UNIT – II
PROCESS DEVELOPMENT
AND
INNOVATION MANAGEMENT
1
Process
Business
Modeling
BUSINESS
PROCESS MODELING
2
What is Business Process Modeling?
 Business process modelling is a means of representing the
steps, participants and decision logic in business processes.
 It is the analytical representation or illustration of a
organisation’s business processes
There are three main types of process models:
1. Descriptive models: Written explanations of the processes
2. Active models: A working model that represents the
processes (eg. computer simulations)
3. Diagrammatical models: A diagram that shows the
processes and the relationships between them (eg. process
maps and flowcharts.)
3
Why Business Process Modeling?
 Need for BPM
a.
To engineer/ develop business system
b.
To establish business activities logically
c.
To keep business process technologically updated
d.
To analyse and improve current business process
e.
To attain the expected operational quality
f.
To reduce modifications and wastage
g.
To develop process efficiency and productivity
4
Process mapping at a Distribution Center
Dealer
Faxes
Order
Paper
Order
Created
4% of
orders lost
Order Sits
In Fax
In Box
0 to 4 hours
2 hours on average
Order Sits
In Clerk’s
In Box
Internal Mail
Delivers Fax
0.5 to 1.5 hours
1 hour on average
1% of orders lost
0 to 2 hours
1 hour on average
Clerk
Processes
Order
5 minutes
10 to 45 minutes
20 minutes on average
Dealer
Receives
Order
Transport Firm
Delivers Order
1 to 3 hours
2 hours on average
No history of lost,
damaged, or incorrect
deliveries
Inspector
Checks
Order
Worker
Picks
Order
2 minutes
0.5% of orders incorrect
YES
Is Item
In Stock?
NO
Clerk Notifies
Dealer and
Passes Order
On to Plant
5
Improving Business Processes: Guidelines
• Attack each delay
– What causes it?
– How long is it?
– How could we reduce its impact?
• Examine each decision point
– Is this a real decision or just a checking activity?
– If the latter, can we automate or eliminate it?
• Dematerialize documentation.
– Can we do it electronically?
– Eliminate multiple copies?
– Share a common database?
6
What Measures Business Process?
Business Process Measures
Productivity : Measuring the relationship or ratio between
inputs incorporated for a particular out
Efficiency : A comparison of a company’s actual
performance to some standard
Cycle Time : Total time required to complete a process from
start to finish.
Bench Marking : A comparison of a company’s
performance to the performance of: Other firms in its industry
(strategic), Firms identified as “world-class” (process)
7
Business Process Modeling Techniques
•
Business Process Modeling and Notation [BPMN]
•
Cognition enhanced Natural Languages Information
Analysis Method [CogNIAM]
•
Extended Business Modeling Language [xBML]
•
Event-driven Process Chain [EPC]
•
ICAM DEFinition [IDEFO]
•
United Modeling Language [UML]
8
Value Chain Analysis for
Manufacturing and Services Industries
9
Michael Porter’s Value-Chain
• Developed in 1985 by Michael E. Porter in Competitive
Advantage
• Highlights cost advantages and distinctive capabilities--the
value processes
• Value chain refers to the process or activities by which a
company adds value to an article, including production,
marketing, and the provision of after-sales service.
10
Value Chain and the QCT Triangle
• VC allows alignment of processes with
customers. This generates a quality advantage.
• VC focuses cost management efforts.
• VC provides for efficient processes which
improves the timeliness of operations.
• Value Chain Benefits
• Identifies value processes
• Identifies areas for cost improvement
11
QCT Triangle
• Time: Completion of tasks depends on a number of factors such as the
number of people working on the project, experience, skills, etc. Time
is a crucial factor which is uncontrollable.
• Cost: Budgets will ensure that project is developed or implemented
below a certain cost.
• Quality: Many project managers are under the notion that 'high quality
comes with high cost', which to some extent is true.
12
Value Chain for Manufacturing Industries
from Michael E. Porter’s Competitive Advantage
13
Value Chain for Manufacturing Industries
from Michael E. Porter’s Competitive Advantage
• There are (5) primary activities.
Inbound Logistics: Receiving, inventory, and
distribution of inputs from suppliers.
Operations: Transforming inputs into a final
product.
Outbound Logistics: Moving the final products and
services to customers.
Marketing & Sales: Communicating product's to
customers and then selling products.
Service: Providing customer service and
maintaining the value of a product.
14
Value Chain for Manufacturing Industries
from Michael E. Porter’s Competitive Advantage
• There are (4) support activities.
Firm Infrastructure: Legal, administrative,
accounting, and management
Human Resource Management: The ability for a
company to hire, train, motivate, and reward
employees.
Technology Development: Research & design and
information systems are able to generate value
which in turn can create a competitive advantage.
Procurement: Sourcing raw materials and
negotiating contracts can definitely add value to a
company.
15
Profitability and
Revenue Growth
Customer
Loyalty
Internal
Service Quality
Employee
Satisfaction
Value Chain
for Service
Industry
Employee
Productivity
Customer
Satisfaction
External
Service Value
Employee
Retention
16
Value Chain Elements
• Customer value added
• Margin orientation
• Primary activities
–
–
–
–
–
Inbound logistics
Operations
Outbound logistics
Sales and marketing
Service and support
• Support Activities
– Human resources
(general and admin.)
– Tech. development
– Procurement
17
Goal of Value Chain
• Driven by customer perceptions
• Increase margins
• Focus on value processes
– Distinctive capabilities
– Cost advantages
• Some examples
– Southwest Airlines
– Intel Corporation
18
Value Chain Analysis
• Document the activities
• Understand the cost and margins at each step.
– Use Activity Based Costing
• Map the value chain to the industry value
chain
– Look for core competencies
• Map the cost structure
– Note that external values drive cost advantages
19
Discovering Your Own Value Processes
• Distribute a summary of the value chain model.
• Create functional process lists.
• Transfer lists to color-coded labels.
• “Pin the process” on a large VC diagram.
• Identify appropriate processes as:
– Cost advantage
– Core competency
20
Using the Value Chain
•
•
•
•
Helps you to stay out of the “No Profit Zone”
Presents opportunities for integration
Aligns spending with value processes
Provides for reconfiguration of the value chain
–
–
–
–
outsourcing
off-shoring
co-location with customers or suppliers
redesign for efficiency
• Involves chain partners: customers & suppliers
21
22
Frugal Innovation
• Design to extreme affordability
• Strategic thinking towards volume markets
• Creativity and innovation towards extreme
affordability
• Design, engineer and produce for marginal
markets
• Translating and innovating a high margin brand
for low margin markets
• Creating and innovating towards branded and
quality products for marginal markets
23
Frugal Innovation Market Potential
Source : WRI 2008
24
25
26
Electric Tricycle
27
Example :Service Sector-Microfinance
• Microfinance is the offer of financial & non-financial services to
people excluded from the traditional banking system. The services
are adapted to the needs of the target populations.
MICRO
• Micro-entrepreneurs
• Self-employed
• Low income populations
• Excluded populations
FINANCE
• Business & educational loans
• Savings
• Micro-insurances
• Remittances
• Micro-entrepreneur training
• Coaching & workshops on
health, hygiene, etc.
28
Fast Moving Consumer Goods
•
•
•
•
•
•
•
•
Sampoo
Bathing Soaps
Beauty Items
Utensils
Coolers and ACs
Refrigerators
TV sets
Washing Machine
29
Hot Water Maker
30
Prefabricated Houses
31
Theoretical Perspective
www.frugal-innovation.com
32
Creative Process in
Developing Innovation
33
Creativity, Innovation and Entrepreneurs
Creativity is thinking new things, and
innovation is doing new things
 Creativity is the ability to develop new
ideas and to discover new ways of
looking at problems and opportunities.
 Innovation is the ability to apply creative
solutions to those problems and
opportunities in order to enhance
people’s lives or to enrich society
Entrepreneurship = Creativity + Innovation
34
Definition of Creativity
“Creativity is any act, idea, or product that changes an
existing domain, or that transforms an existing domain
into a new one… What counts is whether the novelty he
or she produces is accepted for inclusion in the domain.”
“Creativity is nothing more than seeing and acting on new
relationships, thereby bringing them to life.”
“Creativity is defined as the act of turning new and
imaginative ideas into reality. Creativity involves two
processes: thinking, then producing. Innovation is the
production and implementation of an idea. If you have
ideas, but don’t act on them, you are imaginative but not
creative.”
35
Creative Thinking Process
1.
2.
3.
4.
5.
6.
7.
Preparation
Saturation
Deliberation
Incubation
Illumination
Verification
Accommodation
36
STAGES OF
THE UNIVERSAL CREATIVE PROCESS
Clarify
situation
Generate
ideas
Develop
solutions
Implement
action
37
Creative Thinking Techniques
1.
2.
3.
4.
5.
6.
7.
8.
Attribute Listing
Check List Method
Morphological Analysis
Brainstorming
Synectics
Thinking Hat Method
Nominal Group Technique
Fishbone Diagram
38
Creative Thinking Techniques
39
Brainstorming
Brainstorming
• Brainstorming is a method for generating ideas to solve a
design problem.
• It usually involves a group, under the direction of a facilitator.
• The strength of brainstorming is the potential participants
have in drawing associations between their ideas in a freethinking environment, thereby broadening the solution space.
Morphological Analysis
•
•
•
•
Define the problem
Define the problem in a short and clear statement.
Identify attributes and values
List the things about the situation that can be
varied or changed in some way. Select a subset of
two to six variables to investigate further.
Combing items
• Find a way of combining items from the lists you
have created.
Synectics
• The term "synectics" is derived from the Greek word
"synectikos," which means to bring different things
into unified connection.
• Synectics is an approach to problem-solving that
focuses on cultivating creative thinking, often among
small groups of individuals with diverse experience
and skills.
Synectics
Morphological Analysis - Example
45
Attribute Listing
Thinking Hats Method
Fish Bone Diagram
Fish Bone Diagram
Nominal Group Technique
Nominal Group Technique
The following questions are designed to stimulate the
imagination and can help develop creativity:
1. Is there a new way to do it?
2. Can you borrow or adapt it?
3. Can you give it a new twist?
4. Do you merely need more of the same?
5. Do you just need less of the same?
6. Is there a substitute?
7. Can the parts be rearranged?
8. What if we do just the opposite?
9. Can ideas be combined?
10. Can we put it to other uses?
11. What else could we make from this?
12. Are there other markets for it?
52
New Challenge
• A company manufactures glassware.
• The last step of the process is to wrap glasses
individually in used newspapers and then place
them in a specially designed box.
• The box is then sealed. Management notices low
productivity with this last step, observing that
workers occasionally stop to read the newspapers?
What can management do to increase
productivity?
53
Types, Forecasting and Stages
New Product Development
54
Meaning of New Product Development
•Product development means making changes in
the size, design, color, shape, characteristics,
packing etc. of the product.
•It may include
addition of a new product line,
addition of a new product item in a particular
product line,
elimination of existing product or product line &
changes in the size, color, design, packing,
characteristics, and prices of the product &
discontinuation of the unprofitable item or
product line.
55
Definition
• New product development (NPD) is the
complete process of bringing a new product to the
market till its consumption & feedback from the
end user of the business chain through the
systematic procedure & parameter.
• It may be a consumable product, service or idea.
56
New Product Categories
•
•
•
•
New to the world products
New product lines
Product line extensions
Improvements and revisions to existing
products
• Repositionings
• Cost reductions
57
Why New Products?
• New product development is essential to any
business that must keep up with market trends
and changes.
• Approximately one-third of the revenue a
business generates is coming from products
they did not sell five years ago
• Changing environment creates new demands
and needs
58
Industrial New Product Ideas
•
•
•
•
•
•
•
Company sources other than R&D
Analysis of the competition
Research & Development
Product users
Supplier suggestions
Product user research
Published information
36.2%
27.0%
24.3%
15.8%
12.5%
10.5%
7.9%
59
New Products necessity
• A way of getting new and keeping old
customers
• Effective way of obtaining a competitive
advantage
• Source of growth and excitement
60
What is Forecasting?
Process of predicting a
future event
??
Underlying basis
of all business decisions
•
•
•
•
Production/ Product
Inventory
Personnel
Facilities
61
New Product Forecasting Issues
Low accuracy (high forecast error)
Low credibility
Limited amount of data available for analysis
Inability to fully capture market complexity,
cannibalization, market penetration rate, etc.
Limited amount of time for analysis
62
Keys To New Product Forecasting
 There is no silver bullet when it comes to new product forecasting.
 New product forecasting success is a result of data, experience,
cross-functional communication, business knowledge, and being
connected to the customer.
 Use a toolbox approach when applying new product forecasting
techniques.
 New product forecasting requires reconciliation of multiple
techniques based on judgment and analytical skills.
 New product forecasting is a process of managing assumptions.
 Think in terms of ranges, not specific numbers.
63
Forecasting Techniques
Jury of executive
opinion
• Pool
opinions of
high-level
experts,
sometimes
augment by
statistical
models)
Delphi method
• Panel of
experts,
queried
iteratively
until
consensus is
reached
Sales force
composite
• Estimates
from
individual
salespersons
are reviewed
and then
aggregated
Consumer
Market
Survey
• Ask the
customer
64
New-Product Development Process
65
New-Product Development Process
 New idea generation is the systematic search for
new product ideas. Sources of new-product ideas:
Internal
sources
External
sources
• Refers to the company’s own
formal research and development,
management and staff, and
intrapreneurial programs.
• Refer to sources outside the
company such as customers,
competitors, distributors,
suppliers, and outside design
firms.
9-9
66
New-Product Development Process
Idea Screening: Refers to reviewing newproduct ideas in order to drop poor ones as soon
as possible.
9-10
67
New-Product Development Process
Concept Development and Testing: Refers to newproduct concepts with groups of target consumers.
Product idea
• An idea for a possible product that
the company can see itself offering
to the market
Product
concept
• A detailed version of the idea
stated in meaningful consumer
terms.
Product
image
• The way consumers perceive an
actual or potential product
9-11
68
New-Product Development Process


Marketing Strategy Development: Refers to the initial marketing
strategy for introducing the product to the market.
Marketing strategy statement
• Description of the target market
• Product positioning, sales, market
Part 1: share, and profit goals
Part 2:
• Price, distribution, and budget
• Long-term sales, profit goals, and
Part 3: marketing mix strategy
9-13
69
New-Product Development Process
Marketing Strategy Development
When firms
test
market?
• New product is introduced with
large investment.
• Uncertainty about product or
marketing program
When firms
may not test
market?
•
•
•
•
Simple line extension
Copy of competitor product
Low costs
Management Confidence
9-18
70
New-Product Development Process
Marketing Strategy Development
Business
Analysis
• Involves a review of the sales, costs, and
profit projections to find out whether they
satisfy the company’s objectives.
Product
Development
• Involves the creation and testing of one or
more physical versions by the R&D or
engineering departments. Requires an
increase in investment
Test
Marketing
• Test marketing provides the marketer with
experience in testing the product and entire
marketing program before full introduction
9-15
71
New-Product Development Process
Approaches to test marketing:
Standard test markets
Controlled test markets
Simulated test markets
9-19
72
New-Product Development Process
Marketing Strategy Development
Standard test markets
Are small representative markets where the firm
conducts a full marketing campaign.
Makes use of store audits, consumer and distributor
surveys, and other measures to gauge product
performance.
Results are used to forecast national sales and profits,
discover product problems, and fine-tune the marketing
program.
9-20
73
New-Product Development Process
Challenges of standard test markets:
Cost
Time
Competitors can monitor the test
Competitor interference
Competitors gain access to the new product
before introduction
9-21
74
New-Product Development Process
Marketing Strategy Development
Challenges of standard test markets
• Cost
• Time
• Competitors can monitor the test
• Competitor interference
• Competitors gain access to the new product
before introduction
9-21
75
New-Product Development Process
Marketing Strategy Development
Controlled test markets are panels of stores that have
agreed to carry new products for a fee
• Less expensive than standard test markets
• Faster than standard test markets
•
Competitors gain access to the new product
9-22
76
New-Product Development Process
Marketing Strategy Development
Simulated test markets are events where the firm will
create a shopping environment and note how many
consumers buy the new product and competing
products. Provides measure of trial and the
effectiveness of promotion. Researchers can
interview consumers.
9-23
77
New-Product Development Process
Simulated Test Markets
Advantages
Less
expensive
than other test
methods
Faster
Disadvantages
Not
considered as
reliable and
accurate due
to the
controlled
setting
Restricts
access by
competitors
9-24
78
New-Product Development Process
Marketing Strategy Development
Commercialization is the introduction of the new
product
• When to launch
• Where to launch
• Planned market rollout
9-25
79
Reasons for new product failure
•
•
•
•
•
•
•
•
•
Overestimation of market size
Poor design
Incorrect positioning
Wrong timing
Priced too high
Ineffective promotion
Management influence
High development costs
Competition
80
Prototype Building and
Pitching
81
What is a prototype?
In interaction design it can be (among other things):
a series of screen sketches
a storyboard, i.e. a cartoon-like series of scenes
a Powerpoint slide show
a video simulating the use of a system
a lump of wood (e.g. PalmPilot)
a cardboard mock-up
a piece of software with limited functionality written in the
target language or in another language
82
What is a prototype?
83
Overview on Prototype Building
• Prototyping is a well understood and used
technique in engineering where novel products are
tested by testing a model prototype
– prototypes can be “throw away” (e.g., scale models) or
go into commercial use (Concorde!)
• In software development prototypes can be
– paper-based – software-based
84
What is Prototyping?
•
•
•
•
•
•
Essential element in user centred design
Is an experimental and partial design
Involves users in testing design ideas
Typically done very early in the design process
Can be used throughout the SDLC
Different types of prototyping are appropriate for different
stages of design
– Product conceptualization – requirements – task match
user acceptance
85
Why Prototype?
• Traditional software development: you can’t test until you
implement
• Implementation is expensive, and there is nothing to test
until you have made that expenditure of effort and schedule
time
• Result: any design errors are built in to the first thing you
can test, and it is very expensive to make changes
• Result: design errors, unless they are really bad, are left in
the product
86
Prototyping Process
• Identify basic requirements
– Determine basic requirements including the input and output
information desired
– Details, such as security, can typically be ignored
• Develop Initial Prototype
– The initial prototype is developed that includes only user interfaces
• Review
– The customers, including end-users, examine the prototype and provide
feedback on additions or changes
• Revise and Enhance the Prototype
– Using feedback both specifications and prototype can be improved
– Negotiation about what is within the scope of the contract/product may
be necessary
• Repeat steps #3 and #4 as needed
87
Advantages of Prototyping
• Reduced time and costs
– Can improve the quality of requirements and
specifications provided to developers
– Early determination of what the user really wants can
result in faster and less expensive software
• Improved and increased user involvement
– Requires user involvement
– Provides better and more complete feedback and
specifications
– Prevents
many
misunderstandings
and
misscommunications
– Can result in final product that has greater tangible and
intangible quality
88
Prototyping Techniques
The three major kinds of prototyping are
– “Throw away” prototyping (a.k.a. “rapid
prototyping”)
• used exclusively in requirements gathering
– Incremental prototyping
• not actually prototyping at all, but the delivery of
prioritised functions incrementally to a single, overall
design
– Evolutionary prototyping (a.k.a “Rapid
Application Development, RAD)
• as for incremental prototyping but with evolving
design
89
Killing the Ideas through
Stage Gate Model
90
Stage Gate Process Model
• The State Gate process is a patented trademark of Dr.
Robert Cooper.
• The model focuses on the innovation process and is also
referred to as the waterfall process.
• It is a project management technique, in which an
initiative or project takes place, divided over several
stages.
• These stages are separated by so-called ‘gates’; the
decision points for whether or not to proceed to the next
stage.
• This model can be used when developing new products,
process changes or improvements.
91
Stage Gate Systems
Example Companies use this model:
• Exxon- PIP Product Innovation Process
• HP- Phased Review Process
• Guiness- NaviGate
• others: 3M, Polaroid, Kodak,Rohm and
Haas,ICI,Mobil,Dow Chemical, Asahi Chemical,
P&G, SC JOhnson
92
Stage Gate Systems
93
Typical 2nd Generation Stage-Gate
Process
94
Stages
Gates
• At each gate, a decision is made whether to
continue the process or not.
• This decision is based on the prospects and
information available at that moment.
• The quality of an idea is assessed at each of the
gates.
• This concerns the quality of the
execution, business motivation to continue
financially and the action plan showing what
needs to be done in order for the project to have a
chance at succeeding.
95
Gates – Decisions
Go: The project is good enough to move on to the
next stage
Kill: The project is not good enough to develop
further and is shut down right away.
Hold: The project is neither good enough nor bad
enough. It is put on hold to possibly be resumed at a
later date.
Recycle: The project is good enough to develop
further, provided some changes are made.
96
The Stage Gate process consists of a number of
stages, which are connected to each other by
gates. Each stage is designed to collect specific
information:
Stage 0: Discovery
Stage 1: Scoping or Investigate something
Stage 2: Business plan concept
Stage 3: : Development
Stage 4: Testing and Validation
Stage 5: Launch and Implementation
97
3rd Generation Stage-Gate Process
98
Pitching of Full-Fledged
Business Idea
99
Pitching Business Idea to
Investors
100
Very Important Point
• You are NOT pitching a great idea, team or
product
• You ARE pitching what your business will do
for investors and for customers
• SO, pitch how your business will solve a
tangible problem that exists TODAY!!
101
Example
• WRONG:
– We are the smartest telecom guys in the world and we are
gonna install high bandwidth wireless telecom infrastructure
in really tall downtown buildings in big cities all over the
world
• BETTER:
– We enable you to use your cell phone anywhere inside every
building in all major U.S. metropolitan areas
102
Elements of the Pitch
•
•
•
•
•
•
•
•
•
•
•
The Hook- pain point or heart grabber
Brief description of product/service
Brief market description with opportunity
Brief description of competition
How you are different from other solutions
How you will make money - biz model
Partnerships and alliances
Sales and distribution plan
The experience of the team, board, etc.
Five year financial forecast with milestones
Investment request with ROI expectation
103
Elevator Pitch “Must Haves”
Hook
Passion
Request
Short
• Statement
or question
that
immediately
arouses
interest of
recipient
• If you are
not excited
about your
business, no
one else
will be
either
• Ask
recipient for
permission
to call, a
referral to
others, or
feedback
• Assume you
have less
than a
minute, and
sometimes
only time
for a few
sentences
104
The Hook
• Tag lines can be used as a form of a hook
– GE brings good things to light
– NY Times – “All the news that is fit to print”
– Venture Lab – “Where education is a venture”
105
The Product Pitch
KISS
• Keep It Simple, Stupid
Benef • Focus on customer benefits, not technical benefits
its
• Tell a story that paints a personal picture for your
audience
Story
Geek • Kill Geek Speak (Jargon or special vocabulary)
Speak
106
The Product Pitch
KISS
• Keep It
Simple,
Stupid
Benefits
• Focus on
customer
benefits,
not
technical
benefits
Request
Short
• Ask
recipient
for
permission
to call, a
referral to
others, or
feedback
• Assume
you have
less than a
minute,
and
sometimes
only time
for a few
sentences
107
The KISS of the Devil
Too Much Information
• WRONG:
Our technology is the first integrated and automatic book
scanner that will scan and digitize bound documents at a speed
of 1,200 PPM at a fraction of the cost of existing solutions
based on a disruptive digital imaging technology initially
developed at Bell Labs and protected by 12 patents.
• BETTER:
We capture the future of knowledge by seamlessly digitizing
physical libraries at a very low cost.
108
Geek Speak Is Boring…
• WRONG:
We provide non-penetrable intrusion detection for digital
voice, fax and wireless communication devices with our 2048bit Hellman encryption algorithm that is combined with the
latest 168-bit Hellman DES.
• BETTER:
We allow you to communicate safely on a broad range of
digital devices.
109
Focus On Customer Benefits, Not Technical Benefits
Technical
Benefits
Customer’s
Business
Benefits
Seamless
integration
Increase
your
revenues
Scalable,
adaptable
Reduces
your risk
Improves
network
performance
Cut your
costs by 30%
Secure
networking
110
The Market Pitch – Tie to a Burning Need!!
• Identify the problem or need that you intend to solve in 1-2
sentences
– We allow any cell phone to work anywhere inside buildings that
utilize our wireless network solution.
• Reference a brand-name customer that is using your
product (or that has expressed interest)
– The FAA (Federal Aviation Administration) has determined that we
are the only security system that is able to rapidly move people
through security check points while exceeding their security needs
• Quantify your market size with numbers that are from a
trusted 3rd party source
– According to the American Hospital Association, there are 4,000
hospitals in the U.S. that need the ability to visualize MRI images
in 3D
111
Know Your Competition &
Acknowledge It
Microsoft
You
112
Neutralize Your Competition
• Pitch 1-2 Unique Differentiators that paint a picture
– We use the same insulin compound provided in Merck’s
drugs, but we allow children to take an oral dose instead of
a shot
– There are many flavors of PDA keyboards, but ours is the
only one that folds into the PDA device when it is not in
use
– While there are many wireless router boxes on the market,
ours is able to send signals through cement and steel walls
113
So, How Will You Make Money?
(Optional – depends on time and uniqueness of business)
• Simple description of your business model
• Recurring revenue models are ideal
– We will install the wireless network in a building at no
charge, and then charge a usage fee for all calls that we
carry
– We provide free access to our medical information
website for consumers, and charge advertisers for each
exposure
– Our portable fuel cells will be installed in laptops, and
we will receive a royalty from Dell for each installation
114
Why Invest in You?
• Fact – investors invest in people, not products
– Our founders have over 20 years of combined experience in
the telecom industry
– Our board includes two top executives in the restaurant
franchise industry
– Our technical staff has a combined portfolio of over 30
medical device patents
– We just recruited John Smith to run our sales team. You
may recall that John took Google from $3 million to $100
million in sales in two years.
115
Will You Help Me?
• Always end with a request:
– Could I follow up with you at a more convenient time to present
our company in more depth?
– Given your background, I would greatly appreciate your
feedback. What do you think of our business model?
– I know you have a lot of contacts in the energy utility business.
Who would you recommend for us to ask to join our board?
– Could I have your card? I would like my CTO to follow up with
you on your technical questions.
116
Top 3 Elevator Pitch Mistakes
Focus on selling a cool product/idea
instead of on the viability of the business
Take too long to get to the pain/problem
that you are solving
Don’t engage the recipient via
questions that request them to engage
with you
117
An Example : Activity
– Have you ever had your cell phone fail inside a building?
– We provide a communications network that enables any cell phone
to work anywhere inside all types buildings, while ensuring your
communications are secure.
– The FCC has determined that over 60% of the 5 million
commercial buildings in the U.S. inhibit wireless or cell phone
communications from within. The percentage is even higher in
international markets
– While there are many vendors that provide internal wireless
networks, we are the only vendor that enables communications to
penetrate steel and other high density construction materials,
which significantly reduces the cost of installation
– We will install the wireless network in a building at no charge, and
then charge a usage fee for all calls that we carry on our networks
– Our founders have over 25 years of design experience in
communications systems, and Bob Marriott has recently agreed to
join our Board of Directors.
– It is my understanding that you invest in young communications
companies. Can I follow up with you next week to discuss our
business in depth?
118
Choosing Start Up Team
for Business
119
The Start-Up Team
Possibly the most important
business decision you will make
Entrepreneurship is a team sport
– the vast majority of successful
startups have several co-founders
(why?)
Founding team typically has
shared vision / passion, but
different skill sets and
personalities
120
Complementary Skills
• Teammates complement your skills
• Fill in your gaps
• Work together to become more
– Symbolically: 1 + 1 + 1 = 5
• Do you have people for every role?
– Who will coordinate building product? VP Engineering
– Who will coordinate attracting investors? VP Finance
– Who will understand & sell to customers? VP Marketing
– Who will attract & recruit new employees? VP People
– Who will maintain the passion & organize overall? CEO
121
Checklist for a Great Team
Compatible
Personalities
Complementary
Skills
Mutual Trust
Shared Passion
122
Skills Your Startup Needs
Technical / Programming skills for developing
your product
Business Strategy and financial skills for
steering the organization.
Presentation and Communication skills for
pitching to potential investors or customers
Creative/Artistic/Design for Developing a brand,
idea, features
Organizational/Logistics skills for meeting your
deadlines, realistic milestones
123
General Start Up Activities
• Determine the business to be started and
assess:
Your qualifications for the business
The feasibility of making that business
profitable.
Conduct research on your industry, target market
and competition
Select a location and analyze it for traffic,
parking, and customer and delivery access
Investigate all start-up procedures specific to
your industry.
124