The Entrepreneurial Manager
Harvard Business School
20 April 2001
Entrepreneurial Manager Tool Kit
Managing Relationships
The Business Development Puzzle
Five years ago no one had heard of business development.
Today - Critical function for many companies• 12% of 199 HBS grads went to business
development (higher than marketing or general management)
• VP Biz Dev key member of management team Why?
Partnerships have become... More numerous More strategic More diverse More novel More varied in form
• depth (gold, silver and bronze partners)• duration• type (licensing, investment, alliance,
acquisition)
The Business Development ProcessIdentifyOpportunity
DevelopBusinessModel
Identify/ScreenPotential Partners
StructureDeal
ManageRelationship
Clearly ArticulateOpportunity
Evaluate Opportunity
Map needed resources/skills
Decide which todo in-house andwhich outsource
Identify potentialpartners
Apply preliminaryscreen
Evaluate finalistson key criteria
Evaluate alternativeforms -Licensing -Equity investment -Alliance -Joint-venture -Acquisition
Structure contractto manage risks -Transfer -Reduce -Share
Negotiate Deal
Manage portfolioof ongoingpartnerships -Key metrics -Individual and portfolio level
Manage relationships -Ownership -As they evolve -Multiple points of contact
Line Vendor(MTS)
Office CoffeeSupply
DistributorsBrewers
$650-$825
Brewers
$1000
Filler Line
$500k-$700k
K-Cups @ $0.25 ea..
$0.04 Royalty per K-Cup
Brewer at ?
K-cup @ $0.50 ea..
Out of Pocket Cost = $0.13 per K-cup
Coffee Drinking Employee
Starbucks Alternative = $.75-$1.00
Brewer Vendor(Vandelay)
Office Manager
Map Keurig’s Business ModelMap Keurig’s Business Model
Premium Coffee
Identify Gaps in Guidant Value ChainSourceWire
Catheter AfterloaderDistribution, Tech, IP
Guidant
Neocardia
Novoste
Nucletron
X ?
X X
X
X X
?
?
Simple Rules for Screening Partners
Have I heard of the company? Is it a top website as measured
by Media Metrix? Is it backed by sophisticated
venture capitalists? Is it headquartered in a
technology-savvy location? Have they been referred by
someone I know?
Shared vision on where industry is going.
75 employees/75% engineers. Able to create short-term and
long-term wins. Similarities in culture and
chemistry. Geographic proximity to
current locations.
eBay's Partner Rules Cisco's Acquisition Rules
Neither marriage nor one night stand. Where are we headed?
• What will each party contribute?
• What can each party expect?
How do we get there?• Ways to communicate, discuss and interpret.
• Governance including decision rights.
What is the timing?• Benchmarks, milestones, targets and penalties.
What is forbidden?• What can we not do?
How do we get out?• e.g., buyout, divorce, shotgun
Structuring Deals for Experiments
Managing Relationships Ongoing management is required because
reality is too complex to fully contract. Guidant’s Approach - Ginger Howard:
• Identify an Owner on each side responsible for the contract, negotiation and deliverables.
• Philosophical Alignment of People and Business Processes.
• Formal Reviews - Milestones, etc.• Constant Communication - Talk every day…• Ruthless Honesty.
Outstanding Questions How can managers assess whether business development is right for
their organization? How can managers articulate a clear vision for the business
development group and tie it to concrete performance metrics? What are best practices in optimizing each step in the process of
identifying, evaluating, negotiating and managing partnerships? What are the key design considerations for a biz dev group?
• Organize by technology, market or deal type?
• Optimal level of centralization?
• How best to bridge the boundaries between business development and other staff and line units?
How to identify the best candidates, evaluate and compensate staff? How to use contracts to capture and consolidate learning?