Innovation and Entrepreneurship

3410101

Innovation & Types of Innovation

University Requirements Coordination Center

Dr. Nael Thaher
Dr. Sara Abu Zannad
Management
The function of implementing work through others using planning,
organization, direction and control in order to achieve the organization’s
objectives efficiently and effectively, taking into account internal and
external influences
Control
• Establishing standard performance

• What are the desired goals

• Measuring actual performance through KPIs

• Taking corrective actions

Why does innovation matter?
• Economic growth

• Standard of living

• Improved health

• Interesting work

• It’s fun!
 Industrial Revolution

• James Watt: Scottish inventor, mechanical engineer and chemist

who improved steam engine in 1776

• Thomas Edison & Joseph Swan: both produced a practical lightbulb

in 1880
Industries Products
Apple / Samsung / Huawei Design, features, cellphones …etc.
Amazon / ebay E-commerce, cloud computing, online
advertising …etc.

Pfizer / Bayer / Astra Zeneca Pharmaceutical, drugs …etc.

Tesla / Toyota Design, features, cars …etc.
Microsoft / Google / Yahoo Software & hardware, computers … etc.
Syngenta / Monsanto Seed biotechnology, agrochemicals
But, innovation is really about IT
these days isn’t it?
Rice Business Plan Competition 2011 - $1.3 million in prizes – 1st place $650,000
 Rice Business Plan Winners
Only one is IT. Three are bio.

4th – cycleWood Plastics A lignin-based biodegradable plastic bag that can

decompose in 150 days

3rd – PK Clean Factories that convert carbon containing waste, like

plastic, into hydrocarbon fuels such as diesel

2nd – Are You a Human? A better alternative to the existing Internet tool for
human authentication

1st – TNG Pharmaceuticals A cattle vaccine that starves the horn fly by disabling
the blood thinner that it injects into the cow

https://rbpc.rice.edu/2023/results
How are we doing at innovation?
• Overall (A, B, C, D, etc.)

• Science is a (A, B, C, D, etc.)

• So why do we get a ?? overall?

• Turning inventions into innovations

What is innovation anyway?
“…the implementation of

process, a new marketing method, or a new organizational method

in business practices, workplace organization or external relations”

An innovation is not simply an invention – it must be put into use

Thinking Doing
 Invention vs. Innovation
Narrated by Stacey Willick

https://www.youtube.com/watch?v=i3b_ktTREq0
Why don’t inventions get into use?
Groups discuss and provide ideas

Technological issues, product issues, market issues, money issues, etc.

 Scurvy
1601 – Cure for scurvy discovered

1747 – Further evidence

1795 – Innovation adopted by British Navy

1865 – Innovation adopted by merchant marine

What factors affect the adoption of
innovation?
 Adoption of innovation
• Perceived attributes of innovation

• Relative advantage

• Compatibility – consistent with existing values, experiences and needs

• Complexity – difficult to understand and use

• Trialability – ability to experiment with on a limited basis (iPhone apps)

• Observability – degree to which results of an innovation are visible to others

(RIM)
Innovation = Ideas + Execution
 Entrepreneurship
Entrepreneurship, also called venture engineering, is the process of
identifying a specific business project that aims to solve a challenge,
problem, or new innovation, to start it, focus on it, provide and
organize the necessary resources, and take risks in order to achieve
financial profit
Product Innovation
• Develop a product and service that did not exist before, making changes and variations
to existing products at various levels

Process Innovation
• Implement a new or improved method of delivery for a product or making changes and
variations to existing technology, equipment or programs that are used in production
and services
Radical Innovation
• The creation of new technologies that open new markets, such as the invention of
airplane that provided a new form of travel (it is transformative, not incremental)
• Example: blockchain technology

Incremental Innovation
• Making improvements on an existing product or service and are directed at the existing
market
• In the automobile industry, the improvements made each year to the newest model of
car are incremental innovations. No new markets are formed, and existing technology
is used to make the car better
Examples of Incremental Innovations
• Each new version of Apple’s iPhone that comes out is typically incremental innovation.
iPhone features such as the camera and processor are tweaked to make an improvement
over the previous model

• When Gillette went from a single razor blade to a double blade, to now up to six blades, no
new markets were created, as the same consumers are buying the blades. There was no
new technology involved, so this is incremental innovation

• Residential washers and dryers have been transitioning from top-loading to side-loading,
and can handle larger loads. This incremental innovation used existing technology and
created no new markets, but stimulated demand for more purchasers at higher prices

28
Competence-Enhancing Innovation
• when new and emerging technologies enhance existing competencies and capabilities
• Example: Each generation of Apple's iPhone (e.g., iPhone 12, iPhone SE, and iPhone X)
builds on the technology underlying the previous generation

Competence-Destroying Innovation
• when new and emerging technologies fundamentally destroy existing competencies &
capabilities, and the firm must develop new competencies & capabilities to compete in
the market
 Architectural Innovation
• Occurs when new products or services use existing technology to create new markets
and/or new consumers that did not purchase that item before

• Example: the smart watch used existing cell phone technology and was repackaged into a
watch. This opened up a new market of purchasers by repackaging an existing technology

• Some firms have leveraged solar cell technology to produce small outdoor ground
lighting. This created a whole new group of consumers who decorate their yards with
these environmentally friendly lights

• Copiers used to be large and expensive machines purchased only for large offices. Canon
and others reconfigured these copiers to be small and usable on desktops, creating a
whole new market of people buying personal copier/printers
Component Innovation
• Change to one or more components of the product (change some
parts)
 The type of innovation is dependent on
two factors

• Market – does the innovation create a new market, or address the

existing market?

• Technology – does the innovation use a new technology or an

existing technology?
Is all innovation technological innovation?
• Not all innovation is technological innovation, though it might seem
like it at times. Many companies innovate using their existing
resources and you don't need to invent a revolutionary technology
to be considered an innovator

• Much innovation comes from organizational innovation and creating

new business models to challenge established companies and make
headway in competitive markets

• Many innovative companies also pursue process innovation using

existing technologies, or establish themselves as early adopters of
new technologies that streamline their business
 Innovation and Entrepreneurship
3410101

Product Life Cycle & Stages of New Product Development

University Requirements Coordination Center

Dr. Nael Thaher
Dr. Sara Abu Zannad
 Product Life Cycle

• is the succession of stages that a product goes through during its

existence, starting from development and ultimately ending in
decline

• Business owners and marketers use the product life cycle to make
important decisions and strategies on advertising budgets, product
prices, and packaging
What are the stages of the product life cycle?

Source: https://blog.hubspot.com/marketing/product-life-cycle
 Once a product is found to be feasible and potentially profitable it can be produced,
promoted and sent out to the market. It is at this point that the product life cycle begins

Source: https://www.twi-global.com/technical-knowledge/faqs/what-is-a-product-life-cycle
 1. Market Introduction and Development
• Developing a market strategy, usually through an investment in
advertising and marketing to make consumers aware of the product
and its benefits

• At this stage, sales tend to be slow as demand is created. This stage

can take time to move through, depending on the complexity of the
product, how new and innovative it is, how it suits customer needs
and whether there is any competition in the marketplace

• But there is plenty of evidence that products can fail at this point,
meaning that stage two is never reached
 2. Market Growth
• This should see growing demand promote an increase in production
and the product becoming more widely available

• Branding becomes important to maintain your position in the

marketplace as the consumer is given a choice to go elsewhere

• Product pricing and availability in the marketplace become

important factors to continue driving sales in the face of increasing
competition
 3. Market Maturity
• At this point a product is established in the marketplace and so the
cost of producing and marketing the existing product will decline

• As the product life cycle reaches this mature stage there are the
beginnings of market saturation

• Retailers will not seek to promote your product as they may have done
in stage one, but will instead become stockists and order takers
 4. Market Decline
• Eventually, as competition continues to rise, with other companies
seeking to emulate your success with additional product features or
lower prices, so the life cycle will go into decline

• Many companies will begin to move onto different ventures as

market saturation means there is no longer any profit to be gained

• Some companies will survive the decline and may continue to offer
the product but production is likely to be on a smaller scale and
prices and profit margins may become depressed
Stages of New Product Development
1. Idea Generation
• Brainstorm an idea (or ideas) that will help you solve an existing
customer problem in a new and innovative way

• As you’re coming up with ideas that will help you solve customer
needs, it’s important to have a robust understanding of your target
market

• Your initial idea generation stage can be as simple as saying “What if

we did this?”
2. Research
• Conducting research to elaborate. There are various steps you can
take to do this, like:

• Market research to understand the current sentiment in your

industry

• Competitor analysis to understand if customers think there are

things your competitors' products or services lack

47
3. Planning
• Formulate a final product idea/definition based on your initial idea
and research and begin coming up with your plans to bring it to life

• For example, if you’re creating a physical product, you’ll need to

source the necessary materials or find production partners that will
assist in manufacturing

• Coming up with a marketing strategy that will help you effectively

market when your product is completed, pricing models that make
sense for your product, and that your customers will pay
4. Prototyping
• You come up with a sample product that is a mockup of what will be
created during mass production

• You may make multiple prototypes and go back and forth between
this stage and the testing stage before you have a finalized
prototype

5. Testing
• Before launching your product you need to test it to ensure it will
work as advertised and effectively solve your customer needs

• So you know exactly what works and what doesn’t

6. Product Development
• Creating the final product that will be commercialized once
completed

7. Commercialization
• Where you introduce your products to market. Where people can
finally make use of what you created

• Many businesses launch their products and, over time, return to

make improvements to their products based on customer feedback
and market changes
Innovation and Entrepreneurship
3410101

Introduction to Entrepreneurship

University Requirements Coordination Center

Dr. Nael Thaher
Dr. Sara Abu Zannad
 What is Entrepreneurship and How
Important is it?
• Entrepreneurship is the ability and readiness to develop, organize
and run a business enterprise, along with any of its uncertainties
in order to make a profit

• Entrepreneurship is when an individual who has an idea acts on

that idea, usually to disrupt the current market with a new
product or service

• Entrepreneurship Drives Innovation

• The process by which individuals pursue opportunities regardless
of the resources they currently control to exploit future goods and
services

• Fred Wilson defines entrepreneurship as: the art of turning an

idea into a business

• The tasks can be accomplished either by an individual or a group

and usually require creativity, leadership, and a willingness to
take risks
 The Importance of Entrepreneurship
1- Creating new jobs (contributes to creating opportunities, satisfying individuals’ needs, and
improving living standards)

2- Stimulating economic growth (this enhances economic development and generates new
wealth)

3- Community service (by solving a problem or developing a specific idea that makes it easier
for individuals in society)

4- Providing more advanced services and products of the highest quality (this in turn creates
intense competition between entrepreneurs, which contributes to the quality of products and
service provided to the public in order to strive to gain customer satisfaction and lead the
market)
 Why Do People Become Entrepreneurs
1- To be their own bosses (independence and self-reliance not only at work but also in daily life)

2- To seek to implement their own ideas (freedom and independence in implementing their
ideas, it allows a degree of creativity for those wishing to implement their ideas)

3- This does not mean absolute freedom, because there are factors that influence, such as the
opinions of partners in the project, the directives of investors, and customer comments and
aspirations

4- To achieve financial returns and success (such as making their name successful in society and
making them have a real success story that they can be proud of)
 Characteristics of an Entrepreneur
• Business owners share many of the same entrepreneur characteristics:
Leadership, vision, discipline, curiosity, creativity, adaptability, and the ability
to take measured risks
Developing these traits can help you become successful when launching your
business
• As Jeff Bezos, founder of Amazon, said, “Ideas are easy, but
implementation is difficult.”
 Startup
A startup or start-up is a company or project undertaken by an entrepreneur to
seek, develop, and validate a scalable business model

A startup is a company that's in the initial stages of business. Founders normally

finance their startups and may attempt to attract outside investment before they
get off the ground

Funding sources include family and friends, venture capitalists, crowdfunding,

and loans
 Types of Startup Companies
1. Lifestyle Startup: is a business set up and run by its founders primarily with the aim of
living or maintaining a certain lifestyle. Such as selling eBooks, freelancing, and create
online courses

2. Salary Substitute Startup: indicates reliant on a pre-established skillset. This type of

company differs from an entrepreneurial enterprise since it offers an existing service or
product rather than bringing something new to the market. Such as dry cleaners,
convenience stores, restaurants, accounting firms, retail stores, and hairstyling salons

3. Entrepreneurial Startup: is founded by one or more entrepreneurs who want to develop a

product or service for which they believe there is demand. These companies generally start
with high costs and limited revenue, which is why they look for capital from a variety of
sources such as venture capitalists. Such as a single-location restaurant, one grocery shop,
or a retail shop to sell goods or services
 Innovation and Entrepreneurship
3410101

Identifying opportunities & generating ideas for the project

University Requirements Coordination Center

Dr. Nael Thaher
Dr. Sara Abu Zannad
 Stages of the Entrepreneurial Process
• It is useful to break the entrepreneurial process into five phases:
idea generation, opportunity evaluation, planning,
company formation/launch and growth
 Opportunities and Ideas
• Opportunity: A set of favorable circumstances that create a need for a new product, service, or
customer
• Idea: It is an impression or interest in a certain aspect, but before the actual application process
• Are all ideas considered opportunities?
Not all ideas are opportunities...

• What distinguishes an ordinary idea from an exceptional idea?

It is the possibility of transforming an exceptional idea into an investment opportunity by turning it into a
salable product or service

 Methods of ideas in entrepreneurial companies:

1- Internal reasons: the entrepreneur decides to establish the company by searching the market for
opportunities and needs that she /he can provide
2- External reasons: the entrepreneur notices a gap in the market or a need and establishes a company to
provide solutions and products
Four Essential Qualities of an Opportunity
• It is (1) rare, (2) attractive, (3) timely, and (4) anchored in a
product, service, or business that creates or adds value for its
buyer or end user
 Ways to Identify Opportunities
• Speak to prospects
• Talk to current customers
• Competitor analysis
• Understand the market
• Explore indirect opportunities
• Look at environmental factors
• Analyze foreign markets
• Investigate other industries
 Social Forces
• Social class, age, sex, gender, religious affiliation, racial/ethnic
identity, language, and cultural practices: have a tremendous
effect on life
Steps in the Process of Generating Creative
Ideas
 The creative process is made up of 5 steps
preparation, incubation, illumination, evaluation, and implementation
1. Preparation
The background, experience, and knowledge that the entrepreneur brings to the process of
identifying opportunities
This stage is considered the seed of innovation, determining the aspect of the problem to be
studied, and collecting the necessary information and data in an organized and specific manner

2. Incubation
a state of anxiety, subconscious fear, and hesitation to do work and search for solutions
It is the stage of awareness used to grow to reach the stage of creative incubation
It takes from minutes to weeks
Methods are also drawn up, activating ideas on the ground
3. Illumination/insight/shining
Individual reaches some solutions or proposals that lead to the idea of ​a solution and a way out
of the impasse, where everything that was ambiguous before appears clear, and this stage is
considered the peak of the innovative process

4. Evaluation
The idea is clear here, but the validity of the creative idea may be evaluated, analyzed, and
compared to alternative ideas

5. Verification
Obtaining authentic, useful and satisfactory results, the creative product attaining social
satisfaction and the idea becoming material or on the ground

 In the preparation stage, information is collected, and in the investigation stage, the validity
of the new ideas and their conformity with reality is verified
 In the second, third, and fourth stages, subconscious mental actions take place that help the
individual in the emergence of innovative ideas
 Idea Generation Techniques
• Idea generation techniques are activities and approaches that can
help people process and analyze their thoughts in order to think of
new inventions, solutions or designs

• You can use these techniques in both individual and group settings

• Teams use this ideation method to encourage new ways of thinking

and collectively generate solutions
 Brainstorming
1- Do not use the brainstorming session to analyze ideas or make decisions (analyze and filter
later)

2- Criticism of ideas is not allowed, whether laughing or making facial expressions (this hinders
creativity)

3- Encouraging the free expression of imaginative ideas without restrictions to collect more
ideas

4- We do not want anything to slow down the generation of ideas in brainstorming, for example
not writing down the ideas in detail
 Focus Groups
• A focus group is a small group of people in your target market who meet for a guided
discussion about your business idea

• It is a research technique used to collect data through group interaction. The group
comprises a small number of carefully selected people who discuss a given topic. Focus
groups are used to identify and explore how people think and behave, and they throw light on
why, what and how questions
 Library and Internet Search
• It defines a library as a collection of information resources made available to a community
for reference or borrowing, and can include physical or digital materials

• The internet is defined as a global network of interconnected computer networks using

standard communication protocols
 Other Techniques
• A Day In The Life is a type of ethnographic study where the researcher follows and observes
a user through a typical day

• The objective of this activity is for the researcher to understand the routine and typical
activities of a user that the user performs by mere habit and that the user would perform
subconsciously

• Customer Advisory Board is a group of customers who come together on a regular basis to
share insights and advice with an organization. High-level executives at their organizations
and therefore can provide in-depth market insight
Innovation and Entrepreneurship
3410101

Feasibility Analysis of the Project

University Requirements Coordination Center

Dr. Nael Thaher
Dr. Sara Abu Zannad
 The Process of Moving from Creating
Ideas to Developing a Business
• Step 1 – Initial Idea Exploration, Identification and Assessment

• Step 2 - Idea/Concept and Scenario/Model Deliberation and Assessment

• Step 3 - Go/No-Go Decision

• Step 4 – Business Plan Preparation and Implementation

• Step 5 – Business Operations

 Does an Entrepreneur's Success Depend Only
on Creating a New Idea?
 There are steps to move from creating ideas to developing a successful business
 Evaluating the idea
is the process of ascertaining the need for this idea in the market, developing a solution for that
need, and determining the entrepreneur’s ability to successfully transform the idea into a
business

 What is the goal of idea evaluation

to verify the feasibility of multiple ideas more efficiently and effectively and to determine the
most likely solution

 One of the effective tools used to help evaluate ideas is the Idea Sketch Pad (which helps
evaluate ideas in a relatively short period of time)
The Really Big Idea Sketch Pad
 Feasibility Analysis
• Determine whether the idea can be turned into a viable business to
create a successful business

• Answers the question “Should we move forward with this business

idea?”

• If this step succeeds, you may move to the next step or cancel the
project without wasting time, money, energy, or resources
 Feasibility Study
• It is an opportunity to take a closer and insightful look at your idea to see if it needs
secondary or main axes, or if you should abandon it completely and move on to another idea

• It helps you consider the costs and activities required to set up and run a business, and how
to make an informed decision about whether to start a business and how to do it
 Industry and Market Feasibility Analysis
• The focus at this stage is divided into two parts:
1) To determine the overall attractiveness of the industry as a suitable place
for new work

2) To evaluate potential niches that a small business could profitably occupy

• Evaluate the industry at the macro level

• Most businesses in an industry are driven by changes that occur within it
• If the entrepreneur does not adapt the business to keep pace with the changes
created by macro forces in the industry and the market, the business becomes
obsolete
There are six fundamental forces that play a role in
creating change in industries and the markets

1. Sociocultural factors

2. Technological factors

3. Demographic factors

4. Economic factors

5. Political and legal factors

6. Global factors
 1. Sociocultural Factors
• Social and cultural change can lead to radical changes, entirely new
industries, and radical transformation

• Example: In the 1970s and 1980s, women began entering the workforce at
much higher rates than had previously been the case (this is a result of the
women's movement of the 1960s); This led to:

1. A significant increase in the size of the American workforce

2. Women competed for jobs previously dominated by men
3. (Day care) such as childcare
4. Women's business clothing
5. Rapid growth in the restaurant industry
6. Growth in the Automotive Industry - Owning two cars doubled between
1960 and 2013
 2. Technological Factors

• Technological developments lead to the development of new

products and entirely new industries

• Example: the Internet has changed how people consume

information. As news became available online, there was a
significant decline in the number of people reading print
newspapers. Consequently, print advertising revenues decreased
 3. Demographic Factors
• Researching the changes that occur in the population year after
year in terms of their number, growth rate, distribution in various
age groups, gender, marital and educational status, and their
density in various parts of the country

• Example: Uber
 4. Economic Factors
• Most companies suffer and struggle during economic recessions,
and some companies are able to grow

• Example: Business in the e-learning industry boomed during the

great recession during the Corona pandemic, as web-based
learning provides customers with opportunities to improve their
education and skills at an affordable price

• Companies that provide high-quality e-learning via the web or the

Internet at a fraction of the cost of traditional university education
have filled this gap in the market
 5. Political and Legal Factors

• Enacting new legislation creates opportunities for entrepreneurs

• For example, the passage of the Patient Protection and Affordable

Care Act (Obamacare) in 2010, the payment system for health
care with the allocation of fees for service... since payment for
performance is new in the field of health care
 6. Global Factors
• Open global marketplaces allow businesses to search for
customers and suppliers from all over the world
Feasibility analysis of the product or service: Is
there a market?
 Once entrepreneurs discover that there is market potential for their product, they
rush enthusiastically to start a business without thinking about whether they can
actually produce a product or provide a service that customers want

 A product or service feasibility analysis determines the degree to which the product
or service idea is attractive to potential customers and determines the resources
needed to produce or deliver it

• Two questions are addressed: 1. Are customers willing to buy our products or
services? 2. Can we offer the product or service to customers at a profit?
• Primary research: direct data collection and analysis
• Secondary research: collecting data that has already been collected and analyzing it
 Initial Search
• It may be done through the following:
1. Customer surveys and questionnaires
• The questionnaire must be kept short, and the questions must be
carefully placed so as not to bias the results

• For example, a scale from 1 to 5: I will definitely not buy... I will

definitely buy

• Do not ask people you know who are easy to reach, and you must
poll the opinions of people who represent the target market
2. Focus Group
Involves recruiting a small number of potential customers (5 to 10)
to provide feedback on specific issues about your product or service

Listen carefully to what group members like and don’t like about
your product or service because they are telling you what is on their
minds

These may be through virtual focus groups on the web at no cost

and with valuable marketing information
3. Prototypes
• This is an effective way to measure the feasibility of a product

• An original, functional model of a new product that a business can put into the hands of
potential customers so they can see, test, and use it

• Prototypes point out potential problems in a product's design, giving inventors the
opportunity to address and resolve them even before it gets into customers' hands

• For example, computer software makers often put prototypes of new products into
customers' hands as they develop new products, which improve existing products' design and
add new features

• These experiments are known as beta tests and lead to an iterative design process where
software designers collect feedback from users and then incorporate their ideas into the
product in the next round of testing
4. In-Homes Trials
• It involves sending researchers into customers' homes to observe them as they
use the company's product or service; This is expensive and may not be
affordable for most entrepreneurs

• Such as the Holter Monitor, which is a small, battery-operated, wearable

medical device that measures heart activity. The doctor requires the patient
to use the device for 12, 24, or 48 hours to help him diagnose the patient’s
condition
5. Secondary Research
It is a summary, compilation, and/or arrangement of existing research instead
of basic research, where data is collected from research topics and experiments,
including:

1. Trade Associations and Business Directory

2. Industry databases. Through websites

3. Demographic data (Department of Statistics in Jordan)

4. Expectations/predictions: among the most important predictions are those

issued by: The World Bank and the Center for Strategic Studies at the
University of Jordan (opportunities to know the market trend)
5. Market research: The process of collecting information about the category, target
market, and buyer personality with the aim of determining the efficiency and
effectiveness of your product or service for this group
Companies and entrepreneurs use this information: to design efficient products,
improve user experiences, and formulate a marketing message capable of attracting
customers

6. Articles and studies: Scientific journals, articles, periodicals, index of commercial

periodicals, and scientific studies are important sources of information

7. Local data: Such as the Ministry of Commerce and Chamber of Commerce provide
useful data about the local market

8. The Internet: Benefit from the vast amount of market research information
available online, but care must be taken regarding the reliability of online sources
 Financial Feasibility Analysis
• Extensive financial analysis that examines basic economic viability

• Can this business generate enough profits?

• Business model and creation of a complete business plan

• The four main elements that must be included in the financial feasibility analysis:
Initial capital requirements, estimated profits, time to expiration of cash flow, resulting return
on investment
• How entrepreneurs start with little funding:

• Boot Strapping is the process of finding creative ways to exploit opportunities to

start and grow a business with the limited resources available to most startup
projects

• This process includes a variety of strategies and techniques that cover all business
management functions: marketing, recruitment, inventory management,
production, and other administrative processes to maintain the company

• Lace up your shoes and go,” meaning self-reliance in the self-startup process. Those
who start their startups with their own financial resources and refuse to rely on
investors’ money
How do these self-made people start their
entrepreneurial journey in this way without relying on
any external funding?

The most popular answer is to rely on the financial savings of the

founders - or their relatives and friends - to start their company,
and begin providing and marketing the product or service for them
within budgets limited by the amount of capital they started with

Later, when revenues begin to come in, these revenues are recycled
by creating a Cash Flow cycle, thus achieving the Growth required
for the emerging project
Expected profits (net income, profit): Entrepreneurs must predict the
possibility of achieving profits from the proposed business

Cash Flow Time: The total cash that will be spent to maintain the
business until the project achieves equal cash flow

If the entrepreneur cannot reach the point of positive cash flow before
running out of capital available for startup, the company dies

49% of startups fail due to insufficient capital - that is, not having
enough money to start...
Therefore, it must be taken into account that there are unexpected costs
Return on investment: This aspect combines estimated profits and
capital requirements to determine the rate of return expected to
result from the project

• Rate of return on invested capital = (estimated net profits / amount of capital invested in the
company) *100

• Example: Net profits = $80,000 Operating capital = $620,000

• Rate of return on capital = 80,000/620,000 = 12.9%

• This is very important to decide whether to continue or not to implement

• The higher level of risk involved in a potential business, the higher rate of return it should
provide to the entrepreneur (the return on investment is proportional to the rate of risk)
 Entrepreneur Feasibility
• The feasibility analysis so far has proven that the industry and market are suitable, and there
is evidence of demand for the product or service in the market, and the concept seems
financially feasible...but a question remains:

• Is this idea right for me? Entrepreneurial readiness assessment: The knowledge, experience,
and skills necessary for the success of entrepreneurs (this is called entrepreneurial readiness)

• For example, starting a landscaping business requires knowledge of how to operate a lawn
mower, etc., and knowledge about plants and herbs

• Entrepreneurs can acquire the knowledge and skills they need through previous jobs, formal
education, interests and hobbies

• Conducting an entrepreneurship self-assessment can help assess the extent of

entrepreneurship readiness
Innovation and Entrepreneurship
3410101

Business Model Development

University Requirements Coordination Center

Dr. Nael Thaher
Dr. Sara Abu Zannad
The business model answers the question:
How can we move forward with this business idea?

• Developing a business model helps the entrepreneur fully

understand everything that is required to start and build the
business
• Evaluating ideas
• Conduct a feasibility analysis
• Business model development
• Industry and competitor analysis
• Writing a business plan
• Launch and start working
Components of a Business Model
Business Model Map
 1. Customers Segments
 A good business model always starts with the customer
 It is the process of dividing customers into groups that differ from each other in behavior,
methods of agreement, age, gender, etc.
 The big mistake is: everything is for everyone
 Small companies are usually more successful in focusing on a specific market or magazine,
Narrowing the target market allows a small business to focus its limited resources on meeting
the needs of a specific group of customers rather than trying to satisfy the desires of the mass
market

 What is the most important thing we should focus on at this stage?

• Determining the target audience segments to solve the problem and who will be interested in
the product or service as it can excel in meeting customers’ special needs or desires
• The entrepreneur determines whether the target group is the final consumer, Business to
Customer (B2C), Business to Business (B2B)
• Types of customer purchases:Individuals, Organizations, Schools, Universities, etc.
 2. Prepositions Value (Value provided to customers)
 Value proposition:
It is the promises that the company makes to customers and the way
to benefit from the products or services offered

 All the things/promises that will differentiate the business from

its competitors, such as pricing, quality, features and availability
of the product

 Listen to customers while presenting a realistic value proposition

that can be adhered to, and not making offers that cannot be
achieved so as not to negatively affect the customers’ relationship
with the company
The value provided through products and
services may be in different forms
1. Newness
2. Customization
3. Performance
4. Price
5. Design/ Brand Status
6. Usability
7. Accessibility
 3. Customer Relationships
 How the company deals with its customers and creates a distinctive customer journey

 Not all businesses provide the same type of customer service

 For example, many business models provide meals to customers

 Vending businesses offer fast, convenient and impersonal service

 On the other hand, a fine dining restaurant works closely and personally with customers to
ensure they get exactly what they want
 4. Channels
 The process of choosing appropriate channels is an important and
precise process due to its close connection to the ability to reach
customers, which is included in the marketing plan

• Channels through direct sales or through an intermediary, and

they may be remote or face-to-face depending on the nature of the
product

• Distribution channels determine the most effective way to deliver

products to customers for this type of business:
1- Through websites (online) such as Amazon
2- Others may want to see the product, touch it
 5. Key Activities
• It is a set of basic procedures that must be taken to achieve the
value proposition provided to potential customers in the event of
purchasing the product/service

• It lists the important operational activities to start the project

• Product manufacturing, Consulting, Technical development such

as building a platform, application, or software development
 6. Key Resources
o Key Resources in the business model canvas are the main inputs and assets the business uses
to function effectively. Phrased differently it is what you need. For example,

• Plant and Equipment

• Buildings
• Employees
• Intellectual Property
• Computer Software
• Expert Knowledge
• Political Connections
• Also internet services, cars, and electric energy

o What are the human, capital and intellectual resources necessary for business success?
 7. Key Partners
• It is a list of all external parties that the company needs to
complete its work related to the product or service

• Include suppliers, key partners, distributors, investors and

advisors

• Entrepreneurs cannot expect to become successful alone

 8. Cost Structure
• Cost structure is the aggregate of the various types of costs, fixed
and variable, that make up a business' overall expenses

• Companies use cost structure to set pricing and identify areas

where expenses can be reduced

• There are two main categories of cost structure: value-driven and

cost-driven

• The entrepreneur must determine the fixed and variable costs

needed to make the business model work
 9. Revenue Streams
• Revenue streams are a crucial component of the business model canvas

• They represent the various ways a company makes money from its value
proposition

• Understanding and effectively managing these

streams is vital for the survival and growth of any business

• All cash flows that transform value propositions to

customers, to financial gain

• The sources of income are usually diverse and do not depend on one source
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