[MUSIC] Hello learners. We are at step two in our five-step process to prepare you for your capstone experience. You've geared up your mindset with respect to your strategy focus. And you have geared up your mindset and you business with respect to your resource focus. We continue step two in this lesson from our fifth course in our specialization how to start business to help you gear up the business with respect to its execution focus. As we get started, it may be useful to remember those foundational questions answered by your strategy statement that we discussed earlier in this series of lessons. First, what do you need to do with respect to your business to achieve success? Second, what are you able to do? And third, how do you bridge that gap? We laid out for you four analyses that would help provide answers to those foundational questions. Resource risk assessment and the business's budget help answer the foundational question, what does the business need to do? Resource inventory and resource acquisition help answer the foundational question, what can that business do? In the spirit of our upside down startup philosophy using effectual logic, we dealt with these two analyses, that is, inventory and resource acquisition. We dealt with them first. At the end of this lesson you'll be able to express the standard aspects of a risk assessment in terms of refining your business model in a way that enhances its chances to result in what we will define as breakthrough performance. Again in our ongoing gambling scenario, risk assessment focuses on determining what game are you going to play, given that different games in a casino have different risks and require different table stakes. This context is analogous to what business model are you going to choose to execute? Again, given that different business models have different risks and require different levels of stakes, that is resources. Strategy and a business model are very much intertwined and very much reflect the game that you will choose to play. The strategy and business model that reflects your vision typically is not the strategy and business model, and thus the game, you're able to execute or play at your initial launch. The strategy and business model executed at launch, as you know, is captured by your launch plan. As you remember, a launch plan consists of three components. A focused business model, a detailed plan designating the focused business model design that will be initiated at launch, the hypothesis of that model that will be tested by the activities of the initial launch, and based on those validated hypothesis, the financial projections to establish a budget. Thus the development of your launch plan begins with your business model developed in course three. Here's a summary of the business model for the Stederal Packing Company case. In course three, we discussed the design process to make your business model as creative and innovative as possible and, most importantly, to fit your available resources and the market conditions you might be facing. In order to accomplish this task we proposed brain storming alternative designs, or mixing and matching systematically any one of the over 55 known generic business models presented in the assigned reading at the time, Business Model Navigator, to see if any of those provided what we will call a breakthrough performance. Now a breakthrough performance is defined by four factors. The first of which is providing the market with an innovative value. An innovative value or value innovation is a key concept of a blue ocean strategy. A product or service that is an innovative value provides a new and unique set of values of benefits the customers, not necessarily a completely new product, service or technology. But only the value is new, the value provided by some product is unique. And it does all of this at a lower cost. A breakthrough performance is also feasible. Feasible here refers to our, again, much lauded philosophy of initiating and innovating a business startup within one's own resources. Thus the business model and the innovative value it proposes can be implemented with your available resources. The third defining element of a breakthrough performance is that its results provide the company, your business, with competitive advantages relative to other firms in the marketplace. It enables you to do something no one else can do, do something in a way that no one else can do it, do something for someone no one else is doing it for, or do something at a price no one else can match. Finally, the desired breakthrough you seek for your business model design minimizes the risk associated with this implementation. Let's look at an example of this risk assessment or risk minimization. Consider of food truck business. The customer relationship and channel sales of it's business model calls for it to select a limited menu given it's restricted storage, select a location in downtown Detroit, and once located proceed to provide quality food with great service. Essentially, this is a mobile, fast food restaurant. As with any business of this type just starting out there's risk associated, but particularly there's risk associated with picking the right location, since you don't have any real history to go by. Also picking the right menu items. You don't really know what your regular customers typically will order, since you don't have regular customers yet. Focusing on these risk points, this person changed their business model from a mobile fast food restaurant to a mobile food delivery business. It developed an app that allowed it to take preorders the day or evening before and then stock to fill those orders and located the truck in a downtown area central to the orders. And then deliver those orders directly to customers. Customers were willing to pay a very small fee for the delivery. But note the truck was also open to walk up customers in its physical location. More importantly, though, this refinement to its business model greatly minimize the risk of selecting a location and any risk of menu selection. At the same time, as we said, the truck was still open for its normal course of business in terms of walk-up traffic. In summary, we have shown that a major aspect of the fundamental strategic question, what can you do or what does your business need to do, involves minimizing the riskiness of your actions. You can now add a risk assessment approach to the brain-storming approach and the systematic mixing and matching approach to refining your business model as a way to achieve or enhance the likelihood of that business model providing you with breakthrough performance. You've also learned the elements of a break through performance being risk aversion along with an innovative value, feasibility and providing competitive advantages. [MUSIC]
