1 ÅA Management of Innovations and Entrepreneurship Malin Brännback Fall 2005 ÅA Course Outline W. 38; Sept. 19, Introduction, Entrepreneurship Entrepreneurial Business Opportunity recognition Opportunity recognition The Idea, The Concept Key learning note on • Each articles 13, 14, 15, 20, • Guest Lecture: Alan Carsrud Entrepreneurship, what it is and what it isn’t W. 38; Sept. 22 13-17, Arken, Aud. Armfelt Family Business Key learning note W. 39; Sept. 26, Innovations, Innovations Management, Entrepreneurship, Key learning note on • Each articles18, 19, 22, 23 • Guest Lecture: N.T.Saarinen, Turku Science Park Course outline
Opportunity recognitionThe Idea, The ConceptKey learning note on
• Each articles 13, 14, 15, 20,
• Guest Lecture: Alan Carsrud Entrepreneurship, what it is and what it isn’t
W. 38; Sept. 22 13-17, Arken, Aud. Armfelt
Family BusinessKey learning note
W. 39; Sept. 26, Innovations, Innovations Management, Entrepreneurship,
Key learning note on• Each articles18, 19, 22,
23• Guest Lecture:
N.T.Saarinen, TurkuScience Park
Course outline
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ÅA Key Learning NoteA key learning note is not a summary of the content of the articles. It includes your reflections on the text; on the things that you found particularly interesting or puzzling. What did you learn from the texts? You should reflect on your personal perceptions and interpretations of the presented arguments. Do you agree or disagree with the authors’ arguments, and why? Your text needs to be structured in a systematic manner, not presented as checkpoints.At least, reflect upon the following questions (do not use them as headings!):
What are the researchers basically debating about?Whose views do you agree with, and why?
Length max. 1000 words
ÅA Course OutlineW.40; Oct. 3, Diffusion of Innovations,
Questions to complete for week 44 (Moore Ch. 1-5)Key learning note on
• Each article 3, 5, 7 and 8• Guest Lecture: CEO Markku Jalkanen, Faron pharmaceuticals,
former CEO, still owner and founder of Biotie TherapiesHand-out of GR-1 assignment to be prepared in pairs and to be handed in on October 17
• Contact Lenses for Chickens• Cases Wedgewood, Heinz, Estee Lauder
W. 42; Oct. 17 Defining the Concept and Markets – it’s more than just potential
Key learning notes on• Guest Lecture 17.10, Director Business Development Ane Angher,
Commercialising New Technology Applications• Each article 1, 2, 6, 11
Course outline
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ÅA Course OutlineW. 45; Nov. 7, Business Plan Development
Contact Lenses for Chickens, Cases Wedgewood, Heinz, EsteeLauderprepare to discuss
Hand-out of 4 Business plansYou will read 4 business plansGR-2 assignment. Prepare in pairs an evaluation of one Business plan, to be handed in and prepare to discuss. November 21; short evaluation of the other 3 exec.summary
W. 46; Nov. 14, Studying E-shipA Synthesis Key learning note on Articles 10, 15, 16, 21, 24Perceptions on growth strategiesStudying entrepreneurial intentionality
W. 47; Nov. 21,Analysis of Business plans
W.48; Nov. 28 Analysis of Business Plans, cont.
Guest lecture, VP Business Development Kai Lähdesmäkiand CTO Timo Veromaa, BiotieTherapies
Individual assignment to be handed in W.48 Friday at 15.00
Course outline
ÅA Large Individual AssignmentYou will write a case on an innovationDescribe an innovation –Describe how it came aboutand its evolution over time.Describe the market, competition, Describe the management teamGrowth/no growthWhere is it right now? Problems aheadI want a good story; I wantfacts and I want your ownanalysis of the case
ORYou will write case on an entrepreneur – a real entrepreneur; you will interview the person(s)
Can be a family entrepreneur; serial entrepreneur, failed entrepreneur/successful or..be creative
Describe how s/he became an entrepreneurThe idea, the opportunity, the foundation it’s evolutionThe market, the competition, managementWhere is it right now – is it Kirznerian or SchumpeterianI want a good story; I want facts and I want your own analysis of the case
• 15 p for full analysis• 5p x 3 for minor analysis of the other 3
B: 10 Individual assignments max 120p (40%)• w. 38 5,5,5,5+5+ 5 = 25p• w. 39 20 + 5 = 25p• w. 40 25+5 = 30p• w. 42 20+5 = 20p• w. 46 15p• w. 48 5p
C: 1 Large Individual assignment 90 points (30%)D: Participation 30 points (10%)Total 300 p. 150 points required for pass, min. 50% of eachassignment. NO EXAM
Course outlineAssignments
ÅA IN 1874….SAMUEL CLEMENS WROTE…
TRYING TO GET THE HANG OF THIS NEW FANGLED MACHINE....[IT] COSTS 125 DOLLARS. THE MACHINE HAS SEVERAL VIRTUES. I BELIEVE IT WILL PRINT. FASTERTHAN I CAN TYPE…IT PILES AN AWFUL STACKOF WORDS ON A PAGE
Course outlineAssignmentsIntroduction
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ÅA
ÅA “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.”
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ÅA Firms EvolvingThe dominance of the minority
Most firms are small
Corporations constitute a minority of all businessesPublicly traded firms are a minority of all corporations
Large firms make out 4% or less of all firmsBut: they dominate economically if measured by assetsSmall firms are significant employers
Course outlineAssignmentsIntroduction
ÅA Firms EvolvingThe dominance of the minority
1 in 100 business plans get fundingMost firms start out small; change little if at all!Most firms never add more employees. Of those that grow only 3% add more than 100 employees
Starting a firm is not necessarily expensive:
Over 60% required less tahn $5,0003% required more than $100,000Less than 0.5% required $1M or more
The probability of self employment depends heavily on
Inheritance or giftMost start with almost nothing in the way of assets
Course outlineAssignmentsIntroduction
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ÅA Just how large are the smallThere were approximately 22.9 million small businesses in the US in 2002Approximately 75 percent of all net new jobs are added by small firmsSmall firms represent 99.7 percent of all employersSmall firms employ 50.1 percent of the private workforceSmall firms account for 52 percent of the private sector output in 1999Small firms represent 97 percent of all US exporters
Today’s Fortune 500 companies employ fewer total employees than they did ten years ago – a trend that has been going on for the past 20 years.Small firms are more efficient in many ways than are large counterparts. On average small firms produce 13 to 14 more patents per employee than do large firms.Small firms are able to respond more quickly and to operate more efficiently and this is one reason for the growth of small businesses
ÅAIsn’t it a bit strange that most of our textbooks and what we teach is about an outlayer??
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ÅA Entrepreneurship
Often:One who starts his own, new and small businessIs 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 resourcesChanging the value and satisfaction obtained from the resources by the consumer
Course outlineAssignmentsIntroductionE-ship
ÅA 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 outlineAssignmentsIntroductionE-ship
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ÅA Entrepreneurship
But not every new smallbusiness is entrepreneurialor representsenrtrepreneurship
Even large companies canbe entrepreneurial
Course outlineAssignmentsIntroductionE-ship
ÅA OPPORTUNITIESGood 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.
(i) the Equilibrium schoolassumes that everyone can recognize all entrepreneurial opportunities and that whether this actually takes place is dependent on fundamental attributes of people.
(ii) the Psychological schoolthat fundamental attributes of people, rather than information about opportunities determine who becomes an entrepreneur and this again depends on a person’s willingness and ability to take action Entrepreneurial intentionality studies and it has been argued and shown that attitude towards behavior, social norm, and perceived behavioral control influence a person’s intentions to act
(iii) the Austrian School, builds on the idea of information asymmetry as the driving force. People cannot recognize all entrepreneurial opportunities, and that information about opportunities will drive entrepreneurial opportunity recognition rather than a willingness to take action Schumpeter (1934 and Kirzner(1973,1979).
ÅA Opportunity RecognitionSchumpeter – not really the Austrian school; the entrepreneur is an innovator who shifts the curves of costs and revenues through innovationKirzner - entrepreneur as an actor in the process-conscious market theory who exhibits deliberate behaviors who sees that the curves have shifted; spots market ignoranceRead Ch. 3 in Delmár et al 2005
Limited discoveryInvolves creation
CommonRare
Less innovativeVery innovative
Does not require new knowledgeRequires new knowledge
ÅA Let’s look at the history of technological change..
The past informsthe present and the present illuminatesthe past
Cases: Wedgewood, Heinz, Estee Lauder
You will need to look into a firm’s or an industry’s historicaldevelopment in orderto spot discontinuitiesor other major breaksFind out about theirpast leadersLook into develop-ments in society at largeGet the big picture!
Course outlineAssignmentsIntroductionTech change
ÅA Times of ChangeThe 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 – butchange is incremental (mostly)
Course outlineAssignmentsIntroductionTech change
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ÅA Eras of Change
Reference: R Boulton & al. Cracking the Value Code an Arthur Andersen publication
Time
Valu
e C
reat
ion
StoneAge
IronAge
AgriculturalAge
IndustrialAge
TechnologyAge
KnowledgeAge
BiotechAge
Course outlineAssignmentsIntroductionTech change
ÅA Technological change
However, the market is almostnever where the inventor thinks it willbe. Although the feelings about hypeappears to create the same kinds of feelings regardless of time
Course outlineAssignmentsIntroductionTech change
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ÅA 150 years ago!The Industrial revolution – nothing muchhappened before the railroads camealthough the steame engine was the invention enabling the REAL change:The communications and transportationrevolution
telegraph and railroadsCity 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 outlineAssignmentsIntroductionTech change
ÅA Technological change
The Internet would not have been without the invention of the computer or even the coming of the PC back in the 1970’s
Paul Freiberger and Michael Swaine: Fire in the Valley
and ultimately the World Wide Web 1989, whichneeded an interface – the Mosaic in 1992
So, the major invention was the computer, needing the combination of a whole array of priorinnovations assembled together for creating a commodity – and now all hell’s loose.
Course outlineAssignmentsIntroductionTech change
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ÅA 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
ÅA DefinitionsA 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.
ÅA DefinitionsAn 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.
Innovation is a highly complex process affected by many factors within the business environment. Innovation goesbeyond R&D and should not be understood as simple transfer of know-how and technology, in which knowledge, production, application and exploitationcan be separatedSupport of R&D is still based on the linearmodel of innovation
Innovations are closely related to productdevelopment
levers by which companies can reinventthemselvesInnovations streams are patterns of innovationthat are required for sustained competitiveadvantageFirst, we will look at the purpose of the business andThen, on diffusion of innovations – to innovationstreams we will return on week 45
Innovations studied within industrial economicsas technological paradigms and trajectoriesInnovations management as management of technology and R&DProduct innovationsProcess innovationsBusiness concpet innovationIncremental, radical or disruptive innovationsArchitectural innovations
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 differentproduct or service rather than just an improvement (most are entrepreneurs are replicators)
innovation is not inventionit’s a term of economics rather than of technologynon-technological innovations are as important
Innovation is the task of endowing human and material resources with new and greater wealth-producing capacity.
Used to be integrated – today basedon networkingSpatial proximity becomes essentialfor sharing and creating knowledgeManagement of knowledge-basedprocesses bewteen
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.”
Drucker, P. F. (1974), (2001), (2002)Porter M. E. (1980), (2001)Moore, G. A. (1991), (1995)
Moore, J. F. (1996)
Course outlineAssignmentsIntroductionE-shipOpportunitiesTech changeIdea, InventionInnovationThe Purposeof Business
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ÅA
The purpose of a business
To create a customer
Course outlineAssignmentsIntroductionE-shipTech changeIdea, InventionInnovationThe Purposeof Business
ÅA Business Model
A business model is not just an idea of what could be a businessA business model require the definition of the business and its purpose and mission have to be translated into objectivesotherwise, they remain insights, good
intentions, and brilliant epigrams that never become achievements
Course outlineAssignmentsIntroductionTech changeIdea, InventionInnovationE-shipThe Purposeof Business
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ÅA Business Model
Business people have to create markets with effective demandThere 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 himA 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 modelProfit is a condition of survival. It is the cost of the future,the cost of staying in business
Course outlineAssignmentsIntroductionTech changeIdea, InventionInnovationE-shipThe Purposeof Business
ÅA The purpose of a business
create a customera business enterprise therefore has only two basic functions:
marketing and innovationsThere is only one starting point
The customer
The customer defines the business!
Course outlineAssignmentsIntroductionTech changeIdea, InventionInnovationE-shipThe Purposeof Business
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ÅA 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 acceptableIt is not necessary to grow bigger but to grow better
Course outlineAssignmentsIntroductionTech changeIdea, InventionInnovationE-shipThe Purposeof Business
ÅAThe Focus and the Starting point
There is only one starting pointIt is the customerThe customer defines the business
not the name or statutesnot the technology
Who is our customer?there is never the customer – but a customer –there is usually at least two sometimes evenmore
Where is the customer?What does the customer buy?
Course outlineAssignmentsIntroductionTech changeIdea, InventionInnovationE-shipThe Purposeof Business
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ÅA Fundamental questions
What is our business?can only be answered by looking at the business from the outsideshould not be asked when the company is in trouble although then it must be asked!it is never popular to argue with success, butsuccess always makes obsolete the verybehavior that achieved it. It always creates new realities.
Course outlineAssignmentsIntroductionTech changeIdea, InventionInnovationE-shipThe Purposeof Business
ÅA 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 eventsregarding the future for which true prediction is possible
Course outlineAssignmentsIntroductionTech changeIdea, InventionInnovationE-shipThe Purposeof Business
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ÅA What is our business?
A systematic analysis of all existingproducts, 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 populationand markets of technology and economy?
Defining the purpose of the business and mission have to be translated into objectives.
Course outlineAssignmentsIntroductionTech changeIdea, InventionInnovationE-shipThe Purposeof Business
ÅA 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 outlineAssignmentsIntroductionTech changeIdea, InventionInnovationE-shipThe Purposeof Business
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ÅA Five Requirements of Obectives
Must be derived from what our business is, willbe and should be
represent the fundamental strategy of a business
Operationalconverted into specific targets and assignments
Enable concentration of resources and efforts –must be selective
Course outlineAssignmentsIntroductionTech changeIdea, InventionInnovationE-shipThe Purposeof Business
ÅA Five Requirementsof Obectives
Multiple objectivesAre 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
Marketing objective – create a customerInnovation objective – or become obsoleteHuman resources – do we have the right skillsCapital resources – do we have the materialPhysical resources – do we have adequatefacilities
These need to be employed productively;
Productivity objectivesSocial responsibility, and Profit requirement
ÅA Technology adoptionThe Chasm; a time of great despair, when early-market’s interest wanes, and the mainstream market is still not comfortable.The Bowling Alley; a period of niche-based adoption in advance of the general marketplaceThe Tornado; mass-market adoption - when the general market switches over to a new infrastructureMainStreet; aftermarket development, flesh out the full potential of the infrastructureEnd of life; can come too soon in High-tech due to disruptive technologies
BenefitsReal time communicationEasy mass mailingNo delayQuick & easy responseMinimalNo paper, no postage, no envelopes, no storage cabinetsBUT THERE ARE NEGATIVE BENEFITS AS WELL
Functional Capabilities160 characters/messageFaster to transmit than voice ;minimum transmission timeMessage immediately transmittedEmail on a cell phone
BenefitsLess costly to transmitCellular services price lower than voice callsSilent, doesn’t ring, discreet messagingInstantaneous transmission
Customer/Buyer: Finnish Army User : Military cook/bakerApplication: Baking 500 cakes/dayProduct: $3,500 Large capacity, heavy duty, floor mounted industrial mixerValue proposition:
“This industrial mixer provides high capacity, high performance and very long term reliability”.
Critical to product launch successWithout it you’ll probably never get to see the chasm, let alone cross itAbsolutely required to cross the chasm and to sell early majority pragmatists
ÅA “Must Have” #1: Provides a Dramatic Competitive Advantage
Advantage not previously availableDramatic, significant, not minorIn a major operational areaExamples?ATM, CT scanner, Polaroid camera, Xerox 914 copier, Birth control pill
Improves productivity of a well-understood critical success factorSuperior price-performanceExamples?CAD software, e-mail, Internet search engines, word processing & spreadsheet software, Viagra
Must be visible, verifiable, significant, quantifiable, easy to prove“Free” offers get attentionExamples?ATM, laparascopic surgery, spreadsheet & word processing software, online software distribution
ÅA Bowling Pin ModelApproach niche market expansion in as leveraged a way as possible -towards the tornadoA niche requires its own whole product to be fully complete before it can adopt the new paradigm
ÅA The Bowling Pin ModelNiche market (risk of being stuck in the middle (Porter, 1980)Knowledge spill-overKnowledge leverage and stretchingOne shot and several hits - as many as possible!
They require time to implement; time which is a shortage in fast moving industries -therefore thought not to workCompanies tend to be happy with their first achievement - “we’re aiming for 1% market share”; satisficingServing a niche may require to hefty product and too much service, which paralyses the organisationThe structure of the consumer market does not support bowling alley strategy (functional food)
ÅA On Main StreetFrom niche market to commodity marketFocus on the end-usermass customisationyou already have the customers just continue feeding themget closer to customers - markets are conversations!
Course outlineAssignmentsIntroductionIdea, InventionInnovationE-shipValuePropositionTech Assessm.Bowling PinThe tornadoMain Street
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ÅAThe Main Street of the Information Age
The Tornadosell to infra buyersdrive price points ever lower to maximise market shareattack the competitor to gain market shareposition yourself horizontally as standard global infrastructure
The Main Streetsell to end-users+1 value propositions to gain marginscompete against yourself to gain margin shareposition yourself in niche markets based on individual preferences
Course outlineAssignmentsIntroductionIdea, InventionInnovationE-shipValuePropositionTech Assessm.Bowling PinThe tornadoMain Street
ÅA SegmentationIn the early market - beware of segmenting - you must not!In the bowling alley - you must!Once inside the tornado - don’t!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 outlineAssignmentsIntroductionIdea, InventionInnovationE-shipValuePropositionTech Assessm.Bowling PinThe tornadoMain Street
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ÅA Other barriersApart from technology
culturalpsychological
The barrier is not objective but subjective
Course outlineAssignmentsIntroductionIdea, InventionInnovationE-shipValuePropositionTech Assessm.Bowling PinThe tornadoMain Street
ÅA Predicting TornadoesBowling alley successes help start tornadoes as they validate product architectures - one niche market success in placePrice point is a good indicator of when you’re in reach, i.e. when the tornado comes - mobile phones became the commoditykiller apps. (do tornados cause killer apps or vice versa?)When a gorilla comes around - you are in a tornado
Course outlineAssignmentsIntroductionIdea, InventionInnovationE-shipValuePropositionTech Assessm.Bowling PinThe tornadoMain Street
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ÅA 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
