new product development · entrepreneurship: principles © 2012 ff -jack m. wilson distinguished...

Entrepreneurship: Principles © 2012 ff -Jack M. Wilson Distinguished Professor New Product Development - 1

New Product DevelopmentDr. Jack M. Wilson, Distinguished Professor of Higher Education, Emerging Technologies, and Innovation

http://www.jackmwilson.net/Entrepreneurship/index.html

http://www.jackmwilson.net/Entrepreneurship/Principles/JMW-Principles-Schedule-F2016.htm

http://en.wikipedia.org/wiki/File:Jack_Ma_2008.jpg


Steve Jobs

• "You‘ve got to start with the customer experience and work back toward the technology - not the other way around.“

• “A lot of times, people don't know what they want until you show it to them.”

• Cofounder of Apple, NeXT, and Pixar

• Visionary of iPod, iPhone, iPad, iTunes, Macintosh, Apple II, etc.

• Don’t let the noise of other’s opinions drown out your own inner voice. And most importantly, have the courage to follow your heart and intuition. They somehow already know what you truly want to become. Everything else is secondary.

– Steve Jobs



http://upload.wikimedia.org/wikipedia/commons/b/b9/Steve_Jobs_Headshot_2010-CROP.jpg


A more complete version of the Job’s Quote

• “This is what customers pay us for—to sweat

all these details so it’s easy and pleasant for

them to use our computers. We’re supposed

to be really good at this. That doesn’t mean we

don’t listen to customers, but it’s hard for them

to tell you what they want when they’ve never

seen anything remotely like it.

• Take desktop video editing. I never got one

request from someone who wanted to edit

movies on his computer. Yet now that people

see it, they say, ‘Oh my God, that’s great!’”

• http://archive.fortune.com/magazines/fortune/fortune_archive/2000/01/24/272277/index.htm

• http://www.simonandschuster.com/books/Steve-Jobs/Walter-Isaacson/9781501127625



http://archive.fortune.com/magazines/fortune/fortune_archive/2000/01/24/272277/index.htm

http://www.simonandschuster.com/books/Steve-Jobs/Walter-Isaacson/9781501127625


The Ten Times Rule – 10x rule

• If your solution is ten times better at meeting the customer’s needs

than current products, then you have a very good chance to

succeed.

– Email is 10x better than snail mail

– Wikipedia is 10x better than encyclopedias

– Amazon.com has 10x times the books than the worlds largest book star.

– Apple iPod has ten times the songs of a Sony Walkman

– Google is 10x better than competitors

– Facebook got 10x number of members as MySpace




Remember the Two Key Concepts in Innovation

• Creative Destruction – Joseph Schumpeter –Harvard University economist from Austria

– Creative Destruction – 1934- new products and technologies make old products and technologies obsolete

• Disruptive Innovation– Clayton Christensen –Harvard University Management

– Disruptive Innovation-1997 – new products begin in new, unexplored markets but grow in quality and capability to displace older markets.

• Mini-computer disrupted mainframes and were in turn disrupted by PC’s.

• Steel mini-mills created poor quality steel at low prices to take the least profitable part of the steel market. They then grew to displace the old-line steel companies.

• I cannot over-emphasize how important these two topics are in understanding entrepreneurship. Creative destruction and disruptive innovation are indeed closely related, disruptive innovation is a very special case when a company enters into a very low end of a market at a place where the dominant players are not so interested because it is not profitable or not able to satisfy their largest customers. But, the company doing the disruption gets a foothold in the market, establishes itself, and then learns how to do the things it needs to do to enter the more profitable and sophisticated portions of the market.

• Often the established companies never see it coming.– http://www.claytonchristensen.com/key-concepts/

– http://en.wikipedia.org/wiki/Clayton_M._Christensen

– http://en.wikipedia.org/wiki/Disruptive_innovation



http://en.wikipedia.org/wiki/Clayton_M._Christensen

http://en.wikipedia.org/wiki/Clayton_M._Christensen

http://en.wikipedia.org/wiki/Disruptive_innovation


Innovation is what makes enterprises sustainable

• In the immortal words of Andy Grove

– the former Intel Corporation CEO

• “Only the Paranoid survive!”

Andy Grove congratulates Mark Bernstein of ILinc



../CaseStudies-VariousCourses/Case-ILINC-LearnLinc Case.pptx


NetFlix and Blockbuster – a great example of creative destruction.

• Blockbuster and other vendors would rent video tapes to homeowners who

would need to return them or incur a late fee.

• Videotapes were later replaced with DVD’s but the model of rental remained

the same.

• Netflix introduced a business model in which DVD’s were mailed to

subscribers and there were no late fees. Viewers no longer had to go to a

store to get the disc. Blockbuster went bankrupt.

• Digital delivery of Video then began to displace video disc mailing and video

was delivered over he network directly to the viewer.

• Netflix managed to get through this change in business models –at least to

this point.

• NetFlix Case



http://www.jackmwilson.net/Entrepreneurship/Cases/Case-NetFlix.pdf


The path from idea to a product




The Development Funnel




An Alternative View of the Product Development Funnel.




Diffusion of innovations

• Diffusion is the means by which innovations are translated into

social and economic benefits.

• We know that the impact of the use of innovations is around four

times that of their generation

• However, the benefits of innovations can take 10–15 years to be

fully effected, and in practice most innovations fail to be adopted

widely, and so have limited social or economic impact.




Everett Rogers, Professor of Communication, Ohio State Univ.

• Rogers’ definition of diffusion is

used widely: – ‘the process by which an innovation is

communicated through certain channels

over time among members of a social

system. It is a special type of

communication, in that the messages are

concerned with new ideas’

– “Diffusions of Innovations;” Everett Rogers;

Simon & Schuster; (1962).



http://www.google.com/url?sa=i&rct=j&q=&source=imgres&cd=&cad=rja&uact=8&ved=0ahUKEwiBkNWH95nOAhVEGR4KHXWzD-QQjRwIBw&url=http://books.google.com/books/about/Diffusion_of_Innovations.html?id%3Dv1ii4QsB7jIC%26source%3Dkp_cover&psig=AFQjCNHrAx5qsyHIiyCh7nGLh7xhvJ62tw&ust=1469924887803086


Rogers’ 3 types of innovation decision

• Individual,

– in which the individual is the main decision-maker, independent

of peers. Decisions may still be influenced by social norms and

interpersonal relationships, but the individual makes the ultimate

choice. For example, the purchase of a consumer durable such

as a mobile phone.

• Collective,

– where choices are made jointly with others in the social system,

and there is significant peer pressure or formal requirement to

conform. For example, the sorting and recycling of domestic

waste.

• Authoritative,

– where decisions to adopt are taken by a few individuals within a

social system, owing to their power, status or expertise (e.g.

adoption of ERP systems by businesses, or MRI systems by

hospitals).




Rogers Model of Diffusion

The famous “S” curve

By Tungsten - self-made based on Rogers, E. (1962) Diffusion of innovations. Free Press, London, NY, USA., Public Domain, https://commons.wikimedia.org/w/index.php?curid=8043923




Crossing the chasm: some jargon

• Early market –– the early adopters

• Chasm –– getting from the early adopters

to the early majority.

• Bowling Alley –– once established in the early

majority

• Tornado –– as the innovation moves from

early majority to late majority it becomes a tornado of adoption.

• Main Street –– we made it!

• Total Assimilation– Now it is old news!



http://www.muckercapital.com/wp-content/uploads/2013/10/chasm.jpg


Barriers to Adoption

• Economic –

– personal costs versus social benefits, access to information,

insufficient incentives

• Behavioral –

– priorities, motivations, rationality, inertia, propensity for change or

risk

• Organizational –

– goals, routines, power and influence, culture and stakeholders

• Structural –

– infrastructure, sunk costs, governance.




Factors affecting diffusion

In predicting the rate of adoption of an innovation, five factors explain 49–87% of the variance:

• Relative advantage – the degree to which an innovation is perceived as better than the product it supersedes, or

competing products. Typically measured in narrow economic terms, for example cost or financial payback.

– Non-economic factors such as convenience, satisfaction and social prestige may be equally important.

• Compatibility –– how compatible is the innovation to existing systems?

• Complexity– How complex is it to implement?

• Trialability– the degree to which an innovation can be experimented with on a limited basis. An

innovation that is trialable represents less uncertainty to potential adopters, and allows learning by doing. Innovations which can be trialled will generally be adopted more quickly than those which cannot.

– Sometimes called ‘divisibility’ – how far can the risk of adoption be broken down into small steps rather than requiring a full commitment at the outset

• Observability.– the degree to which the results of an innovation are visible to others. The easier it is for

others to see the benefits of an innovation, the more likely it will be adopted.

– The simple epidemic model of diffusion assumes that innovations spread as potential adopters come into contact with existing users of an innovation.




• Intellectual property –patents, copyrights, trademarks and trade

secrets.

- (I need to add a bit more to his stuff here.)

• Key Asset Access

• Proof of concept –Selling the product in advance

(Use the ILinc Success magazine article that related how we

did this for millions.)

• Gross margins -ARPU-Ave. Rev. per User

• COGS- Cost of Goods Sold

• CoCA- cost of customer acquisition (also CCA)

• Scalability




The Four Key Forms of Intellectual Property (IP)

• Patents

• Copyright

• Trademarks

• Trade Secrets

• Detailed information may be found in my text on Technological

Entrepreneurship– http://www.jackmwilson.net/Entrepreneurship/TE/TE-Chap4-IntellectualProperty.pdf

• I also have several cases that illustrate these principles– http://www.jackmwilson.net/Entrepreneurship/Cases/Case-CRISPR-MITvsUC-IP.pdf

– http://www.jackmwilson.net/Entrepreneurship/Cases/Case-Napster-Ethics-Legal.pdf



http://www.jackmwilson.net/Entrepreneurship/TE/TE-Chap4-IntellectualProperty.pdf

http://www.jackmwilson.net/Entrepreneurship/Cases/Case-CRISPR-MITvsUC-IP.pdf

http://www.jackmwilson.net/Entrepreneurship/Cases/Case-Napster-Ethics-Legal.pdf


Patents

Patents are often the first thing that scientists or engineers think of

when dealing with intellectual property.

• Patents

– A patent is a grant from the federal government conferring the rights to exclude

others from making, selling, or using an invention for the term of the patent as

many as 20 years.

• To obtain a patent, an invention must:

– Be novel

• It must be something that is completely new. If others have done it before and

disclosed that, then it cannot be patented.

– Not be obvious to a person of ordinary skill in the field

• This is often the point around which patents disputes start. If one can show that an idea

would be obvious to anyone skilled in the field then it cannot be patented. Sometimes

that can be in heavy dispute.

– Be useful

• You cannot patent something that does not have an obvious immediate use.

• Prior to 2013 you had to be the first to invent.

Now you need to be the first to file.




Three forms of patent protection

There are three basic forms of patent protection that are each designed

to do something a bit different.

• The Utility Patent:

– Duration is 20 years from the date of the original application.

– It is awarded for any new or useful process, machine, manufacture, or

composition of material or any new and useful improvement thereof.

• The Design Patent

– The duration is 14 years from the date the patent is awarded.

– It is awarded to protect the invention of a new, original, and ornamental design

for manufactured products.

• The Plant Patent

– The duration is 20 years from the date of the original application

– It protects any new varieties of plants than can be reproduced asexually.




What Can You Patent?

You can patent any:

• Process

• Machine

• Manufacture

• Chemical formula

• Design

• Plants




The Business Method Patent

In 1998, a Federal Court ruling assigned the US Patent and Trademark Office (USPTO) with the responsibility of issuing patents for unique automated technologies that process data or generate revenue (i.e. business models, methods, processes—including computer software).

Suddenly, e-commerce features such as subscription-based access, targeted advertising networks, portal sites, online auctions, virtual malls, and even forums were now considered business models, methods, and processes that could be patented.

The Business Method Patent has become a very important form of patent in the eCommerce and other internet mediated business interactions. A business method patent is a patent that protects an invention that is or facilitates a method of doing business.

• This includes new types of e-commerce, insurance, banking, tax compliance etc.

– This is a relatively new type of patent and continues to be the subject of controversy and litigation.

• Here are a few important examples:– Amazon.com’s one-click ordering system,

– Priceline.com’s “name-your-price” business model

– Netflix’s method for allowing customers to set up a rental list of movies to be mailed to them.




Trademarks

• A trademark is any word, name, symbol, or device used to identify

the source or origin of products or services and to distinguish those

products or services from others.

ApplePayiPadiPodiPhoneBut not iWatch!




Trade Secrets (Coca Cola formula for example)

• A piece of knowledge that confers an advantage on a firm and is protected by non-disclosure

• Protect a competitive advantage without disclosing how an underlying technology works

• There are some disadvantages– Must be kept hidden to remain valuable

– Doesn’t provide a monopoly right

– To enforce and claim damages in court, must show a loss of competitive advantage

• What qualifies for trade secret protection– Is not known outside the company

– Is known only inside the company on a “need to know” basis

– Is safeguarded by stringent efforts to keep the information confidential

– Is valuable and provides the company a compelling competitive advantage

– Was developed at great cost, time, and effort

– Cannot be easily duplicated, reverse engineered, or discovered.

• If you don’t take active steps to protect it, then you lose it.




Copyrights

• Copyrights

– A copyright is a form of intellectual property protection that grants to the owner of

a work of authorship the legal right to determine how the work is used and to

obtain economic benefits from the work.

• What is Protected by a Copyright?

– Literary works

– Musical compositions (and derivative works)

– Dramatic works

– Pantomimes and choreographic works

– Pictorial, graphic, and sculptural works




Key Asset Access

• Today many companies are dependent upon things like

– Facebook

– Amazon Web Service –the Cloud

– IBM Watson

• Hootsuite is a took to manage twitter accounts.

– https://hootsuite.com/#

– Twitter could block access or go into competition.

– Partnerships are often key to such relationships.

– Larger companies often cut off potential competitors to their own products.



https://hootsuite.com/


Proof of Concept –Selling the Product before Making It

• In software this is often called selling “vaporware.”

• Example: Jackie Courtney –Nearly Newlywed

– Second hand wedding dresses.

– Did not work

• Example: ILinc

– Met with many successful entrepreneurs

• Bugle Boy, Wellfleet, Interlan, Bay Networks, Nortel, MapInfo, etc

– Went against advice

– Decided to sell vaporware.

– Success magazine called it the “Wimpy method”

• Wimpy: “I’ll gladly pay you Tuesday for a hamburger today!”

• ILinc: “I’ll gladly give you software next year for $300,000 today.”

– Against all odds (and reason): It worked!

– First Customers: IBM, AT&T, GTE, Sprint, Office Depot, and News Corp.

– We also had received funding from the Air Force SBIR program.




Key terms to know

• Gross margins

– (Price-COGS)/COGS as %

• COGS- Cost of Goods Sold

• CoCA- cost of customer acquisition (also CCA)

• ARPU-Average Revenue per User over a period of time

– Repeat business is a good thing.

• Scalability:

– My partner, Mark Bernstein, told his father, a dentist that a dentist could only

treat so many patients per day, but that selling software had no limit as to how

much he could sell (or make) in a day.

– Variable costs versus fixed costs

• Variable costs do not help in scaling. The amount of steel in every similar car is the

same.

• Fixed costs do not go up with more sales. A machine that stamps steel fenders does

not cost any more to stamp 100 per day as it does to stamp one.




• The following pages are optional checklists for the user.




Checklist for Relative Advantage

• How well does my plan show how much better off people

will be when they adopt it?

• Why is this plan better than what has been done before?

• What advantages or benefits may there be to accepting

the plan?

• Who will gain from the implementation of the plan?

• How will I (or others) be rewarded by adopting the plan?

• How can I emphasize the plan’s benefits to all?




Checklist for Compatibility

• How well does my plan demonstrate that it is compatible

with current values, past experiences and needs?

• Is the plan consistent with current practice?

• Does the plan meet the needs of a particular group?

• Does it offer better ways to reach our common goals?

• Who will naturally support and agree with the plan?

• Can it be favorably named, packaged or presented?




Checklist for Trialability

• How well does my plan allow for trialability?

• Can the plan be tried out or tested?

• Can uncertainty be reduced?

• Can we begin with a few parts of the plan?

• How can others be encouraged to try out the plan?

• Can the plan be modified by you or others?




Checklist for complexity

• How well does my plan provide for easy communication,

comprehension and use?

• Is the plan easy for others to understand?

• Can it be explained clearly to many different people?

• Will the plan be easily communicated?

• How can the plan be made more simple or easy to

understand?

• Is the plan easy to use or follow?




Checklist for Observability (Visibility)

• How well does my plan provide results that are easily

observed and visible to others?

• Is the plan easy for others to find or obtain?

• Can the plan be made more visible to others?

• How can I make the plan easier for others to see?

• Will others be able to see the effects of the plan?

• Are there good reasons for not making the entire plan

visible?

Viral marketing is a derivative of this issue that is a critical

way of bringing your new product to the publics attention.




What other factors do we need to pay attention to?

• What other resources will I need; how can I get them?

• What obstacles exist; how can we prevent or overcome

them?

• What new challenges will be created; and dealt with?

• How can I encourage commitment to the plan?

• What feedback about the plan is needed?



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