Mod2_session4 - Choosing Your Competition.pptx

1. ESBM 3700
ENTREPRENEURIAL ENVIRONMENTS
MOD 2, SESSION 4: CHOOSING YOUR COMPETITION

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. CHOOSING YOUR INDUSTRY
Porter’s Five Forces
• Why are some industries (not firms) more profitable than others?

4. COMPETITIVE POSITIONING WITHIN THE INDUSTRY

5. COST LEADERSHIP
STRATEGY
Reducing cost below that of competitors
while offering adequate value.

6. DIFFERENTIATION
STRATEGY
Adding unique features that increase the
perceived value of goods and services in
the minds of consumers, so they are
willing to pay a higher price.

7. THE COPENHAGEN WHEEL

8. THE COPENHAGEN WHEEL
Has this startup already chosen an industry? If yes, which one?
Does this startup focus on cost leadership or differentiation?

9. HOW WOULD YOU COMMERCIALIZE THE COPENHAGEN
WHEEL?

10. COMMERCIALIZATION
The process by which a new product, service, or platform is brought to market – the
means by which an entrepreneur turns their idea into a specific reality.
The key to successful commercialization is maximizing sustainable value capture.
Value capture challenges:
• How to actually deliver the product, service, or platform to the customer?
• Will value capture ability be eroded by competitors’ imitation?
A startup’s ability to capture value thus depends on:
• Imitability of the innovation.
• Ownership of complementary assets (e.g., manufacturing, distribution, sales).

11. WITH WHOM TO COMPETE: COMPETITION VS.
COOPERATION
Should you compete with incumbent firms or cooperate with them?
Cooperating with established players allows the entrepreneur to:
• Leverage the established player’s complementary assets to commercialize the idea.
• Avoid head-to-head competition.
Competing with established players requires constructing a distinct value chain but
allows the entrepreneur to:
• Have a higher degree of control over how the idea is commercialized.
• Capture more value.
Value creation vs. value capture: cooperation may allow the startup to create more
value more quickly, but competition allows the startup to capture more of the
created value – tradeoff
• Bargaining power plays a big role in cooperation with respect to value capture

13. COOPERATION

14. THE “DISCLOSURE PROBLEM”
To sell an idea, the buyer needs to see the idea. But when that has been done, they no
longer need to pay for it.
As a result, the seller must make a difficult choice: to risk misappropriation vs. getting
underpaid.

15. HOW TO COMPETE – CONTROL VS. EXECUTION
Competition is not just who you compete with but also the terms of that competition
(i.e., how you compete).
Two ways of competing:
• Control: pre-emptively making investments to protect a market position.
• Execution: developing and continually building capabilities.
While an execution path might allow a startup to quickly enter and compete in the
market, control requires investment and can delay market entry.

16. CONTROL

17. CONTROL
How to protect your market position:
• IP protection (patents, trademarks, copyrights, trade secrets)
• Algorithms
• Non-compete agreements
• Network effects
• Economies of scale
• Branding

18. EXECUTION

20. DISCUSSION
John is working on a new smartphone game where users solve simple puzzles based on
information about local retail stores. While his friends love playing the game (and many local
retailers are interested in experimenting with the game as a new advertising channel), John is
unsure about whether this idea will serve as the foundation for a profitable business, and he has
yet to protect the idea in any way. His friend Jane is encouraging him to just launch the app to see
if it gains traction, emphasizing that he does not need to worry about competition, as he is the
first to pioneer this game.
• If the game is indeed attractive to both users and local retailers, will John be able to avoid
competition simply by being the first to commercialize this idea?
• What could John do to commercialize his idea more effectively? Should he cooperate or
compete? Should he focus more on control or execution?

21. COMING UP …
• Tomorrow (6/23): Intellectual Property Strategy
• Monday (6/26): Quiz II (Module 2)
• Tuesday (6/27):
• Submit (before class) Movie Review II – “Flash of Genius”
• Disruption Strategy
*Assignment III due next Friday 6/30!!!

22. THANK YOU!