Upload
zifa-sire
View
32
Download
2
Tags:
Embed Size (px)
Citation preview
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
Study Pack Guide
Aims, Learning Outcomes, Content, Session Structure,
Syllabus
A Framework for Enterprise Development and Entrepreneurship 3
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
A Framework for Enterprise Development and Entrepreneurship 4
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
A Framework for Enterprise Development and Entrepreneurship 5
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
A Framework for Enterprise Development and Entrepreneurship 6
Teaching, Learning & Assessment (TLA) framework 1
Context & Group
Formation
Self Awareness
Idea/Concept Generation
Idea/Concept Selection
Project Management
Proposal
Business plan andpresentation
A Framework for Enterprise Development and Entrepreneurship 7
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
A Framework for Enterprise Development and Entrepreneurship 8
Study pack content
1. Learning material for 12 teaching sessions – Lecture slides with deliver’s 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 references4. Guide for deliverers
A Framework for Enterprise Development and Entrepreneurship 9
Study topics x 12
1. The context and group formation2. Self awareness3. Idea generation and selection4. Project management 5. Intellectual property rights: Patents and Trade Marks6. Market and competitor analysis7. Business strategy and risk analysis8. Marketing strategy 9. Operational strategy10. The management team11. Financial forecasting planning12. ‘Pitching’ the idea
A Framework for Enterprise Development and Entrepreneurship 10
“Where observation is concerned, chance favours only the prepared mind”
Louis Pasteur (1854)
1. Context
The Nature, Importance and Potential of Start-Up Businesses in
the Biosciences and the Role of Business Planning
A Framework for Enterprise Development and Entrepreneurship 12
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
A Framework for Enterprise Development and Entrepreneurship 13
TLA frameworkContext and
Group Formation
Self awareness
Idea/Concept Generation
Idea/Concept selection
Project management
Proposal
Business plan andpresentation
What is Bioscience and why is it important?
A Framework for Enterprise Development and Entrepreneurship 15
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”
A Framework for Enterprise Development and Entrepreneurship 16
DTI classification of business sectors for biotechnology pharmaceuticals
and healthcare
• Pharmaceutical• Biotech• Medical Devices and Diagnostics• Industrial• Agri• Non-Food crop and • Marine Biotechnology
A Framework for Enterprise Development and Entrepreneurship 17
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
What is Biotechnology and why is it important?
A Framework for Enterprise Development and Entrepreneurship 19
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
A Framework for Enterprise Development and Entrepreneurship 20
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
A Framework for Enterprise Development and Entrepreneurship 21
‘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
A Framework for Enterprise Development and Entrepreneurship 22
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
A Framework for Enterprise Development and Entrepreneurship 23
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
A Framework for Enterprise Development and Entrepreneurship 24
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
What key technological developments are driving the
Bioscience revolution?
A Framework for Enterprise Development and Entrepreneurship 26
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
A Framework for Enterprise Development and Entrepreneurship 27
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
What is entrepreneurship?
A Framework for Enterprise Development and Entrepreneurship 29
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)
A Framework for Enterprise Development and Entrepreneurship 30
Intrapreneurship defined
Intrapreneurship is entrepreneurship by employees in existing organisations
Source: Antoncic and Hirsh, 2003
What businesses do entrepreneurs create?
A Framework for Enterprise Development and Entrepreneurship 32
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
A Framework for Enterprise Development and Entrepreneurship 33
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
A Framework for Enterprise Development and Entrepreneurship 34
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
Company evolution in the Biosciences
A Framework for Enterprise Development and Entrepreneurship 36
Stages of company evolution in the Biosciences
1. Idea generation and validation
2. Early stage
3. Late stage
Source: DTI, BIGT, 2003
A Framework for Enterprise Development and Entrepreneurship 37
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
A Framework for Enterprise Development and Entrepreneurship 38
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
A Framework for Enterprise Development and Entrepreneurship 39
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
A Framework for Enterprise Development and Entrepreneurship 40
Example: Typical route of commercialisation from university
University Incubator Start-up
Seed capital Venture Capital
Technology Transfer
Difficulties and success factors for Bioscience start ups
A Framework for Enterprise Development and Entrepreneurship 42
Difficulties for Bioscience start-ups 1
• Long lead time from concept to market e.g. typically 10 -15 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
A Framework for Enterprise Development and Entrepreneurship 43
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
A Framework for Enterprise Development and Entrepreneurship 44
Success factors for Bioscience 1
• The company must efficiently develop viable products or services
• The company’s 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
A Framework for Enterprise Development and Entrepreneurship 45
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
The importance and nature of business planning
A Framework for Enterprise Development and Entrepreneurship 47
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?
A Framework for Enterprise Development and Entrepreneurship 48
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
A Framework for Enterprise Development and Entrepreneurship 49
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
A Framework for Enterprise Development and Entrepreneurship 50
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
A Framework for Enterprise Development and Entrepreneurship 51
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
A Framework for Enterprise Development and Entrepreneurship 52
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
A Framework for Enterprise Development and Entrepreneurship 53
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
2. Self Awareness
Entrepreneurial Traits and Motivation
A Framework for Enterprise Development and Entrepreneurship 55
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
A Framework for Enterprise Development and Entrepreneurship 56
TLA frameworkGroup
Formation and Context
Self awareness
Idea/Concept Generation
Idea/Concept selection
Project management
Proposal
Business plan andpresentation
Who are entrepreneurs?
A Framework for Enterprise Development and Entrepreneurship 58
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)
A Framework for Enterprise Development and Entrepreneurship 59
Well known entrepreneurs
• Julian Richer – Richer sounds
• Richard Branson– Virgin
• Stelios – Easy Jet
• Alan Sugar – ‘You’re fired
• Anita Roddick – Body shop
Less well known women
• Meg Whitman – founder of e-bay
• Ann Gloag – Stage coach
A Framework for Enterprise Development and Entrepreneurship 60
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
A Framework for Enterprise Development and Entrepreneurship 61
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
A Framework for Enterprise Development and Entrepreneurship 62
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
What motivates people to become entrepreneurs?
A Framework for Enterprise Development and Entrepreneurship 64
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 Jerry’s 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
A Framework for Enterprise Development and Entrepreneurship 65
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
A Framework for Enterprise Development and Entrepreneurship 66
Why be an entrepreneur?
Rewards of Entrepreneurship
ProfitFinancial gain
proportionate to personal achievement
Personal Satisfaction
Enjoyment of a satisfying way of life
IndependencePower to make own
decisions
Personal Fulfilment
Contribution to the community
Freedom
Escape from undesirable situation
Source: Entrepreneurial Incentives - Lockerneck et al, 2006
A Framework for Enterprise Development and Entrepreneurship 67
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
What skills/traits/characteristics do entrepreneurs have?
A Framework for Enterprise Development and Entrepreneurship 69
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
A Framework for Enterprise Development and Entrepreneurship 70
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
A Framework for Enterprise Development and Entrepreneurship 71
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/questionnairenewse
ction1en.asp– http://www.wid.org/equity/2004/05/Entrepreneurs%20Quiz.doc
A Framework for Enterprise Development and Entrepreneurship 72
Observed characteristics of entrepreneurs: The 10 I’s model
‘I’ Characteristics
• Independence• Interest• Insight• Ideas• Invention
‘I’ Characteristics
• Inspiration• Involvement• Instigation• Insistence• I - will
A Framework for Enterprise Development and Entrepreneurship 73
The 10 I characteristics in action in the entrepreneurial process
Step I Characteristic
A Recognition Independence Insight
B Formulation Interest Ideas Invention
C Initiation Inspiration Involvement
D Development and Growth
Instigation Insistence I - will
A Framework for Enterprise Development and Entrepreneurship 74
Mapping the ten ‘I’ characteristicsPlotting overall average scores for a sample of 20 successful entrepreneurs. Indicated by
1 Independence2 Interest3 Insight4 Ideas5 Invention6 Inspiration7 Involvement8 Instigation9 Insistence 10 I will
10
9
8
76
5
4
3
21
0
A Framework for Enterprise Development and Entrepreneurship 75
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
A Framework for Enterprise Development and Entrepreneurship 76
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
A Framework for Enterprise Development and Entrepreneurship 77
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
3. Idea Generation and Selection
Thinking Creatively and Screening Potential Business Ideas in the
Biosciences
A Framework for Enterprise Development and Entrepreneurship 79
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
A Framework for Enterprise Development and Entrepreneurship 80
TLA frameworkGroup
Formation and context
Self awareness
Idea/concept generation
Idea/concept selection
Project management
Environmentalscanning
Drucker’s seven sources
of innovation
Proposal
Business plan
‘Creative swiping’
Idea Generation
A Framework for Enterprise Development and Entrepreneurship 82
Sources of start up ideas
• Personal experience – work or home• Hobbies• Accidental discoveries - serendipity• Deliberate search
– Drucker’s seven sources of opportunity/innovation
– Environmental scanning– Creative swiping
A Framework for Enterprise Development and Entrepreneurship 83
Technology push or market pull?
Str
uct
ure
d/P
lan
ned
Big Bang
Op
portu
nistic
Completely NewProcess Or Product
Major Strategy Shift eg Switch To
E.Business
Add New Features To
Products
Add New Brands Or Styles
To Range
Major Product & ProcessInnovation
Response To AMajor Order In
New Market
New Products In Existing
Markets
Existing Products In New
Markets
Most MinorProduct & Process
InnovationIncremental
Idea Generation
Drucker’s 7 sources of innovation
A Framework for Enterprise Development and Entrepreneurship 85
Drucker’s seven sources of opportunity/innovation
1. Unexpected happenings2. Incongruous happenings3. A need for process improvements4. Changes in industry or market structures5. Changes in population demographics6. Changes in perception, mood and meaning7. New knowledge
A Framework for Enterprise Development and Entrepreneurship 86
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
A Framework for Enterprise Development and Entrepreneurship 87
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!
A Framework for Enterprise Development and Entrepreneurship 88
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
A Framework for Enterprise Development and Entrepreneurship 89
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
A Framework for Enterprise Development and Entrepreneurship 90
4b. Changes in industry or market structures + examples
Porter’s Five Forces Model
SupplierBuyingPower
Suppliers
PotentialEntrants
Substitutes
Buyers
Industry Rivalry
SubstituteThreat
BuyerBuyingPower
NewEntrantThreat
A Framework for Enterprise Development and Entrepreneurship 91
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
A Framework for Enterprise Development and Entrepreneurship 92
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 1946-1963. 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
A Framework for Enterprise Development and Entrepreneurship 93
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
A Framework for Enterprise Development and Entrepreneurship 94
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
Idea generation
Environmental scanning – PESTEL analysis
A Framework for Enterprise Development and Entrepreneurship 96
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
A Framework for Enterprise Development and Entrepreneurship 97
What environmental influences are there on a business?
BusinessSocial
Political Economic
Technology
Demographics
InfrastructureEnvironment
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 flightsbroadband
A Framework for Enterprise Development and Entrepreneurship 98
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 forcesEconomic forcesSocial forcesTechnological forcesEnvironmental forcesLegal and regulatory forces
A Framework for Enterprise Development and Entrepreneurship 99
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)
A Framework for Enterprise Development and Entrepreneurship 100
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
A Framework for Enterprise Development and Entrepreneurship 101
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
A Framework for Enterprise Development and Entrepreneurship 102
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
A Framework for Enterprise Development and Entrepreneurship 103
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
A Framework for Enterprise Development and Entrepreneurship 104
Technological forces
• New developments & discoveries• Reducing product life cycles• Increasing rates of obsolescence • Rates of technological diffusion
E.g. rDNA manipulation, digital technology
A Framework for Enterprise Development and Entrepreneurship 105
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
A Framework for Enterprise Development and Entrepreneurship 106
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
Idea generation
Creative swiping
A Framework for Enterprise Development and Entrepreneurship 108
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”
“It’s all about the relative novelty of innovation”
Idea Screen/Selection
A Framework for Enterprise Development and Entrepreneurship 110
Product development funnel –filtering in an R&D environment
Source: Wheelwright, 1992
A Framework for Enterprise Development and Entrepreneurship 111
Product development funnel – filtering in a start-up enterprise
Source: Wheelwright, 1992
Screen 1
Screen 2
A Framework for Enterprise Development and Entrepreneurship 112
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
A Framework for Enterprise Development and Entrepreneurship 113
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
A Framework for Enterprise Development and Entrepreneurship 114
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
Filtering criteria
What makes a potentially successful business idea
A Framework for Enterprise Development and Entrepreneurship 116
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
A Framework for Enterprise Development and Entrepreneurship 117
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
A Framework for Enterprise Development and Entrepreneurship 118
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
A Framework for Enterprise Development and Entrepreneurship 119
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
A Framework for Enterprise Development and Entrepreneurship 120
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
A Framework for Enterprise Development and Entrepreneurship 121
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
• Drucker’s 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
4. Project Management
Controlling and Completing the Business Plan Project on Time
A Framework for Enterprise Development and Entrepreneurship 123
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
A Framework for Enterprise Development and Entrepreneurship 124
TLA FrameworkContext &
Group Formation
Self awareness
Idea/Concept Generation
Idea/Concept selection
Project Management
Proposal
Business plan andpresentation
What is project management and why is it important to business
planning?
A Framework for Enterprise Development and Entrepreneurship 126
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: www.ecbp.org/glossary.htm
A Framework for Enterprise Development and Entrepreneurship 127
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
A Framework for Enterprise Development and Entrepreneurship 128
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
A Framework for Enterprise Development and Entrepreneurship 129
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
Project players and management skills
A Framework for Enterprise Development and Entrepreneurship 131
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
A Framework for Enterprise Development and Entrepreneurship 132
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
Key project management techniques
MilestonesGantt charts
Responsibility chartsTeam meetings
A Framework for Enterprise Development and Entrepreneurship 134
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
A Framework for Enterprise Development and Entrepreneurship 135
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: http://www.wiley.co.uk/
A Framework for Enterprise Development and Entrepreneurship 136
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
A Framework for Enterprise Development and Entrepreneurship 137
Gantt chart example
Source: www.smartdraw.com/tutorials/gantt/index.htm
A Framework for Enterprise Development and Entrepreneurship 138
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 team’s responsibilities
• Can be used to clarify understandings, improve the distribution of work, and build agreements that involve all and therefore can last
A Framework for Enterprise Development and Entrepreneurship 139
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: http://web.mit.edu
A Framework for Enterprise Development and Entrepreneurship 140
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: http://web.mit.edu
A Framework for Enterprise Development and Entrepreneurship 141
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: http://web.mit.edu/
A Framework for Enterprise Development and Entrepreneurship 142
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 involved3. 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: http://web.mit.edu
A Framework for Enterprise Development and Entrepreneurship 143
Example chart (incomplete)
Task Person or role
Person A Person B Person C
Ideageneration
r c a
Conceptselection
c r a
TechnicalFeasibility
c c r
Patent Search r c a
etca r a
A Framework for Enterprise Development and Entrepreneurship 144
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
A Framework for Enterprise Development and Entrepreneurship 145
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: www.mindtools.com/CommSkll/RunningMeetings.htm
A Framework for Enterprise Development and Entrepreneurship 146
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
A Framework for Enterprise Development and Entrepreneurship 147
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
5. Intellectual Property Rights (IPR): Patenting
and Trade Marks
Nature, Importance of IPR in Bioscience Entrepreneurship
A Framework for Enterprise Development and Entrepreneurship 149
Learning outcomesBy 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
A Framework for Enterprise Development and Entrepreneurship 150
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
What is IPR and why is it important?
A Framework for Enterprise Development and Entrepreneurship 152
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
A Framework for Enterprise Development and Entrepreneurship 153
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
A Framework for Enterprise Development and Entrepreneurship 154
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 nation’s policy to encourage innovation
and dissemination of knowledge
A Framework for Enterprise Development and Entrepreneurship 155
Types of IPR
Registered IP Rights
• Patents• Designs• Trade Marks• Plant Breeder’s Rights
Unregistered IP Rights
• Copyright • Unregistered Design
Rights• Trade Marks and
Reputation• Traditional Knowledge• Database rights• Publication rights
A Framework for Enterprise Development and Entrepreneurship 156
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
A Framework for Enterprise Development and Entrepreneurship 157
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
A Framework for Enterprise Development and Entrepreneurship 158
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
Patents
A Framework for Enterprise Development and Entrepreneurship 160
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)
A Framework for Enterprise Development and Entrepreneurship 161
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 EuropeFor 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
A Framework for Enterprise Development and Entrepreneurship 162
Where is the protection valid? 2
• In the rest of the worldIf 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
A Framework for Enterprise Development and Entrepreneurship 163
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
A Framework for Enterprise Development and Entrepreneurship 164
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
A Framework for Enterprise Development and Entrepreneurship 165
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
A Framework for Enterprise Development and Entrepreneurship 166
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 invention’s 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
A Framework for Enterprise Development and Entrepreneurship 167
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
A Framework for Enterprise Development and Entrepreneurship 168
Patent application process 1
Making the application It takes between three and four years to obtain a UK patent.
The first step in submission1. 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
A Framework for Enterprise Development and Entrepreneurship 169
Patent application process 2
The specificationThe 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
A Framework for Enterprise Development and Entrepreneurship 170
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
A Framework for Enterprise Development and Entrepreneurship 171
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
A Framework for Enterprise Development and Entrepreneurship 172
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
A Framework for Enterprise Development and Entrepreneurship 173
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
A Framework for Enterprise Development and Entrepreneurship 174
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
A Framework for Enterprise Development and Entrepreneurship 175
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: www.dfat.gov.au/publications/biotech/downloads/Module01.pdf
A Framework for Enterprise Development and Entrepreneurship 176
On-line patent databases
Extensive list of country and region specific databases can be found at:
World Intellectual Property Associationhttp://www.wipo.int/ipdl/en/resources/links.jsp
Trade Marks
A Framework for Enterprise Development and Entrepreneurship 178
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
A Framework for Enterprise Development and Entrepreneurship 179
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 countriesUK applications can be used as a basis for international applications through the World Intellectual property Organisation (WIPO)
A Framework for Enterprise Development and Entrepreneurship 180
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
Registering intellectual property
A Framework for Enterprise Development and Entrepreneurship 182
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 Agent’sTrade mark registration Trade Mark Attorney’s & Chartered Patent Agents
A Framework for Enterprise Development and Entrepreneurship 183
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 Agent’s• Trade mark registration -Trade Mark Attorney’s &
Chartered Patent Agents
A Framework for Enterprise Development and Entrepreneurship 184
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
A Framework for Enterprise Development and Entrepreneurship 185
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
6. Market Research and Competitor Analysis
Identifying your Target Market, Market Attractiveness and
Competitive Advantage
A Framework for Enterprise Development and Entrepreneurship 187
Learning outcomesBy 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
A Framework for Enterprise Development and Entrepreneurship 188
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
A Framework for Enterprise Development and Entrepreneurship 189
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
A Framework for Enterprise Development and Entrepreneurship 190
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
A Framework for Enterprise Development and Entrepreneurship 191
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?
Identifying the target market
A Framework for Enterprise Development and Entrepreneurship 193
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
A Framework for Enterprise Development and Entrepreneurship 194
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
A Framework for Enterprise Development and Entrepreneurship 195
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)
A Framework for Enterprise Development and Entrepreneurship 196
‘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
A Framework for Enterprise Development and Entrepreneurship 197
What are segments? 2
• Behavioral segments:– Usage occasions
• Kodak single-use cameras from underwater use to baby pictures and weddings
– Usage Rates• 80-20 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
A Framework for Enterprise Development and Entrepreneurship 198
Measurable Measurable
AccessibleAccessible
SubstantialSubstantial
DifferentialDifferential
ActionableActionable
• 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
A Framework for Enterprise Development and Entrepreneurship 199
Positioning
• Positioning = Segmentation + Differentiation– Segment = a division of the market– Differentiation = how your product is different from the
competition
• Slotting the product in the consumer’s mind– Who am I? – Why buy me?
A Framework for Enterprise Development and Entrepreneurship 200
Positioning
• Against competition e.g. ‘Pepsi Challenge’ in Pepsi vs Coca Cola
• Position with the competitione.g. Dixon’s own brand for electronic equipment
• Grab an unoccupied position i.e.market nichee.g. SMART cars
• Using your endowment e.g. Number one position - Microsoft
Market potential/attractiveness
A Framework for Enterprise Development and Entrepreneurship 202
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
A Framework for Enterprise Development and Entrepreneurship 203
Trends: Industry life cycle
TIME
Sales Trend Line
Profits Trend Line
0
Revenue
Str
eam
+
Develo
pm
ent
Gro
wth
Matu
rity
Satu
rati
on
1.
Decl
ine
2 3 4 51Phase
2.
Sta
gnati
on
3.
Renovati
on
-
A Framework for Enterprise Development and Entrepreneurship 204
Changes in industry or market structures:
Porter’s five forces model
SupplierBuyingPower
Suppliers
PotentialEntrants
Substitutes
Buyers
Industry Rivalry
SubstituteThreat
BuyerBuyingPower
NewEntrantThreat
A Framework for Enterprise Development and Entrepreneurship 205
Industry life cycle & competitive forces
Intro. Growth Maturity Decline
New Entrants
Few Bandwagoneffect
Consolidate Exit
Power ofBuyers
Low Low, It’s a sellers market
Increasing High, It’s a buyers market
Power ofSuppliers
Medium High Declining Low
Threat ofSubstitutes
Non Existent
Low Growing Substitutes may cause decline
Rivalry amongst Firms
Low Low, focus on growth
Intense, firms grow at rivals expense
Declining as firms exit.
Analysing the Competition
Key Success Factors
A Framework for Enterprise Development and Entrepreneurship 207
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
A Framework for Enterprise Development and Entrepreneurship 208
Analysing competitors 3Key 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
A Framework for Enterprise Development and Entrepreneurship 209
Analysing competitors 4Key Success Factors (KSF)
Aaker’s Key success factors• A model for measuring a business against
competitor’s 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
A Framework for Enterprise Development and Entrepreneurship 210
Analysing competitors 5 Key Success Factors (KSF)
Graphic representation of firm’s relative KSFs
Firm A
Firm B
Firm C
Own Firm
A Framework for Enterprise Development and Entrepreneurship 211
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
A Framework for Enterprise Development and Entrepreneurship 212
Key criteria to evaluate competition 2
Market position• Market share• Reputation• Breadth of product/service portfolio – ability to
offer a ‘one stop shop’• Brand imageService delivery• Responsiveness• Consistency• Flexibility
Source: BBSRC, 2006
A Framework for Enterprise Development and Entrepreneurship 213
Key criteria to evaluate competition 3
Customers• Customer inertia –general unwillingness or
lack of propensity to change• Customer ‘lock in’ – customer investment
in competitor’s system/products so great as to make switching difficult/costly or otherwise unattractive
Source: BBSRC, 2006
Market research
A Framework for Enterprise Development and Entrepreneurship 215
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!
A Framework for Enterprise Development and Entrepreneurship 216
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
A Framework for Enterprise Development and Entrepreneurship 217
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
A Framework for Enterprise Development and Entrepreneurship 218
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
Sources of secondary market data
A Framework for Enterprise Development and Entrepreneurship 220
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
A Framework for Enterprise Development and Entrepreneurship 221
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
A Framework for Enterprise Development and Entrepreneurship 222
Sources of secondary market related information: Biotechnology/Bioscience
• Biotechnology handbook – (available from libraries)
• Bioindustry Association website– http://www.bioindustry.org/
• Patent databasesWorld Intellectual Property Association
http://www.wipo.int/ipdl/en/resources/links.jsp
• Biotechnology Industry portals and networks– http://www.europabio.org/
• On line biotechnology publications for business news
A Framework for Enterprise Development and Entrepreneurship 223
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
A Framework for Enterprise Development and Entrepreneurship 224
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
A Framework for Enterprise Development and Entrepreneurship 225
Sources of Other Secondary World, EU, UK and Regional Information
• Benn’s Media• Clover Newspaper Index• Wilings Press Guide • McCarthy Cards: Indexing national and
regional newspapers• Trade Associations• Chambers of Commerce• Dun and Bradstreet
A Framework for Enterprise Development and Entrepreneurship 226
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• Kelly’s Business Directory
– Listing a wide range of suppliers, products and contact details
A Framework for Enterprise Development and Entrepreneurship 227
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
A Framework for Enterprise Development and Entrepreneurship 228
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 business’s competitive edge.
A Framework for Enterprise Development and Entrepreneurship 229
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
7. Business Strategy and Risk Analysis
Exploiting IPR and Establishing Routes to Market in the
Biosciences
A Framework for Enterprise Development and Entrepreneurship 231
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
A Framework for Enterprise Development and Entrepreneurship 232
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
A Framework for Enterprise Development and Entrepreneurship 233
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
What is strategy?
A Framework for Enterprise Development and Entrepreneurship 235
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”
A Framework for Enterprise Development and Entrepreneurship 236
What is strategy?
Preparing a road-map ofhow to get to where you want to be
Knowing where you are now
Knowing where you want to be
A Framework for Enterprise Development and Entrepreneurship 237
Emergent and realised strategies
Source: Brunet, J.P.,Mintzberg,H and Water J.(1986)
Intended Strategy Deliberate Strategy
Emer
gent
Stra
tegy
Realised Strategy
Unrea
lised
Stra
tegy
Impo
ssib
le to
impl
emen
t
The plannedstrategy
Applied throughforce
What actually happens
Exte
rnal
Envi
ronm
ent
Rando
m a
nd
power
ful
A Framework for Enterprise Development and Entrepreneurship 238
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
A Framework for Enterprise Development and Entrepreneurship 239
Strategy and its relation to operational activities
Corporate
e.g.Marketing
e.g.Marketing Communications BottomUp
Top Down
directivesresults
Porter’s Generic Strategies
A Framework for Enterprise Development and Entrepreneurship 241
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.
A Framework for Enterprise Development and Entrepreneurship 242
Porter’s generic strategies
Segmentation (Or Focus)Strategy
DifferentiationStrategy
Cost LeadershipStrategy
Narr
ow
Mark
et
Bro
ad
Mark
et
UniquenessCompetency
Low CostCompetency
Strategic Strength
Str
ate
gic
Sco
pe
3. Cost Leadership Strategyemphasises efficiency, through
economies of scale and experience.Constant focus on cost reduction.Requires market share advantageor easy access to important raw
materials. e.gEasyjet, Kwik Save
2. Differentiation StrategyInvolves 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 StrategyFirms concentrate on a select few
target markets targeting effort on one or two segments.
A strategy most suited to relativelysmall firms
Growth strategies in the Biosciences
A Framework for Enterprise Development and Entrepreneurship 244
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
A Framework for Enterprise Development and Entrepreneurship 245
Key strategic options for the Biosciences development
1. Collaborative research2. Licensing 3. Selling IP outright4. Strategic alliances5. Joint venture 6. Start-up
A Framework for Enterprise Development and Entrepreneurship 246
1. 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
A Framework for Enterprise Development and Entrepreneurship 247
2. LicensingAllowing 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
A Framework for Enterprise Development and Entrepreneurship 248
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
A Framework for Enterprise Development and Entrepreneurship 249
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
A Framework for Enterprise Development and Entrepreneurship 250
3. 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 IPSource: BBSRC, 2006
A Framework for Enterprise Development and Entrepreneurship 251
4. 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
A Framework for Enterprise Development and Entrepreneurship 252
5. 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
A Framework for Enterprise Development and Entrepreneurship 253
6. 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
A Framework for Enterprise Development and Entrepreneurship 254
6. Start-up 2Disadvantages• 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
A Framework for Enterprise Development and Entrepreneurship 255
A typical route to Commercialisation in the Biosciences
ImpreciselyDefined
Applications
Core Technology Status
WellDefined
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
SWOT analysis
A Framework for Enterprise Development and Entrepreneurship 257
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
A Framework for Enterprise Development and Entrepreneurship 258
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
A Framework for Enterprise Development and Entrepreneurship 259
The 10 ‘P’s 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
A Framework for Enterprise Development and Entrepreneurship 260
The 10 ‘P’s 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
A Framework for Enterprise Development and Entrepreneurship 261
Opportunities and threats
• These can be established through environmental scanning:– PESTEL analysis– Market analysis– Industry forces – Porter’s five forces
A Framework for Enterprise Development and Entrepreneurship 262
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
A Framework for Enterprise Development and Entrepreneurship 263
Example: BioBurp
• See example in pack (In class exercise, page 8)
Risk analysis and scenario planning
A Framework for Enterprise Development and Entrepreneurship 265
Risk analysis matrixP
rob
ab
ilit
y
ImpactHighLow
Low
Hig
h
High Impact High ProbabilityPESTEL Factors
High Impact Low ProbabilityPESTEL Factors
Low Impact High ProbabilityPESTEL Factors
Low Impact Low ProbabilityPESTEL Factors
A Framework for Enterprise Development and Entrepreneurship 266
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
A Framework for Enterprise Development and Entrepreneurship 267
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
8. Marketing Strategy
Defining the Marketing Mix for your Business
A Framework for Enterprise Development and Entrepreneurship 269
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
A Framework for Enterprise Development and Entrepreneurship 270
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
The marketing mix
The 7Ps
A Framework for Enterprise Development and Entrepreneurship 272
The marketing mix: 7 ‘P’s
Physical
People
Promotion
Place
Price
Product
Process
Source: Bitner, M. J., Boom, B. H. and Tetrealt (1995)
The traditionalmix elements
Additional service organisation specific
mix elements
A Framework for Enterprise Development and Entrepreneurship 273
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
A Framework for Enterprise Development and Entrepreneurship 274
Product 1
Comprising of:
• Product architecture and design• Product positioning• Product development and planning
There is no right price for the wrong product
A Framework for Enterprise Development and Entrepreneurship 275
Product 2
Consider the following for you business plan:
• Product variety• Quality• Design/Features• Brand name• Packaging/Sizes• Services• Warranties and Returns
A Framework for Enterprise Development and Entrepreneurship 276
Price
• PRICE provides PROFIT• Profit indicates your success in finding,
satisfying and keeping customers. However, for your customers it’s 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
A Framework for Enterprise Development and Entrepreneurship 277
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’
A Framework for Enterprise Development and Entrepreneurship 278
How profit is defined
Sales
Cost of sales
Grossprofit
Operatingcosts
Net profit
A Framework for Enterprise Development and Entrepreneurship 279
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
A Framework for Enterprise Development and Entrepreneurship 280
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
A Framework for Enterprise Development and Entrepreneurship 281
The timing of responses to promotion investments
Increasesin
Sales
Time AfterInvestment
PersonalSelling
PublicRelations
Promotions
Advertising
Rapid Return on Investment
Delayed Return on Investment
A Framework for Enterprise Development and Entrepreneurship 282
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
A Framework for Enterprise Development and Entrepreneurship 283
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
A Framework for Enterprise Development and Entrepreneurship 284
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)
Customer behaviour and the importance of service
A Framework for Enterprise Development and Entrepreneurship 286
Market type, customer behaviour & indicators
MarketType
Embryonic Mature Declining
Customer Behavior
Early Adopter’s
Follower’s Traditionalist
PrincipleMotivationIndicator
SecurityBelongingEsteem
SecurityBelongingEsteem
SecurityBelongingEsteem
A Framework for Enterprise Development and Entrepreneurship 287
The loyalty ladder –The customer loyalty continuum
Advocates
Clients
Customers
Prospects
Suspects
Enterprises shouldaspire to becontinuallydeveloping theirrelationship with customers. From the first point of contact as Suspects moving up the loyalty continuumto Advocate status
A Framework for Enterprise Development and Entrepreneurship 288
Reasons for customer erosion
68% Move because of poor customer
service
5% Develop otherbusiness
relationships
14% Move because of the poor quality of
offering
3% Relocate
9% Are claimed by aggressive competitors
1% Death of principalcontact
A Framework for Enterprise Development and Entrepreneurship 289
Reasons why business fail?
42% Poor marketing 6% Skills gap
18% Poor cash flow 3% High interest rates
10% Compliance 2% Bad management
9% Raising finance 1% Materials
9% Tax problems
A Framework for Enterprise Development and Entrepreneurship 290
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
9. Operational Strategy
Determining How Your Business Will Run and How It Can Be
Simplified
A Framework for Enterprise Development and Entrepreneurship 292
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
A Framework for Enterprise Development and Entrepreneurship 293
Learning outcomes 2
For the assessment students should:• Determine their product/service operational
requirements
A Framework for Enterprise Development and Entrepreneurship 294
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
A Framework for Enterprise Development and Entrepreneurship 295
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 business’s operations has been planned, costed and will be managed in the most effective and efficient manner
A Framework for Enterprise Development and Entrepreneurship 296
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 don’t have as comprehensive an operational plan as they should have and suffer the consequences
A Framework for Enterprise Development and Entrepreneurship 297
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
Porter’s value chain: Overview
Understanding Where To Explore
Infrastructure
Financial
Management
Human Resources
Sales &
Marketing
OutboundLogistics
ProcessInboundlogistics
Aftercare
Sup
port
Act
iviti
esP
rimar
y A
ctiv
ities
Source: Porter,1985
A Framework for Enterprise Development and Entrepreneurship 299
Porter’s 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
A Framework for Enterprise Development and Entrepreneurship 300
Porter’s 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
A Framework for Enterprise Development and Entrepreneurship 301
Porter’s 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
Porter’s value chain 1
Understanding Where To Explore
Infrastructure
Sales &
Marketing
OutboundLogistics
ProcessInboundlogistics
Aftercare
Porter’s value chain 2
Understanding Where To Explore
Infrastructure
Financial
Sales&
Marketing
OutboundLogistics
ProcessInboundlogistics
Aftercare
Porter’s value chain 3
Understanding Where To Explore
Infrastructure
Financial
Human Resources
Sales&
Marketing
OutboundLogistics
ProcessInboundlogistics
Aftercare
Porter’s value chain 4
Understanding Where To Explore
Infrastructure
Financial
Management
Human Resources
Sales&
Marketing
OutboundLogistics
ProcessInboundlogistics
Aftercare
Outsourcing
Simplifying the business by using external resources
A Framework for Enterprise Development and Entrepreneurship 307
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
A Framework for Enterprise Development and Entrepreneurship 308
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
A Framework for Enterprise Development and Entrepreneurship 309
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
Incubators
A Framework for Enterprise Development and Entrepreneurship 311
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
A Framework for Enterprise Development and Entrepreneurship 312
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
A Framework for Enterprise Development and Entrepreneurship 313
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
A Framework for Enterprise Development and Entrepreneurship 314
Incubator services: Benefits to clients 1
• Incubator director’s and staff’s 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
A Framework for Enterprise Development and Entrepreneurship 315
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
A Framework for Enterprise Development and Entrepreneurship 316
Location of Bioincubators in the UK
E.g.• Manchester• Liverpool• Imperial College, London• Cambridge• Oxford• Porton Down• York• Norwich
A Framework for Enterprise Development and Entrepreneurship 317
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?
A Framework for Enterprise Development and Entrepreneurship 318
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?
A Framework for Enterprise Development and Entrepreneurship 319
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
10. The Management Team
Building a Credible Management Team
A Framework for Enterprise Development and Entrepreneurship 321
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
A Framework for Enterprise Development and Entrepreneurship 322
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
A Framework for Enterprise Development and Entrepreneurship 323
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:
A Framework for Enterprise Development and Entrepreneurship 324
The Limited Liability Company
Treated as an individual in law with rights and responsibilities.
Senior ManagementTeam
Senior ManagementTeam
WorkersWorkers
Middle and Junior Management
Middle and Junior Management
BoardBoard
ShareholdersShareholders
Identify Strategic ObjectivesHave Overall Responsibility
Identify Strategic ObjectivesHave Overall ResponsibilityInterpret Strategic ObjectivesDevelop Tactical Response
Interpret Strategic ObjectivesDevelop Tactical ResponseImplement Tactical ResponseImplement Tactical Response
Do The GraftDo The Graft
CollaboratorsCompetitorsCustomersFundersGovernmentSuppliersRegulatory Authorities
CollaboratorsCompetitorsCustomersFundersGovernmentSuppliersRegulatory Authorities
Own The CompanyOwn The Company
External Stakeholders Traditional Hierarchy Roles
A Framework for Enterprise Development and Entrepreneurship 325
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
A Framework for Enterprise Development and Entrepreneurship 326
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.
A Framework for Enterprise Development and Entrepreneurship 327
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
A Framework for Enterprise Development and Entrepreneurship 328
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
A Framework for Enterprise Development and Entrepreneurship 329
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
A Framework for Enterprise Development and Entrepreneurship 330
5 Phases Of Growth Source: Greiner, 1996
Age Of Organisation
2 3 4 51Phase
Sta
ge
Of
Org
anis
atio
n
Large
CrisisOf
Leadership
CrisisOf
Autonomy
CrisisOf
Control
CrisisOf
Red Tape
CrisisOf ???
GrowthThroughCreativity
GrowthThroughDirection
GrowthThrough
Delegation
GrowthThrough
Coordination
GrowthThrough
Collaboration
Small
Revolution Stages
Evolution (Growth) Stages
A Framework for Enterprise Development and Entrepreneurship 331
Typical CEO start-up package
• Salary: £120-150k 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
A Framework for Enterprise Development and Entrepreneurship 332
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
A Framework for Enterprise Development and Entrepreneurship 333
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
10. Financial Planning
Funding in the Biosciences and Projecting Financial Performance
of the Business
A Framework for Enterprise Development and Entrepreneurship 335
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 documents1. Cash flow forecast2. Profit and loss 3. Balance sheet
• And break even analysis and establish loan requirements
A Framework for Enterprise Development and Entrepreneurship 336
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
A Framework for Enterprise Development and Entrepreneurship 337
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
A Framework for Enterprise Development and Entrepreneurship 338
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
A Framework for Enterprise Development and Entrepreneurship 339
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
Funding enterprise development in the Biosciences
A Framework for Enterprise Development and Entrepreneurship 341
Funding the Biosciences
• The creation of top tier US Bioscience companies has historically required $600-700 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
A Framework for Enterprise Development and Entrepreneurship 342
Funding rounds for the Biosciences
Initial finance
Source: Ithaka Life Sciences, 2004
Formation Seed finance
1st VC round
Founders, family & friends
Business angels; University Challenge Funds; specialist
Venture capitalists
A Framework for Enterprise Development and Entrepreneurship 343
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
Funding sources in Bioscience commercialisation process
A Framework for Enterprise Development and Entrepreneurship 345
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
A Framework for Enterprise Development and Entrepreneurship 346
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
A Framework for Enterprise Development and Entrepreneurship 347
3: Later stage
Multiple rounds of venture capital funding £10 -50 million per round
• Institutions willing to invest in private companies
• Pharma/biotech partners• Public markets: AIM,LSE,NASDAQ
Source: DTI, BIGT, 2003
Business Angels
A Framework for Enterprise Development and Entrepreneurship 349
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
A Framework for Enterprise Development and Entrepreneurship 350
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
A Framework for Enterprise Development and Entrepreneurship 351
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
A Framework for Enterprise Development and Entrepreneurship 352
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
A Framework for Enterprise Development and Entrepreneurship 353
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 termE.g. closing the business, selling the business, floating the business, merging
A Framework for Enterprise Development and Entrepreneurship 354
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
A Framework for Enterprise Development and Entrepreneurship 355
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
The financial forecast documents and Break even point
Costing start upCash flow forecast
Profit and loss forecastBalance sheet forecast
Break even point
A Framework for Enterprise Development and Entrepreneurship 357
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
Costing the start up
A Framework for Enterprise Development and Entrepreneurship 359
Costing the start up:The ‘shopping list’
The enterprise shopping list will consist of five elements:
1. Premises2. Operational needs3. Administrative needs4. Intangible needs5. Working capital
A Framework for Enterprise Development and Entrepreneurship 360
Costing the start up - Premises
Example selection criteria:• Floor size• Location• Rateable value• Security• Service costs• Utility costs
A Framework for Enterprise Development and Entrepreneurship 361
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
A Framework for Enterprise Development and Entrepreneurship 362
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
A Framework for Enterprise Development and Entrepreneurship 363
Costing the start up 4 -Intangible needs
• Critical breakdown covers • Insurances • Licences and permissions • Professional fees, legal, accountancy, surveying
etc.
A Framework for Enterprise Development and Entrepreneurship 364
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
A Framework for Enterprise Development and Entrepreneurship 365
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
Cash flow forecast
What is it for?How do we construct one?
A Framework for Enterprise Development and Entrepreneurship 367
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
A Framework for Enterprise Development and Entrepreneurship 368
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
A Framework for Enterprise Development and Entrepreneurship 369
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
A Framework for Enterprise Development and Entrepreneurship 370
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
A Framework for Enterprise Development and Entrepreneurship 371
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
A Framework for Enterprise Development and Entrepreneurship 372
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?
A Framework for Enterprise Development and Entrepreneurship 373
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 OverheadsAll other business expenses that are not directly proportional to income (takings)
A Framework for Enterprise Development and Entrepreneurship 374
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
A Framework for Enterprise Development and Entrepreneurship 375
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 doesn’t 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)
A Framework for Enterprise Development and Entrepreneurship 376
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
A Framework for Enterprise Development and Entrepreneurship 377
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
Profit and Loss forecast
A Framework for Enterprise Development and Entrepreneurship 379
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
A Framework for Enterprise Development and Entrepreneurship 380
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
A Framework for Enterprise Development and Entrepreneurship 381
Profit and Loss account- Typical layout
ACME Pharmaceutical s Ltd
Profit & Loss for the year ended 31 March 2006
Cost (£) Income (£)
Sales Income 500,000
Cost of Sales•Raw materials•Sub Contract Costs
50,000120,000170,000
Gross Profit (Sales less Cost of Sales) 330,000
Overheads•Employment Costs•Depreciation•Other Operating Costs
150,00020,00080,000
250,000
Profit before interest and tax 80,000
Interest payable 10,000
Profit before tax 70,000
Tax 15,000
Profit after tax 55,000
Dividends 5,000
Net profit or retained earnings 50,000
The Balance Sheet
See Excel example
A Framework for Enterprise Development and Entrepreneurship 383
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
A Framework for Enterprise Development and Entrepreneurship 384
The balance sheet 2 -What it doesn’t 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
A Framework for Enterprise Development and Entrepreneurship 385
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
A Framework for Enterprise Development and Entrepreneurship 386
Balance Sheet Typical Layout
Fixed Assets (1)
Tangible Assets
Equipment 40,000
Buildings 95,000
Intangible Assets
Goodwill 5,000
140,000
Current Assets (2)
Stock 10,000
Debtors 20,000
Cash at bank 5,000
35,000
Current Liabilities (3)
Loans 23,000
Creditors 7,000
Tax 2,000
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 Assets 43,000
Capital and reserves
Shareholders 30,000
Reserves 13,000
Net Worth 43,000
BALANCESHEETAS AT
31 MARCH 06
Break Even Point
A Framework for Enterprise Development and Entrepreneurship 388
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
A Framework for Enterprise Development and Entrepreneurship 389
Break Even Point
Break Even Point
Variable Cost Element
Fixed Cost Element
Income£££
£’s
Number of units output
Total Costs
A Framework for Enterprise Development and Entrepreneurship 390
Break Even Point 1
= Fixed Costs
Selling Price – Unit Variable Costs
A Framework for Enterprise Development and Entrepreneurship 391
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 %
A Framework for Enterprise Development and Entrepreneurship 392
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
12. ‘Pitching’ the Idea
Presenting the Business Case to Potential Investors
A Framework for Enterprise Development and Entrepreneurship 394
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
A Framework for Enterprise Development and Entrepreneurship 395
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
A Framework for Enterprise Development and Entrepreneurship 396
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 ‘what’s in it for them?’
A Framework for Enterprise Development and Entrepreneurship 397
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
A Framework for Enterprise Development and Entrepreneurship 398
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?
A Framework for Enterprise Development and Entrepreneurship 399
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
A Framework for Enterprise Development and Entrepreneurship 400
Content of business presentation
1. The company’s background and its product and services
2. A market analysis and description of the opportunities present
3. The company’s competitive edge and the marketing strategies it will use to promote that edge
4. The management team and it’s member’s qualifications and experience
5. The financial analysis that shows lenders and investors an attractive payback or pay off
A Framework for Enterprise Development and Entrepreneurship 401
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 – what’s in it for
the investor• Follow up with each investor
A Framework for Enterprise Development and Entrepreneurship 402
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!
A Framework for Enterprise Development and Entrepreneurship 403
If you want to take it further
• University Business Support Unit • Business Link
www.businesslink.gov.uk• YES – Young Enterprise Scheme in the
Biosciences www.Bioscienceyes.co.uk/
• NES Programme New Entrepreneur Scholarship programmewww.nesprogramme.org/