Mental Models for Business

10 Mental Models for business

Minimum Viable Product (MVP)

A product with just enough features to gather validated learning about the product and its continued development. (related: perfect is the enemy of good; de-risking; Customer Development, Get out of the building.

Product/Market Fit

the degree to which a product satisfies a strong market demand. (related: pivot-structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth., rebuilding year)

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Reversible vs Irreversible Decisions

For reversible decisions: If the decision was a bad call you can unwind it in a reasonable period of time. An irreversible decision is firing an employee, launching your product, a five-year lease for an expensive new building, etc. These are usually difficult or impossible to reverse. (related: Jeff Bezos on Type 1, Type 2 decisions)

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Capital Allocation Options

Five capital allocation choices CEOs have:

1) invest in existing operations;

2) acquire other businesses;

3) issue dividends;

4) pay down debt;

5) repurchase stock.

Along with this, they have three means of generating capital: 1) internal/operational cash flow; 2) debt issuance; 3) equity issuance.

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Open Platform vs Closed Platform

A closed platform, walled garden or closed ecosystem is a software system where the carrier or service provider has control over applications, content, and media, and restricts convenient access to non-approved applications or content. This is in contrast to an open platform, where consumers generally have unrestricted access to applications, content, and much more.

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Freemium

a pricing strategy by which a product or service (typically a digital offering or application such as software, media, games or web services) is provided free of charge, but money (premium) is charged for proprietary features, functionality, or virtual goods. (related: If you’re not paying for it, you’re the product.; pay to play)

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Luck Surface Area

When you do something you’re excited about you will naturally pull others into your orbit. And the more people with whom you share your passion, the more who will be pulled into your orbit.

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Hunting Elephants vs Flies

Salespeople sometimes refer to ‘elephants’, ‘deers’ and ‘rabbits’ when they talk about the first three categories of customers. To extend the metaphor to the 4th and 5th type of customer, let’s call them ‘mice and flies’. So how can you hunt 1,000 elephants, 10,000 deers, 100,000 rabbits, 1,000,000 mice or 10,000,000 flies? (related: brontosaurus, whale, and microbe)

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Secrets

Every one of today’s most famous and familiar ideas was once unknown and unsuspected…There are many more secrets left to find, but they will yield only to relentless searchers.

Strategic Acquisition vs Financial Acquisition

Different motivations for an acquiring company typically have significantly different valuation models. (related: rollup-a technique used by investors (commonly private equity firms) where multiple small companies in the same market are acquired and merged., P/E-driven acquisitions, auction)

06/24/2017