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Creativity and the Business Idea
SOURCES OF NEW IDEAS
• consumers, existing products and services, distribution channels, the federal government, and research and development. 1. Consumers
– attention to potential customers. – informally monitoring potential ideas – opportunity to express their opinions.
SOURCES OF NEW IDEAS
2. Existing Products and Services
– method for monitoring and evaluating competitive products and services on the market. – a new product or service that has more market appeal.
3. Distribution Channels
– their familiarity with the needs of the market. – suggestions for completely new products,
4. Federal Government
– the files of the Patent Office contain numerous new product possibilities., – available for license or sale..
5. Research and Development
– The largest source of new ideas is his own “research and development,” .
and problem inventory analysis. brainstorming. 5 .METHODS OF GENERATING IDEAS • Focus groups. Focus Groups – Group of people providing idea in a structured manner. 1. – group of 8 to14 participants motivated by comments from other group members – Creatively conceptualizing and developing a new product idea to fulfill a market need. in-depth discussion rather than simply asking questions to solicit participant response. – A moderator leads a group of people through an open.. – excellent method for initially screening ideas and concepts.
Quantity of ideas is desired—the greater the number of ideas. – focuses on a specific product or market area. ideas of others can be used to produce still another new idea. No criticism is allowed by anyone in the group—no negative comments. 4. 2.. with no one dominating or inhibiting the discussion four rules should be followed: I. Brain Storming – A group method for obtaining new ideas and solutions – stimulated to greater creativity by meeting with others and participating in organized group experiences. Combinations and improvements of ideas are encouraged. 3.METHODS OF GENERATING IDEAS 2. the greater the likelihood of the emergence of useful ideas. the better. Freewheeling is encouraged—the wilder the idea. 6 . – should be fun.
METHODS OF GENERATING IDEAS 3. problem Inventory analysis – A method for obtaining new ideas and solutions by focusing on problems – uses individuals in a manner that is analogous to focus groups to generate new product ideas. – instead of generating new ideas themselves. 7 . – used to test a new product idea. consumers are provided with a list of problems in a general product category.
problem Inventory analysis 8 .
CREATIVE PROBLEM SOLVING • • • • • • • • • • • Brainstorming Reverse brainstorming Brainwriting Gordon method Checklist method Forced relationships Collective notebook method Attribute listing method Big-dream approach Parameter analysis. Free association 9 .
no matter how illogical. the spontaneous contributions of participants. 10 . with participants prohibited from criticizing or evaluating during the brainstorming session. generating ideas about a problem within a limited timeframe. – All ideas.CREATIVE PROBLEM SOLVING 1. Brainstorming – used for both creative problem solving and idea generation. – solving. recorded.
followed by a discussion of ways to overcome these problems. Reverse brainstorming – A group method for obtaining new ideas focusing on the negative – criticism is allowed. – the technique is based on finding fault – involves the identification of everything wrong with an idea. 11 .CREATIVE PROBLEM SOLVING 2.
– is silent. – Bernd Rohrbach.CREATIVE PROBLEM SOLVING 3. – usually consists of six members. Brainwriting – a form of written brainstorming. 12 . – participants write ideas on special forms or card.circulate within the group. written generation of ideas by a group of people.
Gordon Method – Method or developing new ideas when the individuals are unaware of the problem – group members not knowing the exact nature of the problem. 13 . enabling the group to make suggestions for execution or modification of the final solution.CREATIVE PROBLEM SOLVING 4. – The actual problem is then discovered. – the solution is not clouded by fixed ideas and behavioral patterns.
Checklist Method – Developing a new idea through a list of related issues or suggestions – use the list of questions or statements to guide the direction of developing new ideas or concentrating on specific “idea” areas.CREATIVE PROBLEM SOLVING 5. – Put to other uses? New ways to use as is? Other uses if modified? – Adapt’? copy? Modify? Magnify? Stronger? Larger? Thicker? 14 .
with each new word attempting to add something new to the ongoing thought processes. – a word or phrase related to the problem is written down. thereby creating a chain of ideas ending with a new product idea emerging. Free Association – Developing a new idea through a chain of word associations – helpful in developing an entirely new slant to a problem. 15 . another and another.CREATIVE PROBLEM SOLVING 6.
4. 1.CREATIVE PROBLEM SOLVING 7. 5. Find the relationships between these elements. Analyze the resulting relationships to find ideas or patterns. Isolate the elements of the problem. 3. a technique that asks questions about objects or ideas in an effort to develop a new idea. Forced Relationships Developing a new idea by looking at product combinations Process of forcing relationships among some product combinations. Record the relationships in an orderly form. 2. Develop new ideas from these patterns. 16 .
CREATIVE PROBLEM SOLVING 8. Attribute Listing – Developing new idea by looking at the positives and negatives – an idea-finding technique that requires to list the attributes of an item or problem and then look at each from a variety of view points. – thinking big. 9.Parameter Analysis – Developing a new idea by focusing on parameter identification and creative combination 18 .Big-Dream Approach – Developing a new idea by thinking without constraints – come up with a new idea requires that the entrepreneur dream about the problem and its solution. Collective Notebook Method – a new idea by group members regularly recording ideas – a small notebook that easily fits in a pocket—contain a statement of the problem. 11.. 10.
OPPORTUNITY RECOGNITION PROCESS 19 .
PRODUCT PLANNING AND DEVELOPMENT PROCESS 20 .
and the share of the market the product could reasonably capture. financial factors. the size of potential market. the characteristics and attitudes of consumers or industries that may buy the product. prices. The new product should have synergy with existing management capabilities and marketing strategies.Establishing Evaluation Criteria • • • • • • • • • • At each stage of PPDP criteria for evaluation need to be established. The determination of market demand is by far the most important criterion of a proposed new product idea. and marketing policies should meet or overcome current and anticipated competition. and production factors. machinery. evaluate the new idea in terms of market opportunity. competition. The manufacturing cost per unit. 21 . competing producers. The compatibility requirements with existing plant. the marketing expense. the nature of the market with respect to its stage in the life cycle (growing or declining). the marketing system. and personnel should also be evaluated. and the amount of capital to be determined to break-even point and the long-term profit outlook for the product. A market opportunity in the form of a new or current need for the product idea must exist.
benefits and risks. satisfaction.PRODUCT PLANNING AND DEVELOPMENT PROCESS • Idea Stage – new product ideas be identified and impractical ones eliminated. and economic conditions. price-versus-product performance features. alternatives. – determine potential needs of the market in terms of timing. market structure and size. 22 . future expectations.
price.PRODUCT PLANNING AND DEVELOPMENT PROCESS • Concept Stage – the refined product idea is tested to determine consumer acceptance. and promotion should be evaluated 23 . – it should be further developed and refined through interaction with consumers. – Features.
PRODUCT PLANNING AND DEVELOPMENT PROCESS • Product Development Stage – consumer reaction to the physical product is determined. – Positive test results indicate the degree of probability of a successful product launch and company formation. which indicate the acceptance level of consumers. 24 . • Test Marketing Stage – provides actual sales results.
E-COMMERCE AND BUSINESS START-UP • the opportunity to be very creative and innovative. • widespread use of personal computers, the adoption of internets in companies, and the acceptance of the Internet as a business communications platform.
• Numerous benefits—such as access to a broader customer base, lower information dissemination costs, lower transaction costs, and the interactive nature,
Legal issues for the entrepreneur
• includes patents, trademarks, copyrights, and trade secrets. • NEED FOR A LAWYER
– – – – – – – – business is regulated by law, the legal expertise required based on the new venture is a franchise, an independent start-up, or a buyout, produces a consumer versus an industrial product; it is nonprofit aspect of computer software, exporting, or importing.
LEGAL ISSUES IN SETTING UP THE ORGANIZATION
• • • • • • •
issues as liability, taxes, continuity, transferability of interest, costs of setting up, attractiveness for raising capital. Legal advice for agreements
– the government grants the inventor uniqueness regarding the invention for a specified amount of time. – At the end of this time.PATENTS A patent is a contract between the government and an inventor. 29 . the government publishes the invention and it becomes part of the public domain.
– to prevent others from getting around the patent. – background and advantages of the invention – the nature of problems that it overcomes. • Introduction. – state how the invention differs from existing offerings. • Claims. – a brief description of the drawings that accompany it.The Patent Application • patent application must contain a complete history and description of the invention as well as claims for its usefulness. – detailed description of the invention. • Description of invention. components. – criteria by which any infringements will be determined. materials. – drawings must comply with PTO requirements. 30 . which may include engineering specifications. vital to the actual making of the invention.
the entrepreneur may try to license the product from the patent holder. or innovations are the result of improvements. 31 . inventions. existing products. or modifications of. • Many businesses. • someone else already has a patent does not mean the end of any illusions of starting a business. • If it is impossible to copy and improve the product to avoid patent infringement.Patent Infringement • entrepreneur to be sensitive about whether he or she is infringing on someone else’s patent.
• Seek a patent attorney having expertise in your product line • design patent protect. 32 . • Consider licensing patents. the product design or product look • Before making an external disclosure seek legal counsel • Evaluate competitor insight into what they may be developing. • Be sure to mark product granted a patent.
• can last indefinitely.a slogan or even a particular sound that identifies the source or sponsorship of certain goods or services. symbol.TRADEMARKS • may be a word. design. 33 . or some combination. as long as the mark continues to perform its indicated function.
Kodak) and afford the possibility of expansion to a wide range of products 35 .g..• coined marks denote no relationship between the mark and the goods or services e. Mercedes.
g. 36 .. Apple) and is applied to a product or service.• an arbitrary mark is one that has another meaning in language (e.
Ruberoid as applied to roofing materials that contain rubber). it is descriptive of a particular product or service (e.• a suggestive mark is used to suggest certain features. 37 .. • a descriptive mark must have become distinctive over a significant period of time and gained consumer recognition before it can be registered. The mark then is considered to have secondary meaning. or characteristics of a product or service • suggest some describable attribute of the product or services. that is. qualities. ingredients.g.
38 .Registering a trademark • Exclusive rights to the use of the mark • sue in federal court for trademark infringement (profits. • entitles you to use the notice of registration ® • Provides for filing application in foreign countries. • prevent importation of goods with a similar mark. • Incontestable rights for commercial use of the mark. damages and costs).
maps. articles. pictures. • the tremendous growth of the use of the Internet. data. 39 . poems. blueprints. and music. and videos • computer software. books. models. sculptures. songs. printed material on board games. collages. literary work. especially to download music. scripts.COPYRIGHTS • A copyright protects original works of authorship.
TRADE SECRETS • maintain an idea or process as confidential and to sell or license it as a trade secret. • will have a life as long as the idea or process remains a secret. 40 . • not covered by any federal law • recognized under a governing body of common laws in each state.
buy supplies from the franchisor 41 . or copyright. process or technology protected by patent. trademark. • requires the licensee to pay a royalty or some other specified sum for permission to copy the patent. or copyright.LICENSING • an arrangement between two parties. where one party proprietary rights over some information. pay a royalty based on sales volume. • agrees to pay a fixed sum for use of the trademark. trademark. • involves a franchising agreement.
PRODUCT SAFETY AND LIABILITY • Responsibility of a company to meet any legal specifications regarding a new product by the Consumer Product Safety Act 42 .
windstorm hail.Insurance • Property – Fire insurance explosion. and smoke – Burglary and robbery Business interruption • Casualty – bodily injury or property damage Automobile liability • Life – Life insurance • Workers’ compensation – work-related injury • Bonding – in case of employee theft of funds or – protects contractor if subcontractor fails to complete a job 43 . vehicle damage. riot.
CONTRACTS • • • • • • Consideration. competent and/or have the right to negotiate Contract legal Voluntary acceptance of offer. 44 . oral or written voluntary acceptance of offer is given.
THE BUSINESS PLAN CREATING AND STARTING THE VENTURE 45 .
finance. 46 .WHAT IS THE BUSINESS PLAN a written document prepared by the entrepreneur that describes all the relevant external and internal elements involved in starting a new venture. human resources. manufacturing. • an integration of functional plans such as marketing.
investors. perspective of the entrepreneur – articulate what the venture is all about. • three perspectives considered in preparing the plan. customers. bankers. suppliers. advisors. the marketing perspective. 1.SCOPE AND VALUE OF THE BUSINESS PLAN • The business plan may be read by employees. the entrepreneur should try to view his or her business through the eyes of the investor. – must try to view their business through the eyes of their customer. 3. 2. venture capitalists. 47 . and consultants.
Customers suppliers of capital lenders or investors banks 48 .EVALUATE THE BUSINESS PLAN? • • • • suppliers.
an overview of the marketing program (addresses how the opportunity will convert to reality). leading to a final investment decision. focus is on why this is a good opportunity. It is also likely that a venture capitalist or angel group would ask the entrepreneur to present to their partners before making a final decision on whether to invest.PRESENTING THE PLAN • • • • • • • The entrepreneurs are expected to “sell” their business concept in this short time period with the audience given the opportunity to ask difficult and penetrating questions. It’s analogous to a situation where an entrepreneur would get on an elevator with one or more investors and try to persuade them that he or she is a good investment before the elevator reaches its final destination. Some investors describe these plans as the elevator plan. 49 . effort is really designed to sell the investors on why this would be a good investment for them. Remember. to a number of firms or individuals who could immediately decide they like the plan and request further negotiation. In all these instances the entrepreneur must decide what to say in this short time frame. the benefit is that they are presenting in one place. and the results of this effort (sales and profits). remarks might reflect the recognized risks and how the entrepreneur plans to address them.
aid financial plan. obtainable from many sources. marketing plan. finance. and production. 50 . should focus on marketing. • goals and objectives also provide a framework for the business plan.INFORMATION NEEDS FOR BUSINESS PLAN • information.
Market Information • to build a strong marketing plan with reasonable and measurable market goals and objectives the entrepreneur will need to gather information on the industry and market. 51 .
assessment of trends in the national food service industry look for data on total food sales and commercial restaurant sales by type of restaurant. travel. include household income trends. food consumption habits and trends. 52 . population shifts. employment trends.the process by evaluating general environmental trends.
cost. assembly operations. raw materials. • Overhead. addresses. unique skill needed. The companys location. suppliers. • Manufacturing operations. • Space. purchased or leased. • Raw materials. pay rate. The equipment. and distributors need to be determined. and costs • Equipment. The total amount of space needed space will be owned or leased. suppliers’ names.an assessment of where and how these skills will be obtained should be determined. • Labor skills. supplies. support manufacturing—-such as tools.Operations Information Needs • Location. utilities. the number of personnel in each skill. accessibility to customers. Basic machine. subcontracted and by whom. and salaries 53 .
• capital expenditures. and cash expenditures for non expense items.FINANCIAL INFORMATION NEEDS • prepare a budget .all possible expenditures . The revenues from sales must be forecast from market data • identify benchmarks in the industry to prepare the final pro forma statements in the financial plan. . a list of all revenue sources including sales and any external available funds. direct operating expenses.
. and customers as well as to distribute. Compared with alternative sources the entrepreneur need only make a small investment in hardware and software to be ready to use these online services. the opportunities for the entrepreneur in planning the start-up or the growth of a venture will be invaluable. information about the market. its products and services. and sell company products and services. competition. provides opportunities for marketing strategy which through its website. expediently. business activities efficiently. and its ordering instructions.USING THE INTERNET AS A RESOURCE TOOL access information. With the continuous improvements and modifications in the Internet. advertise. information on the company. business intelligence resource. and at very little cost.
.WRITING THE BUSINESS PLAN • • • • • • • • could take hundreds of hours to prepare depending on the experience knowledge purpose it is intended to serve. comprehensive enough a complete picture understanding of the new venture clarify his or her thinking about the business.
Description of Venture Product's Service's Size of business Office equipment and personnel Background of entrepreneurs 5.1.Production Plan Manufacturing process ( subcontracted) Physical plant Machinery and equipment Names of suppliers of raw materials . Introductory Page BUSINESS PLAN Name and address of business Name(s) and address(es) of principal(s) Nature of business Statement of financing needed Statement of confidentiality of report 2. Industry Analysis Future outlook and trends Analysis of competitors Market segmentation Industry and market forecasts 4.. Executive Summary Three to four pages summarizing the complete business plan 3.
Operational Plan Description of company's operation flow of orders for goods and/or services Technology utilization 10. Contingency plans Financial Plan Pro forma income statement Cash flow projections Pro forma balance sheet Break-even analysis Sources and applications of funds 7. Assessment of Risk Evaluate weakness of business New technologies Contingency plans .BUSINESS PLAN 6.Appendix (contains backup material) Letters Market research data Leases or contracts Price Lists from suppliers 9. Marketing Plan Pricing Distribution Promotion Product forecasts Controls 8 Organizational Plan Form of ownership Identification of partners or principal shareholders Authority of principals Management-team background Roles and responsibilities of members of organization 11.
worker hours. specific products sold. Sales control. Quality control. • • • Production control. delay time.Measuring Plan Progress • Inventory control. – Information on units. dollars. meeting of delivery dates. • Disbursements. the faster that capital can be reinvested to meet additional customer needs. price of sales. The faster the firm gets back its investment in raw materials and finished goods. process time. – the product performs satisfactorily. – The new venture should also control the amount of money paid out. and credit terms is useful to get a good perspective of the sales of the new venture. control machine time. . and downtime cost. – .
• Goals are not measurable. • No customer need was established for the proposed product or service. • not made a total commitment to the business or to the family.WHY SOME BUSINESS PLANS FAIL • Goals set are unreasonable. • has no sense of potential threats or weaknesses to the business. • has no experience in the planned business. .
THEMARKETING PLAN .
MARKETING RESEARCH FOR THE NEW VENTURE • the gathering of data in order to determine such information as who will buy the product or service • size of the potential market. • the most appropriate distribution channel. • price that should be charged. most effective promotion strategy .
. – potential customers prefer to purchase the product or service.Marketing Research Step One • Defining the Purpose or Objectives – a list of the information that will be needed to prepare the marketing plan. – ask people what they think of the product or service – background demographics and attitudes of these individuals. – customer to expect to hear about or learn about such a product or service. – potential customers willing to pay for the product or service.
government agencies. libraries. newspaper articles. and the Internet provide information on industry market and competitors. – Commercial data may also be available. . – trade magazines.Step Two • Gathering Data from Secondary Sources – Secondary sources .gathering information for the industry analysis section of the business plan.
– Focus groups . networking. the customer. . or experimentation data collection instrument. such as a questionnaire. – competitors. focus groups. trade associations. open format. – issues in an informal. recent publications. and the industry.gathering in-depth information.Step Three • Gathering Information from Primary Sources – observation. using networking. interviewing.
Step Four • Analyzing and Interpreting the Results – Depending on the size of the sample. the results can hand-tabulate or entered on a computer. – the results evaluated and interpreted in response to the research objectives specified in the first step of the research process. . – data cross-tabulated to provide more focused results.
UNDERSTANDING THE MARKETING PLAN • Situation analysis – – – – Background of venture Strengths and weaknesses of venture Market opportunities and threats Competitor analysis • • • • Marketing objectives and goals Marketing strategy and action programs Budgets Controls .
• specify performance criteria that will be monitored and controlled. • provide for continuity. successfully meeting longer-term goals and objectives. • Allocation of all equipment.Characteristics . • success of the plan may depend on its flexibility.human resources must be described.MARKETING PLAN • To provide a strategy for accomplishing the company mission or goal. • based on facts and valid assumptions. • should be simple and short. financial resources . .
sizes. service availability and Warranties • Price.Marketing Mix • Combination of product. sales promotion (displays. packaging. list price. geographic coverage. – Quality image. – Quality of components or materials. options. message. allowances for quick payment credit terms. style. brand name. inventory. and transportation • Other marketing activities . discounts. and payment period • Promotion – Media alternatives. role of personal selling. features. quantity. coupon) Media interest in publicity • Distribution – wholesaler & length of channel. media budget.
STEPS IN PREPARING THE MARKETING PLAN • Situation analysis – Tells about past and presents business achievements of new venture • Target Market – Specific Group of potential customers towards venture aims its marketing plan • Market segmentation – Process of dividing a market into definable and measurable groups for purposes of targeting marketing strategy .
and acts of Gods . • Unanticipated competitive moves. • Unrealistic goals – lack of understanding of the situation. product deficiencies. before deciding where you want to go. ly regarding goals and objectives.WHY SOME PLANS FAIL • Lack of a real plan— – The marketing plan is superficial and lacks detail and substance. • Lack of an adequate situation analysis— – It is invaluable to know where you are and where you have been.
THE ORGANIZATIONAL PLAN .
(2) partnership.LEGAL FORMS OF BUSINESS • three basic legal forms of business formation (1) proprietorship. (3) corporation .
TAX ATTRIBUTES OF FORMS OF BUSINESS .
TAX ATTRIBUTES OF FORMS OF BUSINESS .
• Organization structure. measurement. • Planning. – activities should reflect the goals and objectives that underlie the venture’s existence. and evaluation schemes. – defines members’ jobs and communication and relationship these jobs have with each other. praise • Selection criteria. must be specified. bonuses. . on or off the job. • Rewards – In the form of promotions. relationships are depicted in an organization chart. – to determine a set of guidelines for selecting individuals for each position. – Training. • Training. – form of formal education or learning skills. will be achieved (plans). measured and evaluated.
• Second.• important considerations and strategies in recruiting and assembling an effective team and creating an effective and positive organization culture. the entrepreneurs should be flexible enough to try different things. the entrepreneur’s desired culture must match the business strategy outlined in the business plan. • Third. the leader(s) of the organization must lead and be role models for their employees. . marketable product. • First. • Leadership needs to establish core values and provide the appropriate tools so that employees can effectively complete their jobs. it is necessary to spend extra time in the hiring process. • Fourth. • Finding the most effective team and creating a positive organization culture is a challenge is just as critical as having an innovative.
The Financial Plan .
. buying used. computers. • To project expenditures for new equipment.to provide a basis for evaluating expenditures that will impact the business for more than one year.OPERATING AND CAPITAL BUDGETS • Capital budgets . or even a new facility. • evaluating the costs of make or buy decisions in manufacturing or a comparison of leasing. or buying new equipment. vehicles.
summarizes the assets. and net worth . liabilities.• Pro-forma income statement – Projected net profit calculated from projected revenues minus projected costs and expenses • PRO FORMA CASH FLOW – Projected cash available calculated form projected cash accumulation minus projected cash disbursement – help justify • pro forma balance sheet – reflects the position of the business at the end of the first year.
• BREAK-EVEN ANALYSIS – volume of sales at which the business will neither make a profit nor incur a loss. – break-even sales point the volume of sales needed to cover total variable and fixed expenses. • proforma sources & applications of funds – Summarizes projected sources of funds available to the venture and how these funds will he disbursed .
even when the venture is profitable. • measures the point where total revenue equals total cost. • emphasizes the interrelationship of assets. liabilities. It reflects the difference between cash actually received and cash disbursements. • The pro forma income statement provides a sales estimate in the first year (monthly basis) and projects operating expenses each month. . and net worth of the firm. the amount of cash available.• planning tools is designed to provide clear picture of where funds come from. • Many new ventures have failed because of a lack of cash. • The break-even point can be determined from projected income.the general financial well-being of the new venture. and stockholders’ equity to working capital. liabilities. how they are disbursed. • The pro forma sources and applications of funds statement understand how the net income for the year was disposed of and the effect of the movement of cash through the business. • Cash flow is not the same as profit. • The pro forma balance sheet reflects the condition of the business at the end of a particular period. It summarizes the assets.
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