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Life Cliff Notes: Disciplined Entrepreneurship (Bill Aulet)

Disciplined Entrepreneurship will change the way you think about starting a business, project, non-p r ofit, etc. Many believe that entrepreneurship cannot be taught, but great entrepreneurs aren't born with something special — they simply make great products. Entrepreneurship is a skill that can be taught. I first learned of this book during my visit to the Martin Trust Center for MIT Entrepreneurship earlier this year. After skimming through this book, I realized that the way I teach entrepreneurship at Gallaudet University could benefit from the principles outlined in this book on top of the Business Model Canvas (BMC) and Lean Startup concepts.

This book basically breaks down the necessary processes into an integrated, comprehensive, and proven 24-step framework that any aspiring entrepreneur can learn and apply.

Author Bill Aulet is the managing director of the Martin TrustCenter for MIT Entrepreneurship as well as a senior lecturer at theMIT Sloan School of Management.

Without further ado, here are my major takeaways from the book:

Entrepreneurship is not only a mind-set but a skill set.
While I am not a big fan of business plans. I am a big fan of the business planning process.
Ideas are a dime a dozen but great entrepreneurs are what create value.
Create a common language.
Social entrepreneurs must develop business models which balance social impact with business sustainability.
Entrepreneurship is becoming increasingly scientific each day as the body of knowledge and research grows.
As an intuitive entrepreneur, I prefer less structure.
I realize that some structure is very valuable.
Provides enough guidance to help you succeed but not too much to stifle creativity.
As an entrepreneur, I have found many sources to be helpful, from books to mentors, and most of all, my own experiences. However, I have not found a single source that pulls everything together and does it well.
(Recommended) Renee Mauborgne's Blue ocean Strategy
Using the analogy of a toolbox, a screwdriver is a great tool for certain situations, but it does not function as well as a hammer in other situations.
You should realize that when you gain knowledge in one step, you may need to reevaluate previous step, and refine or even redo your previous work. This iterative process of "spiraling" toward the optimal answer is important because you do not have unlimited time to perfect your work on a particular step.
Some people tell me that entrepreneurship should not be disciplined, but chaotic and unpredictable-and it is. But that is precisely why a framework to attack problems in a systematic manner is extremely valuable.

Pages xiii-xiv

When we look at Richard Branson, Steve Jobs, Bill Gates, Larry Ellison, and all the other highly visible entrepreneurs, they seem to be different from us. They seem extraordinary. But each of their successes is a result of great products that made them successful, not some special gene.

To be a successful entrepreneur. You must have great and innovative products. Products can be physical goods, but also services or the delivery of information.

Entrepreneurs need to be effective communicators, recruiters, and salespeople.

There are real skills that increase the odds of success, such as people management, sales skills, and the topic of this book, product conception and delivery

The real reason why MIT is so successful at creating new companies is a combination of spirit and skills. At MIT there is a culture that encourages people to start companies all the time and everywhere much like in Silicon Valley, Israel, Tech City in London, and Berlin today. Role models are everywhere, and they are not abstract icons, but rather very real people no different from you, an aura of possibility and collaboration so pervades the very air at MIT that students quickly adopt the mindset that "yes, I can start a company too." they become infected with the "entrepreneurial virus," believing in the benefits of launching a new venture.

Students are galvanized by the atmosphere of ambition and collaboration. The work of developing entrepreneurial skills comes from classes, competitions, extracurricular events, and networking programs, and the teachings available both in the classroom and outside are extremely relevant and immediately valuable to the students so that in this environment they attack the subjects with a greater level of interest and commitment.

A major contributor to this virtuous cycle is the social herding mentality.

Entrepreneurship is about creating a new business where one did not exist before.

The first type of entrepreneurship is small and medium enterprise entrepreneurship (SME).

These businesses generally do not need to raise as much money, so the key distinguishing factor is their focus on local markets.

Innovation-driven enterprise (IDE) entrepreneurship is the more risky and more ambitious of the two.

These entrepreneurs usually work in teams where they build their business off some technology, process, business model, or other innovation that will give them a significant competitive advantage as compared to existing companies.

In the short run, the SME model will be more responsive; but with patience, the IDE ventures have the capacity to produce profound results as we have seen with companies like Apple, Google.

Innovation = Invention * Commercialization

Because innovation is not a sum of invention and commercialization, but product. If there is commercializatization but no invention (invention = 0), or invention but no commercialisation (commercialization = 0), then there is no innovation.

Pages 2-8

When I listen to my students, I hear a diverse range of reasons as to why they are interested in entrepreneurship. Some students have worked in one industry for years and want a change. Some want to push their skills to the maximum and have the biggest impact on the world. Some want to be their own boss. Some hold patents and are interested in the different way they can commercialize them. Some have have an idea about how their own life could be improved and they wonder if that idea is interesting to others.

I am frequently told that an entrepreneur cannot start without knowing a "customer pain"-a problem that bothers someone enough that they would be willing to pay to alleviate the problem. But that approach can be discouraging to someone who is unfamiliar with entrepreneurship. Furthermore, it discounts the importance of starting a company in line with the entrepreneur's values, interests, and expertise. In time, they will find a customer with a pain, or opportunity, where the customer is willing to pay for a solution.

No matter how you have become interested in entrepreneurship, you need to start by first answering the following question: What can I do well that I would love to do for an extended period of time?

First taking stock of your personal interests, strengths, and skills, you can more readily identify good opportunities.

Often, you will find an idea or technology that improves something for you personally, then realize that idea or technology has the potential to help many others. This phenomenon is called "user entrepreneurship"; the Kauffman Foundation had found that nearly half of all innovation-based startup that are at least five years old were founded by entrepreneurs.

Your first goals is to assess the needs of potential customers, focusing on a target customer with the goal of achieving product-market fit — a product that matches what customers in a specific market are interested in buying.

Pages 17-20

Now, just because you a paying customer does not mean you have a business. In oder to have a good, sustainable business, you will need to gain enough customers paying enough money within a relatively short period of time so you do not run out of capital, but instead, become profitable. And as a startup, you have few resources, so every action you take must be hyper-efficient.

A target customer is a group of potential customers who share many characteristics and who would all have similar reasons to buy a particular product. Focus is the most important skill for an entrepreneur, and as you will find throughout these step, it is difficult to focus too much. You must work hard to identify and understand customers through primary market research.

Once you have established a foothold within that target group, meaning that you've provided that group with a substantially superior product and they are paying you for it, you will have enough resources to expand to an adjacent market.

Pages 25-26

There are three important caveats when conducting your primary market research:

1. You do not have "the answer" for potential customer and their needs.

2. You potential customers do not have "the answer" for you.

3. Talk with potential customers in "inquiry" mode, not "advocacy/sales" mode. Listen to what they have to say, and don't try to get them to buy anything.

Page 33

The market segmentation process identifies multiple potential market opportunities. Once you have a list of potential markets, direct market research-based analysis on a finite number of market segments will help you determine which markets are best for you idea or technology. The goal of the research is not to provide a perfect solution, but to present a wide spectrum of market opportunities as you start to think about where you will focus your business.

Pages 39–40

Choose a single market to pursue; then, keep segmenting until you have a well-defined and homogenous market opportunity that meets the three conditions of a market. Focus is your ally.

Page 47

Visually laying out your product will allow your team and your potential customers to converge around an understanding of what the product is and how it benefits customers. Staying at a high level, without too many details or a physical prototype, allows for rapid revision without investing too much time and resources this early in the process of creating your new venture. Building a visual representation of the product will likely be harder than you think, but will get everyone on the same page, which will prove extremely valuable going forward. A brochure with features, function, and benefits to the customer further clarifies your product offering and is a great complement to the pictures you create.

Page 101

The quantified Value Proposition is framed by the top priority of the Persona, You first need to understand and map the "as-is" state in a way familiar to the customer, using the Full Life Cyele Use Case. Then, map out the "possible" state of using your product, clearly indicating where the customer receives value based on the Persona's top priority. A visual, one-page diagram is best, because the customer can easily see the Quantified Value Proposition and can show it to others for validation. When done well, this will be of immense value to you throughout the process of launching your business, so extra effort spent to get this optimized is well worth it.

Page 111

How to map the process

The following items from the Full Life Cycle Use Case (Step 6) will be the basis for mapping the process to acquire a paying customer.

● How customers will determine they have a need and/or opportunity to move away from their status quo and how to activate customers to feel they have to do something different (purchasing your product).

● How customers will find out about your product.

● How customers will analyze your product.

● How customers will acquire your product.

● How customers will install your product.

● How customers will pay for your product.

Through this process, you will better understand the customer's business as it relates to your product. Mapping out this process is important because you will need to navigate the same process over and over to sell to more customers; so understanding this process will pay dividends later, when you can more easily acquire new customers.

Page 151-152

Entepreneurs often spend a disproportionately small amount of time on their business model. They invest a lot of time in developing the End User Profile, the product definition, and the value proposition, showing how they will create value for the customer, but barely any time figuring out how that value translates into a profitable business. They are so excited to bring the product to market that they just default to adopting whatever business model is popular in similar markets.

Google's search product is an excellent example of innovative business model. Prior to Google, the business model or "value capture framework" of search engines was to fit as many banner advertisements on a page as possible, and to charge as much as possible for them. Google by contrast, used simple text ads and targeted them based on the keywords used in a particular search. Advertisers found this technique more attractive than banner ads, because they had better data on the effectiveness of individual ads, and could make more effective ads based on the data. This highly innovative business model is what made Google the juggernaut it is today, not the technical proficiency of its search algorithm.

Apple successfully differentiatied itself with a one-time $.99 per song charge, after which the user could keep the digital song forever. Initially, this model was perceived as risky, so Apple had to put a lot of effort into getting musci labels to agree to the model and to educate ursers on the model's benefits. The model ended up being a major factor, if not the major factor, in the success of iTunes relative to other music services, with a tremendously positive return on the investment Apple made in carefully and innovatively thinking through the value capture model.

Therefore, make sure spend time on deciding what your business model for value capture will be and don't just default to the current standard in your industry.

A business model is a framework by which you extract from your customers some portion of the value your product creates for them.

Pages 165–166

Pricing is primarily about determining how much value your customer gets from your product, and capturing a fraction of that value back for your business. Costs are irrelevant to determining your pricing structure. You will be able to charge a higher price to early customers as opposed to later customers, but be flexible in offering special, one-time-only discounts to select early testers and lighthouse customers, as they will be far more beneficial to your product's success than the average early customer.

Page 180

Dollar Shave Club create a quirky video beyond the bounds of what a company like Procter & Gamble could do.

Mike starts by describing the purpose of his company )"for a dollar a month we send high-quality razors right to your door") with the on-screen tagline "Shave Time. Money." all is in alignment with his value proposition.

But then he start walking toward the camera, about to create the moment that everyone will remember. He asks, "Are our blades any good?" the camera pan to a poster that answers that question, and defines the tone for the rest of the video: "No. Our blades are F**king Great." Mike continues to use humor and boldness throughout to mock current razor vendors, positioning himself to his target customer (young, digitally savvy, time-pressed urban males) as the lovable David taking on Goliath.

The video went viral immediately. The time and energy Dollar Shave Club spent on this video was probably the best money the company will ever spend.

To see the final product, you can go to www.dollarshaveclub.com use it as inspiration to think of creative ways you can reduce your COCA acquisition.

Pages 216-217

Identifying and breaking down your key assumptions is not difficult, but entrepreneurs tend to skip over this step, trusting intuition or research to substitute for actual testing of business and customer behavior assumptions. But until you have tested your business assumptions and your have shown you will take a specified action, there is too much of a leap of faith for our disciplined entrepreneurial approach. Actions speak louder than words.

"Minimum Viable Business Product" (MVBP) — a different concept than the MVP as used in Lean Startup language. The process of establishing an MVBP provides a "systems test" of whether your customer will pay money for what you are offering, not just a channel through which to test an assumption. Much as you do not have a meaningful business until you have a paying customer, your business doesn't have a product until someone purchases it, get value from it, and can provide meaningful feedback to you about it.

Page 221

The 24 Step gives you a framework to get a rock-solid product-market fit at initial launch. But as your business expands beyond its MVBP, you will also need to learn about many other things including the following:

● Building a Company Culture

● Selecting a Founding Team

● Growing and Building the Team (HR Processes)

● Developing the Product

● Selling and Sales Execution

● Servicing the Customer and Building Customer Service Processes

● Building You Financials and Managing Cash Flow

● Raising Money to Scale the Business

● Entrepreneurial Leadership and Scaling the Business

● Building and Utilizing Good Company Governance

Entrepreneurship is not a spectator sport. It is action that get entrepreneurs going-intelligent and adaptive action. We entrepreneurs want constantly be moving and making progress, testing our ideas and products really customers and spiraling toward success.

The solution to any of your business questions does not lie in this book but rather out there in the marketplace with a customer who has an unmet need. All this book does is help you to pull it out and think about how systemically you can produce a solution that will be economically sustainable from this information.

The world need more and better entrepreneurs because our world's problems are becoming more dire, complex, and ubiquitous. Historically it has been the intrepid spirit and skill of the entrepreneur that has come up with the solution for the world's problems, and I have faith it will happen again and again and again. So hopefully this framework will make you more successful as put it into action, as that has been the goal all along.

Pages 261-262

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