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 23) Limitations vs. Opportunities-
Leaders see possibilities where others don’t and help other to see and seize those opportunities; People who focus on
opportunities while others focus on limitations, achieve more. Being a leader is a matter of choice- the choice to make a
Machiavelli: Entrepreneurs are simply those who understand that there is little difference between an obstacle and
opportunity, and are able to turn both to their advantage.
Turn limitations into opportunities
24) Selective Information-
In a world of information overload, a leader must be able to separate “truly important from merely important”. Truly
important information will have an impact.
25) Why is Change so hard? (fear and momentum)
Change is so hard because of fear and momentum. Everyone is afraid of change; courage is action in the face of fear, not
the absence of fear.
Momentum affects change because of status quo. Those that hold important positions do not want to lose their status
quo due to change, so they use their power to resist change.
Change has to 10x bigger in order to overcome fear and momentum. The bigger the change, the greater and faster the
adoption rate will be.
26) What do you need to implement change?
To enact change one needs (1) Vision, (2) Focus, (3) Energy, and (4) Perseverance. These four qualities are needed in
order to change the order and disrupt status quo.
Leadership in the 21 Century:
(a) Capability- Ask a question and hear the answer, keep learning, be adaptive to change
(b) Collaboration- The world is flat; new ideas, changes, resources become approachable;
surround yourself with a diverse group of people for better decision making
(c) Character- Judgment (when to act), Perspective (things are different elsewhere), and ethics
** Listen to what the secretary has to say, because it’s important that every employee feels that they are part of the
team (especially when they are the face of your company), and eventually, s/he will come up with a good idea!
27) Why is Talent so Important (Key)?
You can’t change people; the people differentiate your company from the rest. Therefore, it is important that you make
sure you have the right people; get all the 9s on the bus.
28) Hiring Mistakes at Start ups-
-Hiring someone just because you know them. Lack sense of objectivity and accountability in the workplace.
-Hiring someone to help them out. Only hire someone who can add value to the company and its operations.
-Taking someone on as a partner because you can’t afford to hire him. You should outsource projects or work on a fee
-Hiring someone to do a bit of everything. The specific functions of a business need to be staffed with people who are
-Not knowing what job you want to hire for. Clearly define roles for any new hires. Not only will you avoid hiring a non-
productive person in an ill defined role, you’ll start attracting people who’ll add real value to their role and your
-Hire for the job you hate. Only assign things that others can do better, not just with less moaning.
Sameness vs suitability
Follower’s vs leaders
Profile for the candidate vs candidate for the profile
Equity vs higher pay
Overheads vs value add
29) The Talent Triangle (Business Acumen, Domain Knowledge, Operational Experience)-
Business Acumen: skills needed to manage a high growth venture.
Domain Knowledge: experience in the field the venture is penetrating and a network of contacts in such a field.
Operational Experience: more than just theory, experience executing and a track record of delivering.
30) The BodCat Management Style-
Show that you have the business acumen, operational experience, and domain knowledge. To make the business a
success, match up the operational phase of the business with the talent triangle (start-up, rapid growth, operational
excellence, global reach, public), and show that all decisions are made based on (1) consultation, (2) authority, and (3)
trust. External parties must at all time see that the Management team as being 100% in agreement. 31) Hiring from Within (Home-grown Employees)-
Benefits of home growing:
1) Save money (training, hiring, etc.)
2) Keep Intellectual Property within the company (Knowledge Economy)
3) Employees have a sense of ownership, and are motivated to work harder
4) Less training, employees are more knowledgeable and experienced
5) Less risk of a bad hire
6) Core values are stronger
32) Top Down vs. Bottom Hiring-
Hiring from the bottom up means filling up specific roles (specific skill sets) with people who will be doing jobs that are
typically lower paying but take up large amounts of time. Using this method, hiring is used to fill specific gaps.
Hiring from the top down means hiring senior people first and hoping they can do it all. Using this method, visionaries
33) Double Dipping
Making something once and creating multiple revenue streams from it. You make starwars movie, you make starwars
toys, lunchboxes, books, and games.
34) Been There, Done That-
Investors want someone who has experience; either has created a successful start up, or has had success within the
industry, or preferably both. By finding a management team that has experience, investors are able to mitigate the risk
of management (One of the 3 Ms).
35) The Start up Catch 22-
You need a great team to earn money, but in order to get a great team together you need money. In order to overcome
this obstacle, one can encourage a great team to work for the company based on the vision, or stock options.
36) 6 or 9 Theory-
Jack Welch (GE) said that you should rate all your employees as either 6s or 9s. You should then fire all your 6s, and
reward the 9s with the 6s’ compensation. Weed out all the bad employees, and give more benefits/ value to the good
37) Three Elements for Entrepreneurship (Martin)-
1) Suboptimal Solution Exists
2) Person brings- (a) inspiration, (b) creativity, (c) direct action, (4) courage, (5) fortitude
3) Results in a 10x shift in equilibrium, shifting the entire market
38) Steps to Raising Capital-
1. Be clear about why you want the money
2. Be prepared for external scrutiny; develop a clear executive summary, business plan, investor pitch, elevator pitch
3. Compare, contrast and decide on the method of capital acquisition
4. Assemble the best team, based on management (boards- lawyers, bankers, IRs)
5. Fine tune your strategy based on your chosen source
6. Relentless pursue ( Plan the work; work the plan)
39) Questions to Ask Yourself when Preparing to Raise Capital-
1) How much do I need?
2) What is the best source of funding based on:
Cost of Capital
Supply & Demand
Stage of Venture
3) Am I prepared to put in the time and resources necessary to get this done?
40) 14 Questions Evert Investor Asks-
o Have you raised seed capital?
o Does management have skin in the game?
o Why does your company need capital at this time?
o Are all the key management positions filled?
o Is your team “well rounded” (remember the Talent Triangle) and experienced? o Are your Boards (Directors/Advisors) in place?
o Do you have a strong well developed plan to leverage the capital into high growth?
o Is there a large market potential for your venture?
o At what stage is the market for your offerings?
o At what stage is investor appetite for your opportunity?
41) 3 Ms of Risk Mitigation-
The 3 Ms include Magic, Market and Management. These are the three biggest risks that investors take into
consideration before investing.
42) 3 Ts of What Investors Want-
The 3 Ts include Traction, Technology and Team. Investors take all the 3 Ts into consideration when making investment
** Traction is 3 party evidence; somebody is willing to pay for it. (Sales)
Traction refers to progress or the concrete milestones that you have reached and surpassed.
1. Management Risk: Can these founders deliver?
2. Magic Risk: Can the product be built? And if so, will it be exponentially better?
3. Market Risk: If the founders deliver and the product works, will anyone buy it?
43) What Attracts Investors-
The 3 Ts and the 3 Ms may attract investors; this means that there should be
third party evidence (proof of concept)
o What proof of concepts or third party validation can you use? Surveys, data from the market, patents
solid management team
solid lead product with strong spinoff related products in the pipeline; always want more options just in case
well protected IP (trademarks, patents, copyrights, plant rights)
Traction (milestones achieved, alliances, IP)
Past start-up & seed now pushing for launch and operational excellence
A high potential ROI to reward their risk
44) What Investors Look for in the Documents-
The 4 Obvious P’s
People: the management team
Product: and the Pain it addresses
Placement: industry size, status and saturation
Plan: go to market strategy
……and that is what they want to learn from your Business Plan and Investor Deck
45) Angel Investors vs. Venture Capitalists
VCs work for (6-12) clients so they require traction, and are more about the math, rather than the passion. There is more
governance and terms are trickier. VCs are also professional investors
Business angels use their own money; if Jim says he’s investing, it’s from his own bank account
Venture Capitalists use other people’s money to invest (OPM)
Every venture capitalist has their money in their own fund.
Every 7 years, VC raise money; it takes 7 years to implement money, get money back, pay back etc.
Big differences between US and Canada is in US, most are CEO, in Canada, most are former service providers
As a VC, once you screw up, you are done.
3 things can happen: they love you for making them money, so they double up; they don’t want to participate and
continue investing for a second time (if the people who don’t want to give you more money, it’s the kiss of death,
meaning if your current investor doesn’t want to invest more, new investors won’t either)
46) What Investors want?
The higher the risk level, the more investors want in return (x); e.g. - double, triple…
Family/Friends expect the same return as founders
Angels expect 10-15x return
VCs that invest in seeds expect 10-15x return
VCs that invest in early start ups expect 10x return VCs that invest late expect 5x return
Venture Debt expect 2x return
47) Three tests of clarity
Clarity is necessary for investors to know what you do and who cares RIGHT AWAY. This is helpful in getting the
attention and focus of the audience. Three tests that are used include the Back of the Napkin Diagram, the Elevator
Pitch, and the Executive Summary. By having a clear message, the company will seem more focused, and therefore
management will seem stronger.
48) How to get from GOOD to GREAT?
The majority of companies are just good, because good is good enough. However, in order to get from good to great,
you need to get rid of all the bad employees and get the good employees on the “bus” (6 and 9 theory). With the right,
talented people (bodcat) on the bus, you will be able to find the right direction and be successful. Main theories for
getting from good to great are the Bus, Level 5 Leadership, and the Hedgehog theory.
**Employees must be self-motivated, so that you do not always need to watch over them.
Reasons to Let Your Staff Make Mistakes:
1) It’s cheaper and more impactful if they learn from their mistakes, rather than teaching them
2) Gives your staff more authority
3) Creates a positive culture
49) Level 5 Leadership-
“Ambition first and foremost for the company and concern for its success, rather than for one’s own riches and personal renown.”
A leader that builds enduring greatness through the paradoxical blend of personal humility and professional will. They
channel their ego’s needs away from themselves and into the larger goal of building a great company; their ambition is
first and foremost for the institution. They are humble in the sense that they do not take credit for the company’s
success, yet they always take blame for the company’s failures. (Window for praise, mirror for blame)
** Lead change instead of having change lead you
50) The Bus-
Good-to-great leaders began the transformation by first getting the right people on the bus (and the wrong people
off the bus).
“Who” question comes BEFORE the “What” decisions i.e. before vision, before strategy, before organization
structure, before tactics!
The Right People...
a) Can adapt easier to a changing world and appreciate being on the bus with the other right people.
b) Are self-motivated to be part of something great.
c) Are not the wrong people i.e. if you have the wrong people, it doesn’t matter if you discover the right direction!
This can be tied in with the 6 and 9 theory and the Talent Triangle theory
51) Theories on how people become leaders-
1) Trait Theory: People are born with leadership traits (Alexander the great was a leader since the age of 12; he was
born a leader)
2) Great Events Theory: Crisis brings out leadership qualities in an ordinary person (Batman)
3) Transformational Leadership Theory: A person chooses to become a leader, most commonly accepted theory
52) 6 Timeless fundamentals
1. Be a clock builder not a time teller
2. Build your company around a core ideology – sense of purpose and ideology
3. Build a cult-like culture – go beyond value statements
4. Homegrow your management
5. Stimulate progress through big hairy audacious goals
6. Embrace the genus of the AND
53) Blue Ocean Strategy-
When other companies are competing over a certain product/service by making small changes, one must use a blue
ocean strategy- do something completely different (Creating uncontested market space making the competition
Simultaneous pursuit of differentiation and low cost
The aim of BOS: not to outperform the competition, but to create new market space
Reorient your focus from competitors to alternatives, and from customers to non customers of the industry
Cornerstone of BOS= Value Innovation; create a leap of value for buyers and or the company, thereby opening
up new and uncontested market space
54) The Hedgehog- The fox tries to come up with different tactics to beat out the hedgehog, but the hedgehog just continues to use one
technique which he is very good at, and wins every time. From this, we learn that one should find his core competency
(what he or she is best at) and use that to his advantage. You will be successful if you combine your economic drive,
passion, and what you are best at (core competency) in order to make a living.
Take a complex world and simplify it.
An understanding of what you can do best
The Hedgehog Concept – Not a goal to be the best, a strategy to be the best, an intention to be the best or a
plan to be the best. It is an understanding of what you can be the best at.
55) Sull’s 4 Rules for Going Global- Donald Sull is a Harvard professor, gives simple rule to follow when going after a blue
a) Have a Clear Focus: diversification is dangerous when a company decides to pursue a golden opportunity
b) Standardize What Matters: to avoid the strain of rapid growth when scaling a business
c) Manage Binding Constraints: binding constraints are potential bottlenecks that could prevent a company from
d) Hedge Against the Unforeseen Problems: war chest, operational/financial discipline, strong partners vested in your
success, owners in it for the long haul, managers willing to take the plunge
56) Core Competencies-
The essence of core competences is that you have a set of skills and capabilities that collectively are hard for
competitors to copy.
Core competencies are extreme capabilities that serve as a source of competitive advantage for a firm over its rivals
Core competency must meet the following three conditions:
It provides consumer benefits
It is not easy for competitors to imitate
It can be leveraged widely to many products and markets. (Scalability)
57) Moving an Elephant with a Mouse
McEwen Goldcorp changed the gold mining industry by giving away its key asset (Proprietary geo data) which is not
done in such a traditional industry. Crowd sourcing was used in order to gain information on how to best mine for gold
through the Goldcorp challenge. They are now the lowest cost and highest profit gold miners in the world.
Crowd sourcing- WE i