TechConnectSection Two

Moving from idea to invoice

TechConnect Day two agenda

Review of job-mapping exerciseImportance of innovation scienceIdentifying new opportunitiesSegmenting the marketBarriers to adoptionCreating the compelling value proposition:

• Offering pain killers or vitamins• Creating the value proposition

Choosing a commercialization strategyLicensing versus new venture creationLessons learned

Importance of innovation science

• Technologists believe that offering a better technology leads to market success

• However, commercial success requires both making money and stimulating adoption

• You will make money if you ensure that you:• Have enough cash – or have the ability to generate cash• Can raise sufficient cash to fund negative cash flow

• You will stimulate adoption if you understand how potential customers make decisions:

• What will motivate them to purchase?

• How you can overcome innovation inertia?• How will you leverage early adoption to stimulate growth?• Which market segment to attack first

Understanding how different solutions lead to different strategic choices

• Pain killers - take away a pain• Offer a pain killer that addresses a real problem that

the customer is already aware of

• Vitamins - provide a gain• Offer a vitamin that will help the customer address

an issue that you have an anticipated

If you have a pain killer

• How big is customers’ pain: what does it cost?• Are they motivated to look for pain relief?• How do alternate solutions compare?• Can you demonstrate your pain killer works?• What features offer competitive advantage?• Typical pain points:

– High cost, – Low quality, – Poor service, – High risk

If you have a vitamin

• How would you build awareness of benefits?• How can you motivate interest?• How can you show it works?• How can you demonstrate/measure benefits?• How will customer measure outcomes? • Typical gains: Enhanced competitiveness, improved

performance, new levels of service, enhanced well being, reduced environmental/social impact

Bring to the exercise insights from previous day

• Technology unknowns• Application unknowns• New applications• Considering the applications:

– review the competitive advantages associated with each technology

TECHNOLOGY UNKNOWNSTransfer from previous sheet

Development Performance

Cost Integration

TRANSFER FROM PREVIOUS SHEET: NEW APPLICATIONS

APPLICATION UNKNOWNSTransfer from previous sheet Market SegmentBarriers to entry Competition Stakeholders

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Prototype development time

Performance comparison

Technology reliability

Unit cost

Ease of technology integration

Market segment

Competitor reactions

Cost to change

Benefits to stakeholders

Competitive advantage

Perceived technology risk

Solution in same industry

Solution for same application

Similar application, new industry

Radical application, new industry

COMPETITIVE ADVANTAGE

How does this solution offer an advantage over other solutions

(including doing nothing)?

• Initial cost• Speed• Performance• Reliability• Installation

• Integration• Operating cost• Reputation• Availability• Choice

8

How does the capital cost

of acquisition (including

installation) compare to

alternate solutions?

How does the operating

cost of the technology

compare to alternate

solutions?

How does the technology

enable the customer to

offer a lower cost solution

to their customers?

How does the technical

performance compare to

alternate solutions?

How does the reliability

compare to alternate

solutions?

How does the ease of

installation (or

maintenance) compare to

alternate solutions?

How does the ease of

integration with existing

technologies compare to

alternate solutions?

How does the reputation of

this technology (or

company) influence

compare to solutions from

alternate providers?

How does availability of the

technology (or of add-ons

for the technology)

compare to alternate

solutions?

Is there a perceived value in

offering the customer a

choice?

Customer segmentation

Crossing the chasm:Identifying first customers

Moore, G (1991) Crossing the chasm.

Tech

nology

enth

usiasts

Visionar

ies

(early

adopte

rs)Prag

matists

(early

majo

rity)

Conserva

tives

(late

majo

rity)

Skep

tics(la

ggard

s)

MARKET SEGMENT

How does this solution offer an advantage over other solutions

(including doing nothing)?

• Market size• Market dynamics• Adoption rates• Resource requirements

• Stakeholders• Influencers• Proximity• Complementarities

9

What are the different

markets in which this

technology offers an

advantage?

Within each market, what

are the market segments

you can identify, by

industry, by application…?

Within each market are

there groups of customers

who can be viewed as a

segment?

How dynamic is each

market segment (nature of

competition)?

What is the speed of

introduction of new

technology in each market

segment?

Has technology leadership

played a role in building

market share?

What are the resource

requirements associated

with attacking each market

segment (people,

technology, financial)?

Within each segment, who

are the critical stakeholders

who can influence the

adoption decision (users,

economic buyers)?

How does industry or

company leadership impact

the potential for each

market segment?

How big is the market

segment, and how fast is

growing, or declining?

How close (in business or

geographic terms) is the

new market to the market

you now serve?

What are the long term

strategic advantages of one

market segment over

another?

Barriers to adoption

Getting people to adopt new technologies requires you to understand• That change (especially behaviors) is hard• That organizations discourage risk taking• That new solutions and new companies have a

liability of newness”• Thant you need to understand how ideas diffuse,

and how barriers to adoption can be reduced

Three laws of innovation inertia

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1. There is a natural tendency for organizations to keep doing what they’re doing and resist changes. In the absence of a force, they will continue to do what they’ve always done.

2. Larger organizations require more force to change what they are doing than smaller organizations.

3. For every force there is a reaction force that is equal in size, but opposite in direction. When someone exerts a force on an organization, he or she gets pushed back in the opposite direction equally hard.

BARRIERS TO ADOPTION

What factors limit the adoption of the

proposed solution?

• Integration• Changing behaviors• Compatibility• Demonstrability

• Trialability• Embeddedness• Observability• Novelty

810

Are there technology

issues with building in this

new technology to an

existing solution?

Is the technology

backwards and forwards

compatible?

Will the people using the

technology have to change

their current behaviors?

Will the organizations using

these technologies have to

change their current work

practices?

Can the technology be

trialed before a final

selection decision is made?

Are the results of using the

new technology easy to

measure and observe?

Are there perceptions of

technology risk that might

discourage adoption?

Are there embedded

supplier relationships that

might be difficult to

change?

What are the issues with

approvals?

Is the new business model

for this technology

consistent with existing

business models?

Is it clear who the decision

makers are in adopting this

new technology?

Develop the value proposition to describe perceived benefits

• Explain what job the technology does• Explain how this creates value (pain killer or

vitamin) for a specific user• Identify how the customer will measure benefits• Demonstrate your solution is better than

alternates (including doing nothing) • Show how the benefits outweigh the costs• Explain how the risks of adoption are less than

the risk of doing nothing

Motivation to adopt

Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats.”

Howard Aiken

2

VALUE PROPOSITION

Motivation is the difference between the perceived value and costs of

adoption

Perceived adoption costs

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What provides the motivation to change?

Perceived value

Identify specific market

segments where there is a

compelling value

proposition

Identify segments in that

market that can be early

adopters, based on need,

risk propensity, or culture

Build a model of the

relevant stakeholders for

each segment

Understand the

competitive nature of the

marketplace, both for your,

and your customers’,

competitors

Identify mechanisms for

communicating the value

and benefits of adoption

Analyze how specific

adoption concerns create a

barrier to adoption

Develop strategic

approaches that might

reduce these barriers

Identify how customers will

measure the value of using

your technology

Look for ways to enhance

the perceived value of the

technology

Strategic approaches to facilitate adoption

Develop partnerships or channels that will overcome liability of newness and reduce adoption barrier

Find critical client who will partner with you to solve their problem and become a reference for expansion

Develop a technology/business model that:• Makes your solution backwards/forwards compatible• Enable trials and allows observability• Minimizes the changes in behaviors required• Reduces acquisition, installation or maintenance costs

Alternate revenue models to facilitate adoption

• Offer for free (trial) before you have to purchase• Turn a capital purchase into a service agreement• Charge per use• Steeped charges for increasing use• Offer basic service for free, with premium options• Offer for free and have others pay for data access• Share use of underutilized resources

Licensing or new venture creation?

• When to create a new venture:• Technology is sold as a complete solution • Market for technology is growing, lacks

standards and is not dominated by major player• Technology + business dev. costs not excessive• Technology likely to disrupt the market • Required expertise and resources available

locally and not controlled by competitors• Inventor wishes to play critical role

5 forces influencing new venture creation (characteristic in brackets favour new venture creation)

Market dynamics

Input factors

Demand conditions

Barriers to entry

Disruptive potential

Market dynamics Market trends (growing, segmenting)Product life-cycle (short)Market concentration (low)Cost relative to total cost (discrete)Competitor diversity (high)

Disruptive potential Underserved customers (high)Changes in price/performance (high)Alternate revenue/business models (high)Defendable patent (high)

Demand conditions Customer/buyer characteristics (incentives)Performance measures (high)Perceived need (high)Price sensitivity (high)Switching costs (low)Government legislation (low)

Input factors Supplier concentration (low)Distributor concentration (low) Capital requirements (low)Economies of scale (low)

Barriers to entry Dominant technology (low)Level of vertical integration (low)Brand loyalty (low)Established relationships (low)Freedom to operate (high)

Thank you

• Thanks for participating• Takeaways

• Novel and proprietary technology necessary, but not sufficient elements for technology commercialization

• Initial job or market may not be the main, or the first, market opportunity• Value proposition must consider competitive solutions• Need to understand the eco-system, multiple stake holders and the

barriers to adoption• Myopia can cause you to miss the big opportunity, the novel business

model or the best application

• The TechConnect approach creates opportunities for: improvement, learning and attitude adjustment

• Follow up