Management%20of%20Innovations%20and%20Entrepreneurship

1
Management of Innovations and Entrepreneurship

• Malin Brännback
• Fall 2004

2
Course Outline
Course outline

• W. 38 Sept. 13, Introduction, Innovations,
  Innovations Management, Entrepreneurship
• Questions to complete for week 39 (Drucker Ch.
  1,2, 10,11..you may want to look through ch. 3-9
  as well)
• Analyze Business Week great innovators, cold
  call 15 min. max on week 39
• Guest Lecture Alan Carsrud Entrepreneurship,
  what it is and what it isnt
• W. 39 Sept. 20, Entrepreneurship,
  Entrepreneurial Business The New Venture
• Questions to complete for week 40. Drucker Ch.
  12-15) Article 1, 12, 4, and 9

3
Course Outline

• W.40 Sept. 27, Diffusion of Innovations,
• Questions to complete for week 44 (Moore Ch. 1-5)
• Article 3, 5, 7 and 8
• Guest Lecture CEO Markku Jalkanen, Faron
  pharmaceuticals, former CEO, still owner and
  founder of Biotie Therapies
• Hand-out of GR-1 assignment to be prepared in
  pairs and to be handed in on October 25
• Contact Lenses for Chickens
• W. 44 Oct. 25 The Idea, Defining the Concept and
  Markets its more than just potential
• Guest Lecture 25.10, Kei Heikkilä-Stenvik,
  Commercialising high technology
• Articles 2, 6, 11

Course outline
4
Course Outline

• W. 45 Nov. 1, Business Plan Development
• Questions from article 13 to be handed in on
  Nov. 8
• Contact Lenses for Chickens prepare to discuss
• Hand-out of 2 Business plans
• W. 46 Nov. 8, The Dynamics of Innovation/Open
  Innovation
• Questions from Utterback and Chesbrough to be
  handed in on Feb. 3
• W. 47 Nov. 15, Four Business Plans
• You will read 2 business plans
• GR-2 assignment. Prepare in pairs an evaluation
  of one Business plan, to be handed in and prepare
  to discuss.
• Guest lecture, VP Business Development Kai
  Lähdesmäki and CTO Timo Veromaa, Biotie Therapies
• Individual assignment to be handed in W.48 Friday
  at 15.00

Course outline
5
Large Individual Assignment

• You will write a case on an innovation
• Describe an innovation
• Describe how it came about and its evolution over
  time.
• Describe the market, competition,
• Describe the management team
• Where is it right now? Problems ahead
• I want a good story I want facts and I want your
  own analysis of the case

Course outline Assignments
6
Assignments, and Grading

• A 2 Group assignments, max. 45p
• Contact Lenses for Chickens 15p
• Business Plans 30p
• 15 p for full analysis
• 5p x 3 for minor analysis of the other 3
• B 10 Individual assignments max 90p
• w. 38 10105 25p
• w. 39 10 10p
• w. 40 105 15p
• w. 44 105 15p
• w.45 10p
• w. 46 10p
• w. 47 5p
• C 1 Large Individual assignment 65 points
• Total 200 p. 100 points required for pass, min.
  50 of each assignment. NO EXAM

Course outline Assignments
7
IN 1874.SAMUEL CLEMENS WROTE
Course outline Assignments Introduction
TRYING TO GET THE HANG OF THIS NEW FANGLED
MACHINE.. ..IT COSTS 125 DOLLARS. THE MACHINE
HAS SEVERAL VIRTUES. I BELIEVE IT WILL PRINT.
FASTER THAN I CAN TYPEIT PILES AN AWFUL STACK OF
WORDS ON A PAGE
8
(No Transcript)
9

• There are more things in heaven and earth than
  are dreamt of in your philosophy.
• It was the best of times, it was the worst of
  times, it was the age of wisdom, it was the age
  of foolishness, it was the epoch of belief, it
  was the epoch of incredulity, it was the season
  of light, it was the season of darkness, it was
  the spring of hope, it was the winter of despair,
  we had everything before us, we had nothing
  before us, we were all going direct to heaven ,
  we were all going direct in the other way.

Course outline Assignments Introduction
10
Lets look at the history of technological
change..

• The past informs the present and
• the present illuminates
• the past

• You will need to look into a firms or an
  industrys historical development in order to
  spot discontinuities or other major breaks
• Find out about their past leaders
• Look into develop-ments in society at large
• Get the big picture!

Course outline Assignments Introduction Tech
change
11
Times of Change
Course outline Assignments Introduction Tech
change

• The emergence of the Internet is said to be the
  greatest change ever.
• Scientific advances in biotechnology is said to
  have the most profound change on man now and in
  the future.
• It depends on your reference point!
• Major technological breakthroughs tend to change
  industries, business, society, etc but change
  is incremental (mostly)

12
Eras of Change
Course outline Assignments Introduction Tech
change
13
Technological change

• However, the market is almost never where the
  inventor thinks it will be.
• Although the feelings about hype appears to
  create the same kinds of feelings regardless of
  time

Course outline Assignments Introduction Tech
change
14
150 years ago!

• The Industrial revolution nothing much happened
  before the railroads came although the steame
  engine was the invention enabling the REAL
  change
• The communications and transportation revolution
• telegraph and railroads
• City of Chicago population soared 1850 29,963
  1870 298,977 1890 1,099,850 1910 2,185,283
• 104 trains came and left Chicago per day in 1856

Course outline Assignments Introduction Tech
change
15
Technological change

• The Internet would not have been without the
  invention of the computer or even the coming of
  the PC back in the 1970s
• Paul Freiberger and Michael Swaine Fire in the
  Valley
• and ultimately the World Wide Web 1989, which
  needed an interface the Mosaic in 1992
• So, the major invention was the computer, needing
  the combination of a whole array of prior
  innovations assembled together for creating a
  commodity and now all hells loose.

Course outline Assignments Introduction Tech
change
16
Views of technology business

• A Technologists view
• If a man makes a better mousetrap than his
  neighbor, though he builds his house in the
  woods, the world will make a beaten path to his
  door.
• Ralph Waldo
• Emerson

• A Market-Oriented view
• The manufacturer who waits for the world to beat
  a path to his door is a great optimist. But the
  manufacturer who shows this mousetrap (and its
  value) to the world, keeps the smoke coming out
  his chimney.
• O.B. Winters

Course outline Assignments Introduction Tech
change
17
Idea, Invention, Innovation 3 different words
Course outline Assignments Introduction Tech
change Idea, Invention Innovation
18
Definitions

• A Technological innovation is the successful
  implementation of a technical idea new to the
  institution creating it. The essence of
  technology-based innovation is the systematic and
  successful use of science to create new forms of
  economic activity. Technology-based innovation
  thus represents a subset of all innovation. The
  distinction between technology-based innovation
  and incremental product enhancement is based on
  the extent of novelty in the science or
  technology
• A commercial innovation is the result of the
  application of technical, market, or
  business-model ingenuity to create a new or
  improved product, process, or service that is
  successfully introduced into the market.

Course outline Assignments Introduction Tech
change Idea, Invention Innovation
19
Definitions

• An invention is distinguished from an innovation
  by its character as pure knowledge. An invention
  becomes an innovation with the first commercial
  transaction. An innovation is thus a
  commercialised invention
• The direct products of a technological invention
  are not goods or services, but the recipes used
  to create them. This may result in patents, or
  more broadly in new firms or business units
  within existing firms. A patent refers more to an
  invention than an innovation. Inventions are the
  necessary seed for technological change, but it
  is innovation that generates the economic
  benefit.

Course outline Assignments Introduction Tech
change Idea, Invention Innovation
20
Innovation

• Innovation is a highly complex process affected
  by many factors within the business environment.
  Innovation goes beyond RD and should not be
  understood as simple transfer of know-how and
  technology, in which knowledge, production,
  application and exploitation can be separated
• Support of RD is still based on the linear model
  of innovation

Course outline Assignments Introduction Tech
change Idea, Invention Innovation
21
Innovations

• Innovations are closely related to product
  development
• levers by which companies can reinvent themselves
  
• Innovations streams are patterns of innovation
  that are required for sustained competitive
  advantage
• First, we will look at the purpose of the
  business and
• Then, on diffusion of innovations to innovation
  streams we will return on week 45

Course outline Assignments Introduction Tech
change Idea, Invention Innovation
22
Innovations
Course outline Assignments Introduction Tech
change Idea, Invention Innovation

• Innovations studied within industrial economics
  as technological paradigms and trajectories
• Innovations management as management of
  technology and RD
• Product innovations
• Process innovations
• Business concpet innovation
• Incremental, radical or disruptive innovations
• Architectural innovations
• Value innovations

23
The basic functions Innovation

• Schumpeter (1934) innovations is an idea or an
  invention that can actually be sold on the
  market, mere commercial potential is not enough!
• The most productive innovations is a different
  product or service rather than just an
  improvement (avoid me toos!)
• innovation is not invention
• its a term of economics rather than of
  technology
• non-technological innovations are as important
• Innovation is the task of endowing human and
  material resources with new and greater
  wealth-producing capacity.

Course outline Assignments Introduction Tech
change Idea, Invention Innovation
24
Innovations according to Drucker
Course outline Assignments Introduction Tech
change Idea, Invention Innovation
Is much more a term of economics than it is
about technology
!!
What do you know about markets??
!!
25
Innovations

• Along intensified competition and globalisation
  of business a wider view of innovations is
  evolving
• Knowledge management, and
• Complex search, learning and problem-solving
  process
• Organisations learning
• Competence-based competition

Course outline Assignments Introduction Tech
change Idea, Invention Innovation
26
Innovations management

• Used to be integrated today based on networking
• Spatial proximity becomes essential for sharing
  and creating knowledge
• Management of knowledge-based processes bewteen
• university and business
• business and business
• Create profitable business

Course outline Assignments Introduction Tech
change Idea, Invention Innovation
27
Its not just about ideas
Heres a great idea, its from me
28
(No Transcript)
29
(No Transcript)
30
Entrepreneurship

• Often
• One who starts his own, new and small business
• Is entrepreneurship only for small business???
• Better
• one who creates a new business in the face of
  risk and uncertainty for the purpose of achieving
  profit and growth by identifying opportunities
  and assembling the necessary resources to
  capitalize on them
• Or
• J. B. Say changing the yield of resources
• Changing the value and satisfaction obtained from
  the resources by the consumer

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship
31
A process definition of Entrepreneurship

• It is the process of recognizing, seizing,
  pursuing and exploiting opportunities without
  regard to the resources you currently control.
• An attitude towards management and technology
  that focuses on opportunities, needs fulfillment
  and controlling resources. It is not focused on
  risk management, owning resources, or science for
  technology sake.

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship
32
Entrepreneurship
Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship

• But not every new small business is
  entrepreneurial or represents enrtrepreneurship
• Even large companies can be entrepreneurial

33
OPPORTUNITIES

• Good scientific outcomes are not always good
  opportunities nor viable business concepts.
• Concepts are built using science
  entrepreneurial creativity - in real time and
  take time.
• Opportunities are attractive, durable, timely,
  and anchored in a product or service which
  creates or adds real value for its buyers and end
  users.
• Viable business concepts provide Need
  Satisfaction, Pain and/or Suffering Relief.
• Opportunities yield measurable net benefits to
  the entrepreneurial team and to society.

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship Opportuni
ties
34
Science, Commercialization and customers

• ScienceCommercia-lization
• Avoid spending too much time and money on
  Trombone oil or Space Shuttle docking ideas
• You may turn out the best product in the world,
  but the entire world needs only about a pint a
  year or five in a generation. These are great
  ideas, but poor business opportunities or
  concepts.

• Customers
• I cannot give you the formula for success, but I
  can give you the formula for failure...which is
  try to please everyone.
• Herbert Bayard Swope

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship Opportuni
ties Commerciali- zation
35
VENTURE CONCEPTS andFinancial resources

• Venture Concepts
• "Vision is the art of seeing things invisible.
• Jonathan Swift

• Financial Resources
• "Happiness is a positive cash flow.
• Fred Adler

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship
36
ENTREPRENEURIALASSESSMENT and Reality Check

• "The true entrepreneur acknowledges that he or
  she cannot succeed alone."
• Dr. An Wang

• "Never tell me the odds."
• Han Solo in "Star Wars"

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship
37
VENTURE EVALUATIONand Success

• "Confidence is what you feel before you
  comprehend the situation."
• Old Proverb

• "Success, as I see it, is a result, not a goal."
• Gustavae Flaubert

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship
38
COMPELLING INTEREST

• Choose a job you love, and you will never have
  to work a day in your life.
• Confucius

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship
39
IN FINLANDIn 2000 there were 222817
companieswhich employed1,301419 persons, with
aturnover of 262 million
Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship
40
The corporate structure of Finalnd in 2000
(Pki-Ytkkk/Tukkk)
Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship
41
What is the purpose of a business?
Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business

• Drucker, P. F. (1974), (2001), (2002)
• Porter M. E. (1980), (2001)
• Moore, G. A. (1991), (1995)
• Moore, J. F. (1996)

42
The purpose of a business
Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business

• To create a customer

43
Business Model

• A business model is not just an idea of what
  could be a business
• A business model require the definition of the
  business and its purpose and mission have to be
  translated into objectives
• otherwise, they remain insights, good intentions,
  and brilliant epigrams that never become
  achievements

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business
44
Business Model

• Business people have to create markets with
  effective demand
• There has to be a customer who is willing to pay
  converting resources into wealth.
• What the customer considers value is never just a
  product, it is always a utility, i.e. what a
  product or service does for him
• A business model in order to be viable requires a
  sound revenue model, with one objective
• Profit is the test of the validity of the
  business model
• Profit is a condition of survival. It is the cost
  of the future, the cost of staying in business

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business
45
The purpose of a business

• create a customer
• a business enterprise therefore has only two
  basic functions
• marketing and innovations
• There is only one starting point
• The customer
• The customer defines the business!

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business
46
The basic functions Marketing

• The business will start out with the needs,
  realities and values of the customer.
• What does the customer want to buy? Not what do
  we want to sell!
• A business can exist only in an expanding economy
  or in one that considers change both natural and
  acceptable
• It is not necessary to grow bigger but to grow
  better

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business
47
The Focus and the Starting point

• There is only one starting point
• It is the customer
• The customer defines the business
• not the name or statutes
• not the technology
• Who is our customer?
• there is never the customer but a customer
  there is usually at least two sometimes even more
• Where is the customer?
• What does the customer buy?

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business
48
Fundamental questions

• What is our business?
• can only be answered by looking at the business
  from the outside
• should not be asked when the company is in
  trouble although then it must be asked!
• it is never popular to argue with success, but
  success always makes obsolete the very behavior
  that achieved it. It always creates new realities.

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business
49
Fundamental questions

• What will it be?
• What should our business be?
• the most important trend which few businesses pay
  much attention too is changes in population
  structure and population dynamics. Population
  shifts are the only events regarding the future
  for which true prediction is possible

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business
50
What is our business?

• A systematic analysis of all existing products,
  services, processes, markets, end users, and
  distributions channels.
• Are they viable?
• Will they remain viable?
• Do they still give value to the customer?
• Will they do so tomorrow too?
• Do they still fit the realities of the population
  and markets of technology and economy?
• Defining the purpose of the business and mission
  have to be translated into objectives.

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business
51
QUESTIONS TO ASK

• Is this really an adequate business opportunity?
• Is this one we want to pursue?
• What resources are required to exploit it?
• How do we acquire them?
• How do we manage the operation?
• How and when do we harvest?

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business
52
Five Requirements of Obectives

• Must be derived from what our business is, will
  be and should be
• represent the fundamental strategy of a business
• Operational
• converted into specific targets and assignments
• Enable concentration of resources and efforts
  must be selective

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business
53
Five Requirements of Obectives

• Multiple objectives
• Are needed in all areas on which the survival of
  the business depend
• Objectives are not fate they are directions,
  commitments, and means making the future of the
  business

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business Objectives
54
The objectives need to be formalised into what
isnormally known as a business plan!
55
(No Transcript)
56
(No Transcript)
57
8 Objectives

• Marketing objective create a customer
• Innovation objective or become obsolete
• Human resources do we have the right skills
• Capital resources do we have the material
• Physical resources do we have adequate
  facilities
• These need to be employed productively
• Productivity objectives
• Social responsibility, and
• Profit requirement

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business Objectives
58
Innovation as an objective
Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business Objectives
59
Diffusion of Innovations
Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business Objectives Diffusion
of Innovations
60
Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business Objectives Diffusion
of Innovations
61
Product Adoption
Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business Objectives Diffusion
of Innovations
62
Moores Tornado
Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business Objectives Diffusion
of Innovations
63
Technology adoption

• The Chasm a time of great despair, when
  early-markets interest wanes, and the mainstream
  market is still not comfortable.
• The Bowling Alley a period of niche-based
  adoption in advance of the general marketplace
• The Tornado mass-market adoption - when the
  general market switches over to a new
  infrastructure
• MainStreet aftermarket development, flesh out
  the full potential of the infrastructure
• End of life can come too soon in High-tech due
  to disruptive technologies

Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business Objectives Diffusion
of Innovations
64
The Value Proposition
Course outline Assignments Introduction Tech
change Idea, Invention Innovation E-ship The
Purpose of Business Objectives Diffusion
of Innovations Value Proposition
65
Assessing High Technology
66
Technology Assessment
Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
67
The new technology will provide increased
capabilities to the user.

• Technology should yield significant benefits in
• Performance
• Functionality
• Capabilities
• Cost reduction
• Two or more of the above

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
68
Product Technology

• This technology is not a radically new,
  disruptive technology that will replace current
  technology
• Examples 8 to 5 1/4 to 3 1/2 disk drives
• Might be more expensive initially, lower cost
  after majority adoption

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
69
Product Technology

• There are no technology standards issues.
• Technology based on stable standards
• Not in a current technology standards conflict
• (or will this replace an existing standard that
  is outmoded)

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
70
Example Portable Personal Computers

• Functional Capabilities
• Weight
• Size/Volume
• Processor speed Mhz
• Battery life

• Benefits
• Portablity
• Effective compute power
• Maximum time without power connection

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
71
Example Fiberoptic Cable

• Functional Capabilities
• Low weight/size/cable
• Less signal attenuation
• High message volume capacity
• Fast transmission
• Immune to cross talk, RFI and EMI

• Benefits
• Easier to install lower cost
• Fewer re-transmission amplifiers
• More clear signals
• Easier to trouble shoot maintain

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
72
Example Email

• Functional Capabilities
• Multiple addressees
• Instantaneous, electronic transmission
• One click reply forward
• Stored addresses
• Electronic message storage

• Benefits
• Real time communication
• Easy mass mailing
• No delay
• Quick easy response
• Minimal
• No paper, no postage, no envelopes, no storage
  cabinets
• BUT THERE ARE NEGATIVE BENEFITS AS WELL

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
73
Example Cellular Short Message Service (SMS)

• Functional Capabilities
• 160 characters/message
• Faster to transmit than voice minimum
  transmission time
• Message immediately transmitted
• Email on a cell phone

• Benefits
• Less costly to transmit
• Cellular services price lower than voice calls
• Silent, doesnt ring, discreet messaging
• Instantaneous transmission

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
74
Market Hypotheses

• Competitive environment acceptable
• 1 or 2 major competitors maximum
• Segment addressable
• Segment is unique, identifiable, reachable
• Segment critical problem
• Target customers can verbalize their problem
• Serious problems exist

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
75
More Hypotheses

• Small segments better for startups
• Segment knowledge critically important

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
76
Product Hypotheses

• H Product is unique breakthrough
• Advanced over current state of technology
• H Product concept is proven
• Developed and beta tested
• Solid technical foundation
• No standards issues

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
77
The Value Triad Basic Elements of a Value
Proposition
Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
Customer
Value Proposition
Product
Application
78
The Value Triad

• An analysis tool
• Has three inter-related elements
• Product
• Customer
• Application A set of functional capabilities
  or features
• All three interact to create a value
• This value is what customers buy

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
79
The Value Proposition

• The combination of product application creates
  value for a particular customer segment
• Is something to sell
• Forms the basis of
• Marketing
• Advertising and public relations
• Promotional programs

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
80

• Change any element of the triad and it creates an
  entirely new value proposition

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
81
Value Triad Example

• Customer Consumer in their own kitchen
• Product A 3.00 manual eggbeater
• Application Bake a family birthday cake
• Value Proposition
• A manual eggbeater can save you time and energy
  over using a spoon to bake a single cake

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
82
Another version

• Customer Owner of Bed Breakfast Inn
• Product A 350 Hobart table top mixer
• Application Making pancakes for 10 guests every
  day
• Value Proposition
• The Hobart mixer is a faster, more efficient
  mixer that is sturdier, reliable, and suitable
  for significant daily use.

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
83
And a third version

• Customer/Buyer Finnish Army
• User Military cook/baker
• Application Baking 500 cakes/day
• Product 3,500 Large capacity,
  heavy duty, floor mounted industrial mixer
• Value proposition
• This industrial mixer provides high capacity,
  high performance and very long term reliability.

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
84
Value Matrix

• Frequently the product is already defined
• Then 2 variables Customer Application
• Can use a spreadsheet analysis
• Rows Applications/ Features
• Columns Customer target market segments
• Rank each application and customer type
• 1 to 5 5 must have, 4 should have, 3
  nice to have, 2 useable, but not important

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
85
A Must Have CompellingReason To Buy

• Critical to product launch success
• Without it youll probably never get to see the
  chasm, let alone cross it
• Absolutely required to cross the chasm and to
  sell early majority pragmatists

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
86

• Early majority/Pragmatists dont buy 4s -
  Should Have value propositions
• The strength of the value proposition must exceed
  the pragmatists fear and risks of buying a high
  tech discontinuous product

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
87
A Must Have Value Proposition is a Compelling
Reason to Buy
Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.

• Three sources of a Must Have
• 1 - Provides a dramatic competitive advantage
• 2 - Radically improves productivity
• 3 - Significantly reduces costs

88
Must Have 1 Provides a Dramatic Competitive
Advantage

• Advantage not previously available
• Dramatic, significant, not minor
• In a major operational area
• Examples?
• ATM, CT scanner, Polaroid camera, Xerox 914
  copier, Birth control pill

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
89
Must Have 2 Radically Improves Productivity

• Improves productivity of a well-understood
  critical success factor
• Superior price-performance
• Examples?
• CAD software, e-mail, Internet search engines,
  word processing spreadsheet software, Viagra

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
90
Must Have 3 Significantly Reduces Operating
Costs

• Must be visible, verifiable, significant,
  quantifiable, easy to prove
• Free offers get attention
• Examples?
• ATM, laparascopic surgery, spreadsheet word
  processing software, online software distribution

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
91
CROSSING MOORES CHASM

• Difficult to cross the chasm if only have 1 of
  the 3 sources of must have
• Better to have 2 of 3 sources
• Best to have all 3 sources
• ATMs
• Laparascopic surgery

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
92
Laparascopic Surgery

• Why has this method of surgery become so popular?
• Can you determine the sources of the Compelling
  Reason To Buy?

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
93
Laparascopic Surgery

• Dramatic competitive advantage
• Faster patient recovery, reduced pain, safer
• Patients go to doctors hospitals who do it
• Radically improves productivity
• Doctors spend less time per surgery post op
• Significantly reduces costs
• Less time in hospital less cost
• Insurance companies benefit, lower premiums

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
94
Value Matrix Exercise for Any Technology

• Develop a value matrix
• Vertical axis applications/features
• Horizontal axis Target customers
• Rank each cell 1 through 5
• 1 not usable, 2 minor benefit
• 3 nice to have 4 should have
• 5 must have

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm.
95
Back to Moore

• The Bowling Pin model

96
Bowling Pin Model

• Approach niche market expansion in as leveraged a
  way as possible - towards the tornado
• A niche requires its own whole product to be
  fully complete before it can adopt the new
  paradigm

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin
97
The Bowling Pin Model

• Niche market (risk of being stuck in the middle
  (Porter, 1980)
• Knowledge spill-over
• Knowledge leverage and stretching
• One shot and several hits - as many as possible!

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin
98
Bowling Alley Market Development
Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin
Whole Product
Customer References
99
Principles of the Bowling Alley Strategy

• Pick on someone your own size
• The primary objective to establish yourself as
  the market leading standard
• Merita Solo/Wells Fargo
• The segment has a very good reason to buy
• The segment is not well served by any competitor

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin
100
Principles of the Bowling Alley Strategy

• Focus on the end-user community not on the
  technical community
• Not on the doctor but the patient
• Not on the operator but on US
• Customer-orientation versus product-orientation
• monipuolinen vs. monimutkainen

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin
101
Rejecting the Bowling Alley

• They require time to implement time which is a
  shortage in fast moving industries -therefore
  thought not to work
• Companies tend to be happy with their first
  achievement - were aiming for 1 market share
  satisficing
• Serving a niche may require to hefty product and
  too much service, which paralyses the
  organisation
• The structure of the consumer market does not
  support bowling alley strategy (functional food)

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin
102
Tornadoes

• The focus shifts from the economic buyer to the
  technical buyer
• Ignore the customer people are lining up anyway
• they do not want to be courted
• they want to be supplied
• they want the commodity
• Internet is said to be the greatest commoditiser!
• The tornado requires distribution channels and
  logistics - can you afford it? (Bowling Alley)

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin The tornado
103
On Main Street

• From niche market to commodity market
• Focus on the end-user
• mass customisation
• you already have the customers just continue
  feeding them
• get closer to customers - markets are
  conversations!

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin The
tornado Main Street
104
The Main Street of the Information Age

• The Tornado
• sell to infra buyers
• drive price points ever lower to maximise market
  share
• attack the competitor to gain market share
• position yourself horizontally as standard global
  infrastructure

• The Main Street
• sell to end-users
• 1 value propositions to gain margins
• compete against yourself to gain margin share
• position yourself in niche markets based on
  individual preferences

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin The
tornado Main Street
105
Segmentation

• In the early market - beware of segmenting - you
  must not!
• In the bowling alley - you must!
• Once inside the tornado - dont!
• When on Main Street - segment you must! But not
  in the same way as in the bowling alley - the
  basis is now your 1 the value proposition

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin The
tornado Main Street
106
Other barriers

• Apart from technology
• cultural
• psychological
• The barrier is not objective but subjective

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin The
tornado Main Street
107
Predicting Tornadoes

• Bowling alley successes help start tornadoes as
  they validate product architectures - one niche
  market success in place
• Price point is a good indicator of when youre in
  reach, i.e. when the tornado comes - mobile
  phones became the commodity
• killer apps. (do tornados cause killer apps or
  vice versa?)
• When a gorilla comes around - you are in a tornado

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin The
tornado Main Street
108
The Gorilla Advantage

• Competitive advantage
• getting more customers - market leader effect
• business partners actively bring in new customers
• keeping more customers
• barriers to entry and switching costs
• driving costs down
• keep profits up

Course outline Assignments Introduction Idea,
Invention Innovation E-ship Value
Proposition Tech Assessm. Bowling Pin The
tornado Main Street Gorillas