Mod2_session2 - Choosing Your Technology.pptx

1. ESBM 3700
ENTREPRENEURIAL ENVIRONMENTS
MOD 2, SESSION 2: CHOOSING YOUR TECHNOLOGY

2. COURSE STRUCTURE
MODULE 1 MODULE 2 MODULE 3
CHOOSING
ENTREPRENEURSHIP
CHOOSING OPPORTUNITY
FUNDING
LEAN STARTUP
PITCHING
QUIZ 1
DISCIPLINE & LEADERSHIP
CHOOSING YOUR
TECHNOLOGY
CHOOSING YOUR CUSTOMER
CHOOSING YOUR
COMPETITION
QUIZ II
INTELLECTUAL PROPERTY
STRATEGY
DISRUPTION STRATEGY
VALUE CHAIN STRATEGY
ARCHITECTURAL STRATEGY
QUIZ III

3. TECHNOLOGY DILEMMA
Exploitation vs. exploration
To bring an idea to fruition, entrepreneurs often face a choice between the near-
exploitation of already existing technology or exploring the potential of an
innovation.
While rapid exploitation allows a firm to get to market more quickly, a more
exploratory approach might allow them to discover a path towards a higher and
more impactful way to create value.

4. TESLA
• 2003
• Elon Musk’s first test-drive of the tzero
• First electric vehicle to replace traditional lead batteries with lithium-ion batteries
• Expensive and not functioning well
• Tesla
• Why?

5. TESLA
• Not only battery performance had to be improved; the entire car needed to be
redesigned
• Incumbent firms not interested
• Gas prices low, high demand for power-oriented vehicles
• A wave of startups founded in the 2000s focused on creating a low-cost vehicle
based on lithium-ion technology
• Slow acceleration, poor vehicle handling, limited vehicle range

6. TESLA
• 2006
• “The Secret Tesla Motors Master Plan”
1. Build sports car
2. Use that money to build an affordable car
3. Use that money to build an even more affordable car
4. While doing above, also provide zero emission electric power generation options
5. Don’t tell anyone
• Did Tesla succeed?

7. TESLA

9. TESLA
• The success of Tesla reflects two critical early choices by Elon Musk
• Musk embraced the potential for lithium-ion batteries to serve as a transformative
technology for practical electric vehicles.
• Musk explicitly chose a strategy in which Tesla did not need to establish a cost-effective
solution for nearly a decade in order to succeed.
• Choosing a more exploratory approach to lithium-ion batteries allowed Tesla to
not only leverage this technology but also establish leadership through its
innovation within this technology.

10. CHOOSING YOUR TECHNOLOGY
• Every startup must choose its technology.
• Technology: the tools, techniques, design, and knowledge used by a business to create
practical value for consumers.
• For many startups, technological change is the trigger for entrepreneurial opportunity.

11. CHOOSING YOUR TECHNOLOGY
• Not all startups require a major technological breakthrough to create value.
• Many successful startups draw on modular areas of technological improvement
combined with other elements of a unique entrepreneurial strategy.
• Examples?
• Regardless of whether a startup is founded to bring a new technology to market or
whether technology plays more of a supporting role, value creation and value capture
are key!

12. EXPLOITATION VS. EXPLORATION
• Every entrepreneur faces the fundamental tradeoff between exploitation of existing
technological solutions versus long-term exploration of emerging technological
options.
• Example: cryptocurrencies

13. WHY EXPLORATION?
• Potential for massive customer value creation.
• Potential to gain control over knowledge.
• IP protection (patents, trademarks, copyrights)
• Internal learning that is hard for others to absorb
• It can anchor the venture around a particular path that can attract resources.
• VCs seeking to invest in “X” technology
• Engineers whose expertise is closely linked to the new trajectory
• Prioritizing technological innovation allows a startup to offer a vision to potential
investors, employees, and customers in advance of actually having to produce a
specific product or service.

14. WHY EXPLOITATION?
• It is difficult (in advance) to understand the value of a more exploration-oriented
approach.
• We can test, fail, and succeed faster.

15. TECHNOLOGY S-CURVE

16. THE WINDOW OF OPPORTUNITY
Startups can disrupt
incumbents with new
technologies at the
point of rapid
improvement

17. THE S-CURVE CHALLENGE
• It is very difficult to determine where we are on the curve.
• While the S-curve pattern for a given technological trajectory can be observed after
that trajectory has occurred, it is extremely difficult to forecast how long and how
much effort would be required to realize the potential for a still nascent technological
trajectory.
• How do cognitive biases relate to the above?

18. DISCUSSION
A striking pattern associated with emerging technologies is when an established player is unable to make
the transition to the new trajectory while a startup is able to take advantage of the “window of
opportunity” to establish their position in the marketplace. Your assignment is to identify a potential
“winner” and “loser” from an emerging technology. Specifically,
• Identify an emerging technological trajectory (i.e., a new “Technology S-Curve”) that you think will have
meaningful impact over the next 5 years.
• Identify one firm who is a current leader within an established industry or segment that will be
by the new technology, and a startup that is attempting to leverage that technology to gain a hold in the
marketplace.
• Why will the established firm be unable to adjust to the new technology?
• How can the startup leverage its expertise with the emerging technology to position itself for
advantage?

19. DISCUSSION
The vast majority of venture capital investment is premised on a model whereby the time from initial
investment to “exit” occurs usually within 6-8 years (and at most 10 years). You have been asked to advise a
new type of fund that is thinking of establishing a 25-year time frame for investing in startups that are
nurturing novel technologies.
• How might the establishment of a longer time frame for investment (with adequate funding along that
entire path) impact the types of ventures that receive investment?
• How might the longer time frame impact how those ventures resolve the tradeoff between exploration
and exploitation of their focal technologies?
• Do you think this would be a promising strategy for an investment fund?

20. COMING UP …
• Tomorrow (6/21): Choosing Your Customer
• Thursday (6/22): Choosing Your Competition
• Friday (6/23): Intellectual Property Strategy
*Assignment III due on June 30th. If you haven’t started yet, you
TODAY!

21. THANK YOU!