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Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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Page 1: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

Management of Innovations and Entrepreneurship

Malin Brännback

Spring 2004

Page 2: 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

Page 3: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

Thus you have to make identifying and capturing opportunities a joyous and fulfilling experience. -

Dodge Morgan

Keeping a Company Entrepreneurial

Page 4: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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

Page 5: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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

Page 6: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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

Page 7: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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

Page 8: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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

Page 9: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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

Page 10: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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

Page 11: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

The Team

Randy Wise, ProfessorAl Leighton, ProfessorCarl Johnson, VP salesBill Erickson, VP marketingDiane Porter, Director of Administration

and Secretary-Treasurer

Page 12: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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

Page 13: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

Market Strategy

Economic savings from reduced mortality, reduced feed consumption, and more eggs– No other value– No competiton against other products

Page 14: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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%

Page 15: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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

Page 16: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

Finance Needed & Preparation

In 1988 a limited offering memorandum for raising $300,000-$420,000

What about the reasons for raising money?

Page 17: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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?

Page 18: Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

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