Business Strategy

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Text of Business Strategy

  • 1. Management ofTechnological Innovation Andrew Maxwell

2. Business Strategy 3. Business model exists at 3 levels Howwill youmake money? How will youdeliver your solution? How are you goingto make money for other people? 4.

  • Make a product from scratch and sell it to a customer
  • Provide a service and charge a monthly usage fee
  • Create a new product and sell copies of it to customers
  • Provide a free service of value and provide access to users of that service to third parties
  • Create an efficient marketplace forbuying and selling products

Business Model Examples 5.

  • Ford Integrating product manufacturingon assembly line and national distribution through dealers
  • ATT provision of national phone service, with a pay per use or pay for access model
  • Visicalc Software production and distribution pay for site license, with updates
  • Google Free search engine with revenues from variety of advertising
  • E Bay revenue from putting buyers and sellers into contact

Business model innovators that created shareholder wealth 6.

    • You need one to help clarify what it is you are doing:
    • It acts as a guide to how you move forward.
    • It helps you focus on customer value added and profit.
    • It provides a communication tool for engaging with other parties.

Why do you need a business model? 7.

    • How do you:
    • Create value?
    • Select customers?
    • Do it better than anyoneelse?
    • Differentiate your solution?
    • Make a profit?
    • Grow your business?

Core components of business model? 8. Opportunity recognition

  • Customers. Understand their needs vitamins and pain killers.
  • Existing enterprises. Understand gaps in their current products or howthey canbe improved.
  • Technology understanding. Hownew technology can facilitate newopportunity or business model.
  • Personal experience. Identify aspecific gap in the market basedupon personal experience.

9. Opportunity Drivers

  • Technological change
  • Political or regulatory change
  • Social or demographic change

10. Opportunity recognition process 11. This leads to creation of new business opportunities:

    • Opportunity Example
  • Products / servicesMedical device1
  • Production method Computerizeddrug development
  • Markets Viagra
  • Ways of organizing Boeing 787 Dreamliner2
  • New raw materials Bio-diesel3
  • Refs:
  • 1.http://www.iwalk-free.com/june052000.html
  • 2.http://www.businessweek.com/magazine/content/06_05/b3969417.htm
  • 3. http://www.bioxcorp.com/

12. Technology Innovation Drivers Core technologies and convergence

  • Materials Biotechnology
  • Information Technology Energy

13. Political Drivers

  • Environmental legislation (Kyoto protocol)
  • Enforcement legislation (Sarbannes- Oxley)
  • Security concerns (Homeland Security)
  • Deregulation (new wireless carriers)

14. Social Drivers

  • Demographic changes (age and health)
  • Geo-economic changes (rise of China and India)
  • Wealth changes (Baby boomers retiring)

15. New ventures versus existing players

  • Industry stage/structure
  • Existing resources
  • Disruptive capacity
  • Protection of existing customer base

16. Industry stage/structure

  • Factors favouring startups:
  • Young industry
  • No dominant design
  • Not capital intensive
  • Limited economies of scale/brand
  • High number of smaller firms

17. Opportunities favouring existing firms

  • Steep learning curve
  • Negative cash flow
  • Economies of scale
  • Complementary assets

18. Disruption factors that favour new firms

  • Competence destroying change
  • Cannibalize existing business
  • Discrete sales opportunities
  • Significant use of human capital
  • Ref: Clayton Christensen Innovators Dilemma Harvard Business School 1997

19. Biggest issue is ease of adoptionPain killers vs vitamins

  • Pain killers solve an existing problem of which people are already aware.If they do this better than current solutions, customers need to have them.
  • Vitamins provide enhancements to current solutions, in some cases providing benefits customers were not even previously aware of, they are therefore nice to have.

Which do you think would be easier to get customers to adopt? 20. Recognizing adoption issues 21.

    • How do you:
    • Overcome perceived risk of buying your product or service?
    • Obtain or circumvent the traditional purchasing pattern?
    • Utilize others toincrease awarenessor availability?

How do you overcomeadoption issues? 22. The entrepreneurial process 23. Universal Industrial Success Curve Shows Most New Business Development Efforts Unsuccessful 1 10 100 1000 10,000 Number of Ideas 1 2 3 4 5 6 7 Stage of NBD Process 3000 Raw Ideas (Unwritten) 300 Ideas Submitted 125 Small Projects 9 Early Stage Development 4 Major Development 1.7 Launches 1 Success Source: G. Stevens and J. Burley, 3000 Raw Ideas = 1 Commercial Success! Research-Technology Management,40(3):16-27,May-June, 1997. Runner-Up, IRI Best Paper of the Year. 24. Product Planning and Development Process

  • Idea stage: Idea is generated
  • Concept stage: Validate the idea
  • Product development stage: Find a first customer and create a demo
  • Test marketing stage: put out on trial
  • Commercializationstage

25. The opportunity assessment process

  • Technology (uniqueness, protectability)
  • Market (opportunity, competition, structure)
  • Management (leader, team)
  • Business Model (margins, revenues, costs and implementation issues)
  • Be a Dragon:
  • http:// www.cbc.ca/dragonsden/video.html

26. Technology

  • Will lots of people be interested in buying this product?
    • Great product, clear need, can see lots of customers lining up for this one.
    • Good product, of interest to a limited number of people.
    • Can not se many people buying or switching to this product.
  • Do you think that the product is ready for customers, or is there still some development required?
    • Product complete and ready for sale, investment required for marketing and/or inventory build up.
    • Product design finished but needs some more work before ready.
    • Needs some more development before it is ready.

27. Technology/Market

  • Will other people be able to copy the product easily?
    • The product is patented or very difficult to copy.
    • It will not be that easy to copy the product.
    • Anyone could copy it easily.
  • Did the inventor have a customer in mind when they developed the product?
    • They have a first customer/s in place who will purchase the product/service as soon as it is available.
    • Some clear early customers who have been consulted in developing the product, but have not yet agreed to purchase.
    • There are no first customers identified.

28. Market

  • Does the inventor know how they are going to sell the product to customers?
    • They understand the market and have a realistic marketing plan and a distribution strategy in place.
    • They have explored a number of realistic options, but there are no agreements in place.
    • Limited thought has been given to this issue or plan proposed not realistic.
  • Did the inventor persuade you that there will be a large market for this product?
    • Large market (over $20 million) identified and achievable
    • Medium market (over $5 million) identified and achievable
    • Market size small (less than $5 million) or unconvinced that thelarger market identified exists.

29. Management / Business Model

  • Do you th