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ENGINEERING

THE HIGH TECH


START UP
ENGINEERING
THE HIGH TECH
START UP
Fundamentals and Theory

Volume I

CORY R.A. HALLAM AND


WILLIAM FLANNERY

MOMENTUM PRESS, LLC, NEW YORK


Engineering the High Tech Start Up: Fundamentals and Theory,
Volume I

Copyright © Momentum Press®, LLC, 2018.

All rights reserved. No part of this publication may be reproduced, stored


in a retrieval system, or transmitted in any form or by any means—­
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First published by Momentum Press®, LLC


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ISBN-13: 978-1-60650-554-0 (print)


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Abstract

Technological entrepreneurship has been a key driver of economic growth


in developed countries, and will play an ­increasingly important role in
developing countries. Successful entrepreneurial efforts will be dependent
not so much upon the abilities of the engineer or skilled technical entre-
preneur to solve a technical problem, but upon the startup team’s ability
to traverse the myriad of problems they face in commercialization efforts.
This two-volume set has been written primarily for engineers, tech-
nicians and scientists who are contemplating the unknown but attractive
world of technological entrepreneurship, a key driver of economic growth
in developed countries and critical in stimulating growth in developing
countries. The purpose is to prepare these professionals as members of
teams focusing on commercializing new technology-based products.
The material has also been used to introduce engineering students to the
­processes involved in technological entrepreneurship.
Volume I provides a background of fundamentals and theory to pre-
pare the reader for the venture launch. Topics include the entrepreneurial
process, the venture team, developing and marketing high tech products,
and launching the new venture. Volume II goes into detail in critical areas
such as intellectual property protection, legal forms of organization, finan-
cial projections, and business plan preparation and delivery. The primary
emphasis is focused on creating lean and agile organizations capable of
recognizing opportunities, quickly developing introductory products for
small test markets to better define the opportunities, and using the results
of those test markets to arrive at a product with wide acceptance capable
of driving growth.

KEYWORDS

commercialization process, enrepreneurial process, e­ ntrepreurship, high


tech startups, marketing high tech products, new product development,
starting new ventures
Contents

List of Figures ix
List of Tables xi
Acknowledgments xiii
1  Introduction 1
1.1  The Entrepreneurial Engineer 1
1.2 Successful Entrepreneurial Ventures 2
1.3 Engineering Entrepreneurship Opportunities 3
1.4  Creativity, Invention, and Innovation 3
1.5 Entrepreneurship and Commercialization 6
1.6  Why Study Entrepreneurship 7
1.7  Outline of the Book 8
2  The Entrepreneurship Process 11
2.1 Introduction 11
2.2 Traditional Commercialization Process 13
2.3  Entrepreneurship Process 16
2.4 Summary 25
3  The Entrepreneurial Team 27
3.1 Introduction 27
3.2  Stages of Growth 28
3.3  Knowledge Workers 29
3.4  Team Formation 33
3.5  Supporting Network 36
3.6 Leadership 42
3.7 Summary 43
4  Marketing High-Tech Products 45
4.1 Introduction 45
4.2  Industry Analysis 45
4.3  Market Analysis 54
viii  •   Contents

4.4  High-Tech Marketing Strategy 61


4.5 Summary 67
5  Developing High-Tech Products 71
5.1 Introduction 71
5.2 Characteristics of High-Tech Products 72
5.3  Technology Life Cycles (S Curves) 72
5.4  New Product Development Processes 76
5.5  Support for Product Development 83
5.6 Summary 88
6   Launching the Venture 89
6.1 Introduction 89
6.2  Funding the Venture 89
6.3  Operating the Company 94
6.4  Exit Strategies 98
6.5  The Path Forward 103
Appendix 105
Bibliography 109
About the Authors 113
Index 115
List of Figures

Figure 1.1.  The creative process. 4


Figure 1.2. Invention versus innovation. 4
Figure 1.3.  Types of innovation. 6
Figure 2.1.  Product development process. 13
Figure 2.2.  Creating a successful technology venture. 15
Figure 2.3.  The entrepreneurship process. 16
Figure 2.4.  Entrepreneurship: An iterative process. 18
Figure 2.5. Build-Measure-Learn feedback loop. 20
Figure 2.6. Customer development process. 22
Figure 3.1. Knowledge and learning with a technology company. 33
Figure 3.2.  The entrepreneurial team’s support network. 37
Figure 4.1.  The computer industry. 46
Figure 4.2.  Industry life cycle. 48
Figure 4.3.  Porter’s Five Force Model. 50
Figure 4.4.  Diffusion of technologies across the “chasm.” 58
Figure 4.5. Product positioning examples. 63
Figure 5.1.  Technology life cycle. 73
Figure 5.2.  Product life cycle. 74
Figure 5.3. Comparison of the product life cycle and industry
life cycle. 75
Figure 5.4. Product and process changes required as function
of type of technology and products. 78
Figure 5.5.  Example of a traditional product development plan. 79
Figure 5.6.  Example of a waterfall development process. 81
x  •   List of Figures

Figure 5.7.  Stage gate development model. 82


Figure 5.8.  Agile development process. 83
Figure 6.1.  Startup funding dynamics. 91
Figure 6.2. Actual (dashed) versus planned (solid) cumulative
earnings. 96
Figure 6.3. Average age of company-going public in the network
and equipment industry. 102
List of Tables

Table 4.1. Characteristics of oligopolistic, segmented, and


­commodity  markets 54
Table 4.2. Pricing strategies for segmented and oligopolistic markets 66
Table 5.1. Representative technologies in a firm’s value chain 86
Table 6.1.  Valuation techniques 92
Table 6.2.  Risk assessment for new venture 95
Acknowledgments

We acknowledge and salute the great minds and personalities that have
forged entrepreneurial paths. They have pushed new technologies to
markets, and connected existing needs with technological capability to
improve the human condition. We encourage you to explore the many
excellent books that are available for expanded reading, and deeper dives
into specific elements of the entrepreneurial process that we cover in our
books.
CHAPTER 1

Introduction

It’s been widely reported that over 90 percent of all startups, including
high-tech ventures, fail. In spite of this statistic, entrepreneurship remains
a vibrant force in most economies, and tech startups continue to play an
important role in economic and quality-of-life growth. Presented with a
wide variety of reasons for failure of a new venture, budding entrepreneurs
find it difficult to draw any constructive conclusions that could guide them
through the startup process. Not only would a list of reasons for failure be
incomplete, it could also prove to be distracting, causing a focus on pre-
venting failure rather than on designing an outstanding product or service
with exceptional value for a customer.
This book is written for engineers who desire to start their own com-
panies and are looking for guidance in the entrepreneurial process. The
goal of the book is to turn the engineer into an entrepreneurial engineer, an
individual who keeps one foot solidly planted in the engineering profes-
sion while guiding the process of moving a product or service idea to the
marketplace. The terms “entrepreneurial engineer” or “engineer entrepre-
neur” are not oxymorons. Examples abound of engineers who have been
highly successful as entrepreneurs, demonstrating that one does not have
to forsake a career in engineering in order to become an entrepreneur. For
those engineers who are members of a startup but are reluctant to stray far
from the engineering discipline and take up the activities of the entrepre-
neur, the goal of the book is to help them understand the entrepreneurial
process as well as the way entrepreneurs think and the tools they use.

1.1 THE ENTREPRENEURIAL ENGINEER

Engineers and entrepreneurs have one key characteristic in common:


a high degree of motivation to proactively take action in solving prob-
lems or pursuing opportunities. This propensity to act is essential for
any ­entrepreneurial endeavor. However, whereas engineers are trained to
2  •   ENGINEERING THE HIGH TECH START UP

r­ ecognize a problem and apply scientific and engineering principles to


solve that problem, entrepreneurs are skilled at recognizing opportunities
and gathering the necessary resources to take advantage of opportuni-
ties to launch new ventures. This difference in approach to problems and
opportunities is a major cause of conflicts that often separate the engineer
from the entrepreneur.
There are other important differences between the two. Engineers are
reluctant to accept failure in any form as an acceptable outcome. They tend
to be uncomfortable with uncertainty, preferring precision and ­certainty
in dealing with problems and approach problems in a highly organized
project management manner, emphasizing schedules, milestones and
deadlines, resources required, and budgets. Success, or performance, is
measured in terms of the degree to which the ultimate product or service
meets predetermined or desired specifications.
Entrepreneurs, on the other hand, are calculated risk takers, comfort-
able dealing with uncertainty. They recognize that failure is indeed a pos-
sible outcome, but are willing to take action if the perceived rewards are
high enough. In seeking a successful startup, they are concerned with the
steps or stages required to commercialize the product or service. They
recognize that the organized project management approach favored by
the engineer is ineffective, and focus instead on whatever is required to
develop and offer a product or service of significant value to a customer.
In the high-tech environment, engineers are prone to failure unless they
develop the ability to deal with the highly ambiguous and uncertain business
world, whereas the entrepreneur is likely to fail without an understanding
of the technology world. In reality, it is much easier for the engineer to learn
the intricacies of entrepreneurship than it is for the entrepreneur to learn
the details of the engineering world. The entrepreneurial engineer should
be able to move easily between the rational world of the engineer and the
uncertain, nonlinear world of new startups. For the engineer starting a small
consulting firm, the transition can be relatively easy. For larger new ven-
ture efforts, however, the engineer will most likely work in a dynamic team
environment with diverse sets of individual skills and personalities, adding
another level of complexity and uncertainty to the effort.

1.2 SUCCESSFUL ENTREPRENEURIAL
VENTURES

Successful new ventures have several characteristics in common. This


book will focus on three characteristics or themes that will be carried
throughout the remaining chapters. First, the product or services in a
Introduction  •  3

s­ uccessful venture is proven to be ideal for the user or customer. Invari-


ably this means that the founders have expended significant energy in
identifying market needs and tailoring the product or service to meet
those needs. Second, the entrepreneur is involved in every aspect of the
­successful startup. Starting a firm from scratch is a daunting task that goes
well beyond designing a marketable product, but includes seeking nec-
essary funding, researching potential markets, establishing manufactur-
ing capabilities, and protecting the resulting intellectual properties. The
entrepreneur cannot afford to delegate any of those tasks to others, but
must develop, organize, and lead a compatible team capable of addressing
these critical areas. Third, successful companies show consistent growth,
beyond the initial market or customer base. The entrepreneur’s vision is
essential in defining growth opportunities and communicating that vision
to employees and stakeholders alike.

1.3 ENGINEERING ENTREPRENEURSHIP
OPPORTUNITIES

Engineering entrepreneurship opportunities occur in many forms. Many


engineers get started in entrepreneurship out of a desire to have more con-
trol over their professional careers. Some start their own ­consulting firms
after spending some time developing marketable skills while employed
and gaining unique experience in larger organizations. Others start acci-
dentally when a hobby or part-time avocation becomes time-consuming
and they are forced to decide whether to drop the avocation or devote
their total energies to their interests. Many entrepreneurial engineers are
content to experience a slow but steady internal growth as sole proprietors,
whereas others seek protection under the corporate umbrella, ­perhaps
as a limited liability company (LLC) or S-corporation. At some time in
their development, however, they will be forced to decide whether to
remain small with a limited staff, thus maintaining complete control over
the entity, or expand significantly to meet a larger market. Finally, they
will face the challenge of an “exit strategy,” that is, whether to plan for
the company’s long-term success as a “stand-alone” entity, or sell their
­company to some other firm.

1.4  CREATIVITY, INVENTION, AND INNOVATION

Recognizing opportunity and taking advantage of the recognized opportu-


nity are two completely different mental states. Recognizing ­opportunities
4  •   ENGINEERING THE HIGH TECH START UP

involves an understanding of the differences between creativity, invention,


and innovation. Taking advantage of opportunities involves an under-
standing of entrepreneurship.

1.4.1 CREATIVITY

Creativity is recognized as the ability to bring something new into exis-


tence. There is a general agreement that creativity evolves through a
process from idea germination to verification, involving some conscious
effort to uncover new knowledge to support the idea as well as a period
of incubation in which the gathered information and new knowledge is
assimilated. Hopefully it concludes with the recognition or realization that
the idea has merit, and is subsequently verified through some application
or test (Figure 1.1).

1.4.2  INVENTION AND INNOVATION

Recognition that an idea is feasible does not suggest or imply that an


invention or innovation has occurred. Invention is a process whereby
something new is created, even though it may not have any immediate
social or economic value, whereas innovation is the transformation of
an idea or resource into a useful application (Figure 1.2). The distinction

Idea
Preparation Incubation Illumination Verification
Germination

The seeding Conscious Subconscious Recognition of Application or


stage of a new search for new assimilation of idea as being test to prove
idea knowledge information feasible idea has value
Recognition Rationalization Recognition Realization Recognition

Figure 1.1.  The creative process (adapted from Holt 1992).

The creation of
1% of effort Invention something new Results in new
knowledge

The transformation Results in new


99% of effort Innovation of an idea into a products, processes,
useful application or services

Figure 1.2.  Invention versus innovation (adapted from Holt 1992).


Introduction  •  5

between invention and innovation may appear subtle, but is important for
entrepreneurship. Thomas Edison was a prolific inventor with over 1,000
patents, but only a relatively few resulted in devices of social or economic
value, most notably the electric light bulb and the phonograph.
Edison’s comment that “Genius is one percent inspiration and
­ninety-nine percent perspiration” is useful in pointing out the ­difference
in effort between an invention and an innovation. Of the total effort
required to transform an idea to a new product, process, or service, as
little as 1 ­percent could be expended in the invention phase while up
to 99 ­percent of the total effort may be required to commercialize the
invention ­(Figure 1.2). Whereas recognizing an invention only requires
a demonstration that the created device “works,” an innovation cannot
be claimed until the item or process has gone through four development
steps, including technology, business, strategy, and economic. First, the
technology must be shown to be feasible, have attractive performance
features, and manufacturable. Second, the technology must be developed
to the point that it demonstrates business value through its marketability
to a customer group. Third, an effective strategy must be articulated and
implemented for the marketing of that product. Finally, the technology
innovation must demonstrate favorable economic returns to the developer.

1.4.3  TYPES OF INNOVATION

There are several ways of categorizing the types of innovations typically


encountered in the technology world. Types of innovations can be catego-
rized by examining the degree of changes in two key components of inno-
vative products: the degree of change of basic design concepts present in
the new technology; and the degree of change in the linkages connecting
separate modules of the product (Figure 1.3). Comparing a new technol-
ogy with its predecessor, we might find the basic design concepts rela-
tively unchanged (reinforced) or, conversely, the basic design concepts
radically different (overturned). Similarly, the linkages between modules
of the product may be basically the same (unchanged) or dramatically
altered (changed) in one way or another.
Figure 1.3 illustrates the relationships between these two fundamental
components. Incremental innovations are found in which basic design con-
cepts and linkages between product modules remain relatively unchanged,
that is, relatively minor changes are made from existing practices. Radical
or disruptive innovations result when both basic design concepts and link-
ages between modules are dramatically changed, resulting in an innova-
tion that is very new and different from previous solutions. Architectural
6  •   ENGINEERING THE HIGH TECH START UP

Basic design
concepts
Reinforced Overturned

Component or
Unchanged Incremental modular

Linkages
between
modules

Radical or
Changed Architectural disruptive

Figure 1.3.  Types of innovation.

innovations occur when the linkages between modules are changed but the
basic design concepts are unchanged, resulting in changes in the overall
design of a system or the way its components interact with one another.
Finally, component or modular innovations occur when changes are made
to the basic design concepts of a component, but linkages between mod-
ules are unchanged, resulting in innovation to one or more components
that do not significantly affect the overall configuration of the system.

1.5 ENTREPRENEURSHIP AND
COMMERCIALIZATION

The type of innovation dramatically impacts the degree of difficulty faced


by the entrepreneurial engineer in commercializing an innovation. An
incremental innovation could be relatively simple for an engineer famil-
iar with the technology and product to undertake individually, whereas
a radical innovation could require the talents of a team of engineers to
solve the myriad of complex technical problems encountered. Without
the need to commercialize a radical innovation, however, engineers are
well trained to tackle extremely complex technical problems encountered,
for ­example, in the manned space program. In this situation, technology
development emerges as the most challenging of the four development
steps required for an effective innovation. Business, strategy, and eco-
nomic development, while still important, are generally constrained to
Introduction  •  7

the needs or requirements of a single customer, typically the government.


In such an environment, business development normally focuses on the
creation of an organization capable of managing technology develop-
ment, strategy development is concerned with planning for the success
of the overall mission for which the technology is being developed, and
­economic development is primarily involved with the procurement and
management of the funds required over the projected time of the technol-
ogy development.
However, if one adds the requirement that the innovation be suc-
cessfully commercialized, the primary motivation of the entrepreneurial
engineer, the technology, business, strategy, and economic development
environments become much more complex, dynamic, and nonlinear. The
engineering management tools and techniques, such as project and man-
ufacturing management methods, quickly become less important to suc-
cessful commercialization than marketing, financial, and legal concerns.
Understandably, management of the development and commercialization
effort can become overwhelming for the engineer.

1.6  WHY STUDY ENTREPRENEURSHIP

Entrepreneurship is a discipline requiring completely different knowl-


edge and training than normally experienced by the engineer. It has been
described as a full contact sport, requiring hands-on experience and active
involvement by the entrepreneur. Although it may be easier to teach an
engineer about entrepreneurship rather than teach an entrepreneur to be an
engineer, there is still an extensive learning period involved.
If the engineer is involved in a sole proprietorship offering a special-
ized product or service to a small customer base, it is possible for the engi-
neer to self-learn “on the job.” Still, even the smallest firm will find that
accounting and legal services are essential. As the company grows, the
engineer will find that required knowledge base of the engineer-manager
increases. The initial resources required are typically modest, primarily
only those assets required to support the engineer and other knowledge
workers. Financial management concerns are primarily cash flow, with
cash coming initially from the owner’s original investment and from oper-
ations. Management problems become more complex with the addition of
staff while marketing and product development become critical as o­ riginal
products or services become outdated or increase in demand taxes the
firm’s resources. In short, success is dependent upon understanding and
managing the process well—the purpose of this book!
8  •   ENGINEERING THE HIGH TECH START UP

1.7  OUTLINE OF THE BOOK

This book is organized into two volumes to take the budding entrepre-
neurial engineer through the various stages of creating the new venture.
­Volume I is focused on high-level entrepreneurial theories, while volume II
is more activity based, guiding you through the tech start up process. In
Volume I, Chapter 2 begins by providing an overview of the entrepreneur-
ship process, that is, the process through which an entrepreneur transforms
an idea into a commercial reality, most likely through the creation of a new
venture. The chapter highlights key differences between traditional means
of developing products or services and the entrepreneurship process of
identifying customers and creating products of value for those customers.
The following three chapters elaborate on the entrepreneurship
­process by presenting three essential components of an effective process:
team formation (Chapter 3), marketing high-tech products (Chapter 4),
and the product development process (Chapter 5). Chapter 3 covers
the ­critical issue of managing a new venture team composed of highly
­motivated individuals representing a range of specialized disciplines
and interests. Chapter 4 discusses marketing high-tech products, distin-
guishing between the various market types and describing the nature of
high-tech markets. Chapter 5 presents several models for developing the
high technology product, emphasizing the need for speed and agility in
the development process. Finally, Chapter 6 ends Volume I by covering
major elements associated with the launch, operation, and exit of the high
tech venture.
Volume II contains six chapters geared toward activity-based learning
and technology entrepreneurship. Once an opportunity has been identi-
fied and assessed, a strategy for capitalizing on the opportunity needs to
be developed. Chapter 1 discusses the means for developing and testing
the business concept, that is, the description of the product or ­service to
be developed, the identification of the benefits to the customer, and the
strategy for distributing the product or service to the customer. Chapter 2
follows by showing the means by which the new venture team can add to
the business concept by creating the business model canvas, which cap-
tures the basic elements of the proposed enterprise including the value
­proposition, customer segments, channels, customer relationships, reve-
nue streams, key resources, key activities, key partnerships, and cost struc-
ture. Protecting the firm’s intellectual property, be it patents, trademarks,
copyrights, or trade secrets, is covered in Chapter 3. An introduction to
entrepreneurial finance is provided in Chapter 4, followed by an overview
of the legal aspects of company formation in Chapter 5. Finally, Chapter 6
Introduction  •  9

provides an overview of the business plan, slide deck, and pitch, key tools
that summarize your work in these two volumes, and sets you on the path
to venture creation.

PRACTICE
EXERCISE 1.1  ASSESS YOURSELF

Assessing your skills and desires is important before starting this technopre-
neur journey. In this exercise ask yourself the ten questions below. Rate your-
self on each question from highly negative (No) to highly p­ ositive (Yes), with
neutral in the middle (). Add up the totals for each column and sum your
overall score. A highly negative score suggests you may not be ready for this,
whereas a highly positive score suggests you are ready to go. We recommend
you complete the book and all exercises and try this first exercise again—you
might be surprised to find some of your answers change.

SELF ASSESSMENT No Yes


QUESTIONS (-3) (-2) (-1) (0) (+1) (+2) (+3)
1) I like to win?
2) I can handle stress?
3) I do not give up
easily?
4) I can create a vision
for the future?
5) I can convince oth-
ers of my vision?
6) I can build and lead
a team?
7) I deal well with
ambiguity and the
unknown?
8) I am a fast learner?
9) I can accept a good
enough solution
versus the perfect
solution?
(Continued )
10  •   ENGINEERING THE HIGH TECH START UP

SELF ASSESSMENT No Yes


QUESTIONS (-3) (-2) (-1) (0) (+1) (+2) (+3)
10) I can prioritize and
focus myself and
others?
Total

EXERCISE 1.2  CREATE MANTRA

Guy Kawasaki promotes the idea of creating


a mantra. In its dictionary definition, a mantra
is a word or sound repeated to aid concentra-
tion in meditation. For your start-up venture,
the idea is you want to ­create a mantra that
generates meaning and focus, and directs your
scarcest resources—your time and energy. He
gives several examples for the f­ ollowing companies:

• Federal Express: “Peace of mind”


• Nike: “Authentic athletic performance”
• Target: “Democratize design”
• Mary Kay: “Enriching women’s lives”

The mantra is not the slogan, but a saying that anyone involved in the
company or dealing with the company would easily associate with your
reason for existing as a venture. In this exercise take the first cut at creat-
ing a 3 to 5 word mantra for your venture idea. It might change over time
as you evolve and pivot, but should give you clarity and focus in working
through the planning and launch process.

MY VENTURE MANTRA:________________________________
Index

A C
Advisors Cash flow, 28, 97
cash compensation, 39–40 Chasm, 35, 58
entrepreneur, 39 Commodity, 54
selection of, 38, 39 Commodity market, 56
time expectations, 39 Company building, 24–25
Agile development process Compensation, 38–40
high-tech products, 82 Competitive uncertainty, 57
minimally viable product Component innovations, 6
development, 82 Computer industry, 46, 47
product development, 82–83 Conceptual technology, 77
Architectural innovations, 5–6, 73 Consultants, 40
Consumer pricing, 66
B Cost-benefit analysis, 47
Bargaining power Creative tension, 32
of customers, 51 Creativity, 4
of suppliers, 51–52 Customer
Barriers to entry, 55 creation, 24
Bayh-Dole Act, 41 development model, 22–23
Board of advisors, 38–40 discovery, 23
Board of directors validation, 23–24
closely held corporations, 37
fiduciary responsibility, 36–37 D
independent directors, 38 Degree of rivalry, 49–50
privately held corporations, 36 Demand-oriented pricing, 66
professional investor directors, Department of Defense (DOD),
37, 38 41
publically traded corporations, 36 Derivative product, 77
Breakthrough product, 77 Differentiated product, 48–49, 50,
Build-Measure-Learn feedback 56
loop, 20 Disruptive innovations, 5, 72
Business model, 15, 16 Disruptive product, 76
Buyer power, 51 Disruptive technology, 35, 48, 77
116  •  Index

Dominant design, 75–76 stages of growth, 28–29


Dominant technology, 48 supporting network
advisors and mentors, 38–40
E board of directors, 36–38
Early adopters, 57–58 consultants, 40
Early majority, 57, 58 government resources, 41–42
Economic environment, 52–53 independent contractors, 40
Emergent industries, 57 research institutions, 41
Entrepreneur service providers, 40–41
courage and intelligence, 103 strategic partners, 41
engineers, 1–3 Entrepreneurship
successful new ventures, 2–3 agile and lean process, 19–21
support network, 103 and commercialization, 6–7
time management, 103 company-building, 24–25
Entrepreneurial process creativity, 4
entrepreneurship customer creation, 24
agile and lean process, 19–21 customer discovery, 23
company-building, 24–25 customer identification and
customer creation, 24 capture, 21–23
customer discovery, 23 customer validation, 23–24
customer identification and invention and innovation, 4–6
capture, 21–23 iterative process, 17–19
customer validation, 23–24 value proposition, 16–17
iterative process, 17–19 Exit strategies
value proposition, 16–17 acquisition, 99–100
iterative process, 17–19 IPO, 101–103
skills, 12 licensing, 99
successful entrepreneurs, 11–12 operating, 100–101
traditional commercialization
process F
business model failures, Feasible technology, 77
14–15 Fiduciary responsibility, 36, 39
business plan, 14 Film-making approach, 30–31
development and marketing, Financial management, 7
14 Financing documents, 94
discovery and product Five Force model
concept, 14 bargaining power of customers,
successful technology 51
venture, 15 bargaining power of suppliers,
value proposition, 16–17 51–52
Entrepreneurial team degree of rivalry, 49–50
formation of, 33–36 substitute products, 51
knowledge workers, 29–33 threat of new entries, 50–51
leadership, 42–43 Funding sources, 89–92
Index  •   117

G technology life cycles


Government resources, 41–42 architectural innovations, 73
Growing industries, 57 dominant designs, 75–76
Growth dramatic improvements,
high-tech companies, 29 73–74
initial growth, 28 materials innovations, 73
rapid growth, 28 performance improvement,
stable growth, 29 72, 73
startup stage, 28 product/industry life cycles,
74–75
H propeller technology, 72
High-tech markets transistor performance, 73
competitive uncertainty, 57
emergent industries, 57 I
growing and mature industries, Incremental innovations, 5, 6, 75,
57 77
marketing uncertainty, 56 Independent contractors, 40
technological uncertainty, 57 Independent directors, 38
High-tech products Industry analysis
characteristics, 72 computer industry, 46
marketing economic cost–benefit analyses,
high-tech markets, 56–57 47
industry analysis, 45–54 Five Force Model, 49–52
market types, 54–56 industry changes, 46–47
product positioning, 62–63 industry life-cycle, 47–49
promotion, 63–65 peripheral equipment
purchasing decisions, 59–61 manufacturing, 47
relationship marketing, 59 PEST model, 52–53
store locations, 65 political decisions, 47
technology diffusion and SWOT model, 54
market adoption, 57–58 technology drivers, 47
transaction marketing, 58–59 Industry life-cycle, 47–49
well-thought-out marketing Initial growth, 28
plan, 61–62 Innovation, 4–5
new product development Innovation context, 60–61
lean and agile development Invention, 4–5
process, 82–83 Iteration, 12, 17–19, 83
product vs. process
development, 76–79 K
stage gate development Knowledge workers
process, 81–82 approval and appreciation, 31
support, 84–87 competence and satisfaction, 31
traditional models, 79–80 creative tension, 32
waterfall development film-making approach, 30–31
process, 80–81 learning organization, 32–33
118  •  Index

long-term career self-interest, 32 product positioning, 62–63


marketing and organizational promotion, 63–65
skills, 30 store locations, 65
problem-solving scenarios, uncertainty, 56
29–30 Marketing mix, 62
professionalism, 31 Maslow’s hierarchal need theory,
successful technology-based 31
venture, 20 Mature industry, 57
tensions and conflicts, 30 Mature technology, 77–78
Medical device approval process,
L 39
Laggards, 57 Mentors, 39–40
Late majority, 57 Milestones-assumptions-tasks
Launch. See Venture launching (MAT), 79, 88
Leadership, 42–43 Minimally viable product (MVP)
Lean development process, development, 82
82–83 Modular innovations, 6
Lean startup, 19 Moore’s law, 73
Learning organization, 32–33 Motivation, 31
Licensing, 99
Loss-leader pricing, 66 N
National Aeronautics and Space
M Administration (NASA), 41
M New product development (NPD)
Managerial leaders, 42 lean and agile development
Managing risk, 95 process, 82–83
Market product vs. process development,
analysis 76–79
high-tech markets, 56–57 stage gate development process,
market types, 54–56 81–82
purchasing decisions, 59–61 support
relationship marketing, 59 consequences of lack of, 84
technology diffusion and innovation strategy, 87
market adoption, 57–58 resources and commitment,
transaction marketing, 58–59 86–87
characteristics, 54–55 screening model, 84–85
commodity markets, 56 successful NPD, 84
oligopolistic markets, 55 team culture embracing
pricing strategies, 65–67 innovation, 87
pull, 18 traditional models, 79–80
segmented markets, 55–56 waterfall development process,
segments, 58 80–81
Marketing New venture
plan characteristics, 2–3
elements, 61–62 risk assessment, 95
Index  •   119

O Proven technology, 77
Oligopolistic markets Purchasing decisions
characteristics, 54–55 compatibility, 60
pricing strategies, 66–67 cost/benefit advantage, 60
Opportunities, 3 factors involved, 59

P R
Penetration pricing, 66 Radical innovations, 6, 61, 76
Peripheral equipment Rapid growth, 28
manufacturing, 47 Relationship marketing, 59
PEST analysis, 49 Research institutions, 41
PEST model Risk, 95
economic environment, 52–53 Risk categories, 95
political environment, 52 Rivalry, 49
social environment, 53
technology environment, 53 S
Pivot, 22 S-curves, 72–74
Platform product, 77 Segmented markets
Political environment, 52 characteristics, 55–56
Porter’s five force model, 49–52 pricing strategy, 66
Price, 65 product positioning, 63
Pricing strategies skimming, 66
oligopolistic markets, 66–67 Service providers, 40–41
segmented markets, 66 Skimming pricing, 66
Process development, 76–79 Small Business Innovation
Process innovation, 76 Research (SBIR) program, 41
Product development Small Business Technology
resources, 86–87 Transfer (STTR) program, 41
support Social environment, 53
consequences of lack of, 84 Stable growth, 29
innovation strategy, 87 Stage gate development process,
resources and commitment, 81–82
86–87 Stages of growth, 28–29
screening model, 84–85 Startups
successful NPD, 84 funding, 91
team culture embracing growth, 28
innovation, 87 lean, 19
Product innovation, 76 team formation, 34–35
Product innovation strategy, 87 Stevenson-Wydler Technology
Product life-cycle, 74–75 Innovation Act, 41
Product positioning, 62–63 Strategic leaders, 42
Professional investor directors, Strategic partners, 41
37 Substitute products, 51
Professionalism, 31 Supplier power, 51–52
Promotion, 63–65 SWOT analysis, 54
120  •  Index

T V
Team culture, 87 Valuation, 92–94
Team formation Valuation techniques, 92
access to capital, 34 Value added premium, 67
entrepreneurial venture, 33–34 Value proposition, 16–17
experience in industry, 34 Value proposition canvas (VPC), 25
expertise in key areas, 34 Venture capitalists, 91–92
growth and expansion, 35–36 Venture funding
learning organization, 34 availability, 90
startup team, 34–35 ease of acquisition, 90
Technology financing documents, 94
constraints, 60 impact on venture, 90
diffusion, 57–58 time-sensitive supply–demand
drivers, 47 relationship, 90–91
environment, 53 valuation and negotiation, 92–94
life cycle venture capitalists, 91–92
architectural innovations, 73 Venture launching
dominant designs, 75–76 exit strategies
dramatic improvements, acquisition, 99–100
73–74 IPO, 101–103
materials innovations, 73 licensing, 99
performance improvement, operating, 100–101
72, 73 operations management
product/industry life cycles, growth, 97–98
74–75 plan vs. actual, 96–97
propeller technology, 72 risk assessment, 95
transistor performance, 73 venture funding
limitations, 72 financing documents, 94
push, 18 sources, 89–92
uncertainty, 57 valuation and negotiation,
Threat of new entries, 50–51 92–94
Traditional commercialization Venture team, 33–36
process, 13–15 Visionary leaders, 42
Traditional product development,
79–80 W
Transaction marketing, 58–59 Waterfall development process,
Types of innovations, 5–6 80–81