Technology Ventures: From Idea to OpportunityChapter 8: Summary

Even if you are on the right track, you’ll get run over if you just sit there

Will Rogers

What forms do new businesses take and what are corporate ventures?

The appropriate legal and organizational format used to organize a new venture will vary according to several factors such as context, people, legal and tax consequences, and cultural norms. New ventures can range from small businesses or consulting services to high-growth, high-potential enterprises. Other organizations start out operating in a niche market and grow into a broader one. An important contrast to these independent ventures is the corporate new venture. It emerges within larger existing enterprises and is granted autonomy so it can fulfill its promise.

Summary

Technology Ventures: From Idea to OpportunityChapter 8: Organizational Forms

Organizational Forms:

•Independent venture: new venture not owned or controlled by an established corporation.

•Corporate venture: new venture started by an existing corporation.

•Nonprofit organization: Corporation, member association, or charitable organization that provides a service but does not earn a profit, nor does it distribute dividends or payments to its employees, donors, or volunteers. Today, these organizations are often called not-for-profit.

Technology Ventures: From Idea to OpportunityChapter 8: Organizational Forms

Organizational Forms (continued):

•Family-owned: includes two or more members of a family who hold control of the firm.

•Franchise: legal arrangement in which the owner of a business format has licensed it to an individual or local firm, called a franchisee. The franchisor is the organization that owns and operates a firm that controls the business format and its associated trademarks and logo.

Technology Ventures: From Idea to OpportunityChapter 8: concept

Imitation or replication of a successful enterprise can lead to success

Examples:

Wal-Mart

Starbucks

Williams-Sonoma

Technology Ventures: From Idea to OpportunityChapter 8: Types of New Business Ventures

Types of New Business Ventures:

Small business is a sole proprietorship, a partnership, or a corporation owned by a few people.

Niche business seeks to exploit a limited opportunity or market to provide the entrepreneurs with independence and a slow-growth buildup of the business.

High-growth business aims to build an important new business and requires a significant investment to start up.

Technology Ventures: From Idea to OpportunityChapter 8: Types of New Business Ventures

Types of New Business Ventures (continued):

Radical innovation business seeks to commercialize an important new innovation and build an important new business.

Nonprofit organization is a corporation or a member association initiated to serve a social or charitable purpose.

Corporate new venture (CNV) is that started by an existing corporation for the purpose of building an important new business unit as a solely owned subsidiary or a spin-off as a new independent company.

Technology Ventures: From Idea to OpportunityChapter 8: Table 8.1

Type

Revenue Growth

Planned for Most Likely Size

Description

Objective

1. Small Business

Slow Small Sole proprietorship, and family business

Provide independence and wealth to partners by serving customers

2. Niche Slow to Medium

Small to Medium

Slow growth of corporation Provide steady, lower-risk growth, good income

3. High Growth Fast Medium to Large

Fast growth, needs large initial investment

Important new business

4. Radical Innovation

Fast Large Requires R&D and seeks disruptive innovation

To commercialize an important innovation

5. Non-Profit Organization

Slow Small to Medium

Serves members or a social need

To serve a social need

6. Corporate New Venture

Medium to Fast

Large Independent unit of an existing corporation

To build an important new business unit or separate firm

The Six Types of New Ventures

Technology Ventures: From Idea to OpportunityChapter 8: Table 8.6

Newness and Novelty of the Product Relative to the

Firm's Existing Products

Independence or Semi-Autonomy from Existing

Corporate Structure

High Potential for Significant Innovation

Unique Entrepreneurial Team Leadership Capabilities

Characteristics of Corporate New Ventures

Technology Ventures: From Idea to OpportunityChapter 8: Table 8.7

Strengths Weaknesses

Ready access to capital May be subjected to a corporate budget process

Access to capabilities of corporate employees

Multiple control and review levels

Suppliers willing to help in the design process

Limited autonomy

Emphasis on the marketing plan Limited access to strong entrepreneurial talent

Gain from brand equity of parent firm Risk-reward may be less attractive than for an independent entrepreneur

Access to processes and technologies of the parent

Limited to parent firm's technologies and processes

The Strengths and Weaknesses of a Corporate New Venture

Technology Ventures: From Idea to OpportunityChapter 8: Table 8.7 continued

The Strengths and Weaknesses of a Corporate New Venture (cont.)

Strengths Weaknesses

Ready access to capital May be subjected to a corporate budget process

Access to capabilities of corporate employees

Multiple control and review levels

Suppliers willing to help in the design process

Limited autonomy

Emphasis on the marketing plan

Limited access to strong entrepreneurial talent

Gain from brand equity of parent firm

Risk-reward may be less attractive than for an independent entrepreneur

Access to processes and technologies of the parent

Limited to parent firm's technologies and processes

Technology Ventures: From Idea to OpportunityChapter 8: Table 8.11

1. Identify and screen opportunities. Create a vision. Designate a venture

champion and an entrepreneurial team.

2. Refine the concept and determine feasibility. Prepare the concept and vision

statement. Draft a brief Business Plan Summary or Outline for review and

gathering support.

3. Prepare a complete Business Plan. Identify the person to lead the new venture.

4. Determine the best form of the corporate new venture: internal new venture

unit; spin-out, subsidiary, or internal project.

5. Establish the Corporate New Venture with talent, resources, and capabilities

transferred from the parent company.

The Five-Step Process for Establishing A Corporate New Venture

Technology Ventures: From Idea to OpportunityChapter 8: Exercise

A new firm plans to develop and offer a computer design program for creating and machining hip replacement joints. Describe the cluster this firm should locate within. What sources of legitimacy should it focus on? Should it outsource the software programming of its design software product?

Technology Ventures: From Idea to OpportunityChapter 8: Cluster

Cluster: Geographic concentration of interconnected companies with an existing infrastructure system.

Technology Ventures: From Idea to OpportunityChapter 8: Table 8.4

The Characteristics for Innovation in a Cluster Setting

•High Quality Human Resources

•Research in Local Universities

•Availability of Investment Capital

•Representative Customers

•Suppliers and Compl3mentors

•Competitors

•Consultants, Attorneys, and Accountants

Technology Ventures: From Idea to OpportunityChapter 8: Principle

An important, vigorous new business venture can emerge from a large firm when afforded the appropriate balance of independence, resources, and people to respond to the opportunity.

Technology Ventures: From Idea to OpportunityChapter 8: Venture Challenge

VENTURE CHALLENGE

1)Using table 8.1, describe the specific type of new venture selected by your team.

2)Assuming your venture was developed as a corporate venture, describe the advantages and disadvantages of this approach using table 8.7

Technology Ventures: From Idea to OpportunityChapter 8: DVD Videos

DVD Videos

“Thinking about Sustainability for Non-Profit Organizations”

Kavita Ramdas (Global Fund for Women)

“Classes of Innovations in the Product Leadership Zone”

Geoffrey Moore (Mohr Dardon Ventures)