4/27/20

Lecture - 4
Creation of New Ventures and Start-Ups

Entrepreneurship and Innovation

KUSOM, MBA, 2020
Faculty - Shashi Raj Bajracharya

Creation of New Ventures and Start-Ups

§ Creation of New Business Idea
• Sources of New Ideas
• Method of Generating Ideas
• Creative Problem Solving

§ Creation of New Ventures

• Planning as Part of New Ventures
• Creating New Venture Team

§ Start-Ups
• Understanding
• Types of Start-Ups
• Challenges and Opportunities

1
 4/27/20

4. Creation of New Ventures and Start-Ups

Creation of new venture is a process

Phase I: Identifying opportunities and creating new business idea

Phase II: Feasibility analysis and assessment
Phase III: Planning as part of new venture
Phase IV: Launching the venture
Phase V: Managing and growing new venture
Phase VI: Exiting the venture

4.1 Creation of New Business Idea

A business idea is a concept that can be used for financial gain that is
usually centered on a product or service that can be offered for money.

• Sources of New Business Idea

• Methods
• Creative Problem Solving

2
 4/27/20

4.1.1 Sources of New Business Idea

1. Consumers
Potential entrepreneurs should continually pay close attention to potential
customers. This activity includes monitoring ideas, opinions, complains and
suggestions of existing customers. These feedbacks can lead to development
of new products and services.

2. Existing Products and Services

Potential entrepreneurs should establish a formal method for monitoring and
evaluating existing products and services in the market. The things to be
monitored are as follows:-
i. What are the existing products, new products and processes?
ii. What alternatives can be made in the existing product and process?
iii. Who are the dissatisfied customers of existing products and what do they
want?
This analysis gives way to improve these offerings and this may lead to the
birth of a new product that has more market appeal.

4.1.1 Sources of New Business Idea

3. Distribution Channels
Members of the distribution channels are excellent sources for new ideas
because of their familiarity with the needs of the market.

4. Government
• Government agencies – Patent Office, Govt owned patents, Technical
Services
• New Regulations

5. Research and Development

The largest source of new ideas is the entrepreneur’s own research and
development.
*

3
 4/27/20

4.1.2 Method of Generating Ideas

§ Brainstorming
• No criticism by anyone in the group – no negative comments
• Freewheeling is encouraged – the wider the idea, the better.
• Quantity of ideas is desired – greater the number of ideas, the
greater the likelihood of the emergence of useful ideas.
• Combinations and improvements of ideas are encouraged;
ideas of others can be used to produce still another new idea.

§ Focus Groups
• Structured format
• In-depth discussion, focused to solution rather than diverse
• Improve existing ideas
• Requires skilled moderator

4.1.2 Method of Generating Ideas

§ Problem Inventory Analysis

• A method for obtaining new ideas and solutions

by focusing on problems. This analysis uses
individuals in a manner that is analogous to focus
groups to generate new product areas.

• This technique is therefore a nice illustration of

how innovative ideas can often be developed
from responses that are not intrinsically creative

• Useful for testing a new product idea

4
 4/27/20

4.1.3 Creative Problem Solving

CPS is a proven method for approaching a problem or a challenge in an
imaginative and innovative way. It is the mental process of searching for an
original and previously unknown solution to a problem.

Method for obtaining new ideas focusing on the given parameters. Can be
stifled by perceptual, cultural, emotional, and organizational factors

According to Ruth Noller

• Creative specifies elements of newness, innovation, and novelty.
• Problem refers to any situation that presents a challenge, offers an
opportunity,
or represents a troubling concern.
• Solving means devising ways to answer, to meet, or to satisfy a
situation by changing self or situation.

4.1.3 Creative Problem Solving

• Brainstorming
• Reverse Brainstorming : A group method for obtaining new ideas
focusing on the negative. Similar to brainstorming except that
criticism is allowed. Its is based on finding fault by asking the
question “in how many ways can the idea fail”?
• Brainwriting : Developing new ideas which is the form of written
brainstorming.
• Gordon Method : Method for developing new ideas when the
individuals are unaware of the problem.
• Checklist Method : Developing a new idea through a list of related
issues. – Put to other uses, Modify, Magnify (what to add), Minify,
Substitute, Rearrange, Reverse, Combine etc.

5
 4/27/20

4.1.3 Creative Problem Solving

• Free Association : Developing a new idea through a chain of word
association. E.g., clothing.
• Forced Relationships : Developing a new idea by looking at product
combinations. E.g., paper and soap.
• Collective Notebook Method : Developing a new idea by group members
regularly recording ideas.
• Attribute Listing : Developing a new idea by looking at the positives and
negatives, look at problem from variety of viewpoints. E.g dried raisins
• Big-Dream Approach : Developing a new idea by thinking without
constraints, thinking big.
• Parameter Analysis : Developing a new idea by focusing on parameter
identification and creative synthesis. E.g. Supercars, Superbikes

**

4.1.3 Creative Problem Solving

• Define and explain what is “Creative Problem Solving” (CPS)?
• Explain CPS as done by Alex Osborn and Sidney Parnes.
• Explain Creative Problem Solving Process according to Osborn Parnes
known as Osborn Parnes Model, also known as CPS Framework.
• Divergent and Convergent Thinking with examples

***

6
 4/27/20

4.2 Creation of New Venture

A business enterprise or speculation in which

something is risked in the hope of profit; a
commercial or other speculation.

Creation of a start-up venture is a process which

starts with a business idea or opportunity, followed
by an intended individual/entrepreneur who
organizes a series of activities, creates
competence, and mobilizes resources, using
his/her networks, in an environment, in order to
create value.

4.2.1 Planning as Part of New Venture

It is extremely important in the early stages of any new venture
when the entrepreneur will need to prepare different preliminary
plans

• Business Plan
• Feasibility Studies
• Business Models

**

7
 4/27/20

4.2.2 Creating New Venture Team

• Selecting the Legal Forms of Business
• Building Successful Organization Culture
• The Founder/s and the Leadership
• The Role of Board of Directors
• The Board of Advisors
• The Management Team
• Recruiting and Selecting Key Employees

***

4.3.1 Start-Ups
• A startup is a company or project initiated by an entrepreneur to seek,
effectively develop, and validate a scalable business model.

• The term startup refers to a company in the first stage of its operations.
Startups are founded by one or more entrepreneurs who want to develop a
product or service for which they believe there is a demand. These companies
generally start with high costs and limited revenue which is why they look for
capital from a variety of sources such as
venture capitalists. – Mitchell Grant

8
 4/27/20

4.3.1 Start-Ups
According to startup guru Steve Blank, a startup is a “temporary
organization designed to search for a repeatable and scalable business
model”, while the small business runs according to the fixed business
model.
For a startup founder this concept means the following three main functions:
• To provide a vision of a product with a set of characteristics;
• Create a series of sceneries of the business model regarding customers,
distributions, and finance of the company.
• Understand, whether the model is the right one, based on customers
behavior, as your model predicts.

Vs

4.3.2 Start-Ups
1. Lifestyle Startups
Lifestyle entrepreneurs are living their preferred lives while working for no one,
but themselves. In this case, an entrepreneur can pursue a desire to experience
a certain lifestyle and earn a sufficient amount of income while doing so. For
hobby lovers that work on their real passion may be listed under this type of
startups. They are usually people who want to satisfy their needs by being in
activities that are entirely on what they like.
E.g., music lovers, freelance coders or web designers, surfers and divers,
2. Small Business Startups
Small businesses are those, who runs his/her own business to feed the
family. Small business entrepreneurship is not designed to scale and most are
barely profitable. The owners want to own their own business and “feed the
family.” They hire local employees or family. E.g., grocery stores, hairdressers,
bakers, travel agents, carpenters, electricians, etc.

9
 4/27/20

4.3.2 Start-Ups
3. Scalable Startups
From the very beginning, the founders believe that they are going to change the
world. Google, Uber, Facebook, Twitter are just the latest examples of scalable
startups. Such startups hire the best and the brightest. They always search for a
repeatable and scalable business model. When they find it, they start to look
for more venture capital to boost their businesses. They are also known as
Silicon Valley Startups, Tech Startups and Gazelles.

4. Buyable Startups
During the last five years, startups that offer Web and mobile app solutions, are
sold to larger companies. This tendency becomes more and more popular.
Their goal is not to build a billion-dollar company, but to be sold to a larger
company for pretty cash.
E.g., Instagram, Whatsapp, Kaymu etc

4.3.2 Start-Ups
5. Large Company Startup
Large companies have a finite life duration. Changes in customer tastes,
new technologies, legislation, new competitors, etc., can create pressure for
more disruptive innovation—requiring large companies to create entirely
new innovative products sold to new customers in new markets E.g., Google
and Android.

6. Social Startups
their mission is to make the world a better place, not for wealth's sake, but
for an idea. Unlike scalable startups, their goal is to make the world a better
place, not to take market share or to create to wealth for the founders but
usually some form of charitable foundation.

7. Other types of Startups

i. Salary-Substitute Firms
ii. Foundation Companies
**

10
 4/27/20

4.3.3 Challenges and Opportunities

• Money
Startups need cashflow to fund product development, office space, marketing,
technology and many more which either has to come from sales or investors. And when
cash flow issues hit a startup, they can hit hard, delaying important progress like rolling
out products, hiring key staff, or the entire operations.

• Neglecting marketing and sales

Many startups ignore marketing and sales functions completely and hope that word of
mouth will be enough. Need to put rigorous effort to grow them with a proper structured
plan to promote the startup.

• Lack of planning
Many startups fail because they ignore to plan. Or maybe they really did plan, but they
just didn’t cover all the bases. All the areas of business should be a part of the business
plan right from the beginning. Not only that, but you need to plan for the things you can’t
plan for, too. “if you fail to prepare, prepare to fail.”

4.3.3 Challenges and Opportunities

• Finding the right people
It is important to make it a priority to lay out the hiring strategy right at the start.
Certain skills are crucial not only for your business to survive, but also for it to
grow. Knowing the exact skills you need and how to get those essential people on
board might be the determining factor in how well your startup thrives.

• Time management
There’s never enough time during the startups. There are numerous decisions to
be made and only 24 hours in a day. Hence need to focus time and energy on the
most impactful things and set priorities. Need to figure out what is important and
what can be postponed till next day.

• Founders
While the founders may have developed a great product and set the wheels of
the whole venture in motion, they can’t do everything. And even if they could,
they shouldn’t. It’s not just a time thing it’s a skill thing. Good leaders know the
extent and limitations of their own expertise.

11
 4/27/20

4.3.3 Challenges and Opportunities

• Scaling up
Every stage of growth creates new challenge. Maybe you need to hire more staff,
need to focus on functions like administration, payroll, support, need a larger
office space to deal with your increased staff numbers etc and may be you
haven’t budgeted for that. This is the price of success.

• Your comfort zone

At the beginning, you’re going to need to wear a lot of different hats
(metaphorically speaking, at least). And you’re going to have to push yourself to
go outside your comfort zone on a regular basis.

• Competitors
No matter how great your products or services are, it’s a crowded marketplace.
And it’s growing all the time. the startup doesn’t remain new for long, and new
rivals can quickly alter the playing field. Hence continuously need to create what
makes your company different? What makes your products special? What makes
your brand unique? Why would someone choose you over your competitors?

4.3.3 Challenges and Opportunities

• Poor management
One thing startups definitely can’t afford is ineffective management. A
management team that worked well in the initial stages may find itself
struggling as the startup expands, as they’re tested by anything from poor
sales to market conditions.

• Lack of mentorship
You may have a great product or idea, but lack the necessary guidance,
market experience, or knowledge to take it to the next level. That’s where a
mentor comes in, with the wisdom and confidence to help you clear those
roadblocks that are holding your startup back. Having somebody you can lean
on when major decisions have to be made, or even just when you need a
sounding board who has already been there and done that, is super useful.

*****

12
 4/27/20

Assignment – 3, Lecture 4
1. Attend Osborn Parnes Model question as mentioned in 4.1.3, slide No. 12.
Please submit answers in computer printouts

2. Business idea pitching.

• Develop a new business idea
• Product / service description
• Identification of the opportunity, market perspective
• Product differentiation with respect to existing competitors’ products
• Benefits to the customers
• 3-4 minutes per individual to present the idea.
Make succinct individual presentation.

13