Management of Innovations and Entrepreneurship

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Management of Innovations and Entrepreneurship

• Malin Brännback
• Spring 2004

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In Keeping a Company Entrepreneurial, Remember
One the greatest pains to human nature is the
pain of a new idea. - Walter Bagehot
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Keeping a Company Entrepreneurial
Thus you have to make identifying and capturing
opportunities a joyous and fulfilling experience.
- Dodge Morgan
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The setting

• Four drivers
• A story that need to be tended to
• The business opportunity
• The opportunity to change animal husbandry,
  generate savings, impact more than just Randy
• Glory...a dream to go to history as having done
  something

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Annual Chicken Turnover in Millions of Birds
Chicken population annual growth 6-12 percent Egg
production decline 1 per year
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The Process

• Start laying eggs at the age of 18 weeks
• Lay their first eggs in the spring
• Farmers have to trick the hen into thinking its
  spring
• The amount of light during the day spring

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The Economics
A 20 week old hen 2.50 Feed cost/dozen
eggs 0.28 other production costs 0.06 deprecia
tion 0.12 -------- 0.46 Total
production costs/dozen eggs 0.52 The weighted
average income/ dozen eggs 0.53 Not much
profit
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Problems with red light

• it has to be entirely in the red range (5300-6800
  Ångström) if it spills into blue or green
  ineffective
• the building has to be closed which is not the
  case in the largest egg producing states CA,GA,
  Fl, Tx, Ol.
• Red light takes more energy than white light
  since 90 of the white light is screened out.
  Costs for light and ventialtion is thus required!
• Hard for workers to constantly adjust their eyes
  while entering and leaving the closed houses

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Previous Attempt

• 1963 Vision Control Inc. started by Al Schriner
  and Irv Wise, closed after a few months
• late 1960searly 1970s a second attempt no
  luck
• 1969 a patent for contact lenses for chickens,
  patent expired
• 1973-1974 third attempt by Randy Wise...no luck
  here either

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Fourth Attempt

• In 1984 Randy Wise, Al Leighton (Univeristy of
  Virginia Polytechnic) started working on the
  lenses
• Victor Cota and George Daniels of Omicron joined
  the in the efforts
• Can we manufacture these lenses and if so at what
  price?
• 15 cents was seen as the rigth sales price
  15-20 perhaps collective gut feeling
• Built a mold enabling production of 775,000 pair
  a month
• Patens are important filed in oct. 1987

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The Team

• Randy Wise, Professor
• Al Leighton, Professor
• Carl Johnson, VP sales
• Bill Erickson, VP marketing
• Diane Porter, Director of Administration and
  Secretary-Treasurer

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The Market

• Relatively few potential customer 200-250 egg
  raising ranches represent 80 of the US market
• 700-1,000 cover 80 of the market overseas
• Turkeys, pigs, and ducks all of which exhibit
  aggressive behaviour when raised under commercial
  conditions

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Market Strategy

• Economic savings from reduced mortality, reduced
  feed consumption, and more eggs
• No other value
• No competiton against other products

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Economic justification to the farmers
Decreased mortality 0.10 Decreased feed
consumption 0.26 Increase in egg
production 0.32 0.68 Cost of a pair ABL-1
lenses -0.15 Cost of insertion -0.15
--------- Total 0.48 Cost of a
Chicken 2.50 Chickens increase in egg
production from 1-3 or 4
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Market Strategy

• Advertise their product in 2 or 3 main poultry
  digests for exposure
• Send a trial kit to larger farms containing ten
  pairs, a booklet about the company and a short
  video showing how the product is used and how to
  insert the lenses
• Sales force to convince the larger ranches to do
  trials on 1,000 chickens

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Finance Needed Preparation

• In 1988 a limited offering memorandum for raising
  300,000-420,000
• What about the reasons for raising money?

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Part I 2and 3

• What recommendations would you make to improve
  any of the above?
• Would you invest in this company in late august
  1988 at 30 per share?

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Part II

• What have they learned from their first three
  months of operations? Should their problems have
  been forseen? Why or why not?
• What does this all mean for their financial
  plans?
• What should they do now?
• Marketing
• Finance
• Operations
• What do you think will happen next?
• Would you invest in this company in late october
  1988 at 30 per share