Professional Documents
Culture Documents
and Ventures
Key Factors for Success
Bruce Gjovig
Entrepreneur Coach and Director
Center for Innovation, Rural Tech Incubator
TECHNICAL EVALUATION
Innovative product, not me too
Competitive advantages, features, and benefits
Barriers to competitive entry (hard to imitate)
High quality
Third-party test results
Ability to deliver a consistent, quality product on time
Spin-off, different market applications
Environmentally safe
No safety/health risks, regulatory control
MARKET EVALUATION
Competitive advantage
USP: Unique Selling Proposition
Differentiate on quality, service, or
innovation
Market Pull vs. Market Push
Solves customer problems
Sunrise vs. Sunset market
MARKET EVALUATION
CONTINUED
Significant market niche
Market plan/strategy
Distribution channels available
Repeat sales likely
Year-round vs. Seasonal demand
Approaches to Differentiation
Prestige Rolex, Mont Blanc
Quality Honda, Cadillac
Top-of-the-Line image Ralph Lauren,
Cross Pens
Innovative, technological leadership 3M
Corp.
Engineering design and performance
Mercedes
Approaches to Differentiation
Continued
A different taste Dr. Pepper, Listerine
Product reliability Johnson & Johnson
baby products
Superior service Federal Express
Full range of services Merrill Lynch
Complete line of products Campbells
Soups
Spare parts availability - Caterpillar
Approaches to Differentiation
Continued
More for your money McDonalds,
Wal-Mart
Special features Jenn-airs indoor
cooking tops
Economy GEs miser light bulbs
ECONOMIC EVALUATION
Premium, price possible for quality
Competing on innovation,
quality & service - not price
Low up-front investment intensity
Low overhead
High value-added
Business plan
ECONOMIC EVALUATION
CONTINUED
High productivity
Minimum product liability
Owners have financial commitment
Management paid for performance, not title
High Return on Investment (ROI)
Realistic financial projections
Good margins & profitability
Good cash flow
MANAGEMENT EVALUATION
(The most important criteria)
Experienced in industry
Entrepreneurial aptitude and attitude
Results-oriented, bias for action
Business experience and education
Visionary leadership sees big picture
Business strategy is clear and concise
MANAGEMENT EVALUATION
(The most important criteria)
Team has experience and depth
(Production, engineering, finance,
marketing, management)
Experienced consultants, advisors
(Technical, business, legal, accounting)
Outside accountability
Board of Directors, investors, etc.
Five-Year Profitable Survival
of New Business
35%
30%
25%
ROI (%)
20%
34%
15%
5% 11% 11%
0%
0 16 30 45 80
Relative Market Share (%)
30
25
ROI (Pretax)
20
15
10
0
#5 #4 #3 #2 #1
Market Share Rank
30
25
20
Percent
ROS
15
ROI
10
0
20 40 60 80 100
Relative Qualtity (percentile)
25%
21%
20%
18% 18%
ROI(%)
15%
10% 10%
5%
0%
0 5 25 50
Perceived Quality By Competition
25
20 ROS
15
ROI
10
5
0
0 20 60 80 100
Investment/Sales (%)
AS INVESTMENT INTENSITY
RISES ROI DECLINES
0.4
36%
0.35
0.3
26%
0.25
ROI (%)
21%
0.2
0.15 15%
0.1 9%
0.05
0
0 36 46 58 72
Investment/Sales (%)
Journal of 65% -- --
Marketing (1971)
Gallagher -- 36% -- --
Cooper -- -- 24% --
BUT
12% college graduates lost job since 1993
Corporate downsizing
Job insecurity
Economic uncertainty
Growth
Security