what are business plan specifics for new technology- based firms? a business plan should ask and...
TRANSCRIPT
What Are Business Plan Specifics for New Technology-
Based Firms?A business plan should ask and
answer the tough questions!
cf. Module 11 of Technology Entrepreneurshiphttp://ce.ioc.uni-karlsruhe.de/download/Chem_Entrepreneur_10_13.pdf
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What Are We Talking About?
• New Technology-Based Firms (NTBFs) and/orResearch-Based Startups (RBSUs)?
• Innovation?
• Invention (patents) to innovation?
• Science2Innovation?
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What Should We Talk About?
Value Creation and Capture
by
Science and Technology
(Technology for technical innovationand organizational innovation)
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Key Subjects
• Business Model• Value – Market and Technical Value• Technology Intelligence and Strategy• Technology Classes• Customers and Competitors• Commercialization and Revenue Models• Analogies between Entrepreneurship and
Intrapreneurship
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Key Questions to Be Addressed• What are value added components for the
offering?• Do we have or can we create the
organizational capabilities to deliver?(SWOT - self-assessment; feasibility)
• Is the offering a complete solution for the customer or only part of the solution?
• What if …– Development will take so long that money does not
suffice, competing technologies/products occur …– The original idea/plan does not materialize (modify
the venture concept and strategy until it fits?), or a different opportunity shows up (follow a new direction?)
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The Time and Digestion Factor
• Completing a business plan for an NTBF/RBSU easily takes 12 – 18 months!
• And the decision to commit to a new enterprise is not a single act, but a process that takes time to unfold(months or years from initial statement of entrepreneurial intent and commitment to start)
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The Business Model• How do you plan to make money?• An organization’s core logic for creating
value; a hypothesis how to create value• A set of planned arguments and
assumptions about how a firm will create value for all its stakeholders
• A decision and a process to transform scientific or technology ideas or opportunities into market value
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Mediating between Domain-Specifics and Drivers
Description,Modeling,Assessment and“Measurement”
Domain:Technology& Science
Business Model
• Technology
• Markets
• Value Proposition
• Value Chain
• Value System
• Revenues and Profits
• Technical and Market Competition
• Competitive Strategies
Description,Modeling,Evaluation and“Measurement”
Domain:Socio-Economy,
Policy
Value Drivers(External Parameters)
• Megatrends (+ Regulations)
• Market/Customer Insight (Actual and “Latent”)
• Technology Forecasting
• Industry Foresight
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Market value and technical valuedoes not necessarily match!
Value Creation: Market and Technical Value
Slide 9.6; Ref. Runge, p. 613
Market Value: degree to which a real customer perceives the need for the company’s offering (e.g. product) and after a cost/benefit assessment pays the offering price to purchase it.
Which customers (market segment)?
Technical Value:different perspectives for producer or supplier and customer
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More on Value• Value: worth, importance/relevance or usefulness• Value and Price: Value (what you get) = worth of
the social and economic benefits a customer pays (price; in monetary terms) for an offering
• Most technology-based products are initially focused on functionality and performance
Values Offered to a (Technical) Customer:• Product (Functionality, Performance)• Service (Technical Service, Consulting)• Price• Access (Sales Channels; Sales Cycle)• Experience
Ref. Slide 9.7; Dorf & Byers, p. 65
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Technical Value: PerspectivesProducer Perspective:
How protectable from the competition the product is orhow exploitable the product is as a basis for further offerings
Customer Perspective:• Meeting or exceeding
design specifications expressed by the price the customer accepts to pay
• Patents (Patenting Strategies!), trade secrets, technical reports; know-how, experience – “tacit technology”
• Imitation barriers (product complexity)• Synergy with other products,
lower cost of manufacturing• Related (technical) service that can be provided• Product switching cost with the customer
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Market Value: The Value Proposition
Value Proposition:a statement of how customer value can be created (by your NTBF) – usually one or two values (Slide 9.8) dominate,– Compelling reason to purchase– Provides profit margin– Quantification of customer benefits (money/time
saved; less repair, etc.)
Technology Offering,Solution
Market
Valuable attributes belong to offeringsnot to technology!
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Benefits:Supplier and Customer Perspectives
Customer Perspective:
Customer’s OverallExpenses
Cost reductionof 0.02%
Supplier Perspective:Cost reduction by 50%
Before After
Potential Price-Insensitivity
Price increase by 50%
Customer’s Economics
Price Elasticity
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Customers: Types and RolesType:• Industrial customer (who makes the
purchasing decision; customers-of-customer?)• Professional customer
(may be end-user; e.g. craftsman, physician; also “academic customer”; retail etc.)
• Consumer ( “Normal Marketing”)Role:• Buyer, client, adopter (of innovation)• End-user• Cooperation partner, competitor• Source of capital, investor
Have abusiness plan!
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The Value Chain• The value chain categorizes the generic value-
adding activities of an organization• The set of (company-internal) activities
required to design, procure, produce, market, distribute, and service a product or service
Which activities can we do best?Which activities do we want to do?
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Technology meets markets!
Technology Intelligence (TI)“Intelligence is knowledge and foreknowledge of the world around us - the prelude to Presidential decision and action”(U.S. CIA Factbook on Intelligence; emphases added).
Technology Intelligence:• (what, when, how, where and who)
actionable knowledge and foreknowledge arising from systematic processes involving gathering, analyzing, hypothesizing and disseminating information on external scientific or technological developments, opportunities and threats that may affect a company’s competitive position (defined by its strengths and weaknesses).
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Market Data (TI)• Good data are rarely available for the
market you are after or envision• Almost never available for “disruptive
(“radical”) innovation” –“new-to-the-world”!
• “Good” data are from two sources:1. An “educated guess” –
or an extremely lucky guess2. Actually, get out in the field and talk to
people
Or a little of both
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Technology Strategy Basics
Firm Founding (NTBF) or an R&D Project in a Firm:Create protectable value for which real customers or specific organizations will pay money to the company rather than its competition
Value Creation• How does the scientific idea or technology
create protectable market and technical value?• Which product, process, application?
Value Capture
• Can we capture the market value inherent in this idea/technology in the face of competition?
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Technology and FunctionalityFunctionality• Single, intrinsic functionality• Combinable functionalities
(“architectural innovation” = combining features) • Smart/intelligent functionality (responding to
external stimuli)Substrate/Target• Human-Oriented (“environment-oriented”)
Regulations! (specifically, human exposure)• “Intermediate”: animals exposed• Non-Human-Oriented (“material”, e.g. paper, wood,
plastics, glass, metal etc.; devices, systems)
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Technology Classes: Opportunities• Key Technology
A crucial element in research/innovation; may involve the creation of fundamentally new capabilities (advantages)
• Platform TechnologyA core competency; basis for “exploitation strategies”
• Enhancing TechnologyIncremental shifts in product performance of existing materials, e.g. chemical nanotechnology (known markets!)
• Enabling TechnologySubset of technologies, prerequisite or essential for a specific phase of (chemical) science, product or process development, or manufacturing; also new functions for existing materials
• Pacing TechnologyA technological area representing a limiting factor in the progress of a particular program (project or innovation)
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Technology Classes: Threats• Generic Technology
Defined with regard to an end (function), a particular product, process or system;allows same result to be implemented through different technologies
• Emerging TechnologyA technology anticipated (or proven) to grow and expand and become important and valuable for an industry or industry segment
• Respond!– What is your protection layer around your technology,
offering, customers? (Threat by your competition)– How will you attack incumbents (your opportunity;
threat to your competition; competitive response)?
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Competition-1• There is almost never no competition!
– At least “state-of-the-art”; functional equivalents; the “realities of the market”; “import regulations”
– Even for the “first mover” (serendipity; “Holy Grail”; etc.) there is only “lead time”
• Reviving “old ideas” clash(worldwide; incl. converting the perspective)
“Sailing Ship Effect”KiteShip Corp.Skysails GmbH & Co. KG
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Competition-2
Coincidence of scientific or technical discovery and innovation is not so rare!( technology watch; technology intelligence!)
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Technology Strategy Orientations
• How can we create and keep competitive advantages?
• Potentially complementary aspects:– Resource-oriented
(Resources of the firm push)– Market-oriented
(The market drives)– Interrelation-oriented
(Alliances are key)– Opportunity-oriented
(Fast opportunity identification and exploitation drives)
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Revenue Model andCommercialization Model
(Technology) Commercialization Model:• Technical, marketing and business activities that must
be considered as you move through the overall process to enter into sales and distribution of your anticipated offering – to achieve profit and business growth
• Revenue Model:The various revenue streams your business will be putting in place and how each will bring in money, e.g.– Sales of Offerings (including how to … prices, sales
cycle)– Royalties (e.g. from licenses, selling IP)– Contractual Revenues (contract research, contract
manufacturing)– Consulting, other services (also technical service?)
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Sc
ale
Up
Technology Commercialization
http://asbdc.ualr.edu/technology/commercialization/the_model.asp
“Commodization”
Product Life Cycle
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Nine Types of Revenue/Profit ModelsName Description Example Firm
1. Installed base Build a large installed base of customers (and sell consumables or upgrades)
Henkel KGaA (Persil),HP (printers)
2. Protected innovation
Create a unique, innovative product and protect it using patents and copyrights
Merck KGaA (liquid crystals; FPD); WITec
3. New business model
Find unmet customer needs and build a new business model
ChemCon, Vitracom
4. Value chain or value system specialization
Specialize in one or two functions on a value chain or system
Polymaterials AG;most large chem. firms; Closure Medical
5. Brand Create a valued brand for your product BlueBiotec; most large chem. firms; Henkel KGaA!
6. Blockbuster Focus on creating a series of big winners Large pharmaceutical firms
7. Profit multiplier
Build a system that reuses a product in many forms [platform technology]
IoLiTec; Nano-X, Nanogate, SiGNa; large chem. firms
8. Solution Shift from product to unique total solutions(incl. process chains of customers)
BASF, DuPont, 3M,GE etc.
9. Low cost Create a low-cost product to offer; low price per unit of value
Dow Chemical (China, India!), BlueBiotech
Adapted from: Dorf & Byers, Table 16.3
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Corporate Staged InnovationProcesses (Stage-Gate, PhaseGate)
Project Proposal: Shaping + Analysis (several addressees) Feedback/Learning:Post-Launch Review
ConceptShaping
ConceptAnalysis Validation Development Implementation
Ideas
Select forConcept Analysis
Select forValidation
Commit toDevelop?
• Customer Value• Business Success
Ideas – Opportunity
CrudeHypotheses
Refined & ExpandedHypotheses with Critical Issues (and Economic Model)
Verification of Critical Issuesto an AcceptableLevel of Confidence
Demonstration ofthe Viability of the ProjectBusiness Plan
Achievementof Business Startup
Commit to Resources
Whether … How …
Research
Markets
NPD:
Slide 12.23
Similar to “Business Plan”
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A PhaseGate Shaping Form• Opportunity Summary (Summarize opportunity hypothesis):
• Value Proposition (Win-Win) (One sentence):1. Market / Customer Need:
Describe your hypothesis of the need and identify the customer type or market group with the need (Sources of information!) – 12+ questions …
2. Product / Service:Describe the product or service which you hypothesize will satisfy the market need (Sources of information!) - 12+ questions to be answered
3. Competitive Advantage:Describe how “our firm” could gain and sustain an advantaged position at potential customers (Sources of information!) - 12+ questions …
4. Market Attractiveness:Describe why this market would be attractive to any potential supplier -12+ ...
5. Business Attractiveness / Strategic Fit:Describe why this specific opportunity is attractive to “our firm’s” businesses – 12+ questions to be answered
6. Value Potential: (Value management, economic analysis; entry)