Entrepreneurial Strategy
Joshua Gans
Fiona Murray
Scott Stern
January 2014
Capitalized with great
fanfare as a disruptive startup aimed at overturning
traditional grocers, Webvan
positioned itself as an
integrated substitute for
supermarkets
With a much smaller
capitalization, and focusing
on online grocery delivery
using existing chains, Andy
and Tom Parkinson
positioned Peapod as a
complement to traditional
supermarkets
Two entrepreneurial companies…
both having access to significant resources…
seeking to exploit the same opportunity….
at the same time….
With fundamentally different strategies
Webvan ultimately burned
through ~ $1 billion and
went bankrupt less than two
years after its IPO…
Peapod established a
partnership with Ahold
(Stop&Shop), who ultimately
acquired majority ownership.
Highly profitable niche business,
with Parkinson brothers still in
direct operational control of the
company…
The challenge of innovation-based entrepreneurship
is not about coming up with great ideas….
The hard part is commercializing the idea in a way that
creates unique value for an end user while allowing the
entrepreneur to capture value on an ongoing basis
Idea Generation
Idea Selection
Commercialization
What do we Do and Not Do in Commercializing
Our Idea?
The Paradox of Entrepreneurship
Coming to market requires market knowledge; the process of
gathering knowledge -- market experimentation – inherently
limits the scope of competitive advantage
What is Entrepreneurial Strategy?

Entrepreneurial Strategy is the plan a founder
(and her team) undertakes to identify a system
for value creation and value capture before the
opportunity for value capture is dissipated.
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Combines systematic experimentation and learning
with escalating strategic commitments
Not a passive process, but the active choices that
allow a firm to establish priorities, achieve internal
coherence, time irreversible commitments, and
ensure value capture
A plan for choosing what NOT to do
Do Entrepreneurs Need Strategy?

Many start-up companies find their growth path guided
not by design but by circumstance
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
And, there has long been skepticism among
entrepreneurs in the lessons from “strategy” for their
fledgling ventures
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
The Customer is Always Right
Money Talks
Who can afford another expensive study?
My industry / setting moves so quickly – those static tools
are not very helpful!
Isn’t this just my business plan?
Our objective is to offer a novel framework that allows
entrepreneurs to choose how their company evolves, and
helps to align the disparate decisions made during the
earliest stages of a venture.
The Four Choices that Shape
Entrepreneurial Strategy
Selecting Strategy
Your Canvas
The Entrepreneurial
Entrepreneurial Strategy
ORIENTATION
COLLABORATION COMPETITION
CONTROL
INVESTMENT
EXECUTION
Agenda

What is Entrepreneurial Strategy?

Entrepreneurs Need Strategy

Choosing Your Competition

Choosing an Entrepreneurial Strategy

Putting the Framework to Work
Entrepreneurs Need Strategy

Prioritization

Internal Coherence

Irreversible Commitments

A Field Guide for Experimentation and Evolution
Prioritization
Internal Coherence
The Timing of Irreversible Commitments
Commitments and Expropriation
A Guide for Experimentation and Evolution
Dr. Yet-Ming Chiang
A Few Thoughts…

Execution is fundamental to any business…the
pay-offs to execution are higher when guided by
strategic priorities and internal consistency

Experimentation and learning are fundamental to
the evolution of any new venture…the value of
experimentation is far higher when guided by
strategic priorities, and allows more effective
staging of irreversible commitments

More generally, because they have more freedom
but fewer resources, the marginal returns to
“strategy” are higher for entrepreneurs than for
established businesses
Agenda

What is Entrepreneurial Strategy?

Entrepreneurs Need Strategy

Choosing Your Competition

Choosing Your Entrepreneurial Strategy

Putting the Framework to Work
Two Broad Dimensions for Choosing
With Who and How you Compete…
Control Versus Execution
Tactus Technology has
created a tactile user
interface that combines the
elegance of touchscreen
with the physical sensation
when typing
Swiftkey has developed a
powerful predictive
algorithm that dynamically
updates keyboards on a
stroke-by-stroke basis
Tactus Technology has
focused on establishing a
strong IP position, with 15
issued and 45 pending
patents. “We made a
choice to go with
intellectual property…”
Swiftkey has focused on
bringing their product to
market, with three software
generations over the past
four years, and significant
follow-on innovation in the
area of predictive text
Investing in Control Versus Execution
The Benefits of
Execution
The Benefits of
Control

Increased “Appropriability”

Time-to-Market

Ensuring the “Vision” of
the Founder

Feedback and
Experimentation

Facilitating Value Capture
with Key Partners

Lower Commercialization
Cost
Oriented Towards….
Collaboration
Competition
Oriented Towards Compete Versus
Cooperate?
Benefits from
Collaboration




Enhanced Value
Proposition
Reduced Costs
More Focused Incentives
Higher Product Market
Profits
Benefits from
Competition

More Control

Fewer Bargaining Hassle

High-Powered Incentives

Potential for Increased
Value Capture (as a
Share of Value Creation)
Agenda

What is Entrepreneurial Strategy?

Entrepreneurs Need Strategy

Choosing Your Competition

Choosing an Entrepreneurial Strategy

Putting the Framework to Work
Choosing an Selecting
Entrepreneurial
Strategy
Your
Entrepreneurial Strategy
ORIENTATION
COLLABORATION COMPETITION
CONTROL
INVESTMENT
EXECUTION
Intellectual Property Strategy
Objective
• Use Control over Key Intellectual
Property Assets as a Means for
Extracting Significant and Sustainable
Revenue Streams
Internal
Organization
• Capabilities focuses on innovative
capacity and IP management
• Integration and collaboration between
technical workers and IP managers
• Focus on the technology S-Curve
Scope
rather than the Market S-Curve
External Position
• Entrepreneurs Role is Limited to
Invention, IP Management, Technology
Transfer, and Perhaps Standard-Setting
• Competitive advantage is premised on
• Global Approach to Implementation and
Commercialization of Innovation
• Reputation and commitments for
• Potential for Exclusive or Non-Exclusive
Arrangements
bargaining power rather than market
power.
enforcing control over knowledge
assets
• Exploit comparative advantages in
invention versus commercialization
Investing in Control, Oriented Towards Partners
Disruptive Strategy
Objective
• Exploitation of new Technology S-Curve
through the development of a novel
value chain
Scope
• Must consider how to create and deliver
value to key consumer groupings, with
a particular focus on consumer
segments poorly served by existing
products
• Often involves the development of a
novel and integrated value chain, with
an explicit focus on differentiation and
isolation from established players
Internal
Organization
• A focus on experimentation and
execution. Integration of customer
insights into the technology
development process
• Capability Development focuses on
building out an organization to serve
key customer groupings .
External Position
• Strategy as Hustle!
• Avoiding detection and early response
by established firms
• Choosing a lonely place on the
strategic frontier
• Early focus is often on local markets
Investing in Execution, Oriented
Towards Competition
Value Chain Strategy
Objective
• Integration of an Innovation into an
Established Value Chain to Enhance
Market Power (for the Chain) and
Establish Bargaining Power (for the
Innovation and Entrepreneurial Team)
Scope
• Scope follows the strategic logic of the
value chain you will join
• Often involves establishing a
commitment to serve a particular
“horizontal” piece of the value chain
(but not others) and depends on
commitments by others not to encroach
on your piece of the value chain
• Leveraging the Technology S-Curve to
serve the established Market S-Curve
Internal
Organization
• Not Simply a Technology but a Team
and Organization to Support the
Deployment of the Innovation within
the Value Chain
• Integration between innovators,
business development, and supply
chain partners
External Position
• Exclusivity: Enhancing and
Reinforcing the Uniqueness and
Distinctive Positioning of the Value
Chain you Join
• Bargaining Power: Enhancing the
Exclusivity & Isolation of the “Piece”
You Contribute to the Value Chain
Investing in Execution, Oriented
Towards Cooperation
Architectural Strategy
Objective
• Exploitation of new Technology S-Curve
by architecting a new value chain
Scope
• Careful choice of which stages of the
value chain to participate in (or not) and
taking responsibility for the coordination
and integration of the entire value chain
• Very often must consider how to create
and deliver value to stakeholders within
the eco-system, both through your
technology and as a broker
• Often involves the development of a
platform core that allows multiple side
to interact and exchange easily and
transparently
Internal
Organization
• Often involves a separation between
Job 1 (grow the ecosystem) and Job 2
(monetize the core)
• Coring involves a combination of
technology and market design; tipping
involves a combination of market
design and tactics
External Position
• Platform architects serve a crucial role
at the “hub” of multiple stakeholders
through control over an interface or
access point
• Platform Architects Compete For the
Market Rather than In the Market
Investing in Control, Oriented Towards
Competition
Architectural Strategies
Different Entrepreneurial Strategies Involve
Different Priorities and Commitments
Value Chain Strategy
 Integrating your
Innovation into an
Existing Value Chain
 Reinforces Value
Proposition of Already
Existing Consumers
 Emphasis on Exclusive
Relationships and
“Horizontal” control
Disruptive Strategy
 Exploiting a New
Technology S-Curve
through the development
of a novel value chain
 Focus on customer
segments poorly served by
existing value chains
 Need to execute quickly
enough to avoid response
by established players
Agenda

What is Entrepreneurial Strategy?

Entrepreneurs Need Strategy

Choosing Your Competition

Choosing an Entrepreneurial Strategy

Putting the Framework to Work
“I am thrilled to finally draw back the curtain and
introduce our new light field camera company, one
that will forever change how everyone takes and
experiences pictures. Lytro’s company launch is truly
the start of a picture revolution.”
– Ren Ng, Lytro Product Launch,
2011
Entrepreneurial
Strategy:
The First
Selecting
Your
Stage of Strategic Experimentation
Entrepreneurial Strategy
ORIENTATION
COLLABORATION COMPETITION
CONTROL
INVESTMENT
EXECUTION
Disney and
Entrepreneurial
Selecting
Your Strategy
Entrepreneurial Strategy
ORIENTATION
COLLABORATION COMPETITION
CONTROL
INVESTMENT
EXECUTION
Parting Thoughts…

The power of entrepreneurship is the ability to not
only identify and implement exciting opportunities but
to make choices that allow you to create real value for
the world and capture value for your stakeholders

The more exciting and disruptive the innovation, the
more important those choices are for your ability to
commercialize and build a new company with
competitive advantage

The process of choosing an entrepreneurial strategy
requires a venture to come to terms with the core value
that it will create, and the logic of how it will capture value
on a sustainable basis
Thank You!