Key Concepts in Entrepreneurship and Startup Models

Posted on Mar 30, 2025 in Communication

What is Entrepreneurship?

The process of identifying a business opportunity and creating a new venture to pursue that opportunity. However, when it comes to creating value, generating revenue, and achieving success when creating a new business venture, it involves taking a calculated risk. In addition, entrepreneurship is commonly associated with creativity as well as innovation.

Entrepreneurship Goals

Creating value: Providing products or services to customers that meet their needs, solve a problem, or provide a unique experience.
Generating revenue and profit: Often achieved through effective marketing, sales, and financial management strategies.
Innovation and creativity: Entrepreneurs often aim or strive to create new and innovative products, services, or business models that can disrupt existing ones or create new ones.
Growth and expansion: Related to growing and scaling their business.

Why Entrepreneurship is More Relevant Than Ever

Because of the rapidly changing economic landscape and increasing pace of technological innovation. Entrepreneurship is essential for driving economic growth and job creation, and it plays a critical role in advancing innovation and creating solutions to complex societal problems.

Social Entrepreneurship Focus

It aims to create a sustainable business model. However, its main focus is addressing social or environmental issues through the creation and delivery of products or services. The primary objective is to achieve social or environmental impact.

Why Benchmarking is Crucial

It is crucial because it provides a framework for measuring and improving a business’s performance against competitors. Businesses are able to set achievable as well as realistic goals based on competitors’ performance. In addition, businesses can identify areas in which they can differentiate themselves and drive innovation compared to the competition, reinforcing the development of uniqueness within their products and the validation of their business strategies.

The Lean Startup Methodology

Understanding who your customer is before building your product or service. It is a methodology for developing and managing startups that emphasizes iterative development, experimentation, and customer feedback. It also emphasizes the importance of continuous experimentation and data-driven decision-making. This can help startups make informed decisions about product development, marketing, and business strategy. It can help startups minimize risk, conserve resources, and increase the chances of success.

Lean Startup Process: Build, Measure, Learn

These steps are designed to help entrepreneurs develop and refine their business ideas in an iterative and data-driven way.

Build: The first step in the Lean Startup process is to build a Minimum Viable Product (MVP), which is a basic version of the product or service that can be tested with customers. The MVP should be developed quickly and with minimal resources, in order to test the key assumptions of the business idea. The focus of this step is on creating a product or service that can be tested in the market as quickly as possible.
Measure: The second step is to measure the results of the MVP test with customers, in order to gather feedback and data on how the product or service is being used. This involves setting up metrics and analytics to track customer behavior and engagement with the product, as well as gathering feedback through surveys, interviews, or other means. The goal of this step is to collect as much data as possible on how customers are interacting with the product, in order to identify what’s working and what’s not.
Learn: The third step is to learn from the data and feedback gathered in the Measure step, in order to refine the business idea and improve the product or service. This involves analyzing the data, identifying patterns and trends, and making hypotheses about how to improve the product or service. Based on these hypotheses, the entrepreneur can then make changes to the MVP and repeat the Build and Measure steps, in an iterative and continuous cycle of improvement.

Traditional Business Plan vs. Lean Startup

Traditional Business Plan

Outlines all aspects of the business in a very in-depth, detailed, as well as comprehensive approach. Also, it is typically developed over a longer period of time and requires significant research and analysis to create.

Lean Startup Approach

Focuses on rapid experimentation and feedback to test assumptions about the business idea, with a goal of creating a product or service that meets the needs of the target market. In contrast, it is designed to be developed quickly and iteratively, with a focus on building and testing a Minimum Viable Product (MVP) as soon as possible.

The Business Model Canvas Explained

The Business Model Canvas is a strategic management tool that helps entrepreneurs and business owners visualize and analyze the key components of their business model. It consists of nine elements:

Customer Segments: Defines the different groups of customers that the business is targeting.
Value Proposition: Describes the unique value that the business is offering to its customers and how it differentiates itself from competitors.
Channels: Describes the channels through which the business will reach and interact with its customers.
Customer Relationships: Describes the type of relationships the business will have with its customers, such as personal assistance or self-service.
Revenue Streams: Describes the different ways that the business will generate revenue from its customers, such as through product sales or subscription fees.
Key Activities: Describes the core activities that the business needs to perform in order to deliver its value proposition and generate revenue.
Key Resources: Describes the key resources that the business needs to perform its key activities, such as human resources or equipment.
Key Partnerships: Describes the key partnerships that the business needs to develop in order to leverage resources and capabilities outside of its own organization.
Cost Structure: Describes the costs associated with running the business, including fixed costs and variable costs.

Understanding Bait and Switch Tactics

A tactic or method of selling in which a product is advertised at a very low price to attract customers, who are then persuaded to buy a different product at a higher price.
A sales tactic in which a customer is attracted by the advertisement of a low-priced item but is then encouraged to buy a higher-priced one.
The low-priced product is the ‘bait’.

A ‘bait and switch’ takes place when a seller creates an appealing but disingenuous offer to sell a product or service, which the seller does not actually intend to sell. This initial advertised offer is the ‘bait.’ Then the seller switches customers from buying the advertised product or service that the seller initially offered to buying a different product or service that is usually at a higher price or has some other advantageous effect for the advertiser. This is the ‘switch.’ Normally, the switched product that the consumer buys is usually at a higher purchase price, results in an increased profit for the seller, or may have a less marketable characteristic than the product advertised.

Example

The tablet or other advertised product is out of stock, but the customer is informed that other, similar options are available – for a higher price. For instance, the vendor may try to sell the customer a much smaller tablet that is inferior in every aspect to the one advertised at $100.

Bait and Switch and the Business Model Canvas

Bait and switch tactics are a deceptive marketing practice where a company advertises a product or service at a low price to attract customers but then tries to sell them a more expensive product or service instead. This practice is generally considered unethical and can damage the reputation of the company.

While bait and switch tactics are not a component of the Business Model Canvas itself, they can be related to several elements of the canvas, including:

Value Proposition: If a company uses bait and switch tactics, it may be offering a product or service that does not actually deliver the value that was promised in the advertising. This can damage the company’s value proposition, as customers may become disillusioned with the company and its products.
Customer Relationships: If a company uses bait and switch tactics, it is likely to damage its customer relationships. Customers who feel deceived or misled are unlikely to want to do business with the company in the future.
Revenue Streams: Bait and switch tactics may be used to try to increase the company’s revenue, but in the long run, it is likely to backfire. Customers who feel deceived are unlikely to make repeat purchases or refer others to the company, which can damage the company’s revenue streams.

Summary

In summary, while bait and switch tactics are not a specific component of the Business Model Canvas, they can negatively impact several key elements of the canvas, including the value proposition, customer relationships, and revenue streams. Companies that engage in these practices are likely to damage their reputation and long-term success.

The Razor and Blade Business Model (Gillette Example)

What is the Razor and Blade Business Model?

Also known as Razor-Blade and still Bait-and-Hook, this business model is characterized by selling a product at a very low price, often to the point of not being able to cover its own cost, to profit from the sale of other related items.
The goal is to encourage consumption over time, based on a very cheap initial offer. The core product (razor) is just a gimmick for the sale of the consumable (blade), where the money really is. Thus, the initial investment in the core product is diluted in consumable and dependent goods, which will guarantee the return on that capital.

Origin

Gillette’s razor handles were almost free. The replacement blades, on the other hand, were quite expensive. The strategy was very successful and continues to be today. Instead of throwing it away and buying another one, most people did what the company expected: they bought blades when needed. The idea of the razor and blade business model is precisely this: to avoid competition, offering a very cheap product in the first place, and guaranteeing consumer loyalty through related goods.

How it Makes Money

The Razor and Blade Business model makes money by offering a very low-profit platform but one that locks customers in to very high-profit related products (such as cartridges).

Challenges of the Razor and Blade Model

The great benefit of the razor and blade business model: when you make the purchase of the consumable product (blade) a habit, you guarantee customer loyalty and, thus, a recurring revenue stream. But every business model faces its monsters. Challenges for the razor and blade model include:

Value perceived by the customer: It is not because the customer bought the core product at a low price that they will simply start buying its related consumable goods. In fact, the buyer needs to be convinced that there is an advantage in continuing to use that product, instead of exchanging it for a competitor. That is, if they have a greater perception of value in the competition, they will not hesitate to migrate to a new alternative. Therefore, the consumable product must be desirable, offering the best-perceived cost-benefit.
Environmental costs: People are increasingly concerned with the ecological footprint that we are leaving on the planet. For this reason, many companies that apply the razor and blade business model have been the target of activists due to the amount of waste that their consumable products produce. This was the case with coffee makers with capsules, for example. However, for now, this has not yet significantly affected business. The truth is that the consuming public is still more concerned with convenience than with the environment.
Brand lock-in: Some customers may have a bad image of the brand that applies this business model due to the lock-in that it causes, with the product itself or with the brand. People can be frustrated by feeling that the company takes away their freedom of choice and end up denying the brand for it. In addition, if consumable products are too expensive, the price may end up discouraging customer loyalty.
Disruption: Razor and Blade Business Models are ripe for disruption and therefore are best suited for incumbents in well-defended categories (and even then are ripe targets).

As you can see, the razor and blade business model is an old business, about a century old, but which remains consistent and profitable for several companies that choose to apply this strategy. However, it is a business model that requires a lot of attention and updating by the company that develops the core product, in order to avoid the risk of facing a competitor with ‘blades’ that fit their ‘razor’ (when patents expire) or one able to develop a new compelling ‘razor’ with more affordable ‘blades’.