Entrepreneurship & New Business Development (Technology) PDF

(Technology) Entrepreneurship & New Business Development Dr. Jonas Debrulle Associate Professor of Management 1  Addendum: Pitching a business At the end of this part, you should be able to: Adequately pre...

(Technology) Entrepreneurship & New Business Development Dr. Jonas Debrulle Associate Professor of Management 1  Addendum: Pitching a business At the end of this part, you should be able to: Adequately present a business opportunity and project ENTREPRENEURSHIP 2 What to do before a business plan is written? 3  Some techniques for pitching – How? Start by telling a personal story or anecdote Show passion through hand gestures and excitement in voice Do not bring any paper notes Involve the audience yet be careful when asking questions Demonstrate a prototype of the product 4  Some techniques for pitching – What? Focus on those parts of the business that are the most important to the audience Explain the problem to be solved or shed light on the gap to be filled ‒ What is the issue? ‒ Why are customers not satisfied with current solutions? ‒ Validate the problem or gap via research and numbers Present the new business as the solution to the identified problem or gap ‒ Describe how the offered solution is distinctly different from all others ‒ Describe the degree to which the new business makes your customers’ lives richer or more efficient or effective ‒ Talk about how barriers to entry can be erected (if appropriate) 5  Some techniques for pitching – What? Articulate the specific target market ‒ Illustrate, if possible, the size of the target market ‒ Be prepared to defend your numbers Talk about the technology or unique aspects of your product or service Show pictures or descriptions of the product (prototype) Discuss the direct, indirect and future competitors ‒ Make use of a competitive analysis grid and to (graphically) represent any advantages you might have over your competitors 6  Some techniques for pitching – What? Describe the overall marketing strategy ‒ Shed light on pricing ‒ Address the promotions mix, if appropriate ▪ How will you make customers aware of the product or service? ▪ How do you plan to reach them? Describe your existing management team ‒ Shed light on the team members’ backgrounds and expertise that are key to the new business ‒ Discuss the current skill gaps and how you plan to fill them (skills map) 7  Some techniques for pitching – What? Show a summary of the income projections and cash flow projections for the first 3 to 5 years ‒ Make use of a sources and uses of funds statement to introduce the financing sought Highlight the milestones achieved to date Summarize the strongest points about the new business Summarize the strongest points about the management team Solicit feedback 8  Addendum: Preparing for growth At the end of this part, you should be able to: Describe how businesses can properly prepare for growth Explain the most important factors for organizations to focus on during each stage ENTREPRENEURSHIP of growth Address the managerial capacity problem Discuss the growth challenges imposed by adverse selection and moral hazard Discuss day-to-day challenges of growing a business 9  Growth not always a good thing Problems with growth: ‒ Not all businesses have the potential to grow aggressively ‒ A business can grow too fast ‒ Business success doesn’t always scale Hence, businesses should establish growth-related plans 10 Growth not always a good thing 11  Reasons for pursuing growth Economies of scale Economies of scope Establishment of market leadership Influence, power and survivability ‒ Larger businesses usually have more influence and power Accommodate for the growth of key customers Attract and retain key employees 12  Managing growth It’s important for a business owner to know the stages of growth along with the unique opportunities and challenges that each stage entails 13  Stages of growth Introduction ‒ Start-up phase where a business determines what its core strengths and capabilities are ‒ The main challenge is to make sure the initial product or service is right 14  Stages of growth Early growth ‒ Generally characterized by increasing sales and heightened complexity ‒ Two important things must happen for a business to be successful in this stage: ▪ The founder(s) must start working “on the business” rather than “in the business” ▪ Increased formalization takes place, and the business must start developing policies and procedures 15  Stages of growth Continuous growth ‒ The need for structure and formalization increases ‒ Some of the toughest decisions must be taken in this stage: ▪ One is whether the owner and current management team have the experience and abilities to take the business any further 16  Stages of growth Maturity ‒ Growth stalls ‒ The business is typically more focused on managing efficiently than developing new products or services ‒ Well-managed businesses often look for partnering opportunities or opportunities for acquisitions or licensing deals to breath new life into the company 17  Stages of growth Decline ‒ It is not inevitable that a business enters the decline stage ‒ A business’ ability to avoid decline hinges on the strength of its leadership and its capacity to adapt over time 18  Challenges of growth Managerial capacity Moral hazard Adverse selection Day-to-day challenges 19  Challenges of growth A business can’t quickly increase its managerial services to take advantage of new market, product or service ideas because: ‒ It is expensive to hire new employees ‒ It takes time for new employees to be socialized into the culture of the business ‒ It takes time for new employees to acquire business-specific skills When a business’ managerial resources are insufficient to take advantage of its new ideas, the subsequent bottleneck is referred to as the managerial capacity problem 20  Challenges of growth Adverse selection means that as the number of employees a business needs increases, it becomes increasingly difficult for the business to find the right employees, place them in appropriate positions and provide adequate supervision Moral hazard means that as a business grows and adds personnel, the new employees typically do not have the same ownership incentives as the original founders, so they may not be as motivated to put in long hours (and may even try to avoid hard work) 21  Challenges of growth Day-to-day challenges ‒ Cash flow management ▪ A business requires an increasing amount of cash as it grows ‒ Price stability ▪ If growth comes at the expense of a competitor’s market share, a price war could ensue ‒ Quality control ▪ An increase in business activities can result in quality control issues if a business is not able to increase its resources to handle the extra work ‒ Capital constraints ▪ Ever-present problem for growing businesses 22 Addendum: Strategies for business growth At the end of this part, you should be able to: Explain the differences between internal growth strategies and external growth strategies Differentiate joint ventures from mergers ENTREPRENEURSHIP and acquisitions 23  Internal and external growth strategies Internal growth strategies ‒ Involve efforts taken within the business itself, such as new product development and international expansion External growth strategies ‒ Rely on establishing relationships with third parties, such as mergers, acquisitions, strategic alliances and joint ventures 24 Internal and external growth strategies 25  Advantages and disadvantages of internal growth Advantages ‒ Incremental, even-paced growth ‒ Provides maximum control ‒ Preserves organizational culture Disadvantages ‒ Slow form of growth ‒ Requirement to develop new resources ‒ Investments can be difficult to recoup ‒ Adds to industry capacity 26 New product development 27  Other product-related strategies Improving an existing product or service ‒ Often a business can increase its revenues by simply increasing the quality of an existing product or service Increasing market penetration ‒ Growing the sales of a product or service through greater marketing efforts or through increased production capacity within known markets Extending product lines ‒ Making additional variations of a product or service Geographic expansion ‒ Growth via expanding to additional geographic locations 28  International expansion International new ventures or “born globals” are businesses that, from their inception, seek to derive significant competitive advantage selling products or services in multiple countries ‒ Although there is vast potential associated with selling overseas, it remains relatively complex Foreign market entry strategies: ‒ Exporting (direct or indirect) ‒ Licensing or franchising ‒ Joint ventures ‒ Wholly owned subsidiaries (M&A or greenfield) ‒ Turnkey projects 29  Advantages and disadvantages of external growth Advantages ‒ Reduces competition ‒ Quick access to new products or services and markets ‒ Economies of scale ‒ Diversification of business risk Disadvantages ‒ Incompatibility of top management ‒ Clash of corporate cultures ‒ Increased business complexity ‒ Antitrust implications 30 Mergers and acquisitions 31