Enterprise Project
Enterprise Project UMCD9Q-30-3
Presentation by
Dr Akin Ojolo
Module Leader
September 2019
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Building a New-Venture Resources
Gathering Entrepreneurial Resources
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Context
Understanding value
Delivering value
Appropriating value
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Gathering Entrepreneurial Resources
Start –up resources
- People
- founding team
- advisors
- contractors etc
- Physical resources
- equipment
- inventory
- office space
- Financial Resources
- Cash
- Equity
- Debt
Gathering Entrepreneurial Resources
- A dynamic market place and inherent chaos of a start-up venture
- Lean new venture
- Product
- Services
- Strategies
can be tested and modify quickly in response to customers’ feedback
Identifying resource needs
- This best achieved by creating a process map that details how information flows through the business
- To create a process map take an imaginary tour of the business during a single day, listing all the functions, people, equipment, supplies, and space required for the business
- Begin at the front door and ask the following questions:
Identifying resource needs
It is important to understand all the activities and processes in the business
- Who does the work in this business?
- Where would these people work?
- What do they need to do the work?
- equipment, technology, space, suppliers etc
- What information is needed?
- work orders, customer lists etc
- Where does the information go?
The entrepreneurial approach to organisational structure
The virtual organisation vs traditional enterprise
The virtual organisation – e commerce
- Business transactions are conducted via open networks based on the fixed and wireless internet infrastructure
- Many small enterprises start an online business to give them a higher profile in the marketplace.
The traditional bricks-and-mortar enterprise
today bricks and mortar shops and the Internet are very close
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The ‘nuts and bolts’
of creating and delivering value
Bootstrapping
Staff
- Payment
- By the hour / piecework
- Other incentives?
- Contract type
- Unskilled / skilled / professional?
- Organising / Managing
- Recruitment
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The ‘nuts and bolts’
of creating and delivering value
Suppliers
- Local / national / EU / Other international
- First / second tier?
- Supplies inventory
- How much to stock?
- Replenishment quantities
- How to store?
- Perishability?
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The ‘nuts and bolts’
of creating and delivering value
Distribution*
- Physical or digital?
- Direct or via intermediaries
- In house or sub-contract?
- Finished goods inventory
- How much to stock?
- How to store?
- Perishability?
*NB: We’re referring to the (usually physical) distribution of the goods or services here; separate consideration needs to be given to the strategic implications of various distribution channels.
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The ‘nuts and bolts’
of creating and delivering value
Partners
- Distribution
- Manufacturing
- Service / support
- Marketing
- Sales
- Back office….
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Finding the right numbers
- Estimating revenue, expenses and start-up cost is difficult with a new business concept
- Fluidity of the concept as well as the changing business environment
Finding the right numbers
- Reasons why these could change before a business plan is written
- Manufacturing or outsourcing to a manufacturer- impossible to estimate parts of manufacturing costs accurately
- Product development may take several months or years – cost for prototyping substantially higher
- For services – costs are based initially on information gathered from other companies in the industry – tricky to achieve inside information
- Knowledge of industry
Finding the right numbers
- The entrepreneur’s knowledge and experience
- Especially if the entrepreneur has worked in the industry in which the business will be operating
- “the entrepreneur ‘s experience is anecdotal and should always be confirmed by other sources”.
Finding the right numbers
The industry
- Understanding of the industry helps to understand:
- Typical margins
- Sales patterns – purchase cycles will provide valuable benchmarks for the entrepreneur’s forecasts.
Finding the right numbers
Another critical source of information is the customer
- Customers are far more likely than competition to provide useful information
- Talking to customers and observing them in their “buying habitat” can provide useful insights into patterns and cycle of buying than can be applied to forecast.
- “ with these three sources of information estimate of forecast should be close to reality”
Forecasting
- forecasting is crucial because it’s prospective investors will want to know how large the potential market for your goods or services will be in the coming years - measured perhaps in several ways:
- in numbers of potential users, numbers of units to be purchased the foundation on which every business plan is based
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Forecasting
- Use of triangulation process
- Entrepreneur’s knowledge and experience
- The industry
- a solid understanding of typical margins, sales pattern and purchase cycle – benchmarks for forecast
- The market /customer
- talking to customers and observing them in their buying habitat
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Forecasting methods
- There are six major evidence-based methods for estimating market potential and forecasting sales:
- statistical methods
- observation
- surveys
- analogy
- judgement
- market tests
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evidenced-based forecasting
- Statistical and other quantitative methods
- in established firms, for established products, statistical methods are extremely useful
- Statistical methods use past history and various statistical techniques, such as multiple regression and time series analysis, to forecast the future based on an extrapolation of the past
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evidenced-based forecasting
Statistical and other quantitative methods
- in established firms, for established products, statistical methods are extremely useful
- Statistical methods use past history and various statistical techniques, such as multiple regression and time series analysis, to forecast the future based on an extrapolation of the past
- Slack et al, 2013
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evidenced-based forecasting
- Observation
- to observe or gather existing data directly about what real consumers really do in the product-market of interest
- like statistical methods, observation based forecasting is attractive because it is based on what people actually do
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evidenced-based forecasting
- Surveys
- These surveys can be done with different groups of respondents.
- Consumers, after being shown a statement of the product concept or a prototype or sample of the product can be asked how likely they are to buy it.
- Buyers can also be asked about their current buying behaviour: what they currently buy, how often or how much they use
- there are important limitations of surveys
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evidenced-based forecasting
- Purchase intent, Percentage response, Rule of thumb reduction, Percentage deemed likely to actually buy
- Definitely would buy = 27%
- RTR = multiply by .8
- PDLB = 27% x .8 = 21.6%
- Probably would buy 43%
- RTR = multiply by .3
- PDLB = 43% x .3 = 12.9%
- Might or might not buy 22% Count as zero
- Probably 8% Count as zero
- Totals 100% 21.6% + 12.9% = 34.5%
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evidenced-based forecasting
- Analogy
- an approach often used for new product forecasting where neither statistical methods nor observations are possible
- forecast the sales or market potential for a new product or new venture by analogy
- Under this method, the product is compared with similar products that were introduced earlier, for which historical data are available.
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evidenced-based forecasting
- Judgement
- All forecasting method requires a degree of informed judgement but sometimes forecasts are made solely on the basis of experienced judgement or intuition.
- Some decision-makers are intuitive in their decision processes and cannot always articulate the basis for their intuitive judgements.
“Trend forecasting is a visceral thing that cannot be trained. I rely on my sense of colour and texture, but at times I cannot explain why I feel a certain way . . . I just know”
- a footwear buyer at Nine West Group
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evidenced-based forecasting
- Market tests
- of various kinds are the last of the commonly used forecasting methods.
- used largely for new products, market tests may be carried out under controlled experimental conditions in research laboratories
- on the internet or in live test markets with real advertising and promotion and real distribution in real stores.
- Use of test markets has declined over the past few years
- they are expensive to carry out
- competitors’ reaction
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References
- Kathleen Allen, 2000, Launching New Ventures: an entrepreneurial approach, 4th ed.
- Mullins W: The New Business Road Test; GB; Pearson Education, 2000.
Further reading:
Barringer, B. R., and Duane Ireland, R. 2016. Entrepreneurship: Successfully Launching New Ventures, 5th ed., Upper Saddle River, New Jersey: Pearson Education Inc.
Slack, N., Chambers, S. & Johnston, R., 2013 Operations Management. 7th ed., Harlow: Prentice Hall.