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Management of Innovations and Entrepreneurship
Malin Brännback
Spring 2004
One the greatest pains to human nature is the pain of a new idea. -
Walter Bagehot
In Keeping a Company Entrepreneurial, Remember
Thus you have to make identifying and capturing opportunities a joyous and fulfilling experience. -
Dodge Morgan
Keeping a Company Entrepreneurial
The setting
Four drivers:– A story that need to be tended to– The business opportunity– The opportunity to change animal
husbandry, generate savings, impact more than just Randy
– Glory...a dream to go to history as having done something
Annual Chicken Turnover in Millions of Birds
Market Segment US World Market
Table Eggs 240 1,200
Broilers 4,000 16,000
Brooders 32 128
Total 4,272 17,328
Chicken population annual growth 6-12 percentEgg production decline 1% per year
The Process
Start laying eggs at the age of 18 weeks
Lay their first eggs in the spring– Farmers have to trick the hen into
thinking it’s spring– The amount of light during the day=
spring
The Economics
A 20 week old hen $2.50Feed cost/dozen eggs $0.28other production costs $0.06depreciation $0.12
--------$0.46
Total production costs/dozen eggs $0.52
The weighted average income/dozen eggs $0.53
Not much profit
Problems with red light:
it has to be entirely in the red range (5300-6800 Ångström) – if it spills into blue or green – ineffective
the building has to be closed – which is not the case in the largest egg producing states; CA,GA, Fl, Tx, Ol.
Red light takes more energy than white light since 90% of the white light is screened out. Costs for light and ventialtion is thus required!
Hard for workers to constantly adjust their eyes while entering and leaving the closed houses
Previous Attempt
1963 – Vision Control Inc. started by Al Schriner and Irv Wise, closed after a few months
late 1960’s&early 1970’s a second attempt – no luck 1969 – a patent for contact lenses for chickens,
patent expired 1973-1974 – third attempt by Randy Wise...no luck
here either
Fourth Attempt
In 1984 – Randy Wise, Al Leighton (Univeristy of Virginia Polytechnic) started working on the lenses
Victor Cota and George Daniels of Omicron joined the in the efforts
Can we manufacture these lenses and if so at what price? 15 cents was seen as the rigth sales price – 15-20 perhaps –
collective gut feeling
Built a mold enabling production of 775,000 pair a month Patens are important – filed in oct. 1987
The Team
Randy Wise, ProfessorAl Leighton, ProfessorCarl Johnson, VP salesBill Erickson, VP marketingDiane Porter, Director of Administration
and Secretary-Treasurer
The Market
Relatively few potential customer; 200-250 egg raising ranches represent 80% of the US market
700-1,000 cover 80% of the market overseas– Turkeys, pigs, and ducks all of which
exhibit aggressive behaviour when raised under commercial conditions
Market Strategy
Economic savings from reduced mortality, reduced feed consumption, and more eggs– No other value– No competiton against other products
Economic justification to the farmers
Decreased mortality $0.10Decreased feed consumption $0.26Increase in egg production $0.32 $ 0.68Cost of a pair ABL-1 lenses $-0.15Cost of insertion $-0.15
---------Total $0.48
Cost of a Chicken $2.50
Chickens increase in egg production from 1%-3% or 4%
Market Strategy
Advertise their product in 2 or 3 main poultry digests for exposure
Send a trial kit to larger farms containing ten pairs, a booklet about the company and a short video showing how the product is used and how to insert the lenses
Sales force to convince the larger ranches to do trials on 1,000 chickens
Finance Needed & Preparation
In 1988 a limited offering memorandum for raising $300,000-$420,000
What about the reasons for raising money?
Part I 2and 3
What recommendations would you make to improve any of the above?
Would you invest in this company in late august 1988 at $30 per share?
Part II
What have they learned from their first three months of operations? Should their problems have been forseen? Why or why not?
What does this all mean for their financial plans? What should they do now?
– Marketing– Finance– Operations
What do you think will happen next?
Would you invest in this company in late october 1988 at $30 per share