1. 1
Bob Caspe
The International Entrepreneurship Center
Entrepreneurial Action

2. This Course
Today is about Strategy and Philosophy.
My goal is to erase everything that you
think you know and start over.
 Tomorrow is about Tactics. We will look
at specific Marketing strategies and how
and why they work.


3. Two Simple Rules for a Startup

Choose a Worthwhile Project
 You Tend to Pick Stupid Projects to Work on
 You Cloud Your Thinking with Passion
 You Waste Your Most Precious Resource

Avoid Going Out of Business
 You Focus only on the Long Term
 You Forget about Today’s Bills
 You Are Far Too Rigid to Simply Make
Money

4. My Observations
Most startups are too internally focused
 Most Medium sized Companies lack
Adequate marketing & strategy
 Time is not an Innovator’s friend
 Randomness is a Critical Part of Business


5. I Know You


It’s Different Here In Brazil
You Believe That You Need to Know A
Customer “As A Friend” Before You Can Make
A Sale
 Result of a weaker legal system




Your Product Development is world class
Your Marketing Departments Stink (or don’t
exist)
Your Sales Department is Under Performing
Your Innovation Doesn’t Give You the Return
That it Should

6. Latin America
Extraordinary Growth over the Last 10
Years
 Stabilizing Politically and Legally
 Missing Pool of Experienced Middle
Managers
 Opening to International Competition
 You are Looking Outside for Growth


7. Today’s Lecture

Create a Framework for Understanding
how Business Works
 Why some grow
 Why others fail

What are Unique Rules and Challenges
for Startups

8. Where does the Study of
Business Fit in?

Education
 Arts
 History
 Sciences
○ Physics
 Business
○ Chemistry
○ Biology
○ Business
Share a common Model

9. Operational Frameworks

Physics
 Newtonian Physics
 Einstein’s Theories of Relativity
 Quantum Mechanics

Biology
 Evolution through Reproduction & Genetics

Business
 Evolution of Ideas & Business Models

10. Evolutionary Models

Biosphere
 Species
○ Plants
 …
○ Animals
 Mammals
 Reptiles
 …

Noosphere
 Ideas
○ Music
○ Art
○ Literature
○ Business
 Online
 Retail…
○ Governments

11. My Model for “Business”
Change is Through Evolutionary
Development that Builds Upon Prior
States with Adaptations that are in partly
Forced by the Environment
 Changes are Driven by Technology

 Innovation Arrives in Bursts which are
“Inventor Independent”

The Speed of Evolutionary Change is
Increasing for Several Reasons

12. Many Beliefsare wrong
You Need to Invent Something
 You Need to Write a Business Plan
before you Act
 You Need to Study other Businesses
 You Need to Raise Venture Capital
 You Need to Develop a Sales and
Marketing Process for Distribution of
your Inventions


13. Course Contents

A Philosophy of
Small Business
A
Guide to
Marketing
 Risk
• Category
 Probability
• Value
 Survival
• OEM
 Metrics
• Transaction

16. Bob Caspe
BS in Electrical Engineering in 1969
 Founded 4 High Tech Companies
 Currently a Consultant and Teacher


18. The IEC

http://iecpartners.com

19. What we offer at the IEC

Mentorship
 Marketing Strategy
 Marketing
 Sales
Education
 Space and a Community
 Market Acceleration into the US, Latin
America and Europe

 IMAP

20. Summer Entrepreneurship Program
June 2014
Boston Massachusetts
Boston College

21. What was the most significant Change
to Society in the Last 500 Years?
Advances in Communications
Printing Press – Telephone – wireless –
loudspeaker –cell phone – Internet

22. What is the Largest Challenge
for the Entrepreneurial Startup?
How
are you going to Sell
your product or service?
Marketing is the process of
Buying Customers!

23. Definition of “Marketing”
Marketing is the process of
Gross Sales
communicating to eligible
COGS
15%
customersGrosstransaction along
a Margin
Marketing & Sales
with adequate value so as to
G&A
EBITDA
convince the customer to buy.

24. Bottom Up Marketing Costs
Direct mail
Phone
Customer Visit
Transaction
Marketing and
Sales Cost

25. Marketing Investment Drives
Revenue
Marketing & Sales
Investment
COGS
Campaign
Contributed Margin
Fixed Costs
Net Profit
Transaction

26. If you spend enough money, you can sell anything!
But can you make money doing it?

28. Most Startup Failures
Sale Price
- Cost of Goods Sold
= Gross Margin
- Customer Acquisition Cost
= Net Transaction Margin
If the Net Transaction Margin is
Negative, then you’re on your way to
failure

29. What is the CAC?

It’s Made Difficult
 Early Startups use the CEO to do sales and
this is not sustainable over the long term
 In the beginning the sales process is being
learned so the cost is higher

But, proving that the CAC can be low
enough to be profitable is key

30. Number of Customers
Relative Importance of the Cost of
Marketing and Sales (size of ball)
IPOD
Jet Plane
Selling Cost as a Percentage of Unit Price

31. Which is Hardest?
Degree of difficulty
Invent
 Build
 Website
 Sell

Which one is best to start with and why?
But, which one do you typically start with?

32. Why Sell First?
Typical Student
Business Concept






Create Concept
Design Product
Build Product
Create Website
Sell
DIE – Oops
 no more money
Bob’s
Business Concept
 Create
Concept
 Sell
 Modify
Concept
 Sell
 Design
Product
 Build Product
 Ship Product
 Create Website
 Buy Boat

33. SELL
FIRST

34. But Bob…
 What
happens if they buy it?
 Will I go to Jail?
 When
Should I Make a
Prototype?
 When Should I write my business
plan?

35. Kickstarter but…
Kickstarter’s model is to sell first. There
is no sale of equity, only a future
product. And, all you need is a
photoshop picture and a story.
 But… we will talk about consumer
markets later.


36. Conclusions





Selling is the hardest part of business.
Sell first, and only continue on if your sales
are successful.
Calculate your CAC Early in the Process
Limit your passion and investment in your
business idea until sales are verified.
Make sure that you can sell for less than
the available margin offered by a
transaction.

38. Entropy – Measurement of
Disorder
Rudolf Clausius 1882
2nd Law of
Thermodynamics
 Entropy of a
Closed System
Increases Over
Time

39. Edwin Schrodinger

Negentropy

40. Entropy versus Life
Disorder
Order

41. Evolution – The Accumulation of Order

43. Central to Evolution

Diversity in the Population
 Random mixing and changes through
mutation
Heredity – the passing on of traits
 Environmental Pressures Causing
Selection


45. Life
Evolution defines the process by which
Life increases its own organization
 Extinctions of species (or companies) is
a byproduct of instability in the
environment and Competition
 Humans have extended our Genome
with language and drawings into
external data


46. The Genome Encodes Life

47. Humans Extended our
Genome

48. Alternative Frameworks
Humans have an extended genome
which includes our ideas, and that
genome evolves by the same rules of
evolution, only faster.
 The Noosphere evolves mindlessly,
inventions are destined to happen, only
waiting for underlying inventions. Its
behavior is identical to evolution of the
biosphere (Driven by the fundamentals
of Physics).


49. Noosphere
Teilhard de Chardin defined the
noosphere as “a living tissue of
consciousness”
 The collective consciousness of the
human species

BIOSPHERE
NOOSPHERE
SPECIES
IDEAS

50. Examples of Selection in
America

In the Biosphere
 North American Animals dominate South
American Animals when the Isthmus of
Panama forms 3M years ago
 Humans push the Buffalo to extinction 200
years ago

In the Noosphere
 Western European Culture Dominates
American Indian Culture – 200 years ago

51. Either Way, they are the
same

52. Darwin Also Observed
Adaptive Radiation - Rapid Bursts of
Innovation that Waited Until Underlying
Innovations Were Available for Use
 Pockets of Concentrated Variety

 Rainforests
 Coral Reefs

53. Concentrations of Diversity

54. The “Invention” of the eye
He Studied the Eye as an example that
would prove his concept of evolution. Was
it “Mindful, or Mindless” creation?
 Cambrian Explosion (540 million years ago)

 Common Ancestry of Visual Pigments
 50-100 Different types of “eyes” evolved

56. Our Inventions including our
companies are part of our own
evolution.

57. Noosphere - Adaptive Radiation
1611 – Sunspots Observed in 4
Countries
 First Battery – Dean Von Kleist &
Cuneus Leyden 1745 & 1746
 Ogburn & Thomas (1920s) – 148
instances of Independent Innovations
within the same decade


58. Invention
Stuart Kauffman, biologist described this
as: The Adjacent Possible
 Defines both the limits and potential that
is “hovering on the edge of the present.”


59. Powered Flight
Santos Dumont ?, BR
Write Brothers 1903, US
Gustave Whitehead 1901, EU
Clement Adler 1890, FR

60. Noosphere Concentrations of Invention
Larger Cities have
patent submission
rates in excess of
linear predictions
 Consider the impact
of the Internet on
“virtual City Size!”


61. Environmental Instability

62. RATE OF CHANGE
Technology

64. Inverted Invention Pyramid
Number of Inventions per time period is expanding

65. What This All Means
Most, if not all, inventions and
innovations of businesses are based
upon technology.
 Each Innovation “waits” for Underlying
Innovations first.
 With the Universality and Speed of the
Internet, each Innovation is Likely to be
Occurring Elsewhere Simultaneously.
 Replacing Innovations are also
Following Closely Behind.


66. The Evolution of Businesses
Abundance of Business Models within
any one Business Category
 Heredity of Business Ideas
 Selection through Competitive Pressure
and Destabilization through
Technological Advancement


67. Conclusion
The Methodologies that We Choose to
Use to Compete in Business Must be
Consistent With the Working Model
Assumptions of How Businesses Grow
and Die.
 In the Biosphere the Direction of
Evolution is Driven by the Laws of
Physics
 In Business, Money Drives the Direction


68. Therefore
Time is NO LONGER your Friend
 You Must Exploit Your Innovation As
Quickly As Possible and you MUST
SEEK:

 International Distribution Quickly
 Partnerships That Can Shorten Your Path to:
○ Capital
○ Brand Equity
○ Distribution

69. Examine the Status Quo
Shift to Mobile Technologies from desktops
and laptops
 Everyone & Everything is Connected
 Knowledge is devalued
 Power is Shifting to the Masses


70. Mobile Phone Growth

71. Smart Phone Growth

72. AVAILABLE YEARS
1
100
Business Adaptation Time
~1899
1876
1900
2010

74. The Results
Spending on TV and print in US has dropped by 40% in 3 years
Revenues Doubled and Net Income Increased 400%

75. Corporate Extinction
Of the top 25
industrial
Companies in the
US in 1900 only
two remain there
today.
 Of the top 25 on
the Fortune 500 in
1961 only 6 remain
there today.


76. CEO’s Have Not Kept Pace

77. Hosni Mubarak didn’t use facebook
Facebook has over 1 billion Users – the third largest “country” in the
world

78. Executives Have Lost Ground

79. Logo Design
1990
Design Agency
Scitex Workstation
$5,000
2000
In-House
Macintosh PC
$500
2010
Cloud
99Designs.com
$50

80. Business Models are Changing

The Virtual Company
 No Employees
 No Facility
 No Overhead
 Reduced Capital Needs
 New types of capital and/or royalty
structures

81. Off-Shore Sourcing
Manufacturing
 Engineering
 Accounting
 Law


82. Conclusions
Technology will leave no business model
untouched and may drive many to
extinction.
 New virtual models are growing.
 Change leads to entrepreneurial
opportunity.
 Time is NOT your friend.


83. Let’s take a break