ENT 526 Exam Notes:
Big Hairy Audacious Goal (BHAG): To be the world’s largest retail store wm
Strategic business statement which is created to focus an organisation on a single medium-long term organisation-
wide goal which is audacious, likely to be externally questionable, but not internally regarded as impossible.
"A true BHAG is clear and compelling, serves as unifying focal point of effort, and acts as a clear catalyst for team
spirit. It has a clear finish line, so the organization can know when it has achieved the goal; people like to shoot for
A BHAG encourages companies to define visionary goals that are more strategic and emotionally compelling. Many
businesses set goals that describe what they hope to accomplish over the coming days, months or years. These
goals help align employees of the business to work together more effectively. Often these goals are very tactical, such
as "achieve 10% revenue growth in the next 3 months."
The authors claim that a company may have more than one BHAG; there may be one over-reaching BHAG and other
shorter term BHAGs.
o A Good BHAG has 4 qualities: Aligned – Audacious - Articulate - Arduous
Example: AIESEC: Engage and develop every young person in the world.
o Amazon: Every book, ever printed, in any language, all available in less than 60 seconds.
o Google: Organize the world's information and make it universally accessible and useful
1) Ghandi’s Talisman (Ultimate test to know if what you are doing is good)
Think about the most destitute person you have ever met and ask if what you are about to do will benefit them.
If it will, then you are safe. If not, think again
1) Definition of an Entrepreneur-
Jean Baptist: An entrepreneur shifts economic resources out of an area of lower productivity to an area of higher
productivity (changes the way that society does a certain thing) FRENCH
Joseph Schumpeter: first definition, an “agent of change” who exploits opportunity GERMAN
Drucker: Spider Sense- intuition and then research it
Notes: A special innate ability to sense and to act on opportunity, combining out of the box thinking with determination
to bring something new to the world
Economies of Scale: Overtime, as production increases, costs decrease. Consulting (based on number of hours,
consultants, and clients) is the least scalable business, while software is the most scalable business. The more you
produce, the cheaper costs are per unit. This is important for investors because they want costs to either be stable, or
decrease while revenues increase.
Once you’ve made one product, you can replicate it through lower costs.
3) Life equals Risk-
Entrepreneurs take calculated risks in order to exploit opportunities. Every opportunity has its risks; there’s no life
4) If you haven’t failed, you aren’t trying hard enough-
Entrepreneurs fail many times before succeeding; they try to find as many opportunities, and exploit them. If one isn’t
failing, that means that he or she is not thinking out the box, and not trying to find new opportunities that will change
5) Adversity Quotient-
The adversity quotient refers to failure (being fired, etc.) and the ability to bounce back. There are quitters, campers,
and climbers- When things get tough, the quitters give up, the campers try to find a safe ground, and the climbers keep
trying. Entrepreneurs learn from their own failures, and try harder the next time.
6) Suboptimal Solutions-
A suboptimal solution is when a product or service is at par; not the best way of doing things. A system will continue to
shift (self-correct) to the right, until it reaches the equilibrium of number of people and happiness. It is an
entrepreneur’s goal to find that shift (happiness deficient) and moves to change it (the opportunity of changing
something to make it better). This optimal solution may lead to creative destruction...
7) Creative Destruction-
Creative destruction is a way of changing something drastically, and taking the market share of previous
products/services. The world will never be the same after this creative destruction, and it is hard to go back to the
8) The 10x Rule-
The 10x rule explains that change must be 10 times bigger than the current product/service in order for an entrepreneur
to succeed. People don’t like change, so in order for them to adopt a new product or service, it must be 10 times better
(cheaper, smaller, faster, and more profitable). The bigger the change, the greater the adoption rate will be.
Examples include email vs. regular mail, eBay vs. garage sale, Wikipedia vs. encyclopaedia.
9) Opportunities (key features, finding, and evaluating)-
An opportunity is a favourable set of circumstances that create the need for a product or service. Opportunities are:
(a) Attractive [CAGR>25%, 10x Better]
(b) Durable [trend, not fad]
(c) Timely [occurring at a suitable time]
(d) Able to Create/add value for the buyer or user *the buyer’s perspective+
Finding Opportunities: one must observe and study trends such as economic factors, social factors, technological
advances, and political action/regulatory statutes. An entrepreneur can also find opportunities by solving a problem-
observing people challenges, look for problems, listen to complaints, think of your own problem. This can be done
through brainstorming and focus groups.
Evaluating Opportunities: one must evaluate opportunities based on feasibility analyses, concept testing and competitive
analyses. The feasibility analysis is the process of determining if a business idea is viable worth pursuing based on (1)
product/service feasibility analysis, (2) industry/market feasibility, (3) organizational feasibility, and (4) financial
feasibility. Concept testing is a way of validating customer interest, desirability and purchase intent that help validate
underlying premise, develop the idea, and estimate sales. Competitive analysis is based on the 4 types of competition
(direct, indirect, alternatives, and status quo- living with something; swimming instead of playing soccer).
Pain is the discontent suffered by consumers using the current product/service. The bigger the pain, the faster the rate
of adoption of a new, better product/service will be. If there is no pain, no one will want to switch products- they are
happy with what they have. An inelastic demand is the most desirable (e.g. - air).
Quantify Opportunity by: Size of Pain * Number of People Suffering
Profit (increases) = Revenue (increases) – Expenses (decreases)
11) Positive Feedback Loop-
A positive feedback loop is when one gathers feedback based on a suboptimal solution, and then uses that feedback to
create an optimal solution. Once that optimal solution is achieved, more feedback is gained based on how to make the
product/service even more optimal. This procedure is continuous (aka “loop”)
◦ Positive feedback is a mechanism by which an output is enhanced. (sub optimal theory)
◦ The end result of a positive feedback is often amplifying and "explosive (aka “creative destruction”)
The starting point – an accepted state or equilibrium
System of dynamics call it an balanced feedback loop
Most of us just accept it even if it is somewhat unsatisfactory
The entrepreneur doesn’t accept it, but is attracted to the opportunity in solving this suboptimal equilibrium
12) Independent Data-
Documents needed in order to convince investors that product/service is viable. Independent data is third party
evidence on the facts, the industry, and sales
13) Business Plan-
20 pages for seed stage, 30 pages for early stage, and 35 pages for late stage. The business plan should contain all the
information an investor needs to make a decision. The business plan doesn’t have to be right, just has to be reasonable!
Business Plans are beneficial because they make you think about your business, goals, etc.
14) 7 P’s-
The 7 Ps are used in order to judge a business’s potential.
People- who is behind the venture? Bodcat diagram
Pain- bigger pain is better
Product- is it 10x? Know examples
Placement (industry) - CAGR > 25%, find an industry that’s growing fast (hockey stick); the year over
year growth rate of an investment over a specified period of time
Plan (go to market) - Doesn’t have to be right, just has to be reasonable
Who are they? Where will they come from? How will you attract them?
How will you monetize them?
Pitch-clear, confident, concise; golden thread that runs through all your messaging (succinct,
easy to understand, hard to argue, and induces greed)
Proposal- reward worth the risk; The risk is the asking price, the Reward is the percentage of
the company being offered; The Pre-money valuation is the value of the
company the day before the deal, and the Post-money valuation is the pre money
valuation plus the money- Does the proposal match the investment?
**People are the most important because they cannot be changed. Investors want people that are in the know
(understand the industry, know contacts) and people that are known (top industry experts). This helps investors mitigate
the risks of bad management. A desirable team consists of people with domain knowledge (an understanding of the
industry), operational experience, and business acumen.
15) Pre money vs. Post money valuations-
If the cash (price asked for a certain amount of the business) is $200,000 for 10%, then the pre money evaluation is
equal to $1,800,000 (9 x 200,000) and the post money evaluation is equal to $2,000,000 (200,000+1,800,000) Post-
money valuation is the value of the company after the investment has been made. This value is equal to the sum of the
pre-money valuation and the amount of new equity
16) The Documents-
10 Magic Slides, Business Plan, Executive Summary, and BoND must all demonstrate the “golden thread”, which is the
17) The Executive Summary-
The executive summary consists of the highlights of the business plan. It is 3-5 pages, fully footnoted, and follows the
same format as the business plan and 10 magic slides.
18) 10/20/30 Rule-
No more than 10 slides, 20 minutes, and no less than 30 point font when making power point presentations for
19) The Back of the Napkin Diagram-
Also known as an infographic or xplane diagram, the back of the napkin is used to convey your entire venture in one
image. It shows all the moving part without the underlying tech. It focuses on customers and value added.
20) Elevator Pitch-
An elevator pitch is a two minute presentation to capture investor’s interest. A good elevator pitch consists of the pain
statement (the need) and then the value proposition statement (your solution). It must be (a) succinct, (b) easy to
understand, (c) greed inducing, and (d) irrefutable- leave the investors with answers, not questions. “What you do and
why should I care?”
21) Executive Summary, Business Plan and 10 Magic Slides-
2. Your Solution
3. Business Model
4. Underlying magic/ technology
5. Marketing and sales
8. Projections and milestones
9. Status and timeline
10. Summary and call to action
22) Leadership Vs. Management-
Leadership is changing the order of things; inspiring people; a macro perspective.
Management is the production of acceptable results within known constraints/conditions; dictating people; a micro
Leadership is a choice to make a change; Leaders find potential in others and help them seize that potential opportunity