' - ' ' " - Technology Ventures From Idea to Enterprise Thomas H. Byers Stanford University Richard C. Dorf University of California, Davis Andrew J. Nelson University of Oregon ^Connect Me I \ Learn 1 I Succeed Graw Hill
CONTENTS Foreword, XIII Preface, > I PART ±VENTURE OPPORTUNITY, CONCEPT, AND STRATEGY 3.4 The Business Model 59 3.5 Business Model Innovation in Challenging Markets 63 3.6 Core Competencies 65 3.7 Sustainable Competitive Advantage 66 3.8 AgraQuest 70 3.9 Summary 72 Chapter 1 Economic Growth and the Technology Entrepreneur 3 1.1 The Entrepreneur's Challenge 4 1.2 The Entrepreneur 7 1.3 Economics and the Firm 12 1.4 Creative Destruction 17 1.5 Innovation and Technology 19 1.6 The Sequential Case: AgraQuest 21 1.7 Summary 22 Chapter 2 Opportunity and the Concept Summary 2.1 Opportunity Identification 26 2.2 Trends and Convergence 32 2.3 Opportunity Evaluation 36 2.4 The Concept Summary 42 2.5 AgraQuest 47 2.6 Summary 48 Chapter 3 Vision and the Business Model 3.1 The Vision 52 3.2 The Mission Statement 55 3.3 The Value Proposition 56 51 25 Chapter 4 Competitive Strategy 75 4.1 4.2 4.3 4.4 4.5 Venture Strategy 76 The Industry and Context for a Firm 79 Strengths and Opportunities SWOT Analysis 83 Barriers to Entry 85 Achieving a Sustainable Competitive Advantage 86 Alliances 89 Matching Tactics to Markets 94 The Socially Responsible Firm 97 AgraQuest 101 4.6 4.7 4.8 4.9 4.10 Summary 102 Chapter 5 Innovation Strategies 107 5.1 First Movers Versus Followers 108 5.2 Imitation 114 5.3 Creativity and Invention 115 5.4 Types and Sources of Innovation 118 5.5 Technology and Innovation Strategy 122 5.6 New Technology Ventures 127 5.7 AgraQuest 130 5.8 Summary 132 ix
Contents PART XX II VENTURE FORMATION AND PLANNING Chapter 6 Risk and Return 137 6.1 Risk and Uncertainty 138 6.2 Scale and Scope 146 6.3 Network Effects and Increasing Returns 150 6.4 Risk Versus Return 155 6.5 Managing Risk 156 6.6 AgraQuest 157, 6.7 Summary 158 Chapter 7 The Business Plan 161 7.1 Creating a New Business 162 7.2 The New Venture Story 163 7.3 The Business Plan 167 7.4 An Annotated Table of Contents 170 7.5 AgraQuest 174 7.6 Summary 176 Chapter 8 Types of Ventures 179 8.1 Independent Versus Corporate Ventures 180 8.2 Nonprofit and Social Ventures 181 8.3 Family-Owned Businesses and Franchising 185 8.4 Corporate New Ventures 189 8.5 The Innovator's Dilemma 193 8.6 Incentives for Corporate Venture Success 195 8.7 Building and Managing Corporate Ventures 198 8.8 AgraQuest 204 8.9 Summary 205 Chapter 9 Knowledge, Learning, and Design 209 9.1 The Knowledge of an Organization 210 9.2 Managing Knowledge Assets 211 9.3 Learning Organizations 212 9.4 Product Design and Development 217 9.5 Product Prototypes 222 9.6 Scenarios 225 9.7 AgraQuest 227 9.8 Summary 228 Chapter 10 Legal Formation and Intellectual Property 231 10.1 Legal Form of the Firm 232 10.2 Company Name 235 10.3 Intellectual Property 237 10.4 Trade Secrets 238 10.5 Patents 239 10.6 Trademarks 242 10.7 Copyrights 243 10.8 Licensing 243 10.9 AgraQuest 244 10.10 Summary 245 PART III XXX DETAILED FUNCTIONAL PLANNING FOR THE VENTURE Chapter 11 The Marketing and Sales Plan 251 11.1 Marketing 252 11.2 Marketing Objectives and Customer Target ' Segments 253 11.3 Product and Offering Description 255 11.4 Market Research and Customer Development 257
Contents xi 11.5 Brand Equity 259 11.6 Marketing Mix 260 11.7 Customer Relationship Management 265 11.8 Diffusion of Technology and Innovations 268 11.9 Crossing the Chasm 270 11.10 Personal Selling and the Sales Force 274 11.11 AgraQuest 276 11.12 Summary 278 Chapter 12 The New Enterprise Organization 281 12.1 The New Venture Team 282 12.2 Organizational Design 283 12.3 Leadership 287 12.4 Teams 290 12.5 Management 291 12.6 Emotional Intelligence 293 12.7 Organizational Culture 294 12.8 Social Capital 297 12.9 Attracting and Retaining Talent 299 12.10 Ownership and Stock Options 301 12.11 Board of Directors 302 12.12 AgraQuest 304 12.13 Summary 305 Chapter 13 Acquiring and Organizing Resources 307 13.1 Acquiring Resources and Capabilities 308 13.2 Influence and Persuasion 310 13.3 Location and Cluster Dynamics 312 13.4 Facility Planning 315 13.5 Telecommuting and Teleconferencing 315 13.6 The Internet 316 13.7 Vertical Integration and Outsourcing 318 13.8 Innovation and Virtual Organizations 322 13.9 Acquiring Technology and Knowledge 324 13.10 AgraQuest 325 13.11 Summary 326 Chapter 14 Management of Operations 329 14.1 The Value Chain 330 14.2 Processes and Operations Management 333 14.3 The Value Web 338 14.4 Strategic Control and the Balanced Scorecard 342 14.5 Scheduling and Operations 343 14.6 AgraQuest 345 14.7 Summary 346 Chapter 15 Acquisitions and Global Expansion 349 15.1 Acquisitions and the Quest for Synergy 350 15.2 Acquisitions as a Growth Strategy 352 15.3 Global Business 357 15.4 AgraQuest 363 15.5 Summary 363 PART IV X Y FINANCING AND BUILDING THE VENTURE Chapter 16 Profit and Harvest 369 16.1 The Revenue Model 370 16.2 The Cost Model 371 16.3 The Profit Model 372 16.4 Managing Revenue Growth 376 16.5 The Harvest Plan 383 16.6 Exit and Failure 386 16.7 AgraQuest 388 16.8 Summary 388
xii Contents Chapter 17 The Financial Plan 391 17.1 Building a Financial Plan 392 17.2 Sales Projections 394 17.3 Costs Forecast 395 17.4 Income Statement 395 17.5 Cash Flow Statement 395 17.6 Balance Sheet 398 17.7 Results for a Pessimistic Growth Rate 401 17.8 Breakeven Analysis 404 17.9 Measures of Profitability 409 17.10 AgraQuest 410 17.11 Summary 411 Chapter 18 Sources of Capital 415 18.1 Financing the New Venture 416 18.2 Venture Investments as Real Options 418 18.3 Sources of Capital 422 18.4 Bootstrap and Seed Financing 423 18.5 Debt Financing 426 18.6 Grants 426 18.7 Angels 427 18.8 Venture Capital 428 18.9 Corporate Venture Capital 434 18.10 Valuation 435 18.11 Terms of the Deal 440 18.12 Initial Public Offering 441 18.13 AgraQuest 450 18.14 Summary 451 19.3 Negotiating the Deal 459 19.4 Critical Issues for the Business Plan 462 19.5 AgraQuest 463 19.6 Summary 464 Chapter 20 Leading Ventures to Success 467 20.1 Execution of the Business Plan 468 20.2 Stages of a Business 471 20.3 The Adaptive Enterprise 478 20.4 Ethics 482 20.5 AgraQuest 486 20.6 Summary 486 References 489 Appendices A. Sample Business Plan 509 I-MOS Semiconductors 510 B. Cases 539 Trexel 540 Biodiesel Incorporated 565 Yahoo! 1995 569 Barbara's Options 585 SolidWorks 589 Artemis Images 602 Sirtris Pharmaceuticals 623 Cooliris 649 C. Information Sources on the Internet 655 Glossary 656 Index 666 Chapter 19 Presentations and Deal Negotiations 455 19.1 The Elevator Pitch 456 19.2 The Presentation 457