Innovation & Entrepreneurship Review PDF

12/13/24 Innovation & Entrepreneurship CH. 12 - NEW PRODUCT & SERVICE DEVELOPMENT 1 New Product Development Processes u Typical New Product Development Processes (NPD) have 4 to 7 stages (depending on model) 1. Idea Generation 2. Idea Screeni...

12/13/24 Innovation & Entrepreneurship CH. 12 - NEW PRODUCT & SERVICE DEVELOPMENT 1 New Product Development Processes u Typical New Product Development Processes (NPD) have 4 to 7 stages (depending on model) 1. Idea Generation 2. Idea Screening 3. Concept Development & Testing 4. Business Analysis 5. Product Development 6. Market Testing 7. Commercialization 2 1  12/13/24 Tools for Improving New Product Development 11-3 3 New Product Development Process --Bessant & Tidd CONCEPT PRODUCT GENERATION COMMERCIALIZATION Identifying Opportunity Testing, Launching & Idea Screening Marketing Product PROJECT PRODUCT ASSESSMENT & DEVELOPMENT SELECTION Developing Feasibility & Product, Business Analysis Market Testing © 2007 Thom son/South-W estern. All rights reserved. 4 2  12/13/24 Success factors in New Product Development Product advantage - superiority in eyes of customer Market knowledge Clear product definition - defined target markets, clear product concepts, clear market position Risk assessment Project organization - cross functional, multi-disciplinary teams Project resources Proficiency of execution Top management support 5 Tools to help with NPD Concept Generation Involve Customers u Able to identify the maximum performance capabilities and minimum service requirements of new product. u Customers may be involved on NPD team. u Firms may use beta testing to get customer input early in development process. u Lead users: Customers who face the same general needs of marketplace but experience them earlier than rest of market and benefit disproportionately from solutions. u Crowdsourcing: People voluntarily contribute their ideas or effort. Platforms include InnoCentive, Yet2.com, and TopCoder 6 3  12/13/24 Product Development Tools Design for Manufacture (DFM) Rapid Prototyping Computer-aided Techniques (CAD/CAM) Quality Function Deployment (QFD) 7 Quality Function Deployment – House of Quality QFD compares customer value of product attributes to engineering attributes & critera. 8 4  12/13/24 Lean Startup Methodology 1. Build: Develop a Minimum Viable Product (MVP) 2. Measure: Collect feedback from early adopters 3. Learn: Use data to improve the product and pivot if necessary. 9 Lean Startup Methodology Minimum Viable Product (MVP) u Definition: A version of a product with just enough features to gather validated learning about the market with minimal effort. 10 5  12/13/24 Benefits of Lean Startup Companies that successfully used the Lean u Reduces waste Startup approach: u Accelerates time-to-market u Increases adaptability to customer u Dropbox - started life as MVP in the form of needs a 3-minute screencast showing consumers what Dropbox could do u Encourages innovation u Airbnb – robust customer feedback, scaled successes u Zappos – tested online shoe sales by mocking up initial MVP website 11 Diffusion of Innovation Barriers to Innovation Adoption u Economic – personal costs versus social benefits, access to information, insufficient incentives u Behavioral – priorities, motivations, rationality, inertia, propensity for change or risk u Organizational – goals, routines, power and influence, culture and stakeholders u Structural – infrastructure, sunk costs, governance. 12 6  12/13/24 Diffusion of Innovation In predicting the rate of adoption of an innovation, five factors explain 49–87% of the variance: u Relative Advantage u Compatibility u Complexity u Trialability u Observability 13 Innovation & Entrepreneurship CH. 13 - CREATING NEW VENTURES 14 7  12/13/24 New Business Application Growth is strong but: 30% fail in two years 50% fail in five years 30% survive 10 years 25 % survive 15 year source US SBA 15 Motives for starting new ventures u Lifestyle entrepreneurs Seek independence & self-employment, most common, Contribute little to overall employment or societal wealth u Growth entrepreneurs Measure success in terms of wealth & power Typically,in more conservative sectors (retail, property, commodities) u Technology entrepreneurs Education & experience major factors in success Silicon Valley/Route 128 u Social entrepreneurs Driven by a desire to address or change a social problem 16 8  12/13/24 Stages in the New Venture Process u Opportunity Assessment generating, evaluating and refining the business concept. u Developing your Business Model and the structure of the venture. u Find the Resources & Funding needed to launch– including expert support and potential partnerships. u Launch your Venture – create value from the business. 17 Fundamental drivers of opportunities u Economic factors, e.g. changes in disposable income. u Technological developments – which may reduce (or increase) barriers to entry. u Demographic trends, e.g. the aging population, more leisure time. u Regulatory changes, e.g. environmental requirements, health and safety. 18 9  12/13/24 I. Assessing Opportunities Potential Users u Numbers, Numbers who has numbers? u How many people are affected by the problem? u What are their ages? Gender? Income? Profession? u Where do they live? Work? u What is their education level? u Numbers are critical in pitching your venture concept. 19 II. Developing your Business Model Remember: u The purpose of a business model is to provide a clear representation of where and how a company creates value, and how that value can be captured. 20 10  12/13/24 Developing your Business ModeI u The Business Model you choose is dependent on your: u Value Proposition u Customer-base/Target Market u Pricing Strategy u Cost Structure u Key Resources & Activities u Vision for Business 21 Developing your Business ModeI u Choice of Business Model is dependent on market, resources and venture goals u Freemium Model: Offers basic services for free while charging for premium features. This is popular in software and app industries. u Subscription Model: Customers pay a recurring fee (monthly or annually) for access to a product or service. This is common in SaaS (Software as a Service) and media streaming. u Marketplace Model: Connects buyers and sellers on a single platform, taking a commission on transactions (e.g., Etsy, Airbnb). u E-commerce: Selling products directly to consumers online. This can be B2C or B2B. u Direct Sales: Selling products directly to consumers, often through personal relationships or networking. 22 11  12/13/24 III. Finding Resources Non-Equity Financing u Bootstrapping u Debt:Personal & Banks u Grants u Accelerators & Competitions u Crowd funding Equity Financing u Angel Investor u Venture Capital u Initial Public Offering 23 III. Credibility: What Do Investors Look For? u Management Team u Market u Competition u Product/Technology u Business Model & Forecast 24 12  12/13/24 II. Resources: Personal Debt u Founder & Family u Provides limited funds ($100K - $200K) u Potential Financial Ruin u Obligation to Founder & Family, Payback & Interest © 2007 Steven F. Tello. All rights reserved. 25 II. Resources: Grants u Government or Foundation Funding u SBIR - Small Business Innovation Research u STTR - Small Business Technology Transfer Research u Proof of Concept ($100K), Development ($1M) u http://grants.nih.gov/grants/funding/sbirsttr_programs.htm u Business Plan Competitions u University Venture Forums, MTTC, Kauffman Foundation u http://eventuring.org u No Interest, No Payback, No Equity Interest 26 13  12/13/24 II. Resources: Equity Financing u Sell a Share of Your Venture u Stock in exchange for Cash, Cash provides Capital u Stockholder has Ownership Interest, Founder loses a measure of Control u Who Provides Equity Financing u Founder, Friends, Family & Fools u Angel Investor - $25K to $200K, Interest & Profit u Angel Groups/Syndicates - Pool resources, $1M to $2M u Venture Capitalists (VC) - Significant Investment for Significant Return (10X or greater) u Strategic Partners - partner with larger company for equity investment (5-25%). u Public (Initial Public Offering) - After company is established, history of revenue and profits 27 Innovation & Entrepreneurship CH. 17 - BUSINESS MODEL INNOVATION 28 14  12/13/24 What is a Business Model? u The purpose of a business model is to provide a clear representation of where and how a company creates value and how that value can be captured. 29 What is Value (Customer Value)? u Value is determined by customers u Different customer segments may value a a product, service or offering differently u A Business Model demonstrates where and how value is created and captured 30 15  12/13/24 Key Questions about Value u What is valued? Value Proposition u Who values this? Target Market u Who helps deliver value? Suppliers u How do we deliver value? Activities u How much is this worth Representation of Value 31 Business Model Innovation u Business model ‘innovation’ is about creating new models or changing existing ones to maximize the value created and return it to the organization which created it u Can you share an example of a Business Model Innovation? 32 16  12/13/24 Business Model Innovation Old Model Internet-enabled Model Airline & Travel Booking with a Booking online directly with airline or Travel Agent through a travel website Encyclopedias were once expert Wikipedia & online open-source driven, printed on paper, sold options have replaced most door-to-door encyclopedias Broadcast News & Journalism Online journalism, Opinion & were once professional trained, Entertainment “News”, no credential print and broadcast studios required Retail Shopping took place in a Online & direct to consumers physical store, or mail order w/a paper catalog 33 Why use Business Models? u Provide a clear representation of where and how value is created and can be captured. u Provide a roadmap for how an innovation can create value – it won’t just happen, it needs a framework. u Provide a way of sharing the idea with others – makes the business vision explicit. Helpful with potential investors and for product development teams. u Provide a checklist of areas to consider in making sure the idea and the route to creating value with it is well thought out. 34 17  12/13/24 Innovation & Entrepreneurship BUSINESS MODEL CANVAS 35 Business Model Canvas u A framework for exploring your business model u Value proposition in the center u Customers on the right, Key Partners on the left u Cost Structure & Revenue Streams on the bottom 36 18  12/13/24 How will you use the business model canvas? A. Articulate the Value Proposition and its relationship to Customer Segments B. Identify Key Partners, Activities and Resources & their relationship to the Value Proposition C. Identify the Cost Structure & Revenue Streams the Business Model is based upon D. Provide a “Big Picture” view of your organization 37 1 Customer Segments Mass market u Firms focus on one large group of customers with broadly similar needs and problems. Niche market u Firms cater to specific, specialized Customer Segments. The Value Propositions, Distribution Channels, and Customer Relationships are all tailored to the specific requirements of a niche market. Segmented u Firms segment a market into a few segments with slightly different needs and problems. Firms offer each segment slightly different Value Propositions. Diversified u Firms serve two (or more) unrelated Customer Segments with very different needs and problems. Firms need to offer different segments with different Value Propositions. Multi-sided markets u Some organizations serve two or more interdependent Customer Segments. Both segments are required to make the business model work. A credit card company, for example, needs a large base of credit card holders and a large base of merchants who accept those credit cards 38 19  12/13/24 2 Value Propositions The Value Propositions Building Block describes the bundle of benefits that a company offers customers through its products and services 39 Value Propositions have different attributes or customer appeal ATTRIBUTE PURPOSE Accessibility Making products and services available to customers Brand/Status Signifying taste, wealth, and status Convenience Making things more convenient or easier to use Cost Reduction Helping customers reduce costs Customization Satisfying the specific needs of individual customers or segments Design Offering simple and emotional design "Job-to-be-done" Helping a customer get certain jobs done Newness Satisfying a new set of needs that customers didn't perceive Performance Improving product or service performance Price Offering similar value at a lower price Risk Reduction Reducing the risks customers incur when purchasing or using 40 20  12/13/24 3 Customer Relationships The Customer Relationships Building Block describes the types of relationships a company establishes with specific Customer Segments 41 3 Customer Relationships Personal Assistance The customer communicates with a real customer representative Dedicated Personal Assistance Dedicating a customer representative specifically to an individual client Self-service Company provides the tools for customers to help themselves. Automated services More sophisticated form of customer self-service with automated processes and personal profiles Communities Companies create communities to engage and connect customers Co-creation Companies co-create value with customers. 42 21  12/13/24 5 Revenue Streams The Revenue Streams Building Block represents the cash a company generates from each Customer Segment (costs must be subtracted from revenues to create earnings) 43 5 Revenue Streams 4 3 Renting/Leasing 5 Subscription fees Licensing 2 6 Usage fee Brokerage fees 1 7 Asset sale Advertising Business Model may use multiple Revenue Streams: 1. Transaction revenues resulting from one-time customer payments; 2. Recurring revenues resulting from ongoing payments. 44 22  12/13/24 45 Innovation & Entrepreneurship CH. 10 - LEADERSHIP, TEAMS & CLIMATE 46 23  12/13/24 Leadership - Individual Successful Ventures & Innovative Companies need Teams - Collective all three! Climate 47 Shared Vision Customer Appropriate Orientation Structure Components of the Innovative Organization Company Creative Key Climate Roles Cross-Org Effective Engagement Teamwork 48 24  12/13/24 Characteristics of Innovators & Entrepreneurs u Passionately seek to identify new opportunities, and ways to profit from change and disruption u Pursue opportunities with discipline and focus on a limited number of projects u Focus on Action and Execution u Involve and energize networks of relationships and resources 49 Cognitive characteristics needed by Entrepreneurial Leaders u Information acquisition and dissemination. Ability to capture information from a wide range of sources, requiring attention and perception. u Intelligence. Ability and capability to interpret, process and manipulate information. u Sense making Giving meaning to information. u Unlearning Reducing or eliminating existing routines or behaviours u Implementation and improvisation Autonomous behaviour, experimentation, reflection and action 50 25  12/13/24 Entrepreneurial Leadership u Strong achievement drive, sensible risk-taking u High degrees of enthusiasm and creativity u Tendency to act quickly when opportunity arises u Constant hurry combined with impatience u Visionary perspective u Dislike of hierarchy and bureaucracy u Preference for dealing with external customers u Eye on the future 12/13/24 4 - 51 u Task-oriented & Charismatic 51 High performing teams Characteristics: a clear, common and elevating goal; results-driven structure; competent team members; unified commitment. Collaborative climate: standards of excellence; external support and recognition; principled leadership. 52 26  12/13/24 Key factors in High Performance Teams Key elements in effective high-performance team working include: clearly defined tasks and objectives; effective team leadership; good balance of team roles and match to individual behavioral style; effective conflict resolution mechanisms within the group; continuing liaison with external organization. 53 3 Simple Virtues Patrick Lencioni 54 27  12/13/24 55 56 28  12/13/24 57 High performing team Appropriate use of the team: participation in decision making; team spirit; embracing appropriate change. 58 29  12/13/24 ‘Tripwires’ undermining team effectiveness group versus team; ends versus means; structured freedom; support structures and systems; assumed competence. 59 Climate factors influencing innovation Source: Derived for Scott Isaksen and Joe Tidd (2006) Meeting the Innovation Challenge (Wiley). 60 30