Here are the key customer segments identified in the document: - Young people 25-34 are dominant participants in entrepreneurship. - Existing companies and their customers. New technologies may disrupt existing companies or enable them to better serve existing customers. - Entrepreneurs seeking to develop new technologies and ideas into viable businesses. The document provides information to help entrepreneurs with opportunity recognition, technology assessment, developing business models, and presenting ideas.

1. CREATING VALUE FROM NEW
IDEAS AND TECHNOLOGIES
Minsk, Belarus
DR. KENT MILLINGTON
OCTOBER 2012

2. INTRODUCTION TO
ENTREPRENEURSHIP
• INNOVATION
• OPPORTUNITY
• TECHNOLOGY STRATEGIES
• BUSINESS MODEL CANVAS
• BUSINESS PLAN STRUCTURE

3. New Ideas and Technologies
Developing technology into viable businesses
Creativity – Innovation – Entrepreneurship
Opportunity Recognition
Technology Assessment and examples
Developing a Strong Business Model
Presenting the Idea to Stakeholders

4. ENTREPRENEURSHIP: THE ART
AND SCIENCE OF BUILDING VALUE
ART: CREATIVITY; ENERGY; FEEL;
INSIGHT
SCIENCE: ANALYSIS; DISCIPLINE;
SYSTEMATIC APPROACH

5. Entrepreneurship: About People
DnA + AnD = Action
DnA = Dreams and Ambitions
AnD = Analysis and Discipline

6. ENTREPRENEURSHIP
Identify a need or opportunity
Create a solution - Innovation
Implement solution to create value
Harvest or other long-term strategy

7. ENTREPRENEUR
Innovates or creates for personal gain
Takes the initiative to create wealth
Assembles and deploys resources
under uncertain situations
Accepts the risks personally

8. Two Kinds of Entrepreneurship
1. Opportunity – based
2. Necessity – based
Young people 25-34 are dominant
participants in entrepreneurship.

9. “A company’s ability to innovate –
to use the value-creating ideas of
employees, partners, customers,
suppliers, and others…has become
the core driver of growth,
performance, and valuation.”
McKinsey Report 2008

10. Two Important Considerations for
Entrepreneurs
• INNOVATION / CREATIVITY
• OPPORTUNITY IDENTIFICATION

11. The three components of creativity
Creative thinking
How people approach
problems and
Expertise / solutions
Knowledge Motivation
Everything that a Determines what
person knows and
people will
can do in the
actually do
broad domain of his
or her work

12. Continuum of Innovation
Imitative Incremental Evolutionary Radical Revolutionary
The secret to innovation is uncovering an unmet consumer
need and the filling it in an innovative, creative way.

13. Continuum of Innovation
Imitative: copies something well-known and accepted
Incremental: small improvements; faster, better,
cheaper
Evolutionary: new to firm but not to world (i.e.,
technologies in new places)
Radical: technologies that give large performance
improvements or lower costs
Revolutionary: new to individual, firm, and the world
Best Opportunities between Incremental and Radical

14. Incremental vs. Radical Innovation
Incremental Innovation Radical Innovation
• Steady improvements • Fundamental rethink
• Sustaining technologies • Disruptive technologies
• Can be rapidly • Need to be nurtured for
implemented long periods
• Immediate gains • Worse initial performance
• Develop customer loyalty • Capture new markets
• May hinder radical change • Can create new standards
Product -, Service -, Process Innovation

15. The Creativity-Innovation-Entrepreneurship Chain
Latest science and technology
Creativity Innovation
Entrepreneurship
• Production of novel • Refining, evaluation
• Creation of value
and useful ideas and first prototypes
in the marketplace
• Discovery of of the new ideas • Exploitation of
opportunities • Evaluation of
opportunities
• Output: new ideas opportunities • Output: new product,
• Output: prototype
service, or process
Needs in society and the marketplace

16. Types of Innovation
1. Product: early stage of product life cycle,
innovations are frequent. As rate of product
innovation decreases, process innovation
increases. (What we make)
2. Process: makes manufacturing more efficient
through automation, lowering costs. (How we
make it)
Product /Service innovation creates much more
new wealth than process innovation!

17. Allocation vs. Attraction
Allocation is the use of existing resources,
or a limited amount of new resources, in a
risk-controlled investment process.
Attraction is the gathering and use of new
resources in creative ways to promote a
new opportunity in a high-risk investment.

18. Three Characteristics of Opportunity
Newness
Potential Economic Value
Perceived Desirability
Opportunity implies something that has not existed or
been available before, that can yield potential economic
gains, and whose development is consistent with legal
and/or moral standards of the society in which it occurs.

19. A Framework
•Alertness
•Social Network Ideas
•Prior Knowledge
-Of markets
-How to service markets
-Customer problems
-Accumulation over time
Example: Focus Media in Shanghai

20. Opportunity Recognition
A process to identify the potential to
create something new that can
generate economic value and is not
currently being exploited or developed.

21. Basic Propositions Concerning
Opportunities
Proposition 1: Opportunities emerge from
changes in knowledge, technology, economic,
political, social, and demographic conditions.
Proposition 2: Recognition depends on
previous experience which enables people
to see links between previously unconnected
changes, knowledge, or events.

22. Product Opportunity Gap
Social:
Social and Cultural
trends, Historical
trends Product
Opportunity Gap
Technology:
Emerging technologies
Re-evaluating existing
Economic: technologies
State of the Economy, Level of
Disposable Income, Changing
Investment Opportunities

23. Place an “X” in the approximate location of the competitors in
terms of price and performance/benefits/value added
Highest
Price
Average
Lowest
Lowest Average
Highest
Performance/Benefit/Value Added

24. Discontinuous opportunities: The source of radical innovation
Adjacent Discontinuous
New Opportunities Opportunities
Markets Exploit current assets Create new markets
and capabilities and new products
Status Quo
Grow market Adjacent
share and profit
Existing Opportunities
Markets (business expansion,
Increase primary
not new business
market demand
development)
Existing Products/ New Products/
Technology Technology

25. … which create disproportionate wealth relative to adjacent
opportunities
14%
38%
Discontinuous
61%
opportunities
Adjacent
86% opportunities
62%
39%
Type of new
Business launch Revenues Profits
Source: Chan & Mauborgne (1997)

26. Managing Technology -
Discovery to Application
Scientific
Discovery
Invention
Innovation
Technology
Application

27. Sustaining vs. Disruptive Technologies
Sustaining technologies focus on
improvements of importance to existing
customers. Existing companies best with
incremental innovation.
Disruptive technologies create a new value
proposition, reach new markets and customers.
New companies better at disruptive, radical
innovation.

28. Creating Competitive Advantage
• Competitive Advantage
– Something that the firm does better than any of
its competitors.
– Goal: To have a sustainable competitive
advantage
• Requires that the advantage:
– Must be valued by customers
– Not easily duplicated by competitors

29. Technology and Competitive
Advantage
Technology
Competitive Value
Competitive Advantage Creation
Dynamics

30. Sustainable Competitive Advantage
Combination of scientific, technical, sales,
and manufacturing knowledge can create a
needed advantage.
Dilemma of a high tech company: How to
provide incrementally superior products at
faster speeds and lower prices?

31. How has technology
changed the way YOU do
business?
How has technology
changed the way YOU live
your life?

32. Effective Technology Management Answers
Three Questions
How will we
create value?
How will we How will we
deliver value? capture value?

33. Three Key Questions – and Eight Others
•How will we create value?
How will the technology evolve?
How will the market change?
How do we organize effectively?
• How will we capture value?
How do we gain a sustainable competitive advantage?
How should we compete when standards are important?
How to manage technology platforms?
• How will we deliver value?
How should we execute the marketing strategy?
How do we make decisions and take decisive action?

34. Major Strategic Questions
• Should we create our own new
technology and innovations
internal to the firm?
OR
• Should we acquire technology from
external sources like acquisition or
strategic alliances?

35. Dimensions of Internal
Innovation
1. Goal of internal innovation is for the firm
to outperform its competition.
2. Internal innovation involves many
individuals, capabilities, and resources.
3. Resources are critical to the innovation
process. (Human, Physical, Financial)

36. Reasons for Using External Innovation:
1. The firm’s product line falling behind competitors.
2. A new competitor enters the market, which will change the
dynamics of the industry.
3. The firm discovers its processes are not as efficient and/or
effective as those of its competitors.
4. The firm believes its current products or processes are not
going to be successful in the future.
5. Expansion into new markets and/or new products is
achieved faster.

37. The Process of Technology Commercialization
Commercializing New Technologies, Vijay K. Jolly, Harvard Business School Press, 1997, p. 4

38. Technology Commercialization Process
Imagining Incubating Demonstrating Promoting Sustaining
Product Build products & Build markets
Creating unique Proving product Build
planning product ideas viability prototypes introduce to & improve
steps markets products
Build initial Develop
Business Find resources to
Find interested markets &
build prototypes & market growth
planning people & money
identify markets plan market strategies
expansions
steps
Resource Needs
People Small Moderate Medium Large
Physical None Moderate Medium Large
Financial None Moderate Large Largest

39. Technology Assessment
1. Understand Technology
2. Discover Possible Uses of Technology
3. Understand Markets for Uses
4. Determine How to Deliver Value

40. Technology S - Curve
P
P e
r r
o f
d o
u r
c m
t a
n
c
e
Time

41. The S-Curve of Technological Progress

42. S – Curve Strategy
P
P e 3rd Technology
r r
o f
d o 2nd Technology
u r
c m
t a
n 1st Technology
c
e Time

43. Managing Along the S – Curve
P
P e Managing 3rd Technology
r r Growth
o f
d o 2nd Technology
u r
m Managing
c
a Transitions
t
n 1st Technology
c
e Time

44. Management Implications
•Technology shifts before investment recovery
•Management focus often fragmented
•Engineering strength often misused
• Marketing becomes a problem introducing
new technology over the old one
•Difficult to manage the ROI in important
technology.

45. The Entrepreneurial Process
Communication
Opportunity Resources
Business Plan
Fits and Gaps
Creativity Leadership
Team
Source: New Venture Creation, 6th Edition, Jeffrey A. Timmons and Stephen Spinelli, McGraw Hill, 2004

46. The Three M’s of Opportunity
Market Demand Market Structure & Size Margin Analysis
• Fast Customer Payback • Emerging or Fragmented • Low cost provider
• Growth Potential > 20% • US$1 Billion Potential • 40%+ Gross margin
per year
• Barriers to Entry • Low capital required
• Reachable Customer
• Number of Competitors • Break even in 1-2 years
• Durable

47. Own or Control Resources
Minimize and Control
versus
Maximize and Own
Human Resources (People)
Financial Resources
Physical Resources

48. The Entrepreneurial Team
Leader: Teacher, Resilient, Deals with adversity and risk,
Has integrity, Builds entrepreneurial culture
Team: Relevant experience, Motivation to excel,
Commitment, Determination, Creative,
Adaptable, Opportunity obsession

49. Michael Porter’s Five Forces Analysis
SUPPLIER POWER
Number of Suppliers, Volume of
Inputs and Impact on Costs,
Available Substitutes, Input
Costs relative to Total Costs.
THREAT OF
BARRIERS TO ENTRY
SUBSTITUTES
Costs, Access to Inputs, RIVALRY Switching Costs,
Government Policy, Brand
Identity, Capital Exit Barriers, Industry Interest in
Requirements, Switching Concentration, Value Substitution,
Costs, Economies of Scale Added, Industry Growth, Price/Performance
Product differences,
Brand Identity
BUYER POWER
Buyer Volume, Price Sensitivity,
Buyer’s Incentives, Product
Differentiation, Brand Identity

50. Three General Strategies
Cost Differentiation Focus
Leadership
Lower Costs Features Target
Mergers Service Markets
Integration Convenience
Price New Innovation Limited
Performance Distribution

51. How Companies Develop
1.Small Business Entrepreneurship – 95%+ of business
2.Scalable Startup Entrepreneurship – receive most
investment
3.Large Company Entrepreneurship – innovation as
variants of existing core products; disruptive innovation
difficult.
4.Social Entrepreneurship - innovation to solve social
needs

53. Search for Execution of
Business Model Business Model

54. Build a Customer Development Process
Product Development
Concept/ Product Alpha/Beta Launch/1st
Bus. Plan Dev. Test Ship
Customer Development
? ? ? ?

55. Customer Discovery: Step 1
Customer Customer Customer Company
Discovery Validation Creation Building
• Stop selling, start listening
– There are no facts inside your building, so get outside
• Test your hypotheses
– Two are fundamental: problem and product concept

56. Customer Validation: Step 2
Customer Customer Customer Company
Discovery Validation Creation Building
• Develop a repeatable and scalable sales
process
• Only earlyvangelists are crazy enough to buy

57. “Pivoting” is changing a fundamental part of the
business model. It can be simple: recognizing that your
product was priced incorrectly. It can be more complex:
your target customer needs to change, the feature set
is wrong, you chose the wrong sales channel or your
customer acquisition programs are ineffective.

58. Customer Discovery: Step 3
Customer Customer Customer Company
Discovery Validation Creation Building
– Goal is to create end-user demand and drive that
demand into the sales channel.
– Marketing message will be different based on the
kind of market being entered and the customers
being sought
– Brand building and heavy advertising work in
existing markets but not so much in new markets.

59. Customer Discovery: Step 4
Customer Customer Customer Company
Discovery Validation Creation Building
– Where the company transitions from informal,
learning, and discovery to formal departments of
Sales, Marketing, Business Development
– Build departments to exploit early market
success
– Add employees to meet demand for products

60. Nine Blocks of the Business Model
1. Customer Segments
2. Customer relationships
3. Value propositions
4. Channels
5. Key Resources
6. Key Activities
7. Key Partners
8. Revenue streams
9. Cost Structure
Business Model Generation, Alexander Osterwalder & Yves Pigneur,
2010

61. Business Model Canvas
Key Value Customer
Partners Key Proposition Customer Segments
Activities Relations
Key
Channels
Resources
Cost Structure Revenue Streams

62. Business Model Canvas
Key Value Customer
Partners Key Proposition Customer Segments
Activities Relations
Key
Channels
Resources
Cost Structure Revenue Streams

63. Customer Segments
Mass Market: focus on one large group; i.e., consumer
electronics
Niche Market: specific segments; i.e., supplier-buyer
relationships like auto parts manufacturers
Segmented: different needs and problems; i.e., banks and
professional services (engineering, consultants)
Diversified: unrelated segments; i.e., Amazon selling products
and providing computer services
Multi-sided platforms: credit card companies; i.e., card
holders and merchants

64. Value Proposition: Five Key Values
• Product: Performance, quality, features, brand, easy to use,
safe.
• Price: Fair, visible, consistent, reasonable.
• Access: Convenient location, found in reasonable time.
• Service: Ordering, delivery, return, check-out.
• Experience: Emotional, respect, ambiance, fun, intimacy.
• One value selected to dominate value proposition, a second
to differentiate, and remaining three meet the industry norm.

65. Channels
Communication: marketing message, raising
awareness, customer evaluation
Distribution: delivering value proposition
Sales: places to purchase product or services
Finding the right mix of channels is crucial to bringing a value
proposition to market.

66. Channel Own Partner
Types
Direct Indirect
Sales Web Own Partner
Wholesale
Force Sales Stores Stores
Channel Phases
1. Awareness: How to raise awareness of products?
2. Evaluation: How do customers evaluate products?
3. Purchase: How and where do customers buy?
4. Delivery: How do we deliver value proposition?
5. After Sales: How provide post-purchase support?

67. Customer Relationships
Motivations: Customer acquisition, customer
retention, Boosting sales (upselling)
Personal Assistance
Dedicated Personal Assistance
Self-service
Automated service
User communities
Co-creation of innovative products

68. Key Resources
Physical: facilities, buildings, equipment
Human: especially for creative industries
Financial: sources of funding
Intellectual: patents, copyrights,
partnerships, customer databases

69. Key Activities
Production: designing, making, delivering
Problem solving: consulting, services,
hospitals
Platform/network: software, networks,
social media, brands, platform promotion

70. Key Partnerships
Strategic alliances between non-competitors and
financial sources
Strategic partnerships with competitors
Joint Ventures
Buyer-supplier relationships to assure reliable
supplies

71. Revenue Streams
One-time customer purchases
Recurring revenues
Asset sales, Usage fee, Subscription fees,
Lending/Renting/Leasing, Licensing
Pricing considerations

72. Cost Structure
Cost-driven model: minimize costs, low
prices, maximum automation, extensive
outsourcing, process innovation
Value-driven model: value creation, premium
values, personalized service, product
innovation
Economies of scale Economies of scope
Fixed costs Variable costs

73. Business Model Canvas
Key Key Value Customer Customer
Partners Activities Proposition Relations Segments
Key Channels
Resources
Cost Structure Revenue Streams

74. Business Model Canvas – SWOT Analysis
I KP KA VP CR CS
n Strengths
t Weaknesses
e
r
n
a
KR C
l
E
x
t Opportunities Threats
e C$ R$
r
n
a
l
Helpful Harmful

75. Business Model Canvas – Value Innovation
KP KA VP CR CS
- Costs + Value
KR C
C$ R$

76. Business Model Canvas – Value Innovation
KP KA VP CR CS
Eliminate Raise
- Costs + Value
KR C
Reduce Create
C$ R$
Cost Side Value Side

77. Apple iPod/iTunes Business Model
What about your Company????

78. Business Model Canvas for Apple iTunes
KP KA VP CR CS
Hardware Lovemark
Record Design
Companies Seamless Switching
Marketing Costs
Music Mass
Experience market
OEMs KR C
People Retail stores
Brand Name Apple stores
iPod hardware Apple.com
iTunes software
C$ R$
People Manufacturing iTunes stores
Marketing and sales Large hardware revenues
Some music revenues

79. Creating the Business Plan
 A roadmap for a desired direction
 Consider essential tasks
 Instills much-needed discipline
 Investors insist on a defensible plan
 Benefit to entrepreneur

80. Sections of Business Plan
• Executive Summary
• Management and Organization Plan
• Product/Service Plan
• Marketing Plan
• Operations Plan
• Financial Plan

81. On-Line Sources
http://www.businessplans.org/
http://www.bplans.com/
http://www.bizplans.com/

82. Management Plan
o Identify key functions and skills
o Identify people
o Identify “fits and gaps”
o Establish credibility
o Show ability to manage business

83. Product/Service Plan
 Describe product or service
 Who will buy the product or
service?
 What benefits result from this
product or service?
 Describe unique features

84. Developing a Marketing Strategy and Marketing Plan
Marketing
Target
Marketing Environment
Strategy
Market
= +
+ Time-Related
Marketing
Details and =
Mix Budget
Marketing
Plan

85. Unique Selling Proposition
Unique Claim
Plausible support
and Tradeoff

86. Crossing the Chasm
34% 34%
Early Late
majority majority
2 1/2% 13 1/2% 16%
Innovators Early Laggards
adopters
Time of adoption for innovations

87. Operations Plan
 Plan for each function of the company:
inventories, manufacturing, distribution,
marketing and sales, customer service,
finances
 Understand the critical path of those
functions
 Prepare contingency plans for each
function

88. The Financial Plan
Building Pro Forma Statements with
Sales and Revenue projections
Operating Expense projections
Asset projections
Debt and Equity needs projections
Cash Flow Projections
***Cash is King***

89. The Executive Summary
 Listed first but Created last
 Most important form of written communication
 2 to 4 pages
 Clear, concise, and compelling
 Highlights each section with emphasis on the
Financial Plan

90. The Elevator Pitch
• Get the interest of potential investors, customers, or
strategic partners
• Gives a clear picture of the company and its products
• 2-minute overview
– Product or service offering
– Target market
– Current development stage
– Current needs (capital, beta testers, etc.)
Practice, Practice, Practice

91. Develop an Elevator Pitch
• Set the stage (product or service)
• Stake a claim (claim it and you own it)
• Benefit (how it helps the target market and
specifically the company you are talking to)
• Provide proof (who is using/testing)
• What is needed (short and specific)

92. Sample Elevator Pitch
• ACME Technology is a developer of proprietary seismic
imaging software.
• ACME is targeting the $2.5 billion spent annually for seismic
imaging software by the upstream oil & gas industry.
• ACME currently has three patents pending and is seeking
funding to complete development of its beta software
product, which is being implemented and tested by Standard
Oil.

93. Дзякуй
J. Kent Millington
milliken@uvu.edu