Organising for
entrepreneurship
Questions and solutions
The foundations of entrepreneurship
KU Leuven
, The Foundations of Entrepreneurship
Class 1: Course kick-off and the business model
Explain the relationship between the type of business opportunity and the cash need (+
related implications)
Need (problem): unidentified and solution: undefined: fantasy
Need (problem): identified and solution: defined: business opportunity
Need (problem): identified and solution: undefined: market pull
This start-up has identified a need but needs to figure out how to provide a product
or service. The market pull firm can auto finance the growth of the firm, but if they
want to expand internationally or expand their product portfolio, the firm can opt for
product portfolio.
Need (problem): unidentified and solution: defined: technology push
This start-up has a solution identified but needs to figure out how these fits into the
market. The technology push firm needs more cash (than a market pull firm) to avoid
bankruptcy and therefore they need venture capital. VC want equity and to be on the
board of directors to monitor the firm and bring strategy in the business. With VC
funding, an exit is essential because they want ROI (5-10 times the investment). So,
this is a very expensive type of funding.
A third type of business is a consultancy firm. This firms solves problems and has as main
activities: working for a client, searching a client and administration. Every time the firm
wants to grow, you will have to hire new people.
Describe the concept “business model” and link it to examples
A business model is the architecture of the firm’s value creation, delivery and capturing
mechanisms. The business model is the business in a nutshell. Value creation is the problem
solution fit and value capturing is the revenue model. Evernote has a pitch where they
explain the business in 50 words or less and therefore it is very clear what their business
model is. They truly understand their business. Their value creation is the function of an
, external brain, their value delivery is of any type of device and their value capturing is the
freemium model. A business model describes the rationale of how an organization creates,
delivers and captures value. In the figure below, you can see the magic triangle. The value
captured is the difference between the customer price and the cost paid to producers (profit
and the value created is the difference between the maximum willingness to pay and the
cost paid to producers (profit and customer surplus). A product can be empowered through
the business model. A business model is the architecture (the functional relation among
these mechanisms and the underlying activities, relationship amongst components and with
the environment) of a firm’s mechanisms for creating, delivering and capturing value with
their components (VP, customer segments, VAC and revenue capture mechanisms).
Explain why entrepreneurs have to test the assumptions of their business model. Use
insights from the case Genappeal to support your answer
Business models often work great in theory but fail in the real worlds and one of the
reasons, beside making a product nobody wants and a rapidly changing business
environment, are assumptions made about the customer, the business model and the
market size. Genappeal made a mistake in calculating the amounts of users of their services,
namely they calculated all singles in the market. Not all singles will use this: think about the
other agencies and apps that people can use. Another mistake they made was that there is
no such thing as “the single” and segmentation of the market is important. It is
homogeneous since singles can vary enormously. It is key for a start-up to spend time in the
market and really get to know the market. For example, they could sell the study
results/model to another player in the market, but you should know who this potential
acquirer can be. You have to look beyond the hockey stick projections because every start-up
will come up with this increase in market share and revenues. It is important to know the
underlying assumptions.
Explain why business models often fail in rapidly changing environments. Use insights from
the case Mobile Internet start-up to support your answer
Business models often work great in theory, but fail in the real worlds and one of the
reasons, beside making a product nobody wants and not testing assumptions about the
entrepreneurship
Questions and solutions
The foundations of entrepreneurship
KU Leuven
, The Foundations of Entrepreneurship
Class 1: Course kick-off and the business model
Explain the relationship between the type of business opportunity and the cash need (+
related implications)
Need (problem): unidentified and solution: undefined: fantasy
Need (problem): identified and solution: defined: business opportunity
Need (problem): identified and solution: undefined: market pull
This start-up has identified a need but needs to figure out how to provide a product
or service. The market pull firm can auto finance the growth of the firm, but if they
want to expand internationally or expand their product portfolio, the firm can opt for
product portfolio.
Need (problem): unidentified and solution: defined: technology push
This start-up has a solution identified but needs to figure out how these fits into the
market. The technology push firm needs more cash (than a market pull firm) to avoid
bankruptcy and therefore they need venture capital. VC want equity and to be on the
board of directors to monitor the firm and bring strategy in the business. With VC
funding, an exit is essential because they want ROI (5-10 times the investment). So,
this is a very expensive type of funding.
A third type of business is a consultancy firm. This firms solves problems and has as main
activities: working for a client, searching a client and administration. Every time the firm
wants to grow, you will have to hire new people.
Describe the concept “business model” and link it to examples
A business model is the architecture of the firm’s value creation, delivery and capturing
mechanisms. The business model is the business in a nutshell. Value creation is the problem
solution fit and value capturing is the revenue model. Evernote has a pitch where they
explain the business in 50 words or less and therefore it is very clear what their business
model is. They truly understand their business. Their value creation is the function of an
, external brain, their value delivery is of any type of device and their value capturing is the
freemium model. A business model describes the rationale of how an organization creates,
delivers and captures value. In the figure below, you can see the magic triangle. The value
captured is the difference between the customer price and the cost paid to producers (profit
and the value created is the difference between the maximum willingness to pay and the
cost paid to producers (profit and customer surplus). A product can be empowered through
the business model. A business model is the architecture (the functional relation among
these mechanisms and the underlying activities, relationship amongst components and with
the environment) of a firm’s mechanisms for creating, delivering and capturing value with
their components (VP, customer segments, VAC and revenue capture mechanisms).
Explain why entrepreneurs have to test the assumptions of their business model. Use
insights from the case Genappeal to support your answer
Business models often work great in theory but fail in the real worlds and one of the
reasons, beside making a product nobody wants and a rapidly changing business
environment, are assumptions made about the customer, the business model and the
market size. Genappeal made a mistake in calculating the amounts of users of their services,
namely they calculated all singles in the market. Not all singles will use this: think about the
other agencies and apps that people can use. Another mistake they made was that there is
no such thing as “the single” and segmentation of the market is important. It is
homogeneous since singles can vary enormously. It is key for a start-up to spend time in the
market and really get to know the market. For example, they could sell the study
results/model to another player in the market, but you should know who this potential
acquirer can be. You have to look beyond the hockey stick projections because every start-up
will come up with this increase in market share and revenues. It is important to know the
underlying assumptions.
Explain why business models often fail in rapidly changing environments. Use insights from
the case Mobile Internet start-up to support your answer
Business models often work great in theory, but fail in the real worlds and one of the
reasons, beside making a product nobody wants and not testing assumptions about the
