The Science of
Entrepreneurship
Entrepreneurship Defined
In looking at the science of entrepreneurship, the obvious question is: What is an entrepreneur?
“An Entrepreneur is somebody who sees something nobody else sees.”
While there are other definitions of entrepreneurship, this one works. It identifies inspiration at its source; it has a clear purpose and provides a place for passion. It hints at the inherent risk in taking a path less traveled and tempts the question: “How does the entrepreneur transform a vision into reality?”
What is it to Be an Entrepreneur? Is being an entrepreneur something one can learn? Can courses, a diploma or an undergraduate degree in entrepreneurship underwrites success? Can one earn a PhD. in entrepreneurship? What does it take?
In his book Lean Startup Eric Ries establishes 5 Principles:
- Entrepreneurs are everywhere,
- Entrepreneurship is Management
- Validated Learning
- Innovation Accounting
- Build-Measure-Learn
Build-Measure-Learn shortens product development cycles by measuring actual progress rather than vanity metrics. “Lean Startup isn’t about being cheap (but is about) being less wasteful and still doing things that are big.” In other words, create a minimal viable product by focusing on what works and elimination what doesn’t. This applies to entrepreneurship in a garage as it does to the ‘new product division” of a global organization.
Logan, King and Fischer-Wright look to shift the culture of an organization from individual to group participation. How is this relevant to entrepreneurship and the promise of a great idea? Success will come from how effectively the entrepreneur creates relationships with partners, suppliers and customers and a culture based on a shared vision and resonant core values ensures a better chance of success long term.
Success of a product or service depends on leveraging the power of internet marketing and social media. Driving organic traffic comes from incremental gains; purchased traffic only pays out where conversion rates generate revenue above traffic costs. Financial viability is inextricably bound to collecting reliable data and applying analyses consistent with good scientific principles.
Entrepreneur’s Startup Checklist
- Opportunity – Where did the idea come from?
- Innovation – Is the Innovation Technical or Marketing?
- Customer – Who is the customer, are users and payers different?
- Competition – Who competes and who complements?
- Sales – What is the channel that reaches the customer?
- Marketing – How do we create end-user demand?
- Business Model – How do we organize to make money?
- Deals, partnerships and sales – Where does the business come from?
- IP / Patents and Regulatory Matters – How and how long to get this done?
- Time to Market – How long does it take to get to market?
- Product Development Model – What engineering is required?
- Manufacturing – What does it take to build?
- Seed Financing – How much and when?
- Follow On Financing – How much and when?
- Liquidity – When do we break-even and make a profit?
First to Market Rarely Wins – the Stanford Model “is Be a Fast Follower”
- Ebay, Amazon and Google were all first-best in execution
Vertical vs. Horizontal Market
- There are no average startups
- Startups in the same vertical market differ (sometime dramatically)
- Taking advice from one vertical can lead to failure in another
Vertical Market Definition
- Customers identify themselves in a narrow industry or group of companies
- Sell similar products
- Typically compete with one another
- Buy and use similar products and services
Horizontal Markets – Cut Across Verticals
- Examples – word-processing, databases – horizontal
- Semi-conductor and tools – vertical
Is You Startup at Risk?
- Technological risk – can the product be built? Are there technical issues to resolve?
- Market risk – will customers adopt and buy for a lifetime
- Or both?
Customer and Market Adoption
- Is the market big enough to make it a viable business?
The Entrepreneur and His Family – Startups are Time Consuming
- If you are single when doing a start-up, stay single
- If you are married – create rules to protect time with the wife and children
Vertical Market Examples
- Web infrastructure
- Enterprise Software
- Enterprise Hardware
- Communications Hardware
- Communications Software
- Consumer Electronics
- Game Software
- Entertainment
- Semiconductor
- Electronic Design and Automation
- Clean tech
- Medical Development / Healthcare
- Life Sciences / Biotech
- Personalized Medicine
Total Available Market (TAM)
- How many want it
- How big is the vertical – how large is the market if everyone in that market bought in $ and how many units would that be?
- How do I find out? Gartner, Forrester, Wall Street, Goldman Sachs, Morgan-Stanley
- How big a share of market (SAM) can I get?
- Talk to potential customers, distribution partners
- Look as specific customers
- Business Model Checklist
- Bowling Alone – Robert Putnam
Few Business Models Survive the First Contact with Customers
- Startups are dynamic
- Most change their business model
- Customers will educate you – if you listen
- Entrepreneurs have to be Agile
- Most startups go through 2 to 3 iterations of their Business Model – technically and radically
- Being Agile is what you do inside the company by constant innovation
- Business Development – is what you do outside the company
- Strategic Shift is a review of the Business Model
Reduce Market Risk
- If there is a market risk, get rid of it early
- When there are customer or engineering problems, solutions are both known
- Look at Lean Start-Up and Customer Development
Characteristics of an Entrepreneur
Are you comfortable with chaos and uncertainty? Are you:
- Resilient?
- Agile?
- Passionate?
- Driven?
- Articulate?
- Tenacious?
