Presentation on theme: "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."— Presentation 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 Entrepreneurship
W. Runge 09/20082 What Are We Talking About? New Technology-Based Firms (NTBFs) and/or Research-Based Startups (RBSUs)? Innovation? Invention (patents) to innovation? Science2Innovation?
W. Runge 09/20083 What Should We Talk About? Value Creation and Capture by Science and Technology (Technology for technical innovation and organizational innovation)
W. Runge 09/20084 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
W. Runge 09/20085 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?)
W. Runge 09/20086 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)
W. Runge 09/20087 The Business Model How do you plan to make money? An organizations 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
W. Runge 09/20088 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
W. Runge 09/20089 Market value and technical value does 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 companys 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
W. Runge 09/ 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
W. Runge 09/ Technical Value: Perspectives Producer Perspective: How protectable from the competition the product is or how 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
W. Runge 09/ 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 offerings not to technology!
W. Runge 09/ Benefits: Supplier and Customer Perspectives Customer Perspective: Customers Overall Expenses Cost reduction of 0.02% Supplier Perspective: Cost reduction by 50% BeforeAfter Potential Price- Insensitivity Price increase by 50% Customers Economics Price Elasticity
W. Runge 09/ Customers: Types and Roles Type: 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 a business plan!
W. Runge 09/ 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?
W. Runge 09/ 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 companys competitive position (defined by its strengths and weaknesses).
W. Runge 09/ 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 guess 2.Actually, get out in the field and talk to people Or a little of both
W. Runge 09/ 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?
W. Runge 09/ Technology and Functionality Functionality 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)
W. Runge 09/ Technology Classes: Opportunities Key Technology A crucial element in research/innovation; may involve the creation of fundamentally new capabilities (advantages) Platform Technology A core competency; basis for exploitation strategies Enhancing Technology Incremental shifts in product performance of existing materials, e.g. chemical nanotechnology (known markets!) Enabling Technology Subset 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 Technology A technological area representing a limiting factor in the progress of a particular program (project or innovation)
W. Runge 09/ 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 Technology A 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)?
W. Runge 09/ 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
W. Runge 09/ Competition-2 Coincidence of scientific or technical discovery and innovation is not so rare! ( technology watch; technology intelligence!)
W. Runge 09/ 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)
W. Runge 09/ Revenue Model and Commercialization 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?)
W. Runge 09/ Scale Up Technology Commercialization Commodization Product Life Cycle
W. Runge 09/ Nine Types of Revenue/Profit Models NameDescriptionExample Firm 1. Installed baseBuild 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. BrandCreate a valued brand for your productBlueBiotec; most large chem. firms; Henkel KGaA! 6. BlockbusterFocus on creating a series of big winnersLarge 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. SolutionShift from product to unique total solutions (incl. process chains of customers) BASF, DuPont, 3M,GE etc. 9. Low costCreate a low-cost product to offer; low price per unit of value Dow Chemical (China, India!), BlueBiotech Adapted from: Dorf & Byers, Table 16.3
W. Runge 09/ Corporate Staged Innovation Processes (Stage-Gate, PhaseGate) Project Proposal : Shaping + Analysis (several addressees) Feedback/Learning: Post-Launch Review Concept Shaping Concept AnalysisValidation DevelopmentImplementation Ideas Select for Concept Analysis Select for Validation Commit to Develop? Customer Value Business Success Ideas – Opportunity Crude Hypotheses Refined & Expanded Hypotheses with Critical Issues (and Economic Model) Verification of Critical Issues to an Acceptable Level of Confidence Demonstration of the Viability of the Project Business Plan Achievement of Business Startup Commit to Resources Whether …How … Research Markets NPD: Slide Similar to Business Plan
W. Runge 09/ 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!) questions to be answered 3.Competitive Advantage: Describe how our firm could gain and sustain an advantaged position at potential customers (Sources of information!) questions … 4.Market Attractiveness: Describe why this market would be attractive to any potential supplier Business Attractiveness / Strategic Fit: Describe why this specific opportunity is attractive to our firms businesses – 12+ questions to be answered 6.Value Potential: (Value management, economic analysis; entry)