Making an Idea Into a Business

8/6/2019 Making an Idea Into a Business

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Turning an Idea into aBusiness



WELCOME Participants!

TOP DAWG

Business Plan CompetitionSponsored by :

ABESE

Outline of Presentation:Intro---CEnIT

What is a Business Plan?Sources of informationBrainstorming for Value



What does CEnIT do?

� we want what you want²more business!

Mission:

� Conduct research and develop new technologies that will

advance IT capabilities in th

e nation.� Conduct research on entrepreneurship development intechnologically under-developed communities.

� Provide an infrastructure to stimulate an entrepreneurialculture.

Vision:� To create an entrepreneurial culture for expanding

education, research, intellectual property, and economicdevelopment opportunities in IT.



What is a Business Plan?

� Its as much for you as it is for anyone else²maybemore« The SBA says::

A business plan precisely defines your business,identifies your goals and serves as your firm's resume.

Its basic components include a current and pro formabalance sheet, an income statement and a cash flowanalysis. It helps you allocate resources properly, handleunforeseen complications, and make the right decisions.

Because it provides specific and organized informationabout your company and how you will repay borrowedmoney, a good business plan is a crucial part of any loanpackage. Additionally, it can tell your sales personnel,suppliers and others about your operations and goals.



B.P. is NOT Just Financial

Numbers and NO

T just for Loans� Bootstraping²your own money (including

loans), friends & family

� Angels²seed money and ³hands onádvice-----Competition presentations to

� VC¶s²La. SBIC being formed

� Suppliers & customers² innovation in

financing� Mix of various above²you have to plan

which/when



Business Plan Info

� Inc Magazine¶s Business Plan Guidance

http://www.inc.com/guides/write_biz_plan/20660.html

� American Express Outline

http://home3.americanexpress.com/smallbusiness/Tool/biz_plan/elements/index.asp

SBAhttp://www.sba.gov/starting/indexstartup.htm

l



B. P. Info. continued

� Two Books used around here lately:

� The Art of Innovation-Tom Kelly-Innovative

Product Design Class-IDEO-http://www.ideo.com/

� High Tech Start-up-John Nesheim-Entrepreneurship for Scientists & Engrs

� http://www.startupweb.com/tools_business.html



Which comes first:

Th

e idea or th

e plan?� Question: The idea comes first. Right?� Answer:

YES«YES«and«and«

NONO� The first patent Thomas Edison was ever granted (of 1087), at the age of 22, was for a ballot

machine designed to instantly record votes made by members of Congress. It was a flop.� The machine worked very well, and Edison had found a financial backer willing to invest $100 in it.

Yet when he demonstrated his new device in Washington, he was told that it would only destroythe time-honored congressional device of filibustering, for example, stalling for time. "Young man,that is just what we do not want," a committee chairman told the future Wizard of Menlo Park.

"Your invention would destroy the only hope that the minority would have of influencinglegislation."� Crushed - and nearly flat broke - the young Edison left the nation's capital determined from then

on to invent only things that would be in "commercial demand.³

source:source: Machine Politics,Machine Politics, By Kevin Baker,By Kevin Baker, Issue Date: Nov 20 2000Issue Date: Nov 20 2000



Who gives a hoot?

Ford¶s Edsel

Coke¶s formula fiasco

³Examples of costly failures are legion. In

today's dollars, Federal Express lost $294 million on Zap Mail. NeXt lost $250 million onits computer workstation. GM lost $420 millionon the Wankel Rotary Engine. DuPont lostover $1 billion on Corfam. Ford lost over $2 billion on the Edsel. Polaroid wrote off $197 million in inventory alone for Polarvisioninstant movies. Xerox invented the personalcomputer ahead of Apple but failed tocommercialize it. Motorola invested over adecade and more than $360 million in itscellular telephone project before taking asingle major order.´

G.S. Lynn and R.R. Reilly in ³Growing the Top LineThrough Innovation´, Chief Executive; New York; Fall2002

Learn from ³Uncle´Thomas (Edison):

Don¶t Assumepeople will want it-

prove it -as you

develop it !!!!!!!



Quality problems and high cost

Th

eE

dsel� "To this day, it¶s still pretty embarrassing to

be broken down onthe side of the road with one."

� Learn Vicariously:

Skip LeFauve, who was the president/CEO of the Saturn Corporation, bought a

case of the books entitled µThe Edsel Affair , gave a copy to all his executives andhad them underline everything that Ford did wrong with the Edsel."

http://www.edsel.com/reviews/failure.htm



Ford lost 2 billion on this beautiful

car! $250

million in 1958

dollars



New Ideas- but more hype thansubstance and introduced in a

recession� For all the criticism of the Edsel's appearance, the car did havesome interesting -- if not long-lasting -- technical innovations.

� One was a speedometer that rotated on a vertical axis like a roulettewheel and was called the rolling dome. There was also a "teletouch"transmission, a series of buttons set in the center of the steering

wheel by which one changed gears.� The ads said that such a light touch was required to push thebuttons that you could shift gears with toothpick -- something thatapparently did not impress the millions who don't keep toothpicks intheir cars.

� Source CNN August 11, 1997 - Web posted at: 10:25 p.m. EDT (0225 GMT)

�M

oral: Don¶t KID t

he market or yourself � Is the product all you want to say it is ± does design meet

requirements you set/committed



The Coke fiasco---Don¶t fix it if it

ain¶

t broke� In April of 1985, the most widely known and best selling soft drink onthe market was going to be reinvented ± ³New Coke´

� Within weeks of the switch, loyal and dedicated fans of the originalformula became so vocal that the rest of the nation followed along,calling the switch in formula Un-American, some stating that Coke

had no right to take away something so intricately ingrained in Americana. Essentially, it was tanking.� "Coca Cola Classic" was revived, and reintroduced to the

marketplace. An apology was made, more or less, but in the spirit of experimentation, New Coke was renamed Coke 2 and remained onthe market for some time in limited quantities. Time has swept theincident under the rug, and no mention of the product is made on the

official Coca Cola website, even in the history section that cites newproducts released in the 1980's

Source²Danger-seekers.com



An idea, A plan & a market³These days, start ups must have more to offer than just a

good idea to build a successful company. There¶s plentyof risk for start ups which need the experience of angels

whohave already taken businesses to maturity or public.From her perspective, entrepreneurs need:´

� A Great Idea, but this is only the beginning,� A rock solid business plan,� A terrific management team,

� An intense desire to succeedShirley Eis, co-partner of Rigo Telecommunications

Remember: BP¶s are for someone else besides you-OPWM



Why Prepare a Business Plan

� Sixty percent of I nc 500 CEOs did nothave a formal business plan beforelaunching their company

� Forty-one percent of the group startedtheir companies with less than $10,000.Source: Inc. Magazine

� SO««Who needs one?-----Do you need more than $10,000?

� Also, what isn¶t said is how many Inc 500 wannabes there were.



The purpose of a businessPlan/Feasibility Study:Is there really a market for

HOOT n GIGGLES?

An idea is good if there is a An idea is good if there is a NEEDNEED for it.for it.

At least a ³perceived need´ At least a ³perceived need´ Another word for NEED: Another word for NEED:

MarketMarket

��³Id

entifying, anticipating and

satisfying customer need

s³Id

entifying, anticipating and

satisfying customer need

s profitably´ profitably´ (the Institute of Marketing¶s definition of (the Institute of Marketing¶s definition of Marketing).Marketing).

�� The four P¶s of marketing:The four P¶s of marketing:Product, Price, Place, PromotionProduct, Price, Place, Promotion



4 P¶s of Marketing Thanks to Ashley Bienvenue

� Product ± Brand ²exclusive, elite ± Packaging ²easy to

remove ± Aesthetics ± Safety ± Quality ± Characteristics

± Warranty ± Support

� Price ± Pricing Strategy ²

great idea but will theypay that much for it?

± Bundling ± Wholesale and volume

price

±M

edicare/M

edicaid ± Cash and EarlyPayment Discounts

± Seasonal Pricing ± Long-term Price

Forecast ±when willcompetition forcereductions?

Promotion Strategy ± Web based? Advertising

Personal Selling Sales Promotion PR Budget ±is there enough margin

to afford? Place

Distribution Channels Logistics Distribution Costs Order Processing Distribution Centers ManufacturingCenters

Market Coverage ---just a niche? Inventory Management Transportation Warehousing Possibility for Long-term

Integration (Forward or Backward)

More on this next time ««..maybe



So«.There¶s a place for:

� ³Brainstorming´

But combine with«

� Market Research

Disregard for the

limitations of marketrealities can betrouble !!!!!!!!! You do them

simultaneously-feedback



Why a business plan? Another Reason--We need a

strategy for:� Connecting / Linking the idea with

� the market

³Strategy leads to the continuous creation of real value. Real value requires sustained

competitive advantage.L

eaping atopportunities without strategy consistentlyproduces failure´ ±The Boston ConsultingGroup



Brainstorming:Some things the Innovative Product Design Class did and

you should do:� Understanding the problem------including the market Are perceived

constraints really constraints? WNDITTWB� Observing²how problem/need is satisfied currently²weaknesses

of current solution. How much is the current solution worth to themarket? ---size of the market²speed of adoption

� Visualizing²how your new product will overcome weaknessesincluding marketing/distribution weaknesses� Evaluating and refining--- dealing with ³the limitations of reality´

Doing what hasn¶t been done.� Implementing²a product is not a desirable (hence ³finished´)

product just because it has been physically created ± it has to be

³packaged´ ---described/

presented to th

e buyer in such

a way th

atthe buyer AGREES it¶s a product to be desired.



Secrets to BrainstormingIDEO (a successful product design company)²

Innovative Product Design Class� Clearly defined focus²not too broad, not too narrow� Go for quantity of ideas to solve the problem ±at first---

Ćreating innovative products can be a challenge like going down aroad with rocks and ruts the whole way. Out of approximately 3,000 raw ideas come 125 small projects, 9 that will go to early

development,4

that continue to major development, and fewer t

han2 that actually make it to market. One recent study found that newly

launched industrial products failed 33 percent of the time; newconsumer packaged goods fail to live up to management sexpectations 80 percent of the time.´---G.S. Lynn and R.R. Reilly in ³Growing theTop Line Through Innovation´, Chief Executive; New York; Fall 2002 24:1

� Minimize critique until all ideas are out

� Facilitator should enforce rules but not dominate� Free movement around the meeting area and free use of paper /sketches/labels-physical triggers---get physically involved in idea.

� Team members must Prepare For Meetings-do homework





If a product or service is³INNOVATIVE´ :

� It has an ³edge´ in the market place that will not quicklydisappear (John Nesheim author of High Tech Start UPcalls this ³edge´ part of your ³Unfair Advantage´):

What limits COMPETITION?

What makes you better?

Legal---Patents, copyrights / Trade secrets

Natural Monopoly---single firm can supply the product at

lower cost than two or more firms. Examples: Networks(cable systems, pipeline, wire) and Large data bases -Human Genome---see J. Nesheim¶s example B.P

Huge cost of Re-inventing the wheel--Microsoft



Initial Advantages continued

John Nesheim author of High Tech Start UP calls this

³SustainableC

ompetitive Advantage´� Key Personnel-Choosing your initial team ±building on its strengths---ćorecompetenciesÉxperience-----VC¶s contribute here more

than with their money. Abilities - complementaryCompatibility

� Getting there ³Firstest with the mostest´²� Gen. Nathan Bedford Forrest²

millionaire cotton speculator Capital for ³capturing ³ the market quicklyServicename/brand recognition - ³fortification´

your brand is the ³generic´ ----Advil -

Ibuprofen

� How Long will initial advantageslast?---What every VC/ Angelwants to know«. and is not afraidto ask.

³In war you win by

outwitting, outflanking,

and overpowering theenemy²your

competition´See Marketing Warfare, by Al Riesand Jack Trout



Summary Challenge:

� Dream up ³Brainstorm´ a product or service (andmethod of delivery/distribution) that:1)satisfies market need(s)

2)With an ³unfair´ and ³sustainable´ competitiveadvantage «..and

3)which appeals to you «.and«

4)«to those who provide funding



Things to Brainstorm for aThings to Brainstorm for aDescription/Boundaries of your Description/Boundaries of your

ideaideaWhat

is our product?need(s) are satisfied

makes it unique?

can go wrong?Are the risks?

selling price?

Whois We?

does what?is our customer(s)?Botox---people with wrinkles

people with migraines

is our competition?



Things to Brainstorm for aThings to Brainstorm for aDescription of your idea, continuedDescription of your idea, continued

How«can we minimize

risks?big is the market?will we produce?Much will it cost?Will it be

sold/delivered?

Where«

Is the market?

advertise?

will you locate?

When«Will it pay off?



See J. Nesheim¶s example B.P.

� http://www.startupweb.com/pdf /DataMedBPlan.pdf



Do you really want to break ahabit?

� Flip top Toothpaste containers

� Selling insurance on-line ³The insurancemarket is huge´«..but««.

How big is your market when for theforeseeable future it contains only³innovators´?

When will the habituated try your product or service´?----Surveys-would you buy?«atwhat price?«how much do you use?



Tom Kelly-IDEO

� ³Make a checklist of the essentials beforeyou begin a project, the minimal elementsyour product or service needs in order tobe accepted in the marketplace.Periodically check to make sure youhaven¶t forgotten one of these basics´

� P. 273, The Art of Innovation.





Linking the market with the productidea²Cooper.com

� A good website on the subject of matching requirements to productinnovation

http://www.cooper.com/newsletters/2002 _ 08/turning_requirements_into_product_definition.htm

http://www.cooper.com/who_we_are.htm



Thanks for your time!QUESTIONS

?



Contact Information

Dr. Jon D. Pratt

Center for Entrepreneurship and I.T.208 A Bogard Hall

Louisiana Tech University

Ruston,L

A7

1272

318 257 3191

[email protected]

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Making an Idea Into a Business

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