1. TEACHING AND ENCOURAGING ENTREPRENEURSHIP AND INNOVATION
Belarus Universities
DR. KENT MILLINGTON
OCTOBER 2012

2. TOPICS OF DISCUSSION Innovation Opportunity Recognition
Managing Innovation
Technology Commercialization
Developing New Business
Business Model canvas

3. Entrepreneurship Risks and Rewards
Business Failure
Unpredictable Business Conditions
Long Hours
Product/Service compete on Price only
Imitation strategy

4. Entrepreneurship Risks and Rewards
Financial
Emotional – building a business
Pride
Recognition
Flexibility
Creativity

5. ENTREPRENEURSHIP: THE ART AND SCIENCE OF BUILDING VALUE
ART: CREATIVITY; ENERGY; FEEL; INSIGHT
SCIENCE: ANALYSIS; DISCIPLINE; SYSTEMATIC APPROACH

6. ENTREPRENEURSHIP Identify a need or opportunity
Create a solution - Innovation
Implement solution to create value
Harvest or other long-term strategy

7. Two Kinds of Entrepreneurship
Opportunity – based
Necessity – based
Young people are dominant participants in entrepreneurship.

8. Two Important Considerations for Entrepreneurs
INNOVATION / CREATIVITY
OPPORTUNITY IDENTIFICATION

9. Continuum of Innovation
Imitative Incremental Evolutionary Radical Revolutionary
The secret to innovation is uncovering an unmet consumer need and the filling it in an innovative, creative way.

10. Continuum of Innovation
Imitative: copies something well-known and accepted
Incremental: small improvements; faster, better, cheaper
Evolutionary: new to firm but not to world (i.e., technologies in new places)
Radical: technologies that give large performance improvements or lower costs
Revolutionary: new to individual, firm, and the world
Best Opportunities between Incremental and Radical

11. The Creativity-Innovation-Entrepreneurship Chain
Latest science and technology
Needs in society and the marketplace
Creativity
Production of novel
and useful ideas
Discovery of
opportunities
Output: new ideas
Innovation
Refining, evaluation
and first prototypes
of the new ideas
Evaluation of
opportunities
Output: prototype
Entrepreneurship
Creation of value
in the marketplace
Exploitation of
opportunities
Output: new product,
service, or process

12. Types of Innovation
Product: early stage of product life cycle, innovations are frequent. As rate of product innovation decreases, process innovation increases. (What we make)
2. Process: makes manufacturing more efficient through automation, lowering costs. (How we make it)
Product /Service innovation creates much more new wealth than process innovation!

13. Three Characteristics of Opportunity
Newness
Potential Economic Value
Perceived Desirability
Opportunity implies something that has not existed or been available before, that can yield potential economic gains, and whose development is consistent with legal and/or moral standards of the society in which it occurs.

14. A Framework Alertness Social Network Ideas Prior Knowledge -Of markets
-How to service markets
-Customer problems
-Accumulation over time
Example: Focus Media in Shanghai

15. Basic Propositions Concerning Opportunities
Proposition 1: Opportunities emerge from changes in knowledge, technology, economic, political, social, and demographic conditions.
Proposition 2: Recognition depends on previous experience which enables people to see links between previously unconnected changes, knowledge, or events.

16. Product Opportunity Gap
Social:
Social and Cultural trends, Historical trends
Product Opportunity Gap
Technology:
Emerging technologies, Re-evaluating existing technologies
Economic:
State of the Economy, Level of Disposable Income, Changing Investment Opportunities

17. Discontinuous opportunities: The source of radical innovation
Create new markets
and new products
Adjacent
Opportunities
Exploit current assets
and capabilities
New
Markets
Status Quo
Grow market
share and profit
(business expansion,
not new business
development)
Adjacent
Opportunities
Increase primary
market demand
Existing
Markets
Existing Products/
Technology
New Products/
Technology

18. … which create disproportionate wealth relative to adjacent opportunities
14%
86%
Adjacent
opportunities
Discontinuous
38%
62%
61%
39%
Type of new
Business launch
Revenues
Profits
Source: Chan & Mauborgne (1997)

19. Discovery to Application
Managing Technology -
Discovery to Application
Scientific Discovery
Invention
Innovation
Technology Application

20. Sustaining vs. Disruptive Technologies
Sustaining technologies focus on improvements of importance to existing customers. Existing companies best with incremental innovation.
Disruptive technologies create a new value proposition, reach new markets and customers. New companies better at disruptive, radical innovation.

21. Creating Competitive Advantage
Something that the firm does better than any of its competitors.
Goal: To have a sustainable competitive advantage
Requires that the advantage:
Must be valued by customers
Not easily duplicated by competitors

22. Technology and Competitive Advantage Competitive Advantage
Value Creation
Competitive Dynamics

23. Major Strategic Questions
Should we create our own new technology and innovations internal to the firm? OR
Should we acquire technology from external sources like acquisition or strategic alliances?

24. Dimensions of Internal Innovation
Goal of internal innovation is for the firm to outperform its competition.
Internal innovation involves many individuals, capabilities, and resources.
Resources are critical to the innovation process. (Human, Physical, Financial)

25. Reasons for Using External Innovation:
The firm’s product line falling behind competitors.
A new competitor enters the market, which will change the dynamics of the industry.
The firm discovers its processes are not as efficient and/or effective as those of its competitors.
The firm believes its current products or processes are not going to be successful in the future.
Expansion into new markets and/or new products is achieved faster.

26. Technology S - Curve
Performance
Product
Time

27. The S-Curve of Technological Progress

28. S – Curve Strategy Performance Product 3rd Technology 2nd Technology
1st Technology
Time

29. Managing Along the S – Curve
Performance
Product
Managing Growth
3rd Technology
2nd Technology
Managing
Transitions
1st Technology
Time

30. Management Implications
Technology shifts before investment recovery
Management focus often fragmented
Engineering strength often misused
Marketing becomes a problem introducing new technology over the old one
Difficult to manage the ROI in important technology.

31. The Process of Technology Commercialization
Commercializing New Technologies, Vijay K. Jolly, Harvard Business School Press, 1997, p. 4

32. Technology Commercialization Process
Imagining
Incubating
Demonstrating
Promoting
Sustaining
Product planning steps
Creating unique product ideas
Proving product viability
Build prototypes
Build products & introduce to markets
Build markets & improve products
Build initial markets & plan market expansions
Business planning steps
Find resources to build prototypes & identify markets
Develop market growth strategies
Find interested people & money
Resource Needs
People Small Moderate Medium Large
Physical None Moderate Medium Large
Financial None Moderate Large Largest

33. Technology Assessment
Understand Technology
Discover Possible Uses of Technology
Understand Markets for Uses
Determine How to Deliver Value

34. How Companies Develop
Small Business Entrepreneurship – 95%+ of business
Scalable Startup Entrepreneurship – receive most investment
Large Company Entrepreneurship – innovation as variants of existing core products; disruptive innovation difficult.
Social Entrepreneurship - innovation to solve social needs

36. Search for Business Model
Execution of Business Model

37. Build a Customer Development Process
Concept/ Bus. Plan
Product Dev.
Alpha/Beta Test
Launch/1st Ship
Product Development
Customer Development ?

38. Customer Discovery: Step 1
Customer Validation
Customer Creation
Company
Building
Stop selling, start listening
There are no facts inside your building, so get outside
Test your hypotheses
Two are fundamental: problem and product concept

39. Customer Validation: Step 2
Customer Discovery
Customer Validation
Customer Creation
Company
Building
Develop a repeatable and scalable sales process
Only earlyvangelists are crazy enough to buy

40. “Pivoting” is changing a fundamental part of the business model
“Pivoting” is changing a fundamental part of the business model. It can be simple: recognizing that your product was priced incorrectly. It can be more complex: your target customer needs to change, the feature set is wrong, you chose the wrong sales channel or your customer acquisition programs are ineffective.

41. Customer Discovery: Step 3
Customer Validation
Customer Creation
Company
Building
Goal is to create end-user demand and drive that demand into the sales channel.
Marketing message will be different based on the kind of market being entered and the customers being sought
Brand building and heavy advertising work in existing markets but not so much in new markets.

42. Customer Discovery: Step 4
Customer Validation
Customer Creation
Company
Building
Where the company transitions from informal, learning, and discovery to formal departments of Sales, Marketing, Business Development
Build departments to exploit early market success
Add employees to meet demand for products

43. Nine Blocks of the Business Model
Customer Segments
Customer relationships
Value propositions
Channels
Key Resources
Key Activities
Key Partners
Revenue streams
Cost Structure
Business Model Generation, Alexander Osterwalder & Yves Pigneur, 2010

44. Business Model Canvas Key Partners Value Proposition Customer Segments
Key Activities
Customer Relations
Key Resources
Channels
Cost Structure
Revenue Streams

45. Customer Segments
Mass Market: focus on one large group; i.e., consumer electronics
Niche Market: specific segments; i.e., supplier-buyer relationships like auto parts manufacturers
Segmented: different needs and problems; i.e., banks and professional services (engineering, consultants)
Diversified: unrelated segments; i.e., Amazon selling products and providing computer services
Multi-sided platforms: credit card companies; i.e., card holders and merchants

46. Value Proposition: Five Key Values
Product: Performance, quality, features, brand, easy to use, safe.
Price: Fair, visible, consistent, reasonable.
Access: Convenient location, found in reasonable time.
Service: Ordering, delivery, return, check-out.
Experience: Emotional, respect, ambiance, fun, intimacy.
One value selected to dominate value proposition, a second to differentiate, and remaining three meet the industry norm.

47. Channels
Communication: marketing message, raising awareness, customer evaluation
Distribution: delivering value proposition
Sales: places to purchase product or services
Finding the right mix of channels is crucial to bringing a value proposition to market.

48. Awareness: How to raise awareness of products?
Channel
Types
Own
Partner
Direct
Indirect
Sales Force
Web Sales
Own Stores
Partner Stores
Wholesale
Channel Phases
Awareness: How to raise awareness of products?
Evaluation: How do customers evaluate products?
Purchase: How and where do customers buy?
Delivery: How do we deliver value proposition?
After Sales: How provide post-purchase support?

49. Customer Relationships
Motivations: Customer acquisition, customer retention, Boosting sales (upselling)
Personal Assistance
Dedicated Personal Assistance
Self-service
Automated service
User communities
Co-creation of innovative products

50. Key Resources Physical: facilities, buildings, equipment
Human: especially for creative industries
Financial: sources of funding
Intellectual: patents, copyrights, partnerships, customer databases

51. Key Activities Production: designing, making, delivering
Problem solving: consulting, services, hospitals
Platform/network: software, networks, social media, brands, platform promotion

52. Key Partnerships
Strategic alliances between non-competitors and financial sources
Strategic partnerships with competitors
Joint Ventures
Buyer-supplier relationships to assure reliable supplies

53. Revenue Streams One-time customer purchases Recurring revenues
Asset sales, Usage fee, Subscription fees, Lending/Renting/Leasing, Licensing
Pricing considerations

54. Cost Structure
Cost-driven model: minimize costs, low prices, maximum automation, extensive outsourcing, process innovation
Value-driven model: value creation, premium values, personalized service, product innovation
Economies of scale Economies of scope
Fixed costs Variable costs

55. Business Model Canvas Key Partners Key Activities Value Proposition
Customer Relations
Customer Segments
Key Resources
Channels
Cost Structure
Revenue Streams

56. Strengths Weaknesses Opportunities Threats
Business Model Canvas – SWOT Analysis
Internal
External KP KA VP CR CS
Strengths
Weaknesses C KR
Opportunities
Threats C$ R$
Helpful Harmful

57. Business Model Canvas – Value InnovationKP KA VP CR CS
- Costs
+ Value C KR C$ R$

58. Business Model Canvas – Value InnovationKP KA VP CR CS
Eliminate
Raise
- Costs
+ Value C KR
Reduce
Create C$ R$
Cost Side
Value Side

59. Apple iPod/iTunes Business Model
What about your Company????

60. Business Model Canvas for Apple iTunesKP KA VP CR CS
Hardware Design
Marketing
Lovemark
Switching Costs
Record Companies
Seamless Music Experience
Mass market C KR
OEMs
People
Brand Name
iPod hardware
iTunes software
Retail stores Apple stores
Apple.com C$ R$
People Manufacturing Marketing and sales
iTunes stores
Large hardware revenues
Some music revenues

61. ENCOURAGING ENTREPRENEURSHIP
Show how to take part in the world
Meet and know older entrepreneurs
Access to technologies and capital
Tax benefits and other incentives
Entrepreneurship education

62. Дзякуй
J. Kent Millington