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©2004 OpenTTO.org email@example.com Slide 1 OpenTTO.org - DILIGENT Phase 4– Alliances Distribution & Clusters ADC Objective SIPOC Process What are the Key Forces? Winners and Losers Nature of Market
©2004 OpenTTO.org firstname.lastname@example.org Slide 2 ADC Objective The context of channels and distribution is important: Helps further understand the industry structure Identifies where and how value is added en-route to customers Further clarifies the economic benefit of a product or service to all partners in the chain The economic chain identifies partners who may be most interested in an invention. In a time of rapid change distributors and distribution channels tend to change faster than anything else. Drucker, Management Challenges for the 21 st Century, 1999.
©2004 OpenTTO.org email@example.com Slide 3 Alliances Distribution & Clusters 1.0 CPA 4.1 Desc ribe Cust omer 4.2 Unde rstan d Whol e Prod uct 4.3 Wor ksho p Distr ibuti on and Chan nels 4.4 Revi ew Clust er Leve rage 4.5 Deve lop Valu e Chai n Leve rage Mod el Business Lead Customers Product Development Cost/Financial Analyst Partner/Cluster Firms Market Value Proposition Industry Dynamics Analysis Industry Cluster Capabilities Product & Partner information 4.1 Describe ultimate customer for IP or embedded IP and how they buy the product/service 4.2 Understand the “whole product” as the accumulation of everything needed to deliver to the end customer 4.3 Workshop the distribution chain and channels to understand how value is supplied to the customer 4.4Review industry and regional clusters to see where leverage for the valuation can be obtained 4.4 Develop the optimum value chain model for distribution and leverage over product lifecycle 4.6 Complete and review Confidence Index for ADC Channel Strategy Alliance/Cluster Strategy Prelim Delivery Cost Models 5.O FCS Business Lead Determine channels to market for the technology, and activities and costs associated with the delivery of the total product offer, and which cluster firm are sources of optimum leverage for the technology development & distribution. Process Supplier Input Output Customer Overview 2.0 MVP3.0 IDA 4.0 ADC
©2004 OpenTTO.org firstname.lastname@example.org Slide 4 ADC Suppliers and Inputs Typical questions for suppliers and inputs: Which partners and collaborators stand out from previous phases? Do we have knowledge of their collaboration history? Are their any specific collaboration criteria – positive or negative?? Do we have sufficient knowledge of the complete “product”? Is their enough expertise to describe the buyer value chain? Are there “influencers” in the chain that are important? Which industry clusters are most relevant? Do we have sufficient information to understand their purpose? Is the cluster track record know and relevant? Can we identify cluster companies that are most important? Templates P C S O I Transform
©2004 OpenTTO.org email@example.com Slide 5 ADC Process and Transformation Analysing and knowing the strategic alliance partners: Adds value to the potential commercialisation Identifies potential investors or collaborators Adds to the business case and plan for financial investors Adds to the reality of how the technology will get to market Starts to focus on cultural and management issues Helps add and refine the value proposition and elevator pitch There are valuable lessons to draw upon in the market Templates P C S O I Transform
©2004 OpenTTO.org firstname.lastname@example.org Slide 6 ADC Alliance Partners Understand the partner’s alliance capabilities: What is their collaboration history e.g. Eli Lilly’s 80+ yrs Do they have an Alliance Management Organisation? Know their process - usually three stages: Research Acquisition screens down against criteria Commercial does the negotiation and finance Alliance Management implements and improves The initial commercialisation customer is Research Acquisition
©2004 OpenTTO.org email@example.com Slide 7 ADC Strategic Alliances – Success Factors The success factors for strategic alliances: Intent – common or overlapping alliance objectives –Why is this alliance important to us? Ability to leverage different organisational cultures Leadership – the cause has an attention quota Support and integration processes –How will we make decisions? –How will we handle conflict? –How will we know whether or not the alliance is a success? Make sure that the alliance is clearly grounded in the corporate strategy and commercialisation strategy of the potential partner
©2004 OpenTTO.org firstname.lastname@example.org Slide 8 ADC Strategic Alliances – Intent Intent (objectives) must be clear to the alliance team: Important to tease out unstated objectives Clarify the capabilities expected on either side Understand the partner’s strategic rationale Understand how value will be created for both sides Understand how value will be distributed for both sides Check the shared view within the commercial team(s) Avoid becoming a minor partner in an orphan project that will continually have to fight for resources
©2004 OpenTTO.org email@example.com Slide 9 ADC Strategic Alliances – Culture & Leadership Take advantage of cultural differences: Assume that there will be differences in culture Must have flexibility and self-awareness Check the capabilities to bridge the gap and to create synergies Leadership Want clear definition of roles and responsibilities Must have strong, decisive, clear, committed leaders Need appropriate authority within the governance structure In the absence of clarity around roles and responsibilities alliances tend to drift (Eli Lilly: Alliance Management Office)
©2004 OpenTTO.org firstname.lastname@example.org Slide 10 ADC Alliance Management Office To increase the chances of success for all partners: An “account manager” and “ombudsman” should be assigned An “alliance champion” - a senior BU executive is needed Have a domain expert as the “Alliance Leader” The Alliance Leader is assigned day-to-day leadership Have tools to quantify progress and quality of the alliance –processes –guides –surveys
©2004 OpenTTO.org email@example.com Slide 11 ADC Alliance Management Office Critical Success Factors to be managed include: Compatibility of values and goals Clarity of roles Leadership Communication Trust Fairness Flexibility
©2004 OpenTTO.org firstname.lastname@example.org Slide 12 ADC Alliance Management Office Typical tools to ensure success e.g. start-up: Workshops to gain consensus on strategic intent Capability identification for all parties Means of aligning capabilities Communication styles and “soft” issues e.g. values How progress with be measured and communicated How different types of problems will be escalated Exit criteria for each party – and termination criteria How success will be measured or determined A partner with alliance methods and training is preferable
©2004 OpenTTO.org email@example.com Slide 13 ADC Alliance Management Tools Devices to allow managers to better handle alliances: Standardized methodology that details the steps of a successful alliance Sample alliance contracts Standard alliance proposal forms Partner-selection criteria Benchmarking post-mortems (post-negotiation, turning points) Three to five pages alliance mapping system (including scope, contract, names, brief history) Detailed case studies of a few successes and failures Hierarchy of preferred partners for different technologies and markets List of external advisors Set of alliance policies to guide the TTO in its alliance-related activities
©2004 OpenTTO.org firstname.lastname@example.org Slide 14 ADC Collaborative R&D Success The probability of technical success increases when # : The duration of the project increases, Collaborating firms are related through ownership, and Firms possess complementary abilities. # Bizan, O., The Determinants of Success of R&D Projects: Evidence from American-Israeli Research Alliances, (STE-WP 8-2001) Working Papers Series, September 2001. Technical Success An R&D project is said to be technically successful if the firm conducting the project achieved the goals it set for itself at the beginning of the project. Commercial Success An R&D project is said to be commercially successful (or commercialised) if the project generate some sales. Financial Success An R&D project is said to be financially successful if the firm conducting the project made positive net profits of the project.
©2004 OpenTTO.org email@example.com Slide 15 ADC Collaborative R&D Success Determinants of successful commercialisation: Findings - technically successful projects take less time to commercialise when: –The project budget increases –Revenue of the larger firms in the alliance increases –Firms are related through ownership # Size influences project success and there is a positive relationship between the organization of R&D and its effectiveness. Thus, these findings favour discriminating towards larger, more established firms. # IBID.
©2004 OpenTTO.org firstname.lastname@example.org Slide 16 ADC Process and Transformation Analysing the distribution and channel structures: Is there a “traditional” distribution and channel? Is there potential to disrupt or redefine the channels? Which channels match the market-cycle of the product? What do partners have to add to the “product” to sell it? What is the compelling reason to buy for an end-user? What do partners add to the product in order to sell it? Which parts of the chain provides the major sources of profit? What technical expertise is needed to support the product? How is demand created? Are their new customers not targeted by traditional players? What is the least cost way of delivering this product to customers? Templates P C S O I Transform
©2004 OpenTTO.org email@example.com Slide 17 ADC Distribution – Whole Product Successful distribution requires: Understanding of the Whole Product # Having the market lifecycle linked to the appropriate channels The distribution value chain – who makes money Product readiness – what has to be in place across the channel The gap between the marketing promise made to the customer - the compelling value proposition - and the ability of the shipped product to fulfil that promise. # The whole product concept originated with Theodore Levitt, The Marketing Imagination (New York: Free Press, 1991) and is used by William Davidow in Marketing High Technology: An Insiders View (New York: The Free Press, 1986).
©2004 OpenTTO.org firstname.lastname@example.org Slide 18 Differentiating the Whole Product – Levitt’s view: Generic Product – Table Stakes Expected Product – Competitive Ante Augmented Product – A “raise”/differentiation Potential Product – The Three Cs Complex Products often Require 3 rd Party Participation in the Channel Differentiating value is not so much in the product you deliver as in the way that you deliver it. ADC Distribution – Whole Product
©2004 OpenTTO.org email@example.com Slide 19 The totality of what the customer buys: Have to create a whole product, which Creates a compelling reason to buy By creating a whole product, we make the product easy to buy, which in turn expedites sales. How is the whole product being supplied and by whom? Answering each question and concern customers may have concerning the product or their needs for such a product, and from that gain an understanding of how the technology or product will enter the marketplace and through whom. Great devices are invented in the laboratory. Great products are invented in the marketing department. William Davidow. Intel ADC Distribution – Whole Product
©2004 OpenTTO.org firstname.lastname@example.org Slide 20 ADC Distribution – Whole Product Gaps between generic product and whole product: Adopt one of four options to satisfy the market Build: Add required features to your product Buy: Acquire technology to complete the whole product Partner: Use other companies' products and services Ignore: Explain why the customers' concern is not critical Understand the role of the invention in these scenarios
©2004 OpenTTO.org email@example.com Slide 21 ADC Market Life-cycle Distribution partners have to be matched to life-cycle # : Most likely innovators and early-adopters Probably solutions-focused and vertical channels # Geoffrey A. Moore, Crossing the Chasm: Marketing and Selling Technology Products to Mainstream Customers (New York: Harper Business, 1991), and William Davidow, Marketing High Technology (New York: The Free Press, 1986). Early Market Mainstream Market Chasm
©2004 OpenTTO.org firstname.lastname@example.org Slide 22 ADC Distribution Channel Example Customers Buying Manufacturers VOLUME VALUE Single Tier Retailers Integrators Tier 2 Retailer VAR Direct (Transactional) Dell BeDirect Compaq DirectPlus ShopIBM BuyHP eSun Indirect Relationship Vertical Expertise Information Needs Logistics Needs Tier 1 Wholesaler Distributor Influencers, Agents, & Services Consultants SI’s ISP’s ISV’s ASP’s Building BlocksVertical Solutions
©2004 OpenTTO.org email@example.com Slide 23 ADC Distribution Value Chain Understand how value is distributed: Who has the costs? Who makes the money? Who has the best return? What is the timing and volume of money flow? Can funding come from the value chain? How can it be expanded? May provide an alternative source of funds for growth
©2004 OpenTTO.org firstname.lastname@example.org Slide 24 ADC Alliance Mapping Alliance and strategic partners linked by relationships: Many different forms of links Financial & equity links Business alliances – e.g. sales alliances Technical cooperation Joint Ventures Cooperative research Unofficial alliances e.g. strong personal connections Helps to understand where & how to position invention
©2004 OpenTTO.org email@example.com Slide 25
©2004 OpenTTO.org firstname.lastname@example.org Slide 26 ADC Process and Transformation Industry clustering # is another form of leverage: Is there information about cluster activities that is relevant? Which clusters centre around the technology? Which cluster innovations complement the technology? How does the cluster gain its energy and where does this fit? Which intermediaries and supplies circle the cluster? Which firms are linking, competing and complementary with respect to the technology? Which buyer-supplier relationships or technologies link the cluster? Templates P C S O I Transform # A group of business enterprises and non-business organizations for whom membership within the group is an important element of each member firm’s individual competitiveness. Binding the cluster together are "buyer-supplier relationships, or common technologies, common buyers or distribution channels, or common labor pools (Enright 1997, p. 191)." See Porter (1990).
©2004 OpenTTO.org email@example.com Slide 27 ADC Clustering – Vibrant Networks THE critical constitution of regional industrial systems: Connects all of the “regional resources” with each other Engenders collaboration and cooperation among “regional resources” Connects with entrepreneurs Give entrepreneurs real-time information on money, people, technology developments, market developments, and job opportunities Transmits the values of the culture: –e.g. “Homebrew Computer Club” in Silicon Valley; CED in Research Triangle Park; IC2 in Austin; VC networks in SV Industry cluster analyses spotlight the key targets for technology development and program interventions to build “regional resources”
©2004 OpenTTO.org firstname.lastname@example.org Slide 28 ADC Elements of Regional Clustering Values: What is honored, rewarded? Cooperation + competition vs. competition Collaboration + interdependence vs. independent and even antagonistic action Start-up vs. climbing the corporate ladder Building companies vs. making money Spinning off or out vs. staying w/ employer Loyalty to the networks vs. loyalty to employer
©2004 OpenTTO.org email@example.com Slide 29 ADC Elements of Regional Clustering More Values Choices: Change + adaptation vs. stability + consistency Openness + sharing info vs. secrecy Risk-taking + honor and learning in failure vs. risk-avoidance + stigma for failure Speed vs. deliberation Democracy + networks vs. hierarchy Does a cluster offer the best commercialisation option?
©2004 OpenTTO.org firstname.lastname@example.org Slide 30 ADC Outputs and Customers Alliances, channels and distribution conclusions: What are the compelling alliance or distribution dynamics? How do they impact on the value of the invention? Which players stand out as strategic for the invention? Which players will likely be most attracted by the invention? How is value created for those players? What value would they seek to capture? Which distributors and channels would have most interest? Which new channels and distributors need to be built? Which cluster companies add value and have resources to invest? Templates P C S O I Transform The more specific the potential alliance and distribution strategy is understood, the more value can be created and captured
©2004 OpenTTO.org email@example.com Slide 31 ADC Templates The ADC Phase Summary Report: Part of the evolving Business Plan Contains sections describing: –Which parties Add value Add disproportionate value Seek to capture disproportionate value Provide partnering advantages Provide clustering advantages –Process to understand industry Describe the partnering and value stream to customers Describe value propositions to partners Create partnering and strategic investment models Actions for further work may precede or run in parallel with the next Phase - FCS Templates P C S O I Transform
©2004 OpenTTO.org firstname.lastname@example.org Slide 32 ADC Confidence Index How confident are you that: 1.The potential alliance partners have been identified? 2.The best alliance partners have been analysed? 3.The partner processes fit the commercialisation objectives? 4.The partner culture is compatible and offers synergies? 5.Distribution and channel arrangements are well understood? 6.The potential “whole product” is well described? 7.The contributors to the whole product have been identified? 8.The timing of readiness of the distribution system is clear? 9.Clusters of interest and value have been identified? 10.Industry dynamics and knowledge has been enhanced?
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