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Lecture 11

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


Department
Entrepreneurship
Course Code
ENT 3003
Professor
Christopher Garrett Pryor
Lecture
11

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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:
SAME AS ABOVE
Growth!:
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
firms
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
Introduction
Low Sales
High Costs
No Profits
Growth
Increasing Sales
Reducing Costs
Some Profits
Maturity
Constant Sales
Reducing Costs
Increasing Profits
Decline
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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