Transcript
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Entrepreneurship for Engineers

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Business plan poster• Complete business plan• Business introduction• Products photos• Ceo• Similar international/national company, introduction, ceo,

business volume• Major environmental risks• Investors• Expected revenues for one year, 3 years and over 10 years• Initial investment• Poster dimensions 6 ft x 4 ft

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Quiz 1 Marks 10 time 15 min

•What are your career objectives list ten points and how would you like to achieve these

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Weightage• End term =40 %• Class project = 15%• Quizes = 10%• Assignments = 5%• Mid term = 20%• Class participation = 10%

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Introduction

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Quiz 1• Procurement process of public and private

sector organisations• Quotations RFP, tendering, comparative

statements

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Aim of the Module• This course aims at:

– Enabling the students to understand the fundamental concepts of Entrepreneurship,

– Learn various techniques and processes of decision making,

– Be able to generate ideas for businesses – Be familiar with business plan and – Technicalities involved in opening their own

private limited company in Pakistan for a startup business

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Learning Outcomes• To learn what is entrepreneurship, concepts, definitions

and applications in real life.• Learn from examples of reasons for failure and successes

of individuals and business companies.• To be able to make a business plan for a product or service

for a startup business• To develop the ability to attract an investor angel for

sponsoring the newly created enterprise• Learn the processes of establishing a private limited

company using services of Securities and Exchange Commission of Pakistan

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Semester project 15% weightageAssignment 1• Project identification, name your company,

what are your products /services• CEO, Middle level manager, employee• Describe duties and responsibilities of all

the members towards the project.• Ass# 2 Find investor angel +seed

money(later Assignment)• Ass#3 preparing a business plan

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Subject Focus Points• Entrepreneurship – the motivations, the risks,

rewards, impact• Seeing opportunities, identifying profitable

opportunities• Creating a business plan- its content and importance

as a tool • Starting a company and the regulatory requirements• Raising money to start the business-bootstrapping,

enrolling investors to your plan• Getting loans- what do banks need

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Subject Focus Points• Getting loans- what do banks need• Selling and getting the first clients• What makes my business different than competition?• Building a team- getting people to believe in the venture• Making mistakes, changing plans, mutilating, adapting to

what customers want• Cash flows – the oxygen of any business• Project- creating a business plan and presenting to potential

investors/stakeholders

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Few definitions of Entrepreneurship?• Organizing a business venture and assuming the

risk for it.

• “An entrepreneur is a person who is willing and

able to convert a new idea into a successful

venture.”

• Entrepreneurship is a process of converting a

new idea into a successful venture

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What is Entrepreneurship may include?

• Practice of starting new organizations or revitalizing mature organizations

• Particularly new businesses in response to identified opportunities.

• Entrepreneurial activities has a vast range• It ranges in scale from solo projects to major

undertakings creating many job opportunities.• Entrepreneur is one who organizes, manages and

assumes the risk of a business enterprise.

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What Is it in nut shell?

The pursuit of opportunity through

innovation, creativity and hard work

without regard for the resources currently

controlled.

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Entrepreneur• Founding entrepreneur who identifies the

opportunity and moves to exploit it commercially.• Often it is the founder (or founding team) who

possesses much of the technical and managerial knowledge that make-up the tangible and intangible assets of the firm.

• In sum, an entrepreneur’s expanding knowledge base and absorptive capacity becomes an entrepreneurial firm’s competitive advantage” (Alvarez and Busenitz 2001, p.766).

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Who Is An Entrepreneur?

A vision-driven individual who

assumes significant personal and financial risk to start or expand

a business.

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Entrepreneurs: Born or Made?

• Is there inborn talent required?

• Assume that the answer is YES: – then we can identify the main characteristics– if we have them, fine - no others need to apply! – we could start spotting talent in kindergarten– we could "stream" these people– we could discourage people without these talents

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Entrepreneurs: Born or Made?• Assume the answer is NO:

– then schools could teach anyone– would be a "profession" like law or medicine– companies could establish "nurseries" for them– government "incubators" would be successes

• The real answer lies somewhere in-between– Talent and education is the way

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Situational more than personality

Who is an Entrepreneur?

AgeDistribution

forStarting Company

Ability

Age20 3025 35 4540

Flexibility

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Who is an Entrepreneur?Manager’s Opportunities

PerceivedCapability

Future GoalsChange Status Quo

Possible

Blocked

SatisfiedmanagerEntrepreneur

Frustratedmanager

Classicbureaucrat

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Burch's Entrep. Personality Traits1.A desire to achieve

• Conquer problems, create successful venture

2.Hard work• Their workload is very hard to match

3.Nurturing quality4.Acceptance of responsibility

• Morally, legally and mentally accountable

5.Reward orientation• Want be rewarded for their efforts

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Burch's Entrep. Personality Traits6.Optimism

• Anything is possible

7.Orientation to excellence• Pride in something first class

8.Organization• They are wholly "take charge" people

9.Profit orientation• Profit primarily a gauge of performance

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Failure? So what!• Failure seen differently in America & Europe.

– In Europe it is a major set-back– U.S. expected (required even!)– Canada - in between but tending to U.S.

• “Our” System:– Many entrepreneurs had been "blue collar"– Many come from families of entrepreneurs– Many are immigrants or their children– But, there are no "rules" that ensure success

• Universally, entrepreneurs shake off failure!

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Failure as “Learning Process”• Ignore it, then start again

– Some find it easy to blame someone else• In public, always optimistic

– Especially with funders– Agonise over what went wrong in private

• Willingness to disregard the rules – Start from first principles.

• Ability to "bend, not break" rules of life

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Classic Entrepreneurship: The Startup

• Raw startup company—an innovative idea that develops into a high growth company

• Qualities of a startup company– Strong leadership from the main entrepreneur– Complementary talents and outstanding teamwork of

team members– Skill and ingenuity to find and control resources– Financial backing to chase opportunity

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Desirable and Acquirable Attitudes and Behaviors

• Commitment and determination• Leadership• Opportunity obsession• Tolerance of

– Risk– Ambiguity– Uncertainty

• Creativity, self-reliance, and adaptability• Motivation to excel

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The Entrepreneurial Process• It is opportunity/market driven• It is driven by a lead entrepreneur

and an entrepreneurial team• It is resource parsimonious(cost conscious)

and creative• It depends on the fit and balance among

these• It is integrated and holistic

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The Timmons Model of the Entrepreneurial Process

Opportunity(2)

Resources(4)

Team(3)

Ambiguity External forces

Capital marketsUncertainty

Founder(1)

Creativity Leadership

Communication

Business PlanFits and gaps

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Enlightened Serendipity (Chance Fate, destiny)

• Being in the right place• At the right time,• Recognizing it, and• Acting upon it,• APPROPRIATELY and• PASSIONATELY!!!

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Entrepreneurs V. Intrapreneurs• Entrepreneurs are people that notice opportunities

and take the initiative to mobilize resources to make new goods and services.

• Intrapreneurs also notice opportunities and take initiative to mobilize resources, however they work in large companies and contribute to the innovation of the firm.

• Intrapreneurs often become entrepreneurs.

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Intrapreneurship• Learning organizations encourage intrapreneurship. • Organizations want to form:

– Product Champions: people who take ownership of a product from concept to market.

– Skunkworks: a group of intrapreneurs kept separate from the rest of the organization.

– New Venture Division: allows a division to act as its own smaller company.

– Rewards for Innovation: link innovation by workers to valued rewards.

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Small Business Owners• Small business owners are people who own

a major equity stake in a company with fewer than 500 employees.

• In 1997 there were 22.56 million small business in the United States.

• 47% of people are employed by a small business.

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Employee Satisfaction

• In companies with less than 50 employees, 44% were satisfied.

• In companies with 50-999 employees, 31% are satisfied.

• Business with more than 1000, only 28% are satisfied.

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Employee Satisfaction

Employee Satisfaction

2831

44

0

10

20

30

40

50

less than 50 50-999 1000+

Number of Employees

Satis

fact

ion

Perc

enta

ge

less than50

50-999

1000+

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Advantages of a Small Business

• Greater Opportunity to get rich through stock options

• Feel more important• Feel more secure • Comfort Level

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Disadvantages of a Small Business

• Lower guaranteed pay• Fewer benefits• Expected to have many skills• Too much cohesion• Hard to move to a big company• Large fluctuations in income possible

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Who are entrepreneurs?

• Common traits– Original thinkers– Risk takers– Take responsibility for own actions– Feel competent and capable– Set high goals and enjoy working toward them

• Common traits– Self employed parents– Firstborns– Between 30-50 years old– Well educated – 80% have college degree and 1/3 have a graduate

level degree

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Successful and Unsuccessful Entrepreneurs

• Successful– Creative and Innovative– Position themselves in shifting or new markets– Create new products– Create new processes– Create new delivery

• Unsuccessful– Poor Managers– Low work ethic– Inefficient– Failure to plan and prepare– Poor money managers

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Characteristics of Entrepreneurs

Successful Entrepreneurs

Key Personal Attributes

Good Technical Skills

Strong Managerial Competencies

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Key Personal Attributes• Entrepreneurs are Made, Not Born!

– Many of these key attributes are developed early in life, with the family environment playing an important role

– Entrepreneurs tend to have had self employed parents who tend to support and encourage independence, achievement, and responsibility

– Firstborns tend to have more entrepreneurial attributes because they receive more attention, have to forge their own way, thus creating higher self-confidence

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Key Personal Attributes (cont.)• Entrepreneurial Careers

– The idea that entrepreneurial success leads to more entrepreneurial activity may explain why many entrepreneurs start multiple companies over the course of their career

– Corridor Principle- Using one business to start or acquire others and then repeating the process

– Serial Entrepreneurs- A person who founds and operates multiple companies during one career

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Key Personal Attributes (cont.)• Need for Achievement

– A person’s desire either for excellence or to succeed in competitive situations

– High achievers take responsibility for attaining their goals, set moderately difficult goals, and want immediate feedback on their performance

– Success is measured in terms of what those efforts have accomplished

– McClelland’s research

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Key Personal Attributes (cont.)• Desire for Independence

– Entrepreneurs often seek independence from others– As a result, they generally aren’t motivated to perform

well in large, bureaucratic organizations– Entrepreneurs have internal drive, are confident in their

own abilities, and possess a great deal of self-respect

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Key Personal Attributes (cont.)• Self-Confidence

– Because of the high risks involved in running an entrepreneurial organization, having an “upbeat” and self-confident attitude is essential

– A successful track record leads to improved self-confidence and self-esteem

– Self-confidence enables that person to be optimistic in representing the firm to employees and customers alike

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Key Personal Attributes (cont.)• Self-Sacrifice

– Essential– Nothing worth having is free– Success has a high price, and entrepreneurs have to be

willing to sacrifice certain things

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Technical Proficiency• Many entrepreneurs demonstrate strong technical skills,

typically bringing some related experience to their business ventures

• For example, successful car dealers usually have lots of technical knowledge about selling and servicing automobiles before opening their dealerships

• Especially important in the computer industry• NOT ALWAYS NECESSARY

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Planning• Business Plan – A step-by-step outline of

how an entrepreneur or the owner of an enterprise expects to turn ideas into reality.

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Questions To Keep In Mind• What are my motivations for owning a business?

• Should I start or buy a business?

• What and where is the market for what I want to sell?

• How much will all this cost me?

• Should my company be domestic or global?

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Motivations• Deciding what your motivations are will

direct you toward what type of business fits you best.

• Types:1. Lifestyle Venture2. Smaller Profit Venture3. High Growth Venture

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1. Lifestyle Venture• Small company that provides its owner

independence, autonomy, and control.• Is often run out of household• Provides flexibility (hours, meeting places,

attire)• Aligns your personal interests and hobbies

with your desire to make a profit.

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2. Smaller Profit Venture• Small company not concentrated on

pushing the envelope and growing inordinately large.

• Making millions of dollars not important.• Content with making a decent living.• Ex. Mom and Pop Stores

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3. High Growth Ventures• Goal is maximum profit and growth.• Concentrated on pushing envelope and

growing as large as possible.• Focus on innovation

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Start or Buy?• Start – cheapest, but very difficult

-requires most planning/research• Buy – expensive – may be out or reach

-requires less planning and research• Franchise (middle ground) – a business run

by an individual (the franchisee) to whom a franchiser grants the right to market a certain good or service.

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The Market???• Planning & Research essential• Extensive market surveys (family, friends,

neighbors…)• Magazines and Polls offer some

information on the market -Businessweek, Harris Poll

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What about the cost?• Plan realistically, not optimistically

• Don’t overestimate your profits• Don’t underestimate your costs

• Sources of Funds• Banks• Venture Capitalists – filthy rich, high risk investors looking for

a many-times-over yield• Angels – seem to have altruistic motives and less stringent

demands than venture capitalists

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Domestic or Global?• Drawbacks to Global – more research and

less accessible connections in startup phase, more travel time required, more considerations.

• Advantages to Global – more human resources, more demand, more financing, easier to start global than go from domestic to global.

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Entrepreneurship: Growth Pressures

Entrepreneurs often find that as their business grows, they feel more pressure to use formal methods to lead their organizations.

Although this formalization process may compromise some entrepreneurs spirit, it often leads to more focus, organization, and greater financial returns.

Basically, it’s a movement from a “seat-of-the-pants” operation to a more structured, legitimate and recognizable business.

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Entrepreneurship: Growth Pressures

Entrepreneurial and Formal Organizations differ in six business dimensions:

Strategic orientation Commitment to opportunity Commitment to resources Control of resources Management structure Compensation policy

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Entrepreneurship: Growth PressuresBusiness

DimensionEntrepreneurial

OrganizationFormal

OrganizationStrategic orientation Seeks opportunity Controls resources

Commitment to opportunity

Revolutionary Short duration

EvolutionaryLong duration

Commitment to resources(capital, people, and equipment)

Lack of stable needs and resource bases

Systematic planning systems

Control of resources Lack of commitment to permanent ventures

Power, status, financial rewards for maintaining status quo

Management Structure

FlatMany informal networks

Clearly defined authority and responsibility

Compensation policy Unlimited; based on team’s accomplishments

Short-term driven; limited by investors

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Entrepreneurship: Growth Pressures

Going Global….

From domestic to worldwide expansion, globalization can be extremely rewarding for entrepreneurs.THINK: Money and Business Exposure

However, it is a huge undertaking. Adapting your business to operate in the global market can lead to a decrease in ownership, and a forced focus on raising money to keep your business alive.THINK: Selling out, Private to Public (Initial Public Offering, IPO)

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Entrepreneurship: Managing a Family Business

Over 50% of the U.S. Gross Domestic Product (GDP) is generated from family business.

12% of CEOs on the Inc. 500 list describe their company as a family business.

So, why not dream up a plan and go into business with your family or friends?

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Entrepreneurship: Managing a Family Business

Two reasons not to go into business with your family or friends.…

Families fightFriends fight.

Often, it involves money. So a business environment could potentially breed arguments, disagreements, and feuds.

Fighting can occur during early developmental stages when hours are long and pay is low. Or, after success has been achieved.

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Entrepreneurship: Managing a Family Business

Six steps to help lead you to a successful Family Business:

Clear job responsibilities Clear hiring criteria Clear plan for management transition Agreement on whether and when to sell business Commitment to resolving conflicts quickly Outside advisors are used to mediate conflicts.

Clarity is key…. but NO GUARANTEE.

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Entrepreneurship: Managing a Family Business

Operational vs. Survival Issues….

Operational = Decisions about the economics of the business and how to balance that with rational and family obligation criteria.THINK: Day-to-day grind.

Survival = Develop out of a lack of attention on the operational issues within the business.THINK: Festering problems; ultimately compromise livelihood.

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Entrepreneurship: Managing a Family Business

FAMILY FEUD:

Severedrelationships

Divorce Poor business

performance

Low morale, motivation

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Entrepreneurship: Corporate INTRA-preneurs

Intrapreneur = someone in an existing organization who turns new ideas into profitable realities.

Not every employee has the ability to become a successful intrapreneur. It takes well-developed strategic action, teamwork and communication abilities.

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Entrepreneurship: Corporate INTRA-preneurs

Organizations that redirect themselves through innovation have the following characteristics:

Commitment from senior management Flexible organization design Autonomy of the venture team Competent/Talented people with entrepreneurial attitudes Incentives and rewards for risk taking Appropriately designed control system

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Entrepreneurship: Corporate INTRA-preneurs

In order to for this type of forward thinking to reap long-term benefits, top management must allow it to flourish in the day-to-day operations of the business….

This is known as “skunkworks”

Skunkworks = Islands of intrapreneurial activity within an organization.

REMEMBER: On the island, formal rules and policies of the organization often DO NOT apply.

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How to be a successfulentrepreneur

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Oil Drilling in Libya• In 1961, something remarkable happened in

the Libyan desert. • Eight years earlier, in 1953, an obscure

entrepreneur named Bunker Hunt applied for a drilling licence.

• BP joined him and he had all failures until 3 meters deep in sand he got one of the biggest oil reserve of the world

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Why Enterpreneurs fail• We make our decisions and our decisions make us. • Being an entrepreneur is like riding a roller coaster

— a combination of thrills and spills.• The spills are many; in the United States, 80 per

cent of new start-ups fold within two years.• The statistics for the United Kingdom are

similarly depressing. • Yet most failures are avoidable. Bad luck is not to

blame; rather, ill-judged decision making

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Major consideration for Enterpreneurs

• How do I recognize a good opportunity?• How do I recognize a decision I might

subsequently regret?• How can I predict how a decision might

turn out?• When should I trust my instincts?• How can I prepare for the unexpected?• When should I take a risk?

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Major consideration for Enterpreneurs

• How to be a Successful Entrepreneur• How should I choose if faced with two

equally attractive options?• When should I cut my losses?• When is the best time to sell a thriving

business?• How do I get what I want and what do I

need to make a success of the business?

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Deciding to‘Give It a Go’

– how not to do it

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Illusion of control• Our innate tendency as human beings to overestimate

our ability to influence outcomes — even those that are actually down to chance.

• Most people have an overly inflated idea of their own competence

• often the realists who quit first when the going gets rough — precisely because they can see only too well that the odds are against them

• Entrepreneurs need a cash flow: they need to sell enough to meet expenses, restock and perhaps repay loans. Where is the money going to come from?

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The overconfidence trap• Why else do people buy hotels that have already

had a succession of owners who have gone bankrupt

• They do it because they believe they can make a difference, though usually they just end up bankrupt too

• Instead of confronting the problem and thinking about whether and, if so, how one could achieve a turnaround, people simply put up a notice saying ‘Under New Management

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Dreaming with discipline• Entrepreneurs who fail make one of the following

mistakes:– They have no plan at all.– Their plan is not properly thought through.– They ‘fiddle’ the figures until the plan makes financial

sense• A plan is a good way of testing reality, thereby

helping to avoid the overconfidence trap because the process of planning forces you to consider whether your ideas are practical

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Questions asked by Investors• How much is the prospective owner proposing to invest in the

idea?• Who else is involved?• At face value, does the idea seem credible?• What market research has been conducted and with what results?• How comprehensive and well thought out is the business plan?• Does the prospective owner have the requisite skills and

experience to run the business?• Does the prospective owner have the requisite energy and

commitment to go the distance?

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The dangers of Myopia• Insufficient reality testing may

result in myopia that prevents us from seeing a complete and accurate picture

• Myopia resides in failing to consider the other side of the equation

• It is also very important to research

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Denial• As human beings we are adept

at hearing good news and equally adept at shutting out bad news.

• Better to begin with doubts and end in certainties than begin with certainties and end in doubts.

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Too Good to lose• Entrepreneurs claim to rely solely upon

intuition when making important decisions• Luck does play a part in business but be aware

that susceptibility to myopia is also heightened when an opportunity seems to be too good to miss

• This is because we are liable to be dazzled by all the advantages of the idea and therefore neglect to probe the potential hazards

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Over Reach• An opportunity is an opportunity if you

can deliver on it. Otherwise it is a liability

• Expansion is almost every entrepreneur’s goal but it brings new challenges

• Don’t try to run before you can walk.

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The experience trap• Firefighters are most likely to be killed not

when they are new to the job but when they have been in it for about 10 years.

• This is because experienced firefighters develop a false confidence in themselves based on the belief that they have seen it all before

• we tend to attribute our successes to our innate abilities and our failures to bad luck

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Basic concepts• All decisions involving uncertainty entail risk.• Many failures could be avoided, however, if

entrepreneurs conducted sufficient reality testing beforehand.

• Failure usually results from over confidence and/or biased information processing.

• Risks of mis judgement are heightened when an opportunity seems too good to lose.

• 5. Experience offers no immunity from error. In fact, it can make things

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Optimal Solutions– how to choose between

alternatives

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Six Thinking Hats Framework

• Confusion is the biggest enemy of good thinking– We try to do too many things at a time

• Juggling with six balls at a time is rather difficult

• Tossing up one ball at a time is much easier

– Six Hat Thinking does one thing at a time and in the end the full picture emerges

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Six Thinking Hats Western Thinking = Argument

• Western thinking was designed about 2300 years ago by the Greek “Gang of Three”:– Socrates – simply point out what is “wrong”– Plato – we see only shadow “truths”– Aristotle – things fit into “boxes” (categories)

• Western thinking is concerned with “what is” determined by analysis, judgment and argument.

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Six Thinking Hats Adversarial vs. Parallel Thinking

Adversarial ThinkingA B

Parallel ThinkingA

B

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Six Thinking Hats Parallel Thinking

It was six men much inclinedTo learning,

Who went to see the Elephant

(Though all of them were blind),

That each by observation

Might satisfy his mind. John Godfrey Saxe's ( 1816-1887) version of

the famous Indian legend

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Six Thinking Hats Parallel Thinking

Wall

Rope

Fan

Spear

Snake

Tree

And so these men of IndostanDisputed loud and long,Each in his own opinionExceeding stiff and strong,Though each was partly in the right,And all were in the wrong!

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Six Thinking Hats Parallel Thinking

A wise man was passing by and he saw this. He stopped and asked them, "What is the matter?" They said, "We cannot agree to what the elephant is like.“

The wise man calmly explained to them, "All of you are right. The reason every one of you is telling it differently is because each one of you touched a different part of the elephant. So, actually the elephant has all those features.“

"Oh!" everyone said. There was no more fight. They felt happy that they were all right.

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Six Thinking Hats Parallel Thinking

• Using parallel thinking they could all walk around and “look” at each part of the elephant together. So at each moment each person is looking in parallel from the same point of view and in the same direction.

• This is almost the exact opposite of argument, adversarial, confrontational thinking – Each party deliberately takes an opposite view – Each tries to prove the other wrong

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Six Thinking Hats Directions and Hats

• By using standard labels (like; front, back, left side, right side, north, south, east, west) we can choose which direction we want to look.

• What are the different directions thinkers can be invited to look?

• This is where the hats come in:– There are six colored hats corresponding to the six

directions of thinking: white, red, black, yellow, green, blue.

• Why hats?– A hat indicates a role (i.e. I see you have your

thinking cap on…)– A hat can be put on or taken off with ease– A hat is visible to everyone around

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Six Thinking Hats The Six Hats

White Hat

Red Hat

Black Hat

Yellow Hat

Green Hat

Blue Hat

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Six Thinking Hats The WHITE Hat = Facts and Data

• The White Hat calls for information known or needed.– Think of white paper, which is neutral

and carries information:• …What information do we have?• …What information is missing?• …What information would we like to have?• …How are we going to get missing

information?

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Six Thinking Hats The RED Hat = Feelings / Intuition

• The Red Hat signifies feelings, hunches, and intuition.–Think of red and fire and warm:

• …Putting on my red hat, this is what I feel about the project

• …My gut feel is that it will not work• …I don’t like the way this is being done

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Six Thinking Hats The BLACK Hat = Issues / Concerns

• The Black Hat is judgment – the devil’s advocate or why something may not work.– Think of a stern judge wearing black

robes who comes down heavy on wrong-doers.

– The Black Hat is the caution hat.• …The regulations do not permit us to do

that• …We do not have the capacity to meet the

demand

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Six Thinking Hats The Yellow Hat = Benefits

• The Yellow Hat symbolizes brightness and optimism.– Think of sunshine.– The Yellow Hat is for:

• The logical positive view of things• Feasibility and how something can be done• Benefits that are logically based:

– …This might work if we moved the plant nearer the customers

– …The benefit would come from repeat customers

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Six Thinking Hats The GREEN Hat = New ideas / Possibilities

• The Green Hat focuses on creativity; the possibilities, alternatives, and new ideas.– Think of vegetation and rich growth.– The Green Hat is for:

• New ideas and additional alternatives• Putting forward possibilities and hypotheses• Creative efforts

– …We need some new ideas here– …Could we do this a different way?

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Six Thinking Hats The BLUE Hat = Managing the Thinking

• The Blue Hat is used to manage the thinking process.– Think of the sky and an overview.– The Blue Hat:

• Is for process control• Sets the agenda for thinking• Suggests the next step in the thinking• Can ask for other hats:

– …I suggest we try some green hat thinking– …Could we have a Basic concepts of your views?

The Blue Hat is for thinking about thinking. It is used for organizing and controlling the process so that it becomes more productive.

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Six Thinking Hats Framework

• Encourages parallel thinking• Directs thinking in discrete

segments• Switches thinking from one mode

to another• Explores a subject more thoroughly• Makes specific time and space for

creative thinking• Separates ego from

performance

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Six Thinking Hats • White Hat: Looks objectively at data and information. Is

neutral and concerned with facts and figures.

• Red Hat: Legitimizes feelings and gives an emotional view, hunches, and intuition.

• Yellow Hat: Is positive and constructive. The yellow color symbolizes sunshine, brightness and optimism.

• Black Hat: Is logical, negative, judgmental, and cautious. Is gloomy, suggests why it cannot be done.

• Green Hat: Is about new ideas and creative thinking.

• Blue Hat: Controls the thinking process. The blue hat is concerned with control and the organization of the thinking process.

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Basic concepts• Good decisions combine emotion and rigorous

analysis.• Try Edward de Bono’s six thinking hats:• — blue: purpose of thinking;• — red: raw emotion;• — yellow: advantages;• — green: possibilities;• — black: risks and difficulties;• — white: information needed to make a decision.

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Basic concepts• Most decisions fail through insufficient

black or white hat thinking.• Insufficient yellow and/or green hat

thinking can mean lost opportunity.• Distinguish between ‘known’, ‘unclear’ and

‘assumed’.• Beware the known facts as they may turn

out to be assumption.• All else equal, give raw emotion thinking

the casting vote.

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Decisions aboutFuture Investments– the sunk costs trap

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Elements for consideration• Amount already invested in the venture — known as

past or Sunk costs should be ignored because they cannot influence future outcomes

• We become obsessed with what was rather than seeing and acting upon what now is.

• The golden rule when making decisions involving sunk costs is to focus upon achieving the best possible return on investment for the future

• WASTE NOT, WANT NOT? What you don’t want you may not waste too.

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Elements for consideration• All else equal, if an opportunity offering a better

return upon investment becomes available, we should take it even though it means abandoning a successful course of action

• What is past is past. We cannot recall the past five minutes, never mind the past five years.

• The sooner we recognize this, the better, for if we cling to the past we risk losing what the future might offer

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Elements for consideration• It is always disappointing when a customer walks

away, particularly if you have invested a lot of time and effort trying to achieve a sale.

• If that happens, respond with charm. Hand the customer your business card and wish them well.

• Today’s sale is lost but there is always a tomorrow• Rather than thinking only of the cost of letting go,

consider the cost of persistence.

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Elements for consideration• .Sometimes it is wise to persist

despite setbacks. More specifically, persistence may be economically wise if:–the likely pay-off is high; and–the project is almost complete.

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Matrix for decision making

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Basic concepts• Sunk costs should normally be ignored

when deciding how to invest resources.• The correct approach is to select the option

that promises maximum return upon investment for the future.

• This may actually mean dropping a successful decision.

• If it is emotionally difficult to forgo past investments, calculate what persistence is costing you.

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Basic concepts• Where large and complex projects are

involved, seek professional help in determining whether and to what extent persistence makes economic sense.

• Try not to deceive yourself about the state of a project.

• Don’t let budgets hold you back.• Time equals risk.• Money and energy can be replenished;

never time

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What is stress• The word ‘stress’ derives from the Latin word

stringer, meaning to draw tight. The concept of stress emanates from physics and engineering,

• where pressure is seen as resulting in strain and ultimately fracture – hence, for example, ‘nervous breakdown’ or ‘the straw that broke the camel’s back’.

• Psychologists regard stress as a person’s adaptive response to any form of stimulus that places excessive psychological or physical demands upon them

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Quiz 3/4• Stress is defined as a person’s adaptive

response to any form of stimulus that places excessive psychological or physical demands upon them

• Explain it clearly with three industrial examples

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Stress and its causesQ aa

• There are seven general causes of stress:• 1. overload;• 2. underload;• 3. responsibility for others;• 4. personality and demands for success;• 5. relationships with others;• 6. major life changes;• 7. daily interruptions and problems.

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Basic concepts• Stress results from demands that

exceed our coping ability and threaten something important.

• Stress is debilitating; it is associated with serious illness and early death.

• Stress also results in poor decision making.

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Basic concepts• 4. The most common causes of

stress are:– overload or underload, quantitative

or qualitative;– relationships and responsibility for

others;– being driven to succeed;– major transitions and daily hassles.

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Basic concepts• 5. Stress is frequently accompanied by

anxiety and depression.• 6. Anxiety produces over-sensitivity to

threat, hence ‘threat rigidity’.• 7. Depression results in perceived

helplessness.• 8. Depression can be nature’s way of

forcing you to slow down.

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Basic concepts• 9. Since stress results from lack of control,

the antidote is taking charge by:• practicing time management;• installing management systems;• prioritizing work;• delegating;• taking responsibility for yourself;• managing expectations;• practicing emotional detachment.

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Basic concepts• There is never a perfect time to do

anything.• Entrepreneurs get rich by employing

people.• Don’t let identity hold you back.• Have a long-term vision for where you

want to be and concrete short- and medium-term plans.

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Basic concepts• Use the latter to create

opportunities.• Never try to wring the last drop of

value out of a business.• The best time to quit is always

before you want to

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Leading the Dream Team– group decisions

• We may not like people who challenge us, but we need them

• As a ‘rule of thumb’, when annual turnover reaches £3 million a professional management team is required

• Try to control everything and you will end up controlling nothing.

• It is the quality of advice that matters, not who is giving it.

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Group Code of conduct• We will listen to one another actively.• We will treat each other with respect.• We will work as a team.• We will be open and honest, without

offending, and say when we disagree with something.

• We will encourage others to speak their minds.

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Lessons from companies• As the firm grows, change your approach to match.• To maintain overall control, don’t try to control

everything.• Value constructive conflict and try to stimulate it.• Seek advice; you don’t have to take it.• Communicate: ensure others understand the

rationale for decisions.• It is better to take people with you than have them

work against you.

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Lessons from companies• Actively solicit contributions from

group members.• Be unfathomable; keep others

guessing.• Challenge the ‘dream team’

constantly.• Escape to reality

occasionally..wZZtr423

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Get Lucky– taking risky decisions

• Risk is a choice.• To be risk-seeking is to take a bigger risk than

circumstances warrant.• Risk-seeking behaviour may be triggered by

loss or disappointment.• Entrepreneurs take risks, but they de-risk

ventures as much as possible.• Be bold in conceiving ventures but cautious in

executing them

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Get Lucky– taking risky decisions

• High risk may be justified by high reward.

• Low risk and high reward is even better.

• It may be worth using options to limit risk and capture opportunities.

• Shadow options may be worth more than you think.

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Risk assessment checklist• List all the main risks involved in a

venture.• How probable is this risk on a score of

1 to 10?• What would the impact be on a score of

1 to 10?• Multiply the two results to achieve a

risk score.

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Risk assessment checklist

• What could I do to reduce the probability?

• What could I do to minimize the impact?

• What might be the cost of not taking the risk?

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Basic concepts• Taking too little risk can be as bad as taking too

much.• Risk aversion arises from fear of endangering

existing gains.• We are most likely to be risk-averse when we are

already successful.• Ask yourself what you would do if you were not

afraid.• Consider feeling the fear and doing it anyway.

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Basic concepts• Small adaptations can add up to

more than the sum of their parts.• Think long-term. Remember, nothing

is for ever.• Beware herding.• Go higher: found a legacy.

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Decisions about ‘Runaway’ Projects– The escalation trap

• Instead of exiting failing ventures, entrepreneurs may be tempted to escalate their commitment.

• Escalation can turn a mistake into a calamity.• Escalation is thought to be mainly driven by fear

of failure.• Sometimes it can be almost as expensive to quit

as it is to continue.• Prevention is better than cure: be careful what

you get into.

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Decisions about ‘Runaway’ Projects– The escalation trap

• Set precise expectations and timescales for their attainment before committing resources.

• Monitor progress regularly.• Budgets used properly can help prevent

‘runaway’ projects.• Set limits on your involvement, identify quitting

points and stick to them..

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Decisions about ‘Runaway’ Projects– The escalation trap

• Don’t take failure personally. If an idea doesn’t work, try something else.

• No law requires you to be consistent.• Beware erring in the opposite

direction to escalation.

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Negotiations • Never negotiate over positions. Focus upon

interests.• Price is seldom the only factor in negotiations.• Interests may conflict but there are frequently

identical and/or mutually compatible interests as well.

• Search for options that meet all parties’ interests.• Try to put yourself in the other party’s shoes.

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Negotiations • Base discussions around market rates or some

other defensible criterion.• Don’t try to argue the other party into submission;

listen and ask questions.• Be prepared to ask for what you want.• Never say ‘no’ when you can say ‘maybe’.• Never negotiate when you and/or the other party

feel angry.• Be patient.

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Negotiations • Be pragmatic if the cost of not doing a

deal is high.• Be clear about what you are agreeing to.• Commit important agreements to

writing.• Reciprocal trust is economically

efficient.• Alternatives are power

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Entrepreneurial Genius– deciding on an idea for business

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How to create ideas1. One approach to inventing new ideas

involves taking familiar products or services for which there is already a market and reinventing them.

2. Asking obvious (silly) questions can be extremely rewarding.

3. Improve the familiar through innovation4. Reduce the loss to customers

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Examples of reducing loss to customers (imparts cost but no value).

• queuing at a hotel checkout;• waiting for a computer to ‘boot up’;• the background ‘hiss’ the television makes;• clothes that need washing;• window frames that need painting;• cars that need servicing;• the weight of a lawnmower;• waiting in a doctor’s surgery;• preparing a supermarket in readiness for customers;• the time it takes to microwave a meal

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How to create ideas5. Solve problems.6. Take what no body wants.7. Make the expensive cheap8. Get people at the price they want to pay9. Add Value to service or product10.Invent a name11.The master key ; acceptance by the people

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Basic concepts• 1. Ideas for business are more likely to

come via active search.• 2. Start by questioning underlying concepts.• 3. Look for hidden assumptions that may be

restricting progress.• 4. Ask yourself, ‘Why?’• 5. Then ask, ‘Why not?’• 6. Experiment with the 10 keys to

innovation:

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Deciding on the idea of Business• Tea bags, liquid soap, highlighter pens – the

world is full of good, • Commercially viable ideas that seem

obvious now but did not exist until someone thought of them.

• How did they do it?• Deciding on an idea for business can be

difficult. • The world is a crowded marketplace

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Deciding on the idea of Business• There are two ways of generating new

ideas. • One is to wait for inspiration to strike. It

may work but it is uncertain.• Entrepreneurial genius does not require

sophisticated scientific or technical knowledge.

• Genius resides in how we think about things

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Deciding on the idea of Business• BlackBerry mobile phone has captured a

market lead in e-mail that rivals have struggled to beat.

• The device is packed full of complicated electronics but its success rests as much as anything on a shift in thinking

• Genius is a trick of mind that can be learned.

• The trick resides in questioning

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Deciding on the idea of Business• The trick resides in questioning the

obvious,• In questioning received ways of doing

things and• Demolishing concepts that are blocking

progress• If you already have an idea for business

or are already in business

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Becoming and Entrepreneurial Genius

• Blocking assumptions are everywhere. They frequently reside in ‘taken for- granted’ assumptions and practices

• when we say ‘pen’, we almost invariably think ‘ink’. It is obvious, is it not?

• The trouble is, if we never looked beyond the obvious, we would never have invented the electronic pen

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Becoming and Entrepreneurial Genius

• Allen Lane, books were expensive partly because they had cardboard covers.

• Lane made business history (and a fortune) by reinventing the ‘book’ as a paperback

• Early computers occupied whole rooms. Initial efforts to make them small focused upon shrinking the hardware

• What is a mobile phone these days? It might be a camera, or an MP3 player, or an organizer

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Conceptual Blockbusting• How we conceptualize something determines

what we see and how we see.• We think of time as something that passes,• but where does it go to after it passes? We

think of the past as irretrievable,• Some things happen time and time again• Possibilities are limited only by imagination

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How to be a successful Entrepreneur

• They glimpse new possibilities by ridding themselves of blocking assumptions.

• If we assume soap always comes in blocks, we will never be able to imagine it in liquid form

• Locks may have keys but we have invented many different kinds of ‘key’, such as electronic cards

• Many cities have broken the blocking assumption that big events such as football matches take place inside a stadium by opening up free space and exploiting the possibilities of wide-screen television

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 1: REINVENT THE FAMILIAR• Taking familiar products or services for which

there is already a market and reinventing them• Example: Potato crisp. the only varieties on offer

were ‘plain’ and ‘cheese and onion but now there are many flavours

• Laptop computer introduced portability into a world dominated by desktop machines

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 1: REINVENT THE FAMILIAR• In order to see new possibilities, try questioning

basic concepts and assumptions. • What is a hotel? Is it a sleeping factory or a place

where guests come to enjoy good food and relax in pleasant and secure surroundings

• Ask silly questions. The answers may be very rewarding

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 2: IMPROVE THE FAMILIAR• In the 19th century an entrepreneur

named George Mortimer Pullman built Lavish railway carriages and introduced innovations such as onboard catering and ‘at seat’ services in return for a supplement

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 2: IMPROVE THE FAMILIAR• Dyson vacuum cleaners are vacuum cleaners made

better. • Videoconferencing saves time, money and effort

and helps to protect the environment. • Yet it is not used as much as it could be because

the equipment is cumbersome and temperamental. • If it could be improved, videoconferencing might

become the norm rather than the exception.

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 3: REDUCE LOSS.• The following are some examples of loss:• ■ queuing at a hotel checkout;• ■ waiting for a computer to ‘boot up’;• ■ the background ‘hiss’ the television makes;• ■ clothes that need washing;• ■ window frames that need painting;• ■ cars that need servicing;

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 3: REDUCE LOSS.• The following are some examples of loss:• ■ the weight of a lawnmower;• ■ waiting in a doctor’s surgery;• ■ preparing a supermarket in readiness for

customers;• ■ the time it takes to microwave a meal.

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 4: SOLVE PROBLEMS.• Life is full of problems waiting to be discovered!• Fountain pens that ran out of ink were a nuisance

until someone invented cartridges. • We never thought much about how messy and

restricting wires are until Blue tooth and wireless electricity technology were discovered

• In order to solve problems you have to recognize their existence and then ask yourself what you can do about it

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 4: SOLVE PROBLEMS.• That means being willing to challenge the status

quo and ‘taken-for-granted’ assumptions about what is acceptable and what can be changed.

• It means thinking about what ‘could be’ as distinct from what merely ‘is’.

• It is the difference between asking ‘why?’ and ‘why not

• Implications of diminishing reserves of oil and began to develop hybrid petrol/electric cars.

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 5: TAKE WHAT NOBODY WANTS• Where there’s muck, there’s brass.’ As this

homely Northern saying recognizes, fortunes have been built by entrepreneurs focusing upon what no one else wants

• Try pouring coffee into a full cup. It will spill over and make a mess because the cup is already full. So, the cup is most useful when it is empty

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 5: TAKE WHAT NOBODY WANTS• Large, established businesses are likewise ‘full’. • They are full of products, full of commitments. • Entrepreneurial potential resides not in competing head on with

giants• But in exploring the empty space, the things that large

organizations are not interested in• the low-cost airline easyJet was launched from• regional airports that the big airlines shunned, where landing

fees were correspondingly cheap• A cup is most useful when it is empty

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 6: MAKE THE EXPENSIVE CHEAP

• P ay as you go’ services have made mobile phones universally affordable.

• Rowland Hill, who is credited with the invention of the postage stamp, got rid of a system of complicated tariffs based on weight and distance, and introduced a single uniform charge encapsulated in the stamp known as the ‘Penny Black

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 6: MAKE THE EXPENSIVE CHEAP• Berni Inns reduced the price of meals by removing

tablecloths, thereby saving over £250,000 a year in laundry,

• and substituting table mats; by reducing the number of dishes on offer to cut the cost of inventory

• by keeping dishes simple so that they could be cooked and served by relatively inexpensive technicians rather than highly trained cooks

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 6: MAKE THE EXPENSIVE CHEAP• Dining pubs take the idea further as customers get

their own drinks and order their own food, thereby cutting down on the need for waiting staff.

• Low-cost airlines have taken a similar approach by subtracting ‘frills’ such as meals.

• ‘Pay as you go’ mobile phone customers get a stripped-down version of the service afforded to contract customers.

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 7: GET THE PRICE RIGHT• Subtraction will make things cheaper but it will not

help you decide how much to charge.• It is not just a matter of making something

affordable; it has to fit the customer’s budget• Budgeting is a way of compartmentalizing resources

either mentally in our heads or on paper.• Give people what they want at a price they will pay.

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 8: ADD VALUE• You can buy a box of Faber-Castell pencils in a nice

wooden box for around £70.• Scientists are currently experimenting with scientific

discoveries into how human vision works to add value by making suits that are utterly invisible.

• There is nothing special about a bag of Granny Smith apples. Imagine, however, receiving rarer varieties packed in an attractive presentation box

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Ten keys to InnovationImagine things that never were and ask, ‘Why not?’

KEY 8: ADD VALUE• Adding value is the opposite side of the coin of

reducing loss• Customers will pay for mineral water in attractive

bottles because it means they can place the bottle directly on to the table and avoid having to use a jug


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