M3-S6 - Session notes

1. Idea generation
   1. Conceiving
   2. Exploring
   3. Shaping
2. Conversion
   1. Screening
   2. Funding
   3. Development
3. Diffusion / Exploitation
   1. Entry
   2. Chasm cross
   3. Exploitation
   4. Leverage

Value creation only happens in diffusion / exploitation. Eric Wood suggested to turn the whole phasing around: first enter to the market and get some customers with someone else product. Example was a scientist with unique bio product, started with competitors product to get customers. Moving on from there.

Some propositions for consideration: P1: Value creation potential is only as good as the weakest link in your innovation / entrepreneurship value P2: The most commonly neglected component is the last which is also the most important for value creation P3: Limiting the number of projects at the conversion stage is even more important for an entrepreneurial venture P4: The failure to recognize flawed assumptions is the single greatest constraint on value creation. P5: A primary task of managers and entrepreneurs is to create an environment in which flawed assumptions are likely to be recognized quickly and acted on appropriately

Exploit before you explore "As a strategy the gold medalist consistently chose to pursue exploitation over exploration initiatives" "... Henry Wellcome... wanted to make name for himself as a medical pioneer" "... the first of many occasions that the firm exploited someone else's invention" "... a me-too product like Zantac could never win more than 50% of the market... Galxo decided to put a price premium to stress its superiority over Tagemet" "... once again buying, rather than buildling its pipeline.

"Risk to value creation in the portfolio" Three mechanisms:

• Duplication
  • Do not pursue projects that are too similiar, possibly competing for resources
• Omision
  • Gap's in execution (marketing, development): you need every function
• Alignment
  • Product does not solve a 'customer pain'

Realistic goals for a disciplined portfolio approach

• Greater formalization of strategic purpose, priorities, and project selection criteria, desirable project characteristics
• Improved communication of these
• More effectively manage expectations of project stakeholders
• Highlight dangers of project overload & non-availability of critical resources
• Highlight imbalances, gaps
• Presever resources for 'special case' projects
• Highlight need to reexamine strategic purpose
• Improve team cooperation, commitment
• But selection process:
  • Wil not be scientific or objective
  • Must leave scope for management judgement

Portfolio techniques

• Value maximization
  • NPV
  • IRR
  • ECV
  • Scoring
  • Monte Carlo
  • Real Options
• Balance alignments
  • Strategic methods
  • Yime & Resources
  • Risk & Reward (bubble)
  • Scoring
• The danger is that these techniques are killing the conversion

Method perspective

• Strategic methods
• Financial methods
• Scoring model
• Bubble diagrams

40% of businesses only use financial methods (Cooper et al 2001)

Consideration in the selection the method

• Simplicity
• Ease of use
• Suspectability to manipulation
• Usefulness for drawing in different perspective

Weighted Scoring Method Capable of incorporating

• Market attractiveness
• Timing
• Risks
• Company Competence

Summary:

• Preserve resource for exploitation
• Displined portfolio metohds need to focus on improving conversations
• Do not only use financial methods