Lesson 2

The entrepreneurial firm

Prof. Vittorio de Pedys

ENTREPRENEURSHIP SEMINAR

2

Why we need entrepreneurs: an idiot proof of approach

<1900 1900-’10

‘10-’20 ‘20-’30 ‘30-’40 ‘40-’50 ‘50-’60 ‘60-’70 ‘70-’80 ‘80-’90 ‘90-2000

‘00-2005

le 200 maggiori imprese piemontesi

le restanti 14.400 imprese

0

500

1.000

1.500

2.000

2.500

3.000

200 biggest Piedmont’s companies

remaining 14.400 companies

GDP contribution of private companies in Piedmont: breakdown by year of foundationMillions of Euros, 2007

Source: AIDA (BvDEP, 2008)

New products enter the market at higher speed

Roger Best, Market-Based Management, 2nd ed.

… beginning of life cycle lasts less; start ups have less time to exploit their advantage

Innovators EarlyAdopters

EarlyMajority

LateMajority

Laggards

TH

E C

HA

SM

Technology Adoption Life-Cycle – buying motivesTechnology Adoption Life-Cycle – buying motives

Techies: Try it!!

VisionariesGet ahead of the herd!

Pragmatists:Stay with the herd!

ConservativesHold on!

SkepticsNo Way!!

otherVisionaries

PersonalVision

High

Potential

InnovativeVision

High LevelConsultancyLots of Services

EarlyAdopters

BusinessPragmatics

otherPragmatists

Market/Med.

StrongContender

SomeConsultancy

EarlyMajority

Safe/EasyLeadingEffective/High return

Competitionfrom E.M.

CompetitorPragmatists

Market/Low.

MarketLeader

Few

LateMajority

Safe/EasyLeadingEffective/High return

Only ViableOption

not anissue

Market/Low.

Monopoly/Commodity

Only choice

None

Laggards

TH

E C

HA

SM

Innovators

Buy-in Pressure

Reference Group

Price Point

Leadership Required

Messages

Services Content

None

Low

No

New!

Apprentice-shipTrainingPartnership

Technology

6

Some firm’s slow growth is written in their dna

D. Birch, A Haggerty e W. Parsons1 classify firms in:- elephant: big firms that do not grow - mice: small firms that produce income for their

promoters and their families - gazelle: firms with high growth rate

1 Birch, David, Haggerty, Andrew and Parsons, William (1995), “Who’s Creating Jobs?“ Boston: Cognetics

Annual sales bigger than 1 mio€ Roughly 10 employees Sales growth in last 3 year Sales doubled in last 3 years Cumulated profit positive in last 4 years “organic” growth ( internal)

7

Management team is the key ingredient in successful start ups

Rielaborazioni STEP di: N.C. Churchill, V.L.Lewis – The five stages of small business growth – Harvard Business Review May-June1983

CREATIVITYLEADERSHIP

DELEGATION

COORDINATION

COOPERATION

The entrepreneur must learn to do different things in different stages of its growth : be creative direct good managers delegate good managers coordinate managers that direct other managers Cooperate with his group of managers

11/04/23 8

I settori a più alta intensità di innovazione secondo Eurostat

Eurostat ha individuato una suddivisione delle attività industriali e dei servizi che fa emergere più chiaramente i Settori a più alta intensità di innovazione, sia per il livello di competitività interno al settore che per l’elevato tasso tecnologico intrinseco.

FABBRICAZIONE DI PRODOTTI FARMACEUTICI E DI PRODOTTI CHIMICI E BOTANICI PER USI MEDICINALI

FABBRICAZIONE DI MACCHINE PER UFFICIO, DI ELABORATORI E SISTEMI INFORMATICI

FABBRICAZIONE DI PRODOTTI FARMACEUTICI E DI PRODOTTI CHIMICI E BOTANICI PER USI MEDICINALI

FABBRICAZIONE DI APPARECCHI PER LE COMUNICAZIONI

FABBRICAZIONE DI APPARECCHI MEDICALI, DI APPARECCHI DI PRECISIONE

HIGH TECHNOLOGYINDUSTRIAL SECTORS

POSTE E TELECOMUNICAZIONI

INFORMATICA E ATTIVITÀ CONNESSE

RICERCA E SVILUPPO

HIGH TECHNOLOGY KNOWLEDGE

INTENSIVE SERVICES

11/04/23 9

Capitale, tecnologia e management team sono i fondamenti per la creazione d’impresa

Capitale:le risorse finanziarie presenti vanno rese accessibili in ogni fase dello

sviluppo Fondi pubblici: Nazionali (Sviluppo Italia: titolo II) Regionali (Docup: misura D3) Fondi privati (Business Angel, Venture Capital): Italiani e Stranieri

Tecnologia:le idee vanno individuate e valorizzate, di solito esistono in

abbondanza nelle Università e nelle imprese Presso le Università: sfruttando economicamente i brevetti esistenti, incrementando la

brevettazione, spingendo la ricerca verso il mercato Presso le imprese esistenti che operano nei settori a crescita intensiva: promuovendo

gli spin-off aziendali

Management team:le capacità imprenditoriali sono la risorsa chiave che deve essere

assicurata Incrementando le competenze manageriali di chi vuole fare impresa Diffondendo la cultura e il rischio imprenditoriale presso professori, ricercatori, studenti

e dipendenti delle imprese

10

Capital is added in stages in the differents phases of the firms’ creation

Seed Start-up Early Stage Sustained growth

Founder Family

Venture Capital

IPO

Bank lending

Internal financing

External financing

Business Angels

3F theoretically should exit ...

11/04/23 11

Ancora 3F negli aumenti di capitale

Nel 50% dei casi in cui subentrano Manager Finanziatori o Partner Finanziari nell’aumento di capitale delle SUI benchmark, i soci promotori non hanno più il 51% delle quote.

53%

41%

12% 12%6%

75%

15%

6% 5% 2%

3F ManagerFinanziatori

PartnerFinanziari

PartnerIndustriali o

Strategici

Altro

benchmark

resto del campione

Chi è entrato?

24%31%

Senza 3F all’inizio

Domanda a Risposta Multipla: le percentuali sono calcolate sul totale dei rispondenti, 17 benchmark e 65 resto del campione.

Innovation…

14

To define the form of your initiative you must understand and design the Business Model

VALUE PROPOSITION RESOURCES People, technology, products, facilities, equipment, brands, cash that are required to deliver this value proposition to the targeted customers.Process automatically followed become Culture.

PROFIT FORMULA PROCESSES

Product or service that helps customers to do more effectively, conveniently and affordably a job they’ve been trying to do

Assets and cost structure, margins, scale, and velocity required to cover them

Ways of working together to address recurrent tasks in a consistent way: training , development, manufacturing, budgeting, planning, etc.

15

Time

Time

Per

form

ance Sustaining Strategy

Bring a better product intoan established market

Dif

fere

nt

Mea

sure

of

Per

form

ance Low-End Disruption

Adress overserved customersWith a lower-cost business model

New-Market DisruptionCompete against nonconsumption

Nonconsu

mers

Or Nonco

nsuming

Occasio

ns

The Third Dimension of the Disruptive Innovation Model

16

The Role of Business Model Innovation in the Process of Disruption

Time

Time

Pe

rfo

rma

nce

Diff

ere

nt

Me

asu

re o

f P

erf

orm

an

ce

Non-consu

mers or N

on-consu

ming occasio

ns

2. Business Model Innovation

3. New Value Network•Customers•Distribution•Suppliers

Sustaining innovations

1. Sim

plifying

Technology

17

Company Job-to-be-Done Integration

IKEA I need to furnish this place today Furniture design for take-it-home-yourself packaging; childcare; things to cover floors, hang on walls, outfit kitchen

Onstar Whatever happens, I want to be sure that my family and I will be taken care of. I need place of mind

Live advisors integrated with local police emrgency systems;Crash & activity sensors througouht vehicle enabling a montly email on vehicle wellness; factory-install despite asynchronous qualification cycles of mechanical and electronic products

Disney Theme Parks 1955-1985

I want a warm and loving escape with my family into a fantasy

Animated films that create characters and stories; Disney’s “Wonderful World of Color” weekly TV show to bring fantasy home; Theme parks

SAS Institute I need to make the right decision, and the safe decision

Data analysis software; decision support tools; data warehousing; virtualization to facilitate access to additional data

FedEx I need to get this from here there with perfect and certainty as fast as possible

Air transportation; Memphis hub; ground pickup & delivery; real-time tracking

Hilti I need to finish this construction job on time and on budget

Hilti leases tools as a service, rather than owing them. It maintains the inventory of tools on its customers’ construction sites

Microsoft Office I need a persuasive document that clearly communicates and makes me look good

Word processing, data analysis &graphics software; web browser; etc.

Mayo Clinic I need a precise diagnosis of & recommended therapy for my disease

Practiced processes for converging physicians for multiple specialties onto each patient. Mayo is integrated into training its own doctors

Other Examples __________________________________________________________________________

______________________________________________________________________________________

Business models built around job to be done

18

Four areas support the good quality of an initiative

Innovation

Market

Consumers

Competitors

The current dynamics between Consumers and Competitors and in 5 and 10 years determine the development of the market.

The growth rate of the market and the breaking points of the sector represent entrepreneurial opportunities.

Current and future competitors fix the structure of the sector.

Know How, Demand, Life Cycle and competitors fix the interest of a sector.

Innovation is the capacity to do something useful for consumers in a different way.

Do in a different way does not (only) mean do in a technologic way.

Consumers must have a need to be satisfied in a different way(feel the pain). Consumers must be available (distribution network) and they have the possibility to spend.

19

JOB (VALUE PROPOSITION) RESOURCES

PROFIT FORMULA PROCESSES

Business Model Template

20

JOB (VALUE PROPOSITION) RESOURCES

PROFIT FORMULA • Very low fixed capital invested and fixed

costs (design fee)• 34% Contribution margin. Price: 12.5$,

variable cost 8.225 (Manufacturing/Assembly 3.1, TV Guide Royalty 10%, Designer 5%, Ad Allowance 5%, Heller Factor 1%, Sales Commission 20%)

• BE reached with the first sales to department stores

• …

PROCESSES • Manage a network of skilled and

independent sale rep• Involve and manage the manufacturer

(Swiss Colony) and the factor (Heller)• Dealing at the same time with two

different resellers• Capability to act quickly • …

• Reiss industry experience, credibility and contacts

• Sales force plug and play• TV guide brand and ad allowance• …

• Spend time together• Involve themselves in a game where

skills and luck are important• Give as a present something the

allows the above mentioned• …

R&R Business Model