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Principles of Innovation Exam 2 (Pitfalls)

Key Concepts:

Terms in this set (9)

These statements could give an investor doubts about how well an entrepreneur understands the business:
A. "The market is wrong";

B. "Large company X just doesn't get it";

C. "If we get only 2 percent of the market...";

D. "We got hot responses from equity crowdfunding";

E. "I have skin in the game";

F. "The only people who have told me my idea is awesome are related to me".
Search Stage
-during this stage, a start-up searches for a business model that works.
-If customer feedback reveals that its business hypotheses are wrong, it either revises them or "pivots" to new hypothese
When model is proven...
-the start up starts executing, building a formal organization.
-each stage of customer development is iterative.
-a start-up will probably fail several times before finding the right approach.
Customer creation
-millions of dollars are often spent to fuel rapid customer growth in customer creation.
The Toughest Question of All: Pivot or Proceed?
There are three steps to answering the crucial "pivot or proceed" question:
1. Assemble and review all key discovery and validation findings;

2, Review the business model hypotheses and their interactions with one another

3. Focus on the "metrics that matter" in the financial model
Work flow map of the prototypical customer
diagrams how customers do their jobs or live their lives both with and without the new product.
Important hard data to review
-customer feedback, particularly from sales report cards evaluating customer enthusiasm for the product and its potential sales revenue over time.

-pricing, customer acquisition costs, any major product cost changes, channel, and important stakeholders.
These could be good metrics to validate financial model in this phase:
A. How much are customers impacted by the network effect in a two-sided market?

B. What are customer acquisition costs, prospect conversion rates, customer lifetime value, and customer switching costs?

C. What are the costs of selling through the channel? Channel margin, promotion, shelf-space charges?

D. Should we choose a small market or medium market?

E. How much cash is the company "burning" (spending) a month? When will the company run out of cash?
Toughest Startup Questions
-Do you want to pivot?
Or do you want to proceed?

-Did the product sell well and easily?

-Is it absolutely, unequivocally clear that when more money is spent to acquire customers, they'll arrive at a steady, predictable, profitable pace?
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