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Lecture 11

ENT 3003 Lecture Notes - Lecture 11: Epinephrine Autoinjector, Attribution Bias, Kodak

Course Code
ENT 3003
Christopher Garrett Pryor

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Module 11 (Apr. 1)
Discovery Driven Planning, No. 1:
In risky environments, managers may project from the past
In uncertain environments, projecting from the past is dangerous
o Number Rigging
Making things look less risky than they are
If it goes wrong, blame the numbers
o Risk Avoiding
o Failure Dodging
We need a way to
o Minimize cost/maximize learning
o Manage expenditures with discipline
The greater the assumptions, the greater the discipline
Assumptions are pesky
o 1) they are invisible
o 2) they are treated as facts
The Principles of Discovery Driven Planning
o #1: Frame
What’s the purpose of the project?
E.g. “10% increase in revenue”
o #2: Benchmark
Account for market requirements and competition
o #3 Be Practical
Convert strategy into discrete, implementable steps
o #4: Track
Turn assumptions into knowledge as quickly and deeply as possible
o #5: Set Milestones
Product development, first sale, customer feedback, competitor
response, etc.
First, set business and profit models
Discovery Driven Planning, No. 2:
Z * (1+r)^y = interest calculation (growth of population over years)
Doing Financial Projections:
Going for growth!
o First, some reality
Growth is hard
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Of 700,000 business launches in 2005, only 3.5% grew into large
Of 2,700 “billion dollar companies,” only 8% were able to
maintain 5% growth, year over year, for five years
Over 10 years, only 10 companies grew 5% a year
Growth is astonishingly hard
What do we mean by growth?
o Revenue growth, profit growth, EPS growth, valuation growth, cash flow, book
value, etc.
o Employees, locations, operations, assets, culture, routines, logistics, IT, etc.
o Family Business- “socioemotional wealth”
o Market penetration, new markets, incremental innovation, radical innovation,
new products, new services, etc.
Why Grow?
o Lifecycle
o Competition
o Moving Forward
o Product (Service) Life Cycle
Low Sales
High Costs
No Profits
Increasing Sales
Reducing Costs
Some Profits
Constant Sales
Reducing Costs
Increasing Profits
Reducing Sales
Constant Costs
Reducing Profits
o Capability Life Cycle
Level of Capability per Unit of Activity vs. Cumulative Amount of Activity
o Business Life Cycle
Start up, Growth, Maturity, Decline/Reinvention
o Industry Life Cycle
Why We Fail:
How to Avoid the Slouch Toward Failure <A Cognitive Perspective>
o We all have biases
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