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Institute for Manufacturing 1 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering MODULE 4E7 – ENTERPRISE AND BUSINESS DEVELOPMENT.

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Presentation on theme: "Institute for Manufacturing 1 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering MODULE 4E7 – ENTERPRISE AND BUSINESS DEVELOPMENT."— Presentation transcript:

1 Institute for Manufacturing 1 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering MODULE 4E7 – ENTERPRISE AND BUSINESS DEVELOPMENT 2004 Dr E. Garnsey ENGINEERING TRIPOS PART IIB

2 Institute for Manufacturing 2 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Session 1 Entrepreneurial problem-solving and technology transfer 4E7 2004

3 Institute for Manufacturing 3 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Programme - Wednesday afternoons 1.Entrepreneurial problem solving and technology transfer 2.Growing a high tech enterprise 3.Operating in a turbulent environment 4.Business planning and finance 5.Making the most of your coursework Not a “how to do it” course - see Centre for Entrepreneurial Learning Here - principles of business development How to find out and apply knowledge in changing circumstances.

4 Institute for Manufacturing 4 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Learning from experience Direct experience is best way to learn about enterprise. Learning from experience of others is next best. Hence case histories. Set these in broader context. Understand influences and outcomes - apply this knowledge as conditions change.

5 Institute for Manufacturing 5 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering By the end of the session you will: Understand role of entrepreneurs in innovation Be familiar with use of case studies to apply and create mental maps (frameworks for analysis) Know why technology transfer from knowledge base occurs Identify different business models for spin-out ventures

6 Institute for Manufacturing 6 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering How much time does 4E7 require? 4th year modules are scheduled to take 40 hours 14 x lectures / class activity Or 4 sessions of 3 hours [3.5 x 50 minute lectures] + 6 hours preparation: 2 of these in class (5th session) + 20 hours on a report to be completed by end March See today’s hand out - course outline

7 Institute for Manufacturing 7 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Workshop Mode Model is executive training in companies –Often all-day workshops –Interactive An hour or two does not allow us to get into unfamiliar subject matter. –time for student participation –time for speaker to share relevant experience. A different learning mode from technical modules

8 Institute for Manufacturing 8 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Today’s Agenda 2.00 Introduction The puzzle of the entrepreneurial breakthrough Creativity and innovation: three case studies 3.00 From lab to market: applying knowledge from research Business models for spin out IP and Incubation 3.30 SoftSound Spins out of CUED - Dr Tony Robinson 4.30 Technology transfer modes

9 Institute for Manufacturing 9 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering By the end of the session you will : Understand role of entrepreneurs in innovation Be familiar with use of case studies to apply and create mental maps (frameworks for analysis) Know why technology transfer from knowledge base occurs Identify different business models for spin-out ventures

10 Institute for Manufacturing 10 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Part 1. The puzzle: how do entrepreneurial ventures make technical and business breakthroughs? Intel (integrated circuit) Apple Computers (PCs) Genentech (biotech) Sun (work stations) Cisco (internet routers) Netscape ( browser) Hotmail (free ) CAMBRIDGESHIRE SOUTH

11 Institute for Manufacturing 11 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Cambridge business breakthroughs include CAMBRIDGESHIRE Aero research: plastic composites Acorn Computers: high performance PCs Domino: Ink Jet Printing ARM: high performance, low power chip design CDT: light emitting polymers PlasticLogic:new semiconductor material

12 Institute for Manufacturing 12 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Long overlooked - now high profile “The ability to turn scientific discoveries into successful commercial products is vital if businesses are to thrive in the knowledge driven economy” White paper – Our Competitive Future

13 Institute for Manufacturing 13 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Is the personality of the entrepreneur the key to new venture breakthroughs? Entrepreneurs have very diverse personalities. Entrepreneurial role and process have more explanatory power than personality traits. People who habitually engage in entrepreneurial processes and identify themselves as “entrepreneurs” share a certain - orientation to opportunity - problem-solving repertoire

14 Institute for Manufacturing 14 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Innovative behaviour leads to breakthrough What is it to be innovative? Why are entrepreneurs innovative? Innovation - not an invention, need not be technical –Early commercial application of invention or idea –New products, processes, channels, organization, business models Innovations can be incremental or radical Innovation does not guarantee diversity –Many innovations reduce diversity

15 Institute for Manufacturing 15 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Innovation and diversity Life forms have 'extraordinary power to diversity, to adapt to opportunities as they present themselves and to create new opportunities in the process.' (Suzuki ) Enterprise plays a similar role in economic life. Some creative process at work?

16 Institute for Manufacturing 16 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Creativity: cognitive and practical Start with vision Implement Let’s look briefly at ideas

17 Institute for Manufacturing 17 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering A Theory of Creativity (Koestler 1964) We rely on ways of thinking (rules, habits, associative contexts, matrices of thought) that have proved useful. Mind sets are like physical reflexes and skills in that they are applied unconsciously. Matrices of thought and physical reflexes are efficient. But once assimilated they limit flexibility Creativity overcomes inertia and the habitual. A. Koestler “The Act of Creation Hutchinson, London summarised by Rick Mitchell

18 Institute for Manufacturing 18 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering The act of creation According to Koestler, the creative act is fundamentally the bringing a new, previously un- associated, matrix of thought to bear on a topic. (“bisociation”)

19 Institute for Manufacturing 19 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Collision of thought paths in two different matrices Result: breakthrough in art; invention; humour

20 Institute for Manufacturing 20 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Is humour creative? Choose a joke Analyse in terms of Koestler’s theory Are there two matrices of association that collide to provide the humour?

21 Institute for Manufacturing 21 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Usually strong resistance to change To overcome this, benefits of change must be > C where C = Perceived cost of change D V P > C D = dissatisfaction V = vision P = plausible plan or process ( M Tushman - summarised by Rick Mitchell)

22 Institute for Manufacturing 22 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Example: TechnoDoc Dissatisfaction: poor quality of technical manuals - Opportunity Vision: great user manuals Plan (process): “ I don’t know how to use your equipment, but if you show me how, I can provide a better guide for your customers than your programmers can produce.” Founder of TechnoDoc Created value for customers and users. Achieved returns through: Leverage of very limited resources Enlistment of others

23 Institute for Manufacturing 23 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Intellectual progress starts from a problem (Karl Popper) Effective innovation meets an unfilled need (someone’s problem) for something “different, cheaper, better.” Entrepreneurial process as a problem-solving process –First and second order problem solving Entrepreneurs solve first order problems (process problems) that have to be overcome in order to provide solutions to others (value creation).

24 Institute for Manufacturing 24 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Creative Activities Idea resources new activity returns value creation

25 Institute for Manufacturing 25 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering knowledge nourishment health transport communications security shelter trade recreation Innovations represent ways to meet unmet needs. Important technologies meet basic needs.

26 Institute for Manufacturing 26 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Case examples of entrepreneurial problem- solving as creative thought and practice Oxford Instruments Psion Hotmail

27 Institute for Manufacturing 27 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Why was Oxford Instruments good at innovation? Look for obstacles encountered by founders of Oxford Instruments. What problem-solving approaches did they use to overcome these? Case Example

28 Institute for Manufacturing 28 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Problem solving at Oxford Instruments Market opportunities limited in founder’s expertise Detects and exploits new opening in his own specialism Immature supplies of semi-conducting materials Ox. Instr. develops skills conferring competitive advantage Semi-conducting materials hard to work with. Competitors fail. Competitor controlled liquid helium supply. Take on production of liquid helium. Acquire critical resource.

29 Institute for Manufacturing 29 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Problem solving at Oxford Instruments Disorganized management Key managers leave when pressed to improve performance and set up competing business Reorganize and outcompete them. Company growing too fast to retain creative culture Segment into a Group of associated companies Generalizing from this case:

30 Institute for Manufacturing 30 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Recognition of opportunity (D,V) Action (P) Entrepreneurs: Lack resources Resist dependence Innovativeness involves continual:

31 Institute for Manufacturing 31 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering David Potter Dissatisfaction of 80s: hardware outpacing software Vision : Improved software and new games Process : make money on stock market Set up new software activity in own company Changed direction when competition heated up Shifted product to personal organizers Market leader

32 Institute for Manufacturing 32 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Enlist others, economize, combine resources  Recruited former students to develop software:  Resource economy - clever and cheap HR  Partnership with Sinclair to provide software for his computers.  Enlist others now by offering share in future returns

33 Institute for Manufacturing 33 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Continual Opportunity Detection When competition intensified, switched to new opportunity. New product : Psion Personal Organiser. What was the thinking behind product?

34 Institute for Manufacturing 34 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Own need helped people at Psion see market gap “Time is most valuable of resources to professionals Hand held computer can be used to help organize our time. Other professionals will pay us to address same problem.”

35 Institute for Manufacturing 35 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering 25 years ago this involved an unexpected combination of ideas (“thought paths on two different matrices”) Software development (advanced technique) + Computer games (play) = Margins (70-80+%)

36 Institute for Manufacturing 36 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering What ideas and processes enabled Bhatia and Smith to innovate at Hotmail? Look for obstacles encountered by founders of Hotmail? What problem-solving approaches did they use to overcome these?

37 Institute for Manufacturing 37 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Hotmail Corporation - free pioneer The firm was founded early 1996 by two friends, Sabeer Bhatia and Jack Smith, young engineers who met as employees of Apple Computer in California. 1995: developed a personal, password protected database for the Internet called JavaSoft. Their business idea for Javasoft was rejected by 20 venture capitalists. In 1995 they had the idea for Hotmail - when they were prevented from receiving personal s at work (for sharing their business plan). Founded by engineers First product idea rejected Solving their own problem

38 Institute for Manufacturing 38 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Develop JavaSoft database Do not impress funders No funds Develop Hotmail concept / free on the Web, advertising revenues Secure minimal funding $300k Running out of cash before launch Persuade employees to work unpaid Use viral marketing Collapse of server Create scaleable technology Sale to Microsoft $400m Cut down their resource requirements 1995 June 1996 Dec 1997 Young engineers Massive growth Hugo and Garnsey 2002 Founders prevented from exchanging private at work

39 Institute for Manufacturing 39 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering “My method of management is to keep the floodgates open, and use the flood as a forcing function to get engineering to do AMAZING things. It worked. In my book, business needs drive engineering deliverables.“ Jack Smith, founder of Hotmail, message, 29 Oct 2001 Pressure to solve problems leads to creation of valuable new resources

40 Institute for Manufacturing 40 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering service provided free to subscribers (details to advertisers) Database Management software for Web

41 Institute for Manufacturing 41 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Generalizing from cases: Entrepreneurs pursue opportunities before they have the means to realize them. (Professor Howard Stevenson, Harvard) When this entails risk, some entrepreneurs find ways to limit risk. Our approach shows they choose to operate within constraints that force them to be creative and do new things. Entrepreneurs promote innovation - and also renew diversity.

42 Institute for Manufacturing 42 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Enlist others, create network to open opportunities & obtain resources Opportunities continually scan and reassess Resource use: Economy Leverage Combine Create Entrepreneurs match up resources and opportunities

43 Institute for Manufacturing 43 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Success Bias in our Analysis? We have seen why entrepreneurial activity is innovative, not that their innovation necessarily succeeds. There is a pattern of positive response to obstacles among the successful But luck plays a large part in success. Capitalism involves a struggle for survival for vulnerable young firms. Many - most entrepreneurs - struggle and fail. Waves of entrepreneurs pursue possibilities for change until finally breakthroughs are achieved. An evolutionary process.

44 Institute for Manufacturing 44 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering PART TWO Spinning out companies from the science base

45 Institute for Manufacturing 45 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering From research to business activity: convert knowledge into economic resource Idea resources new activity returns value creation

46 Institute for Manufacturing 46 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Vehicles for academic-industry transfer Private contract research, occasional consultancy Patent, license Corporate Research Partnership Spin-out Business Academe Business Research & Consultancy Development company Production company

47 Institute for Manufacturing 47 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Advantages of starting a business Tax concessions Limited liability Protect ownership through incorporation Demonstrate product viability Embed learning in organization Store resources Create a community; create jobs

48 Institute for Manufacturing 48 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Type of business activity among university spin- outs Activity: sell, produce product, provide service, combination through: Contract research, consultancy, License invention Development Co. (e.g. biotech ventures) Production co. e.g. BioRobotics

49 Institute for Manufacturing 49 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Are entrepreneurs’ resources sufficient to realize the business opportunity? Consulting and contract research: easier to resource, based on current or accessible know-how. To develop a product based on research knowledge (in a “development company”) Have to transform scientific knowledge into economic resource. Instrumentation and software interesting cases: often have market applications (solve research problems) A B

50 Institute for Manufacturing 50 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Development companies Development companies are established to create future economic resources beyond scope of science grants. Generic technology, further scientific work: costly gestation. E.g. CDT, Plastic Logic, biotechnology ventures Need manufacturing partners (provide them services) and venture capital Development company can take licensing route / eventually could become production company.

51 Institute for Manufacturing 51 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Production Company Setting up a production company: a challenge to flexibility. Requires committed resources. Hewlett Packard Oxford Instruments Psion BioRobotics B A

52 Institute for Manufacturing 52 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering How to protect returns? Patent and license technology Copyright Design rights Trade mark Trade secrets Idea resources new activity Returns? value creation

53 Institute for Manufacturing 53 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering  Patents for inventions - new and improved products and processes that are capable of industrial application  Trade marks for brand identity - of goods and services  Designs for shape and appearance - either functional or aesthetically pleasing articles or surface decoration, pattern or ornament  Copyright for material - literary and artistic material, music, films, sound recordings and broadcasts, including software and multimedia Source: The Inventor’s Guide

54 Institute for Manufacturing 54 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Commercial Returns from Research Patent and license technology Invention protected for a period from competitors who have to pay inventor a license fee to use patent. Patent Criteria: Novel Non-obvious to ‘one skilled in the art' Practical (industrial application) Excluded under British Patent Act: Discoveries

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58 Institute for Manufacturing 58 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Other forms of protection  Trade Secrets  Pre-registration IP  Employee Confidentiality  Consultant/Partner Confidentiality  Non-Disclosure Agreements  - Non Disclosure may provide better protection than patents Source: Iandiorio, 1997

59 Institute for Manufacturing 59 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering License fees Royalties increase with value added* Early stage innovation 1-3% of sales revenues Biotech late clinical trials: 15% New licensing model aims at multiple licensees for key technology - e.g. ARM * “ 25% licensee’s additional profit” Anne Miller, TTP

60 Institute for Manufacturing 60 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Incubation of new ventures Case: St John’s Innovation Centre Incubators can help firms overcome liabilities of newness Incubators attempt to create favourable spin-out environment

61 Institute for Manufacturing 61 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering St John’s Innovation Centre Founded 1987 by St John’s College Aimed at early-stage firms in high-tech Turnover £3.5m 90,000 sq. ft. 50 Tenants firms have “graduated” Failure Rate c. 15% p.a.

62 Institute for Manufacturing 62 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Features of SJIC Flexible Tenancy Centre Facilities Management Support/Advice Credibility Contact with other firms No equity in tenant firms Centre for other Business Support –e.g. European Innovation Relay Centre, Enterprise/Business Link

63 Institute for Manufacturing 63 ELIZABETH GARNSEY Centre for Technology Management Department of Engineering Recap Enterprise involves the matching of opportunities and resources to create value Advance is through a lead-lag dynamic of new problems forcing new solutions Technologies address user needs - potential business opportunities Science base: knowledge converted into economic gain through –spectrum of activities Protect returns through IPR? Incubators aim to create favourable spin-out environment


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