What Are Business Plan Specifics for New Technology- Based Firms? ask

What Are Business Plan
Specifics for New TechnologyBased Firms?
A business plan should ask and
answer the tough questions!
cf. Module 11 of Technology Entrepreneurship
http://ce.ioc.uni-karlsruhe.de/download/Chem_Entrepreneur_10_13.pdf
What Are We Talking About?
• New Technology-Based Firms (NTBFs)
and/or
Research-Based Startups (RBSUs)?
• Innovation?
• Invention (patents) to innovation?
• Science2Innovation?
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What Should We Talk About?
Value Creation and Capture
by
Science and Technology
(Technology for technical innovation
and organizational innovation)
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Key Subjects
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•
•
•
•
•
•
Business Model
Value – Market and Technical Value
Technology Intelligence and Strategy
Technology Classes
Customers and Competitors
Commercialization and Revenue Models
Analogies between Entrepreneurship and
Intrapreneurship
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Key Questions to Be Addressed
• What are value added components for the
offering?
• Do we have or can we create the
organizational capabilities to deliver?
(SWOT - self-assessment; feasibility)
• Is the offering a complete solution for the
customer or only part of the solution?
• What if …
– Development will take so long that money does not
suffice, competing technologies/products occur …
– The original idea/plan does not materialize (modify
the venture concept and strategy until it fits?), or a
different opportunity shows up (follow a new
direction?)
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The Time and Digestion Factor
• Completing a business plan for an
NTBF/RBSU easily takes 12 – 18
months!
• And the decision to commit to a new enterprise
is not a single act, but a process that takes
time to unfold
(months or years from initial statement of
entrepreneurial intent and commitment to start)
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The Business Model
• How do you plan to make money?
• An organization’s core logic for creating
value; a hypothesis how to create value
• A set of planned arguments and
assumptions about how a firm will create
value for all its stakeholders
• A decision and a process to transform
scientific or technology ideas or
opportunities into market value
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Mediating between DomainSpecifics and Drivers
Value Drivers
(External Parameters)
• Megatrends (+ Regulations)
• Market/Customer Insight
(Actual and “Latent”)
• Technology Forecasting
• Industry Foresight
Domain:
Technology
& Science
Description,
Modeling,
Assessment and
“Measurement”
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Business Model
•
•
•
•
•
•
•
Technology
Markets
Value Proposition
Value Chain
Value System
Revenues and Profits
Technical and Market
Competition
• Competitive Strategies
Domain:
Socio-Economy,
Policy
Description,
Modeling,
Evaluation and
“Measurement”
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Value Creation: Market and Technical Value
Market Value:
degree to which a real customer perceives
the need for the company’s offering (e.g.
product) and after a cost/benefit assessment
pays the offering price to purchase it.
 Which customers (market segment)?
Technical Value:
different perspectives for producer or supplier
and customer
Market value and technical value
does not necessarily match!
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Slide 9.6; Ref. Runge, p. 613
More on Value
• Value: worth, importance/relevance or usefulness
• Value and Price: Value (what you get) = worth of
the social and economic benefits a customer
pays (price; in monetary terms) for an offering
• Most technology-based products are initially
focused on functionality and performance
Values Offered to a (Technical) Customer:
•
•
•
•
•
Product (Functionality, Performance)
Service (Technical Service, Consulting)
Price
Access (Sales Channels; Sales Cycle)
Experience
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Ref. Slide 9.7; Dorf & Byers, p. 65
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Technical Value: Perspectives
Producer Perspective: Customer Perspective:
How protectable
• Meeting or exceeding
from the competition
design specifications
the product is or
expressed by the price
how exploitable the
the customer accepts
product is as a basis
to pay
for further offerings
• Patents (Patenting Strategies!), trade secrets, technical
reports; know-how, experience – “tacit technology”
• Imitation barriers (product complexity)
• Synergy with other products,
lower cost of manufacturing
• Related (technical) service that can be provided
• Product switching cost with the customer
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Market Value: The Value Proposition
Value Proposition:
a statement of how customer value can be
created (by your NTBF) – usually one or two
values (Slide 9.8) dominate,
– Compelling reason to purchase
– Provides profit margin
– Quantification of customer benefits (money/time
saved; less repair, etc.)
Valuable attributes belong to offerings
not to technology!
Technology
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Offering,
Solution
Market
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Benefits:
Supplier and Customer Perspectives
Customer’s Economics
Supplier Perspective:
Cost reduction by 50%
Before
Customer Perspective:
After
Customer’s Overall
Expenses
Price increase by 50%
Cost reduction
of 0.02%
Potential PriceInsensitivity
Price Elasticity
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Customers: Types and Roles
Type:
• Industrial customer (who makes the
purchasing decision; customers-of-customer?)
• Professional customer
(may be end-user; e.g. craftsman, physician;
also “academic customer”; retail etc.)
• Consumer ( “Normal Marketing”)
Role:
• Buyer, client, adopter (of innovation)
• End-user
• Cooperation partner, competitor
Have a
business plan!
• Source of capital, investor
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The Value Chain
• The value chain categorizes the generic valueadding activities of an organization
• The set of (company-internal) activities
required to design, procure, produce, market,
distribute, and service a product or service
Which activities can we do best?
Which activities do we want to do?
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Technology Intelligence (TI)
“Intelligence is knowledge and
foreknowledge of the world around us - the
prelude to Presidential decision and action”
(U.S. CIA Factbook on Intelligence; emphases added).
Technology Intelligence:
• (what, when, how, where and who)
actionable knowledge and foreknowledge arising from
systematic processes involving gathering, analyzing,
hypothesizing and disseminating information on external
scientific or technological developments, opportunities
and threats that may affect a company’s competitive
position (defined by its strengths and weaknesses).
Technology meets markets!
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Market Data (TI)
•
•
•
Good data are rarely available for the
market you are after or envision
Almost never available for “disruptive
(“radical”) innovation” –
“new-to-the-world”!
“Good” data are from two sources:
1. An “educated guess” –
or an extremely lucky guess
2. Actually, get out in the field and talk to
people
Or a little of both
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Technology Strategy Basics
Firm Founding (NTBF) or an R&D Project in a Firm:
Create protectable value for which real customers or
specific organizations will pay money to the company
rather than its competition
Value Creation
• How does the scientific idea or technology
create protectable market and technical value?
• Which product, process, application?
Value Capture
• Can we capture the market value inherent in this
idea/technology in the face of competition?
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Technology and Functionality
Functionality
• Single, intrinsic functionality
• Combinable functionalities
(“architectural innovation” = combining features)
• Smart/intelligent functionality (responding to
external stimuli)
Substrate/Target
• Human-Oriented (“environment-oriented”)
 Regulations! (specifically, human exposure)
• “Intermediate”: animals exposed
• Non-Human-Oriented (“material”, e.g. paper, wood,
plastics, glass, metal etc.; devices, systems)
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Technology Classes: Opportunities
• Key Technology
A crucial element in research/innovation; may involve the
creation of fundamentally new capabilities (advantages)
• Platform Technology
A core competency; basis for “exploitation strategies”
• Enhancing Technology
Incremental shifts in product performance of existing
materials, e.g. chemical nanotechnology (known markets!)
• Enabling Technology
Subset of technologies, prerequisite or essential for a
specific phase of (chemical) science, product or process
development, or manufacturing; also new functions for
existing materials
• Pacing Technology
A technological area representing a limiting factor in the
progress of a particular program (project or innovation)
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Technology Classes: Threats
• Generic Technology
Defined with regard to an end (function), a
particular product, process or system;
allows same result to be implemented through
different technologies
• Emerging Technology
A technology anticipated (or proven) to grow and
expand and become important and valuable for
an industry or industry segment
• Respond!
– What is your protection layer around your technology,
offering, customers? (Threat by your competition)
– How will you attack incumbents (your opportunity;
threat to your competition; competitive response)?
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Competition-1
• There is almost never no competition!
– At least “state-of-the-art”; functional equivalents;
the “realities of the market”; “import regulations”
– Even for the “first mover” (serendipity; “Holy
Grail”; etc.) there is only “lead time”
• Reviving “old ideas” clash
(worldwide; incl. converting the perspective)
Skysails GmbH & Co. KG
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“Sailing Ship Effect”
KiteShip Corp.
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Competition-2
Coincidence of
scientific or
technical
discovery and
innovation is not
so rare!
( technology
watch; technology
intelligence!)
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Technology Strategy Orientations
• How can we create and keep competitive
advantages?
• Potentially complementary aspects:
– Resource-oriented
(Resources of the firm push)
– Market-oriented
(The market drives)
– Interrelation-oriented
(Alliances are key)
– Opportunity-oriented
(Fast opportunity identification and
exploitation drives)
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Revenue Model and
Commercialization Model
(Technology) Commercialization Model:
• Technical, marketing and business activities that must
be considered as you move through the overall
process to enter into sales and distribution of your
anticipated offering – to achieve profit and business
growth
• Revenue Model:
The various revenue streams your business will be
putting in place and how each will bring in money, e.g.
– Sales of Offerings (including how to … prices, sales
cycle)
– Royalties (e.g. from licenses, selling IP)
– Contractual Revenues (contract research, contract
manufacturing)
– Consulting, other services (also technical service?)
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Scale Up
Technology Commercialization
“Commodization”
Product Life Cycle
http://asbdc.ualr.edu/technology/commercialization/the_model.asp
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Nine Types of Revenue/Profit Models
Name
Description
Example Firm
1. Installed base
Build a large installed base of customers
(and sell consumables or upgrades)
Henkel KGaA (Persil),
HP (printers)
2. Protected
innovation
Create a unique, innovative product and
protect it using patents and copyrights
Merck KGaA (liquid crystals;
FPD); WITec
3. New business
model
Find unmet customer needs and build a
new business model
ChemCon, Vitracom
4. Value chain or Specialize in one or two functions on a
value system value chain or system
specialization
Polymaterials AG;
most large chem. firms;
Closure Medical
5. Brand
Create a valued brand for your product
BlueBiotec; most large
chem. firms; Henkel KGaA!
6. Blockbuster
Focus on creating a series of big winners
Large pharmaceutical firms
7. Profit
multiplier
Build a system that reuses a product in
many forms [platform technology]
IoLiTec; Nano-X, Nanogate,
SiGNa; large chem. firms
8. Solution
Shift from product to unique total solutions
(incl. process chains of customers)
BASF, DuPont, 3M,GE etc.
9. Low cost
Create a low-cost product to offer; low
price per unit of value
Dow Chemical (China,
India!), BlueBiotech
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Adapted from: Dorf & Byers, Table 16.3
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Corporate Staged Innovation
Processes (Stage-Gate, PhaseGate)
Feedback/Learning:
Post-Launch Review
Project Proposal: Shaping + Analysis (several addressees)
Whether …
NPD:
Concept
Shaping
Concept
Analysis
Select for
Concept
Analysis
Research
How …
Validation
Select for
Validation
Development
Commit to
Develop?
Implementation
Commit to
Resources
• Customer
Value
• Business
Success
Ideas
Markets
Ideas –
Opportunity
Crude
Hypotheses
Refined & Expanded
Hypotheses with
Critical Issues (and
Economic Model)
Verification of
Critical Issues
to an Acceptable
Level of Confidence
Demonstration of
the Viability
of the Project
Business Plan
Achievement
of Business
Startup
Similar to “Business Plan”
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Slide 12.23
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A PhaseGate Shaping Form
•
•
Opportunity Summary (Summarize opportunity hypothesis):
Value Proposition (Win-Win) (One sentence):
1. Market / Customer Need:
Describe your hypothesis of the need and identify the customer type or
market group with the need (Sources of information!) – 12+ questions …
2. Product / Service:
Describe the product or service which you hypothesize will satisfy the
market need (Sources of information!) - 12+ questions to be answered
3. Competitive Advantage:
Describe how “our firm” could gain and sustain an advantaged position at
potential customers (Sources of information!) - 12+ questions …
4. Market Attractiveness:
Describe why this market would be attractive to any potential supplier -12+ ...
5. Business Attractiveness / Strategic Fit:
Describe why this specific opportunity is attractive to “our firm’s” businesses
– 12+ questions to be answered
6. Value Potential: (Value management, economic analysis; entry)
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