Week -2 Agenda Introductions & working definitions Lean Launch - PDF document

1/19/15 ¡ Spring 2015 Semester Week # 1 Course Lesson: “Week-2” Topic: Course Overview & Introductions MGMT 421 – New Ventures ENGIN 597H - Technology Management: Innovation and Entrepreneurship 1/20/15 Evening 1/21/15 Day “Week -2” Agenda • Introductions & working definitions • Lean Launch Pad Approach to Entrepreneurship • Meet your Instructors • Syllabus, course flow, administrative issues and course mechanics • Meet each other • Prep for next week: Teaming & Ideation 1 ENGIN 597H- Technology Management: Innovation & Entrepreneurship and MGMT 341- New Ventures Instructors : Professors David McLaughlin, Karen Utgoff, and Bill Wooldridge Teaching Assistant: Jared Rand Days and Times : Tuesdays, 5:30pm – 8:30pm and Wednesdays 10:10 -12:30 Office Hours : TBA Location: Isenberg SOM 106 and ILC S311 Texts: Startup Owner's Manual: Blank & Dorf; K&S Ranch Publishing LLC, 1 st Edition, 2012. Business Model Generation: Osterwalder & Pigneur, John Wiley & Sons, 1 st Edition, 2010. Class web site: http://blogs.umass.edu/leanlaunchpad Online Lectures : http://www.udacity.com/view#Course/ep245/CourseRev/1 Software: Launchpad Central: https://launchpadcentral.com Prerequisites : Passion for discovering how an idea can become a real company. Willingness to engage in experiential learning about how 2 start-ups are built. 1 ¡

1/19/15 ¡ What Is Innovation? • Fresh thinking that adds value – The Economist • Transforms ideas etc. into valuable and useful applications Customer and Financial Considerations Innovation Idea Outcomes: Invention Customers Products Knowledge Companies Research Improved living Need conditions Technical Inputs & Considerations Jobs Problem Wealth 3 What Is Entrepreneurship? “entrepreneurship is the willingness to pursue opportunity, regardless of the resources under control” (Stevenson and Jarillo, 1990) Pursuit: singular, relentless focus, sense of urgency; perceived short window of opportunity. Opportunity: an offering that is novel: pioneering a truly innovative product; devising a new business model; creating a better or cheaper version of an existing project; targeting an existing product to new sets of customers. From ¡Entrepreneurship: ¡A ¡Working ¡Defini;on, ¡by ¡Thomas ¡R. ¡Eisenmann, ¡ ¡Harvard ¡Business ¡ Review, ¡January ¡10, ¡2013. ¡hKps://hbr.org/2013/01/what-­‑is-­‑entrepreneurship ¡ 4 Beyond resources controlled • Resource constraints. • At the outset: its just the human, social, and financial capital of the founders. • Many entrepreneurs bootstrap: keep expenditures to bare minimum, investing their own time & funds • Typically need to mobilize more resources than they control personally: production facilities, distribution channels, working capital, etc… 5 2 ¡

1/19/15 ¡ Pursuing opportunity when not controlling resources brings risk • Demand risk: will the prospective customers be willing to adopt the envisioned solution? • Technology risk: will the engineering & science breakthroughs -- needed to bring a solution to fruition -- actually happen? • Execution risk: can the employees & partners needed to implement the plans be recruited? • Financing risk: will the external capital be available on reasonable terms? 6 Tech Startup Success Rate • 90% of startups fail • 75% of startups fail • For every 10 start-ups, • 3 or 4 will fail completely • 3 or 4 will return the original investment • 1 or 2 will produce substantial returns “How ¡well ¡a ¡failed ¡entrepreneur ¡has ¡managed ¡his ¡company, ¡and ¡how ¡well ¡he ¡ worked ¡with ¡his ¡previous ¡investors, ¡makes ¡a ¡difference ¡in ¡his ¡ability ¡to ¡persuade ¡ U.S. ¡venture ¡capitalists ¡to ¡back ¡his ¡future ¡start-­‑ups ¡says ¡Charles ¡Holloway, ¡ director ¡of ¡Stanford ¡University's ¡Center ¡for ¡Entrepreneurial ¡Studies.” ¡ – ¡The ¡ Venture ¡Capital ¡Secret: ¡3 ¡out ¡of ¡4 ¡start-­‑ups ¡fail, ¡The ¡Wall ¡Street ¡Journal, ¡9/20/12, ¡hKp:// www.wsj.com/ar;cles/SB10000872396390443720204578004980476429190 ¡ ¡ 7 #1 ¡reason ¡for ¡failure: ¡they ¡ make ¡products ¡no ¡one ¡ wants. ¡ ¡ “Why ¡startups ¡fail, ¡according ¡to ¡their ¡ founders.” ¡Erin ¡Griffith, ¡Fortune, ¡9/25/24, ¡ hKp://fortune.com/2014/09/25/why-­‑ startups-­‑fail-­‑according-­‑to-­‑their-­‑founders/ ¡ 8 3 ¡

1/19/15 ¡ New product disappointments • Kodak Photo CD. Offered film camera customers ability to put pictures on CD, view them on TV. 10 years ahead of customers, who weren’t ready. $500M • Segway. Mobile device for everyone in the world who walked. Diffusion limited to niche markets. $200M. • Apple Newton. 5 years too soon for PDA market. $100M • Motorola Iridium Satellite System. Built to support a customer base of millions that didn’t materialize. $5B. • Webvan. National-scale groceries on demand. Customer demand didn’t materialize at rate needed to cover buildout expenses & scale. $800M. Success Stories • Proctor & Gamble Swiffer. Swiveling, disposable mop-on-a-stick. Several $Bn. • Toyota Prius. Electric Hybrid Car. Multi $B market. • General Mills Yoplait GoGurt: Yogurt in a tube; customer base of toddlers extended as kids grow. • Apple Ipod/Iphone & Itunes platform Stereotypical Approach to Technology Business Planning 11 4 ¡

1/19/15 ¡ Key Steps • Write a business plan • Prove technical feasibility • Secure investment • Develop and field test an early product • Refine and launch first commercial product • Generate sales 12 Product Development Orientation Concept/ Product ¡ Alpha/Beta ¡ Launch ¡ Business ¡Plan ¡ Development ¡ test ¡ 1 st ¡ship ¡ Product Development Orientation Concept/ Product ¡ Alpha/Beta ¡ Launch ¡ Business ¡Plan ¡ Development ¡ test ¡ 1 st ¡ship ¡ 5 ¡

1/19/15 ¡ Problems with that model 1. Where are the customers???? 2. Focus on First Customer ship date 3. Emphasis on execution instead of Learning & Discovery Weaknesses • New venture teams often become so focused on addressing technical risks or so enamored of their own ideas that they overlook customer related risks • Key questions – If you build it, will they come? – What product/service meets the needs/wants of customers? 16 Lean LaunchPad Approach* to Startups * Pioneered by Steven Blank (http://steveblank.com/about/) 17 6 ¡

1/19/15 ¡ How to Build a Startup • Idea • Size the opportunity Discover: Who is your customer, what does the customer value, • Business model and how do you deliver value at an appropriate cost? • Customer development • Lean product development Iterations & Pivots along the way to discovery. Course ¡working ¡defini/on ¡of ¡a ¡startup: ¡a ¡temporary ¡organiza/on ¡formed ¡to ¡search ¡ for ¡a ¡repeatable ¡and ¡scalable ¡business ¡model. ¡ Customer Discovery • …finding out who the customers for your product are and whether the problem you believe you are solving is important to them. • Technology (or a novel idea) is an essential element for building innovation- driven businesses but only as part of the value proposition for customers 19 Business Model … describes the rationale of how an organization creates, delivers, and captures value …shows the logic of how a company intends to make money … describes the flows between company and customers … connects 4 main areas of a business: customers, offer, infrastructure, financial viability A founder-driven construct that is created iteratively 7 ¡