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Please see the doc attached and respond Please see the PPT's 3 and 4 and answer e2c docx 1. Write 600 words on this  Number and title of the chapter - Use the text and the PowerPoints are located in the readings from week  - Pick 5 key points you feel are the most important in each chapter. - 1) The most important lesson YOU learned from that chapter that you would share with a business colleague explaining your reasoning for choosing that lesson;  and 2) how you would utilize this lesson in your own work/life. This is the format you should use:  - Chapter number/ Chapter title  - Key points 1. 2. 3. 4. 5. -  PLUS, the most important lesson learned, explaining why you think so. _______________________________________________________________________________________________ Example of acceptable content is shown below for a fictitious class – Note that each key point teaches a lesson Chapter 1 – Budgeting and Personal Finance (Each key point should be at least one full sentence) 1.       When you do not have enough money at the end of the month, it is better to limit your spending than to lose your precious time by getting a second job. 2.       Paying interest on a purchase increases the cost of the item by as much as double the original price by the time you pay it off. 3.       Interest is money you pay for the right to use someone else’s money to pay for your purchases. 4.       Make sure to include a fourth key point here. 5.       Also, include a fifth one too. Most important lesson learned: (should be one complete paragraph which is a minimum of three sentences) I realized that to be financially free I need to create a personal budget to limit my spending and to pay down my credit card debt as soon as possible. I feel that this is an important lesson because my spending has been out of control and I never realized how you are a slave to the lender.  This has taught me a valuable lesson and one in which I plan to share with my own employees/co-workers to better enable them to deal with personal finances and budgeting.  I plan to use this in my own work/life to better…. (elaborate in a couple of sentences or more). Section 1: The Challenge of Entrepreneurship Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. If this PowerPoint presentation contains mathematical equations, you may need to check that your computer has the following installed: 1) MathType Plugin 2) Math Player (free versions available) 3) NVDA Reader (free versions available) 1 Essentials of Entrepreneurship and Small Business Management Ninth Edition Chapter 3 Creativity and Innovation: Keys to Entrepreneurial Success Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives (1 of 2) Explain the differences among creativity, innovation, and entrepreneurship. Describe why creativity and innovation are such an integral part of entrepreneurship. Explain the 10 “metal locks” that limit individual creativity. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. In this chapter, you will: 1. Explain the differences among creativity, innovation, and entrepreneurship. 2. Describe why creativity and innovation are such an integral part of entrepreneurship. 3. Explain the 10 “metal locks” that limit individual creativity. 3 Learning Objectives (2 of 2) Understand how entrepreneurs can enhance the creativity of their employees as well as their own creativity. Describe the steps in the creative process. Discuss techniques for improving the creative process. Describe the protection of intellectual property through patents, trademarks, and copyrights. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. In addition, you will: 4. Understand how entrepreneurs can enhance the creativity of their employees as well as their own creativity. 5. Describe the steps in the creative process. 6. Discuss techniques for improving the creative process. 7. Describe the protection of intellectual property through patents, trademarks, and copyrights. 4 Creativity and Innovation Creativity: the ability to develop new ideas and to discover new ways of looking at problems and opportunities; thinking new things. Innovation: the ability to apply creative solutions to problems or opportunities to enhance or to enrich people’s lives; doing new things. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. What is the entrepreneurial “secret” for creating value in the marketplace? In reality, the “secret” is no secret at all: It is applying creativity and innovation to solve problems and to exploit opportunities that people face every day. 5 Entrepreneurship Entrepreneurship: the result of a disciplined, systematic process of applying creativity and innovation to the needs and opportunities in the marketplace. Entrepreneurs connect their creative ideas with the purposeful action and structure of a business. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Entrepreneurship requires business owners to be bold enough to try their new ideas, flexible enough to throw aside those that do not work, and wise enough to learn about what will work based on their observations of what did not. 6 Failure: Part of the Creative Process! Most ideas don’t work and most innovations fail For every 5,000 to 10,000 new drug discoveries: 250 get to preclinical trials 5 make it to clinical trials 1 or 2 are reviewed by the FDA Only 1 gets to market Failure is part of the creative process Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Creativity: Essential to Survival Creativity is an important source of building a competitive advantage Can we learn to be creative? Yes! By overcoming paradigms and by suspending conventional thinking long enough to consider new and different alternatives Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Creativity is not only an important source for building a competitive advantage but also a necessity for survival. 8 How Creative are You? (1 of 2) Figure 3.1 How Creative Are You? Can You Recognize the Well-Known Phrases These Symbols Represent? Do you recognize these? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Can you identify the phrases the symbols represent? 9 How Creative are You? (2 of 2) [Figure 3.1 Continued] Sources: Based on Terry Stickels, “Frame Games,” USA Weekend, April 26–28, 2013, p. 14 Do you recognize these? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Can you identify the phrases the symbols represent? 10 Creative Thinkers: (1 of 3) Always ask: “Is there a better way?” Challenge custom, routine, and tradition. Are reflective. Are prolific thinkers. Play mental games. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Creative thinkers tend to model the following types of behavior: Always ask: “Is there a better way?” Challenge custom, routine, and tradition. Are reflective. Are prolific thinkers. Play mental games. 11 Creative Thinkers: (2 of 3) Realize that there may be more than one “right” answer. Know that mistakes are pit stops on the way to success. Recognize that problems are springboards for new ideas. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. In addition, creative thinkers: Realize that there may be more than one “right” answer. Know that mistakes are pit stops on the way to success. Recognize that problems are springboards for new ideas. 12 Creative Thinkers: (3 of 3) Understand that failure is a natural part of the creative process. Have “helicopter skills.” Relate seemingly unrelated ideas to a problem. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Creative thinkers also: Understand that failure is a natural part of the creative process. Have “helicopter skills.” Relate seemingly unrelated ideas to a problem. 13 Divergent vs. Convergent Thinking Successful entrepreneurship requires both divergent and convergent reasoning. Divergent reasoning: the ability to create a multitude of original, diverse ideas. Convergent reasoning: the ability to evaluate multiple ideas and to choose the best solution to a problem. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Successful entrepreneurship requires both divergent reasoning, which is the ability to create a multitude of original, diverse ideas, and convergent reasoning, which is the ability to evaluate multiple ideas and choose the best solution to a given problem. 14 Barriers to Creativity (1 of 2) Searching for the one “right” answer Focusing on “being logical” Blindly following the rules Constantly being practical Viewing play as frivolous Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Barriers to creativity include: Searching for the one “right” answer Focusing on “being logical” Blindly following the rules Constantly being practical Viewing play as frivolous 15 Barriers to Creativity (2 of 2) Becoming overly specialized Avoiding ambiguity Fearing looking foolish Fearing mistakes and failure Believing that “I’m not creative” Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. In addition: Becoming overly specialized Avoiding ambiguity Fearing looking foolish Fearing mistakes and failure Believing that “I’m not creative” 16 Spurring the Imagination (1 of 3) Questions to ask: Is there a new way to do it? Can you borrow or adapt it? Can you give it a new twist? Do you merely need more of the same? Do you need less of the same? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Smart entrepreneurs establish a culture that encourages employees to share their creative ideas and rewards them for doing so. 17 Spurring the Imagination (2 of 3) Is there a substitute? Can you rearrange the parts? What if you do just the opposite? Can you combine ideas? Can you put it to other uses? What else could you make from this? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Spurring the Imagination (3 of 3) Are there other markets for it? Can you reverse it? Can you eliminate it? Can you put it to another use? What idea seems impossible, but if executed, would revolutionize your business? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Enhancing Organizational Creativity (1 of 3) Include creativity as a core company value. Hire for creativity. Create an organizational structure that nourishes creativity. Embrace diversity. Expect creativity. Expect and tolerate failure. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. In addition to establishing creativity as a core company value, entrepreneurs who want to enhance organizational creativity should: Hire for creativity. Create an organizational structure that nourishes creativity. Embrace diversity. Expect creativity. Expect and tolerate failure. 20 Enhancing Organizational Creativity (2 of 3) Incorporate fun into the work environment. Encourage curiosity. Design a work space that encourages creativity. View problems as opportunities. Provide creativity training. Provide support. Develop a procedure for capturing ideas. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Entrepreneurs should also: Incorporate fun into the work environment. Encourage curiosity. Design a work space that encourages creativity. View problems as opportunities. Provide creativity training. Provide support. Develop a procedure for capturing ideas. 21 Enhancing Organizational Creativity (3 of 3) Talk and interact with customers. Reward creativity. Model creative behavior. Monitor emerging trends and identify ways your company can capitalize on them. Look for uses for your product or service in other markets. Don’t forget about business model innovation. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Organizational creativity can also be enhanced when entrepreneurs: Talk and interact with customers. Reward creativity. Model creative behavior. Monitor emerging trends and identify ways your company can capitalize on them. Look for uses for your product or service in other markets. Don’t forget about business model innovation. 22 Enhancing Individual Creativity (1 of 4) Allow yourself to be creative. Forget the “rules.” Give your mind fresh input every day. Take up a hobby. Travel and observe. Collaborate with other people. Observe the products and services of other companies, especially those in completely different markets. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Just as entrepreneurs can cultivate an environment of creativity in their organizations by using the techniques described above, they can enhance their own creativity. 23 Enhancing Individual Creativity (2 of 4) Recognize the creative power of mistakes. Be positive. Notice what is missing. Ask “am I asking the right questions?” Keep a journal handy to record your thoughts and ideas. Listen to other people. Listen to customers. Get adequate sleep. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Enhancing Individual Creativity (3 of 4) Watch a movie. Go for a walk. Talk to a child. Do something ordinary in an unusual way. Keep a toy box in your office. Take note of your “pain” points. Do not throw away seemingly “bad” ideas. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Enhancing Individual Creativity (4 of 4) Collaborate with others. Read books on stimulating creativity or take a class on creativity. Doodle. Take some time off. Be persistent. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Creative Process (1 of 8) Preparation Investigation Transformation Incubation Illumination Verification Implementation Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Although creative ideas may appear to strike as suddenly as a bolt of lightning, they are actually the result of the creative process, which involves seven steps. 27 The Creative Process (2 of 8) Preparation Investigation Transformation Incubation Illumination Verification Implementation Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Preparation (1 of 2) Get your mind ready for creative thinking. Adopt the attitude of a lifelong student. Read … a lot … and not just in your field of expertise. Clip articles of interest to you and save them. Develop your listening skills. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. This step involves getting the mind ready for creative thinking. 29 Preparation (2 of 2) Join professional or trade associations and attend their meetings. Eliminate creative distractions. Take time to discuss your ideas with other people. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Creative Process (3 of 8) Preparation Investigation Transformation Incubation Illumination Verification Implementation Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. This step involves developing a solid understanding of the problem, situation, or decision at hand. 31 The Creative Process (4 of 8) Preparation Investigation Transformation Incubation Illumination Verification Implementation Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Transformation involves viewing the similarities and differences in the information collected. 32 Transformation (1 of 2) Involves viewing both the similarities and the differences among the information collected. Two types of thinking are required: Convergent: the ability to see the similarities and the connections among various and often diverse data and events. Divergent: the ability to see the differences among various data and events. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. This phase requires two types of thinking: convergent and divergent. 33 Transformation (2 of 2) How can you transform information into purposeful ideas? Grasp the “big picture” by looking for patterns that emerge. Rearrange the elements of the situation. Use synectics: taking two seeming nonsensical ideas and combining them. Remember that several approaches can be successful. If one fails, jump to another. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. How can you increase your ability to transform the information collected into a purposeful idea? Try these methods. 34 The Creative Process (5 of 8) Preparation Investigation Transformation Incubation Illumination Illumination Implementation Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Incubation occurs while the individual is away from the problem, often engaging in some totally unrelated activity. Research shows that walking away from a problem to engage in routine tasks sparks creativity. 35 Incubation Allow your subconscious to reflect on the information collected. Walk away from the situation. Take the time to daydream. Relax – and play – regularly. Dream about the problem or opportunity. Work on the problem in a different environment. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. How can you enhance the incubation phase of the creative process, letting ideas marinate in your mind? Try these techniques. 36 The Creative Process (6 of 8) Preparation Investigation Transformation Incubation Illumination Verification Implementation Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. This phase of the creative process is kicked off at some point during the incubation stage, when a spontaneous breakthrough causes “the lightbulb to go on.” 37 The Creative Process (7 of 8) Preparation Investigation Transformation Incubation Illumination Verification Implementation Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. For entrepreneurs, validating an idea as being realistic and useful may include conducting experiments, running simulations, test marketing a product or service, establishing small-scale pilot programs, building prototypes, and many other activities designed to verify that the new idea will work and is practical to implement. 38 Verification (1 of 2) Validate the idea as accurate and useful. Is it really a better solution? Will it work? Is there a need for it? If so, what is the best application of this idea in the marketplace? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The goal of verification is to subject the innovative idea to the test of cold, hard reality. Ask questions like these. 39 Verification (2 of 2) Does this product or service fit into our core competencies? How much will it cost to produce or to provide? Can we sell it at a reasonable price that will produce a profit? Will people buy it? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The Creative Process (8 of 8) Preparation Investigation Transformation Incubation Illumination Verification Implementation Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The focus of this step is to transform the idea into reality. Plenty of people come up with creative ideas for promising new products or services, but most never take them beyond the idea stage. What sets entrepreneurs apart is that they act on their ideas. 41 Techniques for Improving the Creative Process (1 of 4) Brainstorming: The goal is to create a large quantity of novel and imaginative ideas. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The goal of brainstorming is to create an open, uninhibited atmosphere that allows members of the group to “freewheel” ideas. Participants should suggest any ideas that come to mind without evaluating or criticizing them. 42 Brainstorming Guidelines (1 of 2) Keep the group small – “Two pizza rule.” Make the group as diverse as possible. Do aerobic exercise before the session. Emphasize that company rank is irrelevant. Have a well-defined problem: why, how, what. Provide relevant background material. Limit the session to 40 to 60 minutes. Take a field trip. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. For a brainstorming session to be successful, entrepreneurs should follow these guidelines. 43 Brainstorming Guidelines (2 of 2) Appoint a recorder. Throw logic out the window. Encourage all ideas from the team. Shoot for quantity of ideas over quality of ideas. Use a circular or U-shaped seating pattern. Forbid criticism. Encourage idea “hitch-hiking.” Dare to imagine the unreasonable. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Techniques for Improving the Creative Process (2 of 4) Brainstorming Mind-mapping Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Another useful tool for jump-starting creativity is mind-mapping, an extension of brainstorming. 45 Mind-Mapping Mind-mapping: A graphical technique that encourages thinking on both sides of the brain, visually displays relationships among ideas, and improves the ability to see a problem from many sides. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. One strength of mind-mapping is that it reflects the way the brain actually works. Rather than throw out ideas in a linear fashion, the brain jumps from one idea to another. 46 The Mind-Mapping Process Start by writing down or sketching a picture symbolizing the problem or area of focus in the center of a blank page. Work as quickly as possible and write down every idea that comes into your mind for 20 minutes, connecting each to the central picture or words with a line. Don’t try to force creativity. After a brief rest, begin to integrate the ideas into a mind map. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Mind-mapping is a graphical technique that encourages creative thinking by visually displaying the various relationships among ideas and improving the ability to view a problem from many sides. 47 Techniques for Improving the Creative Process (3 of 4) Brainstorming Mind-mapping Force-Field analysis Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Force-field analysis is a useful technique for evaluating the forces that support and oppose a proposed change. 48 Force-Field Analysis Force-Field Analysis A useful technique for evaluating the forces that support and oppose a proposed change. Three columns: Center: Problem to be addressed Left: Driving forces Right: Restraining forces Score each force (−1 to +4) and add them. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Force-field analysis allows entrepreneurs to weigh both the advantages and the disadvantages of a particular decision and work to maximize the variables that support it and minimize those that work against it. 49 Techniques for Improving the Creative Process (4 of 4) Brainstorming Mind-mapping Force-Field analysis TRIZ Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Unlike brainstorming and mind-mapping, which are right-brain activities, TRIZ is a scientific, step-by-step process that is based on the study of hundreds of the most innovative patents around the globe. 50 TRIZ TRIZ A systematic approach designed to solve any technical problem. Relies on 40 principles and left-brained thinking to solve problems. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. TRIZ is a scientific, step-by-step process that is based on the study of hundreds of the most innovative patents around the globe. 51 TRIZ Contradiction Matrix Figure 3.2 TRIZ Contradiction Matrix Source: Based on, G. Altshuller, TRIZ 40, http:// www.triz40.com/aff_Matrix.htm. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. This figure shows the TRIZ Contradiction Matrix. 52 Techniques for Improving the Creative Process (3 of 3) Brainstorming Mind-mapping Force-field analysis TRIZ Rapid prototyping Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Rapid prototyping plays an important part in the creative process because it serves as a way to screen ideas that are not practical or just will not work so that entrepreneurs can focus their creative energy on other ideas. 53 Rapid Prototyping Rapid Prototyping: Transforming an idea into an actual model that will point out flaws and lead to design improvements. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The premise behind rapid prototyping is that transforming an idea into an actual model highlights flaws in the original idea and leads to improvements in its design. 54 Protecting Your Ideas (1 of 3) Patent: A grant from the Patent and Trademark Office to the inventor of product, giving the exclusive right to make, use, or sell the invention for 20 years from the date of filing the patent application. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Once entrepreneurs come up with innovative ideas for a product or service that has market potential, their immediate concern should be to protect it from unauthorized use. 55 Top Counterfeit Products Seized by U.S. Customs Agents Table 3.3 Top 10 Counterfeit Products Seized by U.S. Customs Agents Rank Product Percentage of Counterfeit Goods Seized 1 Wearing apparel and accessories 20% 2 Consumer electronics 16% 3 Footwear 12% 4 Watches and jewelry 11% 5 Handbags and wallets 10% 6 Pharmaceuticals and personal care 8% 7 Optical media 3% 8 Computers and accessories 2% 9 Labels and tags 2% 10 Automotive and aerospace 2% Source: Based on Intellectual Property Rights: Fiscal Year 2016 Seizure Statistics, U.S. Customs and Border Protection, Office of International Trade, 2017, p. 8. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Table 3.3 shows the top 10 counterfeit goods seized by customs agents. 56 Patent Applications and Patents Issued Figure 3.3 Patent Applications and Patents Issued Source: Based on data from the U.S. Patent and Trademark Office, 2016. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Although inventors are never assured of getting a patent, they can enhance their chances by following the basic steps suggested by the PTO. 57 The Six Steps to a Patent Establish the invention’s novelty Document the device Search existing patents Study search results Complete the patent application File the patent application Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. To receive a patent, an inventor must follow specific steps. 58 Protecting Your Ideas (2 of 3) Trademark: any distinctive word, symbol, design, name, logo, slogan, or trade dress a company uses to identify the origin of a product or to distinguish it from other goods on the market. Service mark: the same as a trademark except that it identifies the source of a service rather than a product. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. A trademark serves as a company’s “signature” in the marketplace. A trademark can be more than just a company’s logo, slogan, or brand name; it can also include symbols, shapes, colors, smells, or sounds. 59 Trademark Applications and Trademarks and Renewals Issued Figure 3.5 Trademark Applications and Trademarks and Renewals Issued Source: Based on data from the U.S. Patent and Trademark Office, 2016. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Figure 3.5 shows trademark applications and trademarks and renewals issued. 60 Protecting Your Ideas (3 of 3) Copyright: an exclusive right that protects the creators of original works of authorship such as literary, dramatic, musical, and artistic works. Copyrighted material is denoted by the symbol ©. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. A copyright protects only the form in which an idea is expressed, not the idea itself. 61 Protecting Intellectual Property The primary weapon an entrepreneur has to protect patents, trademarks, and copyrights is the legal system. Before engaging in a legal battle consider: Can the opponent afford to pay if you win? Do you expect to win enough to cover your legal costs? Can you afford the loss of time, money, and privacy involved? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Acquiring the protection of patents, trademarks, and copyrights is useless unless an entrepreneur takes action to protect those rights in the marketplace. 62 Characteristics of Patents, Trademarks, and Copyrights (1 of 2) Table 3.4 Characteristics of Patents, Trademarks, and Copyrights Protection What It Protects Who Is Eligible Length of Protection Approximate Total Cost Utility patent Exclusive right to make, use, and sell an invention First person to file for a patent 20 years $4,000 to $25,000, depending on complexity Design patent New, original changes in the design of existing products that enhance their sales First person to file for a patent 14 years $4,000 to $25,000, depending on complexity Trademark Any distinctive word, phrase, symbol, design, name, logo, slogan, or trade dress that a company uses to identify the origin of a product or to distinguish it from other goods on the market Entity currently using the mark in commerce or one who intends to use it within six months Renewable between fifth and sixth years and ninth and tenth years and every 10 years afterward $1,000 to $2,500 Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Table 3.4 provides a summary of the characteristics of patents, trademarks, and copyrights. 63 Characteristics of Patents, Trademarks, and Copyrights (2 of 2) [Table 3.4 Continued] Protection What It Protects Who Is Eligible Length of Protection Approximate Total Cost Service mark Same protection as a trademark except that it identifies and distinguishes the source of a service rather than a product Entity currently using the mark in commerce or one who intends to use it within six months Renewable between fifth and sixth years and ninth and tenth years and every 10 years afterward $1,000 to $2,500 Copyright Original works of authorship, such as literary, dramatic, musical, and artistic works Author or creator Life of the author or creator plus 70 years $140 to $200 Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Table 3.4 provides a summary of the characteristics of patents, trademarks, and copyrights. 64 Conclusion … Section 2: The Entrepreneurial Journey Begins Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. If this PowerPoint presentation contains mathematical equations, you may need to check that your computer has the following installed: 1) MathType Plugin 2) Math Player (free versions available) 3) NVDA Reader (free versions available) 1 Essentials of Entrepreneurship and Small Business Management Ninth Edition Chapter 4 Conducting a Feasibility Analysis and Designing a Business Model Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Learning Objectives (1 of 2) Describe the process of conducting an idea assessment. Explain the elements of a feasibility analysis. Describe the six forces in the macro environment of an industry. Understand how Porter’s Five Forces Model assesses the competitive environment. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. In this chapter, you will: 1. Describe the process of conducting an idea assessment. 2. Explain the elements of a feasibility analysis. 3. Describe the six forces in the macro environment of an industry. 4. Understand how Porter’s Five Forces Model assesses the competitive environment. 3 Learning Objectives (2 of 2) Describe the various methods of conducting primary and secondary market research. Understand the four major elements of a financial feasibility analysis. Describe the process of assessing entrepreneur feasibility. Describe the nine elements of a business model in the Business Model Canvas. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. In addition, you will: 5. Describe the various methods of conducting primary and secondary market research. 6. Understand the four major elements of a financial feasibility analysis. 7. Describe the process of assessing entrepreneur feasibility. 8. Describe the nine elements of a business model in the Business Model Canvas. 4 Idea Assessment (1 of 2) Idea Assessment: The process of examining a particular need in the market, developing a solution for that need, and determining the entrepreneur’s ability to successfully turn the idea into a business. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Once entrepreneurs develop ideas for new businesses, the next step is to assess these ideas. 5 New Business Planning Process Business ideas Conducting an idea assessment Conducting a feasibility analysis Developing a business model Crafting a business plan Creating a strategic plan Launching the business Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The idea assessment, feasibility study, business model, business plan, and strategic plan all play important but separate roles in the start-up and growth of an entrepreneurial venture. 6 Idea Assessment (2 of 2) Use an idea sketch pad to ask key questions addressing: Customers Offering Value proposition Core competencies People Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. An idea sketch pad helps an entrepreneur assess ideas in a relatively short period of time. When using a sketch pad, the entrepreneur asks a series of key questions addressing five key parameters. 7 Idea Sketch Pad Figure 4.2 Idea Sketch Pad Source: Dr. Alex Bruton, The Innographer, Ltd., theinnographer.com/toolkit/idea-modeling. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Successful entrepreneurs do not become emotionally attached to their ideas. If an idea shows promise based on the idea sketch pad, they move ahead to the next step of conducting a feasibility analysis. If entrepreneurs cannot resolve the gaps or weaknesses that the idea sketch pad reveals in an idea, they turn to the next idea and assess it using the sketch pad process. 8 Feasibility Analysis Is a particular idea a viable foundation for creating a successful business? Feasibility study addresses the question: “Should we proceed with this business idea?” Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. After conducting the idea assessment, an entrepreneur scrutinizes the idea further through a feasibility analysis. 9 Elements of a Feasibility Analysis (1 of 4) Figure 4.3 Elements of a Feasibility Analysis Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Figure 4.3 shows the elements of a feasibility analysis. 10 Environmental Forces and New Ventures Figure 4.4 Environmental Forces and New Ventures Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. When examining an industry, an entrepreneur should examine both the macro environment that can have an impact across many industries and the specific competitive environment of the industry of interest. 11 Industry and Market Feasibility Analysis (1 of 3) Assess industry attractiveness using six macro forces: Sociocultural Technological Demographic Economic Political and legal Global Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Six foundational macro forces create change in industries and the markets they serve. 12 Industry and Market Feasibility Analysis (2 of 3) Ask: How large is the industry? How fast is it growing? Is the industry as a whole profitable? Is the industry characterized by high profit margins or razor-thin margins? How essential are its products or services to customers? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Entrepreneurs should answer these questions to help evaluate the attractiveness of an industry in light of the macro forces for change. 13 Industry and Market Feasibility Analysis (3 of 3) What trends are shaping the industry’s future? What threats does the industry face? What opportunities does the industry face? How crowded is the industry? How intense is the level of competition in the industry? Is the industry young, mature, or somewhere in between? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. In addition, consider the answers to these questions. 14 Porter’s Five Forces Model Five forces interact with one another to determine the setting in which companies compete and, hence, the attractiveness of the industry: Rivalry among companies in the industry Bargaining power of suppliers Bargaining power of buyers Threat of new entrants Threat of substitute products or services Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. A useful tool for analyzing a specific industry’s attractiveness within the competitive environment is the Five Forces Model, developed by Michael Porter of the Harvard Business School. 15 Five Forces Model (1 of 6) Figure 4.7 Five Forces Model of Competition Source: Adapted from Michael E. Porter, “How Competitive Forces Shape Strategy,” Harvard Business Review 57, no. 2 (March–April 1979): 137–145. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Five forces interact with one another to determine the setting in which companies compete and hence the attractiveness of the industry: (1) the rivalry among competing firms, (2) the bargaining power of suppliers, (3) the bargaining power of buyers, (4) the threat of new entrants, and (5) the threat of substitute products or services. 16 Five Forces Model (2 of 6) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The strongest of the five forces in most industries is the rivalry that exists among the businesses competing in a particular market. 17 Rivalry Among Companies Strongest of the five forces Industry is more attractive when: Number of competitors is large, or, at the other extreme, quite small Competitors are not similar in size or capacity Industry is growing fast Opportunity to sell a differentiated product or service exists Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Five Forces Model (3 of 6) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The greater the leverage that suppliers of key raw materials or components have, the less attractive is the industry. 19 Bargaining Power of Suppliers The greater the leverage of suppliers, the less attractive the industry. Industry is more attractive when: Many suppliers sell a commodity product Substitutes are available Switching costs are low Items account for a small portion of the cost of finished products Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Five Forces Model (4 of 6) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Just as suppliers to an industry can be a source of pressure, buyers also have the potential to exert significant power over businesses, making them less attractive. 21 Bargaining Power of Buyers Buyers’ influence is high when number of customers is small and cost of switching to a competitor’s product is low. Industry is more attractive when: Customers’ switching costs are high Number of buyers is large Customers want differentiated products Customers find it difficult to collect information for comparing suppliers Items account for a small portion of customers’ finished products Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Five Forces Model (5 of 6) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The larger the pool of potential new entrants to an industry, the greater is the threat to existing companies in it. 23 Threat of New Entrants The larger the pool of potential new entrants, the less attractive an industry is. Industry is more attractive to new entrants when: Advantages of economies of scale are absent Capital requirements to enter are low Cost advantages are not related to company size Buyers are not loyal to existing brands Government does not restrict the entrance of new companies Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Five Forces Model (6 of 6) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Substitute products or services can turn an entire industry on its head. 25 Threat of Substitutes Substitute products or services can turn an industry on its head. Industry is more attractive to new entrants when: Quality substitutes are not readily available Prices of substitute products are not significantly lower than those of the industry’s products Buyers’ switching costs are high Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Five Forces Matrix (1 of 2) Assign a value to rate the importance of each of the five forces to the industry on a 1 (not important) to 5 (very important) scale. Then assign a value to reflect the threat that each force poses to the industry. Multiply the importance rating in column 2 by the threat rating in column 3 to produce a weighted score. Add the weighted scores in column 3 to get a total weighted score. This score measures the industry’s attractiveness. The matrix is a useful tool for comparing the attractiveness of different industries. Minimum Score = 5 (Very attractive) Maximum Score = 125 (Very unattractive) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. After surveying the power these five forces exert on an industry, entrepreneurs can evaluate the potential for their companies to generate reasonable sales and profits in a particular industry. 27 Five Forces Matrix (2 of 2) Table 4.1 Five Forces Matrix Force Importance (1 to 5) (1 = Not Important 5 = Very Important) Threat to Industry (1 to 5) (1 = Low 3 = Medium 5 = High) C Weighted Score Col 2 × Col 3 Rivalry among companies competing in the industry 5 2 10 Bargaining power of suppliers in the industry 2 2 4 Bargaining power of buyers 2 4 8 Threat of new entrants to the industry 3 4 12 Threat of substitute products or services 4 1 4 Blank Blank Total 38 Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 28 Elements of a Feasibility Analysis (2 of 4) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. A product or service feasibility analysis determines the degree to which a product or service idea appeals to potential customers and identifies the resources necessary to produce the product or provide the service. This portion of the feasibility analysis addresses the question “Are customers willing to purchase our goods and services?” 29 Product or Service Feasibility Analysis (1 of 2) Determines the degree to which a product or service idea appeals to potential customers and identifies the resources necessary to produce it. Two questions: Are customers willing to purchase our product or service? Can we provide the product or service to customers at a profit? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Product or Service Feasibility Analysis (2 of 2) Primary Research: Collect data firsthand and analyze it. Secondary Research: Gather data that already have been compiled and analyze it. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Conducting primary research involves collecting data firsthand and analyzing it; secondary research involves gathering data that have already been compiled and is available, often at a reasonable cost or sometimes even for free. In both types of research, gathering both quantitative and qualitative information is important to drawing accurate conclusions about a product’s or service’s market potential. 31 Primary Research Techniques Customer surveys and questionnaires Focus groups Prototypes In-home trials “Windshield” research Trade associations and business directories Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Primary research tools include customer surveys, focus groups, construction of prototypes, in-home trials, and “windshield” research (driving around and observing the competition). 32 Secondary Research Techniques Trade associations and business directories Industry databases Demographic data Census data Forecasts Market research Articles Local data Internet Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Secondary research should be used to support, not replace, primary research. Secondary research, which is usually less expensive to collect than primary data, includes these sources. 33 Elements of a Feasibility Analysis (3 of 4) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The third component of a feasibility analysis involves assessing the financial feasibility of a proposed business venture. 34 Financial Feasibility Analysis Capital requirements: an estimate of how much start-up capital is required to launch the business. Estimated earnings: forecasted income statements. Time out of cash: the total cash it will take to sustain the business until the business achieves break-even cash flow. Return on investment: combining the previous two estimates to determine how much investors can expect their investments to return. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. This component of the feasibility analysis answers the question “Can this business generate adequate profits?” . The four major elements to be included in a financial feasibility analysis are the initial capital requirement, estimated earnings, time out of cash, and resulting return on investment. 35 Elements of a Feasibility Analysis (4 of 4) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. There is one last component of feasibility to examine: the readiness of the entrepreneur to launch the venture successfully. 36 Entrepreneur Feasibility Is this idea right for me? Assess entrepreneurial readiness: knowledge, experience, and skills necessary for entrepreneurs to be successful. Assess whether the business will be able to generate enough profit to support everyone’s income needs. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Many new businesses require that an entrepreneur have a certain set of knowledge, experiences, and skills to have any chance of being successful. This is called entrepreneurial readiness. 37 Developing and Testing a Business Model Key questions to address: What value does the business offer customers? Who is my target market? What do they expect of me as my customers? How do I get information to them, and how do they want to get the product? What are the key activities to make all this come together, and what will they cost? What resources do I need to make this happen, including money? Who are the key partners I will need to attract to be successful? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. When building a business model, an entrepreneur addresses a series of key questions that explain how the business will become successful. 38 The Business Modeling Process (1 of 5) Figure 4.9 The Business Modeling Process Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Developing a business model is a four-phase process as shown in Figure 4.9. 39 The Business Modeling Process (2 of 5) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The first phase of the Business Modeling Process is to create an initial Business Model Canvas. 40 The Business Model Canvas Figure 4.8 The Business Model Canvas Source: Business Model Generation: A Handbook for Visionaries, Game Changers, and Challengers by Osterwalder, Alexander; Pigneur, Yves Reproduced with permission of Wiley in the format Book via Copyright ClearanceCenter. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Figure 4.8 shows the Business Model Canvas which provides entrepreneurs with a dynamic framework to guide them through the process of developing, testing, and refining their business models. 41 The Business Modeling Process (3 of 5) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The second phase in designing the business model is to test the problem that the team thinks the business solves through its core value proposition. 42 Test the Value Proposition Ask customers: Do we really understand the customer problem the business model is trying to address? Do these customers care enough about this problem to spend their hard-earned money on our product? Do these customers care enough about our product to help us by telling others through word-of-mouth? Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. By engaging potential customers early in the development of a new business and listening to what they have to say, the team has a much better chance of developing a business model that will attract customers. 43 The Business Modeling Process (4 of 5) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The third phase is to test the solution to the problem in the market. 44 Business Prototyping (1 of 2) Entrepreneurs test their business models on a small scale before committing serious resources to launch a business that might not work. Recognizes that a business idea is a hypothesis that needs to be tested before taking it full scale. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. One technique to test the solution offered by the business model involves business prototyping. 45 Business Prototyping (2 of 2) Test early versions of a product or service using a lean start-up: a process of rapidly developing simple prototypes to test key assumptions by engaging real customers Begin the lean start-up process using a minimal viable product: the simplest version of a product or service with which an entrepreneur can create a sustainable business Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Entrepreneurs can test their ideas by selling their products on established sites such as eBay or by setting up their own Web sites to gauge customers’ response. 46 The Business Modeling Process (5 of 5) Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. The fourth phase of designing a business model is to make changes and adjustments in the business, called pivots, based on what the entrepreneur learns from engaging the market about the problem and the solution that the new business intends to pursue. 47 Pivots Pivots: the process of making changes and adjustments in the business model on the basis of the feedback a company receives from customers. Product pivot Customer pivot Revenue model pivot Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. There are three major types of pivots. 48 Conclusion (1 of 2) The best business ideas start with a common problem or need. The ideas assessment process helps an entrepreneur more efficiently and effectively examine multiple ideas to identify the solution with the most potential. A feasibility analysis helps the entrepreneur determine whether an idea can be transformed into a viable business. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Conclusion (2 of 2) Developing a business model helps the entrepreneur better understand all that will be required to launch and build a business. Once the entrepreneur completes the idea assessment, feasibility study, and business model, he or she is ready to develop the business plan. Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. Copyright Copyright © 2019, 2016, 2014 Pearson Education, Inc. All Rights Reserved. 51