Not bad, eh? I attended USASBE’s 2015 conference last week and particularly enjoyed the experiential education track. Thank you Doan Winkel! Based loosely off a concept presented by Diana Kinder, I led the following experiment with my undergrad class Management 311 [Idea to Startup] at Le Moyne College.
- Divide students into 5 teams
- Give each team $10
- Tell them to come back next class (2 days later) with a profit
- Best performing team wins profits made by all teams
- Must be legal
Each team returned my initial investment (my affordable loss) and a variety of profits. Pursuits and profits were:
- Group A: Sold water at a campus basketball game: $29
- Group B: Sold Gatorade & water a campus intramural game: $14
- Group C: Sold candy on campus: $26
- Group D: 50/50 raffle (on-campus): $67
- Group E: 50/50 raffle (off-campus – mainly commuter students): $34
The first three groups bought a product using their $10 investment to try & make money, providing us insight into two lessons of entrepreneurship:
Group A had the right product. They also had the right customers! Water sales at the college basketball game seemed like a no-brainer, as students are not usually able to get any concessions at the game. Selling water fills a totally unmet market need! However, even the best product-customer fit requires the ability for an exchange of funds to occur, and Group A failed to consider their ability to make transactions happen. Turns out, students do not bring money to games, as they are not used to having options to purchase concessions. Lesson? Ease of transaction matters: just ask one-click users!
Group B pivoted from water to Gatorade & saw a large market: there were many more attendees & participants at the intramural games than at the campus basketball game. The group, however, failed to take into account a free, available resource: they discovered direct competition from the water fountain out in the hall. What can we learn from Group B? Larger markets aren’t always the obvious or best way to make money. Understand & research your market. Customer discovery cannot be an oversight.
The last two groups, D & E, leveraged possibility rather than products. Both groups recognized that their success was limited by capital. Instead, they focused on their means (Sarasvathy): who you know, what you know, and who you are. They asked, “How can I make the most amount of money in this time period?” rather than, “How can I make the most amount of money with this capital?” Students must recognize a key lesson: the $10 is in fact a constraint, not an opportunity.
The most successful team did not base their venture on the funding that they had. Instead, they based it on their individual means, concentrating on what they could do, instead of what they could not. They saw the potential of a 50/50 raffle and even segmented their customer base, selling to professors (desiring to support student entrepreneurship) and to students (seeking the chance to win cash). These groups relied on their ability and possibility rather than the constraints of the cash they had on hand.
I was impressed with the outstanding final results of the money made, but the students’ experiential learning was even better!
- Be sure your customers can complete the transaction
- Understand your direct and indirect competition
- Lack of money is not always a constraint. Don’t let it hold you up.