BET 320

Entrepreneurial
Strategy
October 2 – 8, 2024
Group Assignment Topic Proposal
• In groups of three or four, you will investigate the application of BET 320 course
concepts to a topic of interest to you.
• For example, the topic can be about the future opportunities in an industry, the
future prospects for a new technology, or it can be one of the topics discussed in
the course.
• The important point is that you must answer a question about the topic, using
BET 320 concepts and frameworks for your analysis.

• A topic proposal is due October 22, 2024. Proposals are to be submitted to the
LEARN dropbox. Only one group member needs to submit the proposal. The
proposal only needs to explain the topic, the question you hope to answer, and
the names of the group members.
Evaluating Opportunities
 90% of start-ups fail

99.9% of apps will not make money

What’s the problem?

 New products fail because
1. there was no basic need for the item, as seen
by intended users;

New Products Management 10th edition, Crawford and Di

Benedetto, McGraw Hill Irwin, 10th Edition, 2011
 “Build a better
mousetrap and the world
will be a path to your
door.”
Ralph Waldo Emerson
1803 - 1882
Ideas that are 10% better
aren’t good enough

Commercialization of Innovative Technologies, Touhill. Touhill, O’Riordan,

John Wiley & Sons, 2008
Here is a frustration ….
 New products fail because
1. there was no basic need for the item, as seen
by intended users;
2. the new product did not meet its need,
considering all disadvantages;

New Products Management 10th edition, Crawford and Di

Benedetto, McGraw Hill Irwin, 10th Edition, 2011
 Technological assessments are easy;
marketing and business assessments are difficult

Commercialization of Innovative Technologies, Touhill. Touhill, O’Riordan,

John Wiley & Sons, 2008
 Two types of opportunity
Demand-pull
Based on a need or a problem that cries out for a
solution
Market  Product  Technology
Technology-push
Begin with a solution which leads to a search for
ways to apply it

Technology  Product Market

Technology Ventures: From Idea to Enterprise, Byers, Dorf and Nelson, McGraw
Hill, 4th edition 2015
Technology Ventures: From Idea to Enterprise, Byers, Dorf and Nelson, McGraw
Hill, 4th edition 2015
 New products fail because
1. there was no basic need for the item, as seen
by intended users;
2. the new product did not meet its need,
considering all disadvantages;
3. the new product idea was not properly
communicated (marketed) to the intended
user.

New Products Management 10th edition, Crawford and Di

Benedetto, McGraw Hill Irwin, 10th Edition, 2011
 Our Marketing Plan

1. Crowdfunding
2. Social media
3. Viral video
4. Word of mouth
How will your customers
find your page?
One of 900,000,001
 New products fail because
1. there was no basic need for the item, as seen by intended
users;
2. the new product did not meet its need, considering all
disadvantages;
3. the new product idea was not properly communicated
(marketed) to the intended user.
In sum, they didn't need it, it didn't work, they didn't get the message.

New Products Management 10th edition, Crawford and Di

Benedetto, McGraw Hill Irwin, 10th Edition, 2011
 5 characteristics of an attractive opportunity

1. Timely – a current need or problem

2. Solvable – a problem that can be solved in the near future with
accessible resources
3. Important –the customer deems the problem or need important
4. Profitable – the customer will pay for the solution and allow the
enterprise to profit
5. Context – a favourable regulatory and industry situation

Technology Ventures: From Idea to Enterprise, Byers, Dorf and Nelson, McGraw
Hill, 4th edition 2015
 Guiding principles for selecting good opportunities

• Only one or two good opportunities are needed in a lifetime.

• Invest less time, money and effort than the venture will be worth in
one or two years. Calculate the probability of a large return in four
years.
• Do not count on a high-priced sale of the firm to the public or
another company.
• Carry out a solid analysis of current and expected industry conditions
• If it turns out bad, can you exit with minor losses?
• Is there potential for long-term success or is it a fad?
• Can the management team execute the strategy?
• Will the customer enable your firmTechnology
Hill, 4 edition 2015 from this venture?
to profit
Ventures: From Idea to Enterprise, Byers, Dorf and Nelson, McGraw
th
 Basic 5-step process of evaluating an opportunity

1. Capabilities: Is the venture opportunity consistent with the capabilities, knowledge

and experience of the team members?
2. Novelty: Does the product or service have significant novel, proprietary or
differentiating qualities? Will the customer want the product and pay a premium for
it?
3. Resources: Can the team attract the necessary financial, physical and human
resources consistent with the size of the venture?
4. Return: Can the product be produced at a cost so that a profit can be obtained? Is
the expected return consistent with the risk?
5. Commitment: Do the team members feel compelled to commit to this venture? Are
they passionate about the venture?

Technology Ventures: From Idea to Enterprise, Byers, Dorf and Nelson, McGraw
Hill, 4th edition 2015
 Net Present Value
Investment Discounted Year 1 Year 2 Year 3 Year 4 Year 5
(t=0) Cash Flow Cashflow Cashflow Cashflow Cashflow Cashflow
$500,000 $200,000 $200,000 $200,000 $200,000 $200,000

NPV=37,856 $537,856 160,000 128,000 102,400 81,920 65,536

(20% discount rate)
NPV=-223,328 $276,672 120,000 72,000 43,200 25,920 15,552
(40% discount rate)
 Quantitative Methods
• Net present value (NPV)
– Discounted cash inflows of a project minus the discounted outflows
• Internal rate of return (IRR)
– The rate of return from a project, normally calculated as the discount rate
that makes the NPV equal zero
• Discounted payback period
– The time required to break even on a project using discounted cash flows
• Real options
– Applying stock option valuation methods to investments in nonfinancial
assets Strategic Management of Technological Innovation, Melissa Schilling,
McGraw Hill Irwin, 4 Edition, 2013 (and following slides)
th
 Real Options
• The application of stock option valua­tion methods to
investments in non-financial assets
• Development projects can create valuable future opportunities
for the firm
• Even development projects that appear unsuccessful may
prove to be very valuable when they are considered from the
perspective of the options they create for the future of the firm
 Commercialization of
Innovative Technologies
Chapter 6
Assessing Ideas

Commercialization of Innovative Technologies, Touhill. Touhill, O’Riordan,

John Wiley & Sons, 2008 (and following slides)
 An innovation team has to answer many questions:
• Strategic, administrative and legal issues
– Does the concept fit within the scope of the strategic plan?
– Why do you want and need money from us?
– Is the business plan/proposal clear, unambiguous, well organized and well-written?
– Who really was the inventor? Who did the work that led to the innovation?
– What are the qualifications and track record of the inventor/innovator?
– Who owns the innovation?
– Does the owner have unequivocal rights to the innovation?
– Is the legal right fully documented?
– Is the legal right exclusive and defensible?
– Is the inventor/innovator willing and able to make full disclosure of all details?
– Are any special hazards or environmental problems associated with the
innovation?
– Should we move ahead with the idea?
 An innovation team has to answer many questions:
• Technical issues
– Is the concept original?
– Is the concept sound scientifically and theoretically?
– How does it work? How well does it work? Can we make it work better?
– Is the process reproducible?
– What technical work has been performed to prove the idea?
– How well is the idea documented?
– What does the inventor believe remains to be done?
– What do we believe remains to be done to solidify the concept?
– Will it work better, cost less and function more reliably than existing technology?
– Can we lower costs?
– How long is it going to take to reach a first significant milestone?
– How much will it cost to develop, design, build and fully commercialize the innovation? Can it be done safely,
reliably and cost-effectively?
– How much will it cost to prove the concept and develop design criteria?
– How reliable is the concept? Can we make it more reliable?
– Will it be easy to build and fix?
– Do we need outside help whether the idea is a good one?
– Does the inventor/innovator have the laboratory and test facilities with appropriate analytical tools?
 An innovation team has to answer many questions:
• Marketing and commercialization issues
– Is the innovation unique, ingenious and a significant leap forward?
– Who needs the innovation and does it meet well-defined customer needs?
– How many potential customers are there?
– Does the inventor/innovator have a track record of successful innovation and
commercialization?
– Is the innovation suited for the application envisioned?
– How long will it take to develop, design, demonstrate and commercialize the innovation?
– Who are potential competitors?
Readings for next class

“How to Position Your Innovation in the Marketplace”,

MIT Sloan Management Review, Winter 2014, 17-20

Geoffrey Moore – The Chasm Has Evolved

https://www.youtube.com/watch?v=6LHnFsqpzMM

Christense, Hall, Dillon and Duncan,

“Know YourCustomers’ Jobs to Be Done”,
Harvard BusinessReview, September
2016, 54-62

https://blog.bolt.io/what-hardware-startups-can-learn-
from-pebble-3742e2819a45#.dy9d7gk56

What Hardware Startups Can Learn From Pebble

 Discussion questions for next class
1. What is the ‘chasm’? Why does it exist? How do you get across it?
2. What does Moore mean by ‘optimization’? Have we seen this
concept before?
3. How would you position Apple Vision Pro on the New
Attribute/Core Attribute Framework? What are the implications for
Apple? (https://www.apple.com/ca/newsroom/2023/06/introducing-apple-vision-pro/ )
4. Why has Fitbit been more successful than Pebble, according to this
week’s article?
5. Why is it more important for companies to focus on the ‘jobs’
customers are hoping to accomplish, rather than trying to know
more and more about the customers?