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Technology Ventures: From Idea to OpportunityChapter 8: Summary
Even if you are on the right track, you’ll get run over if you just sit there
Will Rogers
What forms do new businesses take and what are corporate ventures?
The appropriate legal and organizational format used to organize a new venture will vary according to several factors such as context, people, legal and tax consequences, and cultural norms. New ventures can range from small businesses or consulting services to high-growth, high-potential enterprises. Other organizations start out operating in a niche market and grow into a broader one. An important contrast to these independent ventures is the corporate new venture. It emerges within larger existing enterprises and is granted autonomy so it can fulfill its promise.
Summary
Technology Ventures: From Idea to OpportunityChapter 8: Organizational Forms
Organizational Forms:
•Independent venture: new venture not owned or controlled by an established corporation.
•Corporate venture: new venture started by an existing corporation.
•Nonprofit organization: Corporation, member association, or charitable organization that provides a service but does not earn a profit, nor does it distribute dividends or payments to its employees, donors, or volunteers. Today, these organizations are often called not-for-profit.
Technology Ventures: From Idea to OpportunityChapter 8: Organizational Forms
Organizational Forms (continued):
•Family-owned: includes two or more members of a family who hold control of the firm.
•Franchise: legal arrangement in which the owner of a business format has licensed it to an individual or local firm, called a franchisee. The franchisor is the organization that owns and operates a firm that controls the business format and its associated trademarks and logo.
Technology Ventures: From Idea to OpportunityChapter 8: concept
Imitation or replication of a successful enterprise can lead to success
Examples:
Wal-Mart
Starbucks
Williams-Sonoma
Technology Ventures: From Idea to OpportunityChapter 8: Types of New Business Ventures
Types of New Business Ventures:
Small business is a sole proprietorship, a partnership, or a corporation owned by a few people.
Niche business seeks to exploit a limited opportunity or market to provide the entrepreneurs with independence and a slow-growth buildup of the business.
High-growth business aims to build an important new business and requires a significant investment to start up.
Technology Ventures: From Idea to OpportunityChapter 8: Types of New Business Ventures
Types of New Business Ventures (continued):
Radical innovation business seeks to commercialize an important new innovation and build an important new business.
Nonprofit organization is a corporation or a member association initiated to serve a social or charitable purpose.
Corporate new venture (CNV) is that started by an existing corporation for the purpose of building an important new business unit as a solely owned subsidiary or a spin-off as a new independent company.
Technology Ventures: From Idea to OpportunityChapter 8: Table 8.1
Type
Revenue Growth
Planned for Most Likely Size
Description
Objective
1. Small Business
Slow Small Sole proprietorship, and family business
Provide independence and wealth to partners by serving customers
2. Niche Slow to Medium
Small to Medium
Slow growth of corporation Provide steady, lower-risk growth, good income
3. High Growth Fast Medium to Large
Fast growth, needs large initial investment
Important new business
4. Radical Innovation
Fast Large Requires R&D and seeks disruptive innovation
To commercialize an important innovation
5. Non-Profit Organization
Slow Small to Medium
Serves members or a social need
To serve a social need
6. Corporate New Venture
Medium to Fast
Large Independent unit of an existing corporation
To build an important new business unit or separate firm
The Six Types of New Ventures
Technology Ventures: From Idea to OpportunityChapter 8: Table 8.6
Newness and Novelty of the Product Relative to the
Firm's Existing Products
Independence or Semi-Autonomy from Existing
Corporate Structure
High Potential for Significant Innovation
Unique Entrepreneurial Team Leadership Capabilities
Characteristics of Corporate New Ventures
Technology Ventures: From Idea to OpportunityChapter 8: Table 8.7
Strengths Weaknesses
Ready access to capital May be subjected to a corporate budget process
Access to capabilities of corporate employees
Multiple control and review levels
Suppliers willing to help in the design process
Limited autonomy
Emphasis on the marketing plan Limited access to strong entrepreneurial talent
Gain from brand equity of parent firm Risk-reward may be less attractive than for an independent entrepreneur
Access to processes and technologies of the parent
Limited to parent firm's technologies and processes
The Strengths and Weaknesses of a Corporate New Venture
Technology Ventures: From Idea to OpportunityChapter 8: Table 8.7 continued
The Strengths and Weaknesses of a Corporate New Venture (cont.)
Strengths Weaknesses
Ready access to capital May be subjected to a corporate budget process
Access to capabilities of corporate employees
Multiple control and review levels
Suppliers willing to help in the design process
Limited autonomy
Emphasis on the marketing plan
Limited access to strong entrepreneurial talent
Gain from brand equity of parent firm
Risk-reward may be less attractive than for an independent entrepreneur
Access to processes and technologies of the parent
Limited to parent firm's technologies and processes
Technology Ventures: From Idea to OpportunityChapter 8: Table 8.11
1. Identify and screen opportunities. Create a vision. Designate a venture
champion and an entrepreneurial team.
2. Refine the concept and determine feasibility. Prepare the concept and vision
statement. Draft a brief Business Plan Summary or Outline for review and
gathering support.
3. Prepare a complete Business Plan. Identify the person to lead the new venture.
4. Determine the best form of the corporate new venture: internal new venture
unit; spin-out, subsidiary, or internal project.
5. Establish the Corporate New Venture with talent, resources, and capabilities
transferred from the parent company.
The Five-Step Process for Establishing A Corporate New Venture
Technology Ventures: From Idea to OpportunityChapter 8: Exercise
A new firm plans to develop and offer a computer design program for creating and machining hip replacement joints. Describe the cluster this firm should locate within. What sources of legitimacy should it focus on? Should it outsource the software programming of its design software product?
Technology Ventures: From Idea to OpportunityChapter 8: Cluster
Cluster: Geographic concentration of interconnected companies with an existing infrastructure system.
Technology Ventures: From Idea to OpportunityChapter 8: Table 8.4
The Characteristics for Innovation in a Cluster Setting
•High Quality Human Resources
•Research in Local Universities
•Availability of Investment Capital
•Representative Customers
•Suppliers and Compl3mentors
•Competitors
•Consultants, Attorneys, and Accountants
Technology Ventures: From Idea to OpportunityChapter 8: Principle
An important, vigorous new business venture can emerge from a large firm when afforded the appropriate balance of independence, resources, and people to respond to the opportunity.
Technology Ventures: From Idea to OpportunityChapter 8: Venture Challenge
VENTURE CHALLENGE
1)Using table 8.1, describe the specific type of new venture selected by your team.
2)Assuming your venture was developed as a corporate venture, describe the advantages and disadvantages of this approach using table 8.7
Technology Ventures: From Idea to OpportunityChapter 8: DVD Videos
DVD Videos
“Thinking about Sustainability for Non-Profit Organizations”
Kavita Ramdas (Global Fund for Women)
“Classes of Innovations in the Product Leadership Zone”
Geoffrey Moore (Mohr Dardon Ventures)