Lecture 2

Vocab Quiz… Barrier to Entry Return on Captial SWOT Switching Costs First-mover advantage Emergent Industries Follower strategy Three Types of competitive tactics Position, Resources, Emergent

Praise competitors. Learn from them Praise competitors. Learn from them. There are times when you can cooperate with them to their advantage and to yours. George Mathew Adams Summary How can ventures create a strategy to fit the new business opportunity? Every new venture has a strategy or approach to achieve its goals. The strategy is developed using the business model, an understanding of the industry, and the context and the key factors for success. Chapter 4: Summary Technology Ventures: From Idea to Opportunity

A strategy is a plan or road map of the actions that a firm or organization will take to achieve its mission and goals, but it is not static. Chapter 4: concept Technology Ventures: From Idea to Opportunity

The Management Process for Developing a Strategy Develop the vision and mission statement, and business model. Describe the firm's core competencies, its customers, and its competitive advantage. Describe the industry and context for the firm and describe the competitors. Determine the firm's strengths and weaknesses in the context of the industry and environment. Describe the opportunities and threats for the venture. Identify the key factors for success using the six forces model. Formulate strategic options and select the appropriate strategy. Translate the strategy into action plans with suitable measures and controls. Chapter 4: Table 4.1 Technology Ventures: From Idea to Opportunity

Are these the “six forces”? Profitability/Success Chapter 4: Figure 4.2 Technology Ventures: From Idea to Opportunity

5. Bargaining power of complementors 6. Bargaining Power of suppliers 1. Firm Rivalry 2. Threat of entry by new competitors d Note: Firms are represented by a circle  represents firm a. The size of the circle indicates the size of revenues of the firm. The six forces are numbered for clarity. The rivalry of the firms is shown as a vortex of competition. a 4. Bargaining Power of customers 3. Threat of Substitute Products Chapter 4: Figure 4.3 Technology Ventures: From Idea to Opportunity

Highly productive pilots, ground and flight crews. Low costs Organizational Environmental   1. STRENGTHS: Highly productive pilots, ground and flight crews. Low costs 1. OPPORTUNITIES: Ability to add scheduled flights to new cities. Low prices enable market share growth 2. WEAKNESSES: Inability to provide non-stop long distance travel 2. THREATS: Inability to secure new gates at airports. Competition from a potential low cost rival such as JetBlue SWOT analysis for Southwest Airlines Chapter 4: Table 4.4 Technology Ventures: From Idea to Opportunity

Potential Barriers to entry into an industry Economies of Scale Barriers to entry are factors that make it costly for companies to enter an industry. Potential Barriers to entry into an industry Economies of Scale Cost advantages Independent of Scale Product Differentiation Contrived Deterrence Government Regulation Switching Costs Chapter 4: Table 4.5 Technology Ventures: From Idea to Opportunity

Distinctive competencies lead to competitive advantage. Chapter 4: Figure 4.5 Technology Ventures: From Idea to Opportunity

Four Common Types of Strategies and Their Characteristics Chapter 4: Table 4.6 Technology Ventures: From Idea to Opportunity

Principle 4 A clear road map (strategy) for a new venture states how it will act to achieve its goals and attain a sustainable competitive advantage. Chapter 4: Principle 4 Technology Ventures: From Idea to Opportunity

Briefly describe the strategy of the BI program using the questions of Figure 4.2 and using success rather than profitability as the desired outcome. Chapter 4: Exercise Technology Ventures: From Idea to Opportunity

VENTURE CHALLENGE Develop a SWOT analysis using the format of table 4.4. Select your strategic approach from table 4.6. Describe your strategy in one or two sentences that could be circulated to your employees and allies. Chapter 4: Venture Challenge Technology Ventures: From Idea to Opportunity

Summary There’s a better way to do it, Find it! Thomas Edison How can an entrepreneur build an effective strategy based on innovation that will lead to a sound technology venture? An innovation strategy is structured to effectively commercialize new products and services for its customers. Using an idealized model of a window of opportunity, the entrepreneur can decide when to act. The entrepreneur needs to maintain a sense of urgency but avoid being too early or too late to market. Entrepreneurs establish and build a network of partners who work with them to achieve the new venture’s goals. Chapter 5: Summary Technology Ventures: From Idea to Opportunity

Emergent industries: Newly created or newly recreated industries formed by product, customer, or context changes [Barney 2002]. Chapter 5: Concept Technology Ventures: From Idea to Opportunity

First Mover Potential Advantages and Disadvantages Chapter 5: Table 5.2 Technology Ventures: From Idea to Opportunity

Three Types of Industries and Their Characteristics Chapter 5: Table 5.1 Technology Ventures: From Idea to Opportunity

Complement: A complement to a product is any other product that makes the first one more attractive to the customer. The Value Network Customers Competitors The New Venture Complimentors Suppliers Chapter 5: Figure 5.3 Technology Ventures: From Idea to Opportunity

Importance reflects the magnitude of the economic value of an invention. Radicalness measures the degree to which an invention, regardless of economic value, differs from previous inventions in the field. Patent scope describes the breadth of intellectual property protection for the invention. Chapter 5: concept Technology Ventures: From Idea to Opportunity

3. The Characteristics of the Invention The Factors that Influence the Entrepreneur to Exploit An Independent Invention 1. The Business Interests, Capabilities, and Experiences of the Entrepreneurial Team 2. The Characteristics of the Industry in Which the Invention Will Be Exploited 3. The Characteristics of the Invention a. Importance of the invention — Economic value and potential payoff b. Radicalness of the invention — differentiation of the invention from its predecessors c. The breadth of patent protection of the intellectual property Chapter 5: Table 5.3 Technology Ventures: From Idea to Opportunity

The New Business Formation Process for an Invention Chapter 5: Figure 5.6 Technology Ventures: From Idea to Opportunity

The Expected Trajectory of a Disruptive Innovation Disruptive or radical innovations introduce a set of attributes to a marketplace different than the ones that mainstream customers historically have valued, and the products often initially perform unfavorably along one or two dimensions of performance that are particularly important to those customers. The Expected Trajectory of a Disruptive Innovation High Range of performance required in the mainstream market Performance Expected Trajectory Current performance of the innovation Low Now Time Chapter 5: Figure 5.7 Technology Ventures: From Idea to Opportunity

Six Resources for A Creative Enterprise Creativity is the ability to use the imagination to develop new ideas, new things, or new solutions. Six Resources for A Creative Enterprise Knowledge in the Required Domain and Fields — knowing what is new Intellectual Abilities to recognize connections, redefine problems and envision and analyze possible practical ideas and solutions Inventive Thinking about the problem in novel ways Motivation towards Action Opportunity Oriented Personality and Openness to Change Contextual Understanding that supports creativity and mitigates risks Chapter 5: Table 5.4 Technology Ventures: From Idea to Opportunity

The Creativity Process Describe The Problem Start Describe The Problem Reframe and Start Again Build a Prototype and Show It to the Customer Incubation Period: Observe and Study the Problem Evaluate and Test the Ideas Intuitive Thinking, Brainstorming Insights, Ideas, Inventive Thinking Chapter 5: Figure 5.10 Technology Ventures: From Idea to Opportunity

The Elements of An Attractive Innovation Strategy A well defined customer A key customer benefit that is measurable in dollars Short period until economic payback and positive cash flow A high benefit to price ratio for the customer A proprietary advantage that can be maintained or defended The core competencies required to exploit the new technology are present or available to the new venture Access to the necessary resources Chapter 5: Table 5.5 Technology Ventures: From Idea to Opportunity

The four steps to achieve a favorable technology innovation. Technology Factors Feasibility Performance Manufacturability Business Model Vision Target Market Value Proposition Strategy Industry and Competitor Analysis Expected Competitive Advantage The four steps to achieve a favorable technology innovation. Expected Economic Results Revenue Profitability Return on Capital Time to Profitability Chapter 5: Figure 5.11 Technology Ventures: From Idea to Opportunity

An innovation strategy builds on creativity, invention, and technologies, acting within a value network, to effectively commercialize new products and services for its customers. Chapter 5: Principle Technology Ventures: From Idea to Opportunity

VENTURE CHALLENGE Describe your venture in terms of timing of entry as illustrated by figure 5.1 Create a value network for your company as outlined in figure 5.3. Create a partnership strategy as discussed in section 5.3. Summarize your technology and innovation strategy. Chapter 5: Venture Challenge Technology Ventures: From Idea to Opportunity