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A Framework for Enterprise Development and Entrepreneurship A Resource Pack for Bioscience Lecturers and students By Zoë Dann and Jeff Gaskell (Version.

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1 A Framework for Enterprise Development and Entrepreneurship A Resource Pack for Bioscience Lecturers and students By Zoë Dann and Jeff Gaskell (Version June 06) Funded by the Centre for Bioscience

2 Study Pack Guide Aims, Learning Outcomes, Content, Session Structure, Syllabus

3 A Framework for Enterprise Development and Entrepreneurship3 Study pack aims 1 1.To emphasise the economic importance of the need to introduce new Bioscience products and services to market in the UK, EU and other parts of the world 2.To prepare the minds of Bioscientists for enterprise. To improve the knowledge and understanding of enterprise and entrepreneurship in the UK HEI Bioscience community

4 A Framework for Enterprise Development and Entrepreneurship4 Study pack aims 2 3.To improve the confidence and capability of UK Bioscience students to identify potentially viable, innovative ideas and bring them to market successfully Either as independent entrepreneurs Or as part of an intrepreneurial business development team working in an established organisation

5 A Framework for Enterprise Development and Entrepreneurship5 Learning outcomes Students who participate in this activity should be able to: Understand and reflect on entrepreneurial activity and personal aptitude towards entrepreneurship Identify and evaluate potential business ideas in the Bioscience sector Construct and present a business case for the exploitation of their own business idea NB: No previous knowledge of business is required but would be advantageous

6 A Framework for Enterprise Development and Entrepreneurship6 Teaching, Learning & Assessment (TLA) framework 1 Context & Group Formation Self Awareness Idea/Concept Generation Idea/Concept Selection Project Management Proposal Business plan and presentation

7 A Framework for Enterprise Development and Entrepreneurship7 Teaching, Learning & Assessment (TLA) framework 2 Business planning Intellectual Property Rights Business strategy and risk Market and competitor analysis Marketing strategy The management team Operations and commercial strategy Financial forecasting The pitch

8 A Framework for Enterprise Development and Entrepreneurship8 Study pack content 1.Learning material for 12 teaching sessions –Lecture slides with delivers notes –A short illustrative video clip –Suggested small group exercise –Extended exercise - Part completion of the Business plan assignment 2.An assignment: Development, presentation of a business plan in Biosciences 3.Resources and references 4.Guide for deliverers

9 A Framework for Enterprise Development and Entrepreneurship9 Study topics x 12 1.The context and group formation 2.Self awareness 3.Idea generation and selection 4.Project management 5.Intellectual property rights: Patents and Trade Marks 6.Market and competitor analysis 7.Business strategy and risk analysis 8.Marketing strategy 9.Operational strategy 10. The management team 11. Financial forecasting planning 12. Pitching the idea

10 A Framework for Enterprise Development and Entrepreneurship10 Where observation is concerned, chance favours only the prepared mind Louis Pasteur (1854)

11 1. Context The Nature, Importance and Potential of Start-Up Businesses in the Biosciences and the Role of Business Planning

12 A Framework for Enterprise Development and Entrepreneurship12 Learning outcomes By the end of this session students should be able to: Realise the importance and potential of the Biosciences and Biotechnology particularly for the UK Understand the meaning of entrepreneurship and intrapreneurship and classification of business entities Recognise some of the particular difficulties and success factors of start up businesses in the Biosciences Recognise the role of business planning in increasing business success

13 A Framework for Enterprise Development and Entrepreneurship13 TLA framework Context and Group Formation Self awareness Idea/Concept Generation Idea/Concept selection Project management Proposal Business plan and presentation

14 What is Bioscience and why is it important?

15 A Framework for Enterprise Development and Entrepreneurship15 The Biosciences: Definitions Any of the branches of natural science dealing with the structure and behaviour of living organisms. Synonym: life science The application of scientific and engineering principles to the processing of materials by biological agents to provide goods and services

16 A Framework for Enterprise Development and Entrepreneurship16 DTI classification of business sectors for biotechnology pharmaceuticals and healthcare Pharmaceutical Biotech Medical Devices and Diagnostics Industrial Agri Non-Food crop and Marine Biotechnology

17 A Framework for Enterprise Development and Entrepreneurship17 UK performance in pharmaceuticals Biggest sector investor in R&D in the UK accounting for around 24% of total investment by business In 2004, 18% of the world's top 100 prescription medicines originated in the UK In world terms, the UK industry has 9% of pharmaceutical R&D expenditure: only the USA (49%) and Japan (15%) are ahead The UK is the largest European recipient of pharma R&D, accounting for 23% of total; followed by France (20%), Germany (19%), and Switzerland (11%) Employs around 73,000 people with about 27,000 in R&D and generates 250,000 jobs in related industries Source: DTI, 2006

18 What is Biotechnology and why is it important?

19 A Framework for Enterprise Development and Entrepreneurship19 Difficulties in defining Bioscience/ Biotechnology Biotechnology generally considered a subset of the Biosciences although terminology is often used interchangeably Not strictly sectors as extremely diverse in application Inconsistent definitions across countries and studies Shifting knowledge base of what is considered state of the art and therefore have moving boundaries

20 A Framework for Enterprise Development and Entrepreneurship20 What is Biotechnology? Some definitions The integration of natural sciences and organisms, cells, parts thereof, and molecular analogues for products and services (European Federation of Biotechnology) Technology in which biological systems, established and controlled through the application of molecular biology, cell biology or microbiology are used for practical purposes Biotechnology is a range of enabling technologies offering a set of new processes employed in existing industries to produce new products or processes i.e. new drugs, diagnostic tools, plants, animals and industrial processes

21 A Framework for Enterprise Development and Entrepreneurship21 Traditional v new Biotechnology Traditional Biotechnology –Conventional techniques used for centuries to produce beer, wine, cheese, bread and in the treatment of sewage New Biotechnology –Genetic modification by recombinant DNA and cell fusion techniques and the modern development of traditional biotechnological processes. New Biotechnology revolution began in 1970s, 1980s

22 A Framework for Enterprise Development and Entrepreneurship22 Classification of modern Bioscience Biotechnology companies: –Encompassing entrepreneurial biotechnology companies using modern biological techniques to develop products and services Suppliers and service companies: –Including suppliers of chemicals, glassware and related plastic disposables, research products, imaging analytical and automated equipment, contract research organisations, companies who employ a niche R&D function Diagnostic and device companies: –Including companies producing bioanalysis, test kits, medical diagnostic kits relating to biotechnology, medical devices and surgical implant developers Source: Ernst and Young, in DTI BIGT, 2003

23 A Framework for Enterprise Development and Entrepreneurship23 Outputs of biotechnology Information process, research and development Drugs and therapeutic products Veterinary drugs Diagnostics Genetically engineered seeds and plants Bioherbicides and pesticides Foods and Animal foods Food additives and processes Waste-treatment processes and micro-organisms Fuel alcohol and other biological sources of energy Educational kits Intermediates, enzymes, feedstocks and reagents Source: Walsh and Green, 1993

24 A Framework for Enterprise Development and Entrepreneurship24 UK performance in the biotechnology UK is the Biotechnology industry leader in Europe It is number two in world after USA There are approximately 455 dedicated biotechnology businesses in the UK employing around 22,400, with revenues of around £3.6bn in 2003 UK biotech companies spent £1.23bn on R&D in 2003 The UK is well placed in the European biotechnology scene because of its greater maturity and much stronger product pipeline Source: DTI, 2006

25 What key technological developments are driving the Bioscience revolution?

26 A Framework for Enterprise Development and Entrepreneurship26 Technology drivers of the Bioscience revolution Gene sequencing –E.g. mapping of human genome to understand human physiology –E.g. sequencing of genomes of viruses and bacteria to help fight against infection The development of molecular techniques –E.g. manipulation of genes to study function for industrial or therapeutic purposes –E.g. gene chip arrays to determine gene activity

27 A Framework for Enterprise Development and Entrepreneurship27 Technology drivers of the Bioscience revolution Advances in imaging techniques –E.g. fluorescence to observe genes in real time The IT revolution –Bioinformatics: data capture, analysis, modelling and sharing for very large international teams collaborating and sharing Nanotechnology –E.g. for Biosensors and drug delivery methods Source: DTI, BIGT, 2003

28 What is entrepreneurship?

29 A Framework for Enterprise Development and Entrepreneurship29 Entrepreneurship defined The act of starting or growing a business through innovative risk assuming management The creation of a new economic entity centred on a novel product or service or, at the very least, one which differs significantly from products or services offered elsewhere (Curran & Stanworth, 1989) The process of creating something different with value by devoting the necessary time and effort, assuming the accompanying financial, psychic and social risk and receiving the resultant rewards of monetary and personal satisfaction (Fry, 1996)

30 A Framework for Enterprise Development and Entrepreneurship30 Intrapreneurship defined Intrapreneurship is entrepreneurship by employees in existing organisations Source: Antoncic and Hirsh, 2003

31 What businesses do entrepreneurs create?

32 A Framework for Enterprise Development and Entrepreneurship32 Businesses as legal entities – A classification Unlimited liability Sole traders Partnerships (can also have Ltd. status) Limited liability (Incorporated) Private: Shares not traded in public. Have company name and suffix Ltd Public: Shares traded in public have company name and suffix PLC

33 A Framework for Enterprise Development and Entrepreneurship33 Classification of Social Enterprise Co-operative Owned and controlled by members, incorporated under the Industrial and Provident Societies Act Regulated by FSA Company limited by guarantee Similar to Limited Liability described above but with members not shareholders Liability is limited to a nominal sum

34 A Framework for Enterprise Development and Entrepreneurship34 What is limited liability? Liability of the owners for the debts of their companies is limited to the paid-up value of the shares they own i.e. the amount they agreed to pay for the shares when they bought them Reduces risk of business failure on owners and transfers it to customers and suppliers who would not receive goods/services or payments

35 Company evolution in the Biosciences

36 A Framework for Enterprise Development and Entrepreneurship36 Stages of company evolution in the Biosciences 1. Idea generation and validation 2. Early stage 3. Late stage Source: DTI, BIGT, 2003

37 A Framework for Enterprise Development and Entrepreneurship37 1.Idea development and validation Secure assignment from University of Intellectual Property Technology validation – Proof of concept Develop commercial prototype products Early pre-clinical trials Source: DTI, BIGT, 2003

38 A Framework for Enterprise Development and Entrepreneurship38 2. Early stage - Start up Start developing technology platform/product pipeline Broaden Intellectual Property base Hire a management team and scientific group Start to engage in corporate partnering Secure premises and build company infrastructure Source: DTI, BIGT, 2003

39 A Framework for Enterprise Development and Entrepreneurship39 3. Late stage – Expansion/public company Build scale, role out technology platform. continue with clinical development (even launch) and prepare exit (likely IPO – Initial Public Offering) Continue with expansion stage activities, with ultimate aim of cash flow, break even, profitability Source: DTI, BIGT, 2003

40 A Framework for Enterprise Development and Entrepreneurship40 Example: Typical route of commercialisation from university UniversityIncubatorStart-up Seed capitalVenture Capital Technology Transfer

41 Difficulties and success factors for Bioscience start ups

42 A Framework for Enterprise Development and Entrepreneurship42 Difficulties for Bioscience start-ups 1 Long lead time from concept to market e.g. typically years for some pharmaceutical products High cost e.g. $1B/year for some pharmaceutical products High risk. Failure rates can be high e.g. 9/10 pharmaceutical products fail to make it to market at Astra Zeneca Low cash flow stream in early years Difficulty in accessing funding

43 A Framework for Enterprise Development and Entrepreneurship43 Difficulties for Bioscience start-ups 2 Rigorous and dynamic legislative and regulatory framework at national, trading block and world levels e.g. Federal Drug Administration, patent law Dynamic competitive environment e.g. many mergers, take-overs, alliances, new business start-ups Negative public sentiment towards some products and testing procedures e.g. GM crops, transgenic animals, animal testing Lack of management/business expertise of scientists

44 A Framework for Enterprise Development and Entrepreneurship44 Success factors for Bioscience 1 The company must efficiently develop viable products or services The companys Intellectual Property (IP) must be defensible and other patents cannot block the path to commercialisation A clear business strategy for generating a significant profit Target a large and/or rapidly growing market. Management should have the skills to implement the business plan Source: Ithaka Life Sciences, 2004

45 A Framework for Enterprise Development and Entrepreneurship45 Success factors for Bioscience 2 An organisational culture that encourages and nurtures enterprise and entrepreneurship Strong management team and company board Clear business plan with realistic targets that can be met before cash runs out A route to market identified and costs covered Competition identified and assessed Valuable accessible market Credible business and revenue model Technology that provides customer benefits Cutting-edge technology that is well protected Source: NatureBio, 2003

46 The importance and nature of business planning

47 A Framework for Enterprise Development and Entrepreneurship47 What is a business plan? A document that explains and justifies the business concept. It attempts to answer three questions: Where are we now? Where do we intend going? How do we get there?

48 A Framework for Enterprise Development and Entrepreneurship48 Three basic objectives of business plans To identify the nature and the context of the business opportunity – why does the opportunity exist? To present the approach the entrepreneur will take to exploit the opportunity To recognise the factors that will determine whether the venture will be successful

49 A Framework for Enterprise Development and Entrepreneurship49 Role of business planning in business success 1.It enables the entrepreneur to understand an opportunity and what it will take to exploit 2.It provides a framework for managing the business in the future 3.It will help recruit partners and management team 4.It should be capable of attracting new capital to the venture 5.It can refocus and rejuvenate a business after start up

50 A Framework for Enterprise Development and Entrepreneurship50 Typical requirements of business plans 1 To clearly identify product, service and unique selling point (USP) Justify its competitive advantage through patent search data and competitor analysis Determine market attractiveness i.e. size and potential growth through identification of potential customers, market trends Determine route to commercialisation including technical development, patenting, licensing and marketing

51 A Framework for Enterprise Development and Entrepreneurship51 Typical requirements of business plans 2 Justify potential income and expenditure for products, IPR, licenses, human resources, patenting, equipment and running costs Demonstrate credibility of management team Demonstrate financial rewards and loan requirements for potential investors

52 A Framework for Enterprise Development and Entrepreneurship52 Key point summary 1 Bioscience/Biotechnology enterprises are an important part of a rapidly expanding part of the economy Bioscience and Biotechnology have a wide range of applications in health care, agriculture, food & beverage and chemical production USA leads the way in Biotechnology; Europe is second; Japan Third UK is an important player globally

53 A Framework for Enterprise Development and Entrepreneurship53 Key point summary 2 Start up is considered the main mechanism for entrepreneurs to exploit their business ideas There are a range of businesses legal entities that entrepreneurs can use as vehicles for enterprise Biosciences have particularly long and complex new product development and commercialisation routes Business planning vital in setting new business entity and exploiting ideas

54 2. Self Awareness Entrepreneurial Traits and Motivation

55 A Framework for Enterprise Development and Entrepreneurship55 Learning outcomes By the end of this session students should be able to: Recognise the typical aptitudes and motivations of entrepreneurs and difficulty in evaluating them For the assessment students should: Evaluate their own competencies against traits and motivations of entrepreneurs Identify ways in which competencies, aptitude and skills can be developed to enhance entrepreneurialism

56 A Framework for Enterprise Development and Entrepreneurship56 TLA framework Group Formation and Context Self awareness Idea/Concept Generation Idea/Concept selection Project management Proposal Business plan and presentation

57 Who are entrepreneurs?

58 A Framework for Enterprise Development and Entrepreneurship58 What is an entrepreneur? Meaning of the word entrepreneur: one who takes between (French) An individual who establishes and manages a business for the principal purpose of profit and growth. The entrepreneur is characterised by innovative behaviour and employs strategic management practices in the business. (Cartland, 1984)

59 A Framework for Enterprise Development and Entrepreneurship59 Well known entrepreneurs Julian Richer – Richer sounds Richard Branson –Virgin Stelios – Easy Jet Alan Sugar –Youre fired Anita Roddick –Body shop Less well known women Meg Whitman –founder of e-bay Ann Gloag –Stage coach

60 A Framework for Enterprise Development and Entrepreneurship60 Who are well known entrepreneurs in the Life Sciences? Sir Christopher Evans Dr Andy Richards Dr Jonathan Milner Dr Keith McCullagh Source: Centre for Bioscience, 2006

61 A Framework for Enterprise Development and Entrepreneurship61 What is the typical profile of an entrepreneur? There is a strong gender bias towards male founders. Men are twice as likely to set up a business as women There is a distinct age-launch window of business start ups (30-40) Family support is a significant factor for success The majority are reliant on personal equity for start up finance Source: Deakins, 1996

62 A Framework for Enterprise Development and Entrepreneurship62 Women entrepreneurs in the UK Gender Gap - Under representation 15% of businesses are majority women owned compared to 60% male owned However, in the US, 30% of businesses are majority female owned. Number of women owned businesses grow at twice the rate of all US firms Encouraging signs that entrepreneurial activity is increasing – more self employed women in UK over last 20 years Source: DTI, Promoting Female Entrepreneurship, 2005

63 What motivates people to become entrepreneurs?

64 A Framework for Enterprise Development and Entrepreneurship64 Typical triggers to the start up decision - Pull factors It works – A product that finally works after many years e.g. Dyson Eureka –An idea out of the blue, but which is often simply a new way of packaging old ideas e.g. Ben and Jerrys Ice Cream If only –Dissatisfaction with existing goods and services. If only I could buy products in smaller packages (Anita Roddick, Body Shop) High Comfort Level – Goal fulfilled with lots of support from family and friends

65 A Framework for Enterprise Development and Entrepreneurship65 Typical triggers to the start up decision - Push factors Friendly Push –The path is made clear for some one who has talked about setting up a business for a long time Misfit –Leaves large organisation because of dissatisfaction to set up a new business Unfriendly Push – Redundancy or unemployment No alternative –Brought about by illness or disability Grey to White –Moonlighter selling products on the fringe of the black market economy whilst in full employment

66 A Framework for Enterprise Development and Entrepreneurship66 Why be an entrepreneur? Rewards of Entrepreneurship Profit Financial gain proportionate to personal achievement Personal Satisfaction Enjoyment of a satisfying way of life Independence Power to make own decisions Personal Fulfilment Contribution to the community Freedom Escape from undesirable situation Source: Entrepreneurial Incentives - Lockerneck et al, 2006

67 A Framework for Enterprise Development and Entrepreneurship67 Potential drawbacks of entrepreneurship Uncertain income Risk of losing entire invested capital Long hours hard work Low quality of life until business gets established High levels of stress Complete responsibility discouragement

68 What skills/traits/characteristics do entrepreneurs have?

69 A Framework for Enterprise Development and Entrepreneurship69 Building blocks of successful entrepreneurship Technical Skills Product/service knowledge Market/industry understanding Management Competencies Marketing Finance Human relations Personal Attributes Innovation Determined External focus Source: Stokes, 2002

70 A Framework for Enterprise Development and Entrepreneurship70 What are the traits or characteristics of entrepreneurs? Achievement orientation: Ability to see and act on opportunities Committed to others High propensity for risk taking Calculated risk taking Ambiguity tolerance Visionary Self-confidence Flexibility Strong desire for independence High energy Emotional stability Creative and innovative ability Conceptual ability Assertiveness Ability to network Measurement of success by wealth Confidence of success

71 A Framework for Enterprise Development and Entrepreneurship71 Psychometric tests for entrepreneurs General personality traits –Myers Briggs type assessment –Hermann Brain Dominance Instrument –LAB profile Examples of on-line entrepreneurial assessment –http://www.potentielentrepreneur.ca/client/questionnairenews ection1en.asphttp://www.potentielentrepreneur.ca/client/questionnairenews ection1en.asp –http://www.wid.org/equity/2004/05/Entrepreneurs%20Quiz.d ochttp://www.wid.org/equity/2004/05/Entrepreneurs%20Quiz.d oc

72 A Framework for Enterprise Development and Entrepreneurship72 Observed characteristics of entrepreneurs: The 10 Is model I Characteristics Independence Interest Insight Ideas Invention I Characteristics Inspiration Involvement Instigation Insistence I - will

73 A Framework for Enterprise Development and Entrepreneurship73 The 10 I characteristics in action in the entrepreneurial process StepI Characteristic ARecognition Independence Insight BFormulation Interest Ideas Invention CInitiation Inspiration Involvement DDevelopment and Growth Instigation Insistence I - will

74 A Framework for Enterprise Development and Entrepreneurship74 Mapping the ten I characteristics Plotting overall average scores for a sample of 20 successful entrepreneurs. Indicated by 1 Independence 2 Interest 3 Insight 4 Ideas 5 Invention 6 Inspiration 7 Involvement 8 Instigation 9 Insistence 10 I will

75 A Framework for Enterprise Development and Entrepreneurship75 Criticism of psychometric tests Characteristics are not stable and change over time Not easily measured characteristics Also environmental and cultural influences can effect enterprises and management decisions Management needs of the business might change through time i.e. different characteristics for start up to managing a mature business Education training and learning can be very valuable Skills can be acquired

76 A Framework for Enterprise Development and Entrepreneurship76 Key point summary 1 Key traits are that entrepreneurs are risk taking, innovative, growth and profit drive Entrepreneurial activity is not limited purely to private enterprise. It can exist in public organisations and large multinationals. In the later case this is called intrapreneurship The characteristics approach to identifying the potential successful entrepreneur can be widely criticised Although women are under represented in the number of entrepreneurs, numbers are increasing in UK

77 A Framework for Enterprise Development and Entrepreneurship77 Key point summary 2 Other factors such as environmental conditions and experience play an important role in determining the successful entrepreneur Motivations and triggers for start up vary widely Entrepreneurs start business not only for selfish reasons but for welfare considerations too Entrepreneurs are both pushed and pulled into new business start up Psychometric tests are used to evaluate characteristics of entrepreneurs but have been widely criticised

78 3. Idea Generation and Selection Thinking Creatively and Screening Potential Business Ideas in the Biosciences

79 A Framework for Enterprise Development and Entrepreneurship79 Learning outcomes By the end of this session students should be able to: Identify a range of methods for developing and selecting business ideas For the assessment students should: Use frameworks to generate business ideas Carry out an evaluation of business idea to establish whether it should be considered for full business planning

80 A Framework for Enterprise Development and Entrepreneurship80 TLA framework Group Formation and context Self awareness Idea/concept generation Idea/concept selection Project management Environmental scanning Druckers seven sources of innovation Proposal Business plan Creative swiping

81 Idea Generation

82 A Framework for Enterprise Development and Entrepreneurship82 Sources of start up ideas Personal experience – work or home Hobbies Accidental discoveries - serendipity Deliberate search –Druckers seven sources of opportunity/innovation –Environmental scanning –Creative swiping

83 A Framework for Enterprise Development and Entrepreneurship83 Technology push or market pull? Structured/Planned Big Bang Opportunistic Completely New Process Or Product Major Strategy Shift eg Switch To E.Business Add New Features To Products Add New Brands Or Styles To Range Major Product & Process Innovation Response To A Major Order In New Market New Products In Existing Markets Existing Products In New Markets Most Minor Product & Process Innovation Incremental

84 Idea Generation Druckers 7 sources of innovation

85 A Framework for Enterprise Development and Entrepreneurship85 Druckers seven sources of opportunity/innovation 1.Unexpected happenings 2.Incongruous happenings 3.A need for process improvements 4.Changes in industry or market structures 5.Changes in population demographics 6.Changes in perception, mood and meaning 7.New knowledge

86 A Framework for Enterprise Development and Entrepreneurship86 1.Unexpected happenings + examples Unanticipated events that lead to either enterprise success or failure: Increasing real and perceived threat of terrorist attack at home and overseas Major unpredictable shifts in weather patterns The unexpected unavailability of cheap domestic fuel supply The unexpected unavailability of cheap raw materials and other essential commodities Pet pharmaceuticals have been very successful in the US with more that 30% of dogs and cats now taking medication

87 A Framework for Enterprise Development and Entrepreneurship87 2. Incongruous happenings + examples Where there is a discrepancy between actual results and what was expected: Low fat ice cream was developed for those trying to lose weight Introduction of new Coke caused a huge upsurge in demand for original Coke (Classic) Some people who have taken nicotine chewing gum have become addicted to it. Others use it when they are non-smokers!

88 A Framework for Enterprise Development and Entrepreneurship88 3. A need for process improvements + examples Current technology is insufficient to address emerging challenges. Improved process yields in food, beverage and pharmaceutical product production Increased shelf life of perishable goods Reductions in land fill volume New fuels to deal with rising energy costs and pollution Increasing use of non food crops for fuel production Increased efficacy of drugs

89 A Framework for Enterprise Development and Entrepreneurship89 4a. Changes in industry or market structures + examples Industries are in a constant state of change as economic and other forces act on individual firms Porter identified five critical forces: –Rivalry between the firms in all industries –The buying power of customers –The buying power of suppliers –The threat of new entrants –The threat of customers moving to substitute products or services

90 A Framework for Enterprise Development and Entrepreneurship90 4b. Changes in industry or market structures + examples Porters Five Forces Model Supplier Buying Power Suppliers Potential Entrants Substitutes Buyers Industry Rivalry Substitute Threat Buyer Buying Power New Entrant Threat

91 A Framework for Enterprise Development and Entrepreneurship91 4c. Changes in industry or markets + examples Changes in NHS structure and funding to more localised units NHS trusts Changes in the nature of education management funding… foundation status meaning more autonomy on major spending decisions PPP - Public private partnership PPP funding packages for infrastructure building

92 A Framework for Enterprise Development and Entrepreneurship92 5. Changes in population demographics Shifts in population size, age structure, ethnicity, and income distribution e.g.: Ageing but still healthy and active baby boom generation born - born in the west in anglophone countries between Powerful consumer group beginning to retire from contributory economic activity but with no diminishing power of spending. Rapidly growing group with time, disposable income and increasing political influence Generation X born between 1965 – 1975 and Generation Y born between 1976 – 1994 much smaller cohorts than the baby boom generation with more liberal attitudes to work, leisure and spending than their forebears Consistently low EU and UK birth rate The influence of economic migrants from the new eastern accession EU states

93 A Framework for Enterprise Development and Entrepreneurship93 6. Changes in perception, mood and meaning + examples Healthy eating particularly with obesity on the rise Generational different between baby boomers generation X and generation Y The direct and indirect influences of the global War on Terror The state pension age debate and to working beyond the age of 1965 (in UK) The effect of changes in world weather patterns Attitudes of host populations to economic migrants

94 A Framework for Enterprise Development and Entrepreneurship94 7. New knowledge + examples Learning opens up the door to new product opportunities with commercial potential Gene sequencing - mapping of human genome The development of molecular techniques Advances in imaging techniques Advances in fuel cell and electricity storage capacity The IT digital revolution Nanotechnology Source: DTI BIGT Report, 2005

95 Idea generation Environmental scanning – PESTEL analysis

96 A Framework for Enterprise Development and Entrepreneurship96 What is environmental scanning? The ability to identify and interpret strong and weak signals from the trading environment An essential skill… –When looking for new enterprise opportunities –To ensure the survival of established businesses

97 A Framework for Enterprise Development and Entrepreneurship97 What environmental influences are there on a business? Business Social Political Economic Technology Demographics Infrastructure Environment E.g. Tsunami, green products E.g. aging population E.g. Internet, genetic engineering E.g. Employment law e.g. Low Interest rates, Taxes E.g. Discerning customer, greater disposable income E.g. More roads, cheap flights broadband

98 A Framework for Enterprise Development and Entrepreneurship98 The PESTEL framework Scanning the trading environment can be used to categorise and measure the shifting forces that continually act on all traders These forces are in a constant state of flux and can provide both new opportunities and new threats to survival. These are: Political forces Economic forces Social forces Technological forces Environmental forces Legal and regulatory forces

99 A Framework for Enterprise Development and Entrepreneurship99 The PESTEL framework The PESTEL forces act and influence at a number of different geographical levels: –At world level (WTO, Kyoto protocol, World Bank) –At trading bloc level (EU, NAFTA, ASEAN) –At national level (UK government, Bank of England, UK judiciary) –At regional level (Regional development agencies) –At district level (Local Authority area) –At sub-district level (Ward level activists and communities)

100 A Framework for Enterprise Development and Entrepreneurship100 The PESTEL framework Entrepreneurs and enterprisers seek out opportunities through: –Looking for new experiences –Meeting poorly addressed needs e.g. Malaria treatment. –Making things better e.g. increased yield on beers. –Matching emerging technologies to new potential users needs e.g. Diagnostics for breast cancer using rDNA technology –Matching older technology or failed products to new markets e.g. aspirin for blood thinning

101 A Framework for Enterprise Development and Entrepreneurship101 Political forces Employment legislation Foreign trade regulation Government political orientation and stability Government policy to creating new knowledge Lobbying mechanisms Monopoly policy Taxation policy E.g. Increased support and government initiatives for Bioscience exploitation

102 A Framework for Enterprise Development and Entrepreneurship102 Economic forces Business cycles Capital availability Credit control Commodity and raw material cost & availability Government economic policy Energy costs and supply continuity Exchange rates Interest rates Unemployment and workforce skill levels E.g. Increasing energy costs, embryonic stage of biotechnology growth

103 A Framework for Enterprise Development and Entrepreneurship103 Social forces Attitude and perception changes of populations Censorship and press freedoms Demographic trends (at world, trading block national and regional levels) Education and skills levels E.g. Negative public sentiment towards some Biotech products

104 A Framework for Enterprise Development and Entrepreneurship104 Technological forces New developments & discoveries Reducing product life cycles Increasing rates of obsolescence Rates of technological diffusion E.g. rDNA manipulation, digital technology

105 A Framework for Enterprise Development and Entrepreneurship105 Environmental forces Energy policies (domestic supply and transport) Environmental protection policies Governmental commitment to environmental protection Waste disposal and recycling policies Weather pattern change E.g. Increasing cost of domestic power supply, global warming

106 A Framework for Enterprise Development and Entrepreneurship106 Legal and regulatory forces National employment legislation National health and safety legislation Intellectual property protection legislation National monopoly policy National planning policy National product safety law Speed of national legislative process & the vigour of enforcement forces E.g. Protection offered by patents

107 Idea generation Creative swiping

108 A Framework for Enterprise Development and Entrepreneurship108 Creative swiping A technique advocated by Tom Peters for stealing good (unprotected) ideas from competitors. The accumulation of lots of these ideas creating a uniqueness and differentiation for the stealing enterprise In his words: Uniqueness… comes from an accumulation of thousands of tiny enhancements The entirely unique product does not exist. Everything stands on previous technology and established precedent Its all about the relative novelty of innovation

109 Idea Screen/Selection

110 A Framework for Enterprise Development and Entrepreneurship110 Product development funnel – filtering in an R&D environment Source: Wheelwright, 1992

111 A Framework for Enterprise Development and Entrepreneurship111 Product development funnel – filtering in a start-up enterprise Source: Wheelwright, 1992 Screen 1Screen 2

112 A Framework for Enterprise Development and Entrepreneurship112 Idea screening 1 Some organisations use filtering processes to screen new ideas and projects Used as projects progress through from concept to full scale development in the product pipeline Typically used in R&D environment Uses employee facilitators who seek out and attract other employees to offer ideas for innovation. The ideas are then initially screened by specialist gatekeepers against given criteria

113 A Framework for Enterprise Development and Entrepreneurship113 Idea screening 2 Success or selection criteria can be used to filter projects at various points of the development funnel or pipe line Each review point is called a gate A go/kill decision is made based on meeting the success criteria If further funds are committed at the gate then they are often called toll gates Fulfilment of the success criteria means a commitment of resources to further development

114 A Framework for Enterprise Development and Entrepreneurship114 Idea screening 3 Typically: 40% get through the initial screening process 18% are supported through a subsequent selection procedure by in house champions and 4% may be realised commercially Successful examples of idea screening processes need to be subject to commonly understood group rules, be open, be systematic and iterative

115 Filtering criteria What makes a potentially successful business idea

116 A Framework for Enterprise Development and Entrepreneurship116 Filtering/selection criteria Ideas can be screened on the following criteria: –Market factors –Competitive advantage –Management capability –Fatal flaws Usually a mixture of these proves to be beneficial in selecting prospective business propositions Source: Longenecker, 2006

117 A Framework for Enterprise Development and Entrepreneurship117 Filtering/selection criteria Market factors –Well identified need for the product –Reachable, receptive customers –Significant value created by product or service or customer –Long life of product –Emerging industry not highly competitive –Significant market size –Significant growth rate

118 A Framework for Enterprise Development and Entrepreneurship118 Filtering/selection criteria Competitive advantage –Low cost producer? –Moderate to strong control over prices costs and channels of supply –Barriers to entry i.e.. Factors that prevent new entrants into the market –Have or can develop proprietary information or regulatory protection –Have or can develop, a good response/lead time advantage –Proprietary or exclusive legal or contractual advantage –Contacts and networks

119 A Framework for Enterprise Development and Entrepreneurship119 Filtering/selection criteria Economics –Good return on investment –Low investment requirements –Time requirement to break even or to reach positive Management capability –Management team with diverse skills and proven experience Fatal flaws –No circumstance or development that could, in and of itself, make the business unsuccessful

120 A Framework for Enterprise Development and Entrepreneurship120 How to select a reasonable idea Brainstorm or systematically generate several (say 3/4) ideas Use a selection method to determine the best prospect (Kepner-Tregoe Method) You may need to carry out a further investigation into your business idea to accurately evaluate them Return to the selection method again and screen until you have finalised your selection and are focusing on one idea

121 A Framework for Enterprise Development and Entrepreneurship121 Key point summary Ideas are usually generated from a grounding of technical competency or market need (technology push v market pull) Systematic idea generation and brainstorming are both viable routes to generating ideas Druckers sources of innovation, PESTEL analysis provide systematic means of generating ideas Product screening is an integral part of the commitment of resources through the various phases of product development Need to evaluate idea against filtering/selection criteria for enterprises before committing further resource to development

122 4. Project Management Controlling and Completing the Business Plan Project on Time

123 A Framework for Enterprise Development and Entrepreneurship123 Learning outcomes By the end of this session students should be able to: Recognise the nature of business planning as a project Build an awareness of skills and mechanisms for planning and monitoring projects For the assessment students should: Use time management and project management skills within the context of delivery of the business plan Reflect on this activity as part of a journal

124 A Framework for Enterprise Development and Entrepreneurship124 TLA Framework Context & Group Formation Self awareness Idea/Concept Generation Idea/Concept selection Project Management Proposal Business plan and presentation

125 What is project management and why is it important to business planning?

126 A Framework for Enterprise Development and Entrepreneurship126 What is project management? Project management is concerned with the overall planning and co-ordination of a project from inception to completion aimed at meeting the client's requirements and ensuring completion on time, within cost and to required quality standards Source:

127 A Framework for Enterprise Development and Entrepreneurship127 What is a project? Any unique venture with a beginning and an end conducted by people to meet established goals within parameters of cost, time (or schedule) and quality. Source: Buchanan and Boddy,1992

128 A Framework for Enterprise Development and Entrepreneurship128 Project key features A unique undertaking each one differing from every other in some respect Project have specific objectives to achieve Projects require budgets Projects have schedules Projects have budgets Projects require the efforts of people drawn from different disciplines Projects should have quality measures

129 A Framework for Enterprise Development and Entrepreneurship129 Why is project management needed? The process of bringing IP to market can be a complex process requiring leadership skills of the highest order There are numerous tasks that interrelate and need to me integrated into the business plan Time is critical in bringing the business ideas to market Resources are finite. A small team is bringing the plan together There are numerous ways in which this business planning can be completed

130 Project players and management skills

131 A Framework for Enterprise Development and Entrepreneurship131 Project players Sponsor: the person providing the resources for the project and ensuring that the project is successful at the business and institutional level Champion: The advocate for the project promoting the cause of the project or proposal Client or customer: The individuals or organisation paying for the contractual project services Stakeholder: Individuals who are directly or indirectly involved with the project, for whom the success of the project is important in any terms

132 A Framework for Enterprise Development and Entrepreneurship132 Key project manager skills Negotiation, obtaining agreement on the scope, aim and objectives of project Ensuring resources are accurately estimated and readily available Effective communication with project stakeholders Identifying clear roles and responsibilities for all team members Establishing ways to maintain project progress when problems arise Being able to fit all the pieces together

133 Key project management techniques Milestones Gantt charts Responsibility charts Team meetings

134 A Framework for Enterprise Development and Entrepreneurship134 What are milestones? A key point in the project, perhaps when something has been achieved, for which a deadline was set A mechanism to monitor progress Short-term goals which are far more tangible than the foggy, distant completion of the entire project Maintain the momentum and encourage effort They allow the team to judge their own progress and to celebrate achievement throughout the project rather than just at its end

135 A Framework for Enterprise Development and Entrepreneurship135 Why use milestones? Identifying main goals Establishing time and cost targets Identifying intermediate decision points Agreeing management information requirements Agreeing reporting intervals Identifying feedback mechanisms Focusing on critical variables Source:

136 A Framework for Enterprise Development and Entrepreneurship136 What is a Gantt chart? Simple chart also known as a bar chart showing task activities in chronological order and timings The length of the bar represents the length of the task (in time). Gantt Charts should include milestones Used to plan resources over time Used in the project planning and execution phase for monitoring progress against objectives and task completion Can be used to identify sequence and interrelationship of activities

137 A Framework for Enterprise Development and Entrepreneurship137 Gantt chart example Source:

138 A Framework for Enterprise Development and Entrepreneurship138 What is a responsibility chart? Helps you determine who-does-what-and-who- helps Can be useful as teams are forming, or as new work emerges as part of a teams responsibilities Can be used to clarify understandings, improve the distribution of work, and build agreements that involve all and therefore can last

139 A Framework for Enterprise Development and Entrepreneurship139 Responsibility charts – How are they used? 1 By the team as a group –This method may be somewhat time- consuming but will result in a high degree of commitment and understanding By a sub-group of the team –This may be a bit more efficient. A review by the full team and agreement on the chart content would be an important second step Source:

140 A Framework for Enterprise Development and Entrepreneurship140 Responsibility charts – How are they used? 2 By each team member –The team would then need to confirm areas of agreement and discuss areas of difference to reach agreement By the team leader –While probably the most efficient method in terms of time, discussion by the whole team is needed to ensure clear understanding and accountability Source:

141 A Framework for Enterprise Development and Entrepreneurship141 What are responsibilities? R - This person is responsible for carrying out the task, or accountable to see that the task is done. Every task must have an R. Then assign letters A, C, and/or I as needed: C - This person consults to the R person for the task. Consulting means that the two work collaboratively, with both having significant responsibility for doing the work A - This person assists the R person with the task. Assisting means this person helps carry out the work but is not as involved in making decisions about what is to be done or how. I - This person is informed about the status of the work, including when it is done, but is not directly involved in planning or doing the work Source:

142 A Framework for Enterprise Development and Entrepreneurship142 How to construct a responsibility chart 1.Purpose Defining exactly what project or work you want to understand is a vital first step in employing the chart. The purpose appears at the top of the chart 2.Across the columns, list the people involved 3.Next, list the tasks to be done. List these at the level of detail that seems right to you. You can increase or decrease that level as needed, and every task does not need be listed at the same level of detail. Look for the amount of detail that will ensure understanding and good distribution of responsibility Source:

143 A Framework for Enterprise Development and Entrepreneurship143 Example chart (incomplete) TaskPerson or role Person APerson BPerson C Idea generation rca Concept selection cra Technical Feasibility ccr Patent Search rca etc ara

144 A Framework for Enterprise Development and Entrepreneurship144 Team meetings Meetings used to progress the project using agendas and minutes They allow regular opportunities for: –Monitoring of progress of the project –Problem solving and conflict resolution

145 A Framework for Enterprise Development and Entrepreneurship145 Successful meeting To ensure the meeting is successful, the leader should: Generate an agenda to all involved in the meeting Start the discussion and encourage active participation Work to keep the meeting at a comfortable pace – not moving too fast or too slow Summarise the discussion and the recommendations at the end of each logical section Circulate minutes to all participants Source:

146 A Framework for Enterprise Development and Entrepreneurship146 Meeting minutes Meeting minutes should contain the following information: Called by – The person who called the meeting Meeting Date/Time – The time the meeting occurred Project - The formal name of the project Purpose - Describe meeting purpose Invitees/Attendees - Meeting attendees Meeting Agenda – A copy of the meeting agenda Meeting Minutes – A summary of the discussion and action items from the meeting clearly specify any decisions that were made at the meeting

147 A Framework for Enterprise Development and Entrepreneurship147 Key point summary Business planning can be viewed as a project because there is a defined goal, a set of activities and a specific resource It is critical particularly for complex technological developments where there are numerous participants working together For business planning it is vital as there are typically limited resources and a complex body of information to investigate Responsibility and Gantt charts are commonly used tools that can aid project planning and execution to direct and monitor the project team Select a team leader, use minutes and agendas for regular team meetings

148 5. Intellectual Property Rights (IPR): Patenting and Trade Marks Nature, Importance of IPR in Bioscience Entrepreneurship

149 A Framework for Enterprise Development and Entrepreneurship149 Learning outcomes By the end of this session students should be able to: Understand the role of IPR in determining their USP and protecting and exploiting business ideas in the Biosciences For the assessment students should: Carry out a simple patent search on their business idea to determine unique selling point/competitors Establish an approach for protecting intellectual property for your proposed business

150 A Framework for Enterprise Development and Entrepreneurship150 TLA framework Business planning Intellectual Property Rights Business strategy and risk Market and competitor analysis Marketing strategy The management team Operations and commercial strategy Financial forecasting The pitch

151 What is IPR and why is it important?

152 A Framework for Enterprise Development and Entrepreneurship152 Why consider Intellectual Property Rights (IPR)? Bioscience entrepreneurs need to consider what intellectual property can be protected and where, as soon as they begin to develop their business idea and considering their business and marketing strategy IPR offer significant competitive advantage and in the context of this learning pack includes: –Patent registration to protect the invented product or process –Trade mark registration to protect the identifying product or process marks

153 A Framework for Enterprise Development and Entrepreneurship153 What is IPR? An intellectual property is: –Any product of the human intellect that is unique, novel and unobvious that has some application in the market place –Output of creative endeavour of literary artistic, industrial, scientific and engineering fields E.g. Unique name, chemical process, drugs, publication, computer programme, multimedia products

154 A Framework for Enterprise Development and Entrepreneurship154 What is IPR? A cluster of legally recognised rights to protect intellectual property Depend on nature of the property Can be registered or unregistered Vary in length of the protection Usually involve a trade-off and requirement for the right holder Part of nations policy to encourage innovation and dissemination of knowledge

155 A Framework for Enterprise Development and Entrepreneurship155 Types of IPR Registered IP Rights Patents Designs Trade Marks Plant Breeders Rights Unregistered IP Rights Copyright Unregistered Design Rights Trade Marks and Reputation Traditional Knowledge Database rights Publication rights

156 A Framework for Enterprise Development and Entrepreneurship156 International framework for IPR WTO TRIPS Agreement Paris convention for the protection of IP Patent Cooperation Treaty (PCT) – streamlined process for international patent making Budapest Treaty for Deposit of Micro-organisms Strasbourg Agreement concerning International Patent Classification (IPC) International convention for the protection of new varieties of plants Other agreements which affect IP: Convention on Biological Diversity (CBD) Food Agriculture Organisation (FAO) International Treaty on Plant Genetic Resources

157 A Framework for Enterprise Development and Entrepreneurship157 Four main types of IPR for Biosciences Patents –For new and improved products and processes that are capable of industrial application Plant Breeders Rights –Offers legal protection for the investment plant breeders make in breeding and developing new varieties. Open to breeders of any species of plant; agricultural, horticultural and ornamental. Trade marks –For brand identity of goods and services allowing distinctions to be made between different traders Designs –For product appearance - of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture or materials of the product itself or its ornamentation

158 A Framework for Enterprise Development and Entrepreneurship158 Why is IPR important to businesses? IP gives a competitive advantage by preventing competitors from using the protected property IP seen as asset and be a large percentage of the market value of the business IP can attract investors IP is a potential source of income e.g. licensing

159 Patents

160 A Framework for Enterprise Development and Entrepreneurship160 What is a patent? A disclosure of an invention for exclusive exploitation by patent owner Limited period of protection for invention – generally lasts for 20 years Means of preventing others making, using or selling an invention unless permission granted e.g. by license Contains sufficient detail so some one skilled in the art can reproduce that invention Granted by government e.g. UK Patent Office under UK Patent Act 1977 Usually only cover single country – some collectives exist (e.g. Europe, Africa)

161 A Framework for Enterprise Development and Entrepreneurship161 Where is the protection valid ? 1 In the UK A UK patent filed at the Patent Office gives exclusive rights only in the UK, Isle of Man and the British protectorates Botswana & Swaziland In Europe For protection in two or more EU countries that are members of the European Patent Convention the application must be filed with the European Patent Office specifying which states the patent should cover. European patents must be maintained in each designated state separately which means lots of translation costs

162 A Framework for Enterprise Development and Entrepreneurship162 Where is the protection valid? 2 In the rest of the world If you consider the potential market for your invention covers a geographical area beyond Europe then a Patent Cooperation Treaty makes it possible to seek patent protection in over 100 countries with one application

163 A Framework for Enterprise Development and Entrepreneurship163 What is patentable? Only an invention can be patented. To be an invention and patentable it has to be: New –Something that was not known before as has not been published anywhere else in the world - prior art Involve an inventive step –Not obvious to those skilled in the technical field to which the invention relates; i.e. there must be an intellectual jump Be capable of industrial application –E.g. must be capable of being used as a product or in an industrial process Not be among the list of excluded inventions

164 A Framework for Enterprise Development and Entrepreneurship164 Excluded inventions The excluded list consists of: –Scientific theories –Mathematical methods –Animal and plant varieties –Computer programmes –Works of art or literature Computer programmes and works of art and literature are covered by separate IP legislation ….Copyright

165 A Framework for Enterprise Development and Entrepreneurship165 Biotechnological inventions unpatentable on moral grounds Process of cloning human beings Process of modifying the germ line genetic identity of human beings Use human embryos for industrial or commercial purposes Processes for modifying the genetic identity of animals which are likely to cause them suffering without any substantial medical benefit to man or animal, and also animals resulting from such processes Source: DTI, 2006

166 A Framework for Enterprise Development and Entrepreneurship166 Basic patent concepts Prior art –Published documents anywhere in the world and common general knowledge in the field of technology of invention before the priority date of patent application Priority date –Date an inventions validity is assessed – normally first time an application for the invention is filed anywhere in the world. In US date of actual invention is used Person skilled in the art (PSA) –A skilled technician or worker in a field of knowledge who is aware of all common lab/workshop techniques and general knowledge in the field

167 A Framework for Enterprise Development and Entrepreneurship167 UK patent application process overview Develop idea and examine viability. PO conducts search. Application published. If any attempt made to copy invention damages can be sought. Submit detailed examination of invention, form 10/77 and fee. Within 12 months Within 18 months Within 24 months Form 1/77 submitted to Patent Office (PO) Application terminated if no further action taken Submit set of claims, abstract and form 9A/77 request for PO search Third parties can petition PO to reject application Detailed examination must be submitted within 6 months of publication Within 36 months PO examines application and petitions from third parties Application republished as granted Initial Application

168 A Framework for Enterprise Development and Entrepreneurship168 Patent application process 1 Making the application It takes between three and four years to obtain a UK patent. The first step in submission 1.An completed application for Request for grant of patent on Form 1/77 at UK Patent Office. 2.A descriptive specification of the invention: –An abstract: describing how the invention solves problems –One or more claims defining what the invention does and areas that will be protected by patent. –Drawings of specification

169 A Framework for Enterprise Development and Entrepreneurship169 Patent application process 2 The specification The detail of the invention must be very specific and comprehensive. Including descriptions of: All the features that could be incorporated. Surplus ones can be deleted from latter stages of application procedure Advantages of the invention over previous products or processes How the invention can be put into practice. Written description can be supplemented with drawings

170 A Framework for Enterprise Development and Entrepreneurship170 Patent application procedure 3 The Patent Office allocate a patent number to successful initial applications The application submitter is allowed to use patent pending or patent applied for when the patent number is allocated This gives application precedence over all other applications submitted for similar inventions Initially for the first 12 month phase of the application procedure

171 A Framework for Enterprise Development and Entrepreneurship171 Typical Patent contents Document identification Domestic filing data Priority data, i.e. the original country filing details Technical and classification data including, title, search report i.e.. Prior art and abstract written by the applicant giving a full description of the invention Identification of the parties. Applicant, inventor, patent agent. Address information. Designated countries. This usually applies to European Patent Convention or Patent Cooperation Treaty specifications Drawing

172 A Framework for Enterprise Development and Entrepreneurship172 Example: IP and lifecycle of a new product Example of a new product being brought to market from a university research project Research planning phase Use patents to: –Identify competitors –Determine the state of the art in existing research – prior art –Find niche opportunities –Avoid duplication of research efforts

173 A Framework for Enterprise Development and Entrepreneurship173 IP and life cycle of a new product Research Phase Confidentiality and the law of trade of secrets to safe guard: –Research direction and outcomes –Agreements with research partners –Confidentiality within the enterprise institution Patent law considerations essential with respect to: –Publications –Participation in trade fairs

174 A Framework for Enterprise Development and Entrepreneurship174 IP and life cycle of a new product Research breakthrough –Outcomes must be kept confidential until patent application is filed –A patent filing strategy needs to be adopted –Associated developments may be protected by industrial designs and copyright Development phase –An IPR licensing strategy is required –Trade marks may need to be developed –International patent strategy is required –Patents may be required to improve original idea –Cross licensing

175 A Framework for Enterprise Development and Entrepreneurship175 IP and life cycle of a new product Marketing phase –Monitoring marketplace for infringement and enforcement –Continuing evaluation of effective means of using IPR –Continuing issues of licensing and valuation Source:

176 A Framework for Enterprise Development and Entrepreneurship176 On-line patent databases Extensive list of country and region specific databases can be found at: World Intellectual Property Association

177 Trade Marks

178 A Framework for Enterprise Development and Entrepreneurship178 What are trade marks? Signs used to differentiate the goods and services of one business from another in the eyes of potential customers In consumer markets customers may recognise the goods and services offered by your business through the distinctive trade marks which may consist of words, logos, 3 dimensional shapes, colour combinations or sounds Prevent others passing off their goods and services as yours The legislation that covers this intellectual property in the UK is the Trade Marks Act 1994

179 A Framework for Enterprise Development and Entrepreneurship179 Where is trade mark protection valid? A trade mark registered in the UK does not give automatic protection overseas For EU protection in all 25 member states Additional applications can be made to the Office of Harmonisation in the Internal Market (OHIM) through the UK Patent Office For World protection in up to 77 countries UK applications can be used as a basis for international applications through the World Intellectual property Organisation (WIPO)

180 A Framework for Enterprise Development and Entrepreneurship180 Trade mark application process Your UK trade mark design must be subject to a Trade Mark Register search to establish its originality and that no other similar marks are in use in similar enterprises The Patent Office offer a search and advisory service which will check if the application meets all necessary submission criteria If search is successful then form TM3 can be submitted to the Trade Marks Registry at the Patent Office. Approval takes six months, protection lasts for 10 years renewed every decade

181 Registering intellectual property

182 A Framework for Enterprise Development and Entrepreneurship182 Registering intellectual property The legislation that surrounds Intellectual Property Right protection in the UK, EU and rest of the world is very complex The registration procedures should not be taken likely and professional advice should be sought from as many sources as early as possible including university based specialists and independent accredited professionals For: Patents applications Chartered Patent Agents Trade mark registration Trade Mark Attorneys & Chartered Patent Agents

183 A Framework for Enterprise Development and Entrepreneurship183 Support for registering intellectual property The legislation that surrounds Intellectual Property Right protection in the UK, EU and rest of the world is very complex The registration procedures should not be taken likely and professional advice should be sought from as many sources as early as possible including university based specialists and independent accredited professionals Patents applications- Chartered Patent Agents Trade mark registration -Trade Mark Attorneys & Chartered Patent Agents

184 A Framework for Enterprise Development and Entrepreneurship184 The additional considerations of IP protection What mechanisms will the enterprise have in place to police potential IPR infringement? –Owners initiate action against infringers –Typically for Biotech organisations right owner initiates civil procedure How will the defence of IPR infringement be funded? –This can be very expensive and needs to be factored in to the business plan

185 A Framework for Enterprise Development and Entrepreneurship185 Key point summary IPR are a complex set of rights which protect a variety of creative outputs Protect intellectual property is vital in the Biosciences in creating income streams and preventing use of technology created Patent searches can be used to identify: –Whether the product is truly novel –Competitors –Potential collaborators Consider using Trade marks for business/product names and logos Seek help from Patent Office and Agents in this complex and vital area of business development Factor in the cost of defending your IPR as it can be expensive

186 6. Market Research and Competitor Analysis Identifying your Target Market, Market Attractiveness and Competitive Advantage

187 A Framework for Enterprise Development and Entrepreneurship187 Learning outcomes By the end of this session students should be able to: Determine the information requirements and purpose of market analysis and competitor analysis Identify sources of secondary data For the assessment student should: Determine the target market and market attractiveness Evaluate the competition and determine your business competitive advantage Hence determine positioning of their product or service

188 A Framework for Enterprise Development and Entrepreneurship188 TLA framework Business planning Intellectual Property Rights Business strategy and risk Market and competitor analysis Marketing strategy The management team Operational strategy Financial forecasting The pitch

189 A Framework for Enterprise Development and Entrepreneurship189 Why look at markets? It is vital to determine who will want your product, to describe them clearly in terms of their characteristics so that you can approach them through various media and tailor your products and services to suit them. Investors will want to know that the chosen product/service and customer group is attractive in terms of size, growth and value. Market analysis brings all these points to bear

190 A Framework for Enterprise Development and Entrepreneurship190 Why look at competitors? Frequently entrepreneurs (and students!) ignore the reality of competition for their new venture believing that it has no close substitutes and that their success will not attract other entrepreneurs. This is not the case. Examining competitors allows the product/service to be differentiated in some way and help focus you on providing enhanced benefits to customers

191 A Framework for Enterprise Development and Entrepreneurship191 Key questions when identifying the market and analysing competitors For your business plan you will need to find out: Who wants this product/service? What characterises them – what is their market segment? What is the anticipated value of the market? Is the market likely to grow? What are the competition doing? What are their strengths and weaknesses? How are we positioning our product/service offering?

192 Identifying the target market

193 A Framework for Enterprise Development and Entrepreneurship193 What is your target market? A group of people or organisations that share a common set of attributes, a particular set of needs and wants that distinguishes your product or service

194 A Framework for Enterprise Development and Entrepreneurship194 Why segment markets? Better focus on customer needs Promotes new product ideas Helps develop effective marketing mix strategy i.e. place, price, product, promotion Allocation of marketing resources to different products depending upon segment attractiveness

195 A Framework for Enterprise Development and Entrepreneurship195 What are segments? 1 Subgroups of the potential population who may purchase your products. Geographic segments: –Regionalising to accommodate local tastes Demographic segments: –What consumer characteristics are? (e.g. age, gender, income) Psychographics segments: –Why do consumers buy? (e.g. lifestyle, social class)

196 A Framework for Enterprise Development and Entrepreneurship196 Top down approach to define target market 1.Segment – divide up the market into groups of buyers 2.Target – evaluate the attractiveness of each segment and select target/s. A different approach will be needed in each segment 3.Position – select the market position which differentiates it from competitors

197 A Framework for Enterprise Development and Entrepreneurship197 What are segments? 2 Behavioral segments: –Usage occasions Kodak single-use cameras from underwater use to baby pictures and weddings –Usage Rates rule, e.g.beer drinkers –Loyalty Status Hard-core loyals: A A A A A A Switchers: A B E A D B Variety Seekers A B C B A C B

198 A Framework for Enterprise Development and Entrepreneurship198 Measurable Accessible Substantial Differential Actionable Size, purchasing power, profiles of segments can be measured. Segments must be effectively reached and served. Segments must be large or profitable enough to serve. Segments must respond differently to different marketing mix elements & actions. Must be able to attract and serve the segments. Criteria for successful segmentation

199 A Framework for Enterprise Development and Entrepreneurship199 Positioning Positioning = Segmentation + Differentiation –Segment = a division of the market –Differentiation = how your product is different from the competition Slotting the product in the consumers mind –Who am I? –Why buy me?

200 A Framework for Enterprise Development and Entrepreneurship200 Positioning Against competition e.g. Pepsi Challenge in Pepsi vs Coca Cola Position with the competition e.g. Dixons own brand for electronic equipment Grab an unoccupied position i.e.market niche e.g. SMART cars Using your endowment e.g. Number one position - Microsoft

201 Market potential/attractiveness

202 A Framework for Enterprise Development and Entrepreneurship202 Market analysis For you business plan you will need to determine: Size of market in terms of overall sales expected per annum for that product/service –Identify major players and sales for product/service –Identify total potential sales for that product/service given a percentage up take product/service Desired market share for your organisation State drivers and trends of demand in your target market NB/MINTEL and KEYNOTE reports are extremely useful here

203 A Framework for Enterprise Development and Entrepreneurship203 Trends: Industry life cycle TIME Sales Trend Line Profits Trend Line 0 Revenue Stream + Development Growth Maturity Saturation 1. Decline Phase 2. Stagnation 3. Renovation -

204 A Framework for Enterprise Development and Entrepreneurship204 Changes in industry or market structures: Porters five forces model Supplier Buying Power Suppliers Potential Entrants Substitutes Buyers Industry Rivalry Substitute Threat Buyer Buying Power New Entrant Threat

205 A Framework for Enterprise Development and Entrepreneurship205 Industry life cycle & competitive forces Intro.GrowthMaturityDecline New Entrants FewBandwagon effect ConsolidateExit Power of Buyers LowLow, Its a sellers market IncreasingHigh, Its a buyers market Power of Suppliers MediumHighDecliningLow Threat of Substitutes Non Existent LowGrowingSubstitutes may cause decline Rivalry amongst Firms LowLow, focus on growth Intense, firms grow at rivals expense Declining as firms exit.

206 Analysing the Competition Key Success Factors

207 A Framework for Enterprise Development and Entrepreneurship207 Analysing competitors 1 Analysis of competitors will be far less detailed than own business. However it will help owner managers and investors understand existing and future rivals The following checklists - Key Success Factor criteria and BBSRC - should provide a good basis for comparison

208 A Framework for Enterprise Development and Entrepreneurship208 Analysing competitors 3 Key Success Factors (KSF) The KSF scores of the KSF competitor ranking can be plotted graphically and will indicate the overall competitive strength of each competitor in relation to their own business

209 A Framework for Enterprise Development and Entrepreneurship209 Analysing competitors 4 Key Success Factors (KSF) Aakers Key success factors A model for measuring a business against competitors using no more than 10 key success factors or KSFs In this example eight KSFs are chosen: Market Share Distribution Brand Image Product Quality Product variety Patents Research & Development Financial Resources

210 A Framework for Enterprise Development and Entrepreneurship210 Analysing competitors 5 Key Success Factors (KSF) Graphic representation of firms relative KSFs Firm A Firm B Firm C Own Firm

211 A Framework for Enterprise Development and Entrepreneurship211 Key criteria to evaluate competition 1 Resource strength Management Supplier relationships Distribution capability Financial Breadth and depth of intellectual property Manufacturing Strategic partnerships/alliances Source: BBSRC, 2006

212 A Framework for Enterprise Development and Entrepreneurship212 Key criteria to evaluate competition 2 Market position Market share Reputation Breadth of product/service portfolio – ability to offer a one stop shop Brand image Service delivery Responsiveness Consistency Flexibility Source: BBSRC, 2006

213 A Framework for Enterprise Development and Entrepreneurship213 Key criteria to evaluate competition 3 Customers Customer inertia –general unwillingness or lack of propensity to change Customer lock in – customer investment in competitors system/products so great as to make switching difficult/costly or otherwise unattractive Source: BBSRC, 2006

214 Market research

215 A Framework for Enterprise Development and Entrepreneurship215 Why market research is needed? You will need to justify the statements you make about the market and the competition backing up your argument with data from reports or from research that you have carried out. Gut feel is not enough!

216 A Framework for Enterprise Development and Entrepreneurship216 Types and sources of market data Primary –Non published current market and competitor information gleaned by the entrepreneur using tested methods and based on recorded observations Secondary –Published information sources available from libraries in hard copy, disc and more frequently on-line –They will include information on markets and competitors

217 A Framework for Enterprise Development and Entrepreneurship217 Planning market research Define – What information you need to know Carry out – Desk (secondary) research using library sources Establish – Field (primary) research method best suited to your needs Develop – Your primary research study methodology & test thoroughly! Carry out – Field research Analyse – The collected data Incorporate – The results in the marketing plan

218 A Framework for Enterprise Development and Entrepreneurship218 Primary market research methods Focus groups: –Gathering a representative sample of potential customers together and measuring their reaction to your offering Observations: –Watching and recording what potential customers are buying and what competitors offer Surveys: –Formalised information gathering exercise that provide valuable intelligence on potential customers Test marketing: –Developing your offering as fully as possible and then letting it loose in a restricted market place Web based news groups: –A useful way of gauging customers reaction to offerings and reaching potential customers cheaply

219 Sources of secondary market data

220 A Framework for Enterprise Development and Entrepreneurship220 Sources of secondary market research information Market research companies and governmental sources offer reports on the following: The structure of the markets Identifying the major players in the market Identifying customers through demographic profiles, spending and disposable income Major market trends How products are marketed and distributed Future developments in the market due to technological advances and changes in typical customer profiles

221 A Framework for Enterprise Development and Entrepreneurship221 Sources of secondary marketing: Specific sector information in UK and Europe Mintel Reports: –Media, product & consumer intelligence for UK Europe & US markets Euromonitor: –Consumer, industrial and service sector intelligence worldwide scope Key Note: –Information on 370 UK sectors Jordans Ltd: –Information on UK industry Frost and Sullivan: –High specification research on industrial sectors world wide MSI Marketing Research for Industry: –industrial and business to business markets in healthcare, environmental services and others

222 A Framework for Enterprise Development and Entrepreneurship222 Sources of secondary market related information: Biotechnology/Bioscience Biotechnology handbook –(available from libraries) Bioindustry Association website –http://www.bioindustry.org/ Patent databases World Intellectual Property Association Biotechnology Industry portals and networks –http://www.europabio.org/ On line biotechnology publications for business news

223 A Framework for Enterprise Development and Entrepreneurship223 Sources of secondary market related information: Europe and Worldwide NOMIS:On Line Government Statistics (U.Durham) OECD: Organisation for Economic Cooperation & Development ONS (UK): Office of National Statistics Databank World Consumer Markets Eurostat Comext: Monthly Digest of EU Trade CORDIS: Community Research and Development Information Service

224 A Framework for Enterprise Development and Entrepreneurship224 Sources of secondary market related information: UK government The Guide To Official Statistics Products, Sales and Trade Reports The Annual Abstract of Statistics Regional Trends Economic Trends Labour Market Trends Population Trends Social Trends Living in Britain

225 A Framework for Enterprise Development and Entrepreneurship225 Sources of Other Secondary World, EU, UK and Regional Information Benns Media Clover Newspaper Index Wilings Press Guide McCarthy Cards: Indexing national and regional newspapers Trade Associations Chambers of Commerce Dun and Bradstreet

226 A Framework for Enterprise Development and Entrepreneurship226 Sources of UK company information UK Kompass Register –Contains company profiles & financial information Who Owns Whom Key British Enterprises –Listing the top 50,000 companies in Britain Kellys Business Directory –Listing a wide range of suppliers, products and contact details

227 A Framework for Enterprise Development and Entrepreneurship227 Sources of UK household, area and trade information Dun and Bradstreet – Credit reports for all UK trading business Mosaic –Used by credit reference agencies to divide UK population into 60 categories and track social trends Office for National Statistics The-List.co.uk –Search engine for market reports and publications UpMyStreet.com –Local area statistical information

228 A Framework for Enterprise Development and Entrepreneurship228 Key point summary Key to establishing your market is understanding your customer – typically, who they are and what they want and what affects their buying decisions It is important to determine your positioning by answering the question – which segment/segments am I serving and why buy me? Competition is a key threat to the business. They must not be ignored. Their strengths and weaknesses need to be determined to identify threats and your businesss competitive edge.

229 A Framework for Enterprise Development and Entrepreneurship229 Key point summary 2 Using structured means to analyse the business will allow such as Key Success Factors (KSFs), allows a systematic evaluation of the competition Numerous sources of data exist for gathering of market and competitor information. It is vital to scan these for the data that you need before embarking on time consuming primary data gathering exercises

230 7. Business Strategy and Risk Analysis Exploiting IPR and Establishing Routes to Market in the Biosciences

231 A Framework for Enterprise Development and Entrepreneurship231 Learning outcomes 1 By the end of this session students should be able to: Appreciate the meaning of the term strategy Understand the changing nature of strategy in the growth of an organisation and a range of approaches specifically used in Bioscience exploitation i.e. the route to commercialisation Recognise a range of generic strategies that business adopt Recognise the use of SWOT and scenario planning in determining strategies

232 A Framework for Enterprise Development and Entrepreneurship232 Learning outcomes 2 For the assessment students should: Determine key growth strategies for their organisation and how they might change with the development of their product or service i.e. the route to commercialisation Carry out a SWOT analysis and scenario planning to determine a range of strategies to deal with RISK presented to the business

233 A Framework for Enterprise Development and Entrepreneurship233 TLA framework Business planning Intellectual Property Rights Business strategy and risk Market and competitor analysis Marketing strategy The management team Operations and commercial strategy Financial forecasting The pitch

234 What is strategy?

235 A Framework for Enterprise Development and Entrepreneurship235 What is strategy? There is no single, universally accepted definition: …the determination of how an organisation, in its entirety, can best be directed in a changing world The direction and scope of an organisation over the longer term which seeks to match its resources to its changing environment, particularly its markets, customers or clients so as to meet stakeholder expectations

236 A Framework for Enterprise Development and Entrepreneurship236 What is strategy? Preparing a road-map of how to get to where you want to be Knowing where you are now Knowing where you want to be

237 A Framework for Enterprise Development and Entrepreneurship237 Emergent and realised strategies Source: Brunet, J.P.,Mintzberg,H and Water J.(1986) Intended Strategy Deliberate Strategy Emergent Strategy Realised Strategy Unrealised Strategy Impossible to implement The planned strategy Applied through force What actually happens External Environment Random and powerful

238 A Framework for Enterprise Development and Entrepreneurship238 Emergent and realised strategies Business strategies are subject to the constantly changing external and internal forces Much of what is planned strategy is not implemented because of the strength of the influence of the external environment Although enterprises need to have strategic aims they must also have the capability to adapt and reject the elements of their intended strategy that are impossible to implement Embrace the opportunities that the changing environment offer

239 A Framework for Enterprise Development and Entrepreneurship239 Strategy and its relation to operational activities Corporate e.g.Marketing e.g.Marketing Communications Bottom Up Top Down directives results

240 Porters Generic Strategies

241 A Framework for Enterprise Development and Entrepreneurship241 Three generic strategic options Cost leadership –Strives to be the lowest cost compared to its competitors in the industry e.g. Netto Differentiation –Strives to build customer loyalty by making products/services that are different from the competition Focus – Aims to fulfil needs. Wants or interest of a clearly defined group of people. Niche.

242 A Framework for Enterprise Development and Entrepreneurship242 Porters generic strategies Segmentation (Or Focus) Strategy Differentiation Strategy Cost Leadership Strategy Narrow Market Broad Market Uniqueness Competency Low Cost Competency Strategic Strength Strategic Scope 3. Cost Leadership Strategy emphasises efficiency, through economies of scale and experience. Constant focus on cost reduction. Requires market share advantage or easy access to important raw materials. e.g Easyjet, Kwik Save 2. Differentiation Strategy Involves creating an offering perceived as unique. Providing superior value and customers brand loyalty. Additional cost associated with differentiation needs premium pricing. Requires innovation and marketing skills. 1.Segmented Or Focussed Strategy Firms concentrate on a select few target markets targeting effort on one or two segments. A strategy most suited to relatively small firms

243 Growth strategies in the Biosciences

244 A Framework for Enterprise Development and Entrepreneurship244 What are growth strategies? Organic v Acquisition Growth strategies Acquisition Growth Outright Purchase Joint Ventures Strategic Alliances Internal/Organic Growth R&D: new and improved products Exporting and licensing Expanding capacity: new premises, equipment Improving efficiency: making processes faster, cheaper and more accurate

245 A Framework for Enterprise Development and Entrepreneurship245 Key strategic options for the Biosciences development 1.Collaborative research 2.Licensing 3.Selling IP outright 4.Strategic alliances 5.Joint venture 6.Start-up

246 A Framework for Enterprise Development and Entrepreneurship Collaborative research E.g. transfer of personnel between non-competitive industries Advantages No financial risk to academic partner Low financial return to academic partner Can allow commercialisation to take place with different levels of involvement of academic partner (though most likely to be limited involvement Disadvantages Unlikely to have control over the commercialisation of the technology Source: BBSRC, 2006

247 A Framework for Enterprise Development and Entrepreneurship Licensing Allowing third party to use of Intellectual property Advantages Can allow researcher to continue academic research or explore other routes to commercialisation Can produce a royalty income stream License can be assigned exclusively to one licensee or to many licensees Disadvantages Requires specialist expensive IPR legislation expertise. Terms and conditions of the licensing contract are crucial Source: BBSRC, 2006

248 A Framework for Enterprise Development and Entrepreneurship248 Types of licences Exclusive: –This type of license gives the licensee exclusive rights to exploit the technology (including exclusion of the licensor) Non-exclusive: –Here, the licensor can license the technology to more than one licensee Sole: –Here, there is only one licensee, but the licensor also retains the use of the technology Source: BBSRC, 2006

249 A Framework for Enterprise Development and Entrepreneurship249 Negotiated terms of a license The timescale of the license, when does it start, when does it finish, under what circumstances may the license may be terminated (by either party) What exactly is being licensed What can be done with the technology, are there any restrictions on the use? Where the technology can be utilised, are there any geographical, market sector or other constraints on its use The payment terms; what payments will be made, when, and on what basis will they be calculated? Source: BBSRC, 2006

250 A Framework for Enterprise Development and Entrepreneurship Selling IP outright The outright transfer of IP from academic researchers to another owner for a substantial sum. Advantages Can be lucrative if the potential of idea has been thoroughly researched and identified Academic researchers could still operate under licence agreement with new owner Disadvantages Academic originators have no control over the future commercialisation of IP Source: BBSRC, 2006

251 A Framework for Enterprise Development and Entrepreneurship Strategic alliances Collaboration with partners on joint research programme under clear and negotiated terms and conditions. Advantages Little/no financial risk to academic partner Can allow commercialisation to take place with different levels of involvement of academic partner Disadvantages Modest financial return to academic partners Limited control over the commercialisation of the technology Source: BBSRC, 2006

252 A Framework for Enterprise Development and Entrepreneurship Joint Ventures A negotiated contractual alliance between academic IPR originators and commercial partners to develop that IPR and bring it to market. Usually infers a new start up business is created. Advantages The skill sets of alliance partners are used to mutual advantage, partners concentrate on their strengths Disadvantages Significant effort involved in the search for a alliance partner Requires a great deal of trust between alliance partners Source: BBSRC, 2006

253 A Framework for Enterprise Development and Entrepreneurship Start-up 1 Starting a new business to harvest the most benefit of the commercialisation of IPR. Advantages Can offer the most financial and career development rewards The academic founder(s) have more control over the exploitation of the technology than via other exploitation route, depending on role chosen in the company Source: BBSRC, 2006

254 A Framework for Enterprise Development and Entrepreneurship Start-up 2 Disadvantages Requires a high level of financial and personal involvement and risk from the academic business founders. The level of involvement and risk can vary depending on the legal structure of the new company Requires a the deployment of a much larger set of skills from IPR originators than other options. Requires significantly more investment than other exploitation routes Academic start up founders take the full burden of venture risk Source: BBSRC, 2006

255 A Framework for Enterprise Development and Entrepreneurship255 A typical route to Commercialisation in the Biosciences Imprecisely Defined Applications Core Technology Status Well Defined Fluid Well Developed Early stage licensing Research partnerships: Government/universities/ companies Test & development agreements with licence option Licence agreements and joint ventures End-customer & supplier alliances Source: Ithaka Life Sciences, 2004

256 SWOT analysis

257 A Framework for Enterprise Development and Entrepreneurship257 What is SWOT analysis? A SWOT analysis is a simple framework aimed at analysing the strengths and weaknesses of the organisation in relation to the opportunities and threats in the present and future environment It aims to provide strategic options which: –Take advantage of the opportunities –Overcome or circumvent the threats –Remedy weaknesses –Capitalise on strengths

258 A Framework for Enterprise Development and Entrepreneurship258 Strengths and weaknesses Strengths and weaknesses are internal to the business There are a number of frameworks that can be used to carry out an internal audit of the business to determine strengths and weaknesses e.g. McKinsey 7s, Key Success Factors Here we suggest a simple framework: 10Ps You will need to determine how your business performs currently on all the criteria

259 A Framework for Enterprise Development and Entrepreneurship259 The 10 Ps of internal risk analysis Policies: –Need to be developed to meet and exceed statutory requirements Planning: –At strategic and operational level, clarifying purpose and involvement Product/Service: – Design or for purpose and eventual disposal. Process: –Risk associated with all production processes Premises: –Location, size, lease stability suitability

260 A Framework for Enterprise Development and Entrepreneurship260 The 10 Ps of internal risk analysis People: –Skill training, creation of apt organisational culture, risk reduction and supervision Protection: –People premise, materials, intellectual property, data Procedures: –Are they apt for organisation, monitored, measured and evaluated Purchasing: –Continuity of supply, quality standards of suppliers, manual handling Performance: –Benchmarked against others in sector, measurement of risk

261 A Framework for Enterprise Development and Entrepreneurship261 Opportunities and threats These can be established through environmental scanning: –PESTEL analysis –Market analysis –Industry forces – Porters five forces

262 A Framework for Enterprise Development and Entrepreneurship262 TOWS Matrix WT Strategies Minimise weaknesses and avoid threats ST Strategies Use strengths to avoid threats Threats WO Strategies Overcome weaknesses by taking advantage of opportunities SO Strategies Use strengths to take advantage of opportunities Opportunities WeaknessesStrengths

263 A Framework for Enterprise Development and Entrepreneurship263 Example: BioBurp See example in pack (In class exercise, page 8)

264 Risk analysis and scenario planning

265 A Framework for Enterprise Development and Entrepreneurship265 Risk analysis matrix Probability Impact High Low High High Impact High Probability PESTEL Factors High Impact Low Probability PESTEL Factors Low Impact High Probability PESTEL Factors Low Impact Low Probability PESTEL Factors

266 A Framework for Enterprise Development and Entrepreneurship266 Scenario planning (what if) Consider high impact, highly probably PESTEL factors Each of these factors can then be given two or three contrasting development path scenarios to identify ways of minimising their negative influence and maximising the potential that each path might have. The combination of PESTEL analysis and scenario planning techniques can be used to generate a picture of the anticipated future environment which the business may have to operate

267 A Framework for Enterprise Development and Entrepreneurship267 Key point summary There are numerous growth strategies that can be used on the route to commercialisation for the Biosciences - Collaborative research, Licensing,Selling IP outright, Strategic alliances, Joint venture and start-up Growth strategies change over the development of the business SWOT analysis enables the identification of a range of strategies that will allow the business to grow and defend itself against potential threats RISK analysis enables the key external factors to be identified and prioritised according to their probability and severity of impact Scenario planning can be used to prepare the business for a range of risks that are perceived in the external environment

268 8. Marketing Strategy Defining the Marketing Mix for your Business

269 A Framework for Enterprise Development and Entrepreneurship269 Learning outcomes By the end of this session students should be able to: Recognise the elements required in developing a marketing strategy For the assessment students should: Develop a marketing strategy through formulation of the marketing mix for their product/service

270 A Framework for Enterprise Development and Entrepreneurship270 TLA framework Business planning Intellectual Property Rights Business strategy and risk Market and competitor analysis Marketing strategy The management team Operational strategy Financial forecasting The pitch

271 The marketing mix The 7Ps

272 A Framework for Enterprise Development and Entrepreneurship272 The marketing mix: 7 Ps Physical People Promotion Place Price Product Process Source: Bitner, M. J., Boom, B. H. and Tetrealt (1995) The traditional mix elements Additional service organisation specific mix elements

273 A Framework for Enterprise Development and Entrepreneurship273 Unique Selling Proposition (USP) The marketing mix blended together becomes your USP Typically business add and subtract ingredients from the mix to keep the product/service in the customers mind

274 A Framework for Enterprise Development and Entrepreneurship274 Product 1 Comprising of: Product architecture and design Product positioning Product development and planning There is no right price for the wrong product

275 A Framework for Enterprise Development and Entrepreneurship275 Product 2 Consider the following for you business plan: Product variety Quality Design/Features Brand name Packaging/Sizes Services Warranties and Returns

276 A Framework for Enterprise Development and Entrepreneurship276 Price PRICE provides PROFIT Profit indicates your success in finding, satisfying and keeping customers. However, for your customers its not just about the monetary price of your offering. Customers also consider the other costs of the purchase that they may incur, including: Time involved in selecting purchase Physical effort involved in selecting purchase. Sensory and psychic costs Customers perceptions are all important

277 A Framework for Enterprise Development and Entrepreneurship277 Price 2 Needs to cover costs Cost + approach i.e. total cost/ number of products sold PLUS something for profit may be too rigid How does your price compare with the competition Consider whether your customer will pay a premium based on their perception of the product/service - reassuringly expensive

278 A Framework for Enterprise Development and Entrepreneurship278 How profit is defined Sales Cost of sales Gross profit Operating costs Net profit

279 A Framework for Enterprise Development and Entrepreneurship279 Place Place is about having your product or service in the right place at the right time Making it as easy as possible for customers to buy 3 main methods: Transported direct to the user Using one distribution channel, stockist or retailer Using multiple distribution channels including factors, concessionaires, wholesalers, retailers and franchisees

280 A Framework for Enterprise Development and Entrepreneurship280 Promotion What many new businesses consider as the sum total of the marketing effort, it includes: Traditional mass media advertising, press, T.V., radio, posters, etc Sales promotion Personal selling Public relations Sponsorship Direct marketing Telemarketing Electronic media channels

281 A Framework for Enterprise Development and Entrepreneurship281 The timing of responses to promotion investments Increases in Sales Time After Investment Personal Selling Public Relations Promotions Advertising Rapid Return on Investment Delayed Return on Investment

282 A Framework for Enterprise Development and Entrepreneurship282 People All the people directly involved in the consumption of a service Knowledge workers, employees, management and other consumers often add significant value to the total product or service offering, including: –Staff attitudes and internal relations –Consistency of appearance of staff –The level of service mindedness of the organisation –Accessibility of people –Customer to customer contacts

283 A Framework for Enterprise Development and Entrepreneurship283 Process The procedures, mechanisms and flow of activities by which services are consumed (customer management services) are an essential element of the marketing strategy, including: –The degree of customer contact –Application of quality assurance methods and control standards –The convenience of payment methods –Lead or waiting times

284 A Framework for Enterprise Development and Entrepreneurship284 Physical evidence (ambience) The ability and environment in which the service is delivered Tangible goods that help communicate and perform the service and intangible experience of existing customers The ability of the business to relay that existing customer satisfaction to potential new customers For example: –Building design and layout –Furnishings and décor –Goods associated with the service (e.g. packaging and promotional material)

285 Customer behaviour and the importance of service

286 A Framework for Enterprise Development and Entrepreneurship286 Market type, customer behaviour & indicators Market Type EmbryonicMatureDeclining Customer Behavior Early Adopters FollowersTraditionalist Principle Motivation Indicator Security Belonging Esteem Security Belonging Esteem Security Belonging Esteem

287 A Framework for Enterprise Development and Entrepreneurship287 The loyalty ladder – The customer loyalty continuum Advocates Clients Customers Prospects Suspects Enterprises should aspire to be continually developing their relationship with customers. From the first point of contact as Suspects moving up the loyalty continuum to Advocate status

288 A Framework for Enterprise Development and Entrepreneurship288 Reasons for customer erosion 68%Move because of poor customer service 5%Develop other business relationships 14%Move because of the poor quality of offering 3%Relocate 9%Are claimed by aggressive competitors 1%Death of principal contact

289 A Framework for Enterprise Development and Entrepreneurship289 Reasons why business fail? 42%Poor marketing6%Skills gap 18%Poor cash flow3%High interest rates 10%Compliance2%Bad management 9%Raising finance1%Materials 9%Tax problems

290 A Framework for Enterprise Development and Entrepreneurship290 Key point summary The traditional view of the marketing mix is to determine the product, price, place and promotion The Service element is vital in the overall approach to defining a product and therefore the mix has been extended to include people, physical evidence and process It is possible to outsource aspects of the marketing activity such as promotion/ packaging/brand building to ensure that the business can focus on core activities e.g. R&D/technical development

291 9. Operational Strategy Determining How Your Business Will Run and How It Can Be Simplified

292 A Framework for Enterprise Development and Entrepreneurship292 Learning outcomes 1 By the end of this session students should be able to: Recognise the key elements of operations using a value chain framework Recognise the role incubators in supporting Biotechnology/Bioscience start-up Consider the role of outsourcing to simplify business operations

293 A Framework for Enterprise Development and Entrepreneurship293 Learning outcomes 2 For the assessment students should: Determine their product/service operational requirements

294 A Framework for Enterprise Development and Entrepreneurship294 TLA framework Business planning Intellectual Property Rights Business strategy and risk Market and competitor analysis Marketing strategy The management team Operational strategy Financial forecasting The pitch

295 A Framework for Enterprise Development and Entrepreneurship295 Operational planning Many new starts in the biotechnology sector will require some funding from external sources (e.g. banks, business angels, venture capitalists) It is essential that owners/managers can convince those potential professional investors that every aspect of the businesss operations has been planned, costed and will be managed in the most effective and efficient manner

296 A Framework for Enterprise Development and Entrepreneurship296 Operational planning It might sound obvious but anyone who starts a business needs to plan how their business will work and how the individual elements of that business will be managed to produce the desired results…Goods and services that can be sold to enthusiastic and loyal customers for as much as they will pay This is especially true if the business is capital intensive, operates in a very competitive market place and requires significant amounts of time and cash investments before it turns a profit Unfortunately many new starts dont have as comprehensive an operational plan as they should have and suffer the consequences

297 A Framework for Enterprise Development and Entrepreneurship297 Operational planning Porter has developed a framework that can be used to examine how the various elements of a business should interact along the whole business value chain from: 1.The selection and purchase of raw materials 2.Through the process of adding value to 3.Getting the goods or services to customers then managing their satisfaction He describes five primary activities and four support activities or cross cutting themes which can be applied to any business Source: Porter, 1985

298 Porters value chain: Overview Understanding Where To Explore Infrastructure Financial Management Human Resources Sales & Marketing Outbound Logistics Process Inbound logistics Aftercare Support Activities Primary Activities Source: Porter,1985

299 A Framework for Enterprise Development and Entrepreneurship299 Porters value chain: Primary activities The primary business activities are: Inbound logistics: Including purchasing systems, raw material quality and continuity of supply contingency Process: Including administration systems, plant and equipment maintenance, quality assurance Outbound Logistics: Including ordering mechanisms, customer delivery Aftercare: Including complaints and warranty management Sales and Marketing: Including marketing and communications strategies, sales force management, CRM, intelligence gathering

300 A Framework for Enterprise Development and Entrepreneurship300 Porters value chain: Support activities The support activities, or cross cutting themes, are: Infrastructure elements: Including buildings, operational equipment, administrative systems, plant, tools and vehicles Financial elements: Including capitalisation, purchasing systems, debt management systems, cash management Human Resources elements: Including selection procedures, HR policies and procedures Management elements: Including compliance and monitoring systems, management structures, management and staff skills mix, staff development & training

301 A Framework for Enterprise Development and Entrepreneurship301 Porters value chain The value of the Porter model is that it provides a framework to: Break down the business proposal into five major elements or primary activities Examine each individual primary activity against each support activity and make an assessment about whether they are robust enough for the purpose of running and managing the business

302 Porters value chain 1 Understanding Where To Explore Infrastructure Sales & Marketing Outbound Logistics Process Inbound logistics Aftercare

303 Porters value chain 2 Understanding Where To Explore Infrastructure Financial Sales & Marketing Outbound Logistics Process Inbound logistics Aftercare

304 Porters value chain 3 Understanding Where To Explore Infrastructure Financial Human Resources Sales & Marketing Outbound Logistics Process Inbound logistics Aftercare

305 Porters value chain 4 Understanding Where To Explore Infrastructure Financial Management Human Resources Sales & Marketing Outbound Logistics Process Inbound logistics Aftercare

306 Outsourcing Simplifying the business by using external resources

307 A Framework for Enterprise Development and Entrepreneurship307 In house or outsource ? To make or buy ? It is very unlikely that a new start business in the biotechnology sector will possess all the capabilities and resources it needs to develop its offering ready for market It may be more economical and time efficient to subcontract some development work or processes out to other businesses However the decision to outsource must be given careful consideration especially if the new offering is particularly innovative and will offer significant competitive advantage

308 A Framework for Enterprise Development and Entrepreneurship308 Outsourcing in Pharmaceuticals £800M UK outsourcing in pharmaceutical industry Used for clinical trails, software and applied research Driven by lack of expertise, time and cost reduction Concerns over unintentional IPR leakage, R&D too central to outsource Source: Howells, 2006

309 A Framework for Enterprise Development and Entrepreneurship309 Factors for successful outsourcing Potential subcontractors obviously must be subject to an initial screening process through the application of a due diligence test, to examine their capability to complete the required contract Although contracts are subject to stringent legal terms and conditions, it is the mutual trust between principal and subcontractor and similar organisational cultures that are key success factors when outsourcing

310 Incubators

311 A Framework for Enterprise Development and Entrepreneurship311 Business incubator defined Business incubation is a unique and highly flexible combination of business development processes, infrastructure and people designed to nurture and grow new and small businesses by supporting them through the early stages of development and change Source: UK Business Incubation, 2004

312 A Framework for Enterprise Development and Entrepreneurship312 Business incubators Business incubation is a process to deliver stronger new businesses, create jobs and produce firms developing new ideas and technology Incubators usually consist of a property with small units Provides support, access to a range of business skills

313 A Framework for Enterprise Development and Entrepreneurship313 Key features of incubators Some form of selection or entry qualification based on business viability and growth potential via a business plan The incubator director has close, hands on relationship with client business Businesses are encouraged to leave on graduation when they have established sufficient market share or maturity Judged not just by number of companies but on their performance

314 A Framework for Enterprise Development and Entrepreneurship314 Incubator services: Benefits to clients 1 Incubator directors and staffs knowledge, experience and skills as well as emotional support Close proximity to other entrepreneurs from whom experience and skills can be gained Access to business training and educational programmes Access to systems which can provide financial support or investment

315 A Framework for Enterprise Development and Entrepreneurship315 Incubator services: Benefits to clients 2 Knowledge, skills and experience of a network of experts in business or technology Physical services of incubator Atmosphere of business innovation and growth Clear and marketable image which adds credibility and enhances image with clients

316 A Framework for Enterprise Development and Entrepreneurship316 Location of Bioincubators in the UK E.g. Manchester Liverpool Imperial College, London Cambridge Oxford Porton Down York Norwich

317 A Framework for Enterprise Development and Entrepreneurship317 Considerations for your business plan 1 Location and premises –Why that location? –Own or rent the property or Bioincubator? Why? Production/Research facilities – What equipment will you be using? –How modern is it? Does it have the capacity to meet expected demand? –In house or outsource activities? Management Information systems –How are you managing stock control, financial accounts, product information? –How are you sharing information with partners?

318 A Framework for Enterprise Development and Entrepreneurship318 Considerations for your business plan 2 Key suppliers –Who are they and why choose them? Quality control –What legislative requirements, procedures and protocols will you be using in ensuring product and service quality? Health and safety –What health and safety concerns are there and how are you dealing with them? Staff –What staff do you need to operate the business?

319 A Framework for Enterprise Development and Entrepreneurship319 Key point summary Porters value chain allows the systematic considerations of the operational requirements of the business. Research into best practice in each of these areas is required. Both outsourcing and use of Bioincubators are prevalent in the Bioscience industry Consider using incubators or outsourcing activities to simplify operational aspects of your business Ensure that all elements of operations are effectively costed

320 10. The Management Team Building a Credible Management Team

321 A Framework for Enterprise Development and Entrepreneurship321 Learning outcomes By the end of this session students should be able to: Appreciate the scope and difficulty of setting up a credible management team For the assessment students should: Determine proposed titles, duties and responsibilities of the management team Determine external support e.g. advisory panel and consultants Demonstrate their credibility through the inclusion of CVs

322 A Framework for Enterprise Development and Entrepreneurship322 TLA framework Business planning Intellectual Property Rights Business strategy and risk Market and competitor analysis Marketing strategy The management team Operational strategy Financial forecasting The pitch

323 A Framework for Enterprise Development and Entrepreneurship323 The importance of a strong management team It is extremely difficult to grow a higher potential venture by working single handily. Higher potential entrepreneurs build a team, organisation and a company Source:

324 A Framework for Enterprise Development and Entrepreneurship324 The Limited Liability Company Treated as an individual in law with rights and responsibilities. Senior Management Team Senior Management Team Workers Middle and Junior Management Middle and Junior Management Board Shareholders Identify Strategic Objectives Have Overall Responsibility Identify Strategic Objectives Have Overall Responsibility Interpret Strategic Objectives Develop Tactical Response Interpret Strategic Objectives Develop Tactical Response Implement Tactical Response Do The Graft Collaborators Competitors Customers Funders Government Suppliers Regulatory Authorities Collaborators Competitors Customers Funders Government Suppliers Regulatory Authorities Own The Company External StakeholdersTraditional HierarchyRoles

325 A Framework for Enterprise Development and Entrepreneurship325 The management team Board of directors –Usually five or six members –Elected by stock holders –Set and approve management policies –Consider results on operating results –Declare dividends –Brings supplementary knowledge Non-executive director

326 A Framework for Enterprise Development and Entrepreneurship326 Who could be a director? –Lawyer –Banker –Accountant –Other Business Executives –Local management consultants –Expert in the field Often paid through an annual retainer, board meeting fees and pay for committee work Share option packages offered depending on industry practice and plans for growth The due diligence test also applies to potential directors. Checks for disqualification and character references are essential.

327 A Framework for Enterprise Development and Entrepreneurship327 What is due diligence? Process where your business, your financial records and your business plan in minute detail, checking the validity of almost every known fact about your business - including your past performance and the credentials of you and your fellow directors Investigation of the records to support its value and find out whether there are "skeletons in the cupboard" Process is covered by confidentiality undertakings

328 A Framework for Enterprise Development and Entrepreneurship328 Management– the reality Finding good directors and CEOs is not easy Founding scientists rarely make good CEOs Management needs evolve as company develops Long-term vision from the start: identify skill gaps Plan ahead: be receptive to learning opportunities Use experienced help from the start (e.g. mentors, consultants etc) Source: Ithaka Life Sciences, 2004

329 A Framework for Enterprise Development and Entrepreneurship329 Typical profile of a CEO Board experience in technology-based company. Fund raising experience. Deal maker with a successful track record. Marketing and business development skills. Ability to work with academic and industrial scientists. Strong presentation and inter-personal skills. Strategic vision. International experience, preferably in the US market. Ability to take products from R&D to market. Entrepreneurial spirit !!! Source: Ithaka Life Sciences, 2004

330 A Framework for Enterprise Development and Entrepreneurship330 5 Phases Of Growth Source: Greiner, 1996 Age Of Organisation Phase Stage Of Organisation Large Crisis Of Leadership Crisis Of Autonomy Crisis Of Control Crisis Of Red Tape Crisis Of ??? Growth Through Creativity Growth Through Direction Growth Through Delegation Growth Through Coordination Growth Through Collaboration Small Revolution Stages Evolution (Growth) Stages

331 A Framework for Enterprise Development and Entrepreneurship331 Typical CEO start-up package Salary: £ k p.a. (full time) Share options: 5-10% vesting with time Bonus: 10-20% of annual salary Relocation package: up to £7.5k tax-free Additional benefits: pension, health insurance etc Source: Ithaka Life Sciences, 2006

332 A Framework for Enterprise Development and Entrepreneurship332 Your external support team Professional advisors Consultants Advisory board –Can be an alternative to a board of directors –Qualified outsiders are asked to serve on the council

333 A Framework for Enterprise Development and Entrepreneurship333 Key point summary It is important to create a support team for the business through assigning a board of directors, identifying consultants and /or an advisory board Roles of the management team and staff must be clearly defined It is unlikely that scientists will have the capability of managing their own business making the team approach vital The skills required to establish a company may not be the same as those required to steer it through the early stages of growth The selection procedures for managers and other key staff take this into account

334 10. Financial Planning Funding in the Biosciences and Projecting Financial Performance of the Business

335 A Framework for Enterprise Development and Entrepreneurship335 Learning outcomes 1 By the end of this session students should be able to: Determine possible funding sources appropriate to the stage of development List and cost the resources required to establish an enterprise Understand the purpose of the three financial forecast documents 1.Cash flow forecast 2.Profit and loss 3.Balance sheet And break even analysis and establish loan requirements

336 A Framework for Enterprise Development and Entrepreneurship336 Learning outcomes 2 For the assessment students should: Estimate sales projections and other sources of income Estimate costs Demonstrate funding required through a cash flow forecast Identify funding sources Demonstrate the attractiveness to investors through calculation of payback and breakeven Justify all assumptions made in determining the financial requirements of the business

337 A Framework for Enterprise Development and Entrepreneurship337 TLA framework Business planning Intellectual Property Rights Business strategy and risk Market and competitor analysis Marketing strategy The management team Operational strategy Financial forecasting The pitch

338 A Framework for Enterprise Development and Entrepreneurship338 What investors want You will need to be able to provide potential investors with : Estimated sales projections based on the marketing strategy and estimates of anticipated share of targeted market Estimated start up and initial running costs Cash flow forecasts (usually three - five years) Profit & loss and balance sheet forecasts Any other potential sources of finance

339 A Framework for Enterprise Development and Entrepreneurship339 What do potential funders want to know about your business ? The eventual choice of funder will depend on many different objective (and some subjective) factors, including: Attitudes to risk Application of the due diligence test Experience of lending to the sector Expected return on investment Institutional lending policy Rapport between lender and borrower

340 Funding enterprise development in the Biosciences

341 A Framework for Enterprise Development and Entrepreneurship341 Funding the Biosciences The creation of top tier US Bioscience companies has historically required $ million dollars prior to profitability Companies need these finds to finance lengthy, risky drug development Even in the US, the best funded Bioscience market in the world, Bioscience companies have historically taken 10 years to reach profitability Source: DTI, BIGT,2003

342 A Framework for Enterprise Development and Entrepreneurship342 Funding rounds for the Biosciences Initial finance Source: Ithaka Life Sciences, 2004 Formation Seed finance 1 st VC round Founders, family & friends Business angels; University Challenge Funds; specialist Venture capitalists

343 A Framework for Enterprise Development and Entrepreneurship343 Sources of funding Self, family and friends Shareholders and directors Internal company sources Banks Second tier finance Special financial institutions Venture Capitalists Mergers and Acquisitions Grants Business Angels

344 Funding sources in Bioscience commercialisation process

345 A Framework for Enterprise Development and Entrepreneurship345 1: Idea development and validation Requires typically £50,000 to £1 million University Challenge Seed Funds: up to £250,000 Family/friend/angel funding (e.g. Cambridge Angels): typically £100,000 Venture Capital (seed specialists e.g. Avalar, Sitka and some broader biotech specialists e.g. Merlin, Apax, Advent BBSRC Small Business Research Initiative: grants of £100,000 -£200,000 over 2-3 years, second call of £1.4M Investment funds aligned alongside research bodies –Catalyst BioMedica (Wellcome Trust) –Cancer Research Technology Ltd (CRC) –MVM (MRC) Source: DTI, BIGT, 2003

346 A Framework for Enterprise Development and Entrepreneurship346 2: Early stage – Start up/first stage venture capitalists Requires typically £1M -10 million Start-up focused on broader venture capitalists e.g. Abingworth Schroder Ventures, Apax, Merlin, Advent Very high net worth angels SMART: grants for £50,000 - £400,000, out of a ttal funds of £2 million LINK programme: collaboration between industry and research base funding 50% of R&D costs over 2-3 years Source: DTI, BIGT, 2003

347 A Framework for Enterprise Development and Entrepreneurship347 3: Later stage Multiple rounds of venture capital funding £ million per round Institutions willing to invest in private companies Pharma/biotech partners Public markets: AIM,LSE,NASDAQ Source: DTI, BIGT, 2003

348 Business Angels

349 A Framework for Enterprise Development and Entrepreneurship349 Who are business angels? One of the sources of funding available to businesses with high growth potential is through Business Angels, high net worth individuals with cash to invest and skills that can be utilised Attracting investment from these individuals requires more than a high quality business plan Business angels examine every aspect of a business proposal before they decide to invest The disciplines required to prepare an investment case for these individuals can be applied to other potential funders

350 A Framework for Enterprise Development and Entrepreneurship350 Business angels – Who are they? 1 High net worth individuals with cash to invest on their own or as part of a syndicate in high growth businesses They also make their own skills, experience and contacts available to company They rarely have previous connections with companies before they invest but will have very a strong experience of its industry or sector The motives for their investment may be purely financial but there may be many more reasons why a business angel will choose to invest

351 A Framework for Enterprise Development and Entrepreneurship351 Business angels - Who are they? 2 A typical business angel may have investments which last for three years under the Enterprise Investment Scheme (EIS) In the UK most business angels belong to a trade association The British Business Angel Association all of whose members will have signed up to the BBAA best practice Code of Conduct

352 A Framework for Enterprise Development and Entrepreneurship352 Business angels - What do they look for? 1 A return of between 35% and 40% per year through dividend and share value growth An opportunity to influence the strategic direction of the enterprise and also operational issues The enthusiasm, expertise, motivation, track record and integrity of the business founders The business competitive edge and growth potential of the business target market

353 A Framework for Enterprise Development and Entrepreneurship353 Business angels - What do they look for? 2 Compatibility between the management, business proposal the business angel skills and investment preferences The financial commitment of the business founders An exit strategy i.e. How you wish to reap the benefit of your business in the long term E.g. closing the business, selling the business, floating the business, merging

354 A Framework for Enterprise Development and Entrepreneurship354 Business angels – What should you look for?! That the enterprise management team and business angel are compatible and will be able to work together That the business angels skills match the companies needs You are within your rights to apply the due diligence procedure to any potential BA or other investor

355 A Framework for Enterprise Development and Entrepreneurship355 Business angels – What should you provide? Basic information about the business product and service range, number of employees and trading history A comprehensive business plan containing all the essential elements Historical trading and financial information the previous 3-5 years (where applicable) Amount of money sought and its use Access to your financial and legal representatives to enable the Business Advisor to conduct a due diligence test A valuation of the enterprise

356 The financial forecast documents and Break even point Costing start up Cash flow forecast Profit and loss forecast Balance sheet forecast Break even point

357 A Framework for Enterprise Development and Entrepreneurship357 The financial forecast documents Whoever is approached to provide the cash for enterprise start up and early trading will want to evaluate the business plan including the comprehensive financial forecasts and the assumptions used in their construction

358 Costing the start up

359 A Framework for Enterprise Development and Entrepreneurship359 Costing the start up: The shopping list The enterprise shopping list will consist of five elements: 1.Premises 2.Operational needs 3.Administrative needs 4.Intangible needs 5.Working capital

360 A Framework for Enterprise Development and Entrepreneurship360 Costing the start up - Premises Example selection criteria: Floor size Location Rateable value Security Service costs Utility costs

361 A Framework for Enterprise Development and Entrepreneurship361 Costing the start up – Operational needs Communications hardware Health and Safety equipment Marketing costs Monitoring equipment Process equipment Tools: hand, powered and associated consumables Pre start and early trading trading

362 A Framework for Enterprise Development and Entrepreneurship362 Costing the start up – Administrative needs Office equipment Communications systems ICT Systems for compliance monitoring, customer relationship management (CRM) financial control and process quality measurement Stationery and consumables

363 A Framework for Enterprise Development and Entrepreneurship363 Costing the start up 4 - Intangible needs Critical breakdown covers Insurances Licences and permissions Professional fees, legal, accountancy, surveying etc.

364 A Framework for Enterprise Development and Entrepreneurship364 Costing the start up – Working capital and contingency needs Cash in the bank to fund the running of the business and the additional contingency element

365 A Framework for Enterprise Development and Entrepreneurship365 Costing the start up The costing exercise will require subsequent review as the business plan is developed and more options become available: –Leasing equipment rather than outright purchase of new or second hand examples –Subcontracting some less critical parts of the business process may be an alternative to doing everything in house providing that subcontractors can meet both the hard and the softer sub contracting qualifications

366 Cash flow forecast What is it for? How do we construct one?

367 A Framework for Enterprise Development and Entrepreneurship367 What are cash flows for? 1 An attempt to forecast the future viability of the business in terms of cash flowing into and out of the business, utilising the most realistic assumptions possible Remember … –Measuring the business performance by turnover is insanity –Profit is vanity –Cash is reality

368 A Framework for Enterprise Development and Entrepreneurship368 What are cash flows for? 2 You are trying to predict the future performance of your business over a 12, 24, 36 month or even longer period of time The longer the prediction period the less the probability of accuracy The finished result should be consistent with all other elements of your business plan and obviously convince you (the entrepreneur) of potential viability

369 A Framework for Enterprise Development and Entrepreneurship369 What are cash flows for? 3 To anticipate the amount of working capital (cash in the bank) required to start the business Most businesses do not make enough provision for working capital at the start of trading and never recover from that initial lack of investment Bioscience based businesses have long gestation periods. There must be a commitment to the provision of sufficient working capital until revenues flow into the business from sales

370 A Framework for Enterprise Development and Entrepreneurship370 What are cash flows for? 4 To anticipate the flow of cash into and out of the business. The timing of inflows and outflows of cash from the business account are as important as the quantities involved To anticipate when net cash flows and more importantly, monthly closing balances are likely to be negative The business manager can arrange supplementary short term loans (overdrafts) or additional injections of cash well before they are needed

371 A Framework for Enterprise Development and Entrepreneurship371 Cash flow forecast construction 1 Identify how much money you need to cover the cost of your shopping list, in terms of: Premises requirements Operational needs: Tools, equipment, staffing requirements, marketing, etc Administration needs: ICT systems Intangible needs: Professional fees etc Working capital: Cash in the bank

372 A Framework for Enterprise Development and Entrepreneurship372 Cash flow forecast construction 2 Determine how you will fund your start up shopping list including all the important elements: Will it be from grants, soft unsecured loans, secured loans, your own money or a mix of all four? If funding is from loans from external sources what is the rate of interest demanded by lenders? What is the probability of interest rates rising during the loan period?

373 A Framework for Enterprise Development and Entrepreneurship373 Cash flow forecast construction 3 Start the cash flow forecast by determining what it will cost to run the business in terms of: 1.Direct Costs The raw materials and other consumables that are used at a rate directly proportional to income (takings) from sales 2. Indirect Costs or Overheads All other business expenses that are not directly proportional to income (takings)

374 A Framework for Enterprise Development and Entrepreneurship374 Cash flow forecast construction 4 One of the easiest overheads to work out is your own monthly drawings or salary requirement: The amount you need to draw out of the business to meet your own personal, survival budget requirements An example survival budget layout is shown in the word document that accompanies this presentation

375 A Framework for Enterprise Development and Entrepreneurship375 Cash flow forecast construction 5 By calculating your total business costs you can then work out how much income you need to generate from your customers Be generous with your business cost forecasts!! Then be conservative with your business income forecasts!! If your first draft cash flow doesnt look viable (and you may need to do more than one) start looking at: –Ways to reduce your costs –Increase income by positioning your product or service at markets that might provide better returns (takings)

376 A Framework for Enterprise Development and Entrepreneurship376 Applying sensitivity analyses [Looking at the what ifs???] An examination of the sensitivity of the business to fluctuations in costs and income from sales The longer the forecast period the more valid the application of this analysis

377 A Framework for Enterprise Development and Entrepreneurship377 Cash flow forecast assumptions Cash flows are only as valid as the assumptions made in their construction Potential investors, business angels and venture capitalists will always question the validity of all the assumptions made during the construction of the forecast State them in your business plan

378 Profit and Loss forecast

379 A Framework for Enterprise Development and Entrepreneurship379 Profit and Loss (P&L) forecast 1 The P & L forecast or income statement captures, over a specific period all the sales and costs associated with achieving either a profit or loss for that period Sales Revenue (recorded net of any tax) relates to all sales in a specific trading period (in this case 1 year) Costs of Sales are the direct costs associated with achieving the sales revenue Gross Profit = Sales revenue - Costs of sales

380 A Framework for Enterprise Development and Entrepreneurship380 Profit and Loss (P&L) forecast 2 Operating Costs also known as indirect costs or overheads do not vary with the volume of sales Operating profit = Gross Profit – Total Operating Costs However there are other non-operating costs and income sources that need to be taken into account: –Depreciation and amortisation –Interest charges and interest derived income Profit before tax take these non operating costs into account and this is the figure that is subject to corporation tax leaving Profit after Tax

381 A Framework for Enterprise Development and Entrepreneurship381 Profit and Loss account - Typical layout ACME Pharmaceutical s Ltd Profit & Loss for the year ended 31 March 2006 Cost (£)Income (£) Sales Income500,000 Cost of Sales Raw materials Sub Contract Costs 50, , ,000 Gross Profit (Sales less Cost of Sales)330,000 Overheads Employment Costs Depreciation Other Operating Costs 150,000 20,000 80, ,000 Profit before interest and tax80,000 Interest payable10,000 Profit before tax70,000 Tax15,000 Profit after tax55,000 Dividends5,000 Net profit or retained earnings50,000

382 The Balance Sheet See Excel example

383 A Framework for Enterprise Development and Entrepreneurship383 What is the balance sheet? It is a financial snap shot that summarises the value of the business at a particular point in time although it is usually carried out on annual basis. The balance sheet does provide an indication of… The accounting value of the business, (assets less liabilities). How the business is financed and How solvent the business is i.e. how quickly assets can be converted into cash

384 A Framework for Enterprise Development and Entrepreneurship384 The balance sheet 2 - What it doesnt do Balance sheets do not: Show the profitability of the business Represent the true market value of assets which may be more or less than the figures on the balance sheet Show the market value of the business which depends on many other factors including profitability and the current value of assets

385 A Framework for Enterprise Development and Entrepreneurship385 How to build a Balance sheet Estimate value of fixed assets at year end (asset) Estimate value of stock if any (asset) Estimate how much is owed to the business including VAT (liability) Estimate how much the business owes to suppliers of materials and services including unpaid VAT, PAYE and NI (liability) Estimate borrowings from bank and other sources (liability) Calculate net current assets by deducting current liabilities from current assets

386 A Framework for Enterprise Development and Entrepreneurship386 Balance Sheet Typical Layout Fixed Assets (1) Tangible Assets Equipment40,000 Buildings95,000 Intangible Assets Goodwill5, ,000 Current Assets (2) Stock10,000 Debtors20,000 Cash at bank5,000 35,000 Current Liabilities (3) Loans23,000 Creditors7,000 Tax2,000 32,000 Net Current Assets (2 minus 3)3,000 Total assets minus current liabilities (1 + 2 minus 3)143,000 Creditors (Falling due after one year)(100,000) Net Assets43,000 Capital and reserves Shareholders30,000 Reserves13,000 Net Worth43,000 BALANCE SHEET AS AT 31 MARCH 06

387 Break Even Point

388 A Framework for Enterprise Development and Entrepreneurship388 What is Break Even Point (BEP) ? The point at which the cost of producing an offering, a good or service equals the income made from selling that particular offering Total costs of production consist of two elements: 1.Fixed costs (remain fixed whatever the output) 2.Variable costs (vary according to output) Income increases with increased output (sales) Break Even Point occurs when total costs equal income

389 A Framework for Enterprise Development and Entrepreneurship389 Break Even Point Variable Cost Element Fixed Cost Element Income ££££s Number of units output Total Costs

390 A Framework for Enterprise Development and Entrepreneurship390 Break Even Point 1 = Fixed Costs Selling Price – Unit Variable Costs

391 A Framework for Enterprise Development and Entrepreneurship391 Break Even Point 2 Gross Profit = Sales - Cost of Sales Gross Profit % = Gross Profit x 100 Sales Break Even = Total Fixed Costs x 100 Gross Profit %

392 A Framework for Enterprise Development and Entrepreneurship392 Key point summary There are numerous sources of income for the Bioscience start up firm which vary overtime depending on the amount of money required and the stage development of these products A number of documents are needed to present the business case to investors inc. cash flow, P&L and balance sheet The most important document for the business plan is the cash flow forecast as it determines whether the business has money or not and funding requirements

393 12. Pitching the Idea Presenting the Business Case to Potential Investors

394 A Framework for Enterprise Development and Entrepreneurship394 Learning outcomes These notes should enable students to: Recognise needs of investors Define the scope of a presentation of a business plan Recognise factors that make a successful presentation For the assessment students should: Prepare and present their business plan to potential investors

395 A Framework for Enterprise Development and Entrepreneurship395 TLA framework Business planning Intellectual Property Rights Business strategy and risk Market and competitor analysis Marketing strategy The management team Operational strategy Financial forecasting The pitch

396 A Framework for Enterprise Development and Entrepreneurship396 The Pitch – What is it? A presentation of your business plan to attract potential investors, staff, collaborators, management team Each stakeholder will require different aspects of the business to be explained to them to determine whats in it for them?

397 A Framework for Enterprise Development and Entrepreneurship397 The Pitch – Who are potential investors? Could possibly be drawn from: –Friends –Family –Bank –Business Angel –Venture Capitalists For this learning framework you need to consider presenting your business plan to potential investors

398 A Framework for Enterprise Development and Entrepreneurship398 Preparation Know your investor Decide how much money you want What else do you want – contacts, management expertise Know your business inside out and cover any weak points What are you giving in return? A share of the business – how much are you prepared to give away?

399 A Framework for Enterprise Development and Entrepreneurship399 What are investors looking for? Maximising potential return on investment through cash flows that will be received, while minimising risk exposure World class management - proven track record Products that address major needs

400 A Framework for Enterprise Development and Entrepreneurship400 Content of business presentation 1.The companys background and its product and services 2.A market analysis and description of the opportunities present 3.The companys competitive edge and the marketing strategies it will use to promote that edge 4.The management team and its members qualifications and experience 5.The financial analysis that shows lenders and investors an attractive payback or pay off

401 A Framework for Enterprise Development and Entrepreneurship401 Successful presentation Be enthusiastic but not over emotional Quick upfront explanation of the new venture – the Hook! Discuss benefits and the opportunity rather than detailed aspects of the product/service Avoid detailed technical discussion Use visual to punctuate the presentation rather than to explain all Be sure to answer the question – whats in it for the investor Follow up with each investor

402 A Framework for Enterprise Development and Entrepreneurship402 Key point summary Preparation as with any presentation is key here Investors want to know that any investment they might make offers an attractive reward and is off set by recognition and action against potential risks Do not attempt to present your entire plan. Pick out the key elements that investors will want answers to i.e.. the following questions –what is your product/service –why will it succeed –what is in it for the investor Good luck!

403 A Framework for Enterprise Development and Entrepreneurship403 If you want to take it further University Business Support Unit Business Link YES – Young Enterprise Scheme in the Biosciences NES Programme New Entrepreneur Scholarship programme


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