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Entrepreneurship for PhysicistsA practical guide to move inventions from university to market

Entrepreneurship for PhysicistsA practical guide to move inventions from university to market

Davide IannuzziVrije Universiteit Amsterdam

Morgan & Claypool Publishers

Copyright ª 2017 Morgan & Claypool Publishers

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ISBN 978-1-6817-4668-5 (ebook)ISBN 978-1-6817-4669-2 (print)ISBN 978-1-6817-4670-8 (mobi)

DOI 10.1088/978-1-6817-4668-5

Version: 20171001

IOP Concise PhysicsISSN 2053-2571 (online)ISSN 2054-7307 (print)

A Morgan & Claypool publication as part of IOP Concise PhysicsPublished by Morgan & Claypool Publishers, 1210 Fifth Avenue, Suite 250, San Rafael, CA,94901, USA

IOP Publishing, Temple Circus, Temple Way, Bristol BS1 6HG, UK

To Giacomo and Pietro.

Contents

Preface ix

About the book x

Acknowledgements xi

Author biography xii

Introduction xiii

1 Motivation factors 1-1

Sense of accomplishment 1-2

One way to be different 1-3

If you are a parent 1-4

Fun 1-5

Money 1-5

A quick look at the literature 1-6

References 1-10

2 The idea 2-1

Technology-push 2-1

From 10× to SCAMPER 2-4

Market-pull 2-5

Reframing 2-7

Want to dance? 2-7

How about patents? 2-7

References 2-9

3 Effectuation theory 3-1

A lesson from prospect theory 3-1

Effectuation theory: introduction 3-2

Bird in the hand 3-3

Affordable loss 3-5

Crazy quilt 3-6

Lemonade 3-8

Pilot in the plane 3-9

Moving to the next step 3-10

References 3-10

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4 The four pillars of a strategic plan 4-1

Four pillars to start from 4-1

Value proposition (which game are you playing?) 4-1

Internal analysis (can we play?) 4-5

External analysis (can we win?) 4-6

Value capturing model (is it worth playing at all?) 4-11

References 4-13

5 Business canvas 5-1

The nine elements of the business canvas 5-2

Entrepreneurship for physicists: business canvas of this book 5-4

References 5-6

6 Getting the numbers straight 6-1

Balance sheet 6-2

Profit-and-loss (P&L) statement 6-3

Working capital: matching P&L and balance sheet 6-5

Free cash flow 6-5

Future estimates 6-6

Discounted free cash flow 6-6

Comparing two projects with discounted free cash flow 6-8

Reference 6-8

7 Random thoughts worth spreading 7-1

Trust 7-1

Team efficiency: from Lencioni to Tuckman 7-3

Cialdini’s six principles of persuasion 7-5

Kotter’s eight principles of effective management 7-6

Team composition: culture and people 7-7

The pitch 7-10

References 7-12

8 The role of the technology transfer office 8-1

TTO and the motivation of the scientist 8-1

Friction on the Treacy–Wiersema frame and the funnel 8-3

9 Entrepreneurship for non-entrepreneurs 9-1

Entrepreneurship for Physicists

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Preface

The idea of writing this book came after a homonymous course that I have beenteaching to the students of the Master of Physics in Amsterdam and, in a shorterformat, to physics PhD students and postdocs of different organizations.

Saying that the course is different from what physicists usually get in class isprobably an understatement. There is no equation to understand, no theorem toprove, no ħ; opinions matter, and, for every question, there is often more than onecorrect answer. For most of the people who attend the course, this aspect is hard todigest. Students are disoriented by the lack of solid foundations. Everything seems tobe based on questionable arguments, and it takes a few lectures before they all getacquaintance with what some of them call ‘fluffy stuff’. On the other hand, as thecourse progresses, the atmosphere gradually change to a point that, at the end of thelast lecture, several students confess that coming to my class was a refreshingexperience. There is even a small group of crazy students who eventually decide tofollow my suggestion and do something they would have never thought themselvesable to do: start a business. As usual, however, the success of the course stronglydepends on the attitude of the students. They need to keep an open mind approachand accept the different way of thinking that this subject brings with it. For thisreason, at the start of my course, I always advise them to be ready to let the physicistpart of the brain go, take a leap of faith, and try to enjoy the fact that, in business,the best answer to all questions is: ‘it depends.’ If they do that, they will eventuallyhave some genuine fun.

I have written this book with the same spirit with which I have designed mycourse. It is first and foremost a book from physicist to physicist, despite the fact thatthe subject discussed has little to do with physics. In writing it, I have embraced allthe doubts and perplexities that we, physicists, have towards everything that isrelated to business. I have then put all my enthusiasm to highlight the excitingaspects of the entrepreneurial process that brings ideas to market. I have furtherfilled its pages with all the most relevant lessons that I have learned over the last tenyears, sharing anecdotes, opinions, and arguments from the literature.

Although I expect that most of you will start reading the book with skepticismand will be tempted to abandon it after the first few chapters, I truly hope thateveryone will hold tight and complete the journey, maybe only after taking that leapof faith I was talking about above. I also hope that the more senior colleagues willtake this book as a starting point for considering whether it would be worthdesigning an Entrepreneurship for Physicists course for their students as well. I canguarantee that students are going to love it, and I am convinced that a course of thiskind can be very beneficial for them, regardless of the career they will pursue in thefuture. Finally, I hope that the book will inspire a handful of you to bring an idea tomarket. If that happens, please, let me know: you will certainly make my day.

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About the book

Physicists are very smart people. Still, when it comes to moving their ideas fromuniversity to market, they often lack the basic set of know-hows that could helpthem succeed in the technology transfer process. To fill this gap, Entrepreneurship forPhysicists: a practical guide to move ideas from university to market offers a conciseanalysis of the key ingredients that enable entrepreneurs to bring added value totheir customers. After a short discussion on why university physicists should paymore attention to this aspect of their professional life, the book dives into a set oftheories, models, and tools that could help an academic scientist transform an ideainto customer added value. The reader will be introduced to effectuation theory,internal resource analysis, external landscape analysis, value capture, lean startupmethod, business canvases, financial projections, and to a series of topics that, albeitoften neglected, do play a fundamental role in technology transfer, such as trust,communication, and persuasion. In the last chapter, the book explains how most ofthe concepts discussed actually find application in the career of scientists in a muchbroader sense.

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Acknowledgements

I would have never been able to write this book without the inspirational lectures ofall of my MBA teachers from TIAS Business School, who introduced the mostrelevant pieces of the literature to me and offered their own interpretations, models,theories, and hands-on experience. I am particularly indebted to Robert Dew. I amsure that, reading my book and seeing how often I cite his fascinating lectures, youcan have a feeling of how influential he has been to me and my classmates. I wouldalso like to thank Carla Koen for the numerous stimulating discussions and forpointing me towards effectuation theory; Peter Gillis, whose lectures inspired a largepart of chapter 7; Herbert Paul, for teaching me what strategy is and how to manageit, and for pointing me towards the resource based theory of a firm; Rudy Moenaert,for his enthusiastic and fascinating introduction to marketing and branding; andFrans de Roon, who introduced me to balance sheet, P&L, and cash flow (amongother very interesting topics).

I would further like to express my gratitude to Enno Masurel, from the Faculty ofEconomics of the Vrije Universiteit Amsterdam, with whom we have designed andhave been delivering the course Entrepreneurship for Physicists for the students ofthe Master in Physics of Amsterdam. I am enjoying this collaboration very much,and I am sure that what I have been learning from Enno dwarfs, in any aspect, whatEnno may ever learn from me.

This book would have little value if it were not (at least partially) based on what Ihave learned via direct experience. I am deeply thankful to Hans Brouwer—mybusiness partner in Optics11—who has shared with me all of his plurennialexperience as serial entrepreneur, and to Steven Tan, Nigel Wagstaff, and BartKlijsen—the technology transfer office people who helped me get Optics11 off theground—for the patience and professional attitude with which they have alwaystreated my case. I am further thankful to all the people who are incubating theirideas at the Demonstrator Lab, because, in the attempt to support them, I amcontinuously learning new aspects of the idea-to-market process.

Finally, I would like to thank the two key partners this initiative has hinged on:my Publisher, who bravely embraced the idea of a book on entrepreneurship for anaudience of physicists, and my family, who supported me through the entire process.

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Author biography

Davide Iannuzzi

Davide Iannuzzi (PhD, University of Pavia, Italy, 2002; MBA,TIAS Business School, 2015) is a professor in experimental physicsat the Vrije Universiteit Amsterdam and the Scientific Director ofthe Demonstrator Lab—Amsterdam Physics Research andInnovation Laboratory, in Amsterdam. Parallel to his academiccareer, he has developed an in-depth knowledge of the technologytransfer process that brings scientific ideas to market, both via

direct experience as an entrepreneur himself and via the support he has beenoffering, over the years, to numerous other startuppers.

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Introduction

Entrepreneur /,untrəprə‘nɜ:(r)/ noun a person who makes money by starting […] abusiness [1].

Madison Nicole Robinson is a teenager girl from Galveston Island—a narrowpiece of land that stretches into the Texas Gulf, some 80 km south from Houston.When she was still a child, she used to spend most of her free time at the beach withher family. Like many other kids of her age, in those long days, she would often sitdown with a piece of paper and a bunch of colored pencils to draw whatever wouldpass through her mind. It was on one of those days that, in 2006, she came up with anintriguing idea: why not use some of the colorful sea creatures she had drawn manytimes before as the background of a new line of beach sandals? Madison was only 8years old. Encouraged by her father, who saw a lot of potential in his daughter and hernewly designed shoes, and supported by some family friends, the little girl spent fouryears of hard work going from a kid’s sketch to a trade show product. Then, in July2012, she wrote a solicitation letter to the famous fashion retailer Nordstrom. Inresponse to that letter, Nordstrom decided to put Madison’s beach shoes in not lessthan 64 of its shops. A few months later, American journalist Adrienne Burke pickedthe story up and put it on the front page of yahoo.com [2]. The article went viral, andso did Madison’s flip flops. Today, Madison is considered a role model for youngentrepreneurs, and, even if one may argue whether she would have been thatsuccessful without the support of her family, it is quite impressive to read that,when she was 16, her company had already sold more than 100 000 pairs of shoes [3].

A few years before that, on a day like many others, a kid named Fraser Doherty[4], from Edinburgh, Scotland, was on his way to pay a visit to his grandmother.Even though he was only 13, Fraser was determined to start his company and livethe life of an entrepreneur. After trying out a couple of ideas, however, he had notbeen able to find the right product to build his company around. When he arrived athis grandmother’s house, he found her in the kitchen, preparing jam according to hersecret recipe. It was in that precise second that Fraser had what he recalls as his‘eureka moment’ [4]. After convincing his grandmother to teach him the recipe, hestarted to produce it in his own kitchen and sell it door-to-door in his neighborhood.Encouraged by the excellent results obtained in this first series of tests, he soondecided to move his sale activity to farmers’ markets. Yet, something did not soundright. The global jam industry was in continuous decline, and even renowned brandsseemed to suffer. Why was that? After a bit of research, Fraser realized that theproblem with jam was the large amount of added sugar that all commercialpreserves apparently had. He thus modified his grandmother’s recipe to make it a100% fruit jam, and started to pitch it to British supermarket chain Waitrose. After acouple of failed attempts and new starts, Fraser’s SuperJam finally entered the localgrocery store, where, in the first day alone, it sold more than what all the other jambrands combined would sell in one month. It is not difficult to imagine how the storydeveloped after that. Suffice to say that, at the moment of writing, Fraser is 24, andhis company supplies more than 2000 supermarkets worldwide [5].

xiii

Madison and Fraser are not alone. There is a long list of entrepreneurshipchampions who became successful well before the age of 20. Juliette Brindak, forinstance, was 10 years old when she created a social network for tween and teenagergirls that, six years later, was valued to be a $15 million business [6, 7]; Bella Weemsfounded her million dollar revenue jewelry when she was 14 [8]; and Farrah Gray,who is currently considered an icon of the entrepreneurial world, was only 6 when hestarted to sell homemade body lotions [9]. One could go on and on, listing names ofteenagers who were able to start up their firm and make a living (and something more)with it. While it is clear that their success probably stems from a rare combination ofpersonal skills and fortunate circumstances, when I look at these chaps, I cannotrefrain from asking: why did it take me 39 years of my life to start a company?

I believe that there are at least four good reasons why people do not embrace anentrepreneurial career: lack of awareness (people do not know about the opportunitiesthat this kind of career may offer), lack of motivation (people do not see the benefits ofmoving towards this kind of career), lack of resources (people believe that they do nothave the resources to move towards this kind of career), and lack of know-how(people believe that they do not know what to do to move towards this kind of career).The goal of this book is to address all of these four issues for people like you, namely,physicists who are studying or working in an academic environment.

In this context, it is important to stress that I do not expect to be so convincing that,after reading this book, you will abandon your academic career to fully immerseyourself in your new startup. Actually, it would probably not be the wisest thing to doeither. What I argue, however, is that, if you want, at least at the beginning of thetechnology transfer process, you can live two parallel lives, a bit along the lines of DrJekyll and Mr Hyde: the life of the researcher during the working day and the life ofthe entrepreneur in the time that is left. In other words, becoming an entrepreneur isan exercise that, at first, you can do while (rather than instead of) being an academicresearcher. Furthermore, and maybe more importantly, even if you do not have anyintention to start a company, you can still dedicate some time to look at how theentrepreneurial process works. In doing so, you may find a lot of useful tips that canbe applied to a much more general context. What I mean is: adapting anentrepreneurial way of working to our professional life may prove to be, at times, asensible thing to do even in situations that have nothing to do with the startup process.

The book is organized as follows (see below figure 0.1). In chapter 1, you will beinvited to reflect on the motivation factors that may induce an academic researcherto follow an entrepreneurial pattern. Chapter 2 analyzes the first important step inan academic entrepreneurship process, when the scientist starts to appreciate thedifferences and analogies between scientific ideas and business ideas. In the thirdchapter, following a widely recognized model known as effectuation theory, we willdiscuss how entrepreneurs think about, create, and manage business opportunities.Particular emphasis will be given to the difference between risk and uncertainly, andto how this theory can mitigate a few key show-stoppers that often inhibit academicscientists from bringing their ideas to market. Chapter 4 is dedicated to thedescription of four pillars that every business plan relies on: value proposition(with a short introduction to the lean startup method), internal analysis (with a

Entrepreneurship for Physicists

xiv

discussion of the resource based theory of a firm), external analysis (with an analysis ofthe difference between sustained and temporary competitive advantage), and valuecapture model (with a reflection on the complexity of the sale process). All the pointsdiscussed above are then used in chapter 5 within the framework offered by thebusiness canvas model—a practical tool that allows one to put an entire business planon one sheet of paper. Chapter 6 provides a quick introduction to the main financialsheets that any entrepreneur must be familiar with: balance sheet, profit and lossstatement, and free cash flow. In chapter 7, the focus is moved towards a series ofseminal papers and good-to-know concepts that may help academic entrepreneursboost their teamwork skills. Chapter 8 is dedicated to the role of technology transferoffices. In chapter 9, the topics discussed in the previous chapters are reviewed under adifferent perspective to stress how all that has been said can be more broadly appliedto the career of an academic scientist well beyond the entrepreneurial process.

Figure 0.1. List of the main topics discussed in the book.

References[1] Hornby A S 2011 Oxford Advanced Learner’s Dictionary of Current English 8th edn (Oxford:

Oxford University Press)[2] https://www.yahoo.com/news/blogs/profit-minded/15-old-entrepreneur-got-her-product-nords

trom-233738356.html?soc_src=social-sh&soc_trk=tw[3] https://smallbusiness.yahoo.com/advisor/blogs/profit-minded/from-fishflops-to-fifth-avenue--

teen-entrepreneur-expands-192431319.html[4] Doherty F 2011 SuperBusiness: How I started SuperJam from my Gran’s Kitchen (Chichester:

Capstone)[5] http://www.fraserdoherty.com/pages/biography[6] https://missoandfriends.com/our-team-juliette-brindak/[7] http://www.telegraph.co.uk/technology/internet/10667632/Digital-natives-25-internet-success-

stories-aged-25-and-under.html[8] https://www.origamiowl.com/ourstory[9] http://www.farrahgray.com/about/

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