Chapter two

Formation, Growth and Development of

Technology based New Enterprises

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 2.1 Technology and Business
TECHNOLOGY is “systematic collection of knowledge, skills,
methods processes and end products or services.

 Thus it is the knowledge that goes into the creation and provision
of the product or service that constitutes “technology”, including
the finished product or service.

 Such knowledge should be seen as encompassing both the

technical knowledge on which the end product is based, and the
organizational capacity to convert the relevant productive inputs
into the finished item or service.
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 Consequently, “technology” includes not only “knowledge, methods
or process that are necessary to carry on or to improve the
existing production and distribution of goods and services” or
indeed to develop entire new products Or processes, but also
entrepreneurial enterprise and professional / business know-how.
 Essential competitive advantage possessed by the technology owner.

 TECHNOLOGY is The total sum or application of science and

engineering.

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…

 Advances in technology are the only source of

permanent increases in quality and productivity.
 Technological changes are basically the results of
innovations which in turn are the outputs of
innovative Entrepreneurs.

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 2.2. Important aspects of Technology in Business
Technology Intelligence
Is an activity that enables companies to identify the
technological opportunities and threats that could affect the
future growth and survival of their business.

⚫ Is a technology-related information that is useful and

utilized by firms during strategic decisions.

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…
Intelligence gathering may be deployed at the macro level, industry or
business level, and/or at the program or project level. The process of
gathering external data and analyzing it to derive intelligence for
major strategic decisions is referred to as mapping the technology
environment.
Conceptually, this process consists of four interlinked steps:
1. scanning the environment,
2. monitoring specific environmental trends,
3. forecasting future environmental changes, and
4. assessing current and future environmental changes for
their impact on organizational strategy.

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Acquisition of Technology

ways of acquiring
technology

In-house research External sources by

and development purchasing or
strategic alliances.

Choosing the appropriation technology involves some basic

principles.

Competitive Strong
competitivenes Selection risk
impact of
s of business and reward
technology

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 In-house Research and Development
Deployment in New Products
 The development of new products has always been a considerable
generator of sales and profits for businesses.
 New products range from products that are entirely new to the world
to repositioning of already-existing products.
 The process of developing new products is characterized by
two
phases:
I. The strategic phase is critical in the process in that it determines
the profit potential and ultimate success of the product.
II. The operational phase is just as crucial in that it results in the
actual production of the new product.
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A continuum of research and development is an important process before
new
products are physically exist for the market

Figure 2.1 Development Continuum

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Drive for acquire new technology
• Material cost
• Labor cost
Cost • Distribution costs
minimization • Production costs

• Lead time required to deliver a product

Speed of
delivery

• To improve the quality

Quality

• Retain and increase market share in such competitive environment

Flexibility

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Steps in Technology Transfer
2.3. Formation, Growth and Development of
Technology-Based New
2.3.1. Introduction Enterprises
 The innovative capacity of an entrepreneur and more
accurately, of companies operating in that field, is a key
determinant of its capability to;
 enhance the economic development and
 upgrade the standard of living of a country.
It is widely accepted that one of the indicators of this
innovative capacity is the rate of creation of New Technology-
Based firms (NTBF).

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2.3.1. How to form and develop Technology based ventures?

 Entrepreneurship studies have identified three critical factors

linked
to successful creation of technology ventures:
 innovative Technology
 Strong scientific, entrepreneurial and management talent,
and
 Invest capital

However, these by themselves will not be sufficient for the

successful development of technology based ventures but
also the following are required:

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…
Business consulting
services
Technical consulting
services
Government
policies
International
assistance
Intellectual
property assistance
Financing support
activities

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Technology based business development process

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⚫ Although there are different ways to formulate the formation and
development process of a NTBF, there are four fundamental
growth stages that most entrepreneurs should focus on:
Stage 1: Conception and
development
⚫ The primary focus of the entrepreneur is on the product
development, the securing of adequate financial backing
and the identification of market opportunities.
⚫ Dominant problems of NTBF at this point include
construction of a product prototype and selling of the
business idea to investors.
⚫ In this stage, there are many problems or barriers related
to conception that reduce the chance for new ventures.
Barriers related to: Lack of
opportunities , Lack of well
qualified entrepreneurs and Lack of entrepreneurial
culture
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⚫ Developing the new idea includes writing a feasibility study
that evaluates all aspects of the economic viability of the
business venture business plan that a describes and analysis
of the business prospects.
Stage 2: Commercialization /I ntroduction
In this stage, the major focus of new ventures is on commercializing the
product itself.The dominant problems at this point include acquiring
adequate facilities, establishing a vendor network, and developing
product support capability. To overcome these problems, Some of the
programs carried out by the different administrations are oriented to:
§ Accessibility to different resources (financial and facilities) and services
in
advantageous conditions.
§ Training entrepreneurs to enable them its new challenges
§ Creating incubators which are organized in order to support and
facilitate
processes of enterprise creation &commercialization.

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Stage 3:
Growth
⚫ This stage is characterized by high growth in both sales
and employees. The major problems of the firm at this
stage are to produce, sell, and distribute the product in
volume while attaining profitability.
Important barriers are related to the lack of financial
resources to maintain the rapid growth of the
enterprise and difficulties in managing internally the
effects of the growth. Programs to overcome above-
mentioned problems have to do with:
 Training entrepreneurs in new managing techniques; special
attention to internationalization.
 Processes of clustering companies of the same industry in
order to facilitate the interchange of experiences and best
practices
 Access to financial resources

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Stage 4:
Stability
⚫ The growth rate of the firm slows to a level consistent with market
growth.The

major problems of the firm at this point are to maintain growth momentum

and market position. Therefore, the entrepreneur should focus on the

introduction of second-generation product for acquiring new opportunities

and the expansion of the business into new geographic territories and

markets.Therefore the programs that can be carried out have to do with:

 Enhancing the innovative capacity of firms.

 Facilitating their internationalization

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Examples of Technological
Products & services
Technology in manufacturing
 Computerized Aided Design (CAD)
 Computer Integrated Mfg (CIM)
 Automated Materials Handling (AMH)
 Flexible Manufacturing System (FMS)
 Industrial robots
 Numerically controlled (NC) machines
Technology in service
 Office automation
 Image processing system
 Electronic data interchange
 Decision support system and expert
system
 Networked computer system and expert
system
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2.4. Innovation in Technology based Business

 Innovation refers both to the output and the process of arriving at

a technically feasible solution to a problem triggered by a

technological opportunity or customer need.
 Innovations are new ways to achieve tasks.

It is distinguish as
 process innovations and
 product innovations
 Service innovation

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 Product innovation: results in new or improved products.

 Process innovation: occurs when the manufacturing

processes are improved to make the production of existing

products cheaper, or when new processes are developed
specifically for making a new or improved product.
 Service innovation: occurs when new ways of delivering

services are developed.

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 The approaches of innovations can also be classified as

Market-pull and Technology-push innovation:

I. Market-pull innovations: advancement of technology
oriented customers primarily toward a specific market need
a) Occur when customers are technologically sophisticated
/advanced
b) Occur more frequently with older technologies
II.Technology-push innovations: advancement of technology
oriented companies primarily toward increased technical
performance
c)Require that the firm’s scientists, engineers, and inventors
have direct experience with users
d) Occur more frequently with new and emerging
technologies

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Promotion and Commercialization of technology-
based innovation

 Technology commercialization is the process by which a new

product or service is introduced to the general market..

 Consequently, products must be developed faster, prototyped

earlier, and brought to market in on time.

 The promotion of technology appears to be essential to the
process of industrialization. Though transfers of technology can
be beneficial, potentialities of technology promotion are believed
to lie in a systematic utilization of research and development.

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Entrepreneurship and Technological
Change

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