Entrepreneurial Strategy
Joshua GansFiona MurrayScott Stern
January 2014
Capitalized with great fanfare as a disruptive start-
up aimed at overturning traditional grocers, Webvan
positioned itself as an integrated substitute for
supermarkets
With a much smaller capitalization, and focusing on online grocery delivery
using existing chains, Andy and Tom Parkinson
positioned Peapod as a complement to traditional
supermarkets
Two entrepreneurial companies…both having access to significant resources…
seeking to exploit the same opportunity….at the same time….
With fundamentally different strategies
Webvan ultimately burned through ~ $1 billion and
went bankrupt less than two years after its IPO…
Peapod established a partnership with Ahold
(Stop&Shop), who ultimately acquired majority ownership.
Highly profitable niche business, with Parkinson brothers still in direct operational control of the
company…
The hard part is commercializing the idea in a way that creates unique value for an end user while allowing the
entrepreneur to capture value on an ongoing basis
Idea Selection CommercializationIdea Generation
What do we Do and Not Do in Commercializing Our Idea?
The Paradox of Entrepreneurship
Coming to market requires market knowledge; the process of gathering knowledge -- market experimentation – inherently limits
the scope of competitive advantage
What is Entrepreneurial Strategy? Entrepreneurial Strategy is the plan a founder
(and her team) undertakes to identify a system for value creation and value capture before the opportunity for value capture is dissipated. – Combines systematic experimentation and learning
with escalating strategic commitments– Not a passive process, but the active choices that
allow a firm to establish priorities, achieve internal coherence, time irreversible commitments, and ensure value capture
– A plan for choosing what NOT to do
Do Entrepreneurs Need Strategy? Many start-up companies find their growth path guided
not by design but by circumstance– The Customer is Always Right– Money Talks
And, there has long been skepticism among entrepreneurs in the lessons from “strategy” for their fledgling ventures– Who can afford another expensive study?– My industry / setting moves so quickly – those static tools
are not very helpful!– Isn’t this just my business plan?
Our objective is to offer a novel framework that allows entrepreneurs to choose how their company evolves, and helps to align the disparate decisions made during the earliest stages of a venture.
Selecting YourEntrepreneurial Strategy
INVESTMENT
ORIENTATION
CONTROL
EXECUTION
COLLABORATIONCOMPETITION
The Entrepreneurial Strategy Canvas
Agenda
What is Entrepreneurial Strategy?
Entrepreneurs Need Strategy
Choosing Your Competition
Choosing an Entrepreneurial Strategy
Putting the Framework to Work
Entrepreneurs Need Strategy
Prioritization
Internal Coherence
Irreversible Commitments
A Field Guide for Experimentation and Evolution
The Timing of Irreversible Commitments
A Few Thoughts… Execution is fundamental to any business…the
pay-offs to execution are higher when guided by strategic priorities and internal consistency
Experimentation and learning are fundamental to the evolution of any new venture…the value of experimentation is far higher when guided by strategic priorities, and allows more effective staging of irreversible commitments
More generally, because they have more freedom but fewer resources, the marginal returns to “strategy” are higher for entrepreneurs than for established businesses
Agenda
What is Entrepreneurial Strategy?
Entrepreneurs Need Strategy
Choosing Your Competition
Choosing Your Entrepreneurial Strategy
Putting the Framework to Work
Tactus Technology has created a tactile user
interface that combines the elegance of touchscreen
with the physical sensation when typing
Swiftkey has developed a powerful predictive
algorithm that dynamically updates keyboards on a stroke-by-stroke basis
Tactus Technology has focused on establishing a strong IP position, with 15
issued and 45 pending patents. “We made a
choice to go with intellectual property…”
Swiftkey has focused on bringing their product to
market, with three software generations over the past four years, and significant follow-on innovation in the
area of predictive text
Investing in Control Versus Execution
The Benefits of Control
Increased “Appropriability”
Ensuring the “Vision” of the Founder
Facilitating Value Capture with Key Partners
The Benefits of Execution
Time-to-Market
Feedback and Experimentation
Lower Commercialization Cost
Oriented Towards Compete Versus Cooperate?
Benefits from Collaboration
Enhanced Value Proposition
Reduced Costs
More Focused Incentives
Higher Product Market Profits
Benefits from Competition
More Control
Fewer Bargaining Hassle
High-Powered Incentives
Potential for Increased Value Capture (as a Share of Value Creation)
Agenda
What is Entrepreneurial Strategy?
Entrepreneurs Need Strategy
Choosing Your Competition
Choosing an Entrepreneurial Strategy
Putting the Framework to Work
Selecting YourEntrepreneurial Strategy
INVESTMENT
ORIENTATION
CONTROL
EXECUTION
COLLABORATIONCOMPETITION
Choosing an Entrepreneurial Strategy
Intellectual Property StrategyInternal
Organization
• Capabilities focuses on innovative capacity and IP management
• Integration and collaboration between technical workers and IP managers
• Focus on the technology S-Curve rather than the Market S-Curve
• Use Control over Key Intellectual Property Assets as a Means for Extracting Significant and Sustainable Revenue Streams
Objective
• Entrepreneurs Role is Limited to Invention, IP Management, Technology Transfer, and Perhaps Standard-Setting
• Global Approach to Implementation and Commercialization of Innovation
• Potential for Exclusive or Non-Exclusive Arrangements
ScopeExternal Position
• Competitive advantage is premised on bargaining power rather than market power.
• Reputation and commitments for enforcing control over knowledge assets
• Exploit comparative advantages in invention versus commercialization
Investing in Control, Oriented Towards Partners
Disruptive StrategyInternal
Organization
• A focus on experimentation and execution. Integration of customer insights into the technology development process
• Capability Development focuses on building out an organization to serve key customer groupings .
• Exploitation of new Technology S-Curve through the development of a novel value chain
Objective
• Must consider how to create and deliver value to key consumer groupings, with a particular focus on consumer segments poorly served by existing products
• Often involves the development of a novel and integrated value chain, with an explicit focus on differentiation and isolation from established players
• Early focus is often on local markets
Scope
External Position
• Strategy as Hustle!• Avoiding detection and early response
by established firms• Choosing a lonely place on the
strategic frontier
Investing in Execution, Oriented Towards Competition
Value Chain StrategyInternal
Organization
• Not Simply a Technology but a Team and Organization to Support the Deployment of the Innovation within the Value Chain
• Integration between innovators, business development, and supply chain partners
• Integration of an Innovation into an Established Value Chain to Enhance Market Power (for the Chain) and Establish Bargaining Power (for the Innovation and Entrepreneurial Team)
Objective
• Scope follows the strategic logic of the value chain you will join
• Often involves establishing a commitment to serve a particular “horizontal” piece of the value chain (but not others) and depends on commitments by others not to encroach on your piece of the value chain
• Leveraging the Technology S-Curve to serve the established Market S-Curve
Scope
External Position
• Exclusivity: Enhancing and Reinforcing the Uniqueness and Distinctive Positioning of the Value Chain you Join
• Bargaining Power: Enhancing the Exclusivity & Isolation of the “Piece” You Contribute to the Value Chain
Investing in Execution, Oriented Towards Cooperation
Architectural Strategy
Internal Organization
• Often involves a separation between Job 1 (grow the ecosystem) and Job 2 (monetize the core)
• Coring involves a combination of technology and market design; tipping involves a combination of market design and tactics
• Exploitation of new Technology S-Curve by architecting a new value chain
Objective
• Careful choice of which stages of the value chain to participate in (or not) and taking responsibility for the coordination and integration of the entire value chain
• Very often must consider how to create and deliver value to stakeholders within the eco-system, both through your technology and as a broker
• Often involves the development of a platform core that allows multiple side to interact and exchange easily and transparently
Scope
External Position
• Platform architects serve a crucial role at the “hub” of multiple stakeholders through control over an interface or access point
• Platform Architects Compete For the Market Rather than In the Market
Investing in Control, Oriented Towards Competition
Different Entrepreneurial Strategies Involve Different Priorities and Commitments
Value Chain Strategy Integrating your
Innovation into an Existing Value Chain
Reinforces Value Proposition of Already Existing Consumers
Emphasis on Exclusive Relationships and “Horizontal” control
Disruptive Strategy Exploiting a New
Technology S-Curve through the development of a novel value chain
Focus on customer segments poorly served by existing value chains
Need to execute quickly enough to avoid response by established players
Agenda
What is Entrepreneurial Strategy?
Entrepreneurs Need Strategy
Choosing Your Competition
Choosing an Entrepreneurial Strategy
Putting the Framework to Work
“I am thrilled to finally draw back the curtain and introduce our new light field camera company, one that will forever change how everyone takes and experiences pictures. Lytro’s company launch is truly the start of a picture revolution.”
– Ren Ng, Lytro Product Launch, 2011
Selecting YourEntrepreneurial Strategy
INVESTMENT
ORIENTATION
CONTROL
EXECUTION
COLLABORATIONCOMPETITION
Entrepreneurial Strategy: The First Stage of Strategic Experimentation
Selecting YourEntrepreneurial Strategy
INVESTMENT
ORIENTATION
CONTROL
EXECUTION
COLLABORATIONCOMPETITION
Disney and Entrepreneurial Strategy
Parting Thoughts… The power of entrepreneurship is the ability to not
only identify and implement exciting opportunities but to make choices that allow you to create real value for the world and capture value for your stakeholders
The more exciting and disruptive the innovation, the more important those choices are for your ability to commercialize and build a new company with competitive advantage
The process of choosing an entrepreneurial strategy requires a venture to come to terms with the core value that it will create, and the logic of how it will capture value on a sustainable basis