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ENGINEERING THE HIGH TECH START UP

ENGINEERING THE HIGH TECH START UP

Fundamentals and theory

Volume I

CORY R.A. HALLAM AND WILLIAM FLANNERY

TECH START UP F undamentals and t heory V olume I CORY R.A. HALLAM AND WILLIAM

MOMENTUM PRESS, LLC, NEW YORK

Engineering the High Tech Start Up: Fundamentals and Theory, Volume I

Copyright © Momentum Press ® , LLC, 2018.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means— electronic, mechanical, photocopy, recording, or any other—except for brief quotations, not to exceed 400 words, without the prior permission of the publisher.

First published by Momentum Press ® , LLC 222 East 46th Street, New York, NY 10017 www.momentumpress.net

ISBN-13: 978-1-60650-554-0 (print) ISBN-13: 978-1-60650-555-7 (e-book)

Momentum Press Engineering Management Collection

Collection ISSN: 2376-4899 (print) Collection ISSN: 2376-4902 (electronic)

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10 9 8 7 6 5 4 3 2 1

Printed in the United States of America

abstract

Technological entrepreneurship has been a key driver of economic growth in developed countries, and will play an increasingly important role in developing countries. Successful entrepreneurial efforts will be dependent not so much upon the abilities of the engineer or skilled technical entre- preneur to solve a technical problem, but upon the startup team’s ability to traverse the myriad of problems they face in commercialization efforts. This two-volume set has been written primarily for engineers, tech- nicians and scientists who are contemplating the unknown but attractive world of technological entrepreneurship, a key driver of economic growth in developed countries and critical in stimulating growth in developing countries. The purpose is to prepare these professionals as members of teams focusing on commercializing new technology-based products. The material has also been used to introduce engineering students to the processes involved in technological entrepreneurship. Volume I provides a background of fundamentals and theory to pre- pare the reader for the venture launch. Topics include the entrepreneurial process, the venture team, developing and marketing high tech products, and launching the new venture. Volume II goes into detail in critical areas such as intellectual property protection, legal forms of organization, finan- cial projections, and business plan preparation and delivery. The primary emphasis is focused on creating lean and agile organizations capable of recognizing opportunities, quickly developing introductory products for small test markets to better define the opportunities, and using the results of those test markets to arrive at a product with wide acceptance capable of driving growth.

KEYWORDS

commercialization process, enrepreneurial process, entrepreurship, high tech startups, marketing high tech products, new product development, starting new ventures

contents

List of figures

ix

List of tabLes

xi

acknowLedgments

xiii

1 introduction

1

1.1 The Entrepreneurial Engineer

1

1.2 Successful Entrepreneurial Ventures

2

1.3 Engineering Entrepreneurship Opportunities

3

1.4 Creativity, Invention, and Innovation

3

1.5 Entrepreneurship and Commercialization

6

1.6 Why Study Entrepreneurship

7

1.7 Outline of the Book

8

2 the entrepreneurship process

11

2.1 Introduction

11

2.2 Traditional Commercialization Process

13

2.3 Entrepreneurship Process

16

2.4 Summary

25

3 the entrepreneuriaL team

27

3.1 Introduction

27

3.2 Stages of Growth

28

3.3 Knowledge Workers

29

3.4 Team Formation

33

3.5 Supporting Network

36

3.6 Leadership

42

3.7 Summary

43

4 marketing high-tech products

45

4.1 Introduction

45

4.2 Industry Analysis

45

viii C O nt E nt S

4.4 High-Tech Marketing Strategy

61

4.5 Summary

67

5 deveLoping high-tech products

71

5.1 Introduction

71

5.2 Characteristics of High-Tech Products

72

5.3 Technology Life Cycles (S Curves)

72

5.4 New Product Development Processes

76

5.5 Support for Product Development

83

5.6 Summary

88

6 Launching the venture

89

6.1 Introduction

89

6.2 Funding the Venture

89

6.3 Operating the Company

94

6.4 Exit Strategies

98

6.5 The Path Forward

103

appendix

105

bibLiography

109

about the authors

113

index

115

lIst oF FIgures

Figure 1.1.

The creative process.

4

Figure 1.2.

Invention versus innovation.

4

Figure 1.3.

Types of innovation.

6

Figure 2.1.

Product development process.

13

Figure 2.2.

Creating a successful technology venture.

15

Figure 2.3.

The entrepreneurship process.

16

Figure 2.4.

Entrepreneurship: An iterative process.

18

Figure 2.5.

Build-Measure-Learn feedback loop.

20

Figure 2.6.

Customer development process.

22

Figure 3.1. Knowledge and learning with a technology company.

33

Figure 3.2.

The entrepreneurial team’s support network.

37

Figure 4.1.

The computer industry.

46

Figure 4.2.

Industry life cycle.

48

Figure 4.3.

Porter’s Five Force Model.

50

Figure 4.4.

Diffusion of technologies across the “chasm.”

58

Figure 4.5.

Product positioning examples.

63

Figure 5.1.

Technology life cycle.

73

Figure 5.2.

Product life cycle.

74

Figure 5.3. Comparison of the product life cycle and industry life cycle.

75

Figure 5.4. Product and process changes required as function of type of technology and products.

78

Figure 5.5. Example of a traditional product development plan.

79

x

LiSt Of figuRES

Figure 5.7.

Stage gate development model.

82

Figure 5.8.

Agile development process.

83

Figure 6.1.

Startup funding dynamics.

91

Figure 6.2. Actual (dashed) versus planned (solid) cumulative earnings.

96

Figure 6.3. Average age of company-going public in the network and equipment industry.

102

lIst oF tables

Table 4.1. Characteristics of oligopolistic, segmented, and commodity markets

54

Table 4.2. Pricing strategies for segmented and oligopolistic markets

66

Table 5.1. Representative technologies in a firm’s value chain

86

Table 6.1.

Valuation techniques

92

Table 6.2.

Risk assessment for new venture

95

acknowledgments

We acknowledge and salute the great minds and personalities that have forged entrepreneurial paths. They have pushed new technologies to markets, and connected existing needs with technological capability to improve the human condition. We encourage you to explore the many excellent books that are available for expanded reading, and deeper dives into specific elements of the entrepreneurial process that we cover in our books.

CHAPtER 1

IntroductIon

It’s been widely reported that over 90 percent of all startups, including

high-tech ventures, fail. In spite of this statistic, entrepreneurship remains

a vibrant force in most economies, and tech startups continue to play an

important role in economic and quality-of-life growth. Presented with a wide variety of reasons for failure of a new venture, budding entrepreneurs find it difficult to draw any constructive conclusions that could guide them through the startup process. Not only would a list of reasons for failure be incomplete, it could also prove to be distracting, causing a focus on pre- venting failure rather than on designing an outstanding product or service with exceptional value for a customer. This book is written for engineers who desire to start their own com- panies and are looking for guidance in the entrepreneurial process. The goal of the book is to turn the engineer into an entrepreneurial engineer, an

individual who keeps one foot solidly planted in the engineering profes- sion while guiding the process of moving a product or service idea to the marketplace. The terms “entrepreneurial engineer” or “engineer entrepre- neur” are not oxymorons. Examples abound of engineers who have been highly successful as entrepreneurs, demonstrating that one does not have to forsake a career in engineering in order to become an entrepreneur. For those engineers who are members of a startup but are reluctant to stray far from the engineering discipline and take up the activities of the entrepre- neur, the goal of the book is to help them understand the entrepreneurial process as well as the way entrepreneurs think and the tools they use.

1.1 tHE EntREPREnEuRiAL EnginEER

Engineers and entrepreneurs have one key characteristic in common:

a high degree of motivation to proactively take action in solving prob-

lems or pursuing opportunities. This propensity to act is essential for any entrepreneurial endeavor. However, whereas engineers are trained to

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recognize a problem and apply scientific and engineering principles to solve that problem, entrepreneurs are skilled at recognizing opportunities and gathering the necessary resources to take advantage of opportuni- ties to launch new ventures. This difference in approach to problems and opportunities is a major cause of conflicts that often separate the engineer from the entrepreneur. There are other important differences between the two. Engineers are reluctant to accept failure in any form as an acceptable outcome. They tend to be uncomfortable with uncertainty, preferring precision and certainty in dealing with problems and approach problems in a highly organized project management manner, emphasizing schedules, milestones and deadlines, resources required, and budgets. Success, or performance, is measured in terms of the degree to which the ultimate product or service meets predetermined or desired specifications. Entrepreneurs, on the other hand, are calculated risk takers, comfort- able dealing with uncertainty. They recognize that failure is indeed a pos- sible outcome, but are willing to take action if the perceived rewards are high enough. In seeking a successful startup, they are concerned with the steps or stages required to commercialize the product or service. They recognize that the organized project management approach favored by the engineer is ineffective, and focus instead on whatever is required to develop and offer a product or service of significant value to a customer. In the high-tech environment, engineers are prone to failure unless they develop the ability to deal with the highly ambiguous and uncertain business world, whereas the entrepreneur is likely to fail without an understanding of the technology world. In reality, it is much easier for the engineer to learn the intricacies of entrepreneurship than it is for the entrepreneur to learn the details of the engineering world. The entrepreneurial engineer should be able to move easily between the rational world of the engineer and the uncertain, nonlinear world of new startups. For the engineer starting a small consulting firm, the transition can be relatively easy. For larger new ven- ture efforts, however, the engineer will most likely work in a dynamic team environment with diverse sets of individual skills and personalities, adding another level of complexity and uncertainty to the effort.

1.2 SuCCESSfuL EntREPREnEuRiAL VEntuRES

Successful new ventures have several characteristics in common. This book will focus on three characteristics or themes that will be carried throughout the remaining chapters. First, the product or services in a

intRODuCtiOn •  3

successful venture is proven to be ideal for the user or customer. Invari- ably this means that the founders have expended significant energy in identifying market needs and tailoring the product or service to meet those needs. Second, the entrepreneur is involved in every aspect of the successful startup. Starting a firm from scratch is a daunting task that goes well beyond designing a marketable product, but includes seeking nec- essary funding, researching potential markets, establishing manufactur- ing capabilities, and protecting the resulting intellectual properties. The entrepreneur cannot afford to delegate any of those tasks to others, but must develop, organize, and lead a compatible team capable of addressing these critical areas. Third, successful companies show consistent growth, beyond the initial market or customer base. The entrepreneur’s vision is essential in defining growth opportunities and communicating that vision to employees and stakeholders alike.

1.3 EnginEERing EntREPREnEuRSHiP OPPORtunitiES

Engineering entrepreneurship opportunities occur in many forms. Many engineers get started in entrepreneurship out of a desire to have more con- trol over their professional careers. Some start their own consulting firms after spending some time developing marketable skills while employed and gaining unique experience in larger organizations. Others start acci- dentally when a hobby or part-time avocation becomes time-consuming and they are forced to decide whether to drop the avocation or devote their total energies to their interests. Many entrepreneurial engineers are content to experience a slow but steady internal growth as sole proprietors, whereas others seek protection under the corporate umbrella, perhaps as a limited liability company (LLC) or S-corporation. At some time in their development, however, they will be forced to decide whether to remain small with a limited staff, thus maintaining complete control over the entity, or expand significantly to meet a larger market. Finally, they will face the challenge of an “exit strategy,” that is, whether to plan for the company’s long-term success as a “stand-alone” entity, or sell their company to some other firm.

1.4 CREAti V it Y, in VE nti O n , A n D inn OVAti O n

Recognizing opportunity and taking advantage of the recognized opportu- nity are two completely different mental states. Recognizing opportunities

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involves an understanding of the differences between creativity, invention, and innovation. Taking advantage of opportunities involves an under- standing of entrepreneurship.

1.4.1 CREATIVITY

Creativity is recognized as the ability to bring something new into exis- tence. There is a general agreement that creativity evolves through a process from idea germination to verification, involving some conscious effort to uncover new knowledge to support the idea as well as a period of incubation in which the gathered information and new knowledge is assimilated. Hopefully it concludes with the recognition or realization that the idea has merit, and is subsequently verified through some application or test (Figure 1.1).

1.4.2 INVENTION AND INNOVATION

Recognition that an idea is feasible does not suggest or imply that an invention or innovation has occurred. Invention is a process whereby something new is created, even though it may not have any immediate social or economic value, whereas innovation is the transformation of an idea or resource into a useful application (Figure 1.2). The distinction

Idea Germination The seeding stage of a new idea Recognition
Idea
Germination
The seeding
stage of a new
idea
Recognition

Preparation

Incubation

Illumination

Verification

Conscious

Subconscious

Recognition of

Application or

search for new

assimilation of

idea as being

test to prove

knowledge

information

feasible

idea has value

Rationalization

Recognition

Realization

Recognition

Figure 1.1. The creative process (adapted from Holt 1992).

Figure 1.1. The creative process (adapted from Holt 1992). 1% of effort 99% of effort Invention

1% of effort

The creative process (adapted from Holt 1992). 1% of effort 99% of effort Invention Innovatio n

99% of effort

process (adapted from Holt 1992). 1% of effort 99% of effort Invention Innovatio n The creation
Invention Innovatio n
Invention
Innovatio n
The creation of something new Results in new knowledge The transformation of an idea into
The creation of
something new
Results in new
knowledge
The transformation
of an idea into a
Results in new
products, processes,
or services
useful application

Figure 1.2. Invention versus innovation (adapted from Holt 1992).

intRODuCtiOn •  5

between invention and innovation may appear subtle, but is important for entrepreneurship. Thomas Edison was a prolific inventor with over 1,000 patents, but only a relatively few resulted in devices of social or economic value, most notably the electric light bulb and the phonograph. Edison’s comment that “Genius is one percent inspiration and ninety-nine percent perspiration” is useful in pointing out the difference in effort between an invention and an innovation. Of the total effort required to transform an idea to a new product, process, or service, as little as 1 percent could be expended in the invention phase while up to 99 percent of the total effort may be required to commercialize the invention (Figure 1.2). Whereas recognizing an invention only requires a demonstration that the created device “works,” an innovation cannot be claimed until the item or process has gone through four development steps, including technology, business, strategy, and economic. First, the technology must be shown to be feasible, have attractive performance features, and manufacturable. Second, the technology must be developed to the point that it demonstrates business value through its marketability to a customer group. Third, an effective strategy must be articulated and implemented for the marketing of that product. Finally, the technology innovation must demonstrate favorable economic returns to the developer.

1.4.3 TYPES OF INNOVATION

There are several ways of categorizing the types of innovations typically encountered in the technology world. Types of innovations can be catego- rized by examining the degree of changes in two key components of inno- vative products: the degree of change of basic design concepts present in the new technology; and the degree of change in the linkages connecting separate modules of the product (Figure 1.3). Comparing a new technol- ogy with its predecessor, we might find the basic design concepts rela- tively unchanged (reinforced) or, conversely, the basic design concepts radically different (overturned). Similarly, the linkages between modules of the product may be basically the same (unchanged) or dramatically altered (changed) in one way or another. Figure 1.3 illustrates the relationships between these two fundamental components. Incremental innovations are found in which basic design con- cepts and linkages between product modules remain relatively unchanged, that is, relatively minor changes are made from existing practices. Radical or disruptive innovations result when both basic design concepts and link- ages between modules are dramatically changed, resulting in an innova- tion that is very new and different from previous solutions. Architectural

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Linkages

between

modules

Unchanged

Changed

Figure 1.3. Types of innovation.

Basic design

concepts

Reinforced

Overturned

Incremental

Architectural

Component or

modular

Radical or

disruptive

innovations occur when the linkages between modules are changed but the basic design concepts are unchanged, resulting in changes in the overall design of a system or the way its components interact with one another. Finally, component or modular innovations occur when changes are made to the basic design concepts of a component, but linkages between mod- ules are unchanged, resulting in innovation to one or more components that do not significantly affect the overall configuration of the system.

1.5 EntREPREnEuRSHiP AnD COMMERCiALiZAtiOn

The type of innovation dramatically impacts the degree of difficulty faced by the entrepreneurial engineer in commercializing an innovation. An incremental innovation could be relatively simple for an engineer famil- iar with the technology and product to undertake individually, whereas a radical innovation could require the talents of a team of engineers to solve the myriad of complex technical problems encountered. Without the need to commercialize a radical innovation, however, engineers are well trained to tackle extremely complex technical problems encountered, for example, in the manned space program. In this situation, technology development emerges as the most challenging of the four development steps required for an effective innovation. Business, strategy, and eco- nomic development, while still important, are generally constrained to

intRODuCtiOn •  7

the needs or requirements of a single customer, typically the government. In such an environment, business development normally focuses on the creation of an organization capable of managing technology develop- ment, strategy development is concerned with planning for the success of the overall mission for which the technology is being developed, and economic development is primarily involved with the procurement and management of the funds required over the projected time of the technol- ogy development. However, if one adds the requirement that the innovation be suc- cessfully commercialized, the primary motivation of the entrepreneurial engineer, the technology, business, strategy, and economic development environments become much more complex, dynamic, and nonlinear. The engineering management tools and techniques, such as project and man- ufacturing management methods, quickly become less important to suc- cessful commercialization than marketing, financial, and legal concerns. Understandably, management of the development and commercialization effort can become overwhelming for the engineer.

1.6 WHY StuDY EntREPREnEuRSHiP

Entrepreneurship is a discipline requiring completely different knowl- edge and training than normally experienced by the engineer. It has been described as a full contact sport, requiring hands-on experience and active involvement by the entrepreneur. Although it may be easier to teach an engineer about entrepreneurship rather than teach an entrepreneur to be an engineer, there is still an extensive learning period involved. If the engineer is involved in a sole proprietorship offering a special- ized product or service to a small customer base, it is possible for the engi- neer to self-learn “on the job.” Still, even the smallest firm will find that accounting and legal services are essential. As the company grows, the engineer will find that required knowledge base of the engineer-manager increases. The initial resources required are typically modest, primarily only those assets required to support the engineer and other knowledge workers. Financial management concerns are primarily cash flow, with cash coming initially from the owner’s original investment and from oper- ations. Management problems become more complex with the addition of staff while marketing and product development become critical as original products or services become outdated or increase in demand taxes the firm’s resources. In short, success is dependent upon understanding and managing the process well—the purpose of this book!

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1.7 OutLinE Of tHE BOOK

This book is organized into two volumes to take the budding entrepre- neurial engineer through the various stages of creating the new venture. Volume I is focused on high-level entrepreneurial theories, while volume II is more activity based, guiding you through the tech start up process. In Volume I, Chapter 2 begins by providing an overview of the entrepreneur- ship process, that is, the process through which an entrepreneur transforms an idea into a commercial reality, most likely through the creation of a new venture. The chapter highlights key differences between traditional means of developing products or services and the entrepreneurship process of identifying customers and creating products of value for those customers. The following three chapters elaborate on the entrepreneurship process by presenting three essential components of an effective process:

team formation (Chapter 3), marketing high-tech products (Chapter 4), and the product development process (Chapter 5). Chapter 3 covers the critical issue of managing a new venture team composed of highly motivated individuals representing a range of specialized disciplines and interests. Chapter 4 discusses marketing high-tech products, distin- guishing between the various market types and describing the nature of high-tech markets. Chapter 5 presents several models for developing the high technology product, emphasizing the need for speed and agility in the development process. Finally, Chapter 6 ends Volume I by covering major elements associated with the launch, operation, and exit of the high tech venture. Volume II contains six chapters geared toward activity-based learning and technology entrepreneurship. Once an opportunity has been identi- fied and assessed, a strategy for capitalizing on the opportunity needs to be developed. Chapter 1 discusses the means for developing and testing the business concept, that is, the description of the product or service to be developed, the identification of the benefits to the customer, and the strategy for distributing the product or service to the customer. Chapter 2 follows by showing the means by which the new venture team can add to the business concept by creating the business model canvas, which cap- tures the basic elements of the proposed enterprise including the value proposition, customer segments, channels, customer relationships, reve- nue streams, key resources, key activities, key partnerships, and cost struc- ture. Protecting the firm’s intellectual property, be it patents, trademarks, copyrights, or trade secrets, is covered in Chapter 3. An introduction to entrepreneurial finance is provided in Chapter 4, followed by an overview of the legal aspects of company formation in Chapter 5. Finally, Chapter 6

intRODuCtiOn •  9

provides an overview of the business plan, slide deck, and pitch, key tools that summarize your work in these two volumes, and sets you on the path to venture creation.

PRACtiCE

EXERCISE 1.1

ASSESS YOURSELF

Assessing your skills and desires is important before starting this technopre- neur journey. In this exercise ask yourself the ten questions below. Rate your- self on each question from highly negative (No) to highly positive (Yes), with neutral in the middle (). Add up the totals for each column and sum your overall score. A highly negative score suggests you may not be ready for this, whereas a highly positive score suggests you are ready to go. We recommend you complete the book and all exercises and try this first exercise again—you might be surprised to find some of your answers change.

SELF ASSESSMENT QUESTIONS

No

         

Yes

(-3)

(-2)

(-1)

(0)

(+1)

(+2)

(+3)

1) I like to win?

             

2) I can handle stress?

             

3) I do not give up easily?

             

4) I can create a vision for the future?

             

5) I can convince oth- ers of my vision?

             

6) I can build and lead a team?

             

7) I deal well with ambiguity and the unknown?

             

8) I am a fast learner?

             

9) I can accept a good enough solution versus the perfect solution?

             

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SELF ASSESSMENT QUESTIONS

No

         

Yes

(-3)

(-2)

(-1)

(0)

(+1)

(+2)

(+3)

10) I can prioritize and focus myself and others?

             

Total

             

EXERCISE 1.2

CREATE MANTRA

 

Guy Kawasaki promotes the idea of creating a mantra. In its dictionary definition, a mantra is a word or sound repeated to aid concentra- tion in meditation. For your start-up venture, the idea is you want to create a mantra that generates meaning and focus, and directs your scarcest resources—your time and energy. He gives several examples for the following companies:

He gives several examples for the following companies: • Federal Express: “Peace of mind” • Nike:

• Federal Express: “Peace of mind”

• Nike: “Authentic athletic performance”

• Target: “Democratize design”

• Mary Kay: “Enriching women’s lives”

The mantra is not the slogan, but a saying that anyone involved in the company or dealing with the company would easily associate with your reason for existing as a venture. In this exercise take the first cut at creat- ing a 3 to 5 word mantra for your venture idea. It might change over time as you evolve and pivot, but should give you clarity and focus in working through the planning and launch process.

MY VENTURE MANTRA:

Index

A

Advisors cash compensation, 39–40 entrepreneur, 39 selection of, 38, 39 time expectations, 39 Agile development process high-tech products, 82 minimally viable product development, 82 product development, 82–83 Architectural innovations, 5–6, 73

B

Bargaining power of customers, 51 of suppliers, 51–52 Barriers to entry, 55 Bayh-Dole Act, 41 Board of advisors, 38–40 Board of directors closely held corporations, 37 fiduciary responsibility, 36–37 independent directors, 38 privately held corporations, 36 professional investor directors, 37, 38 publically traded corporations, 36 Breakthrough product, 77 Build-Measure-Learn feedback loop, 20 Business model, 15, 16 Buyer power, 51

C

Cash flow, 28, 97 Chasm, 35, 58 Commodity, 54 Commodity market, 56 Company building, 24–25 Compensation, 38–40 Competitive uncertainty, 57 Component innovations, 6 Computer industry, 46, 47 Conceptual technology, 77 Consultants, 40 Consumer pricing, 66

Cost-benefit analysis, 47 Creative tension, 32

Creativity, 4 Customer creation, 24 development model, 22–23 discovery, 23 validation, 23–24

D

Degree of rivalry, 49–50 Demand-oriented pricing, 66

Department of Defense (DOD),

41

Derivative product, 77

Differentiated product, 48–49, 50,

56

Disruptive innovations, 5, 72 Disruptive product, 76 Disruptive technology, 35, 48, 77

116

i n DEX

Dominant design, 75–76 Dominant technology, 48

E

Early adopters, 57–58 Early majority, 57, 58 Economic environment, 52–53 Emergent industries, 57 Entrepreneur courage and intelligence, 103 engineers, 1–3 successful new ventures, 2–3 support network, 103 time management, 103 Entrepreneurial process entrepreneurship agile and lean process, 19–21 company-building, 24–25 customer creation, 24 customer discovery, 23 customer identification and capture, 21–23 customer validation, 23–24 iterative process, 17–19 value proposition, 16–17 iterative process, 17–19 skills, 12

successful entrepreneurs, 11–12 traditional commercialization process business model failures,

14–15

business plan, 14 development and marketing,

14

discovery and product concept, 14 successful technology venture, 15 value proposition, 16–17 Entrepreneurial team formation of, 33–36 knowledge workers, 29–33 leadership, 42–43

stages of growth, 28–29 supporting network advisors and mentors, 38–40 board of directors, 36–38 consultants, 40 government resources, 41–42 independent contractors, 40 research institutions, 41 service providers, 40–41 strategic partners, 41 Entrepreneurship agile and lean process, 19–21 and commercialization, 6–7 company-building, 24–25 creativity, 4 customer creation, 24 customer discovery, 23 customer identification and capture, 21–23 customer validation, 23–24 invention and innovation, 4–6 iterative process, 17–19 value proposition, 16–17 Exit strategies acquisition, 99–100 IPO, 101–103 licensing, 99 operating, 100–101

F

Feasible technology, 77

Fiduciary responsibility, 36, 39 Film-making approach, 30–31 Financial management, 7 Financing documents, 94 Five Force model bargaining power of customers,

51

bargaining power of suppliers,

51–52

degree of rivalry, 49–50 substitute products, 51 threat of new entries, 50–51 Funding sources, 89–92

i

n DEX

117

G

Government resources, 41–42 Growing industries, 57 Growth high-tech companies, 29 initial growth, 28 rapid growth, 28 stable growth, 29

startup stage, 28

H

High-tech markets competitive uncertainty, 57 emergent industries, 57

growing and mature industries,

57

marketing uncertainty, 56 technological uncertainty, 57 High-tech products characteristics, 72 marketing high-tech markets, 56–57 industry analysis, 45–54 market types, 54–56 product positioning, 62–63 promotion, 63–65 purchasing decisions, 59–61

relationship marketing, 59 store locations, 65 technology diffusion and market adoption, 57–58 transaction marketing, 58–59 well-thought-out marketing plan, 61–62 new product development lean and agile development process, 82–83 product vs. process development, 76–79 stage gate development process, 81–82 support, 84–87 traditional models, 79–80 waterfall development process, 80–81

technology life cycles architectural innovations, 73 dominant designs, 75–76 dramatic improvements,

73–74

materials innovations, 73 performance improvement, 72, 73 product/industry life cycles,

74–75

propeller technology, 72 transistor performance, 73

I

Incremental innovations, 5, 6, 75,

77

Independent contractors, 40 Independent directors, 38 Industry analysis computer industry, 46

economic cost–benefit analyses,

47

Five Force Model, 49–52 industry changes, 46–47 industry life-cycle, 47–49 peripheral equipment manufacturing, 47

PEST model, 52–53 political decisions, 47 SWOT model, 54 technology drivers, 47 Industry life-cycle, 47–49 Initial growth, 28 Innovation, 4–5 Innovation context, 60–61 Invention, 4–5 Iteration, 12, 17–19, 83

K

Knowledge workers approval and appreciation, 31 competence and satisfaction, 31 creative tension, 32 film-making approach, 30–31 learning organization, 32–33

118

i n DEX

long-term career self-interest, 32 marketing and organizational skills, 30 problem-solving scenarios,

29–30

professionalism, 31 successful technology-based venture, 20 tensions and conflicts, 30

L

Laggards, 57 Late majority, 57 Launch. See Venture launching Leadership, 42–43 Lean development process,

82–83

Lean startup, 19 Learning organization, 32–33 Licensing, 99 Loss-leader pricing, 66

product positioning, 62–63 promotion, 63–65 store locations, 65 uncertainty, 56 Marketing mix, 62

Maslow’s hierarchal need theory,

31

Mature industry, 57 Mature technology, 77–78

Medical device approval process,

39

Mentors, 39–40 Milestones-assumptions-tasks (MAT), 79, 88 Minimally viable product (MVP) development, 82 Modular innovations, 6 Moore’s law, 73 Motivation, 31

N

M

National Aeronautics and Space Administration (NASA), 41

M

New product development (NPD)

Managerial leaders, 42 Managing risk, 95

lean and agile development process, 82–83

Market

analysis high-tech markets, 56–57 market types, 54–56 purchasing decisions, 59–61 relationship marketing, 59 technology diffusion and market adoption, 57–58

transaction marketing, 58–59 characteristics, 54–55 commodity markets, 56 oligopolistic markets, 55 pricing strategies, 65–67 pull, 18 segmented markets, 55–56 segments, 58

Marketing

plan

elements, 61–62

product vs. process development,

76–79

stage gate development process,

81–82

support consequences of lack of, 84 innovation strategy, 87 resources and commitment,

86–87

screening model, 84–85 successful NPD, 84 team culture embracing innovation, 87 traditional models, 79–80 waterfall development process,

80–81

New venture characteristics, 2–3 risk assessment, 95

i

n DEX

119

O

Oligopolistic markets characteristics, 54–55 pricing strategies, 66–67 Opportunities, 3

P

Penetration pricing, 66 Peripheral equipment manufacturing, 47 PEST analysis, 49 PEST model economic environment, 52–53 political environment, 52 social environment, 53 technology environment, 53 Pivot, 22 Platform product, 77 Political environment, 52 Porter’s five force model, 49–52 Price, 65 Pricing strategies oligopolistic markets, 66–67 segmented markets, 66 Process development, 76–79 Process innovation, 76 Product development resources, 86–87 support consequences of lack of, 84 innovation strategy, 87 resources and commitment,

Proven technology, 77 Purchasing decisions compatibility, 60 cost/benefit advantage, 60 factors involved, 59

R

Radical innovations, 6, 61, 76 Rapid growth, 28 Relationship marketing, 59 Research institutions, 41 Risk, 95 Risk categories, 95 Rivalry, 49

S

S-curves, 72–74 Segmented markets characteristics, 55–56 pricing strategy, 66 product positioning, 63 skimming, 66 Service providers, 40–41 Skimming pricing, 66 Small Business Innovation Research (SBIR) program, 41 Small Business Technology Transfer (STTR) program, 41 Social environment, 53 Stable growth, 29 Stage gate development process,

81–82

86–87

screening model, 84–85 successful NPD, 84 team culture embracing innovation, 87 Product innovation, 76 Product innovation strategy, 87 Product life-cycle, 74–75 Product positioning, 62–63

Professional investor directors,

37

Professionalism, 31

Promotion, 63–65

Stages of growth, 28–29 Startups funding, 91 growth, 28 lean, 19 team formation, 34–35 Stevenson-Wydler Technology Innovation Act, 41 Strategic leaders, 42 Strategic partners, 41 Substitute products, 51 Supplier power, 51–52 SWOT analysis, 54

Act, 41 Strategic leaders, 42 Strategic partners, 41 Substitute products, 51 Supplier power, 51–52 SWOT analysis,
Act, 41 Strategic leaders, 42 Strategic partners, 41 Substitute products, 51 Supplier power, 51–52 SWOT analysis,
Act, 41 Strategic leaders, 42 Strategic partners, 41 Substitute products, 51 Supplier power, 51–52 SWOT analysis,
Act, 41 Strategic leaders, 42 Strategic partners, 41 Substitute products, 51 Supplier power, 51–52 SWOT analysis,
Act, 41 Strategic leaders, 42 Strategic partners, 41 Substitute products, 51 Supplier power, 51–52 SWOT analysis,

120

i n DEX

T

Team culture, 87 Team formation access to capital, 34 entrepreneurial venture, 33–34 experience in industry, 34 expertise in key areas, 34 growth and expansion, 35–36 learning organization, 34 startup team, 34–35 Technology constraints, 60 diffusion, 57–58 drivers, 47 environment, 53 life cycle architectural innovations, 73 dominant designs, 75–76 dramatic improvements,

73–74

materials innovations, 73 performance improvement, 72, 73 product/industry life cycles,

74–75

propeller technology, 72 transistor performance, 73 limitations, 72 push, 18 uncertainty, 57 Threat of new entries, 50–51 Traditional commercialization process, 13–15 Traditional product development,

79–80

Transaction marketing, 58–59 Types of innovations, 5–6

V

Valuation, 92–94 Valuation techniques, 92 Value added premium, 67 Value proposition, 16–17 Value proposition canvas (VPC), 25 Venture capitalists, 91–92 Venture funding

availability, 90 ease of acquisition, 90 financing documents, 94 impact on venture, 90 time-sensitive supply–demand relationship, 90–91 valuation and negotiation, 92–94 venture capitalists, 91–92 Venture launching exit strategies acquisition, 99–100 IPO, 101–103 licensing, 99 operating, 100–101 operations management growth, 97–98 plan vs. actual, 96–97 risk assessment, 95 venture funding financing documents, 94 sources, 89–92 valuation and negotiation,

92–94

Venture team, 33–36 Visionary leaders, 42

W

Waterfall development process,

80–81