The 16th Annual
The Nuts and Bolts of Business Plans
MIT Course 15.975
January 2005
Image by MIT OCW.
Joe Hadzima
(MIT S.B., M.S. in Management; Harvard Law)
Senior Lecturer, MIT Sloan School
Managing Director, Main Street Partners LLC
Joost Bonsen
Yonald Chery
MIT Sloan Graduate Student
Former Lead Organizer, MIT $50K Competition
Mark Roberge
MIT Course 6, PhD Candidate
$50K Finalist, Founder Virtual Ink
1
Background Image by MIT OCW.
Technology Strategy for Start-Ups
Professor Fiona Murray
Sloan School of Management
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Session Topic: Technology Strategy
Professor Fiona Murray #1
Foundations of Technology Strategy
Markets
How will we create
value?
Technologies
Do we have the
organizational
capabilities
necessary to
deliver it?
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Can we capture
this value despite
competition?
Session Topic: Technology Strategy
Professor Fiona Murray #2
Do all scientific ideas have economic potential?
-Not Very Useful
-Can’t Implement
-Cost / Processes
Potential
Economic
Value of idea
X
X
-Social Constraints
-No “Market”
X
X
X
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Value of
Scientific idea
Session Topic: Technology Strategy
Professor Fiona Murray #3
Is it the case that
great ideas = pots of money?
-Competition
-Standards
Economic
value
captured
by the
startup
X
Microsoft
X
-Licensing Strategy
-Managerial Oversight
GE-CT Scanner
VHS
Philips
& Investors
Betamax
X
EMI- CT Scanner
Xerox Parc
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Economic value
potential created
Session Topic: Technology Strategy
Professor Fiona Murray #4
Two main areas of technology strategy
• Value creation
– Does this technology or scientific idea create
something of value for customers?
• Value capture
– Can we capture the economic value inherent in
this idea in the face of competition?
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Session Topic: Technology Strategy
Professor Fiona Murray #5
What is a business model?
• Business model =
How do you plan to make money?
• Way you decide to transform your scientific
ideas into economic value
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Session Topic: Technology Strategy
Professor Fiona Murray #6
The Business Model Mediates Between
the Technical and Economic Domains
Technical
Inputs:
e.g.
feasibility,
performance
Measured in technical domain
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Business Model:
¥ market
¥ value proposition
¥ value chain
¥ cost and profit
¥ value network
¥ competitive
strategy
Economic
Outputs:
e.g. value,
price,
profit
Measured in social domain
Session Topic: Technology Strategy
Professor Fiona Murray #7
Value Creation
• What is your value proposition?
• What does this idea do for a group of customers?
• Valuable attributes belong to products not technologies
Technology
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Product/
solution
Market
Session Topic: Technology Strategy
Professor Fiona Murray #8
Many technologies can be used in different
ways ….
• Which customers are most willing to pay?
• Where is this the most significant improvement?
• Which applications are the most technology do-able?
• Which applications are on the path to progress?
Technology
Product/solution
e.g. Signage
e.g. e-Ink
Product/solution
e.g. eNews
Product/solution
e.g. eBooks
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Session Topic: Technology Strategy
Professor Fiona Murray #9
Value Capture
• Can we protect our competitive advantage (value proposition)?
• How will we deliver value to customers?
Technology
Product/
solution
Market
What protective layer can we wrap around our
technology, product & customers?
Nuts and Bolts of Business Plans
Session Topic: Technology Strategy
MIT Course 15.975 – Joe Hadzima
Professor Fiona Murray #10
Four key ideas for start-ups:
• Intellectual property
– Controlling the knowledge underlying an innovation
• Secrecy
– No-on else knows how to do this
• Speed
– Moving rapidly beyond current competition &
keeping ahead
• Lock-in customers
– Making it costly for customers to switch or
becoming the standard
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Session Topic: Technology Strategy
Professor Fiona Murray #11
Many ways to deliver value to customers …
• Product or service?
• How far along the value chain?
• Interaction with competitive advantage & protection
Technology
Product
e.g. Library h’ware & s’ware
e.g. combochem
Service
e.g. Library service
Drug discovery
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
e.g. Pharmaco firm
Session Topic: Technology Strategy
Professor Fiona Murray #12
Evolution of your technology strategy:
example of Millennium
Build Revenue:
Apply technology to
different problems thru
service contracts and
maintain IPR
Build Assets:
Firm founding:
Use alliances to
develop key assets &
new technologies
Based on narrowly
defined gene technology
Forward Integrate:
Move down the value chain
internally & thru
acquisitions
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Session Topic: Technology Strategy
Professor Fiona Murray #13
Key Questions that MUST be addressed
• Does this idea create economic value?
1. What is the value proposition of the product?
2. What is the market segment?
• Can we capture this economic value?
3. Can we protect our competitive advantage
4. Where in the value chain are we focused – how do
we deliver the value?
Nuts and Bolts of Business Plans
MIT Course 15.975 – Joe Hadzima
Session Topic: Technology Strategy
Professor Fiona Murray #14