ST Chapter 14

criteria for new venture investment opportunities

1. customers and market segment are clearly defined 2. minimum market as large as $250 million: can achieve single scales without having to have large market share 3. market growing at 30-50%: new entrants can enter without barriers from existing competitors 4. high, durable gross margins 5. no dominant competitor in the market segment: more room for newcomer 6. significant response time in terms of technical superiority, proprietary protection, distribution or capacity 7. experienced entrepreneur

inventors

exceptional for their technical talents, insights, and creativity but low in management skills their ideas usually fail

debt financing

money loaned to a business venture that must be repaid at some point - usually secured by some sort of asset

equity financing

money provided to the venture that entitles the provider rights or ownership in the venture

what must firms committed to breakthrough innovations have?

- ability to explain clearly to all employees at every level how critical the breakthrough project is to the company's future - set next-to-impossible goals - target only rich domains - areas where plenty of answers are still waiting to be found - move people between labs and business units to ensure researchers fully understand the needs of the marketplace

drivers of incremental innovation

- continuous improvement - cost reduction - quality management

characteristics of successful entreprenuers

- endless commitment/determination - strong desire to achieve - orientation towards opportunities and goals - internal locus of control - self confident - tolerance for ambiguity and stress - skills in taking calculated risks - little need for status and power - problem solvers - high need for feedback - ability to deal with failure - boundless energy, good health, and emotional stability - creativity and innovativeness - high intelligence and conceptual ability - vision and the capacity to inspire

three sources of equity financing

- friendly sources - informal venture investors - angel investors - professional venture capitalists - seek high-growth potential venutres

how to add more innovation

- joint ventures: share costs and risks - cooperation with lead users - do it yourself innovation: get customers involved in the innovation - acquiring innovation - outsourcing innovation: ex. product design

characteristics of successful innovations

- moderately new to marketplace - based on tried and tested technology - saved money for users of the innovation - reportedly met customer needs - supported existing products

three elements central to entrepreneurial process

- opportunity - entrepreneurial team - resources

why incremental innovation over raidcal

- point of innovation is growth - get the most of minimum innovation - lock in existing customers through incremental product innovations - innovation can generate more revenue gain or cost savings with less risk - radical innovation can be too radical - launch innovations when they are essential to the marketplace

customer value

- quality: priced competitively (efficiency), can provide it quickly and adapt (responsiveness), and product performs well - price - speed

10 essential elements of incremental innovation

1. define quality and customer value 2. develop a customer orientation 3. focus on business processes 4. develop customer and supplier partnerships - outside suppliers to internal suppliers/customers to external customers 5. take preventative approach 6. adopt an error-free attitude 7. get the facts first - make decisions based on facts not opinions 8. encourage every manager and employee to participate 9. create an atmosphere of total involvement 10. strive for continuous improvement - anticipate customer expectations and deliver fast quality service

9 ways companies are enabling intraprenuers

1. designate intrapreneurship sponsors 2. allow innovation time 3. accommodate intrapreneurial teams 46. provide intrapreneurial forums 5. use intrapreneurial controls 6. provide intrapreneurial rewards 7. articulate specific innovation objectives 8. create a culture of intrapreneurship 9. encourage innovation from without as well as within

six idea factors

1. need spotting: actively looking for an answer to a known problem 2. solution spotting: finding a new way to use an existing technology 3. mental inventions: ideas with little references to outside world - FAILURE 4. random events: innovators stumble upon something they weren't looking for - WINNER 5. market research 6. trend following - FAILURE

10 freedom factors

1. self-selection of ideas 2. no hand-offs 3. doer decides 4. corporate time to work on innovation 5. no "home run" philosophy: interest in innovation only when they represent breakthroughs 6. tolerance of risk, failure, and mistakes 7. patient money 8. freedom from turfness: cross fertilization and no boundaries 9. cross-functional teams 10 . multiple options for discussing ideas

CCC21

Toyota's cost-oriented continuous improvement program

business management skills

ability to understand and manage the economies of the business

disruptive innovation

breakthrough innovations - shake up industries

six sigma

continuous improvement approach to spur incremental innovation in businesses - analytical and rigorous - improve profits through defect reduction, yield improvement, improved customer satisfaction, and best-in class perfromance

invention

creation of new products or processes through the development of new knowledge or from new combinations of existing knowledge

DMAIC process

define, measure, analyze, improve, control system for existing processes falling below specification

administrators

develop strong management skills, specific business know-how, and the ability to organize people

intrapreneurship

encouraging entrepreneurship within a large established company

technical competence

entrepreneur posses knowledge and skill necessary to create product or service

crowdsource lending

form of debt financing

promoters

good at creating programs to push a product, but are looking for a quick payoff rather than a long term business endeavor

successful entrepreneurs

impressive growth and value building innovators

innovation

initial commercialization of invention by producing and selling a new product, service, or process - ideas into profits

breakthrough innovation

innovation in a product, process, technology, or the cost associated with it represents a quantum leap forward in one or more of these ways - revolutionize industries

risks to innovation

market risk: uncertainty of presence of a market technology risk: uncertainty about how technology will evolve

continuous improvement

relentlessly trying to find ways to improve and enhance a company's products and processes from design through assembly, sales, and service - always find continuous improvement

incremental innovation

simple changes or adjustments in existing products, services, or processes

biggest reason for failure among new ventures

someone had the idea but did not identify a concrete market opportunity

entrepreneur

strength in creativity and management

ideagoras

web-enabled, virtual marketplaces that connect people, ideas, and talent