Management of Technological Innovation
Andrew Maxwell
Business Strategy
Business model exists at 3 levels
How will you
make money?
How will you deliver your solution?
How are you going to make money for other people?
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 for buying
and selling products
Business Model Examples
Ford – Integrating product manufacturing on 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
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?
How do you:
Create value? Select customers? Do it better than anyone else? 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 how they can be improved.
Technology understanding. How new technology can facilitate new opportunity or business model.
Personal experience. Identify a specific gap in the market based upon personal experience.
9
Opportunity Drivers
Technological changeTechnological change Political or regulatory changePolitical or regulatory change Social or demographic changeSocial or demographic change
10
Opportunity recognition process
11
This leads to creation of new business opportunities:
OpportunityOpportunity ExampleExample Products / services Products / services Medical device Medical device 11
Production methodProduction method Computerized Computerized drug developmentdrug development
MarketsMarkets ViagraViagra Ways of organizingWays of organizing Boeing 787 Dreamliner Boeing 787 Dreamliner 22
New raw materialsNew raw materials Bio-diesel Bio-diesel 33
Refs: Refs: 1. 1. http://www.iwalk-free.com/june052000.html2. 2. http://www.businessweek.com/magazine/content/06_05/b3969417.htm3. http://www.bioxcorp.com/3. http://www.bioxcorp.com/
12
Technology Innovation DriversCore technologies and convergence
MaterialsMaterials Biotechnology Biotechnology
Information TechnologyInformation Technology Energy Energy
13
Political Drivers
Environmental legislation (Kyoto protocol)Environmental legislation (Kyoto protocol) Enforcement legislation (Sarbannes- Enforcement legislation (Sarbannes-
Oxley)Oxley) Security concerns (Homeland Security)Security concerns (Homeland Security) Deregulation (new wireless carriers)Deregulation (new wireless carriers)
14
Social Drivers
Demographic changes (age and health) Demographic changes (age and health) Geo-economic changes (rise of China Geo-economic changes (rise of China
and India)and India) Wealth changes (Baby boomers retiring)Wealth changes (Baby boomers retiring)
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 1997Ref: Clayton Christensen “Innovators Dilemma” Harvard Business School 1997
19
Biggest issue is ease of adoption Pain 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 Which do you think would be easier to get customers to adopt?customers to adopt?
20
Recognizing adoption issues
How do you:
Overcome perceived risk of buying your product or service?
Obtain or circumvent the traditional purchasing pattern?
Utilize others to increase awareness or availability?
How do you overcome adoption issues?
22
The entrepreneurial process
23
Universal Industrial Success Curve Shows Most New Business Development Efforts Unsuccessful
1
10
100
1000
10,000
Nu
mb
er o
f Id
eas
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 Launches1 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
Commercialization stage
25
The opportunity assessment process Technology (uniqueness, protectability)Technology (uniqueness, protectability) Market (opportunity, competition, structure)Market (opportunity, competition, structure) Management (leader, team)Management (leader, team) Business Model (margins, revenues, costs and Business Model (margins, revenues, costs and
implementation issues)implementation issues)
Be a Dragon:Be a Dragon:
http://www.cbc.ca/dragonsden/video.html
26
Technology
Will lots of people be interested in buying this Will lots of people be interested in buying this product?product? Great product, clear need, can see lots of customers lining up for this Great product, clear need, can see lots of customers lining up for this
one.one. Good product, of interest to a limited number of people. Good product, of interest to a limited number of people. Can not se many people buying or switching to this product.Can not se many people buying or switching to this product.
Do you think that the product is ready for Do you think that the product is ready for customers, or is there still some development customers, or is there still some development required? required? Product complete and ready for sale, investment required for marketing Product complete and ready for sale, investment required for marketing
and/or inventory build up.and/or inventory build up. Product design finished but needs some more work before ready.Product design finished but needs some more work before ready. Needs some more development before it is ready.Needs some more development before it is ready.
27
Technology/Market Will other people be able to copy the product easily?Will other people be able to copy the product easily?
The product is patented or very difficult to copy.The product is patented or very difficult to copy. It will not be that easy to copy the product.It will not be that easy to copy the product. Anyone could copy it easily.Anyone could copy it easily.
Did the inventor have a customer in mind when they Did the inventor have a customer in mind when they developed the product?developed the product? They have a first customer/s in place who will purchase the product/service They have a first customer/s in place who will purchase the product/service
as soon as it is available.as soon as it is available. Some clear early customers who have been consulted in developing the Some clear early customers who have been consulted in developing the
product, but have not yet agreed to purchase.product, but have not yet agreed to purchase. There are no first customers identified.There are no first customers identified.
28
Market
Does the inventor know how they are going to sell the Does the inventor know how they are going to sell the product to customers?product to customers? They understand the market and have a realistic marketing plan and a They understand the market and have a realistic marketing plan and a
distribution strategy in place. distribution strategy in place. They have explored a number of realistic options, but there are no They have explored a number of realistic options, but there are no
agreements in place.agreements in place. Limited thought has been given to this issue or plan proposed not realistic.Limited thought has been given to this issue or plan proposed not realistic.
Did the inventor persuade you that there will be a Did the inventor persuade you that there will be a large market for this product?large market for this product? Large market (over $20 million) identified and achievableLarge market (over $20 million) identified and achievable Medium market (over $5 million) identified and achievableMedium market (over $5 million) identified and achievable Market size small (less than $5 million) or unconvinced that the Market size small (less than $5 million) or unconvinced that the
larger market identified exists. larger market identified exists.
29
Management / Business Model
Do you think that the management team of the company Do you think that the management team of the company have the necessary experience to run this business? have the necessary experience to run this business? Significant relevant experience in running a business of this type.Significant relevant experience in running a business of this type. Limited experience, but some clear knowledge of the issues which Limited experience, but some clear knowledge of the issues which
the business is likely to face.the business is likely to face. No evidence of the experience required.No evidence of the experience required.
Do you think they understand the financial side of running Do you think they understand the financial side of running the business well enough? the business well enough? Complete understanding; - amount of money asking for is enough Complete understanding; - amount of money asking for is enough
to last them until they are making money (usually in less than 12 to last them until they are making money (usually in less than 12 months). months).
Good understanding; - amount of money requested probably Good understanding; - amount of money requested probably enough (may need to last them up to two years) enough (may need to last them up to two years)
Not sufficient evidence of their financial understanding or they will Not sufficient evidence of their financial understanding or they will run out of money before they are profitable.run out of money before they are profitable.
Business Strategy
Business model exists at 3 levels
How will you
make money?
How will you deliver your solution?
How are you going to make money for other people?
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 for buying
and selling products
Business Model Examples
Ford – Integrating product manufacturing on 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
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?
How do you:
Create value? Select customers? Do it better than anyone else? Differentiate your solution? Make a profit? Grow your business?
Core components of business model?
36
Opportunity recognition
Customers. Understand their needs – vitamins and pain killers.
Existing enterprises. Understand gaps in their current products or how they can be improved.
Technology understanding. How new technology can facilitate new opportunity or business model.
Personal experience. Identify a specific gap in the market based upon personal experience.
37
Opportunity Drivers
Technological changeTechnological change Political or regulatory changePolitical or regulatory change Social or demographic changeSocial or demographic change
38
Opportunity recognition process
39
This leads to creation of new business opportunities:
OpportunityOpportunity ExampleExample Products / services Products / services Medical device Medical device 11
Production methodProduction method Computerized Computerized drug developmentdrug development
MarketsMarkets ViagraViagra Ways of organizingWays of organizing Boeing 787 Dreamliner Boeing 787 Dreamliner 22
New raw materialsNew raw materials Bio-diesel Bio-diesel 33
Refs: Refs: 1. 1. http://www.iwalk-free.com/june052000.html2. 2. http://www.businessweek.com/magazine/content/06_05/b3969417.htm3. http://www.bioxcorp.com/3. http://www.bioxcorp.com/
40
Technology Innovation DriversCore technologies and convergence
MaterialsMaterials Biotechnology Biotechnology
Information TechnologyInformation Technology Energy Energy
41
Political Drivers
Environmental legislation (Kyoto protocol)Environmental legislation (Kyoto protocol) Enforcement legislation (Sarbannes- Enforcement legislation (Sarbannes-
Oxley)Oxley) Security concerns (Homeland Security)Security concerns (Homeland Security) Deregulation (new wireless carriers)Deregulation (new wireless carriers)
42
Social Drivers
Demographic changes (age and health) Demographic changes (age and health) Geo-economic changes (rise of China Geo-economic changes (rise of China
and India)and India) Wealth changes (Baby boomers retiring)Wealth changes (Baby boomers retiring)
New ventures versus existing players
Industry stage/structure Existing resources Disruptive capacity Protection of existing customer base
44
Industry stage/structure
Factors favouring startups: Young industry No dominant design Not capital intensive Limited economies of scale/brand High number of smaller firms
45
Opportunities favouring existing firms Steep learning curve Negative cash flow Economies of scale Complementary assets
46
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 1997Ref: Clayton Christensen “Innovators Dilemma” Harvard Business School 1997
47
Biggest issue is ease of adoption Pain 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 Which do you think would be easier to get customers to adopt?customers to adopt?
48
Recognizing adoption issues
How do you:
Overcome perceived risk of buying your product or service?
Obtain or circumvent the traditional purchasing pattern?
Utilize others to increase awareness or availability?
How do you overcome adoption issues?
50
The entrepreneurial process
51
Universal Industrial Success Curve Shows Most New Business Development Efforts Unsuccessful
1
10
100
1000
10,000
Nu
mb
er o
f Id
eas
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 Launches1 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.”
52
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
Commercialization stage
53
The opportunity assessment process Technology (uniqueness, protectability)Technology (uniqueness, protectability) Market (opportunity, competition, structure)Market (opportunity, competition, structure) Management (leader, team)Management (leader, team) Business Model (margins, revenues, costs and Business Model (margins, revenues, costs and
implementation issues)implementation issues)
Be a Dragon:Be a Dragon:
http://www.cbc.ca/dragonsden/video.html
54
Technology
Will lots of people be interested in buying this Will lots of people be interested in buying this product?product? Great product, clear need, can see lots of customers lining up for this Great product, clear need, can see lots of customers lining up for this
one.one. Good product, of interest to a limited number of people. Good product, of interest to a limited number of people. Can not se many people buying or switching to this product.Can not se many people buying or switching to this product.
Do you think that the product is ready for Do you think that the product is ready for customers, or is there still some development customers, or is there still some development required? required? Product complete and ready for sale, investment required for marketing Product complete and ready for sale, investment required for marketing
and/or inventory build up.and/or inventory build up. Product design finished but needs some more work before ready.Product design finished but needs some more work before ready. Needs some more development before it is ready.Needs some more development before it is ready.
55
Technology/Market Will other people be able to copy the product easily?Will other people be able to copy the product easily?
The product is patented or very difficult to copy.The product is patented or very difficult to copy. It will not be that easy to copy the product.It will not be that easy to copy the product. Anyone could copy it easily.Anyone could copy it easily.
Did the inventor have a customer in mind when they Did the inventor have a customer in mind when they developed the product?developed the product? They have a first customer/s in place who will purchase the product/service They have a first customer/s in place who will purchase the product/service
as soon as it is available.as soon as it is available. Some clear early customers who have been consulted in developing the Some clear early customers who have been consulted in developing the
product, but have not yet agreed to purchase.product, but have not yet agreed to purchase. There are no first customers identified.There are no first customers identified.
56
Market
Does the inventor know how they are going to sell the Does the inventor know how they are going to sell the product to customers?product to customers? They understand the market and have a realistic marketing plan and a They understand the market and have a realistic marketing plan and a
distribution strategy in place. distribution strategy in place. They have explored a number of realistic options, but there are no They have explored a number of realistic options, but there are no
agreements in place.agreements in place. Limited thought has been given to this issue or plan proposed not realistic.Limited thought has been given to this issue or plan proposed not realistic.
Did the inventor persuade you that there will be a Did the inventor persuade you that there will be a large market for this product?large market for this product? Large market (over $20 million) identified and achievableLarge market (over $20 million) identified and achievable Medium market (over $5 million) identified and achievableMedium market (over $5 million) identified and achievable Market size small (less than $5 million) or unconvinced that the Market size small (less than $5 million) or unconvinced that the
larger market identified exists. larger market identified exists.
57
Management / Business Model
Do you think that the management team of the company Do you think that the management team of the company have the necessary experience to run this business? have the necessary experience to run this business? Significant relevant experience in running a business of this type.Significant relevant experience in running a business of this type. Limited experience, but some clear knowledge of the issues which Limited experience, but some clear knowledge of the issues which
the business is likely to face.the business is likely to face. No evidence of the experience required.No evidence of the experience required.
Do you think they understand the financial side of running Do you think they understand the financial side of running the business well enough? the business well enough? Complete understanding; - amount of money asking for is enough Complete understanding; - amount of money asking for is enough
to last them until they are making money (usually in less than 12 to last them until they are making money (usually in less than 12 months). months).
Good understanding; - amount of money requested probably Good understanding; - amount of money requested probably enough (may need to last them up to two years) enough (may need to last them up to two years)
Not sufficient evidence of their financial understanding or they will Not sufficient evidence of their financial understanding or they will run out of money before they are profitable.run out of money before they are profitable.
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