GENE452 – Technical Entrepreneurship



GENE452 – Technical Entrepreneurship

Lecture Notes #2 – Jan 12, 2006

Review of Key Points from Last Week

• Approx 2.2M businesses in Canada

• Nearly 99% have 50 or fewer employees – employ 49% of Canadian workforce

• In US, 37% employed by firms with 100 employees or less

• 99.9% of Canadian business are Small and Medium size Enterprises or SMEs (less than 500 employees)

• Business profile ~ 1/4 goods 3/4 services – matches GDP

• Small and early stage businesses:

o Innovate more

o Spend more on R&D positions

o Hire young people more readily

o Create more jobs

• The business plan

o Planning document

o Marketing document

• Three types of small business

o Lifestyle

o Generic

o Gazelle

Class Survey

How many of you did the Text self test?

How did you score?

Was it what you expected?

This Week’s Lecture - Entrepreneurs and Entrepreneurship

Necessary Ingredients: People, Opportunity, Resources

New venture failure rates

Failure Rates of Canadian Companies[1]

|Year |Failure Rate |Survival Rate |

|1 |23% |77% |

|2 |22% |61% |

|3 |18% |50% |

|4 |16% |42% |

|5 |14% |36% |

|6 |13% |31% |

|7 |12% |27% |

|8 |11% |24% |

|9 |10% |22% |

|10 |10% |20% |

Failure Rates in the US[2]

|Year |Cumulative Failure Rate |

|1 |40% |

|2 |60% |

|10 |90% |

According to Jeff Timmons, of Harvard University one of world's leading authorities of new venture start-up:

“Most people think the odds are even worse!”

Why do they fail?

"Failing Concerns: Business Bankruptcy in Canada" Nov. 1997



Examines WHY Canadian businesses fail.

Why do businesses fail?

o lack of financing available

o lack of market

o tough competition

o unanticipated external shocks (exchange rates, disasters, “bubble bursting”)

What about internal factors?

o Financial planning capabilities

o Market planning capabilities

o Competitive awareness, market strategy development

o Lack of robust business model

o Advice from outsiders?

According to study, the Top 3 reasons for failure are:

1. weak general management

2. weak financial management

3. weak marketing capabilities

Interesting to note, from same study:

o 20% of failures had a formal business plan

o 20% of survivors had a formal business plan

Q: Does a business plan help survival rates?

A: Not if it sits on a shelf

In surviving firms with a business plan, 81% used and updated it.

In failing firms with a business plan, 30% measured against plans, and only 12% update.

Recall from last lecture: The High Growth Venture, or "Gazelle"

What does a gazelle need to grow strong and fast?

- First, you need a business idea or concept

- Then you need fuel for growth

- Capacity for expansion, growth

- Access to right combination of people

- Growth market (attractive industry and product/service/technology fit)

- Access to ($$$) capital

Tonight, let’s look at the “people”

Q: Who Starts A Business?

A: An Entrepreneur

Definition of an entrepreneur: 

Webster’s Definition: “one who organizes, manages, and assumes the risks of a business or enterprise.”

(French: entrer: to enter prendre: to take)

– note similarity to Julius Caesar’s famous quote, “veni, vidi, vici”

 

What characterizes an entrepreneur?

Strong motivation: in good health, refuse to get sick and when everyone else leaves for home will often continue to work into the evening

Self-Control: do not function well in structured organizations and do not like someone having authority over them

Self-Confidence: are self-confident when in control of what they're doing and tackle problems immediately with confidence. At their best in the face of adversity.

Sense of Urgency: have a never-ending sense of urgency to develop their ideas. Inactivity makes them impatient, tense, and uneasy.

Comprehensive Awareness: comprehend complex situations including: planning, making strategic decisions, and working on multiple business ideas simultaneously.

Realism: accept things as they are and deal with them accordingly and will change direction when they see that change will improve prospects for achieving their goals.

Conceptual Ability: possess the ability to identify relationships quickly in the midst of complex situations, identify problems and begin working on their solution quickly

Status Requirement: find satisfaction in symbols of success that are external to themselves. They like their business to be praised, but often embarrassed by direct praise.

Emotional Stability: have a considerable amount of self-control and can handle business pressures.

Interpersonal Relationships: are more concerned with people's accomplishments than with their feelings. Their lack of sensitivity to people's feelings can cause turmoil and turnover in their organization. They are impatient and drive themselves and everyone around them.

Entrepreneurs: Demographic Attributes

• Children of entrepreneurs ("Pull" factors)

• Immigrants/children of immigrants ("Push" factors)

• Between ages 30 - 40 (Managed risk)

• Not academically inclined (Doers not thinkers)

• Women less likely to fail (Better risk managers)

 

 

Entrepreneurs: Personality Traits

• High NAch (Need for Achievement)

• NAch vs NPow vs NAff

• Comfortable with uncertainty

• Willingness to take calculated risks

• Self Confidence

• Not team players

• Internal locus of control

Role Demands in Business

[pic]

What is a technology entrepreneur?

Able to identify a market need, where recent technological innovation can provide a solution of value to customers.

Examples: Amazon, RIM, Google

What is a need?

There are two types of need:

• Painkillers – must be taken to relieve current symptoms/problems

• Vitamins – nice to take to provide some level of well being or future benefit

4 Current Sources of Technological Innovation:

• Materials

• Energy

• Biotechnology

• Information technology

Disruptive Technology

1. What is it?

2. Why is it important?

3. How can you identify the opportunity?

4. How can you build a business?

5. How can you defend yourself from the big players in the industry?

“Ideation” - Where to get an idea??

Remember, as an technical entrepreneur, you are crafting a new business based on technology. The key ingredients are a business (structure + good people + capital + process) and an idea for a product or service (technology + application + market)

Lots of theory on creativity, product development and idea generation

Here are some practical methodologies:

• Use your experience

o You have 2 years of work experience already

o What things frustrated you on the job?

o Were there any deficient tools?

o What were customers unhappy about?

• Brainstorming

o Group ideation technique

o Non-threatening contributory environment

o Define a problem, then throw out ideas

o Write down every idea, even trivial ones

o Absolutely NO judgement

o Then, as a group, debate merit of each idea and filter

• Create a product that “does a job”[3]

o People buy products to do a job for them

o What are they trying to do?

o Cut to the heart of it

o Opportunities arise where existing products:

▪ Are too expensive for a particular group

▪ Do lots of things but not well

▪ Don’t do the job customers want done

• Value engineering methodology[4]

o Define “value” for the customer

o Value vs Utility

o Utility/Esteem/Scarcity/Exchange

o What is necessary to provide value?

o Ex. Apollo Lunar Excursion Module – seats too heavy (1962 Grumman Corp)

o Ex. Rover Mars explorer – retrorockets or airbags?

• Ask questions and shift perspectives

o RIM – “how small can a keyboard be, and still allow you to type?”

▪ “how do you type on a really small keyboard?”

• Look for intersecting trends (constructive interference)

o MP3 Players – PCs to play/store music, Compression, File sharing, Consumers buying mobile technology

• Demographics

o Explored in greater detail later

• Watch people

o What makes people frustrated?

o Capture knowledge/intelligence

How to get from “cool technology” to a good product or service

• Start with unique characteristics of technology

• Define markets based on applications (needs) or competitive products

• Rank degree of fit or importance of unique characteristics for each

• Narrow the field, then look at industry dynamics and competition

The First Assignment (only 2 weeks away)

• Part 1 - Business/product concept, development/management team, target market

▪ Submitted as brief outline + pitch presentation

▪ Worth 15% of your grade (10% written, 5% presentation)

Next Week’s Lecture: Intellectual Property

Reading: Stage 9: Protecting Your Idea

Guest Speaker: John Baker, Desire2Learn

 

 

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[1] Statistics Canada "Failure rates of new Canadian Firms" Catalogue No. 61-526-XPE

[2] US Commerce Department, US SBA; Dun & Bradstreet

[3] The Innovator’s Solution: Creating and Sustaining Succesful Growth, Christensen and Raynor, 2003

[4] The Lean Design Guidebook, Ron Mascitelli, 2004

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Creative

Inventor

Innovator

Operational

Time/Maturity of Business

Administrator

Manager

Entrepreneur

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