Entrepreneurship Boot Camp Mindset

Question for today Do entrepreneurs think differently? What is this “outside the box” all about? Is outside the box for real?

Start at any of the nine dots and draw four straight lines that go through all nine dots without lifting your pencil and no tracing over an existing line. I start out with this silly exercise to show them how they think

Four straight without connecting all nine dots w\o lifting your pencil, no tracing over an existing line. You have to go outside the box twice 4

Reading What makes entrepreneurs entrepreneurial? Saras Sarasvathy We seeks to answer the question – is there such a think as entrepreneurial thinking? If there is, is it applicable only to entrepreneurs? How is it different from the thinking process of managers? The conclusion is Effectual vs. Causal reasoning, but can it be learned?

Causal Thinking = Managerial Thinking Setting the framework How Entrepreneurs Think Causal vs. Effectual Thinking Causal Thinking = Managerial Thinking Choosing best means to achieve a predetermined goal Saras Sarasvathy, Harvard Business Review

Managerial Thinking – Causal Reasoning Distinguishing Characteristic: Selecting between given means to achieve a pre-determined goal M1 M2 Given Goal M3 M4 M5 Given Means

Causal Thinking = Managerial Thinking Setting the framework How Entrepreneurs Think Strategic vs. Effectual Thinking Causal Thinking = Managerial Thinking Choosing best means to achieve a predetermined goal Strategic Thinking = Creative Thinking Generating new means to reach predetermined goal

Strategic Thinking – Creative Causal Reasoning Distinguishing Characteristic: Generating new means to achieve pre-determined goals M1 M2 Given Goals M3 M4 New means are generated M5

Setting the framework How Entrepreneurs Think Effectual Thinking Causal Thinking = Managerial Thinking Choosing best means to achieve a predetermined goal Strategic Thinking = Creative Causal Thinking Generating new means to reach predetermined goal Effectual Thinking = Entrepreneurial Thinking Imagining possible new ends using a given set of means Saras Sarasvathy, Harvard Business Review

Entrepreneurial Thinking – Effectual Reasoning Distinguishing Characteristic: Imagining possible new ends using a given set of means M1 E1 M2 Imagine New Ends E2 M3 E3 Could argue that this is limiting because you are in your core competenices. M5 E4 M4 E5 Given Means Saras Sarasvathy, Harvard Business Review

Market Definition Classic Causation Model from Marketing Textbooks Segmentation (using relevant variables such as age, income, etc.) Targeting (based on evaluation criteria such as expected return) Positioning (through market strategies) THE CUSTOMER Customer Identification (through Who am I? What do I know? Whom do I know?) Customer Definition (through strategic partnerships & “selling”) Adding Segments/Strategic Partners Definition of one of several possible markets Process of Effectuation Used by Expert Entrepreneurs

Customer Initial cost $ 11.6MM Classic Causation Model from Marketing Textbooks Preliminary Prototype $ 250M Initial Focus Group Study $ 250M Market Segment Study $ 100 M Gets you to the start line Advertising & PR $ 11MM Customer Gets you to the market Sale often ”pull through” to get to customer Initial cost $ 11.6MM

Introduction of new means to reach goal Strategic, Creative Thinking Generating new means to reach customer Preliminary Prototype $ 250K Initial Focus Group Study $ 250K Market Segment Study $ 100K Gets you to the start line Advertising & PR $ 11M Gets you to the market Customer Introduction of new means to reach goal Partnerships New outlets MLM Channel eCommerce Initial cost $ 11.6MM + or -

Customer Initial cost $ 19.61 Pain Identification Efficacious Thinking Entrepreneurial Thinking Imagining new ends, new means Industry Knowledge Patterns of Change Skill Sets Social Networks Pain Identification Phantom Sale against defined pain \ cure Customer Customer benefit need Customer in Hand Initial customer acquisition on special terms (early adopter, point of sale, etc.) Initial cost $ 19.61

Pure Entrepreneurial Thinking – Efficacy Distinguishing Characteristic: Imagining possible new ends using new means M1 M2 Imagine New Ends M3 M5 M4 Create New Means Apologies to Saras Sarasvathy Harvard Business Review

Thinking like an entrepreneur Causal Thinking Strategic Thinking Effectual Thinking USC Entrepreneurial Thinking Efficacy

The USC thinking Efficacy Imagine the end, Create the means

Types of Thinking Ends Means Causal (Linear) Given Given Strategic (Creative) Given Create some new Effectual Create Given new Efficacy Imagine Create New New Ends Means

Entrepreneurial Thinking Imagine the end, Create the means

Tom O’Malia. Orfalea Chair for Entrepreneurial Studies. 213. 821. 0917 Tom O’Malia Orfalea Chair for Entrepreneurial Studies 213.821.0917 tom.omalia@marshall.usc.edu Lloyd Greif Center Marshall School of Business University of Southern California Bridge Hall One Los Angeles, CA 90089-0801