Chap5

Technology Ventures: From Idea to OpportunityChapter 5: Summary

There’s a better way to do it, Find it!

Thomas Edison

How can an entrepreneur build an effective strategy based on innovation that will lead to a sound technology venture?

An innovation strategy is structured to effectively commercialize new products and services for its customers. Using an idealized model of a window of opportunity, the entrepreneur can decide when to act. The entrepreneur needs to maintain a sense of urgency but avoid being too early or too late to market. Entrepreneurs establish and build a network of partners who work with them to achieve the new venture’s goals.

Summary

Technology Ventures: From Idea to OpportunityChapter 5: Concept

Emergent industries:

Newly created or newly recreated industries formed by product, customer, or context changes [Barney 2002].

Technology Ventures: From Idea to OpportunityChapter 5: Table 5.2

Possible Advantages Possible Disadvantages

Create the Standard and the Rules

Short-Lived Advantages Are Competed Away

Low Cost Position Higher Development Costs

Create and Protect Intellectual Property

Established Firms Circumvent or violate patents and intellectual property

Tie Up Strategic Resources

Cost of Attaining the Resources

Increase Switching Costs for the Producer

High Uncertainty of Designing the Right Product. I f vision is wrong, then large costs to switch

Increase Switching Costs for the Customer

Customer is reluctant to buy when a large cost to switch may be incurred

First Mover Potential Advantages and Disadvantages


TYPE OF INDUSTRY

Mature Growing Emergent

Revenue Growth Slow Moderate Potentially Fast

Stability High Moderate Low

Uncertainty Low Moderate High

Industry Rules Fixed Fluid Unestablished

Competitiveness High Moderate Low or None

CHARACTERISTICS

Three Types of Industries and Their Characteristics

Technology Ventures: From Idea to OpportunityChapter 5: Figure 5.3

Complement: A complement to a product is any other product that makes the first one more attractive to the customer.

The New Venture

Customers

ComplimentorsCompetitors

Suppliers

The Value Network

Technology Ventures: From Idea to OpportunityChapter 5: concept

Importance reflects the magnitude of the economic value of an invention.

Radicalness measures the degree to which an invention, regardless of economic value, differs from previous inventions in the field.

Patent scope describes the breadth of intellectual property protection for the invention.


The Factors that Influence the Entrepreneur to Exploit An Independent Invention

1. The Business Interests, Capabilities, and Experiences of the Entrepreneurial Team

2. The Characteristics of the Industry in Which the Invention Will Be Exploited

3. The Characteristics of the Inventiona. Importance of the invention — Economic value and

potential payoffb. Radicalness of the invention — differentiation of the invention from its predecessorsc. The breadth of patent protection of the intellectual

property


New Technical Knowledge

New Invention

Characteristics of the Invention:

ImportanceRadicalnessPatent Scope

Availability of resources required for this venture

The capabilities and knowledge of the entrepreneurial team

The characteristics of the Industry in which the invention will be

Will this invention be exploited as a new venture led by this team?

New Firm

YES

NO

The New Business Formation Process for an Invention


Disruptive or radical innovations introduce a set of attributes to a marketplace different than the ones that mainstream customers historically have valued, and the products often initially perform unfavorably along one or two dimensions of performance that are particularly important to those customers.

Current performance of the innovation

Range of performance required in the mainstream market

Expected Trajectory

Now Time

High

Performance

Low

The Expected Trajectory of a Disruptive Innovation


Creativity is the ability to use the imagination to develop new ideas, new things, or new solutions.

Six Resources for A Creative Enterprise•Knowledge in the Required Domain and Fields — knowing what is new• Intellectual Abilities to recognize connections, redefine problems and

envision and analyze possible practical ideas and solutions• Inventive Thinking about the problem in novel ways•Motivation towards Action•Opportunity Oriented Personality and Openness to Change•Contextual Understanding that supports creativity and mitigates risks


DescribeThe Problem

DescribeThe Problem

Evaluateand

Test the Ideas

Evaluateand

Test the Ideas

Build a Prototypeand Show It to the

Customer

Build a Prototypeand Show It to the

Customer

Intuitive Thinking,Brainstorming

Intuitive Thinking,Brainstorming

Insights, Ideas,Inventive ThinkingInsights, Ideas,

Inventive Thinking

Incubation Period: Observe and

Study the Problem

Incubation Period: Observe and

Study the Problem

Start

Reframe and

Start Again

The Creativity Process


The Elements of An Attractive Innovation Strategy

• A well defined customer• A key customer benefit that is measurable in dollars• Short period until economic payback and positive cash flow• A high benefit to price ratio for the customer• A proprietary advantage that can be maintained or defended• The core competencies required to exploit the new technology are

present or available to the new venture• Access to the necessary resources


Strategy• Industry and Competitor Analysis• Expected Competitive Advantage

Business Model• Vision• Target Market• Value Proposition

Technology Factors• Feasibility• Performance• Manufacturability

Expected Economic Results• Revenue• Profitability• Return on Capital• Time to Profitability

The four steps to achieve a favorable technology innovation.

Technology Ventures: From Idea to OpportunityChapter 5: Principle

An innovation strategy builds on creativity, invention, and technologies, acting within a value network, to effectively commercialize new products and services for its customers.

Technology Ventures: From Idea to OpportunityChapter 5: Exercise

Many people expect a car with a hydrogen fuel cell will be common within 10 years. Use table 5.5 and figure 5.1 to describe the potential for fuel cell vehicles.

Technology Ventures: From Idea to OpportunityChapter 5: Venture Challenge

VENTURE CHALLENGE1)Describe your venture in terms of timing of entry as

illustrated by figure 5.1

2)Create a value network for your company as outlined in figure 5.3.

3)Create a partnership strategy as discussed in section 5.3.

4)Summarize your technology and innovation strategy.

Technology Ventures: From Idea to OpportunityChapter 5: DVD Video

DVD Video

“Two Weird Ideas That Work”

Bob Sutton (Stanford University)