Innovation Process for Scientists and Engineers



COURSE NUMBER: ENGR 520 Instructors: Tim Faley, Ph.D., M.B.A.

Winter 2012 Phone: (734) 615-4425

T/Th 3:30– 5:00pm E-mail: faley@umich.edu

Room 1012 FXB

Peter Adriaens, Ph.D., P.E. Phone: (734) 763-8032

E-mail: adriaens@umich.edu

Entrepreneurial Business Fundamentals for Engineers & Scientists

– Opportunity Identification –

with introductions to the Business Design Process and Business Assessment

Course Summary

You know the science, but do you know how corporate managers weighing the commercial future of your science make decisions? Do you understand how to indentify business opportunities that may be enabled by new research? Understanding the business framework beyond “cost” is key to both creating value for the organization—from small entrepreneurial to large corporate organizations—and having that organization understand the value of your efforts. The fundamentals of business, including

▪ Value System Creation and Analysis

▪ Blue Ocean Strategy

▪ Finance

▪ Corporate Strategy

▪ Marketing

▪ Introduction to Business Framing,

will be taught in this class from the perspective of identifying business opportunities that could be enabled by new or yet-undiscovered science. Whether you are the CTO of a large corporation of the CSO of a young entrepreneurial company, you need to be able to indentify emerging business opportunities that may be enabled by technology.

Course Objectives

Entrepreneurial Business Fundamentals for Engineers & Scientists is a graduate-level elective designed to provide the fundamental tools to identify emerging business opportunities. These business skills will be used in the course to identify and screen emerging market opportunities and then determine what technology may enable them.

The fundamentals of business will be taught from both a corporate and an entrepreneurial value creation perspective. Case studies will be used to illustrate finance, strategy, marketing and business design aspects. Short, team-based, weekly venture challenge homeworks will be used to reinforce the business principles.

Whereas in this course we will use the IT industry as an example for opportunity identification and new business design, the tools can be applied to any sector of interest to the students. The perspective provided in this course will be valuable for students looking to understand how business value is created in corporations and how value creation drives acquisitions of startup companies.

Other courses are focused on creating a business from a technological discovery (ES715), creating a business plan (ES615), or giving students an overview of entrepreneurship (ENGR 406). This course is focused on opportunity identification and providing the fundamentals tools of business.

Eligibility & Context

This course is open to graduate students from the University of Michigan’s College of Engineering.

Course Materials

This course does not use a single textbook. Instead, we will rely on a set of engaging and informative readings contained in the course pack and materials that can be accessed via CTools.

Course Pack – To purchase a copy of the course pack, check CTools for the announcement of when it is ready and how to buy. It contains required readings that you should read prior to each class session. These readings consist of carefully selected magazine/journal articles and excerpts from books, and case studies. These materials are copyrighted by their respective authors/publishers, so the price of the course pack covers any applicable licensing fees as well as printing costs.

Course Websites

Course materials will be posted on CTools ().

Grading structure

Homeworks: 30%

Midterm and Final Case Studies: 40%

Course Participation: 30%

Sessions

Session 1 Course Introduction

Session 2 Opportunity Identification and the Value Creation Paradigm

Topics:

Entrepreneurship Overview

New Business Creation Overview

Corporate Entrepreneurship: Comparison with the startup environment

Discuss semester-long projects

Readings:

Do by January 10

Kim & Mauborgne, “Blue Ocean Strategy,” HBR Reprint R0410D (2004). (on c-tools)

Faley, Timothy L., “The Process of Business Creation ,” Inc. Magazine (on-line), August 23, 2005.

Faley, Timothy L., “Is your Business Idea Feasible?,” Inc. Magazine (on-line), October 4, 2005.

Faley, Timothy L. & Kirsch, P.S., “Creating Your Business Plan,” Inc. Magazine (on-line), November 3, 2005.

Faley, Timothy L., “Growing Your New Venture,” Inc. Magazine (on-line), February 21, 2006.

Faley, Timothy L., & Porter, T.S., “Making Your Exit,” Inc. Magazine (on-line), March 15, 2006.

(These articles are on c-tools under “Articles and Readings”.)

Session 3 Invention versus Innovation

Topics:

The nature of innovation and its relation to invention.

Readings:

Do by January 12

Drucker, Peter. “The Discipline of Innovation,” Harvard Business Review (1985). Reprint #0208F.

TBD. (Additional article that will be posted on c-tools)

Session 4-6 The Value System: Who is Capturing Value and Why?

Topics:

o Value System Analysis

• Material supply chain

• PLUS information supply chain

• PLUS “follow the money”

Reading:

Do by January17

“Strategy and the New Economics of Information” (HBR reprint #97504)

Visit Mergent Horizon database available through

Sessions 7-8 Corporate Finance: Measuring Value Capture

Topics:

• Elements of Financial Statements

• Cash Flow

• Ratio Analysis

• Financial Forecasting

• Valuation

Readings:

Do by January 31

“Financial Statements: The Elements of Managerial Finance” (HBR Chapter)

Visit OneSource Global Business Browser database available through

Sessions 9 - 11 Strategy: Shifting the Value Capture Potential

Topics:

• Introduction to corporate strategy

o Core competencies

o Discipline of market leaders

o Porter’s five forces

• Entrepreneurial Business Strategies

o Positioning your company

o Leveraging your intellectual property

Readings:

Do by February 2

Porter, Michael. “What is Strategy?” HBR reprint 96608 (1996).

“From Value Chain to Value Constellation: Designing Interactive Strategy” (HBR Review #93408)

Do by February 7

Corporate Case: Inside Intel Inside (HBR Product#: 292106)

Do by February 9

Entrepreneurial Case: Apple, INC.: iPODS and iTUNES (HBR Product#: 905M46)

Sessions 12-14 Positioning for Value Capture (PVC)

Topics:

• The Innovation Process

o Opportunity Identification

▪ Exploring technological needs/opportunities

▪ Exploring customer needs/opportunities

o Framing the Business Proposition

▪ Business Hypothesis

▪ Business Models

• The funding landscape for early stage technology development

Readings:

Do by February 14

Teece, David J. “Capturing Value from Knowledge Assets: The New Economy, Markets for Know-how, and Intangible Assets.” California Management Review Reprint CMR 108 (1998).

Do by February16

Corporate Case: Intel 2006: Rising to the Graphics Challenge (HBR Product#: 607136)

Do by February21

Entrepreneurial Case: ZLI Case Study (unpublished): “HandyLab (A)," Prepared by Prof. Thomas Kinnear, et al. (re-edited by TL Faley)

Session 15 Intellectual Property

Guest Lecturer: Jon Shackleford, Dickinson-Wright, Ann Arbor

Readings:

Do by February 23

Hart, Myra & Zaharoff, Howard. “The Protection of Intellectual Property in the United States.” HBS #9-897-049 (2000).

MIDTERM EXAM Due February 23

Spring Break is the Week of February 27th

Sessions 16-19 Entrepreneurial Finance: Balancing the Solution’s Value and Cost

Topics:

• Boot-strapping

o Loans

o Grants

• Equity Financing

o Pre-seed

o Angel

o Venture Capital

o Private Equity

• Valuation Methods

• Exit strategies

• Cap Tables

Readings:

Do by March 6

Faley, Timothy L. “Entrepreneurial Finance—An Entrepreneur’s Perspective (Unpublished); December 2008.

Do by March 8

Capitalization Table and Valuation Example walk-through

Midterm Exam Review March 13

Do by March 20

Case study: Licensing of ApoEp1.B Peptide Technology (Ivey Product #905N16)

Sessions 20-22 Marketing: Operationalizing the external strategy

Topics:

• Corporate Marketing Elements

o Introduction to Marketing

o Basic Quantitative Analysis for Marketing

o The Marketing Mix

o Pricing

• Entrepreneurial Marketing Elements

o Market identification and strategy

o Product adoption process

o Value Chain

Readings:

Do by March 22

Shapiro, Benson. “An Introduction to Marketing.” HBS 9-584-124 (1986).

Levitt, Theodore. “Marketing Myopia.” HBR Reprint R040L (1960).

Moore, Geoffrey A. Crossing the Chasm (Harper Business, 1991); Chapter 1.(on c-tools)

Do by March 27

Corporate Case: Inside Intel Inside (HBR Product#: 292106) (again)

Session 23-24 Global Entrepreneurship

Topics:

• Corporate vs. entrepreneurial

• Myths/realities

• Developed and undeveloped markets

Readings:

Do by March 29

The Economist articles: Global Heroes (2009); The World turned upside down (2010)

Do By April 3

Case Study: “Spotfire: Managing a Multinational Startup,” prepared by Walter Kuemmerle (HBS Product#: 9-899-078)

Session 25 Integrating the Course Content: 2 examples

Do by April 5

Case I: Developing an App for That (HBS Product #9711415)

Case II: Facebook (HBS Product #9808128)

Sessions 26-27 Final Presentations

Tuesday April 10 and Thursday April 12

-- Final Report

Due Thursday April 17

Instructors

Tim Faley, Ph.D., MBA

Dr. Faley is the managing director of the Zell Lurie Institute for Entrepreneurial Studies and Adjunct Professor of Entrepreneurship at the Ross School of Business. He previously was the managing director of the Wolverine Venture Fund (instructor for ES701 – WVF). Dr. Faley has spent his career creating, valuing and commercializing technologies working in areas ranging from R&D to new business development to technology licensing to venture capital. He is co-developer of the KeyStone Compact™, a business analytical and strategic positioning tool that has been applied on more than 400 global early and later stage CleanTech companies in North America, Asia, and Europe, and Managing Director of CleanTech Acceleration Partners. He was formerly the director of technology transfer for UM’s College of Engineering. Prior to his arrival at UM, he spent 15 years with the Dow Chemical Company, his last assignments being in technology licensing and corporate venturing.

Peter Adriaens, Ph.D., P.E.

Dr. Adriaens is Professor of Civil and Environmental Engineering, and Professor of Entrepreneurship and Strategy in the Ross School of Business, where he serves as CleanTech Director to the Wolverine Venture Fund of the University of Michigan. He is past-President of the Association of Environmental Science and Engineering Professors, and a member-by-eminence of the American Academy of Environmental Engineering. Following a 20-year career focused on validating laboratory-based bioremediation, environmental sensing and green building technologies in the field, his current work focuses on CleanTech innovation and entrepreneurship. He teaches courses on Business Models, Entrepreneurial Business Fundamentals, CleanTech Venture Assessment, and Sustainability Finance. He is co-developer of the KeyStone Compact™, a business analytical and strategic positioning tool for early and later stage CleanTech companies. He founded Global CleanTech LLC, and is Director of Asian Operations at LimnoTech, an environmental services firm focused on energy-water nexus issues in the US and China. He is Director at CleanTech Acceleration Partners, a business services firm, and Head Judge of the Global CleanTech Custer Association (GCCA), focused on open innovation and economic development by screening, repositioning and connecting best in class Cleantech clusters and companies.

Office Hours:

We will be available an hour before class in the 3rd floor lounge in FXB. We will also be available, in general, after class and by appointment. Additional office hours that Dr. Faley is available in his office at are available on-line through the “office hours” link on the Zell Lurie Institute homepage (zli.bus.umich.edu).

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