Entrepreneurship

Lesson 6: Prototype and 4 M’s of Operation

Fundamentals of Product development – before commercializing a new product or service, the
entrepreneur must focus first on refining the product or service and validate its market acceptability.
4 steps of Primary Target Market
1. Developing a product or service description.
2. Creating prototype
3. Testing the prototype
4. Validating the market
Product or Service description – simply describes how a product or service works and it benefits the
customers. – a clear product or service description is important because this will serve as the
blueprint of all business operations. Therefore, the entrepreneur has to take note of the following
regarding the product or service description:
1. It should directly address the primary target market in personal manner using everyday language.
The entrepreneur should put himself or herself in the customer’s shoes, where the product
description will be addressed to.
2. It should highlight the features that will cater to the customer’s needs or address the customer’s
problems.
3. Realistic superlatives should be used for the product description. Like the statements such as
“world class service or product excellence” may not matter to the customers at all.
Creating Prototype of the Product or Service
This is the preliminary model or sample of a new product or service that is created to test a product
concept or service process.
According to Entrepreneur, creating a prototype lessens implementation/commercialization risks and
provides the entrepreneur a bunch of advantages as follows:
1. Creating a prototype enables the entrepreneur to engage in trial and error, provides room for
improvements and refines the functionality of the product design or service process.
2. Creating a prototype provides the entrepreneur a window to test the performance and
specifications of various materials and service processes.
3. A prototype helps the entrepreneur effectively describe the product or service to the product team.
4. Creating a prototype elicit respect from key stakeholders and customers.

Testing the Product Prototype

All the efforts exerted in the creation of a prototype will be put to waste if the prototype will not be tested.
Testing the prototypes is a vital process before an actual product or service is launch.

The following testing methods are applied by the entrepreneur:

1. Focus group discussion – is to identify error, deficiencies, and issues that may impede the
success of the product.
2. Legality and ethical test – the entrepreneur must ensure that the product or service complies
with all relevant laws and regulations and has a necessary license or permit to operate a particular
business.
3. Safety test – the entrepreneur must ensure that the product is safe to use, safe to be consumed
(food and beverages) and safe to be applied (cosmetics product.)
4. Product Costing Test – entrepreneur must examine every stage of the manufacturing process or
every process of the service blue print to evaluate and finalize the cost involve.
5. Component Test – each component of the product or service must be tested independently to
identify component failures for goods or service.
6. Competitors product/service test – the entrepreneur must test a similar line of products or the
competitor’s product or services itself to compare and get the best practices to be applied to the
new product or service.
Validation of Market Acceptability – is the process of finding out if the intended primary target market
will be buying the product or availing the service. Market acceptability is a critical factor that the
entrepreneur must validate before launching the product or service, because this can strongly suggest if
the business will be successful or not.
The following objective questions are more likely to be answered in the whole process of market
acceptability validation:
 1. Will the primary target market like the product or service?
2. Will the primary target market buy the product or service when it is already in the market?

The 4M’s Operations

The operation plan is important part of the business plan because it simply states the details in operating
the business.
1. Methods – the methods aspect represent the day-to-day operations of a business. It describes how
an entrepreneur will run the business from all facets of the business such as the manufacturing of
hoods, service delivery process, distribution of goods and services, logistics for delivery of goods,
and inventory management, to name a few.

Manufacturing of Goods (Schaper and Volery, 2004) – the entrepreneur who will engage in producing
his or her own products will have to consider the basic guidelines and principle in manufacturing.
Manufacturing is the process of translating raw materials into finished goods that are acceptable to the
customer’s standards. It consists of three elements:
 Inputs – the materials or ingredients to be used in creating the product.
 Process - the transformation phase where inputs are processed by manpower and machines to
come up with the final product.
 Output – the final product of the process stage, which is intended to be sold to target customers.

The entrepreneur must also consider the most efficient manufacturing site in which the manufacturing
process will take place. Depending on the entrepreneur ‘s objective and financial capacity, he or she can
opt to have any of the following manufacturing sites:
 Home-based – Most start-ups do not have financial capacity to establish a manufacturing site.
Thus, their only option is to manufacture goods at home.
 Commercial space for rent – A commercial space gives the entrepreneur a more specialized and
suited manufacturing site than manufacturing home.
 Commercial space purchase – It provides the entrepreneur substantial freedom and flexibility to
design and run the commercial space.

Once the entrepreneur has chosen a manufacturing site. He/she should consider location, where the
delivery f raw materials and finished goods will be conducted.

Service Delivery Process

Service entrepreneurs must prepare a detailed flowchart of the service business, which is also
called a service blueprint. Every process in the blueprint must be relevant to the service business to
minimize wastage.
Bottleneck is a part of the process where there is an apparent inefficiency and where the
customer waits longer.

Distribution Method
Distribution is the process of bringing the products or services to customers. It is not a straight
process from the entrepreneur to customers; thus, the term supply chain or distribution channel was
coined.
The manufacturer handles the invention, development, and production of the product or service.
Entrepreneurs can be manufacturers of a product and service.
Payment Process
The entrepreneur must also establish a seamless payment process. The entrepreneur must ensure
that credit payments are seamless and that the customers are aware of the terms and conditions of the
credit.
Some entrepreneurs put point-of-sale (POS) machines in their shops to accommodate those who
will pay through credit or debit cards.

2. Manpower – It is one of the highest costs of operating a business but is also the most instrumental
to its success. Having the right people encompasses a myriad of advantages. The entrepreneur will
need the expertise of qualified employees that can handle operational functions, so that he or she
 will be free from daily activities and can thus focus on the strategic and management functions of
the business.

Job Description
Job description enumerates the duties and responsibilities if the potential employee, including the
scope, limitations, and terms and conditions of employment.

Work Schedules
The specific days and working hours must be written so that the employee will be able to align the
work schedule with his or her personal schedule.

Employee Qualification
1. Educational Background – This gives the entrepreneur an idea on the degree of the candidate’s
knowledge of basic things.
2. Work Experience – This will tell them what to expect from the applicant and what they can
potentially contribute to the business based on his/her past position and experiences.
3. Specific skill or knowledge – It will be easy for entrepreneurs to place highly skilled people into
specialized job because they can help right away.
4. Work Attitude – Entrepreneurs also need people with relationship skills because communication is
important in applying their expertise.

Preparatory Selection of Job Applicants

When the business is already sizeable, entrepreneurs usually establish a human resource (HR)
department that will handle the selection and recruitment of candidates.

Headhunters help companies find a set of people suited for their requirements. Manpower
agencies, on the other hand, recruit temporary employees under a short contract.

Selection of Job Applicants

Preliminary screening can easily be done because the entrepreneur will just need to refer to the
required qualifications and eliminate those who did not qualify.
Here are some common questions being asked in an interview. However, it will be up to the
entrepreneur or the HR personnel to ask relevant questions to the interviewee.
1. What are your strengths that you can contribute to our organization?
2. What are your weaknesses that can prevent you from working effectively in our organization?
3. What exactly did you do in your previous job(s)? How will these past experiences contribute to our
organization?
4. What were your significant milestone in your previous job(s), and why do you consider them as
such?
5. Can you discuss the things you know about our organization? Why are you interested to join our
organization?
6. What are your career plans for the next five years if given the chance to work with our
organization?
7. Can you describe your work ethic? How do you work with a team and with your superior?
Job Offer
A job contract generally summarizes the terms and conditions of the candidate’s employment with
the business. It usually includes the following details: (1) rank or position of the candidate, (2) a list of
responsibilities of deliverables and its cope and limitations, (3) the salary and benefits including vacation
and sick leaves, (4) work schedule, (5) probationary period if any and qualifications to become a regular
employee, (6) the duration of the contract, and (7) resignation procedure.

Employee Development
Training people is one of the biggest investments of an entrepreneur or a businessman. Therefore,
he or she must devise strategies on how to keep employees satisfied working in the company.
The entrepreneur can also conduct internal training programs led by competent subject matter
experts to discuss the intricacies of each department to the newly hired employees.
 3. Machines – Most businesses would not be able to operate without the aid of machines. Machines
are not only limited to physical equipment but can also pertain to new technologies that help
business operations become standardized and seamless. Without machines, business operations
will be cumbersome, costly, and with low quality.

Equipment and Other Facilities

The entrepreneur must prepare a facility plan that details the most economical way to manufacture
the product or offer the service by placing the facilities where they can be efficiently used.

Telecommunications and Information Technology

These pieces of equipment include mobile phones or smartphones, tablet computers, phablets
(phone and tablets), landing phones, laptop or desktops, software programs, POS machines, and business
Websites.
 Landline phones – order-taking, telemarketing, and teleconferencing with business partners and
customers.
 Mobile phones – mobile application for order-taking, mobile application for payments, mobile
marketing, etc.
 Laptop and Desktop – marketing research and online banking preparing reports such as financial
statements, business case, inventory reports, and legal and compliance reports.
 POS machines – charging customers’ debit or credit card, tracking sales storing data, and
analyzing purchases.
 Accounting and Inventory Software – accounting all businesses transactions and profitability,
monitoring sales and inventory.
 Website – order-taking, 24/7 marketing, having online conversations with customers, tracking
customer activities online, collecting customer information.

4. Materials – The supplier must have a consistent and sufficient amount of raw materials and
supplies that can accommodate the demand of the entrepreneur. The entrepreneur should decide
on what route to choose when it comes to materials requisitioning. Options include the following:
(1) manufacturing own products or offer services; (2) outsourcing of manufacturing or service
activities to a third party; and (3) purchasing own product or service from present suppliers.

Logistics
This is where the entrepreneur must understand and implement efficient logistics management.
The entrepreneur is responsible for manufacturing, warehousing, transportation, inventory management,
marketing, and selling the product or service.

Warehousing is storing the finished goods manufactured in a facility until they are distributed to
end users. Therefore, the entrepreneur should think of ways on how to reduce the cost of warehousing by
either buying an economical warehouse or renting an inexpensive space.

Transportation is the process of efficiently transferring the products to retailers or consumers.

The distribution hub is where the entrepreneur combines the goods before delivery to retailers or end
consumers.

Inventory should also be tracked religiously by the entrepreneur. There shouldn’t be a surplus of
inventory especially if the entrepreneur is selling perishable goods. The entrepreneur must also ensure
that there is enough space to store and stock inventory, depending on storage requirements.

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