[MUSIC] Hello learners. This lesson of our fifth course in our specialization, how to start a business, begins our discussion of composing an answer to the second foundational question answered by a strategic statement. We will open this discussion by reminding you that though starting a business isn't gambling, resources will be at risk as you seek to gain rewards. Remember those foundational questions answered by a strategic statement. First, what do you need to do? Second, what are you able to do? And third, how do you bridge the gap? The gap, that is, between what you need to do and what you are able to do. The series of lessons in this module contribute to answering the question, what is your business able to do? What resources are available? In this lesson, you will learn the various aspects of this answer. Specifically, you'll be introduced to the concepts of resource risk assessment, resource budgeting, resource inventory, and resource acquisition planning. As we imply, even though starting a business is in no way equivalent to gambling, we will frame our discussion in that context to focus on the issue of risk management and resource allocation. Consider this scene, The individuals depicted here are professionals. The scene illustrates many of the decisions that have to be made in the course of a poker hand. Do I have the best hand? How much should I bet? Should I call or fold? Not shown though, are several decisions these players had to make before even sitting down to play. As we said, the individuals in the scene were world champion professionals and poker was their game of choice. The key here, though, is that it was their choice. As a novice gambler, or, in your case, novice business startup entrepreneur, you enter the casino, or, in your case, your industry, hoping for success. The first decision you have to make, the decisions these players had to make a while ago is what game to play? What would be enjoyable? What gives the best chance for success? This is equivalent to what we refer to as the risk assessment concept. What business model, analogous to the game you would play, what business model would be innovative? What business model gives you the best chance for success? Once a game is selected, a player has to determine what the ante is. How much does it cost to play? This is equivalent to our concept of resource budgeting. This is the aspect of your resource focus that deals with determining what resources your chosen business model requires in order for it to be effectively implemented. Having selected a game and discovered the ante, your next resource focus issue is what is your table stakes. What do you have available or what can you afford to wager? This implies some awareness of the average loss for that particular game in a gambling context. For an entrepreneurial context it implies awareness of the upside down startup process. In Course 1 on getting the right mindset, we introduced you to the startup approach champion by Newton Campus. This approach begins the startup process with the entrepreneur's coordinated or network resources. As we said then, rather than wait to launch some startup until all the resources it requires are available, the entrepreneur alters the startup just a bit so that it can be launched with the resources either currently available or easily accessible. Chris Coleridge, an innovation researcher at the London School of Economics, reported that his research showed that the most successful entrepreneurs, the truly revolutionary entrepreneurs that turned around industries all possessed what he called the ability to have effectual logic. Effectual logic is an approach to solving a problem that starts not with the desired end but with the available means. He was referring to, in this case, available resources, all of which limited the risk of failure. So in implementing this upside down startup approach and effectual logic you'll be able to answer the third question, what is my table stakes? What resources do I have? You're also will be able to address our fourth gambling analogy question, who can stake you? That is, what resources can you easily acquire? Thus in summary, your efforts to gear up your mindset for launching your startup by answering the second foundational strategic question, what can you do, are all made in the context of risk management. First, there is resource risk assessment, you have to determine what game to play, that is, what business model is easiest for you to implement and provide you with the best odds of winning? Next is resource budgeting. You have to be clear about the ante that you need to get into the game. That is simply you have to count the cost. What resources does your business model require to implement and operate? A resource inventory brings you clarity about your own table stakes, clarity about how many antes you can make over the course of the evening. How many chips can you place on the table? In an entrepreneurial context, that is, how much your business model be altered so that it can be implemented and operated with either the chips, i.e., resources that you have, or with resources you can easily acquire, which would be reflected, of course, by your Resource Acquisition Plan. [MUSIC]
