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Entrepreneurship: Business
Modeling and Business Planning 1 March 2017
Hans Landström
SKJ Centre for Entrepreneurship
Lund University, Sweden
Content today: Business models and
business planning
9.15-9.45 Follow-up from last meeting HLa/SOL
9.45-12.00 Lecture: The entrepreneurial
process, business modeling and
business planning
HLa
12.00-12.50 LUNCH
12.50-14.00 Lecture: Business Modelling –
Canvas, Business Model Blocks and
7-domains. Tool comparisons
SOL/FED
14.00-16.30 Project work Business
Advisors
16.30-17.15 Reflections SOL
HLa
2
Homework for 2017-03-01
1. Read Mullins Chapter 1
2. View Video Business Model Canvas (power point)
3. Read Business Model Blocks (BMB) View file (power
point)
4. Prepare BMB for your project
The entrepreneurial process,
business modeling and business
planning
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Agenda
1) The entrepreneurial process
2) Business models
3) Business plans
4) Course examination
The entrepreneurial process
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The Entrepreneurial Process: Four approaches
Activitiy-based approach Business platform approach Paul Reynolds
Magnus Klofsten
Decision approach Evolutionary approach
Saras Sarasvathy
Howard Aldrich
Start-up activities
Business start-ups do not all follow one and the same process
Any sequence of events is possible. There is no correct way (but
maybe a couple of better ways…) to start a venture
Study in Norway 400 start-up processes
Variation in start-up processes (Aldrich, 1999), examples:
Context
Industry (different logics)
Newness (e.g. innovative-necessity, new vs old industries)
Individual-team
Typically it is a mix of planning and action with a touch of luck
Start-up Gave-up Continued ...
Concrete activities
Many activities
Planning activities
Few activities
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Activity based approach
Activities Example:
Concrete activities
Example:
Planning activities
1. Generate ideas Business Opportunity Recognition
- Discuss with friends and family - Think …
2. Identify business
opportunities
- Talk to potential customers
- Google competitors
- NABC-analysis
3. Prepare and plan Prepare Conceptualize
- Find team members
- IPR application
- Seek finance
- Market analysis
- Business model (eg Canvas)
- Business plan
4. Start-up Launch and manage
- Find office space
- Buy equipment
- Establish legal entity
- Financial projections
- Management and control
systems
5. Post-start activities - Marketing activities
- Production activities
- Reqruite staff
- Acquire inputs
- Growth planning
- Planning for
internationalization
Discussion
What do you perceive as the most difficult
activity/decision in the commercialization of your
idea? Why?
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Business models
The entrepreneurial process
Development of business idea Idea Business Business Business opportunity model plan New venture Career- Decision to start choice a new venture Development of a new venture
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Business modeling – definition
The business model describes how a company creates
something valuable for the customer, build resources and
competencies, in order to earn money (generate revenue
streams) – answering the questions:
Who are the customers and how do we create a
relationship to them?
What are the products/services that will deliver values,
satisfy needs or solve problems for the customers?
What are the resources needed to accomplish the
business model?
How do the company create a revenue stream to the
company?
Conceptualize your business:
Business idea to Business model
E-business
Business Idea Concept Business Model Concept
Richard Normann Jonas Hedlund
(1943-2003) Thomas Kalling
Skapande The Business Model Concept
företagsledning, 1976 European J. of Information System, 2003
Porter (1985) Barney (1990)
Value chain Resources as valuable, rare, difficult
to imitate and support each other
Amit & Zott (2001) Value Creation in E-business, Strategic Mgmt J.
Core Morris & Schindehutte & Allen (2005), The entrepreneur’s business
works: model, J. of Business Research.
Osterwalder & Pigneur & Tucci (2005), Clarifying Business Models,
Communications of AIS.
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Business idea (Normann, 1976)
General business idea
Business area and focus
Differences from competitors
Market and customer
- Our market is …
External efficiency - Our function on the market …
(make the right things)
Product/service FIT
- We will offer …
Internal efficiency
(make things right)
Resources
- Our resources and competences are …
Exemple:
General business idea: Contribute to a better everyday life for the many people!
External efficiency (make the right things): Offer a wide range of functional home
furnishings to low prices that as many as possible will afford to buy them.
Internal efficiency (make things right): Lowering the price without decreasing quality
Each supplier produces the part that
they can deliver best och cheapest.
Customers assemble their furniture The parts are packed in flat packages
themselves. in order to make costs for deliveries
and warehousing as low as possible.
The customers could themselves
select, collect and transport
the furnitures.
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Conceptualize your business:
Business idea to Business model
E-business
Business Idea Concept Business Model Concept
Richard Normann Jonas Hedlund
(1943-2003) Thomas Kalling
Skapande The Business Model Concept
företagsledning, 1976 European J. of Information System, 2003
Porter (1985) Barney (1990)
Value chain Resources as valuable, rare, difficult
to imitate and support each other
Amit & Zott (2001) Value Creation in E-business, Strategic Mgmt J.
Core Morris & Schindehutte & Allen (2005), The entrepreneur’s business
works: model, J. of Business Research.
Osterwalder & Pigneur & Tucci (2005), Clarifying Business Models,
Communications of AIS.
Business Model (Alex Osterwalder)
External
efficiency
Internal
efficiency
Pillars Building blocks
Customer
interface
Describe the segments of customers a company wants to
offer value to.
Describe the various means of the company to get in touch
with its customers.
Explain the kind of links a company established between itself
and its different customer segments.
Product Gives and overall view of a company’s bundle of products and
services.
Infrastructure/
management
Describe the arrangement of activities and resources.
Outlines the competencies necessary to execute the
company’s business model.
Portrays the network of cooperative agreements with other
companies necessary for commercialize value.
Financial aspects Sums up the monetary consequences of the means employed
in the business model.
Describe the way a company makes money through a variety
of revenue flows.
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Business Model Canvas (Osterwalder)
Workshop by Sven Olsson in the afternoon
Business Plan
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The entrepreneurial process
Development of business idea Idea Business Business Business opportunity model plan New venture Career- Decision to start choice a new venture Development of a new venture
The business plan – definition
A written document prepared by the entrepreneur that
describes all relevant external and internal elements
involved in starting a new venture and running a business
– answering the questions:
Where am I now?
Where am I going?
How will I get there?
Marketing
Production
Business Organization/Management
Model Ownership
Finance
etc.
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Business Planning – History 1916 Henri Fayol: ”General theory of business administration”
1960s-1970s Key tool in large corporations: Strategic planning
Drucker (1954); Ansoff (1957); Porter (1980)
1980s-1990s Strategic management scholars rushed into the field
of entrepreneurship:
- Business planning became a key tool in starting new ventures
and institutionalized among business advisors, investors,
educators, etc.
- 78% entrepreneurship curricula and 100+ books on BP
2000s- Entrepreneurship scholars started to question the use of BP:
Bhidé (2000; 2009): Google, Microsoft, Apple and Dell started
without a BP
Honig (2003): No difference in success based on the use of BP
Sarasvathy (2001): New ways of understanding the
entrepreneurial process
Preparing the business plan
Readers of a business plan: (1) action plan for the entrepreneur, and
(2) selling document to investors, bankers, potential partners and
employees, suppliers, customers, potential board members and
advisors, auditors, etc.
Depending on who is reading the plan they will read it
differently!!! Prepare different versions of the business plan.
The preparation of a business plan is more or less difficult:
Apple YouTube
Innovative Google
Product/service
Existing Craftman Amazon
Dell
Existing Innovative
Business model
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Business plan: Disposition
Summary
1. Business Model
2. Products/services
3. Market analysis and
market plan
4. Management and board of
directors
5. Organization
6. IPR
7. Production
8. Owners
9. Financial overview
10. Realization
Supplements
Literature
VentureCup
Jepser Forslund (2014), Connect
Affärsplan FTW How to write a successful
Lean Publishing business plan
www.connectsverige.se http://www.venturecup.se/
ideutveckling/utbildnings
material/
Hisrich, R.D., M.P.
Peters and D.A.
Shepherd (2013)
Entrepreneurship
New York: McGraw-Hill
Chapter 7
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Write or not write: that’s the question Delmar and Shane (2003) Honig and Karlsson (2004)
Arguments BP is an important precursor to
action in new ventures: (1) helps
founders to make more quick
decisions, (2) manage resources
more time-efficient, and (3) turn
abstract goals into concrete
actions.
The economic efficiency of writing a BP can be
questioned – it is more an institutional issue:
(1) public support agencies, (2) industries
where BP is deeply rooted, and (3) business
educations are influencing the writing of a BP.
No positive outcomes in terms of profitability
and survival.
Similarities Database: Swedish Panel Study of Entrepreneurial Dynamics (PSED)
30,427 individuals between 16-70 years 223 new venture started.
Differences Performance measures:
- Product development
- Organization activities
- Disbandon
Performance measures:
- Profitability
- Survival
Results BP is a valuable activity:
- Enhance likelihood of new
venture survival
- Facilitate product development
- Facilitate organizational efforts
Institutional forces:
- Contact with public agencies
- Working in industries rooted in BP
Writing a BP will not increase propensity of
profit or survival.
Discussion
Based on the articles by Honig & Karlsson (2004) and Delmar
& Shane (2003):
What are the arguments for writing and against writing a
business plan?
When should you write a business plan?
In what way will a business plan differ dependent on the
reader (e.g. potential partner, investor, etc.)?
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Course examination
Requirements for the Course
10 – max(!) 15 pages: no supplements
Including: Section 1: Presentation of the project
Section 2-8: The seven domains according to Mullins (2013);
market attractiveness, industry attractiveness, target segment,
competitive and economic sustainability, connection to value
chain, aspirations and propensity for risk, and ability to execute
Section 9: IPR
Section 10: Summary and conclusions Go or No Go
