Care Van: Necessary Financial Assumptions and Farewells

We have been thinking about the Financial plan for our venture. We have identified a couple issues that we will need to address in the long run, but in the short run we will need to use some key assumptions for our business decisions to make financial sense.

Upfront Cost
Our initial activities will be deciding on the technical requirements needed for the mobile unit. That includes, supplies, equipment, working and storage space, as well as more typical vehicular requirements like gas mileage. We can use our homes as an office space to start, but we will need to make sure that at any given time, we have enough supplies and that may mean storing them at home.

Operating Cost
In our case, it will be much easier to determine the cost of sales than the revenue we will receive per customer, because Medicare dictates the payments for services rendered. It will be a work in progress to determine the break-even point, so in the meantime, we will use some static numbers for our calculations. The basis for our assumptions is the expected operating cost (based on research from other mobile medical units) and a goal of a 5% profit margin. We used some 2011 cost figures to project the revenue necessary and corresponding visits that would be required to meet that level.

Goodbye All!
Overall this has been an interesting experience. I have learned a lot during this semester, and it has led to some real critical thinking on our part. Good luck with all of your ventures in the future!

Borrowing from elsewhere

Organizations that are able to look beyond their own institutional borders for inspiration may be surprised at where innovate solutions originate.  The Marine Corps enthusiastically searches for methods outside of their organization and the armed forces, and instead to academia, business, and other fields.  Entrepreneurs would be wise to do the same towards an organization that specializes in operating under uncertainty.  I found the articles’ discussion on the 70% Rule intriguing, and wish it was further explored.  There is an inverse relationship between the time it takes to make a decision and the amount of information available to the decision maker.  I would be intrigued to know if there are similar rules of thumb for an entrepreneur.  Should this rule change according to circumstances?  Do different personality types converge on the same cut-off?

The most beneficial technique that could be borrowed by entrepreneurs is the Marine’s tolerance for failure and encouragement for aggressiveness.  Despite being heralded as the pinnacle of disciplined organizations, the Marines regularly push their new recruits outside of their comfort zones, testing them to see whether they are capable of handling new and challenging environments.  Naturally, combat situations demand this kind of response, but so too do entrepreneurs.  Team members working for an entrepreneur must take initiative to do their jobs effectively, and occasionally that means making mistakes.  They cannot wait for their boss to give them marching orders idly, but they must be proactive.  The boss must in turn empower the team members to make on-the-fly decisions, knowing that mistakes will be inevitable.  In such an environment, small mistakes can be tolerated if the team is actively engaged and trying new approaches to their problems.

However, start-up companies should certainly avoid some aspects of the Marine Corps’ structure and methods, specifically the rigid hierarchy.  The generally point remains, that entrepreneurs should not limit themselves to learning from other start-up ventures.  Clever solutions can be adapted from any institution, and from differing circumstances.  Entrepreneurs must keep an open mind so that they can learn and grow to meet their own challenges, armed with a diverse arsenal of strategies.

Sprint to the finish

This is the last blog post for the class and it feels a bit unsettling. I have actually gotten used to writing a blog post every week and I will probably continue this tradition. I want to thank everyone in the class for the unabashed criticism for the betterment of my venture. I feel having such open discussions really helps in terms of flushing out new ideas for a particular part of the venture. For example, measuring LUVwater's impact is now going to be tied back to its goals and mission instead of just simply listing down the different ways to measure impact. This will show us which measure of impact actually matters. I would like to thank Tim Zak for his guidance and making the class informal enough that ideas flow easily and everyone gives constructive criticism.

Well, getting down to financials was pretty hard for me. This may sound like a rant but financials are probably the last things I would focus on when I am thinking of a business plan as I know I don't have the expertise nor the patience to assume, although intelligently about the various aspects of the business plan. I realize it is a very critical part of the plan and its the sole measure of the ventures health. I am glad that Tim kept this part for the end so that we could spend more time on it. It takes a lot to think of what could come to you 5 years in the future and where your venture would be.

I actually had a really good experience this past two weekends regarding financials. A friend of mine and I started a Chaat Cart at CMU which is open at the Wean lobby every Friday from 5.30 pm for an hour or till stocks last. We sell Indian street food which is of course lip smackingly tasty and its something I and all Indians miss since we have come here. Its good news for us as we have been not only covering our investment costs but making some good money on the side too. This project did not start with a business plan, we just dove straight into it and now that we have done two pilots we are going to write a business plan with financials we've already proved.

Well of course this isn't entirely possible with LUVwater as it is a product that will take time to develop and test and get approvals from various authorities. From this class I have charted out the product development plan and I will definitely be working on it when I have downtime. I also feel it has great licensing opportunities. One of the goals for LUVwater is for it to be available to everyone and I would really like for it to be completely open source. The is to be able to make it so that its a DIY job and just ship the LED's, filter and the circuit. I am working on a product that can be released much sooner but uses the same principle as LUVwater so that we can start generating revenue for funding research for the LUVwater filter.

Reading the right things. Focusing on the right things. Doing the right things.

First - I want you all to attend Sunsmash on friday.  It will be held in front of the U.C. from eleven until . . . who knows - We (Canvas & Hide) will be selling caffeinated drinks to kick off the second half of your friday (or jumpstart your weekend).  I hinted at this side project a few blogs ago, and am excited to say that we are moving forward, and we look forward to seeing you there.

        I've been seduced by the daily insights of Seth Godin, and todays posts¹ are especially relevant.  He talks about how scaling our reach results in the inability to take the time to treat different people differently.  This has been a recurring subject on Seth's Blog, and one that I am inclined to agree with.  At Canvas and Hide we are pushing into a crowded space that will be hard to differentiate in.  It is a space that we are passionate about, and we believe that our passion and personablility will make us stand out in this space.  Essentially we will be known for treating different people differently.  Despite our growth, we will have to focus on personal connections and individualized interactions.  Without this we will just be another bag that has a bit of a price tag.

      While writing our business plan I've noticed two things.  1: We aren't going to be a bag company. We are going to be a service company.  Our purpose will be to empower people to take care of the things that they own so that they can live long fruitful lives that far exceed the premium price tag.  We will do this through an involved product servicing team, the building of an space that encourages and supports user repair, care, and d.i.y. modification.  This leads to the second point, 2: We can't look at how much of the pie will want to buy into our product.  We have to look at ourselves and say "how many people can we realistically serve and how to we grow that number organically and effectively?" From there we can leverage the knowledge we have gained from our existing customers, our support department, and our community of users to identify existing demand and meet it.  By bringing our customers into a community we retain them as a network, and can leverage their networks for grass roots, word of mouth advertising.  Our marketing department IS our service department.  Our marketing department IS our d.i.y. space.

     I know that we still need to identify our early adopters and size the market to predict growth, but these numbers are only important relative to our capabilities.  if M>C then go for it. if M<C then rethink your strategy.  In the end, don't lose time in the books.  A lot can be figured out by going out there and testing your business - which brings us full circle to Sunsmash.²  We will be out there selling on friday and we'd love to give you a taste of what we are all about.  Browsers and Window shoppers are ALWAYS welcome.

      

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1 or perhaps the weekends as well, i'm not a psychopath, I take time away from the internet to stream game of thrones and relax a little. The blogs mentioned are these two^↩

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2 Just a warning - the Sunsmash promo page leaves a lot to be desired. I did look up times though and its 11am to 4pm.

Accounting 101

Since most of our hands were partially raised when Tim Zak asked the class how familiar we were with financial statements, I am using this blog entry as a space to provide further information on income statements, balance sheets, and statements of cash flows. The below articles have been increasingly useful for me as the deadline for our business plans approaches. 

This article by the U.S. Small Business Administration describes, in great detail, the meaning of each section on the balance and income statement, and what your business should include within each section:

http://www.sba.gov/ombudsman/7046

The U.S. Small Business Administration also provides advice on how to design a cash flow analysis: http://www.sba.gov/content/develop-cash-flow-analysis-your-business

This article by eSmallOffice offers ways to develop long and short term goals, as well as, assumptions to develop a financial forecast for your business: http://www.esmalloffice.com/SBR_template.cfm?DocNumber=PL10_0100.htm&location=all

These articles include easy to understand equations for creating financial metrics that should be included on the financial sheets, or used to evaluate your ROI:

 http://www.esmalloffice.com/SBR_template.cfm?DocNumber=PL10_0070.htm&location=all

http://www.esmalloffice.com/SBR_template.cfm?DocNumber=PL10_0080.htm&location=all

http://www.esmalloffice.com/SBR_template.cfm?DocNumber=PL10_0090.htm&location=all

End of the Course...

Back on Day One, we were asked what we wanted to get out of this class. “By the end of the course success for me will look like..." I remember shrugging and reciting something along the lines of, "I have no idea."

For me, this class has been helpful in providing an opportunity to take an idea and go through the process of developing a plan that will (hopefully) turn that idea into a reality. Many of the classes available at Heinz contain assignments that involve the creation of products, of programs. However, creating a plan for implementation, for realization, has not been emphasized. I'm glad that Social Innovation Incubator has provided some insight into what that next step might look like from the perspective of social ventures.

I've always found it hard to get into the details and really expand when writing academic papers, and as a project Restring has been no different. The process Professor Zak took us through has been incredibly helpful in breaking up the required details into more digestible chunks. Paring things down has also helped me notice the areas that I need to dedicate significantly more time to.

As I continue to acquire different tools for my toolkit and figure out how best to use them, I leave this class knowing that 1) I now know how to construct a business plan, whether for a social venture or another project, 2) It is really difficult to have both social impact and financial returns for some industries, 3) This class was completely worth it. You all are amazing people, and I'm looking forward to see where this takes you next.

Care Van: Final Reflection

Reflecting back over the semester, I have three key take-a-ways that I have learned about launching my own social venture. These three concepts are 1) you only need enough capital to get to the next milestone 2) making things happen at the right time is essential to success and 3) your management team can make or break your venture.

You only need enough capital to get to the next milestone

Within Heinz College, many of my professors have stated “no money, no mission.” This statement holds especially true within the healthcare industry.  The Social Innovations Incubator class has given this statement a different prospective by showing that all you need is enough capital to get to your next milestone. Within each milestone, you are trying to do as much as possible with as little capital as possible. After completing all the milestones, you will have successfully reached the mission of your social venture.

Making things happen at the right time is essential to success

Making things happen at the right time is an important concept in terms of making sure that the market is ripe for your social venture. You could have the greatest invention in the world but if you enter the market at the wrong time, it will not be successful. Additionally, leveraging policy, regulations and laws to gain an advantage over your competitors will also help you to be successful in your venture.

Your management team can make or break your venture

Having a diverse and talented management team is crucial to the sustainability of the social venture. As the CEO/idea generator of the venture, it is your job to properly put together a team that is pretty much better than you. Additionally, creating an open culture in the team will allow for hard topics to be discussed.  As stated by the CEO of Thread, Ian Rosenberger, your team has to healthily be able to argue in order to gain all perspectives of a problem

In conclusion, launching a social venture will take a lot of time, more time then you think. Ensuring that you have the proper support system will get you through hard times, financially and mentally, and will get you to the finish line! 

Social Value

I am very impressed by the definition on measuring social value mentioned in class, which is, “Social value is not an objective fact. Instead, it emerges from the interaction of supply and demand, and therefore may change across time, people, places and situations”. From my points of view, even if it is one organization, the social value may value with time. Take my childcare center as an example.

Interaction of Supply and Demand

My program is supposed to promote the interaction between parents and children. However, the way to achieve the goal may vary based on the real needs of the parents, such as the frequency. Also, the goal may change with time. When communication has become a habit of the parents and the children, the goal can be altered to cultivate interpersonal skills of the children.

Time

Childcare center is needed now for the following reasons. First, most of the children have working parents. In the past, the stereotype is that women should stay at home to take care of the children. In these days, more and more women give the same weight to career as family. Most of the children are thus cared by their grandparents. Children are easily spoiled by grandparents. Second, many people seek job in big cities. In this case, grandparents may not live with the children. Parents can only rely on nannies but most of the nannies can only pick up children and cook dinner for them. Also, there are very few childcare centers in China, not to mention the regulations. Few parents dare to send their children to the existing childcare centers. Thus, the after-school education is really a problem in China, especially in big cities like Shanghai.

People

The target audience for my program are the children who do not live with their grandparents. The parents of those children are often quite busy with work because it is not easy to live in a big city if they are not born there. The program is to satisfy their needs. If the target audience changes to local people, the goal of the program should also change. In most cases, what local people worry most is how to compete with other children. The parents do not want childcare centers but after-school classes. Chances are that there will be a day when parents do not value academic performances as the most important matter and want to balance the overall development of the children.

Place

Childcare centers can open in Shanghai but it may not work in the second-tier cities, such as Hangzhou. First, not many people choose Hangzhou as a working place. Second, people their do not often work late. Third, they do not regard it as a worthy investment. Probably, in the future, some kind of childcare centers will be needed in those cities.

Final Thoughts

The final blog entry. For this last entry I would like to just spend the time to look back. Over the past 15 weeks I have taken my idea from just a thought and a couple notes written down, to an almost full-fledged business plan complte with a Gnatt chart and financial models.

We as a class went through developing an idea, finding our strengths through test such as the Meyers Briggs, building a pitch to attract partners and investors, writing a business plan to more fully spell out our ventures, finding a strategy to defeat the competition, user acquisition through marketing and sales, getting the right team for the right job, measuring and determining our social impact, and creating a finical picture of our ventures operations; A lot to cover in 15 weeks. I have to say the time has been fun. This is one of my better classes at Heinz in large part due to the fellow students taking it with me. I really appreciated everyone’s attitude and desire to learn from each other. It is exciting to see everyone’s ventures grow.

At this point for my venture, I have applied to 4 incubator/accelerator programs. I am still waiting to hear back from 3, and I just completed the final round interview for the 4^th. In addition, this past week I spent at the global real estate crowd funding conference where I learned more then I could hope for. The whole event was invigorating as I saw how much of a fledgling industry real estate crowd funding was.  I was able to make some great contacts and I highly encourage people to attend a conference of any sort in an area of their interest. The overall experience was very positive and I have heard similar thoughts from other friends attending different conferences.

Looking forward I think I will continue to work on this venture after graduation. While it would be ideal to get some seed money to do this, I feel that there is enough momentum around the idea for me to feel confident proceding forward despite a lack of funding or a job. Why be unemployed, when you can self-employed? Am I right?

In conclusion I’d like to thank everyone is the class and Prof Z. I wish everyone the best of luck in  their next steps.

Flashback: CROP

The subject of social impact last week included discussion on the theory of change model. During the fall semester, a some fellow classmates and I took the Creating Results-Oriented Programs class by Matt Hannigan of the Sprout Fund. While creating our programs, he had us do a theory of change exercise surrounding the outcomes and impact we desired. The program I created for that class was the first iteration of Restring. It was interesting to look back and see how the original idea has evolved. In case anyone was interested...

Time is Money, Seth Godin, and the cost of social irresponsibility. (BONUS BLOG!)

        In class last week we talked about valuing the social impact of our businesses, and how to do that.  We layer out a plan for measuring the good we were doing and benchmarking our success, and we found ideas to steal from each other.  I was specifically taken by the CareVan team.  They ranked all of their social benefits based on importance.  Their act of doing that made a big impact on me.  Not all good is created equal.  Some good is good, and some good is better.  It made me look at our goals for good at Canvas & Hide.  Very clearly two of the social benefits of our business were subservient to the third.  In a way they were just means to the greater end.  Realizing this will allow us to move forward keeping the perspective of what is the most important.

        I also had a great experience this weekend with a new hat that I purchased from Patagonia.  I love the hat, and was excited for as it was a long overdue replacement.  A friend called me out on not really exhibiting any of the attributes of the patagonia brand.  I don't spend a lot of time outside, I climb in a gymnasium, and I watch a lot of Netflix.  I was a bit put out, and feeling like a poser.  Later on in the evening a guy at a bar asked me what this "patagonia" was.  I initially thought this was a second attempt to question my authenticity in the hat, but he was being sincere.  I was able to tell him that it was the evolution of Chouinard Equipment started by Yvon Chouinard, and pioneered the concept of corporate responsibility.  They created responsibly manufactured equipment for adventurers and that I believed in the way that they did business.  At this point I realized that weather or not I become more of the outdoorsmen that I envision myself to be, I believe in Patagonia.   I spend money on the hat and wear the hat because I want to live in a world full of Patagonias, not a world full of Nikes (though they've done better lately).

       This brings me to a blog post I read this morning by Seth Godin on the true cost of environmental responsibility (here)  He brings up the negative economic impacts of low minimum wages, and the cost that environmental degradation costs companies each year.  I love his perspective.  He frames his arguments away from the choir and towards the skeptics.  I would suggest reading it.  Its not a long read (unless you get sucked into the wisdom of his blog, which could take quite a chunk out of your day.  I suspect though, you would find it to be a well used chunk of time.)

        To bring this full circle to class on monday, we were talking about how value our social impact, and I argued that it all comes down to money (which, we almost all agreed that everything could be boiled down to money).  The strong argument against this approach is that getting it down to dollars and cents takes a lot of time, and time is money; money which can be used to further the social good you are doing in the world.  So where does this leave us on this process?  I'm going to loop in an insight from Lloyd Corder's book Snapshot Surveys. Do enough to get a good picture of your trajectory, and move on.  If you aren't doing as well as you'd hoped, then make some changes, but there is no reason to get hard numbers on this.  Approximations are find.  If you want hard numbers do a ten year audit (the U.S. Government only runs the census every 10 years, and that seems to work out for them)

Calculating Social Value

This week was particularly interesting for me as through most of our education and work life, we have been asked to calculate value generated based of sales, revenues and costs. It is easy to come up with a number based on these parameters, but the discussions this week made me really think about the intangible aspects and effects my venture would have on the society.

An article on 'Measuring Social Impact' by London School of Economics  highlighted the importance of asking the right questions. Here are some questions that they enlisted:

Who are the people that matter to my business? 
This question takes into account the key stakeholders involved throughout the process, and not just the end users. In case of Clip, the key stakeholders are college students and high schools students in rural India. Other than that, the parents, the schools themselves and not for profit organizations are potential stakeholders.

What are their objectives? 
College Students need affordable furniture that looks good and characterizes them, and that they can get rid of once their program is over.
Students in rural schools need furniture that is affordable, ergonomic and durable.
The objective of parents, schools and NGO's is a balance between quality, safety and affordability.

How should I prioritize my stakeholders? 
Our stakeholders can be categorized based on who is using the product and who is paying for the product. The actual users are students where are people who pay can be college students, parents, rural schools (and govt) and not for profit organizations. I feel they are all equally important, and we need to gear different functionality of our design to fit these stakeholders. For example, the design, aesthetics and comfort are more important to the actual users, where are affordability and transportability is much more important to people who are paying for it.

Are their objectives aligned to mine?
My objective for this venture is to really understand the needs and aspirations of a user and create products adequately suited to those. I believe this need based design would help me align my objectives with the stakeholders.

What output indicators illustrate how well I achieve my objectives?
Here is a list of output indicators I came up with last week to help me assess the social value of my venture:
Customers:
- The savings in cost of buying furniture over time.
- Percentage reduction in back problems for students in rural areas.
- Increase in enrollment in schools in rural areas.
- Measuring the resources spent by customers on new vs up cycled furniture.
Resources:
- Cost of material saved due to recycling and up cycling
- Environmental Impact
- Cost and material savings due to the simplicity if design and manufacturing.
- Savings due to online marketing and selling

Can I measure the social return that results from our impact?
Some of the returns are quantifiable, and these can be easily measured by setting targets and measuring the results. In the next few weeks, I would like to identify more indicators to measure the value of social impact generated by Clip.

Arts Implementation Planning

The classes at Heinz College have been valuable in introducing us to a variety of perspectives in relation to the creation, implementation, and evaluation of ventures. In my current program (Arts Management) we learn about implementation planning from a program perspective, ensuring that it fits into an organization's mission, vision, and (if pertinent) strategic plan. Based on courses so far, there appear to be many similarities between arts implementation planning and social venture implementation planning.

For example, a professor at the College of Fine Arts is in the process of putting together an opera production of Mozart's Don Giovanni with an African American cast. We've started going through elements of the business plan model covered in every class, except the plan is actually being carried out as we go. We've covered the product (Don Giovanni) and its related aspects. We have a team, we have assessed our market, our target market, and strategies to achieve our desired penetration. The opera is being produced/financed through a parent company.

Now we are at the stage of scheduling and carrying out the implementation plan, using Asana to ensure tasks are completed on time. Implementation has been separated into several "projects" which consist of Artistic, Funding, Marketing/PR, Audience Engagement, and the Performances. For this project, the first milestone is Artistic, which involves ensuring that the artists involved in the production are committed, (to be) properly compensated and have the means to participate. Without securing artists, the rest of the production simply cannot happen.

At this point in time we are contacting organizations and PR outlets to start publicizing the production and getting the word out. Hopefully we will be able reach our target audience and provide some much needed diversity in arts programming.

For those interested, the production will be on May 24 at 8pm and May 25 at 2pm.

Calculated Impact

Calculating the social impact of an organization is a big step in the right direction towards creating a more effective social venture industry.  However, these calculated values are only valuable when attention is paid to the assumptions implicit in the calculations.  The numbers discussed in the “Stanford Social Innovation Review” article seem sleek and simplistic, and there will be an inevitable temptation to start comparing Calculated Impact numbers across domains. 

A closer look at the subtleties of Cost-Benefit Analysis may provide some insight on these Calculated Impact statements.  First, it appears that when calculating “Outcome”, analysts only examine the direct costs of the problem.  For example, in the health field, the Cost of Illness may be lost wages and medical expenses related to an illness.  However, this Cost of Illness ignores the huge pain and suffering costs borne by the individual.  These costs are often high, and could significantly alter the Calculated Impact ratio.  The fundamental problem is that dollars are being used as a clumsy proxy for peoples’ utility.  This problem is certainly not limited to just the assessment of social impact, but is a problem across disciplines.  However, we need to be aware of it when examining social impact organizations.  However, in general, introducing quantitative rigor to the process will only add the effectiveness of assessing of social impact.  Organizations that can easily show a high monetary outcome of their activities should be funded over organizations that claim to do the same, but with a smaller Calculated Impact ratio. 

Individual funders however should only use these numbers as one among many factors when deciding to fund projects.  They should also look at how many competitors’ individual organizations are facing, as these organizations all will likely have somewhat similar ratios.  Perhaps one organization with a slightly higher ratio would get flooded with capital, while another promising venture is left without capital.  Investors should be careful to spread their capital around to foster several competing ideas, as the Calculated Impact ratio may favor a substandard organization.

I would find it difficult to calculate the Outcome is dollars and cents of my particular venture, reducing Light Pollution.  The aesthetic and environmental benefits of doing so would most likely not translate into the formula very easily.  However, this suggests that it has a smaller impact than an organization that is dedicated to eliminating Polio in Africa.  To those interested in finding the greatest direct impact of the dollars would choose to eliminate Polio, which would certainly have a higher Calculated Impact ratio.  However, select investors may still have the prerogative to invest in reducing light pollution solely because they have the interest in doing so.

Social Impact

This week’s topic is about determining your venture’s social impact. My team’s social venture of the Care Van is to improve the health of the elderly population in underserved areas by providing preventative services. The question to answer is how do we know if our mission is making an impact?

One of the tools discussed in the article “Measuring Social Value” by Geoff Mulgan uses a framework for thinking. The four categories of the framework are: 1) strategic fit (how well the proposed innovation meets the needs of the health service); 2) potential health outcomes (including likely impact on quality-adjusted life years and patient satisfaction); 3) cost savings and economic effects; and 4) risks associated with implementation. Using this framework and applying it to my team’s venture would allow us to assess our social impact. For Care Van we would need to collect Census data in order to see where the current health status of the elderly population in rural counties in Western PA. From these statistics, we will be able to benchmark to see what potential health outcomes Care Van will have in the area.

Another article I came across, “Finding the golden thread: A new approach to articulating program logic statements,” discusses another approach on how to keep on task in fulfilling your social impact.  Creating a program logic statement allows those involved in the venture a comprehensive picture of the mission. “It articulates how the activities of a program lead to the consequences that will drive the final impact.” Care Van’s logic statement would be, if we provide preventative health care services to the elderly population in underserved areas in Western PA, then we will positively impact the health of the population. Part of the process in creating a program logic statement is going through the pros and cons of what would happen if the social venture were launched. The process takes you through all the complex situations that are associated with the social purpose of the venture. What is your program logic statement?

Source: http://svaconsultingquarterly.com/wp-content/uploads/pdfs/svaconsultingquarterly.1.1.pdf

Why plan for risks?

Taking risk is what all entrepreneurs do and we definitely love it, but planning for future risk is important too. Understanding risk is a very crucial part of the business plan process. Thinking about it essentially shows us what could go wrong and makes us think of the possibilities of solving them when they do arise. It's like future planning in a way. Like Tim had told us in class, the best way to go about this is with a beverage of your choice and on the couch.

I first thought about all the bad things that could happen. After I felt I had a comprehensive list and with ideas getting too bizarre (eg. volcanic eruptions near the manufacturing plant?) I decided to focus on the other aspects. How would the risks I thought of affect the company and what would I do to to combat them. This process actually got me thinking a lot and forced me to do research into areas that are really not something I was even considering. I have actually targeted a particular manufacturer of UVc-LED's but what if the deal doesn't go through. I did a lot of research on potential partners and spoke to a few people in the industry too as to how these risks are tackled. An aspect I wasn't even thinking of before is the money. What if we fall short of money at some point. How do we generate more capital and who does it? All these risks are analysed in the complete business plan for LUV-water.

Well its pretty obvious its impossible to plan for and predict everything that may happen but all we can do is prepare for the worst which is what this exercise does very well. I would like to share an amazing story of a 20 something Indian boy who like a lot of people got stuck in an engineering college but took a risk and decided to do something himself. 

Running Experiments

The logic concerning uncertainty described in the “Disciplined Entrepreneur” incorporates a robust understanding of statistics, and the pitfalls of human intuition.  The authors describe that a normal distribution of outcomes is often assumed, it is what we learn in school after all.  However, they caution that the distribution of outcomes is more likely highly irregular, and painfully opaque.  Business leaders sitting around a board room can go around in circles, describing what they believe is the probability of the risk they face.  They may have good reasons for their assumptions, logic and experience on their side, and a solid consensus of their peers.  However, these may mean nothing if they are encountering an unfamiliar risk.  Human simply are not good at anticipating levels of risk and uncertainty intuitively, we are full of biases and heuristics that cloud our judgment.  We must rely on other data driven models or natural experiments that can inform our decisions with more accuracy.

I was intrigued reading about the experience of Noodles and Co.  It is unlikely that keen and experienced business leaders could draw up reasons why their restaurant in Madison failed and their restaurant in Denver did not.  Even if there were such a priori opinions, there would likely be equally compelling arguments why the restaurant in Madison would succeed.  There are simply far too many variables at play, some weigh heavily on an outcome, while some have no effect.  Only experiments have the power to uncover how the real world works.  The restaurant in Denver succeeded.  Noodles and Co. now know that fact, and they should be encouraged to conduct further experiments in other cities.  Once they have more data, they might be able to reconstruct the factors that make their restaurants successful, and adjust their business model accordingly.  Business leaders and entrepreneurs should have their ear tuned to the results they see on the ground, and be constantly flexible and adjusting to their circumstances.  It is simply not enough to have a well thought out business model.  That business model will definitely not be accounting for important variables, or may otherwise be over-emphasizing unimportant variables.

Last week was the sort of week you hope you will eventually wake up from

to find that it was all a bad dream.  Everything was coming to a head on Thursday and valuable information kept surfacing that wasn't exactly conducive to making a presentation.  How do you communicate an invaluable realization that results in a blue ocean of unknowns?  We tried.

as this was going on I was preparing pitching a social tech venture to Big Idea, building a prototype of our technology, and finishing a term paper for brand management.  Canvas and Hide had to take a back seat, which had a negative effect on team morale and made us question our abilities to hit our progress goals before the team split up for the summer (and perhaps for good)

What could we get done in 4 weeks in the middle of our graduate thesis that could prove that we had a team that could work together, solve problems, and validate solutions?  We think it may not be bags.  It may be something else.  It may not be social by any definition but Tim Zack's (which is a pretty good definition if you ask me).

The good news:

Prototyping and testing costs for this project are in the tens of dollars per round.
We have a validation opportunity on campus on May 2nd at Sunsmash.
We will be able to bypass traditional costs associated with starting this type of business by using a cold production process.

Until next week: I'm eager to learn more about assessing the social impact of a business.

Risks and Opportunities in Marketing

One major issue we have in our venture is that we are an unknown entity entering a market that is dominated by two forces (UPMC & Highmark) who have been known to use the media to their advantage. This can affect us in several ways that have nothing to do with the quality of the services we provide. We understand that we will have to develop contingency plans if this ever becomes a competitive problem but, before that happens, we have to get the word out that Care Van exists and enter the market.

I came across an interesting presentation from the University of Wisconsin that explores the risks of of health startups. One thing of particular interest to me was this chart on business models. I thought they could be particularly applicable to us because it could be the key to unlocking how to best market ourselves and turn one of our biggest challenges into a strength.

Cross Subsidies
This model suggests "Giving for free a product that entices you to pay for something else." We have had discussions in the past about offering flu vaccinations during our pilot phase, but if we offered free flu vaccinations all of the time, maybe we could get them to stay for a check-up and gain revenue that way.

Labor Exchange
This model follows the idea that "the act of using these services actually creates something of value." The amount of value placed on health is up to the customer, be we can assume that quality of life is of high value to the elderly population.

These two models offer a clear picture of the possibilities we have in marketing our venture, but we could probably take lessons from all of them. It will be important to consider how best to capture the customer's attention in order to limit the risks to our image and reputation early on.

Additional tips for risk management

The Social Innovation Incubator at the University of North Carolina, Chapel Hill holds an annual workshop on risk reduction for social entrepreneurs. The workshop involves on-campus, two month mentoring sessions by experts in risk management that are open to the public. While navigating through the minutes of the 2012 introduction workshop, I found that Steve Kenney, the Director of Risk Management Services at UNC, made some key points that we did not discuss in class. I have paraphrased the salient points below, while simultaneously relating the content to last week’s class discussion:

(1) You should consider adding technology and reputation risk to the list of risk categories that we created last week (i.e., financial, operation, compliance, or political risk). The objective of assessing your technology risks is to maximize the protection of any sensitive electronic information. The goal of assessing reputation risk is to determine how much of the activity within your business will affect your current/future partnerships, your brand, or competitive advantage.

(2) Begin incorporating risk management in every discussion about expanding or shrinking your business idea. There should be a team member whose responsibility is to outline the opportunities or shortcomings that will come with every decision that is made within the team, as a whole, for your venture.

(3) The status of risks are unpredictable and indefinite. Risks can change at any point, and it is crucial that your team is constantly evaluating the risks that you have already identified and ones that may arise unexpectedly. Remaining informed, inquisitive, and vulnerable is essential.

 Also, I found the following article by the Stanford Social Innovation Review that dissects the meaning of “social entrepreneurship” and offers great examples of social ventures that have had wide social impact while remaining profitable. The article even includes an excerpt on Pittsburgh’s own, Bill Strickland and his successful venture, Manchester Bidwell Corporation. The article is rather long, but here it is: http://www.ssireview.org/articles/entry/social_entrepreneurship_the_case_for_definition

Product Market Fit

As we progress in our projects and come further and further in developing our business plans for our product/services I thought it might be helpful to go back to the beginning: Product Market Fit. This idea is crucial for any product or services survival. The person you originally thought would like your product may not but you may find another market segment that does.  So how does one find product market fit and when does one know you have achieved product market fit?

I’ll address knowing when one has found product market fit. This past week I had the chance to talk to a friend’s friend, Donald Desantis. Donald, is a serial entrepreneur who’s latest venture, Hightower, just finished a funding round of about ~2 Mill. I discussed finding product market fit with him and how do you know when you have it so that you can start to scale your idea. He had one simple line “if you’re asking yourself if you have product market fit, you don’t.” Plain and simple. He said he gets asked this question all the time and wondered himself as well. So he set out to ask successful entrepreneurs and said they basically all gave him some version of that answer.

So how does one go about finding out their product market fit? Well one way is to do surveys, another is a customer interview, another is a user interview. To aid in the development of my idea I have been participating in IdeaLab, collaboration between Heinz and Tepper to act as a incubator of sorts for social ventures. This week was the first week I could make it and fortunately no one else was able to. So I had two MBA students all to myself for two hours to provide me with advice and guidance on my idea. They provided me with some great advice on creating surveys for product validation, which I will share with you.

1.     Have a hypothesis about certain things about your product that you believe to be true. However, this does not mean have a hypothesis about who you think would like your product. If you do that you will have a bias to prove that is the case.

2.     You want to collect demographic info and behavioral info

3.     The last question should always focus on would you pay X amount for X product

4.     Try not to go above 15 questions

5.     Use qualtrics (a website we all have access to I believe) it has a huge amount of pre designed questions that are good about avoiding bias.

6.     You want at least 100 people to fill out your survey

7.     The people filling out your survey should not be only your facebook friends. Chances are they are very homogenous from a behavioral and demographic standpoint.

8.     So how do you get 100 people to fill out the survey who are not your friends? Use the school, ask people on campus to fill it out, circulate to classes, etc.  Another great way is to use twitter. Ask random people such as famous entrepreneurs if they will retweet your survey link. You would be surprised at the amount of positive response you can get for this.

After you complete your survey you can get a good picture of who your ideal user might be and what their price point is.  From here you can target that ideal user and have one-on-one interviews with them. In this way you can help get closer to knowing if you have product market fit.

Risks

This semester, I am taking the Risk Analysis class. The class basically covers the risks that a biotech company can encounter during start-up, development and commercial stages. The risks are divided into three categories, which is, academic/government/other companies, business and commercial risks. For social entrepreneurs, I believe that there are some in common.

First, for the first kind of risks, it mainly depends on which organization the entrepreneur cooperates with to do the R&D work. If it relies on universities/academic institutions to do the research and development, there will be risks such as the owner of the intellectual property and the possibility of being industrialized. If the entrepreneur seeks cooperation with the government, the risk is mainly about the procedures and standards. As to the other companies, the management, finance and organization structure will be the problems to consider. For social entrepreneurs, there will be similar situations. Some rely on a university to develop products. For instance, the create lab we visited last time works with CMU. Others may seek funding from government. My childcare center project is an example. There are ways to mitigate the risks, such as signing an option agreement with the university to define the ownership of the IP. It is critical to prepare for the risks that may be encountered in the future. Otherwise, even if the products or the services are ready to be delivered, the organization may have legal issues to produce or distribute them.

For the business risks, they are the corporate structure, finance and management risks. This part of risks are also very much covered by this class, Social Innovation Incubator. The corporate structure is basically the choice of a team. On a team, there must be people who have different skills. As to finance, it is source of funding and the financial sustainability.

The commercial risks are market trends, geographical considerations, channel access, and partnering. I believe that all the social entrepreneurs are to deal with the unsolved social issues. Actually, the first step is to have a clear picture of the market trend and the have a knowledge of the customers’ needs. Geographical considerations are also an issue. Take my project as an example. There are four trading areas in Shanghai but I may not open four childcare centers. It depends on the likelihood that the parents working in the areas will send their children to the nearby elementary schools. In shanghai, most of the schools only accept the students who live in the district where it is in. Only a few open to the whole city. My target schools are those who have no geographic restrictions. Usually, those schools have higher academic performances and more expensive. The parents are willing to send their children to such schools. As to the channel access, it relies much on the customers and the locations. The road conditions of a place, the norms of the target market and etc.

I find it true in the article, Disciplined Entrepreneurship, that the ability to manage uncertainty is the critical task. Even if one can have a general idea of the risks met in the future, unexpected issues will always happen. However, I still have very little idea about the disciplined approach. The three stages one should take is quite reasonable. My question is about the time and feasibility. Will it take long time to deal with risks? Will other problems arise during the time? Also, what if one solution does work out at the experimental stage?