Examples of successful entrepeneurs
- Henry Ford
- Ray Kroc (McDonalds)
- Dietrich Mateschitz
- Steve Jobs
Competitors that do the exact same thing are not dangerous. Competitors that do something better are dangerous.
& Speckbacher, 2023
death is very likely the single best invention of life. It is lifes change agent. It clears out the old to make way for the new
& Steve Jobs, 2005
Common traits
- idea / vision
- something new
- marketing strategy
- distribution channels
- better execution
- recombination
- technical invention
- willing to go the extra mile
- content-related goals
- not profit-oriented at first
- plenty consumers, adequate price
- not just something new and better
- bearing risk of failure
Joseph Schumpeter
- dynamic entrepreneur / pioneer
- developing new process or products
- advantage over competition or new markets
- pioneering entrepreneurs are imitated/copied by others frequently
- process of creative destruction
- creating something new will always lead to the death of other things
- recombinant innovation
- new combinations instead of new technologies
Two Types of entrepeneurs
- Pioneers (First Movers)
- Imitators
Disruption
- disruptive innovation: displacing an existing technology, product, service
- Smartphones as software platform → mobile phones (Nokia, Blackberry)
- Uber → taxi companies
- Netflix → video store
- Airbnb → agent/hotels
- Spotify → labels / music stores
- Steam → game stores
- business model innovation: an innovation if the business model, not the product
- Nespresso → cheap machine, expensive coffee
- Spotify → free music through ads
- Youtube → platform for ads with free videos
Necessity is the mother of invention
Supplier Rent Generation / Distribution
Outsourcing
- IBM Modularity
- Processor produced by Intel
- Software developed by Microsoft
- Graphic Cards by nVidia
- etc
Value generation/distribution shared between many companies, each specializing into a key technology.
IBM, even tho the main innovators, have not gotten much profit. The profiting companies were Intel and Microsoft.
Business Today is mostly done in Platforms. IBM has failed to create a good platform for monetizing their innovation. How can I protect my piece of the cake?
Smart Rent Generation
Agency Business Model
- get 10.000
- pay freelancer 4.000
- pay for office 1.100
- pay for software 800
result: 4.100 Profit for doing basically nothing
most businesses don’t have their own office space, it is rented from office space providers (including computers, furniture, etc)
Consumer Rent
Consumer would have payed at most 15.000 (this is the “worth” of the service) Consumer only payed 10.000 → 5.000 consumer rent
Laborer Rent
Opportunity Cost with different employer: 2.500 Freelancer received 4.000 → 1.500 laborer rent
Supplier Rent (office)
office space could not have been rented for the exact same price to another company. This does not produce rent, but still profit, as the renting itself is profitable
Supplier Rent (software)
Software has no “production cost” → duplication is free (just the development is pricy). Any price above 0 is a profit for the developers. Received 800 → 800 Supplier Rent
Producer Rent
her tasks:
- taking the risk of failure
- negotiating contracts
Producer Rent from above: 4.100 Reduce by opportunity cost of her time 200 per hour 4.100 - 3 hours * 200 = 3.500
value of risks has to be specified differently, there is no easy way to put a discrete value on the risks she has taken.
Generating the Value is not hard. Getting your share of the Value generated is hard.
Value Generation
The value a business creates for its stakeholders equals the customer value of products minus the value of the contributions made by all stakeholders needed for generating the product.
Value generated is a subjective value. It is how happy the customer is with the result.
- In this case the value generated is 10.800 (15.000 - 2.500 - 1.100 - 600)
- (Value of customer) - (Costs of Stakeholders)
- Each participant (also customer) can increase his share (piece of pie) by negotiating for more money (or a lower price)
- The total value generated (size of pie) is driven by entrepreneur
- The total value generated (size of pie) can be increased by adding value for the customer
- Value generated for the customer (10.800) is subjective, nice things → nice value
It is more successful to have a small piece of a huge pie rather than having a large piece of a smaller pie. Growing the pie is more important than distributing the pie.
Value Generation through Innovation
How can we make the business even more innovative and generate more value for all stakeholders?
- User Innovation: enable users/customers to make suggestions on how the product can be made more valuable. Possibility to further develop or customize the software.
- Employee Innovation: encourage the freelancer to innovate together with the customers and software developers.
- Insight Innovation: Creating a Database with customer experiences to generate unique knowledge. Possibility to develop own software
Most companies have “Intrapreneurships” … when you have a great idea you get a budget and can try out your great idea.