The 16th Annual

The Nuts and Bolts of Business Plans

MIT Course 15.975 January 2005

Image by MIT OCW.

Joe Hadzima
(MIT S.B., M.S. in Management; Harvard Law)

Senior Lecturer, MIT Sloan School Managing Director, Main Street Partners LLC

Joost Bonsen
MIT Sloan Graduate Student Former Lead Organizer, MIT $50K Competition

Yonald Chery
MIT Course 6, PhD Candidate $50K Finalist, Founder Virtual Ink
1 Background Image by MIT OCW.

Mark Roberge

Technology Strategy for Start-Ups

Professor Fiona Murray Sloan School of Management

Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima

Session Topic: Technology Strategy Professor Fiona Murray #1

Foundations of Technology Strategy

Markets

How will we create value?

Technologies

Do we have the organizational capabilities necessary to deliver it?

Can we capture this value despite competition?

Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima

Session Topic: Technology Strategy Professor Fiona Murray #2

Do all scientific ideas have economic potential?

-Not Very Useful -Cant Implement

Potential Economic Value of idea

X X X

-Cost / Processes

X X

-Social Constraints -No Market

Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima

Value of Scientific idea

Session Topic: Technology Strategy Professor Fiona Murray #3

Is it the case that great ideas = pots of money?

-Competition -Standards

Economic value captured by the startup

& Investors

Microsoft

-Licensing Strategy -Managerial Oversight

GE-CT Scanner

VHS

Philips

Betamax

EMI- CT Scanner

Xerox Parc

Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima

Economic value potential created

Session Topic: Technology Strategy Professor Fiona Murray #4

Two main areas of technology strategy

Value creation
Does this technology or scientific idea create something of value for customers?

Value capture
Can we capture the economic value inherent in this idea in the face of competition?

Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima

Session Topic: Technology Strategy Professor Fiona Murray #5

What is a business model?

Business model =
How do you plan to make money?

Way you decide to transform your scientific ideas into economic value

Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima

Session Topic: Technology Strategy Professor Fiona Murray #6

The Business Model Mediates Between the Technical and Economic Domains
Technical Inputs: e.g. feasibility, performance

Measured in technical domain

Business Model: market value proposition value chain cost and profit value network competitive strategy

Economic Outputs: e.g. value, price, profit

Measured in social domain

Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima

Session Topic: Technology Strategy Professor Fiona Murray #7

Value Creation
What is your value proposition? What does this idea do for a group of customers? Valuable attributes belong to products not technologies

Technology

Product/ solution

Market

Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima

Session Topic: Technology Strategy Professor Fiona Murray #8

Many technologies can be used in different ways .

Which customers are most willing to pay? Where is this the most significant improvement? Which applications are the most technology do-able? Which applications are on the path to progress?

Technology e.g. e-Ink

Product/solution Product/solution Product/solution

e.g. Signage e.g. eNews e.g. eBooks

Session Topic: Technology Strategy Professor Fiona Murray #9

Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima

Value Capture
Can we protect our competitive advantage (value proposition)? How will we deliver value to customers?

Technology

Product/ solution

Market

What protective layer can we wrap around our technology, product & customers? Nuts and Bolts of Business Plans Session Topic: Technology Strategy
MIT Course 15.975 Joe Hadzima Professor Fiona Murray #10

Four key ideas for start-ups:

Intellectual property
Controlling the knowledge underlying an innovation

Secrecy
No-on else knows how to do this

Speed
Moving rapidly beyond current competition & keeping ahead

Lock-in customers
Making it costly for customers to switch or becoming the standard
Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima Session Topic: Technology Strategy Professor Fiona Murray #11

Many ways to deliver value to customers

Product or service? How far along the value chain? Interaction with competitive advantage & protection

Technology e.g. combochem

Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima

Product Service Drug discovery

e.g. Library hware & sware e.g. Library service e.g. Pharmaco firm
Session Topic: Technology Strategy Professor Fiona Murray #12

Evolution of your technology strategy: example of Millennium

Build Revenue:
Apply technology to different problems thru service contracts and maintain IPR

Build Assets: Firm founding:

Based on narrowly defined gene technology Use alliances to develop key assets & new technologies

Forward Integrate:
Move down the value chain internally & thru acquisitions
Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima Session Topic: Technology Strategy Professor Fiona Murray #13

Key Questions that MUST be addressed

Does this idea create economic value?
1. What is the value proposition of the product? 2. What is the market segment?

Can we capture this economic value?

3. Can we protect our competitive advantage 4. Where in the value chain are we focused how do we deliver the value?

Nuts and Bolts of Business Plans MIT Course 15.975 Joe Hadzima

Session Topic: Technology Strategy Professor Fiona Murray #14