2007 11 27 CC Vernon Prep Session 1

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Carolina Challenge 2008 Prep Session 1: 

Carolina Challenge 2008 Prep Session 1 Introduction to Vernon’s Razor

Agenda: 

Agenda Online resources Define entrepreneurship Opportunity and Risk Value proposition Why you?

Online Resources: 

Online Resources

Entrepreneurship: 

Entrepreneurship 18th century: bearing the risk of buying at certain prices and selling at uncertain prices Today (my definition): taking good ideas, assessing the value they could create, and building an organization (people and systems) to distribute that value

Entrepreneurship: 

Entrepreneurship Taking good ideas, assessing the value they could create, and building an organization to distribute that value Begs the questions: what value can you create? And is it enough to sustain a new venture? Opportunity Risk

Vernon’s Razor: 

Go or No-Go? Vernon’s Razor Quantify and MAXimize Quantify and MINimize

Slide7: 

Go or No-Go? Quantify and MAXimize Quantify and MINimize

Vernon’s Razor: 

Vernon’s Razor What is my value proposition? How big could this get? What’s in it for me? Why me? Can I compete? Can this thing make money? How bad do they want it?

Vernon’s Razor: 

Vernon’s Razor What is my value proposition? How big could this get? What’s in it for me? Why me? Can I compete? Can this thing make money? How bad do they want it?

Value Proposition: 

Value Proposition Underlying context: you would not be doing this if you were not making the world a better place Brief description of the value that you will create with your new venture Not a description of your idea Often described as a problem being solved Not a mission statement Guy Kawasaki

Good VP: 

Good VP Campus Biodiesel gives universities the ability recycle all their vegetable waste oil into biodiesel fuel for use in university vehicles while educating students about environmental responsibility.

Less Good VP: 

Less Good VP Campus Biodiesel recognizes that reliance on petroleum to fuel our nation’s vehicles is problematic in that domestic production is decreasing, and the petroleum that remains globally is increasingly difficult to extract. Dependence on foreign sources is also inherently costly, insecure and politically undesirable… CB will address this opportunity through an integration of UNC-Chapel Hill (UNC) resources. We will recycle waste vegetable oil (WVO) from UNC dining facilities We will establish a collection system to likewise recycle WVO generated by the broader UNC community. The biodiesel production facility and collection system will serve as educational resources, engaging and empowering faculty, students and staff in being part of the solution to an impending energy transition.

Good VP: 

Good VP Using NewCo software-as-a-service, small- to mid-sized businesses can offer world-class customer services previously only available to the Fortune 500.

Bad VP: 

Bad VP Customer service and efficiency best practices are defined by forward thinking corporations who drive differentiation by their speed, flexibility and quality of service. Providing high levels of service (and “touch”) while driving profitability requires communications-enabled technologies. Such technologies implemented privately/individually by an enterprise are costly and typically out of reach for small and medium businesses – yet customer expectations don’t change. The new venture by NewCo will establish a delivery model and hosted infrastructure based on “software-as-a-service” (hosted/operated/ managed services) for communications enabled business applications. Where appropriate, the chosen applications will be from the opensource community to provide for customer access to business solutions heretofore too expensive and complex to integrate by the Small and Medium sized businesses.

Good VP: 

Good VP Softmaxx seeks to become the DOS of wireless machine-to-machine (M2M) modems, replacing costly development services with an off-the-shelf “operating system.” Tip: use analogies!

Bad VP: 

Bad VP Softmaxx is a startup company that is developing software for wireless machine-to-machine (M2M) communications. While most wireless communications today are for connecting people, M2M wireless communications connects machines. Examples of wireless machine communications include: vehicle tracking, remote asset monitoring, security cameras, kiosks, and vending machines.

VP Example: 

VP Example Zebra Crossings sells unique, fairly traded products that not only look good, but do good as well. We serve as the nexus between the fair trade and online wedding gift registry markets. By attracting socially-conscious consumers and wedding-related customers new to the “Fair Trade” label, we are both solidifying and expanding the market for Fair Trade goods, fulfilling our mission to increase employment opportunities for artisans in economically-disadvantaged areas.

Slightly Better: 

Slightly Better Zebra Crossings supports a double bottom line by creating jobs in impoverished nations and creating revenue by selling high quality hand-made imported goods to the U.S. wedding market.

Good VP: 

Good VP

Value Proposition: 

Value Proposition Two tips Use analogies Solve a problem (in a story)

Value Proposition: 

Value Proposition Start thinking about how things “add value” rather than what they do (e.g., stoplights) Write down a statement and continuously revise it The 1st round of the Challenge will ask for your Value Proposition Value to whom – create a value network

Create a Value Network Chart: 

Caller New GPS Gadget Our Customer ?? Equipment Retailers Equipment Manufacturers Equipment Wholesalers Following the Path of One Phone Call Create a Value Network Chart

Slide24: 

Go or No-Go?

Risk Aversion: 

Risk Aversion When was the last time you… …tried a new route home? …went to a new restaurant? …said hello to a stranger in an elevator? How many of you order the same thing every time you go to your favorite restaurant?

Risk Aversion: 

Risk Aversion Risk aversion explains… …why all popular music sounds the same. …why all morning show sets look the same. (the window, the hooting audience, the jolly weatherman…) …why all talk shows look the same. (the desk, the format of standup and then interviews, the band) If it works, copy it!

Risk: 

Risk Trying something truly NEW is the riskiest of all. The newer and riskier your business, the longer your business plan will need to be. There is no insurance policy for a new venture. (Insurance is just paying to get rid of risk.)

Formula to Deal with Risk: 

Formula to Deal with Risk Chop up the risk into little pieces and establish milestones for each piece. Picking the right risks and milestones is the first step toward mitigating them – just identifying them correctly creates value. Then each milestone you actually hit creates value (by reducing risk). “Line ‘em up, knock ‘em out”

Slide29: 

Go or No-Go?

Vernon’s Razor: 

Vernon’s Razor What is my value proposition? How big could this get? What’s in it for me? Why me? Can I compete? Can this thing make money? How bad do they want it?

Team: 

Team The #1 to mitigate risk in a new venture: proven team Most VCs have “team” as #1 ingredient Can you answer: Why you? Not being an expert is a management problem

Team: 

Team Start building a team Best research is from experts Advisors Don’t over-protect your idea Protecting idea vs. #1 team We’ll try to help you network at Challenge events (practice rounds and public rooms)

Team: 

Team Good news: talented people like meeting talented people Play the student card On the Challenge executive summary application, you’ll be asked who has helped you and how Start getting advice over winter break

Vernon’s Razor: 

Vernon’s Razor What is my value proposition? How big could this get? What’s in it for me? Why me? Can I compete? Can this thing make money? How bad do they want it?

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