Entrepreneurship

2022

Guillermo Elizalde
gjelizalde@uic.es
1.The human being as an entrepreneur: decision making
2.The entrepreneur’s Critical Failure Factors
3.Innovation: ideas and creativity
4.Financing a business
5.Marketing Plan
6.Business Plan
7.Success and Failure
8.Starting the business
9.Communication plan
 The subject of
Entrepreneurship
is the human being
1090 10126
Basics on the human being

• Not only matter

Basics on the human being

• Not only matter

• Intelligent and Free
Truth exists
International Marketing

Matter - Measurable Spirit – Non measurable

What is Freedom?
Free will (internal)
The will, ordained towards the good, chooses a
concrete good

External liberty
Ability to execute the choices of will in a given
situation

Situational freedom
Absence of undesired bonds in a given situation
Basics on the human being

• Not only matter

• Intelligent and Free
• Bound for good and happiness
Good exists
Basics on the human being

• Not only matter

• Intelligent and Free
• Bound for Good and happiness
• Knowledge oriented
3 Sources of Knowledge

Experiencing

Reasoning

Believing
Basics on the human being

• Not only matter

• Intelligent and free
• Bound for good and happiness
• Knowledge oriented
• Uses reason
3 FUNDAMENTAL LAWS OF LOGIC

Things are what they are

(behaviour, truth, laws, induction/deduction, idealism/relativism)

Impossible to say “yes” and “no” about

the same reality

Need for an explanatory reason of reality

Basics on the human being

• Not only matter

• Intelligent and Free
• Bound for Good and happiness
• Knowledge oriented
• Uses reason

MAKES DECISIONS
 Entrepreneur Decisions
Go/No go?
Top line or bottom line?
Everyone or target group?
Customer retention or customer acquisition?
Rational or emotional?
External or internal financing?
Influence attitudes or behaviours?
Maximise reach or frequency?
Change or not change a copy?
How to allocate budget?
Decision making

Shakian & Labuzetta

(Oxford University)
 It is easier to be
a-rational decision makers,
not rational decision makers
3 layers of human brain
INSTINCT brain

Brain Stem and Cerebellum

Heart beat
Breathing
Body temperature
Reflexes
Hunger / Thirst
Sleeping
3 layers of human brain
EMOTIONAL brain

Lymbic system

Primary centers of
emotion

Simple memory
formation

Coordinates and
refines movement
3 layers of human brain
THINKING brain

Neocortex

Complex reasoning

Language

Voluntary movement
 3 layers of human brain
Lymbic
system

Neocortex

EMOTIONS enjoy a pre-emptive,

first-mover advantage in EVERY decision process
 How the brain works

Intuitive Reflective
Unconscious Conscious
Fast Slow
Automatic Controlled
Easy Effortful
Instinctive Rational
Associative Deliberative
Emotional Rational
• Sift through lots of data QUICKLY
https://www.youtube.com/watch?v=-7Ec6tTwkqg
• Sift through lots of data QUICKLY
• Ignore most information SELECTIVELY
- Received info / second: 11.000.000 bits
- Consciously processed info / second: 40 bits
- Intuitively used info / second: 10.999.960 bits
https://www.youtube.com/watch?v=U1saQoMRD8A
• Sift through lots of data QUICKLY
• Ignore most information SELECTIVELY
• Come to conclusions SUBCONSCIOUSLY
• Sift through lots of data QUICKLY
• Ignore most information SELECTIVELY
• Come to conclusions SUBCONSCIOUSLY
• RATIONALIZING final decision afterwards
Decision making

Shakian & Labuzetta

(Oxford University)
 Decisions
can be influenced, especially
when using System 1
How do we process information?

VISION
Easy and fast

BUT...
We see in context
Based on our life’s experiences
Dependent on what we are looking for
Can be manipulated
 A bat and ball cost 1,10€

The bat costs 1€ more than the ball

How much does the ball cost?

https://www.youtube.com/watch?v=sEmCQzueyEQ
 How do we process information?

MEMORIES & HABITS

Easy and fast

BUT...
Repeat past responses
Can be triggered by Consequences, Cues and Convenience
SYSTEM 1
SYSTEM 2
How do we make decisions?

Shakian & Labuzetta

(Oxford University)
 Biases
impact decision making
 Entrepreneurial Biases
intuition vs expertise
innovation oriented vs. customer oriented
overconfidence vs. realism
passion vs. detachment
past experience vs. facts
decision justification vs. real feedback
 HEURISTIC
or mental shortcut / simplifying
strategy to make decisions
When faced with a difficult question,
we answer an easy one instead
Should I invest in Ferrari stock?
 AVAILABILITY heuristic

Relative importance of issues

=
Ease with which they are retrieved from memory

MEDIA
 1- Loss Aversion
People prefer avoiding losses to
acquiring gains

Inspire fear of losing

 2- Scarcity
Rare items have a higher value

Inspire greed for rareness

 3- Fluency
Faster processed objects have a
higher perceived value

Foster availability and inspire easiness to purchase

 4- Anchoring
We judge things relatively, relying on
baseline information
(arbitrary coherence)

Set the right framing

Decoy
 5- Social Proof
We do what others do

Be popular
https://www.youtube.com/watch?v=TYIh4MkcfJA
https://www.youtube.com/watch?v=X6kWygqR0L8
https://www.youtube.com/watch?v=P00i7_C8tl8
 6- Priming
Exposure to a stimulus influences
response to a subsequent stimulus

Influence memories
Priming
Priming with music
 Priming mood in Restaurants
Processes for influencing customer behaviour %Tip increase

Introducing self by name +53%

Squatting down next to customer at the table +25%

Repeat order back to customer +100%

Genuine smile +140%

Entertaining customer (e.g. joke/comment) +23%

Drawing Smiley face on bill +33%

Call customer by name +15%

7- Jumping to Conclusions
We seek data that are likely to be
compatible with current beliefs
(evidence is ignored)

Do not fool yourself

CONFIRMATION BIAS
HALO EFFECT (exaggerated emotional coherence)
WHAT YOU SEE IS ALL THERE IS (WYSIATI)
Information consistency > completeness

Overconfidence

Framing effect
How do we make decisions?

Shakian & Labuzetta

(Oxford University)
Keep choices few
Source: Sheena
Iyengar
6 jams 24 jams
STOP
BUY
40%
30%
60%
3% x6
 Choice? Yes, but not too much

Choice overload Choice 4-6

Engagement Engagement
Decision quality Decision quality
Satisfaction Satisfaction
Regret over lost options
1- Reduce de number of choices

26 à 15
+10%
2- Categorize choices (fewer choices)
3- Develop or rely on expertise
Human beings are rational

It is easier to be a-rational decision makers

Decisions can be influenced

Heuristic biases impact entrepreneurial decision making

Human beings like choice, but not overchoice

 ASSIGNMENT #1

Present an example of the

7 heuristics in a real-life
entrepreneurial case
Presentation: Sep 19th