will work.
Process needs
Current technology is insufficient to address an emerging
challenge.
Structural change
Changes in technology, markets, etc., alter industry dynamics.
Human and Economic Factors
Demographics
Shifts in population size, age structure, ethnicity, and income
distribution impact product demand.
Changes in perception
Perceptual variations determine product demand.
New knowledge
Learning opens the door to new product opportunities with
commercial potential.
3–15
Personal
interest/hobby
16%
Chance
happening
11%
Suggestion
7%
Education/
EXAMPLES?
Family
business Friends/
6%
relatives
Other
OPPORTUNITIES?
5%
4%
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
3–14
7 Sources of Opportunities
• The unexpected – success, failure, outside
event (must peel to underlying phenomena)
• The incongruity – between reality as it is and
reality as it is assumed or ought to be
• Process need – find ‘weak’ link in process
• Changes in industry or market structure
7 Sources of Opportunities
• Demographics – easiest/clearest to predict
• Changes in perceptions, mood, meaning –
glass half full or empty?
• New knowledge (both scientific and
unscientific) – longest lead time, takes years
to cycle through, adoption
Drucker – Practice of
Innovation
“The entrepreneur always
searches for change,
responds to it, and exploits it
as opportunity”
Drucker - Entrepreneurship
Purposeful, organized search for
change and the systematic
analysis of opportunities such
changes might offer for
economic and social innovation
Drucker
“Successful entrepreneurs, whatever
their individual motivation – be it
money, power, curiosity or desire for
fame and recognition – try to create
value and to make a contribution”
Purposeful Innovation
• Entrepreneurs innovate. Innovation is the
specific instrument of entrepreneurship. It is
an act that endows resources with new
capacity to create wealth. Innovation, indeed,
creates a resource.
• Every plant a weed and every mineral just
another rock
• Not always technical (Cyrus McCromick)
Using Innovative Thinking to Generate Business Ideas
1. Borrow ideas from existing products and services or other industries.
2. Combine two businesses into one to create a market opening.
3. Begin with a problem in mind.
4. Recognize a hot trend and ride the wave.
5. Explore ways to improve an existing product or service’s function.
6. Think of how to streamline a customer’s activities.
7. Adapt a product or service to meet customer needs in different ways.
8. Imagine how market for a product or service could be expanded.
9. Study a product or service to see if you can make it “green.”
10. Keep an eye on new technologies.
3–24
WITH YOUR TABLE
WITH YOUR TABLE
IDENTIFY 15 HOT TRENDS
(WAVES TO RIDE)
GREEN 10 BUSINESSES?
Using Internal and External Analyses
to Assess Business Ideas (EXAMPLE)
3.3
Trends in the General Environment
★ Outside-In Analysis
○ Studying context of venture to identify and determine business ideas that
qualify as opportunities.
■ General Environment
● Encompasses factors influencing business in a society.
■ Industry Environment
● Factors that impact a firm and all of its competitors.
■ Competitive Environment
● Focus on the strength, position, and likely moves and countermoves of
competitors in an industry.
3–27
3–28
3.4
The Competitive Environment
Major Factors Offsetting Market Attractiveness
• Who would be the new venture’s current competitors?
• What unique resources do they control?
• What are their strengths and weaknesses?
• How will they respond to the new venture’s decision to
enter the industry?
• How can the new venture respond?
• Who else might see and exploit the same opportunity?
• Are there ways to co-opt potential or actual
competitors by forming alliances?
3–29
Evaluating Market Opportunities
Integrating Internal and External Analyses
• Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis
➔ Inside-Out Analysis
➢ Provides concise overview of firm’s strategic situation.
◆ Assessing the firm’s internal competitive potential
➢ Helps identify opportunities that match the venture.
➔ Resources
• Seeking Competitive Insight
◆ Basic inputs that a firm uses to conduct its business
●
●
3–30
➢ Will the opportunity lead to others in the future?
Tangible resources: visible and easy to measure.
Intangible resources: invisible, difficult to quantify
➢ Will the opportunity build skills that open the door to new
opportunities in the future?
➔ Capabilities
➢ Will pursuit of the opportunity be likely to lead to competitive
response by potential rivals?
◆ Routines and processes that can coordinate the combined use
of productive assets in order to achieve desired outcomes.
➔ Core Competencies
◆ Capabilities that provide a firm with a competitive advantage
over its rivals and reflect its personality.
3–31
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
3–32
3.5
3.6
Examples of SWOT Factors
The Entrepreneur’s Opportunity “Sweet Spot”
PROFS NOTE: LOTS OF
FOLKS LIKE SWEET
SPOT IDEAS -- MORE
COMING SOON!
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Finding a Problem
Worth Solving:
3–33
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
User generated? News? Observation? Local insight?...
How big is it? How many impacted?
How important is it?
An Open Discussion…
Thoughts????
How accessible is it? Skills? Knowledge? (what do we
need?)
Who else do we need (systems, platforms, gov, ??)
https://www.youtube.com/watch?v=8NooqQKrdGE
Is there anyone that can and actually would pay for this?
Passion????
3–34
Selecting Strategies That Capture Opportunities
PROF’s NOTE:
Another Sweet Spot
type of image
Broad-Based
Strategy Options
DifferentiationBased Strategy
Cost-Based
Strategy
Focus
Strategy
PROF’S NOTE: THESE ARE BASIC -- YOU CAN BUILD OFF OF
THEM… IN ALL TEXTBOOKS
Focus Strategies
Focus Strategies (cont’d)
• Focus Strategy Implementation
• Advantages
➢ Niche market shields from direct competition.
➢ Restricting focus to a single subset of customers.
➢ Focus allows development of unique expertise.
➢ Emphasizing a single product or service.
• Disadvantages
➢ Limiting the market to a single geographical region.
➢ Focus markets can quickly erode if:
➢ Concentrating on superiority of product or service.
❖
❖
❖
❖
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
3–38
3–39
Competitors successfully imitate the strategy.
Segment erodes or demand disappears.
Segment loses its uniqueness
New firms subsegment the industry.
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
3–40
Factors in Business Idea Screening
Is Your Startup Idea Feasible?
Strength of the
business idea
Targeted market
and customers
Capability of
founders
Screening
a Business Idea
Market
Factors
Industry and
competitive
advantage
Fatal
Flaws
Capital requirements
and venture
performance
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Judging the
Feasibility of
a Business
Opportunity
Management
Capability
3–41
Is Your Startup Idea Feasible?
Industry
Attractiveness
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
3.7
• Feasibility Analysis
➢ A preliminary assessment of a business idea that gauges whether or
not the venture envisioned is likely to succeed
Competitive
Advantage
A Feasibility Analysis Framework
3–42
PROF’S NOTE: NICE BASIC
DIAGRAM… FROM
INDIVIDUAL AT TOP TO
MACRO AT BOTTOM… THIS
ARE THINGS TO CONSIDER
BEFORE PURSUING AN
OPPORTUNITY
• Fatal Flaws
➢ A circumstance or development that alone could render a new
business unsuccessful
❖ Market potential: acceptance, accessibility, growth, and size
❖ Power of competitors
❖ Strength of competitive advantage
❖ Startup costs
❖ Management capability
3–43
3–44
Feasibility?… (cont’d)
HAIKU CHALLENGE
• New Venture Leadership
- a Japanese poem of seventeen syllables, in
three lines of five, seven, and five, traditionally
evoking images of the natural world
➢ Dimensions of Management Capability
1. Fit of the venture with leader’s mission,
aspirations, and comfort level with risk
involved
2. Leader’s grasp of critical enterprise
success factors and ability to execute
on these factors
An ocean voyage.
As waves break over the bow.
The sea welcomes me.
3. Leader’s connection to others who will be
essential to making the venture work.
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted
in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
3–45
HAIKU CHALLENGE
Small business is big
No matter Zucks data or
Bezos’ billions
All write a small business haiku, share with table,
each table share’s one!
Business Models a brief introduction
(this is an intro to lean startup/customer
development… this is a key way we test
ideas today… this is trying to find a
business model, before you execute -meaning before you build a business)
Lean Startup...Why? What’s different?
Fallacy of the Business Plan
- Don’t survive customer
contact
- 5 year plans are fallacy
(most don’t survive 5 years)
- Startups are not small
versions of large orgs
(lacking many things)
BM = create, deliver, capture value
(Blank)
Lean Startup
- Experiment rather than
plan (hypothesis)
- Customer Development (v
product); testing/MVPs
- Agile Development (quick
iterations based on data,
direct feedback)
50
What is a startup?
An organization that is searching for a
repeatable and scalable business
model (Blank)
What is a business model?
BM = Create, deliver, capture value
(Blank)
51
Owlet
https://vimeo.com/84423056
Gary Erickson - How I Built This
53
Key Terms
capabilities
competitive advantage
competitive environment
core competencies
cost-based strategy
differentiation-based strategy
entrepreneurial alertness
fatal flaw
feasibility analysis
focus strategy
general environment
industry environment
intangible resources
new benefit ideas
new market ideas
new technology ideas
opportunity recognition
pivot
resources
serendipity
startups
strategy
SWOT analysis
tangible resources
3–56
NEXT WEEK
First homework (see blackboard)
Franchise…
Be thinking of who you will interview
Purchase answer to see full
attachment