Tech Entrepreneurship Andrew Maxwell MBA P.Eng Lecture 3

How would you go about monitoring and evaluating the new products being offered by existing companies? Is this a viable technique for generating new ideas? Why or why not?

Which do you think is more important in evaluating a new technology business opportunity, the management or the technology?

Key points from last week Cognitive foundations Sources of new opportunities Market based Technology based Dynamics which affect start ups and existing companies Entrepreneurial process Decision making process

Cognitive foundations

Sources of new opportunities

Market based

Technology based

Dynamics which affect start ups and existing companies

Entrepreneurial process

Decision making process

Agenda for this week Assessing the need For products in new companies For products in existing companies Market dynamics Technology adoption patterns Segmenting market Identifying first customers (exercise) Identifying market size Developing “Go to market strategy”

Assessing the need

For products in new companies

For products in existing companies

Market dynamics

Technology adoption patterns

Segmenting market

Identifying first customers (exercise)

Identifying market size

Developing “Go to market strategy”

Assessing the need For products in new companies For products in existing companies

For products in new companies

For products in existing companies

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.

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.

Assessing the need What is the need? Can you meet it? Can you sell it for more than it costs you to produce? How will competitors react?

What is the need?

Can you meet it?

Can you sell it for more than it costs you to produce?

How will competitors react?

How do existing companies identify needs: Talk to existing customers Look for enhancements to current products. Focus on improving existing technology

Talk to existing customers

Look for enhancements to current products.

Focus on improving existing technology

Market Dynamics Knowledge base: R & D intensive, Locus of Innovation, Innovation process Market: Size, Growth, Segmentation Industry: Life cycle, Design stage Industry structure: Capital intensive, Economies of scale/brand, Concentration, Smaller firms

Knowledge base: R & D intensive, Locus of Innovation, Innovation process

Market: Size, Growth, Segmentation

Industry: Life cycle, Design stage

Industry structure: Capital intensive, Economies of scale/brand, Concentration, Smaller firms

Limits on existing companies Core rigidities Tyranny of current market User myopia

Core rigidities

Tyranny of current market

User myopia

Technology adoption patterns Characteristics of adopters Diffusion of innovation Crossing the chasm

Characteristics of adopters

Diffusion of innovation

Crossing the chasm

Bell curve and S curve

Diffusion of innovation Category innovators (2.5%), early adopters (13.5%), early majority (34%), late majority (34%) laggards (16%), Characteristics innovators - venturesome, educated, multiple info sources, greater propensity to take risk early adopters - social leaders, popular, educated early majority - deliberate, many informal social contacts late majority - skeptical, traditional, lower socio-economic status laggards - neighbours and friends are main info sources, fear of debt Five stage model for the diffusion of innovation: Knowledge - learning about the existence and function of the innovation Persuasion - becoming convinced of the value of the innovation Decision - committing to the adoption of the innovation Implementation - putting it to use Confirmation - the ultimate acceptance (or rejection) of the innovation Source Rogers, E. Diffusion of Innovation 1983

Category

innovators (2.5%),

early adopters (13.5%),

early majority (34%),

late majority (34%)

laggards (16%),

Characteristics

innovators - venturesome, educated, multiple info sources, greater propensity to take risk

early adopters - social leaders, popular, educated

early majority - deliberate, many informal social contacts

late majority - skeptical, traditional, lower socio-economic status

laggards - neighbours and friends are main info sources, fear of debt

Five stage model for the diffusion of innovation:

Knowledge - learning about the existence and function of the innovation

Persuasion - becoming convinced of the value of the innovation

Decision - committing to the adoption of the innovation

Implementation - putting it to use

Confirmation - the ultimate acceptance (or rejection) of the innovation

Source Rogers, E. Diffusion of Innovation 1983

Crossing the chasm between the Early Adopters and the Early Majority. Many (most) high tech ventures fail trying to make it across this chasm. 􀂾 Early Adopters are the rare breed of visionaries "who have the insight to match an

between the Early Adopters and the Early Majority. Many (most) high tech ventures fail trying to make it across this chasm.

􀂾 Early Adopters are the rare breed of visionaries "who have the insight to match an

Segmenting market Identify the specific applications by business need

Identify the specific applications by business need

Identifying first customers Make a list of all the identified applications Develop an understanding of their buying decision Examine the issues of how to get to these customers and how they are influenced Identify what resources and time will be required to enter this market.

Make a list of all the identified applications

Develop an understanding of their buying decision

Examine the issues of how to get to these customers and how they are influenced

Identify what resources and time will be required to enter this market.

Identifying market size Three stages: Based on initial customer segment, identifying potential of short term market, growth in that market and competitive reactions. Identifying additional market segments which can be served using the same technology and as much as possible of same infrastructure Identifying parallel market opportunities Role of market research and market validation

Three stages:

Based on initial customer segment, identifying potential of short term market, growth in that market and competitive reactions.

Identifying additional market segments which can be served using the same technology and as much as possible of same infrastructure

Identifying parallel market opportunities

Role of market research and market validation

Example Heat treatment for repairing varicose veins: Who is the customer? What is the route to market? What does the S curve look like? How big is the market segment? How do you drive speed of adoption and long term adoption levels? What are the secondary or parallel market opportunities?

Heat treatment for repairing varicose veins:

Who is the customer?

What is the route to market?

What does the S curve look like?

How big is the market segment?

How do you drive speed of adoption and long term adoption levels?

What are the secondary or parallel market opportunities?

Exercise For the specific opportunity, identify: What need it fills Is it a pain killer or vitamin Who will be first customers What will be the value proposition For the specific opportunity, identify: The potential market size in North America for the initial market segment Additional market segments and quantify them. (make any assumptions you want but be prepared toio state them)

For the specific opportunity, identify:

What need it fills

Is it a pain killer or vitamin

Who will be first customers

What will be the value proposition

For the specific opportunity, identify:

The potential market size in North America for the initial market segment

Additional market segments and quantify them.

(make any assumptions you want but be prepared toio state them)

Opportunities High speed ink jet technology which can print on glass, ceramics and plastics, creating high quality image which is indestructible (i.e. can be put through a dishwasher). Cooling technology which directly connects to CPUs in computers, to super cool them, allowing them to be over-clocked for increased performance. Super sweet sugar, which creates a natural sugar which is four times sweeter than traditional sugar, therefore having one quarter of the calories. A vehicle immobilization system, which is always on, and can be self installed, significantly reducing the chance of car theft. A technology which combines photo images with GPS coordinates, providing a web based geo-specific photo archiving tool. A motor which is water powered, and can therefore be used in environments where electricity or normal motor lubricants create significant problems. A street hockey net, which is much more robust than traditional nets and can be assembled in less than 1 minute. A pillow which is automatically cooled, allowing individuals suffering from migraines and other medical conditions significant pain relief

High speed ink jet technology which can print on glass, ceramics and plastics, creating high quality image which is indestructible (i.e. can be put through a dishwasher).

Cooling technology which directly connects to CPUs in computers, to super cool them, allowing them to be over-clocked for increased performance.

Super sweet sugar, which creates a natural sugar which is four times sweeter than traditional sugar, therefore having one quarter of the calories.

A vehicle immobilization system, which is always on, and can be self installed, significantly reducing the chance of car theft.

A technology which combines photo images with GPS coordinates, providing a web based geo-specific photo archiving tool.

A motor which is water powered, and can therefore be used in environments where electricity or normal motor lubricants create significant problems.

A street hockey net, which is much more robust than traditional nets and can be assembled in less than 1 minute.

A pillow which is automatically cooled, allowing individuals suffering from migraines and other medical conditions significant pain relief

Developing “Go to market strategy” Importance of personal selling Crossing the chasm Wikinomics

Importance of personal selling

Crossing the chasm

Wikinomics

Commercialization Roadmap Revenue $$$ cover “sins” Relationships Bring Dollars $$$ to Show it works for the Customer I Believe in you $$$ Money Pursuit Distribution centric  Market centric Customer centric  Distribution centric Technology centric  Customer centric Faith in idea  Technology centric Attitude Shift First Customer Demands Beta Configuration & Testing Customer Driven Features Market Opportunity & Impact Technology Capitalization Demands Licensing Considerations Business Resources Business Proposition Business Market Demands Channel Options Competitive Position Market Dynamics Sales Take the Order. Activate Stakeholder Participation Embed the Customers voice Prove Assumptions Goal Launch Maximize Align Validate S E L L Stages of the CIC process for guiding innovation to be market -ready I N V E N T Critical Factor Assessment Multiple Application Assessment

Opportunity assessment A short document, identifying and quantifying the opportunity (not the business, not the financials). Provides enough data to decide if it is worth looking at the opportunity in detail, including: What is the product or service, the underlying technology and the business model? How have you validated that the market/opportunity exits (personal research, third party feedback)? Who are current/future potential competitors, how will you compete? How will you make money and how much can you make? What are the longer term opportunities for growth? How much time/resource do you need to get to these levels of results? What needs to be done to turn this opportunity into a viable venture? Do you need to attract external finance? If so can you make a strong case for potential investors (including identifying a likely exit strategy)? Have you created an entrepreneurial team with suitable background and experience?

A short document, identifying and quantifying the opportunity (not the business, not the financials). Provides enough data to decide if it is worth looking at the opportunity in detail, including:

What is the product or service, the underlying technology and the business model?

How have you validated that the market/opportunity exits (personal research, third party feedback)?

Who are current/future potential competitors, how will you compete?

How will you make money and how much can you make?

What are the longer term opportunities for growth?

How much time/resource do you need to get to these levels of results?

What needs to be done to turn this opportunity into a viable venture?

Do you need to attract external finance? If so can you make a strong case for potential investors (including identifying a likely exit strategy)?

Have you created an entrepreneurial team with suitable background and experience?

Food for Thoughts Explain how the internet enables innovation by enhancing early adoption rates of innovative technologies. What do you think the manufacturers of hybrid cars should do, to enhance the rate of adoption. Perform a conjoint analysis on cell phones..

Explain how the internet enables innovation by enhancing early adoption rates of innovative technologies.

What do you think the manufacturers of hybrid cars should do, to enhance the rate of adoption.

Perform a conjoint analysis on cell phones..