ÅA

Management of Innovations
and Entrepreneurship

Malin Brännback
Fall 2004
 ÅA Course Outline
Course outline
 W. 38; Sept. 13, Introduction, Innovations,
Innovations Management, Entrepreneurship
 Questions to complete for week 39 (Drucker Ch. 1,2,
10,11..you may want to look through ch. 3-9 as well)
 Analyze Business Week “great innovators”, cold call
15 min. max on week 39
 Guest Lecture: Alan Carsrud Entrepreneurship, what it
is and what it isn’t
 W. 39; Sept. 20, Entrepreneurship,
Entrepreneurial Business – The New Venture
 Questions to complete for week 40. Drucker Ch. 12-
15) Article 1, 12, 4, and 9
 ÅA Course Outline
Course outline  W.40; Sept. 27, Diffusion of Innovations,
 Questions to complete for week 44 (Moore Ch. 1-5)
 Article 3, 5, 7 and 8
 Guest Lecture: CEO Markku Jalkanen, Faron
pharmaceuticals, former CEO, still owner and founder of
Biotie Therapies
 Hand-out of GR-1 assignment to be prepared in pairs
and to be handed in on October 25
• Contact Lenses for Chickens
 W. 44; Oct. 25 The Idea, Defining the Concept and
Markets – it’s more than just potential
 Guest Lecture 25.10, Kei Heikkilä-Stenvik,
Commercialising high technology
 Articles 2, 6, 11
 ÅA Course Outline
Course outline  W. 45; Nov. 1, Business Plan Development
 Questions from article #13 to be handed in on Nov. 8;
 Contact Lenses for Chickens prepare to discuss
 Hand-out of 2 Business plans
 W. 46; Nov. 8, The Dynamics of Innovation/Open Innovation
 Questions from Utterback and Chesbrough to be handed in on
Feb. 3
 W. 47; Nov. 15, Four Business Plans
 You will read 2 business plans
 GR-2 assignment. Prepare in pairs an evaluation of one
Business plan, to be handed in and prepare to discuss.
 Guest lecture, VP Business Development Kai Lähdesmäki and
CTO Timo Veromaa, Biotie Therapies

 Individual assignment to be handed in W.48 Friday at 15.00

 ÅA Large Individual Assignment
Course outline
Assignments
You will write a case on an innovation
Describe an innovation –
Describe how it came about and its
evolution over time.
Describe the market, competition,
Describe the management team
Where is it right now? Problems ahead
I want a good story; I want facts and I want
your own analysis of the case
 ÅA Assignments, and Grading

Course outline  A: 2 Group assignments, max. 45p

Assignments  Contact Lenses for Chickens 15p
 Business Plans 30p
• 15 p for full analysis
• 5p x 3 for minor analysis of the other 3
 B: 10 Individual assignments max 90p
• w. 38 10+10+5 = 25p
• w. 39 10 = 10p
• w. 40 10+5 = 15p
• w. 44 10+5 = 15p
• w.45 10p
• w. 46 10p
• w. 47 5p
 C: 1 Large Individual assignment 65 points
 Total 200 p. 100 points required for pass, min. 50% of each
assignment. NO EXAM
 IN 1874….
ÅA SAMUEL CLEMENS WROTE…
Course outline
Assignments
Introduction
TRYING TO GET THE HANG OF THIS NEW
FANGLED MACHINE..
..[IT] COSTS 125 DOLLARS.
THE MACHINE HAS SEVERAL
VIRTUES. I BELIEVE IT WILL PRINT. FASTER
THAN I CAN TYPE…IT PILES AN AWFUL STACK
OF WORDS ON A PAGE
ÅA
 ÅA “There are more things in heaven and earth
than are dreamt of in your philosophy.”
Course outline
Assignments
Introduction “It was the best of times, it was the worst of
times, it was the age of wisdom, it was the age
of foolishness, it was the epoch of belief, it was
the epoch of incredulity, it was the season of
light, it was the season of darkness, it was the
spring of hope, it was the winter of despair, we
had everything before us, we had nothing
before us, we were all going direct to heaven ,
we were all going direct in the other way.”
 Let’s look at the history of
ÅA technological change..
Course outline The past informs the  You will need to look
Assignments
Introduction
present and into a firm’s or an
Tech change the present industry’s historical
illuminates development in order
to spot discontinuities
the past
or other major breaks
 Find out about their
past leaders
 Look into develop-
ments in society at
large
 Get the big picture!
 ÅA Times of Change
Course outline
Assignments The emergence of the Internet is said to be the
Introduction greatest change ever.
Tech change
Scientific advances in biotechnology is said to have
the most profound change on man now and in the
future.

It depends on your reference point!

Major technological breakthroughs tend to change

industries, business, society, etc – but change is
incremental (mostly)
 ÅA Eras of Change
Biotech
Age
Course outline Knowledge
Assignments Age
Introduction
Technology
Tech change
Age

Industrial
Age
Agricultural
Age
Value Creation

Iron
Stone Age
Age

Time

Reference: R Boulton & al. Cracking the Value Code an Arthur Andersen publication
 ÅA Technological change
Course outline
Assignments
Introduction
Tech change However, the market is almost
never where the inventor thinks it will
be.
Although the feelings about hype
appears to create the same kinds of
feelings regardless of time
 ÅA 150 years ago!
Course outline
Assignments
The Industrial revolution – nothing much happened
Introduction before the railroads came although the steame engine
Tech change was the invention enabling the REAL change:
The communications and transportation revolution
 telegraph and railroads
 City of Chicago population soared; 1850 29,963; 1870 298,977;
1890 1,099,850; 1910 2,185,283
• 104 trains came and left Chicago per day in 1856
 ÅA Technological change
Course outline
Assignments
 The Internet would not have been without the
Introduction invention of the computer or even the coming of
Tech change the PC back in the 1970’s
 Paul Freiberger and Michael Swaine: Fire in the Valley
 and ultimately the World Wide Web 1989, which
needed an interface – the Mosaic in 1992

 So, the major invention was the computer, needing

the combination of a whole array of prior
innovations assembled together for creating a
commodity – and now all hell’s loose.
 Views of technology
ÅA business
Course outline  A Technologists view  A Market-Oriented view
Assignments
Introduction The manufacturer who waits
Tech change If a man makes a better
mousetrap than his for the world to beat a
neighbor, though he path to his door is a
builds his house in the great optimist. But the
woods, the world will manufacturer who shows
make a beaten path to this “mousetrap” (and its
his door. value) to the world,
keeps the smoke coming
out his chimney.
Ralph Waldo O.B. Winters
Emerson
 ÅA
Course outline
Assignments
Introduction
Tech change Idea, Invention, Innovation –
Idea, Invention
Innovation 3 different words
 ÅA Definitions
Course outline  A Technological innovation is the successful
Assignments implementation of a technical idea new to the institution
Introduction creating it. The essence of technology-based innovation is
Tech change the systematic and successful use of science to create new
Idea, Invention forms of economic activity. Technology-based innovation
Innovation thus represents a subset of all innovation. The distinction
between technology-based innovation and incremental
product enhancement is based on the extent of novelty in
the science or technology

 A commercial innovation is the result of the application of

technical, market, or business-model ingenuity to create a
new or improved product, process, or service that is
successfully introduced into the market.
 ÅA Definitions
Course outline  An invention is distinguished from an innovation by its
Assignments character as pure knowledge. An invention becomes an
Introduction innovation with the first commercial transaction. An
Tech change innovation is thus a commercialised invention
Idea, Invention
Innovation
 The direct products of a technological invention are not
goods or services, but the recipes used to create them. This
may result in patents, or more broadly in new firms or
business units within existing firms. A patent refers more to
an invention than an innovation. Inventions are the
necessary seed for technological change, but it is
innovation that generates the economic benefit.
 ÅA Innovation
Course outline
Assignments
Innovation is a highly complex process affected
Introduction by many factors within the business
Tech change
Idea, Invention
environment. Innovation goes beyond R&D and
Innovation should not be understood as simple transfer of
know-how and technology, in which knowledge,
production, application and exploitation can be
separated
Support of R&D is still based on the linear
model of innovation
 ÅA Innovations
Course outline
Assignments
Innovations are closely related to product
Introduction development
Tech change
Idea, Invention  levers by which companies can reinvent
Innovation
themselves
 Innovations streams are patterns of innovation
that are required for sustained competitive
advantage
 First, we will look at the purpose of the business
and
 Then, on diffusion of innovations – to innovation
streams we will return on week 45
 ÅA Innovations
Course outline
Assignments
Innovations studied within industrial economics as
Introduction technological paradigms and trajectories
Tech change
Idea, Invention Innovations management as management of
Innovation technology and R&D
Product innovations
Process innovations
Business concpet innovation
Incremental, radical or disruptive innovations
Architectural innovations

Value innovations
 ÅA The basic functions: Innovation
Course outline
Assignments
 Schumpeter (1934); innovations is an idea or an
Introduction invention that can actually be sold on the market,
Tech change mere commercial potential is not enough!
Idea, Invention
Innovation  The most productive innovations is a different
product or service rather than just an improvement
(avoid me toos!)
 innovation is not invention
 it’s a term of economics rather than of technology
 non-technological innovations are as important
 Innovation is the task of endowing human and
material resources with new and greater wealth-
producing capacity.
 ÅIA
nnovations – according to Drucker
Course outline
Assignments
Introduction
Tech change
Idea, Invention Is much more a term of
Innovation Technology economics than it is about
technology

!! What do you know

? about markets??
!!
 ÅA Innovations
Course outline
Assignments Along intensified competition and
Introduction
Tech change
globalisation of business a wider view of
Idea, Invention innovations is evolving
Innovation
 Knowledge management, and
• Complex search, learning and problem-solving
process
 Organisations learning

 Competence-based competition
 ÅA Innovations management
Course outline
Assignments Used to be integrated – today based on
Introduction
Tech change
networking
Idea, Invention
Innovation Spatial proximity becomes essential for
sharing and creating knowledge
Management of knowledge-based
processes bewteen
 university and business
 business and business
Create profitable business
ÅA It’s not just about ideas

Here’s a great idea, it’s from me

ÅA
ÅA
 ÅA Entrepreneurship
Course outline
Assignments
 Often:
Introduction  One who starts his own, new and small business
Tech change  Is entrepreneurship only for small business???
Idea, Invention
Innovation  Better:
E-ship
 one who creates a new business in the face of risk and
uncertainty for the purpose of achieving profit and
growth by identifying opportunities and assembling the
necessary resources to capitalize on them
 Or:
 J. B. Say: changing the yield of resources
 Changing the value and satisfaction obtained from the
resources by the consumer
 A process definition of
ÅA Entrepreneurship
Course outline It is the process of recognizing, seizing,
Assignments
Introduction
pursuing and exploiting opportunities without
Tech change regard to the resources you currently control.
Idea, Invention
Innovation
E-ship
An attitude towards management and
technology that focuses on opportunities,
needs fulfillment and controlling resources. It
is not focused on risk management, owning
resources, or science for technology sake.
 ÅA Entrepreneurship
Course outline
Assignments But not every new small
Introduction
Tech change
business is entrepreneurial
Idea, Invention or represents
Innovation
E-ship enrtrepreneurship

Even large companies can

be entrepreneurial
 ÅA OPPORTUNITIES
Course outline  Good scientific outcomes are not always good
Assignments
Introduction
opportunities nor viable business concepts.
Tech change  Concepts are built using science & entrepreneurial
Idea, Invention
Innovation
creativity - in real time and take time.
E-ship  Opportunities are attractive, durable, timely, and
Opportunities
anchored in a product or service which creates or
adds real value for its buyers and end users.
 Viable business concepts provide Need
Satisfaction, Pain and/or Suffering Relief.
 Opportunities yield measurable net benefits to the
entrepreneurial team and to society.
 Science, Commercialization
ÅA and customers
Course outline
Assignments
 Science&Commercia- Customers:
Introduction lization:  “I cannot give you the
Tech change  Avoid spending too formula for success,
Idea, Invention
much time and money
but I can give you the
Innovation formula for
E-ship on “Trombone oil or
Opportunities Space Shuttle docking failure...which is: try to
Commerciali- ideas” please everyone.”
zation
 You may turn out the
best product in the
Herbert Bayard Swope
world, but the entire
world needs only about
a pint a year or five in a
generation. These are
great ideas, but poor
business opportunities
or concepts.
 VENTURE CONCEPTS and
ÅA Financial resources
Course outline
Assignments
Venture Concepts: Financial
Introduction  "Vision is the art of Resources
Tech change
Idea, Invention seeing things  "Happiness is a
Innovation invisible.” positive cash flow.”
E-ship

Jonathan Swift Fred Adler

 ENTREPRENEURIAL
ÅA ASSESSMENT and Reality Check
Course outline
Assignments
"The true "Never tell me the
Introduction entrepreneur odds."
Tech change
Idea, Invention acknowledges that
Innovation
E-ship he or she cannot  Han Solo in "Star
succeed alone." Wars"

 Dr. An Wang
 VENTURE EVALUATION
ÅA and Success
Course outline
Assignments
"Confidence is "Success, as I
Introduction what you feel see it, is a result,
Tech change
Idea, Invention before you not a goal."
Innovation
E-ship comprehend the
situation."  Gustavae Flaubert

 Old Proverb
 ÅA COMPELLING INTEREST
Course outline
Assignments “Choose a job you love, and you will
Introduction
Tech change never have to work a day in your life.”
Idea, Invention
Innovation
E-ship
 Confucius
 ÅA
Course outline
IN FINLAND
Assignments
Introduction In 2000 there were
Tech change
Idea, Invention
Innovation
222817 companies
E-ship
which employed
1,301419 persons, with a
turnover of €262 million
 The corporate structure of
ÅA
Finalnd in 2000 (Pki-Ytkkk/Tukkk)
Course outline
Assignments
Introduction
Tech change Yritykset
Idea, Invention
Innovation
E-ship
Henkilöstö

Liikevaihto

0% 20 % 40 % 60 % 80 % 100 %

0-9 10-49 50-249 yli 250

 ÅA
What is the purpose of a
Course outline
Assignments
Introduction
Tech change
Idea, Invention
Innovation
business?
E-ship
The Purpose
of Business

Drucker, P. F. (1974), (2001), (2002)

Porter M. E. (1980), (2001)
Moore, G. A. (1991), (1995)
Moore, J. F. (1996)
 ÅA
Course outline
Assignments
Introduction
Tech change
Idea, Invention
Innovation
The purpose of a business
E-ship
The Purpose
of Business

To create a customer
 ÅA Business Model
Course outline
Assignments A business model is not just an idea of
Introduction
Tech change
what could be a business
Idea, Invention
Innovation A business model require the definition
E-ship
The Purpose of the business and its purpose and
of Business
mission have to be translated into
objectives
otherwise, they remain insights, good
intentions, and brilliant epigrams that
never become achievements
 ÅA Business Model
Course outline
Assignments
 Business people have to create markets with
Introduction effective demand
Tech change
Idea, Invention
 There has to be a customer who is willing to pay
Innovation converting resources into wealth.
E-ship
The Purpose  What the customer considers value is never just a
of Business product, it is always a utility, i.e. what a product or
service does for him
 A business model in order to be viable requires a
sound revenue model, with one objective
 Profit is the test of the validity of the business model
 Profit is a condition of survival. It is the cost of the future,
the cost of staying in business
 ÅA The purpose of a business
Course outline
Assignments create a customer
Introduction
Tech change a business enterprise therefore has only two
Idea, Invention basic functions:
Innovation
E-ship  marketing and innovations
The Purpose
of Business There is only one starting point
 The customer

The customer defines the business!

 ÅA The basic functions: Marketing
Course outline
Assignments
The business will start out with the needs,
Introduction realities and values of the customer.
Tech change
Idea, Invention  What does the customer want to buy? Not what do
Innovation we want to sell!
E-ship
The Purpose  A business can exist only in an expanding economy
of Business or in one that considers change both natural and
acceptable
 It is not necessary to grow bigger but to grow better
 ÅAThe Focus and the Starting point
Course outline
Assignments
There is only one starting point
Introduction
Tech change
It is the customer
Idea, Invention
Innovation
The customer defines the business
E-ship  not the name or statutes
The Purpose
of Business  not the technology
Who is our customer?
 there is never the customer – but a customer –
there is usually at least two sometimes even more
Where is the customer?
What does the customer buy?
 ÅA Fundamental questions
Course outline
Assignments
What is our business?
Introduction  can only be answered by looking at the
Tech change business from the outside
Idea, Invention
Innovation  should not be asked when the company is in
E-ship trouble although then it must be asked!
The Purpose
of Business  it is never popular to argue with success, but
success always makes obsolete the very
behavior that achieved it. It always creates new
realities.
 ÅA Fundamental questions
Course outline
Assignments
What will it be?
Introduction
Tech change
What should our business be?
Idea, Invention
 the most important trend which few businesses pay much
Innovation attention too is changes in population structure and
E-ship population dynamics. Population shifts are the only events
The Purpose regarding the future for which true prediction is possible
of Business
 ÅA What is our business?
Course outline
Assignments
A systematic analysis of all existing products,
Introduction services, processes, markets, end users, and
Tech change
Idea, Invention distributions channels.
Innovation  Are they viable?
E-ship
The Purpose  Will they remain viable?
of Business
 Do they still give value to the customer?
 Will they do so tomorrow too?
 Do they still fit the realities of the population and
markets of technology and economy?
Defining the purpose of the business and
mission have to be translated into objectives.
 ÅA QUESTIONS TO ASK
Course outline
Assignments Is this really an adequate business
Introduction
Tech change opportunity?
Idea, Invention
Innovation
E-ship
Is this one we want to pursue?
The Purpose
of Business
What resources are required to
exploit it?
How do we acquire them?
How do we manage the operation?
How and when do we harvest?
 Five Requirements of
ÅA Obectives
Course outline
Assignments
Must be derived from what our business is, will
Introduction be and should be
Tech change  represent the fundamental strategy of a business
Idea, Invention
Innovation
E-ship
Operational
The Purpose  converted into specific targets and assignments
of Business
Enable concentration of resources and efforts –
must be selective
 Five Requirements
ÅA of Obectives
Course outline
Assignments
Multiple objectives
Introduction
Tech change
Are needed in all areas on which the survival of
Idea, Invention the business depend
Innovation
E-ship
The Purpose
of Business Objectives are not fate; they are directions,
Objectives commitments, and means making the future of
the business
ÅA
The objectives need to be
formalised into what is
normally known as a business
plan!
ÅA
ÅA
 ÅA 8 Objectives
Course outline
Assignments
 Marketing objective – create a customer
Introduction  Innovation objective – or become obsolete
Tech change
Idea, Invention  Human resources – do we have the right skills
Innovation
E-ship  Capital resources – do we have the material
The Purpose
of Business
 Physical resources – do we have adequate
Objectives facilities
 These need to be employed productively;

 Productivity objectives
 Social responsibility, and
 Profit requirement
 ÅA
Course outline
Assignments
Introduction
Tech change
Idea, Invention Innovation as an objective
Innovation
E-ship
The Purpose
of Business
Objectives
 ÅA Diffusion
Diffusion of Innovations
Stages
Course outline
Assignments
Introduction Adoption
Tech change
Idea, Invention
Innovation
E-ship
The Purpose Trial
of Business
Objectives
Diffusion of
Innovations
Interest
Awareness

Time
 ÅA Diffusion
Stages

Course outline
Assignments Adoption
Introduction
Tech change
Idea, Invention
Innovation
E-ship Trial
The Purpose
of Business
Objectives
Diffusion of
Innovations
Interest

Awareness

Time
 ÅA Product Adoption
Course outline
Assignments
Introduction
Tech change
34% 34%
Rate of adoption
Idea, Invention
Innovation
E-ship
The Purpose
of Business
Objectives 13.5%
Diffusion of 16%
Innovations
2.5%

Innovators Early Early Late Laggard

adopter majority majorit s
s y
 ÅA Moore’s Tornado
Course outline
Assignments
Introduction
Tech change
Idea, Invention
Innovation
E-ship
The Purpose
of Business The
Objectives mainstream
market
Diffusion of The early
Innovations market

The
Chasm

Pragmatists Conservatives Skeptics

Technology Visionaries
enthusiasts
 ÅA Technology adoption
Course outline
Assignments
The Chasm; a time of great despair, when early-
Introduction market’s interest wanes, and the mainstream market
Tech change is still not comfortable.
Idea, Invention
Innovation The Bowling Alley; a period of niche-based adoption in
E-ship advance of the general marketplace
The Purpose
of Business The Tornado; mass-market adoption - when the
Objectives general market switches over to a new infrastructure
Diffusion of
Innovations MainStreet; aftermarket development, flesh out the full
potential of the infrastructure
End of life; can come too soon in High-tech due to
disruptive technologies
ÅA The Value Proposition
Course outline
Assignments
Introduction
Tech change
Idea, Invention
Innovation
E-ship
The Purpose
of Business Technology
Value
Benefit Proposition Problem Market
Objectives Product
Diffusion of s
Innovations
Value
Proposition

Management
ÅA

Assessing High Technology

 ÅA Technology Assessment
Course outline
Assignments
Introduction
Idea, Invention
Innovation
E-ship
Value
Proposition
Tech Assessm.

Functional Benefits
Technology Capabilities
 The new technology will provide
ÅA increased capabilities to the user.
Course outline
Assignments Technology should yield significant
Introduction
Idea, Invention benefits in:
Innovation
E-ship  Performance
Value
Proposition  Functionality
Tech Assessm.
 Capabilities
 Cost reduction
 Two or more of the above
 ÅA Product Technology
Course outline
Assignments This technology is not a radically
Introduction
Idea, Invention new, disruptive technology that will
Innovation
E-ship replace current technology
Value
Proposition  Examples: 8” to 5 1/4” to 3 1/2” disk
Tech Assessm.
drives
 Might be more expensive initially, lower
cost after majority adoption
 ÅA Product Technology
Course outline
Assignments There are no technology standards
Introduction
Idea, Invention issues.
Innovation
E-ship  Technology based on stable standards
Value
Proposition  Not in a current technology standards
Tech Assessm.
conflict
 (or will this replace an existing standard
that is outmoded)
 Example:
ÅA Portable Personal Computers
Course outline
Assignments
Functional Benefits
Introduction Capabilities  Portablity
Idea, Invention
Innovation  Weight  Effective compute
E-ship
Value  Size/Volume power
Proposition  Maximum time
Tech Assessm.  Processor speed
Mhz without power
 Battery life connection
 ÅA Example: Fiberoptic Cable
Course outline
Assignments
Functional Benefits
Introduction Capabilities  Easier to install;
Idea, Invention
Innovation
 Low lower cost
E-ship weight/size/cable  Fewer re-
Value
 Less signal
Proposition transmission
Tech Assessm. attenuation
amplifiers
 High message
volume capacity  More clear signals
 Fast transmission  Easier to trouble
 Immune to cross shoot & maintain
talk, RFI and EMI
 ÅA Example: Email
Course outline  Functional Capabilities  Benefits
Assignments
 Multiple addressees  Real time
Introduction
Idea, Invention  Instantaneous, communication
Innovation electronic transmission  Easy mass mailing
E-ship  One click reply &  No delay
Value
Proposition forward  Quick & easy response
Tech Assessm.  Stored addresses  Minimal
 Electronic message  No paper, no postage,
storage no envelopes, no
storage cabinets
 BUT THERE ARE
NEGATIVE BENEFITS
AS WELL
 Example: Cellular Short Message
ÅA Service (SMS)
Course outline
Assignments
 Functional Capabilities Benefits
Introduction  160  Less costly to
Idea, Invention characters/message
Innovation transmit
E-ship
 Faster to transmit than
Value voice ;minimum  Cellular services
Proposition transmission time price lower than
Tech Assessm.
 Message immediately voice calls
transmitted  Silent, doesn’t ring,
 Email on a cell phone
discreet messaging
 Instantaneous
transmission
 ÅA Market Hypotheses
Course outline
Assignments Competitive environment acceptable
Introduction
Idea, Invention  1 or 2 major competitors maximum
Innovation
E-ship
Value
Segment addressable
Proposition  Segment is unique, identifiable, reachable
Tech Assessm.
Segment critical problem
 Target customers can verbalize their
problem
 Serious problems exist
 ÅA More Hypotheses
Course outline
Assignments Small segments better for startups
Introduction
Idea, Invention
Innovation
Segment knowledge critically
E-ship important
Value
Proposition
Tech Assessm.
 ÅA Product Hypotheses
Course outline
Assignments
Introduction
Idea, Invention
Innovation
H: Product is unique “breakthrough”
E-ship
Value
 Advanced over current state of
Proposition technology
Tech Assessm.
H: Product concept is proven
 Developed and beta tested
 Solid technical foundation
 No standards issues
 The Value Triad Basic Elements
ÅA of a Value Proposition
Course outline
Assignments
Introduction
Idea, Invention
Innovation
E-ship Customer
Value
Proposition
Tech Assessm.

Value
Proposition
Product Application
 ÅA The Value Triad
Course outline
Assignments An analysis tool
Introduction
Idea, Invention
Innovation
Has three inter-related elements :
E-ship  Product
Value
Proposition  Customer
Tech Assessm.
 Application: A set of functional
capabilities or features
All three interact to create a “value”
This “value” is what customers buy
 ÅA The Value Proposition
Course outline
Assignments The combination of product &
Introduction
Idea, Invention application creates value for a
Innovation
E-ship particular customer segment
Value
Proposition
Tech Assessm.
Is something to sell
Forms the basis of:
 Marketing
 Advertising and public relations
 Promotional programs
 ÅA
Course outline
Assignments Change any element of the triad and
Introduction
Idea, Invention it creates an entirely new value
Innovation
E-ship proposition
Value
Proposition
Tech Assessm.
 ÅA Value Triad Example
Course outline
Assignments
Customer: Consumer in their own
Introduction kitchen
Idea, Invention
Innovation
E-ship
Product: A $3.00 manual eggbeater
Value
Proposition
Application: Bake a family birthday cake
Tech Assessm.
Value Proposition:
 “A manual eggbeater can save you time and
energy over using a spoon to bake a single
cake”
 ÅA Another version
Course outline
Assignments
Customer: Owner of Bed & Breakfast
Introduction Inn
Idea, Invention
Innovation
E-ship
Product: A $350 Hobart table top
Value mixer
Proposition
Tech Assessm. Application: Making pancakes for 10
guests every day
Value Proposition:
 “The Hobart mixer is a faster, more efficient
mixer that is sturdier, reliable, and suitable for
significant daily use”.
 ÅA And a third version
Course outline
Assignments
Customer/Buyer: Finnish Army
Introduction
Idea, Invention User : Military cook/baker
Innovation
E-ship Application: Baking 500 cakes/day
Value
Proposition Product: $3,500 Large capacity,
Tech Assessm.
heavy duty, floor mounted industrial mixer
Value proposition:
 “This industrial mixer provides high capacity,
high performance and very long term reliability”.
 ÅA Value Matrix
Course outline
Assignments
Frequently the product is already defined
Introduction
Idea, Invention Then 2 variables: Customer & Application
Innovation
E-ship Can use a spreadsheet analysis:
Value
Proposition
 Rows: Applications/ Features
Tech Assessm.  Columns: Customer target market segments
Rank each application and customer type
 1 to 5: 5 = “must have”, 4 = “should have”, 3 =
“nice to have”, 2 = “useable, but not important”
 A “Must Have” Compelling
ÅA Reason To Buy
Course outline
Assignments Critical to product launch success
Introduction
Idea, Invention
Innovation
Without it you’ll probably never get to
E-ship see the chasm, let alone cross it
Value
Proposition
Tech Assessm.
Absolutely required to cross the
chasm and to sell early majority
pragmatists
 ÅA
Course outline
Assignments Early majority/Pragmatists don’t buy
Introduction
Idea, Invention “4s - Should Have” value propositions
Innovation
E-ship
Value
Proposition
Tech Assessm.
 The strength of the value proposition
must exceed the pragmatists’ fear and
risks of buying a high tech discontinuous
product
 A “Must Have” Value Proposition is a
ÅA Compelling Reason to Buy:
Course outline
Assignments
Introduction
Idea, Invention
Three sources of a “Must Have”:
Innovation  #1 - Provides a dramatic competitive
E-ship
Value advantage
Proposition
Tech Assessm.  #2 - Radically improves productivity
 #3 - Significantly reduces costs
 “Must Have” #1: Provides a Dramatic
ÅA Competitive Advantage
Course outline
Assignments Advantage not previously available
Introduction
Idea, Invention
Innovation
Dramatic, significant, not minor
E-ship
Value
In a major operational area
Proposition
Tech Assessm. Examples?
ATM, CT scanner, Polaroid camera,
Xerox 914 copier, Birth control pill
 “Must Have” #2: Radically
ÅA Improves Productivity
Course outline
Assignments Improves productivity of a well-
Introduction
Idea, Invention understood critical success factor
Innovation
E-ship
Value
Superior price-performance
Proposition
Tech Assessm.
Examples?
CAD software, e-mail, Internet
search engines, word processing &
spreadsheet software, Viagra
 “Must Have” #3 Significantly
ÅA Reduces Operating Costs
Course outline
Assignments Must be visible, verifiable, significant,
Introduction
Idea, Invention quantifiable, easy to prove
Innovation
E-ship
Value
“Free” offers get attention
Proposition
Tech Assessm.
Examples?
ATM, laparascopic surgery,
spreadsheet & word processing
software, online software distribution
 ÅA CROSSING MOORE’S CHASM
Course outline
Assignments Difficult to cross the chasm if only
Introduction
Idea, Invention have 1 of the 3 sources of “must
Innovation
E-ship have”
Value
Proposition
Tech Assessm.
Better to have 2 of 3 sources
Best to have all 3 sources
 ATMs
 Laparascopic surgery
 ÅA Laparascopic Surgery
Course outline
Assignments Why has this method of surgery
Introduction
Idea, Invention become so popular?
Innovation
E-ship
Value
Can you determine the sources of
Proposition the Compelling Reason To Buy?
Tech Assessm.
 ÅA Laparascopic Surgery
Course outline
Assignments
Dramatic competitive advantage
Introduction  Faster patient recovery, reduced pain, safer
Idea, Invention
Innovation  Patients go to doctors & hospitals who do it
E-ship
Value
Proposition
Radically improves productivity
Tech Assessm.  Doctors spend less time per surgery & post op
Significantly reduces costs
 Less time in hospital = less cost
 Insurance companies benefit, lower premiums
 Value Matrix Exercise for Any
ÅA Technology
Course outline
Assignments Develop a value matrix
Introduction
Idea, Invention
Innovation
Vertical axis = applications/features
E-ship
Value
Horizontal axis = Target customers
Proposition
Tech Assessm. Rank each cell 1 through 5
 1 = “not usable”, 2 = “minor benefit”
 3 = “nice to have” 4 = “should have”
 5 = “must have”
ÅA

Back to Moore

The Bowling Pin model

 ÅA Bowling Pin Model
Course outline
Assignments Approach niche market expansion in
Introduction
Idea, Invention as leveraged a way as possible -
Innovation
E-ship towards the tornado
Value
Proposition
Tech Assessm.
A niche requires its own whole
Bowling Pin product to be fully complete before it
can adopt the new paradigm
 ÅA The Bowling Pin Model
Course outline
Assignments Niche market (risk of being stuck in
Introduction
Idea, Invention the middle (Porter, 1980)
Innovation
E-ship
Value
Knowledge spill-over
Proposition
Tech Assessm.
Knowledge leverage and stretching
Bowling Pin
One shot and several hits - as many
as possible!
 Bowling Alley Market
ÅA
Development
Course outline
Assignments
Introduction
Idea, Invention Seg 3 Seg 2 Seg 1
Innovation
App 1 App 2 App 3
E-ship
Value
Proposition
Tech Assessm.
Bowling Pin Seg 2 Seg 1
App 1 App 2

Whole Customer
Product Seg 1 References
App 1
 Principles of the
ÅA Bowling Alley Strategy
Course outline
Assignments “Pick on someone your own size”
Introduction
Idea, Invention  The primary objective to establish
Innovation
E-ship yourself as the market leading standard
Value • Merita Solo/Wells Fargo
Proposition
Tech Assessm.
Bowling Pin
 The segment has a very good reason to
buy
 The segment is not well served by any
competitor
 Principles of the Bowling Alley
ÅA Strategy
Course outline
Assignments Focus on the end-user community
Introduction
Idea, Invention not on the technical community
Innovation
E-ship  Not on the doctor but the patient
Value
Proposition  Not on the operator but on US
Tech Assessm.
Bowling Pin Customer-orientation versus product-
orientation
 monipuolinen vs. monimutkainen
 ÅA Rejecting the Bowling Alley
Course outline
Assignments
 They require time to implement; time which is a
Introduction shortage in fast moving industries -therefore
Idea, Invention thought not to work
Innovation
E-ship  Companies tend to be happy with their first
Value
Proposition achievement - “we’re aiming for 1% market share”;
Tech Assessm. satisficing
Bowling Pin
 Serving a niche may require to hefty product and
too much service, which paralyses the
organisation
 The structure of the consumer market does not
support bowling alley strategy (functional food)
 ÅA Tornadoes
Course outline
Assignments
The focus shifts from the economic buyer to the
Introduction technical buyer
Idea, Invention
Innovation Ignore the customer; people are lining up
E-ship anyway
Value
Proposition  they do not want to be courted
Tech Assessm.
Bowling Pin
 they want to be supplied
The tornado  they want the commodity
 Internet is said to be the greatest commoditiser!
The tornado requires distribution channels and
logistics - can you afford it? (Bowling Alley)
 ÅA On Main Street
Course outline
Assignments From niche market to commodity
Introduction
Idea, Invention market
Innovation
E-ship
Value
Focus on the end-user
Proposition
Tech Assessm. mass customisation
Bowling Pin
The tornado
Main Street
you already have the customers just
continue feeding them
get closer to customers - markets
are conversations!
 The Main Street of the Information
ÅA Age
Course outline
Assignments
The Tornado The Main Street
Introduction  sell to infra buyers  sell to end-users
Idea, Invention  drive price points ever
Innovation  +1 value propositions
E-ship lower to maximise to gain margins
Value market share
Proposition  compete against
 attack the competitor to
Tech Assessm. yourself to gain
Bowling Pin gain market share
The tornado margin share
 position yourself
Main Street  position yourself in
horizontally as standard
global infrastructure niche markets based
on individual
preferences
 ÅA Segmentation
Course outline
Assignments In the early market - beware of
Introduction
Idea, Invention segmenting - you must not!
Innovation
E-ship
Value
In the bowling alley - you must!
Proposition
Tech Assessm. Once inside the tornado - don’t!
Bowling Pin
The tornado
Main Street
When on Main Street - segment you
must! But not in the same way as in
the bowling alley - the basis is now
your +1; the value proposition
 ÅA Other barriers
Course outline
Assignments Apart from technology
Introduction
Idea, Invention
Innovation
E-ship
Value cultural
Proposition
Tech Assessm.
Bowling Pin
psychological
The tornado
Main Street

The barrier is not objective but

subjective
 ÅA Predicting Tornadoes
Course outline
Assignments
Bowling alley successes help start tornadoes as
Introduction they validate product architectures - one niche
Idea, Invention
Innovation
market success in place
E-ship
Value
Price point is a good indicator of when you’re in
Proposition reach, i.e. when the tornado comes - mobile
Tech Assessm.
Bowling Pin
phones became the commodity
The tornado
Main Street
killer apps. (do tornados cause killer apps or vice
versa?)
When a gorilla comes around - you are in a
tornado
 ÅA The Gorilla Advantage
Course outline
Assignments Competitive advantage
Introduction
Idea, Invention  getting more customers - market leader
Innovation
E-ship effect
Value
Proposition • business partners actively bring in
Tech Assessm.
Bowling Pin
new customers
The tornado
Main Street
 keeping more customers
Gorillas
• barriers to entry and switching costs
 driving costs down
 keep profits up