ECON 125 FINAL STUDY GUIDE 2015 Speakers: ● Desh Deshpande ● Keith Sawyer ○ zig zag guy ● Holden thorp/ clay thorp ● Dana McMahan- Design Thinking ○ Unique looking liquor bottles ○ Talked about the differentiation of their product and how that leads to success ● Crowd Funding- panel ● Ed Strong- raising money in theatre ● Tim FlIf you want to learn more check out compared to australopithecines, homo habilis is characterized by a
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ood- Pitching (obsessed with 3’s) ● https://quizlet.com/_1tiw3u Tim Flood Quizlet for yall ○ Lecture One: ■ Difference Between Experts and nonexperts ● Expert- someone who has all knowledge and info that you have (if not more) and they have at least as much interest in your area ■ Pitch- Proposal/ Proposition ● expression of value (what you add) ● Meant to convince a person ■ All Pitches: ● 1.) Maximize a minimal amount of time ● 2.) Demonstrate a good idea from the right person ● 3.) Motivating your audience to follow-up (get the next meeting) ■ Use/Say: ● Simplicity first ● Emphasis on outcomes ● Imagery ● Chance to Engage ■ DONT use/say: ● highly technical language ● arrogance ● abbreviations/Jargon ● overly detailed explanation ■ “Time is money” - true for those who have a lot of money ● The richest people want to think you value them for more than just their money (ask for advice too) ■ Communication: ● 1.) Information ● 2.) Channel through which you communicate ● 3.) Likeability (big energy)○ Conciseness, Clear Structure & Authenticity ■ Pitches should target: ● 1.) Actionable Information ● 2.) Clear Leadership Presence ● 3.) Near and Long-Term Networking ■ Entrepreneurial Storytelling is NOT ● long-winded ● meandering ● adorable ● chronological ○ Do don’t begin at the beginning- end comes and the beginning ?? ■ ex: “Im going to tell you a story about 2 kids who end up in the oven.” ○ Origin stories work well when they build credibility (cancer survivor), but most times not. ■ Value Proposition: should in 1 line, define/differentiate your venture in its current state ■ Mission Statement: if all goes well in the future, this is where we’ll be... ■ Things to include: ● 1.) BLOT: Bottom Line On Top ○ why are we talking? Could be a hook-> includes value prop and mission statement ● 2.) Ask- What do you want? ● 3.) Map- list of what you’re going to talk about (essentially a table of contents/agenda). Allows people to know when they want to listen ● 4.) PET- Preface, Explanation, Takeaway ○ Lecture 2: Pitch Making ■ Start with BLOT ■ Ask? ● Advice, money, resources, connections ■ PET ● Announce the point you’re about to make (heading under the table of contents) ex: “now we’re gonna look at the final deliverables” ● catches people’s attention better ■ Takeaway- Impact, outcome, value or action statement ● Why should we do this thing (value) ● What happens if we don’t… ■ Then he gave tips on using Videos, Powerpoint, and face to face presentationsBusiness Model Generation ● Pg. 12-19 Business Model ● Business Model ○ describes the rationale of how an organization creates, delivers, and captures value ● 9 Building Blocks for a successful business model (easy way to remember: 4K 4C 1V) 1. Customer Segments- an organization serves one or several customer segments 2. Value Propositions- how the organization creates value to solve customers’ problems and satisfy their needs 3. Channels- the way the value proposition is delivered to the customer 4. Customer Relationships- establishing and maintaining relationships with each customer segment 5. Key Revenue Streams- the result from value propositions being delivered to customers successfully 6. Key Resources- assets required to offer and deliver the previously described elements… 7. Key Activities- …by performing a number of key activities 8. Key Partnerships some activities are outsourced and some resources are acquired outside the enterprise 9. Cost Structure- the business model elements result in the cost structure 1. Pg. 124-133: Building Business Models on Customer Insights a. poor business models fail to consider the customer’s perspective when designing products because they focus too much on their own marketing and research b. good business models view design through the eyes of the customer c. Successful innovations requires a deep understanding of customers, including environment, daily routines, concerns, and aspirations d. challenge is finding which customers to ignore e. challenge is finding a deep understanding vs. just asking them what they want f. Refer to the Empathy Map i. what do customers think, feel, hear, see, say, do, and what are their pains and gains? ii. allows one to look at the MVP through the eyes of the consumer 2. Pg. 244-259: Business Model Design Process Factors Specific to Established Organizations● Reactive: arising out of crisis with the existing business model ● Adaptive: Adjusting, improving, or defending the existing business model ● Pro-active/explorative: preparing for the future ● Expansive: launching a new technology, product or service Outside of the Enterprise (Still Drucker): Business Model Design Process a. 5 phases - MUDIM i. Mobilize 1. Focus: setting the stage 2. main activities: Framing the project objectives, testing preliminary ideas, planning the project, and assembling the team a. form a team b. look for right people and info 3. problems: people tend to overestimate the potential of their idea by focusing too much on why it will work instead of why it won’t work ii. Understand 1. Focus: immersion 2. main activities: understanding the context of the business 3. Customer Empathy Map 4. seek as much feedback as you can get from a variety of sources iii. Design- respond to the markets 1. Focus: Inquiry a. brainstorm i. explore multiple ideas ii. abandon the status quo iii. avoid “falling in love” with the idea b. test i. partners ii. alternative revenue streams iii. distribution channels iv. get feedback and test your model c. prototype iv. Implement 1. Focus: Execution, involvement, and communication and Implement a prototype a. translate the model design into an implementation design i. define related projects ii. specify milestones iii. organized legal structuretiv. manage uncertainties and monitor risk/reward scenarios v. Manage 1. Focus: adapt and modify the business model in response to market reaction a. scan the environment b. continuously asses the business model c. rejuvenate or rethink your model d. align business models throughout the enterprise e. manage synergies or conflicts between modelsDruckers Sources of Innovation 1. The Unexpected 2. Incongruities 3. Innovation Based on Process Need 4. Changes in Industry Structure or Market Structure that cach peple off guard 5. Demographics ● These shifts are clearest, easiest to predict ● Usually lead to productive & dependable opportunity ● CANNOT PREDICT the demographic change itself, but you can PERCEIVE THE CHANGE and predict the results. ● 4 major types of demographic change: ○ Age distribution ■ population gravity: tells us who is the largest & fastest growing segment of the population. ○ educational attainment ○ labor force/occupational ○ income distribution ■ ESPECIALLY discretionary vs. non-discretionary income! *Demographics can be & are usually studied using statistics, but statistics are only the starting point! You have to go out into the world and witness with your own eyes and ears as well! 6. Changes in Perception, Mood, and Meaning ○ “Glass is Half Full vs. Glass is Half Empty” - this illustrates perception, or our subjective interpretation of the world around us. ○ Timing IS ESSENTIAL!!! it must be right. Must strike balance between being first to innovate, & jumping the gun on a short lived fad. ○ start small and specific!!! ○ the facts don’t change, the meaning of the facts does!!!!!7. New Knowledge ○ Knowledge based innovation has longest lead time of all innovations - Drucker does not recommend, and he is NOT A FAN of this source….especially if the knowledge is scientific/technological. ○ Usually takes 25-30 years from breakthrough innovation to adoption ○ Drucker says that these get all the press and publicity, but they’re actually the rarest and least reliable (e specially if the knowledge is scientific/technological.) ○ - External crisis can shorten lead time but very rare ○ - Development of penicillium quickened by need to have potent drug to fight WWII infection ○ Never based on one factor but convergence of several ○ What knowledge based innovation requires (3 req.s): i. Careful analysis of all necessary factors - If you don’t do it right the first time, you’ll get ripped off by someone who does! ii. Clear focus on strategic position. Options: 1-develop complete system to dominate field. 2-market focus: create a market for your knowledge/project. 3-occupy strategic position, w/a key function iii. Learn to practice entrepreneurial management ○ The Innovation “window”: ○ d. Science and technology-based innovation find time working against you!!!! ...creating a brief ‘window’ ○ e. Because the ‘window’ is crowded, anyone innovator has less chance of survivalSteve Jobs Book “Jobs” - His partner at the beginning was Steve Wozniak - 1st project together = “blue box” - make long distance calls for free - He went to Reed college - Jobs dropped out of college - Went to india to find himself - named a computer after his child, lisa - “reality distortion field”- Jobs had a way to motivate people to do amazing things by willfully distorting reality - Jobs clashed with apple and left it to go start NEXT(worked for microsoft) - John Sculley drove apple into the ground- sculley was previously the president of Pepsi, master of marketing and sales. Jobs had initially brought Sculley to help with the marketing of Computers. When Jobs was head of the company the focus was making a great product rather than generating revenue. Once sculley took over he shifted to sales oriented goals and a lot of Apple’s focus was lost - Amelio, the new apple CEO decided to buy Next - Apple bought Next and Jobs was named advisor - partnership with microsoft sent Apple’s stock price soaring - one of his favorite marketing campaigns was the “think different” campaign jobs got cancer - Resigned from apple in 2011 and appointed Tim Cook CEOJED FLASHCARDS Key Terms by Jed: Pre-Money- value of company before taking in any outside money from an investor (at the beginning of each quarter) Post-Money- value of company after receiving outside money from investors Runway- amount of time a company has before the money runs out Silicon Beach- LA Silicon Alley- NY Silicon Valley- San Francisco all 3 are big hubs for venture capitalists Term Sheet: pretty much an agreement between you/your company and the investor on terms of: ● Amount to be invested and Valuation ● Board representation ● Liquidation Preferences (what happens at Exit) ● Closing conditions, Exclusivity, Confidentiality ● Drag Along ● Options and Vesting ● Legal Fees Valuation- what your company is worth to others; The process of determining the value of an owner’s interest VC Sweet Spot- Where do investors want to focus? Balance Sheet- statement of financial condition of the company (assets vs. liabilities etc) assets = liabilities + owners equity Self Contained Process - requires improvement in a certain method after the task is completed. It is self-sufficient. So you can make improvements or changes to it without ruining the whole thing. Objective Thing to be improved and by how muchHigh Receptivity Realization that “there ought to be a better way” - Cash Flow Statement - records of how much cash goes in/out of a company - important for investors to look at this because it gives them an idea of how well you are going to be able to pay them back (based on cash inflow) Burn Rate- - Gross burn- - how much money the company is spending per month (total costs/expenses) - Net burn - How much money the company is losing per month (Revenues-expenses) ○ this shows us how much time it will take for our company to run out of money (runway) Cap Table - an analysis of the founders' and investors' percentage of ownership ● also how the numbers will change as soon as business grows/ receives more money ● This really only matters in an equity investment Pitch Deck How to conduct your pitch through a series of slides Demo prototype Dilution - “I get less” -> When investors take a share of the company; easy concept to understand, the more stakes of your company that you give away, the less you own and the more spread out ownership is. Exit - the point at which your business decides to leave the market; also could but just the point in time where you (the business owner) decided to leave the company.Options/Vesting - vesting is when you give an employee rights to employer-provided assets over time, which gives the employee an incentive to perform well and remain with the company Types of funding: equity - When an investor gives you capital in exchange for stock in your business. ● investors have ownership ● no guaranteed return for the investor (greater risk) debt - when an investor gives you money but does not take any stock in your business. They still expect to be paid interest. - company must have cash flow to be able to pay back their debts convertible debt - when an investor gives you money and at first it is a debt but over time (upon agreement) this debt turns into equity.