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ECON 325 FINAL Here’s my quizlet- based off the other google doc so its not great https://quizlet.com/202280739/econ-325-final-examstudy-flash-cards/

Creativity, Ideation, and Design Module Design thinking process: steps, definition, methods ● ● ● ● ● ●

Empathize: Work to fully understand the experience of the user for whom you are designing. Do this through observation, interaction, and immersing yourself in their experiences. Define: Process and synthesize the findings from your empathy work in order to form a user point of view that you will address with your design. Ideate: Explore a wide variety of possible solutions through generating a large quantity of diverse possible solutions, allowing you to step beyond the obvious and explore a range of ideas. Prototype: Transform your ideas into a physical form so that you can experience and interact with them and, in the process, learn and develop more empathy. Test: Try out high-resolution products and use observations and feedback to refine prototypes, learn more about the user, and refine your original point of view. Human Centered Design: The balance of viability, desirability and feasibility. (Hear, Create, Deliver)

WHAT IS THE IDEATION PROCESS?

Building and using prototypes and MVPs ●

Minimum viable product (MVP) is a product with just enough features to gather validated learning about the product and its continued development

Design concepts from the reading (Design of Everyday Things) chapter ● Everyday things and tasks, such as opening and closing doors (i.e. when we fail to push open a “pull” door because there was no label on the door that says “push”), can sometimes be super (LOL) difficult. This is because these things are often not built for max utility. ● Two most important characteristics of a design ○ Understanding: how is it supposed to be understood/ used? what’s the meaning and how can it be used (purpose is to open the door) ○ Discoverability: Visible, communicate the right message; what actions are available and how to perform them (push sign on door) Three fields of design: ○ Industrial design - optimize form & function ○ Interaction design - emphasis on understandability & usability (tech) ○ Experience design - emotional impact/enjoyment of experience ● Engineers look at things too logically ● Human centered design: process that ensures design matches needs and capabilities for whom they are created for 5 concepts of discoverability ○ Affordances - relationship between the physical object and a person; what actions are possible (a chair affords support for sitting, if it’s heavy it does not

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afford lifting) it's a relationship. Make affordances obvious. ■ Anti-affordance- prevention of interaction between a person and a physical object (i.e. running into a glass door) I Signifiers - any indicator that says how to use ("push" on a door, a trail in the woods) *more important than affordances* Mapping - relationship between controlling something and the controller. Ex. light switches and which lights they turn on in the room (adjusting car seat), a control would be steering and a result would be a car turning Feedback - communicating results, not too little (pedestrian button work?) not too much (oven). Relatable example- when you receive confirmation that your uber request is confirmed and that the uber driver is 8 minutes away. Conceptual model - highly simplified explanation of how something works (folders on computer) ■ There are not literally folders in a computer, but the folder icon is a universal sign of something that holds files/papers/documents...

Branding and the relationship to the ideation process - Producing pleasurable experiences: - Caring about the pain points in a customer’s life. - Investing in the iterative process - Responding to external feedback with new feedback.

Customer Customer discovery process 1. State your hypothesis 2. Test the problem 3. Test the solution 4. Pivot or proceed Company creation The Journey of Customer Development: Authenticity and Voice ● The most effective way to know your customer is to first, know yourself. Be AUTHENTIC! ● Voice is a very influential way to change the perspective that your customer takes. ○ Takes a sense of vulnerability to really find a connection that you require ● Necessary to develop a deep understanding of what matters to the customer ● Anyone who is truly authentic never draws attention to it Customer Discovery: ● First capture the founders’ vision and turn it into a series of business model hypotheses. Then it develops a plan to test customer reactions to those hypotheses and turn them into facts. ● Customer discovery Qs: ○ No pitching, it’s about listening ○ Ask past or present questions, not future/hypothetical questions ○ “Tell me about a story when…” what was hardest and why was it hard? ○ Why was it hard can help develop marketing message

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Ask why 5 times Go through tell me story process 3 times Take notes about customer emotion

Customer Validation: tests whether resulting business model is repeatable and scalable. ● If not, return to customer discovery Customer Creation: creating and driving end user demand

SPA treatment 1. First, add each customer group as a column in Excel 2. Assign each group a value of 1-3 (1 = low, 3 = high) for the following criteria: 1. Market Size – how “many” of this type of customer exist 2. Pay for value – how much we think they’ll pay for this value 3. Accessibility – how easy is it to find, contact and sell customers in this segment 3. Multiply the scores together and sort them from highest score to lowest -

Start testing hypotheses with the highest scoring segment, and work your way down until you’ve got something people are dying to pay you for.

Brad Brinegar Slides and lecture Brand marketing process ● Frame the real challenge ● Know who matters most and why ● Know why they came to the category ● Connect your brand to what they really want ● Make it easy for them to encourage and share ● Measure learn re-calibrate and improve. Dangers of listening to customers: Customers only know what they have experienced · Tendency to make incremental, rather than bold improvements that leave the field open for competitors · “Me-too” products where customers merely ask for missing feature that other manufacturers already offer o Functional fixedness: “the human tendency to fixate on the way products or services are normally used, making people unable to imagine alternative functions o Might not be able to conceive a solution because they have apparently contradictory needs o Behavioral observation can help decrease these pain points · Listening to the recommendations of a narrow group of customers called “lead users”

o They are not the average user: limited appeal and are too sophisticated · Customers don’t want new and improved features and functions that they are forced to pay for

Strategy The creation of a unique and valuable position, involving a different set of activities from a firm’s rivals. Review cases and prep questions ● Trader Joe’s ○ Tradeoffs: valuing their non-mainstream form of marketing, disorder making it unique, cherishing their “quirky” brand. No self-checkouts is a big tradeoff. ○ Differentiation: high paid employees, maze of aisles, no real promotional strategy, item location, small stores, low prices, personal customer service. ○ Customer Understanding: Target market ● Blockbuster/Netflix/Redbox ○ Value proposition → INDUSTRY DISRUPTION ■ Netflix: established new business from old idea w/ subscriptions, mailing of DVDs, recommendation system. ■ Blockbuster: Downfall through lack of evolving, content companies and studios overran the physical market. ■ Redbox: Low fixed and variable costs, kiosks inexpensive to start, profitable within a year. No promotional costs, linked brands to larger companies like McDonald's. ● AirBNB, Etsy, Uber - all showed empathy with customer after MVP was launched (kept modifying their product/service) ○ AirBNB photography: talked to customers, spent the necessary money to gain trust of customer. ○ Uber’s transformative potential: the way it changed people's’ thoughts about transportation, making it less about purchasing one’s own car and more about purchasing rides when needed as an instant gratification service. started with black car concept, made luxury ideals more universal. Expanded city by city, (during large events) focusing on customer tendencies.ii ○ Etsy’s organic growth: Craft fairs, focus on power sellers within the company, allow for network effect (buyers were sellers and vice versa) to grow organically. ● Dropbox ○ Waiting for finished product vs. being first and learning through mistakes ■ “It just works” - driving the product success through not having any “what’s the catch” moments for the customer’s experience. ○ Librarian & poet ■ Poet- Product visionaries, deeply in tune, creative, trust their instinct ■ Librarian- organized, systematic, can easily figure out structure ○ Poet for dropbox - not all analytics, programming, and scheduling. There is an art to earning the trust of the masses.

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AARRR - acquisition (of landing page visitors), activation (of visitors becoming users), retention (of said users), referral (of new members) revenue (from all customers).

Pixar ○

Corporate culture: molding the company into a media company out of a techbased company. (CG Design) Jobs’ blending concept. ■ Other companies were trying to imitate Pixar rather than surpass their innovation. ○ Disney: If you can’t beat them, join them. Wanted to push the CG model to new heights with their pre-existing dynasty. ○ Three basic principles: ■ ‘Everyone must have the freedom to communicate with anyone’’ -Jobs and Lasseter realized the importance of creating a single campuslike environment to maximize employee interactions ■ ‘‘It must be safe for everyone to offer ideas’’ -- the creative brain trust offered constructive feedback to the producer and director ■ ‘‘Stay close to innovations happening in the academic community’’ -Technology informed art LinkedIn ○ Mission: connect the world's professional workers to each other and inspire economic opportunities. ○ “Next play”: not resting on your laurels and moving forward to the newer update/addition to the company to continue grow th. ○ Five components of corporate culture: transformation (seeking to make a lasting impact on the world), integrity (not sacrificing moral practice for economic gain), collaboration, humor, and looking for goal oriented actions in order to sustain results. ○ What’s more important than compensation: working together as a unit ○ Passionate employees

Read slides for more specific information on these cases

Finance-Expect to see some of the more basic conceptual questions from the quiz.

https://quizlet.com/174636736/finance-notes-econ-325-flash-cards/ (This is a brief quizlet with some terms and finance quiz questions) Key definitions from class and textbook ● Balloon payment - lump sum due at the end of a loan. Loan not fully repaid until balloon payment is made ● Lines of credit - short-term, unsecured loans that used for seasonal/emergency funds. Borrowers only pay when they actually borrow money ● 7a Loan Guarantee Program - SBA’s most common loan, finances small business ● P2P Lending - online match lenders directly w/ borrowers, fast & transparent

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Accounts receivable/invoice financing - way of borrowing money based on money owed to you (invoices act as collateral) ● Assets-backed loans - secured by real assets (collateral in case firm defaults) ● Unsecured loans - term loans, no collateral, finance permanent, higher interest rates ● Amortized loans - contains both interest & a principal component. As a result, each payment repays not just interest but part of original amount too. ● Pro Forma Accounting - statement of the company's financial activities while excluding "unusual and nonrecurring transactions" when stating how much money the company actually made ○ Includes income statement, balance sheet, statement of cash flows. ○ NOT including owner’s equity statement ○ When you are developing pro forma financial statements, you must estimate long-term assets. (around 3 years in the most common) Basic equations, definitions of key income statement and financial statement items ● Gross Profit = revenue - Costs of Goods Sold and services (COGS) ● Total assets = total liabilities + owners’ equity ● Net income = Gross Profit - operating expenses and other expenses ● Working Capital= Current Assets - Current Liabilities. ○ When long term loan is attained, part of principal payment due within a year will be reallocated as the Current Portion of the Long Term Debt (CPLTD) in the balance sheet. Since CPLTD is part of Current Liabilities, working capital should fall. Cash versus non-cash expenses ● Cash expense example: raw materials paid for, COGS, interest expense ● Non-cash expense example: depreciation on machines that aren’t actual cash expenses you’re paying for out of pocket, energy invested in a corporate venture (aka deferred payroll) ● Cash flow forecasting ○ First - estimate net cash flows from operatives ○ Second - factor in planned sales, purchases of equipment, and fixed assets ○ Third - Examine different financing options ● Cash cycle starts with payment for raw materials and ends with cash on goods sold. Shorter # of days, shorter cash cycle (more available cash)= healthier business` Funding the venture Types of investors, investor expectation, and goals ● Angel investors - sophisticated, active involvement, private individuals. ○ “4 hour rule” - local is important ○ Seed funding ○ Typically more favorable than VC, like to get involved with the companies they invest in as board members or advisors. ○ Do they always acquire equity in the company in exchange for their finances/expertise? Depends on the deal. Watch shark tank, you can exchange royalties or a licensing agreement ○ Accredited investors (Do they have to be?) NO

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VC firms - manage other people’s money, invest later in cycle ○ Expect return on investment Crowdfunding - funding a project or venture by raising many small amounts of money from a large number of people, 8 via the Internet, very little regulation on this model.

Organizations Review slide deck from class on Simplex and hiring decisions Simplex: Hiring the two Chief Marketing and Chief Financial employees - What types of people would work best given their description and Simplex, company culture Read article on the types of ‘blueprints’ ● Sought to identify a "blueprint" for high-tech start ups ● Not all founders embrace the same “blueprint” model, in-fact almost all organizations have some diverse way of modeling their business ● 3 dimensions: ○ attachment - employees may stay for love, work, money ○ selection - skills, talent/potential, fit with team ○ coordination/control - direct monitoring, peer/cultural control, professional standards, formal processes and procedures

• The relationships among these three dimensions form FIVE blueprints: Star: Work- Potential- peer Engineering: Work - potential - professional Commitment: Love- fit- peer Bureaucracy: Work - Skills - Formal Autocracy: Money - Skills - Direct Make sure you understand basics of hiring ● So what are the basics of hiring? ▪ Star: “We recruit only top talent, pay them top wages, and give them the resources and autonomy they need to do their job.” ▪ Commitment: “I wanted to build the kind of company where people would only leave when they retire.” ▪ Bureaucracy: “We make sure things are documented, have job descriptions for people, project descriptions, and pretty rigorous project management techniques.” ▪ Engineering: “We were very committed. It was a skunk-works mentality and the binding energy was very high.” ▪ Autocracy: “You work, you get paid.” aka government Types/categories of skills DEFT Diversity, Expertise, Faultlines, Timing

Diversity -

Social - Race, gender, blah blah, blah - Pro: different perspectives - Con: interpersonal conflict

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Knowledge - Functional/area expertise - Industry background - Work experience - education - Pro: promotes innovation and creativity; more holistic flexible thinking - Con: can create friction; could take longer to reach consensus/goal

Expertise 1. Functional skills 2. Start-up Skills 3. Industry knowledge 4. Experience

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High

Low IS and TS avoid High IS and TS hire High IS Low TS okay for high task interdependence Low IS High TS okay for low task interdependence -Fault Lines (not entirely sure what this means) 1. When a team divides on more than one attribute Timing of Hiring Timing issues on hiring decisions around different types of skillsets - Hiring a team early can be costly but creates higher cohesion - Hiring a team late will be cheaper but creates lower cohesion - When a company expects to have growth-- the company should begin hiring High commitment vs low commitment blueprints - High commitment wins (commitment and star model) - High commitment is more capable to cope with uncertainty, rapid changes - Better chance for success, but can be fragile, difficult to manage

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Basic forms of organization and characteristics that matter for each Corporation, partnership, LLC https://www.incorporate.com/comparing_corporations_llcs.html Corporation: - Owners are shareholders - Profits are not subject to personal taxes. One corporate tax then dividends shareholders receive are individually taxed. - C-corps get double taxation - S-corps no corporate tax - S corporation: “corporation lite” no biannual taxes, same benefits of a corporation - C Corp: Standard corporation - Positive - Corporate income tax splitting can reduce overall tax - Can entice investors with stock - Limited liability to the actual individuals, moreso to the company - Negative - Double Corporate income tax Limited Liability Company - Owners are members - Distribution of ownership is free among members - Pass Through Tax: Profits and losses go directly to owners, so no federal income tax

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Partnership - Owners are partners - Salaries and Profits are taxed Why you need to form a legal entity Management roles Sharing of profits/ cash flow Protection from liabilities Governance decisions Owner, board, officers Problems that may arise (disputes, deadlock, etc)

Finance Google Doc from before the quiz: ● ● ●

Accounting is the common language of business Financial Statements: gauges on a dashboard Chart of Accounts: way to assign a numeric tag to any value/data ○ Structured way to summarize/break down data ● 4 Key Financial Statements ○ Income Statement: (Profit and Loss). Revenue, Cost of Goods Sold, Expenses ○ Balance Sheet: Snapshot of that specific moment of financial standing ○ Cash Flow Statement: Arguably most important for entrepreneurs ○ Statement of Owner’s Equity Income statement (P&L) ● Revenue - Cost of goods sold = Gross Profit ○ Operating expenses ○ SG&A expenses Net Income ○ Calculating COGS: use beginning and ending inventory (sometimes not good because you miss costs when only using those) ○ EBITDA: Earnings before interest, taxes, depreciation and amortization ■ Amortization - reduce or extinguish (a debt) by money regularly put aside ● DOES NOT INCLUDE capital expenditure and account receivables - belong on balance sheet. Balance sheet Balance out the total assets with the total liabilities and equity. ● Assets: Current Assets

Accounts Receivable Long-term assets - Depreciation & Amortization =Total Assets ●

Liabilities: Liabilities Current Liabilities Accounts Payable Long-term liabilities Total Liabilities Owners Equity =Total Liabilities and equity

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Current liabilities: portion of long-term debt Convertible debt: can convert...