Management of Technological Innovation

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Management of Technological Innovation

• Andrew Maxwell

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Entrepreneurship
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The Nature and Development
of Entrepreneurship

• The word entrepreneur stems from French and
  means between-taker or go between.
• The definition involves four aspects
• The creation process.
• The devotion of time and effort.
• The assumption of risk.
• Rewards of independence, satisfaction, money.

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Entrepreneurship
is the process of creating something new with
value by devoting the necessary time and effort,
assuming the accompanying financial, psychic
(physical) and social risks, and receiving the
resulting rewards of monetary and personal
satisfaction and independence.
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The Entrepreneurial Process

• The process through which a new venture is
  created by an entrepreneur
• Four distinct phases
• Identification and evaluation of the opportunity
• Development of the business plan
• Determination of the required resources
• Management of the resulting enterprise
• Each stage depends upon the other

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What is tech entrepreneurship?

• The process of creating a new venture which uses
  an innovative technology creating value for
  customers
• Why are all new ventures important?
• Why are new technology ventures important?
• What is the difference between an entrepreneur
  and an intrapreneur?
• What is the difference between a technological
  innovation and a new business model?
• Why are new technology ventures growing in
  importance and how do they link to University
  activities and research?

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Small Businesses in Canada

• 2,228,572 businesses of which half only self
  employ
• Of remainder half defined as small businesses
  (one of)
• at least one paid employee
• have annual sales revenues of 30 000
• incorporated and filed income tax return in past
  3 yrs
• One quarter produce products, remainder are
  service companies (this is similar to Canadas
  overall GDP)
• Number of small companies growing rapidly each
  year
• In the 1980s created gt 85 of the 2.5 million
  new jobs
• Based on June 2003 - Statistics Canada Business
  Register April 2004

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Are all small businesses similar?

• No there are significant differences
• Cottage industries employing up to 10
• Lifestyle businesses usually only self employed
• Foundation businesses based on RD
• High potential technology ventures

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Whats special about new technology ventures?

• Small firms provided 28 of the jobs in high tech
• 73 of high tech firms have less than 20
  employees
• They pay wages about 28 higher than average
• They generate about 35 more revenue per employee
  than average (excluding natural resources)
• They spend more on RD (2 - 3x gt than average)
• They hire more scientists/engineers (6.4
  compared to 4.1 average)
• They produce 55 of innovations (gt than 2x
  average)
• They hire more young people than average
• They create more secondary jobs in the community
• Michael Porter on new technology ventures
  Clusters 2003 , Montréal Canada
• Canadian Federation of Independent Business
  On Hire Ground, 1996.

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What is technology entrepreneurship?

• An act of innovation that involves endowing
  existing resources with new wealth producing
  capacity not restricted to a new technological
  innovation that results from research and
  development, or to an innovative cost reduction
  process, but maybe a new application for existing
  technologies, a product or service innovation or
  a new way or place of doing business
• Peter Drucker
• This leads to us defining two types of technology
  entrepreneur
• Technology developers who develop a unique
  technology that drives a new venture
• Technology users who see a new technology
  development and understand how it can be
  applied to meet a market need that
  creates a new venture

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What is an entrepreneur?

• Create/control a new venture to create economic
  value for themselves and their stakeholders.
• Top 6 characteristics
• Desire for independence and financial reward
• Optimistic outlook
• Action orientation
• Moderate risk taker
• Active user of external resources
• Strong and trusted leader

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What is an intrapreneur?

• Creates new opportunity inside an existing
  organization creating economic value for company.
• Top 6 characteristics
• Desire for recognition and financial reward
• Optimistic outlook
• Action orientation
• Moderate risk taker
• Active user of internal resources
• Good team builder

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What is different between technology innovation
and business model?

• Technology innovation is a new technical solution
  to an identified problem.
• A new business model is a new way of making
  money.
• Sometimes a new technological innovation leads to
  the opportunity to create a new business model,
  while other times it just replaces an existing
  technology.
• An example of a new business model is Google
  or Xerox. Why?

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Technology innovation vs business model

• Xerox invented the photocopier, but could not
  sell it as it was too expensive.
• Instead they made money by renting it on a per
  copy basis.
• Google invented a new search technology and
  provided their service free.
• They made money by linking the search to ad-words
  which advertisers valued.

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When are new technology ventures created?

• Depends on combination of technological
  innovation and business model issues
• Disruptive innovations
• fill an existing unmet demand or
• offers significant improvement over current
  solutions
• foster new venture creation
• Sustaining innovations
• improve on current performance
• enhances market share for existing players

Can you think why this might be so and give
examples?
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Technology ventures characteristics which
indicate high potential

• Create a new value for their customers
• Have a significant level of technology
  understanding which is difficult to replicate and
  can often be protected (patented)
• Have a significant first mover advantage
• Have a level of scalability
• Have created a barrier to entry
• Have a high level of initial risk which
  can be translated into high levels of return

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High risk also means high risk of failure!

• Only 1 in 6 million high tech business ideas 6
  ends up with an IPO
• Less than 1 of business plans received by VCs
  get funded
• Founder CEOs typically own less than 4 of a
  company after IPO
• 60 of tech firms funded by VCs go bankrupt
• Typical time to IPO is usually five years or more
• 8 Stanford Technology Ventures 2006

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How do new tech ventures link to University
activities?

• In Canada generate more than 2.5 billion of
  revenue and 84 million of license income
• Employ grads (RIM hired 3000 from U of W)
• Provide co-op opportunities for undergraduates
• Provide a significant source of contract research
  
• Create demand for local infrastructure
• Channel to market, early adopters or licensee
• Continue to interact with Universities creating
  industry oriented culture
• If successful become significant donors
• Read, Stats Canada Data, 2003

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