Enterprise Dann

A Framework for Enterprise Development and Entrepreneurship
A Resource Pack for Bioscience Lecturers and students

By Zo Dann and Jeff Gaskell (Version June 06) Funded by the Centre for Bioscience
Study Pack Guide

Aims, Learning Outcomes, Content, Session Structure, Syllabus
Study pack aims 1

1. To emphasise the economic importance of the need to introduce new Bioscience products and services to market in the UK, EU and other parts of the world
2.
To prepare the minds of Bioscientists for enterprise. To improve the knowledge and understanding of enterprise and entrepreneurship in the UK HEI Bioscience community
Study pack aims 2

3. To improve the confidence and capability of UK Bioscience students to identify potentially viable, innovative ideas and bring them to market successfully
Either as independent entrepreneurs

Or as part of an intrepreneurial business development team working in an established organisation
Learning outcomes
Students who participate in this activity should be able to: Understand and reflect on entrepreneurial activity and personal aptitude towards entrepreneurship Identify and evaluate potential business ideas in the Bioscience sector Construct and present a business case for the exploitation of their own business idea NB: No previous knowledge of business is required but would be advantageous
A Framework for Enterprise Development and Entrepreneurship 5
Teaching, Learning & Assessment (TLA) framework 1

Context & Group Formation Self Awareness Idea/Concept Generation Idea/Concept Selection
Proposal
Project Management
Business plan and presentation

6
Teaching, Learning & Assessment (TLA) framework 2

Business strategy and risk Intellectual Property Rights Market and competitor analysis Marketing strategy Business planning Financial forecasting The management team Operations and commercial strategy
The pitch
Study pack content

1. Learning material for 12 teaching sessions
Lecture slides with delivers notes A short illustrative video clip Suggested small group exercise Extended exercise - Part completion of the Business plan assignment
2. 3. 4.
An assignment: Development, presentation of a business plan in Biosciences Resources and references Guide for deliverers
Study topics x 12
1. The context and group formation 2. Self awareness 3. Idea generation and selection 4. Project management 5. Intellectual property rights: Patents and Trade Marks 6. Market and competitor analysis 7. Business strategy and risk analysis 8. Marketing strategy 9. Operational strategy 10. The management team 11. Financial forecasting planning 12. Pitching the idea
Where observation is concerned, chance favours only the prepared mind

Louis Pasteur (1854)
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1. Context
The Nature, Importance and Potential of Start-Up Businesses in the Biosciences and the Role of Business Planning
Learning outcomes
By the end of this session students should be able to: Realise the importance and potential of the Biosciences and Biotechnology particularly for the UK Understand the meaning of entrepreneurship and intrapreneurship and classification of business entities Recognise some of the particular difficulties and success factors of start up businesses in the Biosciences Recognise the role of business planning in increasing business success
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TLA framework
Context and Group Formation Self awareness Idea/Concept Generation Idea/Concept selection Project management
Proposal

13
What is Bioscience and why is it important?
The Biosciences: Definitions

Any of the branches of natural science dealing with the structure and behaviour of living organisms. Synonym: life science The application of scientific and engineering principles to the processing of materials by biological agents to provide goods and services
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DTI classification of business sectors for biotechnology pharmaceuticals and healthcare

Pharmaceutical Biotech Medical Devices and Diagnostics Industrial Agri Non-Food crop and Marine Biotechnology
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UK performance in pharmaceuticals
Biggest sector investor in R&D in the UK accounting for around 24% of total investment by business In 2004, 18% of the world's top 100 prescription medicines originated in the UK In world terms, the UK industry has 9% of pharmaceutical R&D expenditure: only the USA (49%) and Japan (15%) are ahead The UK is the largest European recipient of pharma R&D, accounting for 23% of total; followed by France (20%), Germany (19%), and Switzerland (11%) Employs around 73,000 people with about 27,000 in R&D and generates 250,000 jobs in related industries
Source: DTI, 2006
What is Biotechnology and why is it important?
Difficulties in defining Bioscience/ Biotechnology

Biotechnology generally considered a subset of the Biosciences although terminology is often used interchangeably Not strictly sectors as extremely diverse in application Inconsistent definitions across countries and studies Shifting knowledge base of what is considered state of the art and therefore have moving boundaries
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What is Biotechnology? Some definitions

The integration of natural sciences and organisms, cells, parts thereof, and molecular analogues for products and services (European Federation of Biotechnology) Technology in which biological systems, established and controlled through the application of molecular biology, cell biology or microbiology are used for practical purposes Biotechnology is a range of enabling technologies offering a set of new processes employed in existing industries to produce new products or processes i.e. new drugs, diagnostic tools, plants, animals and industrial processes
Traditional v new Biotechnology

Traditional Biotechnology Conventional techniques used for centuries to produce beer, wine, cheese, bread and in the treatment of sewage New Biotechnology Genetic modification by recombinant DNA and cell fusion techniques and the modern development of traditional biotechnological processes. New Biotechnology revolution began in 1970s, 1980s
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Classification of modern Bioscience

Biotechnology companies:
Encompassing entrepreneurial biotechnology companies using modern biological techniques to develop products and services
Suppliers and service companies:

Including suppliers of chemicals, glassware and related plastic disposables, research products, imaging analytical and automated equipment, contract research organisations, companies who employ a niche R&D function
Diagnostic and device companies:

Including companies producing bioanalysis, test kits, medical diagnostic kits relating to biotechnology, medical devices and surgical implant developers
Source: Ernst and Young, in DTI BIGT, 2003
Outputs of biotechnology
Information process, research and development Drugs and therapeutic products Veterinary drugs Diagnostics Genetically engineered seeds and plants Bioherbicides and pesticides Foods and Animal foods Food additives and processes Waste-treatment processes and micro-organisms Fuel alcohol and other biological sources of energy Educational kits Intermediates, enzymes, feedstocks and reagents Source: Walsh and Green, 1993
UK performance in the biotechnology

UK is the Biotechnology industry leader in Europe It is number two in world after USA There are approximately 455 dedicated biotechnology businesses in the UK employing around 22,400, with revenues of around 3.6bn in 2003 UK biotech companies spent 1.23bn on R&D in 2003 The UK is well placed in the European biotechnology scene because of its greater maturity and much stronger product pipeline
Source: DTI, 2006
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What key technological developments are driving the Bioscience revolution?
Technology drivers of the Bioscience revolution

Gene sequencing E.g. mapping of human genome to understand human physiology E.g. sequencing of genomes of viruses and bacteria to help fight against infection The development of molecular techniques E.g. manipulation of genes to study function for industrial or therapeutic purposes E.g. gene chip arrays to determine gene activity
Technology drivers of the Bioscience revolution

Advances in imaging techniques E.g. fluorescence to observe genes in real time The IT revolution Bioinformatics: data capture, analysis, modelling and sharing for very large international teams collaborating and sharing Nanotechnology E.g. for Biosensors and drug delivery methods
Source: DTI, BIGT, 2003
What is entrepreneurship?
Entrepreneurship defined
The act of starting or growing a business through innovative risk assuming management The creation of a new economic entity centred on a novel product or service or, at the very least, one which differs significantly from products or services offered elsewhere (Curran & Stanworth, 1989) The process of creating something different with value by devoting the necessary time and effort, assuming the accompanying financial, psychic and social risk and receiving the resultant rewards of monetary and personal satisfaction (Fry, 1996)
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Intrapreneurship defined
Intrapreneurship is entrepreneurship by employees in existing organisations

Source: Antoncic and Hirsh, 2003
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What businesses do entrepreneurs create?
Businesses as legal entities A classification

Unlimited liability Sole traders Partnerships (can also have Ltd. status)
Limited liability (Incorporated) Private: Shares not traded in public. Have company name and suffix Ltd Public: Shares traded in public have company name and suffix PLC
Classification of Social Enterprise

Co-operative Owned and controlled by members, incorporated under the Industrial and Provident Societies Act Regulated by FSA
Company limited by guarantee Similar to Limited Liability described above but with members not shareholders Liability is limited to a nominal sum
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What is limited liability?

Liability of the owners for the debts of their companies is limited to the paid-up value of the shares they own i.e. the amount they agreed to pay for the shares when they bought them Reduces risk of business failure on owners and transfers it to customers and suppliers who would not receive goods/services or payments
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Company evolution in the Biosciences
Stages of company evolution in the Biosciences

1. Idea generation and validation 2. Early stage 3. Late stage

1. Idea development and validation

Secure assignment from University of Intellectual Property Technology validation Proof of concept Develop commercial prototype products Early pre-clinical trials

2. Early stage - Start up

Start developing technology platform/product pipeline Broaden Intellectual Property base Hire a management team and scientific group Start to engage in corporate partnering Secure premises and build company infrastructure

3. Late stage Expansion/public company

Build scale, role out technology platform. continue with clinical development (even launch) and prepare exit (likely IPO Initial Public Offering) Continue with expansion stage activities, with ultimate aim of cash flow, break even, profitability

Example: Typical route of commercialisation from university
Technology Transfer
University
Incubator
Start-up
Seed capital
Venture Capital
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Difficulties and success factors for Bioscience start ups
Difficulties for Bioscience start-ups 1

Long lead time from concept to market e.g. typically 10 -15 years for some pharmaceutical products High cost e.g. $1B/year for some pharmaceutical products High risk. Failure rates can be high e.g. 9/10 pharmaceutical products fail to make it to market at Astra Zeneca Low cash flow stream in early years Difficulty in accessing funding
Difficulties for Bioscience start-ups 2

Rigorous and dynamic legislative and regulatory framework at national, trading block and world levels e.g. Federal Drug Administration, patent law Dynamic competitive environment e.g. many mergers, take-overs, alliances, new business start-ups Negative public sentiment towards some products and testing procedures e.g. GM crops, transgenic animals, animal testing Lack of management/business expertise of scientists
Success factors for Bioscience 1

The company must efficiently develop viable products or services The companys Intellectual Property (IP) must be defensible and other patents cannot block the path to commercialisation A clear business strategy for generating a significant profit Target a large and/or rapidly growing market. Management should have the skills to implement the business plan
Source: Ithaka Life Sciences, 2004
Success factors for Bioscience 2

An organisational culture that encourages and nurtures enterprise and entrepreneurship Strong management team and company board Clear business plan with realistic targets that can be met before cash runs out A route to market identified and costs covered Competition identified and assessed Valuable accessible market Credible business and revenue model Technology that provides customer benefits Cutting-edge technology that is well protected
Source: NatureBio, 2003
The importance and nature of business planning
What is a business plan?

A document that explains and justifies the business concept. It attempts to answer three questions: Where are we now? Where do we intend going? How do we get there?
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Three basic objectives of business plans

To identify the nature and the context of the business opportunity why does the opportunity exist? To present the approach the entrepreneur will take to exploit the opportunity To recognise the factors that will determine whether the venture will be successful
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Role of business planning in business success

1. It enables the entrepreneur to understand an opportunity and what it will take to exploit 2. It provides a framework for managing the business in the future 3. It will help recruit partners and management team 4. It should be capable of attracting new capital to the venture 5. It can refocus and rejuvenate a business after start up
Typical requirements of business plans 1

To clearly identify product, service and unique selling point (USP) Justify its competitive advantage through patent search data and competitor analysis Determine market attractiveness i.e. size and potential growth through identification of potential customers, market trends Determine route to commercialisation including technical development, patenting, licensing and marketing
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Typical requirements of business plans 2

Justify potential income and expenditure for products, IPR, licenses, human resources, patenting, equipment and running costs Demonstrate credibility of management team Demonstrate financial rewards and loan requirements for potential investors
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Key point summary 1

Bioscience/Biotechnology enterprises are an important part of a rapidly expanding part of the economy Bioscience and Biotechnology have a wide range of applications in health care, agriculture, food & beverage and chemical production USA leads the way in Biotechnology; Europe is second; Japan Third UK is an important player globally
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Key point summary 2

Start up is considered the main mechanism for entrepreneurs to exploit their business ideas There are a range of businesses legal entities that entrepreneurs can use as vehicles for enterprise Biosciences have particularly long and complex new product development and commercialisation routes Business planning vital in setting new business entity and exploiting ideas
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2. Self Awareness
Entrepreneurial Traits and Motivation
Learning outcomes
By the end of this session students should be able to: Recognise the typical aptitudes and motivations of entrepreneurs and difficulty in evaluating them
For the assessment students should: Evaluate their own competencies against traits and motivations of entrepreneurs Identify ways in which competencies, aptitude and skills can be developed to enhance entrepreneurialism
TLA framework
Group Formation and Context Self awareness Idea/Concept Generation Idea/Concept selection Project management
Proposal

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Who are entrepreneurs?
What is an entrepreneur?
Meaning of the word entrepreneur: one who takes between (French) An individual who establishes and manages a business for the principal purpose of profit and growth. The entrepreneur is characterised by innovative behaviour and employs strategic management practices in the business. (Cartland, 1984)
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Well known entrepreneurs

Julian Richer
Richer sounds
Less well known women Meg Whitman

founder of e-bay
Richard Branson
Virgin
Stelios
Easy Jet
Alan Sugar
Youre fired
Ann Gloag
Stage coach
Anita Roddick
Body shop
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Who are well known entrepreneurs in the Life Sciences?

Sir Christopher Evans Dr Andy Richards Dr Jonathan Milner Dr Keith McCullagh
Source: Centre for Bioscience, 2006
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What is the typical profile of an entrepreneur?

There is a strong gender bias towards male founders. Men are twice as likely to set up a business as women There is a distinct age-launch window of business start ups (30-40) Family support is a significant factor for success The majority are reliant on personal equity for start up finance
Source: Deakins, 1996
Women entrepreneurs in the UK

Gender Gap - Under representation 15% of businesses are majority women owned compared to 60% male owned However, in the US, 30% of businesses are majority female owned. Number of women owned businesses grow at twice the rate of all US firms Encouraging signs that entrepreneurial activity is increasing more self employed women in UK over last 20 years
Source: DTI, Promoting Female Entrepreneurship, 2005
What motivates people to become entrepreneurs?
Typical triggers to the start up decision - Pull factors

It works Eureka
A product that finally works after many years e.g. Dyson An idea out of the blue, but which is often simply a new way of packaging old ideas e.g. Ben and Jerrys Ice Cream Dissatisfaction with existing goods and services. If only I could buy products in smaller packages (Anita Roddick, Body Shop) Goal fulfilled with lots of support from family and friends
If only
High Comfort Level
Typical triggers to the start up decision - Push factors

Friendly Push
The path is made clear for some one who has talked about setting up a business for a long time
Misfit
Leaves large organisation because of dissatisfaction to set up a new business
Unfriendly Push
Redundancy or unemployment
No alternative
Brought about by illness or disability
Grey to White
Moonlighter selling products on the fringe of the black market economy whilst in full employment
Why be an entrepreneur?
Rewards of Entrepreneurship Profit
Financial gain proportionate to personal achievement
Independence
Power to make own decisions
Freedom
Escape from undesirable situation
Personal Satisfaction
Enjoyment of a satisfying way of life
Personal Fulfilment
Contribution to the community
Source: Entrepreneurial Incentives - Lockerneck et al, 2006

Potential drawbacks of entrepreneurship

Uncertain income Risk of losing entire invested capital Long hours hard work Low quality of life until business gets established High levels of stress Complete responsibility discouragement
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What skills/traits/characteristics do entrepreneurs have?
Building blocks of successful entrepreneurship

Technical Skills
Product/service knowledge Market/industry understanding Personal Attributes Innovation Determined External focus
Source: Stokes, 2002
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Management Competencies
Marketing Finance Human relations
What are the traits or characteristics of entrepreneurs?

Achievement orientation: Ability to see and act on opportunities Committed to others High propensity for risk taking Calculated risk taking Ambiguity tolerance Visionary Self-confidence Flexibility Strong desire for independence High energy Emotional stability Creative and innovative ability Conceptual ability Assertiveness Ability to network Measurement of success by wealth Confidence of success
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Psychometric tests for entrepreneurs

General personality traits Myers Briggs type assessment Hermann Brain Dominance Instrument LAB profile Examples of on-line entrepreneurial assessment
http://www.potentielentrepreneur.ca/client/questionnairenews ection1en.asp http://www.wid.org/equity/2004/05/Entrepreneurs%20Quiz.d oc
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Observed characteristics of entrepreneurs: The 10 Is model

I Characteristics
Independence Interest Insight Ideas Invention
I Characteristics
Inspiration Involvement Instigation Insistence I - will
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The 10 I characteristics in action in the entrepreneurial process

A B Step Recognition Formulation I Characteristic Independence Insight Interest Ideas Invention Inspiration Involvement
Initiation
Development and Growth
Instigation Insistence I - will

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Mapping the ten I characteristics
Plotting overall average scores for a sample of 20 successful entrepreneurs. Indicated by
1 2 3 4 5 6 7 8 9 10
Independence Interest Insight Ideas Invention Inspiration Involvement Instigation Insistence I will
10 9
2 3
0 8 7
4 6
5
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Criticism of psychometric tests

Characteristics are not stable and change over time Not easily measured characteristics Also environmental and cultural influences can effect enterprises and management decisions Management needs of the business might change through time i.e. different characteristics for start up to managing a mature business Education training and learning can be very valuable Skills can be acquired
Key point summary 1

Key traits are that entrepreneurs are risk taking, innovative, growth and profit drive Entrepreneurial activity is not limited purely to private enterprise. It can exist in public organisations and large multinationals. In the later case this is called intrapreneurship The characteristics approach to identifying the potential successful entrepreneur can be widely criticised Although women are under represented in the number of entrepreneurs, numbers are increasing in UK
Key point summary 2

Other factors such as environmental conditions and experience play an important role in determining the successful entrepreneur Motivations and triggers for start up vary widely Entrepreneurs start business not only for selfish reasons but for welfare considerations too Entrepreneurs are both pushed and pulled into new business start up Psychometric tests are used to evaluate characteristics of entrepreneurs but have been widely criticised
3. Idea Generation and Selection

Thinking Creatively and Screening Potential Business Ideas in the Biosciences
Learning outcomes
By the end of this session students should be able to: Identify a range of methods for developing and selecting business ideas
For the assessment students should: Use frameworks to generate business ideas Carry out an evaluation of business idea to establish whether it should be considered for full business planning
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TLA framework
Group Formation and context Environmental scanning Self awareness Idea/concept generation Idea/concept selection Project management
Druckers seven sources of innovation
Creative swiping
Proposal
Business plan
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Idea Generation
Sources of start up ideas

Personal experience work or home Hobbies Accidental discoveries - serendipity Deliberate search Druckers seven sources of opportunity/innovation Environmental scanning Creative swiping
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Technology push or market pull?

Big Bang
Completely New Process Or Product Response To A Major Order In New Market
Structured/Planned
Major Strategy Shift eg Switch To E.Business
Opportunistic
Add New Brands Or Styles To Range
New Products In Existing Markets
Add New Features To Products
Existing Products In New Markets
Major Product & Process Innovation
Incremental
Most Minor Product & Process Innovation 83
Idea Generation
Druckers 7 sources of innovation
Druckers seven sources of opportunity/innovation

1. 2. 3. 4. 5. 6. 7. Unexpected happenings Incongruous happenings A need for process improvements Changes in industry or market structures Changes in population demographics Changes in perception, mood and meaning New knowledge
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1. Unexpected happenings + examples

Unanticipated events that lead to either enterprise success or failure: Increasing real and perceived threat of terrorist attack at home and overseas Major unpredictable shifts in weather patterns The unexpected unavailability of cheap domestic fuel supply The unexpected unavailability of cheap raw materials and other essential commodities Pet pharmaceuticals have been very successful in the US with more that 30% of dogs and cats now taking medication
2. Incongruous happenings + examples

Where there is a discrepancy between actual results and what was expected: Low fat ice cream was developed for those trying to lose weight Introduction of new Coke caused a huge upsurge in demand for original Coke (Classic) Some people who have taken nicotine chewing gum have become addicted to it. Others use it when they are non-smokers!
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3. A need for process improvements + examples

Current technology is insufficient to address emerging challenges. Improved process yields in food, beverage and pharmaceutical product production Increased shelf life of perishable goods Reductions in land fill volume New fuels to deal with rising energy costs and pollution Increasing use of non food crops for fuel production Increased efficacy of drugs
4a. Changes in industry or market structures + examples

Industries are in a constant state of change as economic and other forces act on individual firms Porter identified five critical forces:
Rivalry between the firms in all industries The buying power of customers The buying power of suppliers The threat of new entrants The threat of customers moving to substitute products or services
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4b. Changes in industry or market structures + examples Porters Five Forces Model
Suppliers
Supplier Buying Power
Potential Entrants
New Entrant Threat
Industry Rivalry
Buyer Buying Power
Substitute Threat
Substitutes
Buyers
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4c. Changes in industry or markets + examples

Changes in NHS structure and funding to more localised units NHS trusts Changes in the nature of education management funding foundation status meaning more autonomy on major spending decisions PPP - Public private partnership PPP funding packages for infrastructure building
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5. Changes in population demographics

Shifts in population size, age structure, ethnicity, and income distribution e.g.: Ageing but still healthy and active baby boom generation born - born in the west in anglophone countries between 1946-1963. Powerful consumer group beginning to retire from contributory economic activity but with no diminishing power of spending. Rapidly growing group with time, disposable income and increasing political influence Generation X born between 1965 1975 and Generation Y born between 1976 1994 much smaller cohorts than the baby boom generation with more liberal attitudes to work, leisure and spending than their forebears Consistently low EU and UK birth rate The influence of economic migrants from the new eastern accession EU states
6. Changes in perception, mood and meaning + examples

Healthy eating particularly with obesity on the rise Generational different between baby boomers generation X and generation Y The direct and indirect influences of the global War on Terror The state pension age debate and to working beyond the age of 1965 (in UK) The effect of changes in world weather patterns Attitudes of host populations to economic migrants
7. New knowledge + examples

Learning opens up the door to new product opportunities with commercial potential Gene sequencing - mapping of human genome The development of molecular techniques Advances in imaging techniques Advances in fuel cell and electricity storage capacity The IT digital revolution Nanotechnology
Source: DTI BIGT Report, 2005
Idea generation
Environmental scanning PESTEL analysis
What is environmental scanning?

The ability to identify and interpret strong and weak signals from the trading environment An essential skill When looking for new enterprise opportunities To ensure the survival of established businesses
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What environmental influences are there on a business?

Infrastructure
E.g. More roads, cheap flights broadband E.g. Tsunami, green products
Environment
Social
E.g. Discerning customer, greater disposable income
Demographics Business
E.g. aging population
Political
E.g. Employment law Economic e.g. Low Interest rates, Taxes
Technology
E.g. Internet, genetic engineering
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The PESTEL framework

Scanning the trading environment can be used to categorise and measure the shifting forces that continually act on all traders These forces are in a constant state of flux and can provide both new opportunities and new threats to survival. These are: Political forces Economic forces Social forces Technological forces Environmental forces Legal and regulatory forces

The PESTEL forces act and influence at a number of different geographical levels:
At world level (WTO, Kyoto protocol, World Bank) At trading bloc level (EU, NAFTA, ASEAN) At national level (UK government, Bank of England, UK judiciary) At regional level (Regional development agencies) At district level (Local Authority area) At sub-district level (Ward level activists and communities)
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Entrepreneurs and enterprisers seek out opportunities through:
Looking for new experiences Meeting poorly addressed needs e.g. Malaria treatment. Making things better e.g. increased yield on beers. Matching emerging technologies to new potential users needs e.g. Diagnostics for breast cancer using rDNA technology Matching older technology or failed products to new markets e.g. aspirin for blood thinning
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Political forces
Employment legislation Foreign trade regulation Government political orientation and stability Government policy to creating new knowledge Lobbying mechanisms Monopoly policy Taxation policy E.g. Increased support and government initiatives for Bioscience exploitation
Economic forces
Business cycles Capital availability Credit control Commodity and raw material cost & availability Government economic policy Energy costs and supply continuity Exchange rates Interest rates Unemployment and workforce skill levels E.g. Increasing energy costs, embryonic stage of biotechnology growth
Social forces
Attitude and perception changes of populations Censorship and press freedoms Demographic trends (at world, trading block national and regional levels) Education and skills levels E.g. Negative public sentiment towards some Biotech products
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Technological forces
New developments & discoveries Reducing product life cycles Increasing rates of obsolescence Rates of technological diffusion E.g. rDNA manipulation, digital technology
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Environmental forces
Energy policies (domestic supply and transport) Environmental protection policies Governmental commitment to environmental protection Waste disposal and recycling policies Weather pattern change E.g. Increasing cost of domestic power supply, global warming
105
Legal and regulatory forces

National employment legislation National health and safety legislation Intellectual property protection legislation National monopoly policy National planning policy National product safety law Speed of national legislative process & the vigour of enforcement forces E.g. Protection offered by patents
Idea generation
Creative swiping
Creative swiping
A technique advocated by Tom Peters for stealing good (unprotected) ideas from competitors. The accumulation of lots of these ideas creating a uniqueness and differentiation for the stealing enterprise In his words:
Uniqueness comes from an accumulation of thousands of tiny enhancements The entirely unique product does not exist. Everything stands on previous technology and established precedent Its all about the relative novelty of innovation
Idea Screen/Selection
Product development funnel filtering in an R&D environment
Source: Wheelwright, 1992

Product development funnel filtering in a start-up enterprise

Screen 1 Screen 2
Source: Wheelwright, 1992
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Idea screening 1
Some organisations use filtering processes to screen new ideas and projects Used as projects progress through from concept to full scale development in the product pipeline Typically used in R&D environment Uses employee facilitators who seek out and attract other employees to offer ideas for innovation. The ideas are then initially screened by specialist gatekeepers against given criteria
112
Idea screening 2
Success or selection criteria can be used to filter projects at various points of the development funnel or pipe line Each review point is called a gate A go/kill decision is made based on meeting the success criteria If further funds are committed at the gate then they are often called toll gates Fulfilment of the success criteria means a commitment of resources to further development
Idea screening 3
Typically: 40% get through the initial screening process 18% are supported through a subsequent selection procedure by in house champions and 4% may be realised commercially Successful examples of idea screening processes need to be subject to commonly understood group rules, be open, be systematic and iterative
114
Filtering criteria
What makes a potentially successful business idea
Filtering/selection criteria
Ideas can be screened on the following criteria:
Market factors Competitive advantage Management capability Fatal flaws
Usually a mixture of these proves to be beneficial in selecting prospective business propositions

Source: Longenecker, 2006
116
Market factors
Well identified need for the product Reachable, receptive customers Significant value created by product or service or customer Long life of product Emerging industry not highly competitive Significant market size Significant growth rate
117
Competitive advantage
Low cost producer? Moderate to strong control over prices costs and channels of supply Barriers to entry i.e.. Factors that prevent new entrants into the market Have or can develop proprietary information or regulatory protection Have or can develop, a good response/lead time advantage Proprietary or exclusive legal or contractual advantage Contacts and networks
Economics
Good return on investment Low investment requirements Time requirement to break even or to reach positive
Management capability
Management team with diverse skills and proven experience
Fatal flaws
No circumstance or development that could, in and of itself, make the business unsuccessful
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How to select a reasonable idea

Brainstorm or systematically generate several (say 3/4) ideas Use a selection method to determine the best prospect (Kepner-Tregoe Method) You may need to carry out a further investigation into your business idea to accurately evaluate them Return to the selection method again and screen until you have finalised your selection and are focusing on one idea
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Key point summary

Ideas are usually generated from a grounding of technical competency or market need (technology push v market pull) Systematic idea generation and brainstorming are both viable routes to generating ideas Druckers sources of innovation, PESTEL analysis provide systematic means of generating ideas Product screening is an integral part of the commitment of resources through the various phases of product development Need to evaluate idea against filtering/selection criteria for enterprises before committing further resource to development
4. Project Management
Controlling and Completing the Business Plan Project on Time
Learning outcomes
By the end of this session students should be able to: Recognise the nature of business planning as a project Build an awareness of skills and mechanisms for planning and monitoring projects For the assessment students should: Use time management and project management skills within the context of delivery of the business plan Reflect on this activity as part of a journal
TLA Framework
Context & Group Formation Self awareness Idea/Concept Generation Idea/Concept selection Project Management
Proposal Business plan and presentation

124
What is project management and why is it important to business planning?
What is project management?

Project management is concerned with the overall planning and co-ordination of a project from inception to completion aimed at meeting the client's requirements and ensuring completion on time, within cost and to required quality standards
Source: www.ecbp.org/glossary.htm
126
What is a project?
Any unique venture with a beginning and an end conducted by people to meet established goals within parameters of cost, time (or schedule) and quality.
Source: Buchanan and Boddy ,1992
127
Project key features

A unique undertaking each one differing from every other in some respect Project have specific objectives to achieve Projects require budgets Projects have schedules Projects have budgets Projects require the efforts of people drawn from different disciplines Projects should have quality measures
128
Why is project management needed?

The process of bringing IP to market can be a complex process requiring leadership skills of the highest order There are numerous tasks that interrelate and need to me integrated into the business plan Time is critical in bringing the business ideas to market Resources are finite. A small team is bringing the plan together There are numerous ways in which this business planning can be completed
Project players and management skills
Project players
Sponsor: the person providing the resources for the project and ensuring that the project is successful at the business and institutional level Champion: The advocate for the project promoting the cause of the project or proposal Client or customer: The individuals or organisation paying for the contractual project services Stakeholder: Individuals who are directly or indirectly involved with the project, for whom the success of the project is important in any terms
Key project manager skills

Negotiation, obtaining agreement on the scope, aim and objectives of project Ensuring resources are accurately estimated and readily available Effective communication with project stakeholders Identifying clear roles and responsibilities for all team members Establishing ways to maintain project progress when problems arise Being able to fit all the pieces together
Key project management techniques

Milestones Gantt charts Responsibility charts Team meetings
What are milestones?

A key point in the project, perhaps when something has been achieved, for which a deadline was set A mechanism to monitor progress Short-term goals which are far more tangible than the foggy, distant completion of the entire project Maintain the momentum and encourage effort They allow the team to judge their own progress and to celebrate achievement throughout the project rather than just at its end
Why use milestones?

Identifying main goals Establishing time and cost targets Identifying intermediate decision points Agreeing management information requirements Agreeing reporting intervals Identifying feedback mechanisms Focusing on critical variables
Source: http://www.wiley.co.uk/
What is a Gantt chart?

Simple chart also known as a bar chart showing task activities in chronological order and timings The length of the bar represents the length of the task (in time). Gantt Charts should include milestones Used to plan resources over time Used in the project planning and execution phase for monitoring progress against objectives and task completion Can be used to identify sequence and interrelationship of activities
Gantt chart example
Source: www.smartdraw.com/tutorials/gantt/index.htm
What is a responsibility chart?

Helps you determine who-does-what-and-whohelps Can be useful as teams are forming, or as new work emerges as part of a teams responsibilities Can be used to clarify understandings, improve the distribution of work, and build agreements that involve all and therefore can last
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Responsibility charts How are they used? 1

By the team as a group This method may be somewhat timeconsuming but will result in a high degree of commitment and understanding By a sub-group of the team This may be a bit more efficient. A review by the full team and agreement on the chart content would be an important second step
Source: http://web.mit.edu
Responsibility charts How are they used? 2

By each team member The team would then need to confirm areas of agreement and discuss areas of difference to reach agreement By the team leader While probably the most efficient method in terms of time, discussion by the whole team is needed to ensure clear understanding and accountability
What are responsibilities?

R - This person is responsible for carrying out the task, or accountable to see that the task is done. Every task must have an R. Then assign letters A, C, and/or I as needed: C - This person consults to the R person for the task. Consulting means that the two work collaboratively, with both having significant responsibility for doing the work A - This person assists the R person with the task. Assisting means this person helps carry out the work but is not as involved in making decisions about what is to be done or how. I - This person is informed about the status of the work, including when it is done, but is not directly involved in planning or doing the work
Source: http://web.mit.edu/
How to construct a responsibility chart

1. Purpose Defining exactly what project or work you want to understand is a vital first step in employing the chart. The purpose appears at the top of the chart 2. Across the columns, list the people involved 3. Next, list the tasks to be done. List these at the level of detail that seems right to you. You can increase or decrease that level as needed, and every task does not need be listed at the same level of detail. Look for the amount of detail that will ensure understanding and good distribution of responsibility
Example chart (incomplete)

Task
Idea generation Concept selection Technical Feasibility Patent Search
Person or Person A Person B Person C role r c a c c r c a r
r
a
c
r
a
a
143
etc
Team meetings
Meetings used to progress the project using agendas and minutes They allow regular opportunities for: Monitoring of progress of the project Problem solving and conflict resolution
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Successful meeting
To ensure the meeting is successful, the leader should: Generate an agenda to all involved in the meeting Start the discussion and encourage active participation Work to keep the meeting at a comfortable pace not moving too fast or too slow Summarise the discussion and the recommendations at the end of each logical section Circulate minutes to all participants
Source: www.mindtools.com/CommSkll/RunningMeetings.htm
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Meeting minutes
Meeting minutes should contain the following information: Called by The person who called the meeting Meeting Date/Time The time the meeting occurred Project - The formal name of the project Purpose - Describe meeting purpose Invitees/Attendees - Meeting attendees Meeting Agenda A copy of the meeting agenda Meeting Minutes A summary of the discussion and action items from the meeting clearly specify any decisions that were made at the meeting
Key point summary

Business planning can be viewed as a project because there is a defined goal, a set of activities and a specific resource It is critical particularly for complex technological developments where there are numerous participants working together For business planning it is vital as there are typically limited resources and a complex body of information to investigate Responsibility and Gantt charts are commonly used tools that can aid project planning and execution to direct and monitor the project team Select a team leader, use minutes and agendas for regular team meetings
5. Intellectual Property Rights (IPR): Patenting and Trade Marks

Nature, Importance of IPR in Bioscience Entrepreneurship
Learning outcomes
By the end of this session students should be able to: Understand the role of IPR in determining their USP and protecting and exploiting business ideas in the Biosciences
For the assessment students should: Carry out a simple patent search on their business idea to determine unique selling point/competitors Establish an approach for protecting intellectual property for your proposed business
TLA framework
Business strategy and risk Intellectual Property Rights Market and competitor analysis Marketing strategy
Business planning
Financial forecasting
The management team Operations and commercial strategy
The pitch
What is IPR and why is it important?
Why consider Intellectual Property Rights (IPR)?

Bioscience entrepreneurs need to consider what intellectual property can be protected and where, as soon as they begin to develop their business idea and considering their business and marketing strategy IPR offer significant competitive advantage and in the context of this learning pack includes:
Patent registration to protect the invented product or process Trade mark registration to protect the identifying product or process marks
What is IPR?
An intellectual property is: Any product of the human intellect that is unique, novel and unobvious that has some application in the market place Output of creative endeavour of literary artistic, industrial, scientific and engineering fields E.g. Unique name, chemical process, drugs, publication, computer programme, multimedia products
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What is IPR?
A cluster of legally recognised rights to protect intellectual property Depend on nature of the property Can be registered or unregistered Vary in length of the protection Usually involve a trade-off and requirement for the right holder Part of nations policy to encourage innovation and dissemination of knowledge
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Types of IPR
Registered IP Rights Patents Designs Trade Marks Plant Breeders Rights Unregistered IP Rights Copyright Unregistered Design Rights Trade Marks and Reputation Traditional Knowledge Database rights Publication rights
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International framework for IPR

WTO TRIPS Agreement Paris convention for the protection of IP Patent Cooperation Treaty (PCT) streamlined process for international patent making Budapest Treaty for Deposit of Micro-organisms Strasbourg Agreement concerning International Patent Classification (IPC) International convention for the protection of new varieties of plants Other agreements which affect IP:
Convention on Biological Diversity (CBD) Food Agriculture Organisation (FAO) International Treaty on Plant Genetic Resources
Four main types of IPR for Biosciences

Patents For new and improved products and processes that are capable of industrial application Plant Breeders Rights Offers legal protection for the investment plant breeders make in breeding and developing new varieties. Open to breeders of any species of plant; agricultural, horticultural and ornamental. Trade marks For brand identity of goods and services allowing distinctions to be made between different traders Designs For product appearance - of the whole or a part of a product resulting from the features of, in particular, the lines, contours, colours, shape, texture or materials of the product itself or its ornamentation
Why is IPR important to businesses?

IP gives a competitive advantage by preventing competitors from using the protected property IP seen as asset and be a large percentage of the market value of the business IP can attract investors IP is a potential source of income e.g. licensing
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Patents
What is a patent?
A disclosure of an invention for exclusive exploitation by patent owner Limited period of protection for invention generally lasts for 20 years Means of preventing others making, using or selling an invention unless permission granted e.g. by license Contains sufficient detail so some one skilled in the art can reproduce that invention Granted by government e.g. UK Patent Office under UK Patent Act 1977 Usually only cover single country some collectives exist (e.g. Europe, Africa)
Where is the protection valid ? 1

In the UK A UK patent filed at the Patent Office gives exclusive rights only in the UK, Isle of Man and the British protectorates Botswana & Swaziland In Europe For protection in two or more EU countries that are members of the European Patent Convention the application must be filed with the European Patent Office specifying which states the patent should cover. European patents must be maintained in each designated state separately which means lots of translation costs
Where is the protection valid? 2

In the rest of the world If you consider the potential market for your invention covers a geographical area beyond Europe then a Patent Cooperation Treaty makes it possible to seek patent protection in over 100 countries with one application
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What is patentable?
Only an invention can be patented. To be an invention and patentable it has to be: New
Something that was not known before as has not been published anywhere else in the world - prior art
Involve an inventive step

Not obvious to those skilled in the technical field to which the invention relates; i.e. there must be an intellectual jump
Be capable of industrial application

E.g. must be capable of being used as a product or in an industrial process
Not be among the list of excluded inventions

Excluded inventions
The excluded list consists of:
Scientific theories Mathematical methods Animal and plant varieties Computer programmes Works of art or literature
Computer programmes and works of art and literature are covered by separate IP legislation .Copyright
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Biotechnological inventions unpatentable on moral grounds

Process of cloning human beings Process of modifying the germ line genetic identity of human beings Use human embryos for industrial or commercial purposes Processes for modifying the genetic identity of animals which are likely to cause them suffering without any substantial medical benefit to man or animal, and also animals resulting from such processes
Source: DTI, 2006
Basic patent concepts

Prior art
Published documents anywhere in the world and common general knowledge in the field of technology of invention before the priority date of patent application
Priority date
Date an inventions validity is assessed normally first time an application for the invention is filed anywhere in the world. In US date of actual invention is used
Person skilled in the art (PSA)

A skilled technician or worker in a field of knowledge who is aware of all common lab/workshop techniques and general knowledge in the field
UK patent application process overview

Initial Application
Form 1/77 submitted to Patent Office (PO)

Submit set of claims, abstract and form 9A/77 request for PO search Application published. If any attempt made to copy invention damages can be sought. Submit detailed examination of invention, form 10/77 and fee. PO examines application and petitions from third parties Application republished as granted
Application terminated if no further action taken Develop idea and examine viability. PO conducts search. Third parties can petition PO to reject application
Within 12 months
Within 18 months
Within 24 months
Within 36 months
Detailed examination must be submitted within 6 months of publication
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Patent application process 1

Making the application It takes between three and four years to obtain a UK patent. The first step in submission 1. An completed application for Request for grant of patent on Form 1/77 at UK Patent Office. 2. A descriptive specification of the invention:
An abstract: describing how the invention solves problems One or more claims defining what the invention does and areas that will be protected by patent. Drawings of specification
Patent application process 2

The specification The detail of the invention must be very specific and comprehensive. Including descriptions of: All the features that could be incorporated. Surplus ones can be deleted from latter stages of application procedure Advantages of the invention over previous products or processes How the invention can be put into practice. Written description can be supplemented with drawings
Patent application procedure 3

The Patent Office allocate a patent number to successful initial applications The application submitter is allowed to use patent pending or patent applied for when the patent number is allocated
This gives application precedence over all other applications submitted for similar inventions Initially for the first 12 month phase of the application procedure
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Typical Patent contents

Document identification Domestic filing data Priority data, i.e. the original country filing details Technical and classification data including, title, search report i.e.. Prior art and abstract written by the applicant giving a full description of the invention Identification of the parties. Applicant, inventor, patent agent. Address information. Designated countries. This usually applies to European Patent Convention or Patent Cooperation Treaty specifications Drawing
Example: IP and lifecycle of a new product

Example of a new product being brought to market from a university research project Research planning phase Use patents to: Identify competitors Determine the state of the art in existing research prior art Find niche opportunities Avoid duplication of research efforts
IP and life cycle of a new product

Research Phase Confidentiality and the law of trade of secrets to safe guard: Research direction and outcomes Agreements with research partners Confidentiality within the enterprise institution Patent law considerations essential with respect to: Publications Participation in trade fairs

Research breakthrough
Outcomes must be kept confidential until patent application is filed A patent filing strategy needs to be adopted Associated developments may be protected by industrial designs and copyright
Development phase
An IPR licensing strategy is required Trade marks may need to be developed International patent strategy is required Patents may be required to improve original idea Cross licensing

Marketing phase
Monitoring marketplace for infringement and enforcement Continuing evaluation of effective means of using IPR Continuing issues of licensing and valuation
Source: www.dfat.gov.au/publications/biotech/downloads/Module01.pdf
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On-line patent databases

Extensive list of country and region specific databases can be found at: World Intellectual Property Association http://www.wipo.int/ipdl/en/resources/links.jsp
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Trade Marks
What are trade marks?

Signs used to differentiate the goods and services of one business from another in the eyes of potential customers In consumer markets customers may recognise the goods and services offered by your business through the distinctive trade marks which may consist of words, logos, 3 dimensional shapes, colour combinations or sounds Prevent others passing off their goods and services as yours The legislation that covers this intellectual property in the UK is the Trade Marks Act 1994
Where is trade mark protection valid?

A trade mark registered in the UK does not give automatic protection overseas For EU protection in all 25 member states Additional applications can be made to the Office of Harmonisation in the Internal Market (OHIM) through the UK Patent Office For World protection in up to 77 countries UK applications can be used as a basis for international applications through the World Intellectual property Organisation (WIPO)
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Trade mark application process

Your UK trade mark design must be subject to a Trade Mark Register search to establish its originality and that no other similar marks are in use in similar enterprises The Patent Office offer a search and advisory service which will check if the application meets all necessary submission criteria If search is successful then form TM3 can be submitted to the Trade Marks Registry at the Patent Office. Approval takes six months, protection lasts for 10 years renewed every decade
Registering intellectual property
Registering intellectual property

The legislation that surrounds Intellectual Property Right protection in the UK, EU and rest of the world is very complex The registration procedures should not be taken likely and professional advice should be sought from as many sources as early as possible including university based specialists and independent accredited professionals For: Patents applications Chartered Patent Agents Trade mark registration Trade Mark Attorneys & Chartered Patent Agents
Support for registering intellectual property

The legislation that surrounds Intellectual Property Right protection in the UK, EU and rest of the world is very complex The registration procedures should not be taken likely and professional advice should be sought from as many sources as early as possible including university based specialists and independent accredited professionals Patents applications- Chartered Patent Agents Trade mark registration -Trade Mark Attorneys & Chartered Patent Agents
The additional considerations of IP protection

What mechanisms will the enterprise have in place to police potential IPR infringement?
Owners initiate action against infringers Typically for Biotech organisations right owner initiates civil procedure
How will the defence of IPR infringement be funded?

This can be very expensive and needs to be factored in to the business plan
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Key point summary

IPR are a complex set of rights which protect a variety of creative outputs Protect intellectual property is vital in the Biosciences in creating income streams and preventing use of technology created Patent searches can be used to identify:
Whether the product is truly novel Competitors Potential collaborators
Consider using Trade marks for business/product names and logos Seek help from Patent Office and Agents in this complex and vital area of business development
Factor in the cost of defending your IPR as it can be expensive
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6. Market Research and Competitor Analysis

Identifying your Target Market, Market Attractiveness and Competitive Advantage
Learning outcomes

By the end of this session students should be able to: Determine the information requirements and purpose of market analysis and competitor analysis Identify sources of secondary data
For the assessment student should: Determine the target market and market attractiveness Evaluate the competition and determine your business competitive advantage Hence determine positioning of their product or service
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TLA framework
Business planning
The management team Operational strategy
The pitch
Why look at markets?

It is vital to determine who will want your product, to describe them clearly in terms of their characteristics so that you can approach them through various media and tailor your products and services to suit them. Investors will want to know that the chosen product/service and customer group is attractive in terms of size, growth and value. Market analysis brings all these points to bear
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Why look at competitors?

Frequently entrepreneurs (and students!) ignore the reality of competition for their new venture believing that it has no close substitutes and that their success will not attract other entrepreneurs. This is not the case. Examining competitors allows the product/service to be differentiated in some way and help focus you on providing enhanced benefits to customers
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Key questions when identifying the market and analysing competitors

For your business plan you will need to find out: Who wants this product/service? What characterises them what is their market segment? What is the anticipated value of the market? Is the market likely to grow? What are the competition doing? What are their strengths and weaknesses? How are we positioning our product/service offering?
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Identifying the target market
What is your target market?

A group of people or organisations that share a common set of attributes, a particular set of needs and wants that distinguishes your product or service
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Why segment markets?

Better focus on customer needs Promotes new product ideas Helps develop effective marketing mix strategy i.e. place, price, product, promotion Allocation of marketing resources to different products depending upon segment attractiveness
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What are segments? 1

Subgroups of the potential population who may purchase your products. Geographic segments:
Regionalising to accommodate local tastes
Demographic segments:
What consumer characteristics are? (e.g. age, gender, income)
Psychographics segments:
Why do consumers buy? (e.g. lifestyle, social class)
Top down approach to define target market

1. Segment divide up the market into groups of buyers 2. Target evaluate the attractiveness of each segment and select target/s. A different approach will be needed in each segment 3. Position select the market position which differentiates it from competitors
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What are segments? 2

Behavioral segments: Usage occasions Kodak single-use cameras from underwater use to baby pictures and weddings Usage Rates 80-20 rule, e.g.beer drinkers Loyalty Status Hard-core loyals: A A A A A A Switchers: A B E A D B Variety Seekers A B C B A C B
Criteria for successful segmentation

Measurable Accessible Substantial Differential Actionable
Size, purchasing power, profiles of segments can be measured. Segments must be effectively reached and served. Segments must be large or profitable enough to serve. Segments must respond differently to different marketing mix elements & actions. Must be able to attract and serve the segments.
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Positioning
Positioning = Segmentation + Differentiation
Segment = a division of the market Differentiation = how your product is different from the competition
Slotting the product in the consumers mind Who am I? Why buy me?
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Positioning
Against competition e.g. Pepsi Challenge in Pepsi vs Coca Cola Position with the competition e.g. Dixons own brand for electronic equipment Grab an unoccupied position i.e.market niche e.g. SMART cars Using your endowment e.g. Number one position - Microsoft
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Market potential/attractiveness
Market analysis
For you business plan you will need to determine: Size of market in terms of overall sales expected per annum for that product/service
Identify major players and sales for product/service Identify total potential sales for that product/service given a percentage up take product/service
Desired market share for your organisation State drivers and trends of demand in your target market NB/ MINTEL and KEYNOTE reports are extremely useful here
Trends: Industry life cycle

3. Renovation Saturation Maturity
Development
Revenue Stream
Sales
Trend Line
Profits Trend Line 0
TIME
Phase
1. Decline 5
2. Stagnation
Growth
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Changes in industry or market structures: Porters five forces model

Suppliers
Supplier Buying Power
Potential Entrants
New Entrant Threat
Industry Rivalry
Buyer Buying Power
Substitute Threat
Substitutes
Buyers
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Industry life cycle & competitive forces

Intro. New Entrants Power of Buyers Few Low Growth Bandwagon effect Low, Its a sellers market Maturity Consolidate Increasing Decline Exit High, Its a buyers market
Power of Suppliers
Threat of Substitutes Rivalry amongst Firms
Medium
Non Existent Low
High
Low
Declining
Growing
Low
Substitutes may cause decline
Low, focus on Intense, firms Declining as growth grow at rivals firms exit. expense
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Analysing the Competition

Key Success Factors
Analysing competitors 1
Analysis of competitors will be far less detailed than own business. However it will help owner managers and investors understand existing and future rivals The following checklists - Key Success Factor criteria and BBSRC - should provide a good basis for comparison
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Analysing competitors 3 Key Success Factors (KSF)

The KSF scores of the KSF competitor ranking can be plotted graphically and will indicate the overall competitive strength of each competitor in relation to their own business
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Aakers Key success factors A model for measuring a business against competitors using no more than 10 key success factors or KSFs In this example eight KSFs are chosen: Market Share Distribution Brand Image Product Quality
Product variety Patents Research & Development Financial Resources

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Graphic representation of firms relative KSFs
Firm A Firm B Firm C Own Firm

Key criteria to evaluate competition 1

Resource strength Management Supplier relationships Distribution capability Financial Breadth and depth of intellectual property Manufacturing Strategic partnerships/alliances
Source: BBSRC, 2006

Market position Market share Reputation Breadth of product/service portfolio ability to offer a one stop shop Brand image Service delivery Responsiveness Consistency Flexibility
Source: BBSRC, 2006

Customers Customer inertia general unwillingness or lack of propensity to change Customer lock in customer investment in competitors system/products so great as to make switching difficult/costly or otherwise unattractive
Source: BBSRC, 2006
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Market research
Why market research is needed?

You will need to justify the statements you make about the market and the competition backing up your argument with data from reports or from research that you have carried out. Gut feel is not enough!
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Types and sources of market data

Primary Non published current market and competitor information gleaned by the entrepreneur using tested methods and based on recorded observations
Secondary Published information sources available from libraries in hard copy, disc and more frequently on-line They will include information on markets and competitors
Planning market research

Define Carry out What information you need to know Desk (secondary) research using library sources
Establish suited to
Develop
Field (primary) research method best your needs

Your primary research study methodology & test thoroughly! Field research The collected data The results in the marketing plan
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Carry out Analyse Incorporate
Focus groups:
Primary market research methods
Observations:
Gathering a representative sample of potential customers together and measuring their reaction to your offering Watching and recording what potential customers are buying and what competitors offer Formalised information gathering exercise that provide valuable intelligence on potential customers Developing your offering as fully as possible and then letting it loose in a restricted market place A useful way of gauging customers reaction to offerings and reaching potential customers cheaply
Surveys:
Test marketing:
Web based news groups:
Sources of secondary market data
Sources of secondary market research information

Market research companies and governmental sources offer reports on the following:
The structure of the markets Identifying the major players in the market Identifying customers through demographic profiles, spending and disposable income Major market trends How products are marketed and distributed Future developments in the market due to technological advances and changes in typical customer profiles
Sources of secondary marketing: Specific sector information in UK and Europe

Mintel Reports: Euromonitor:
Media, product & consumer intelligence for UK Europe & US markets Consumer, industrial and service sector intelligence worldwide scope Information on 370 UK sectors Information on UK industry
Key Note:
Jordans Ltd:
Frost and Sullivan:
MSI Marketing Research for Industry:
High specification research on industrial sectors world wide

industrial and business to business markets in healthcare, environmental services and others
Sources of secondary market related information: Biotechnology/Bioscience

Biotechnology handbook
(available from libraries)
Bioindustry Association website

http://www.bioindustry.org/
Patent databases
World Intellectual Property Association
http://www.wipo.int/ipdl/en/resources/links.jsp
Biotechnology Industry portals and networks

http://www.europabio.org/
On line biotechnology publications for business news

Sources of secondary market related information: Europe and Worldwide

NOMIS: On Line Government Statistics (U.Durham) OECD: Organisation for Economic Cooperation & Development ONS (UK): Office of National Statistics Databank World Consumer Markets Eurostat Comext: Monthly Digest of EU Trade CORDIS: Community Research and Development Information Service
Sources of secondary market related information: UK government

The Guide To Official Statistics Products, Sales and Trade Reports The Annual Abstract of Statistics Regional Trends Economic Trends Labour Market Trends Population Trends Social Trends Living in Britain
Sources of Other Secondary World, EU, UK and Regional Information

Benns Media Clover Newspaper Index Wilings Press Guide McCarthy Cards: Indexing national and regional newspapers Trade Associations Chambers of Commerce Dun and Bradstreet
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Sources of UK company information

UK Kompass Register Contains company profiles & financial information Who Owns Whom Key British Enterprises Listing the top 50,000 companies in Britain Kellys Business Directory Listing a wide range of suppliers, products and contact details
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Sources of UK household, area and trade information

Dun and Bradstreet Credit reports for all UK trading business Mosaic Used by credit reference agencies to divide UK population into 60 categories and track social trends Office for National Statistics The-List.co.uk Search engine for market reports and publications UpMyStreet.com Local area statistical information
Key point summary

Key to establishing your market is understanding your customer typically, who they are and what they want and what affects their buying decisions It is important to determine your positioning by answering the question which segment/segments am I serving and why buy me? Competition is a key threat to the business. They must not be ignored. Their strengths and weaknesses need to be determined to identify threats and your businesss competitive edge.
Key point summary 2

Using structured means to analyse the business will allow such as Key Success Factors (KSFs), allows a systematic evaluation of the competition Numerous sources of data exist for gathering of market and competitor information. It is vital to scan these for the data that you need before embarking on time consuming primary data gathering exercises
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7. Business Strategy and Risk Analysis

Exploiting IPR and Establishing Routes to Market in the Biosciences
Learning outcomes 1
By the end of this session students should be able to: Appreciate the meaning of the term strategy Understand the changing nature of strategy in the growth of an organisation and a range of approaches specifically used in Bioscience exploitation i.e. the route to commercialisation Recognise a range of generic strategies that business adopt Recognise the use of SWOT and scenario planning in determining strategies
Learning outcomes 2
For the assessment students should: Determine key growth strategies for their organisation and how they might change with the development of their product or service i.e. the route to commercialisation Carry out a SWOT analysis and scenario planning to determine a range of strategies to deal with RISK presented to the business
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TLA framework
Business planning
The management team Operations and commercial strategy
The pitch
What is strategy?
What is strategy?
There is no single, universally accepted definition: the determination of how an organisation, in its entirety, can best be directed in a changing world The direction and scope of an organisation over the longer term which seeks to match its resources to its changing environment, particularly its markets, customers or clients so as to meet stakeholder expectations
What is strategy?
Knowing where you are now
Knowing where you want to be
Preparing a road-map of how to get to where you want to be

Emergent and realised strategies

The planned strategy Intended Strategy Applied through force Deliberate Strategy What actually happens
Realised Strategy
Source: Brunet, J.P.,Mintzberg,H and Water J.(1986)

Emergent and realised strategies

Business strategies are subject to the constantly changing external and internal forces Much of what is planned strategy is not implemented because of the strength of the influence of the external environment Although enterprises need to have strategic aims they must also have the capability to adapt and reject the elements of their intended strategy that are impossible to implement Embrace the opportunities that the changing environment offer
Strategy and its relation to operational activities

Top Down
Corporate
e.g.Marketing
results
directives
e.g.Marketing Communications
Bottom Up
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Porters Generic Strategies
Three generic strategic options

Cost leadership Strives to be the lowest cost compared to its competitors in the industry e.g. Netto Differentiation Strives to build customer loyalty by making products/services that are different from the competition Focus Aims to fulfil needs. Wants or interest of a clearly defined group of people. Niche.
Porters generic strategies

Narrow Market
Segmentation (Or Focus) Strategy
1.Segmented Or Focussed Strategy Firms concentrate on a select few target markets targeting effort on one or two segments. A strategy most suited to relatively small firms
Strategic Scope
Broad Market
Differentiation Strategy
Cost Leadership Strategy
2. Differentiation Strategy Involves creating an offering perceived as unique. Providing superior value and customers brand loyalty. Additional cost associated with differentiation needs premium pricing. Requires innovation and marketing skills. 3. Cost Leadership Strategy emphasises efficiency, through economies of scale and experience. Constant focus on cost reduction. Requires market share advantage or easy access to important raw materials. e.g Easyjet, Kwik Save
Uniqueness Competency Strategic Strength
Low Cost Competency
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Growth strategies in the Biosciences
Organic v Acquisition Growth strategies

Internal/Organic Growth
What are growth strategies?
R&D: new and improved products

Exporting and licensing Expanding capacity: new premises, equipment Improving efficiency: making processes faster, cheaper and more accurate
Acquisition Growth Outright Purchase Joint Ventures Strategic Alliances
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Key strategic options for the Biosciences development

1. 2. 3. 4. 5. 6. Collaborative research Licensing Selling IP outright Strategic alliances Joint venture Start-up
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1. Collaborative research
E.g. transfer of personnel between non-competitive industries
Advantages No financial risk to academic partner Low financial return to academic partner Can allow commercialisation to take place with different levels of involvement of academic partner (though most likely to be limited involvement
Disadvantages Unlikely to have control over the commercialisation of the technology
Source: BBSRC, 2006
2. Licensing
Allowing third party to use of Intellectual property
Advantages Can allow researcher to continue academic research or explore other routes to commercialisation Can produce a royalty income stream License can be assigned exclusively to one licensee or to many licensees
Disadvantages Requires specialist expensive IPR legislation expertise. Terms and conditions of the licensing contract are crucial Source: BBSRC, 2006
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Types of licences
Exclusive: This type of license gives the licensee exclusive rights to exploit the technology (including exclusion of the licensor) Non-exclusive: Here, the licensor can license the technology to more than one licensee Sole: Here, there is only one licensee, but the licensor also retains the use of the technology Source: BBSRC, 2006
Negotiated terms of a license

The timescale of the license, when does it start, when does it finish, under what circumstances may the license may be terminated (by either party) What exactly is being licensed What can be done with the technology, are there any restrictions on the use? Where the technology can be utilised, are there any geographical, market sector or other constraints on its use The payment terms; what payments will be made, when, and on what basis will they be calculated?
Source: BBSRC, 2006

3. Selling IP outright
The outright transfer of IP from academic researchers to another owner for a substantial sum. Advantages Can be lucrative if the potential of idea has been thoroughly researched and identified Academic researchers could still operate under licence agreement with new owner Disadvantages Academic originators have no control over the future commercialisation of IP
Source: BBSRC, 2006
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4. Strategic alliances
Collaboration with partners on joint research programme under clear and negotiated terms and conditions. Advantages Little/no financial risk to academic partner Can allow commercialisation to take place with different levels of involvement of academic partner Disadvantages Modest financial return to academic partners Limited control over the commercialisation of the technology
Source: BBSRC, 2006
5. Joint Ventures
A negotiated contractual alliance between academic IPR originators and commercial partners to develop that IPR and bring it to market. Usually infers a new start up business is created. Advantages The skill sets of alliance partners are used to mutual advantage, partners concentrate on their strengths
Disadvantages Significant effort involved in the search for a alliance partner Requires a great deal of trust between alliance partners
Source: BBSRC, 2006
6. Start-up 1
Starting a new business to harvest the most benefit of the commercialisation of IPR. Advantages Can offer the most financial and career development rewards The academic founder(s) have more control over the exploitation of the technology than via other exploitation route, depending on role chosen in the company
Source: BBSRC, 2006
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6. Start-up 2
Disadvantages Requires a high level of financial and personal involvement and risk from the academic business founders. The level of involvement and risk can vary depending on the legal structure of the new company Requires a the deployment of a much larger set of skills from IPR originators than other options. Requires significantly more investment than other exploitation routes Academic start up founders take the full burden of venture risk
Source: BBSRC, 2006
A typical route to Commercialisation in the Biosciences

Applications
Well Defined
End-customer & supplier alliances Licence agreements and joint ventures Test & development agreements with licence option
Research partnerships: Government/universities/ companies

Early stage licensing
Imprecisely Defined
Fluid
Core Technology Status

Well Developed
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SWOT analysis
What is SWOT analysis?

A SWOT analysis is a simple framework aimed at analysing the strengths and weaknesses of the organisation in relation to the opportunities and threats in the present and future environment
It aims to provide strategic options which: Take advantage of the opportunities Overcome or circumvent the threats Remedy weaknesses Capitalise on strengths
Strengths and weaknesses

Strengths and weaknesses are internal to the business There are a number of frameworks that can be used to carry out an internal audit of the business to determine strengths and weaknesses e.g. McKinsey 7s, Key Success Factors Here we suggest a simple framework: 10Ps You will need to determine how your business performs currently on all the criteria
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The 10 Ps of internal risk analysis

Policies:
Need to be developed to meet and exceed statutory requirements
Planning:
At strategic and operational level, clarifying purpose and involvement
Product/Service:
Design or for purpose and eventual disposal.
Process:
Risk associated with all production processes
Premises:
Location, size, lease stability suitability
The 10 Ps of internal risk analysis

People:
Skill training, creation of apt organisational culture, risk reduction and supervision People premise, materials, intellectual property, data
Protection:
Procedures: Purchasing:
Are they apt for organisation, monitored, measured and evaluated

Continuity of supply, quality standards of suppliers, manual handling Benchmarked against others in sector, measurement of risk
Performance:
Opportunities and threats

These can be established through environmental scanning: PESTEL analysis Market analysis Industry forces Porters five forces
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TOWS Matrix
Strengths Weaknesses
Opportunities
SO Strategies
Use strengths to take advantage of opportunities
WO Strategies
Overcome weaknesses by taking advantage of opportunities
Threats
ST Strategies
Use strengths to avoid threats
WT Strategies
Minimise weaknesses and avoid threats
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Example: BioBurp
See example in pack (In class exercise, page 8)
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Risk analysis and scenario planning
Risk analysis matrix

Low High Impact High
Probability
Low Impact High Probability PESTEL Factors
High Impact High Probability PESTEL Factors
Low Impact Low Probability PESTEL Factors
High Impact Low Probability PESTEL Factors
Low
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Scenario planning (what if)

Consider high impact, highly probably PESTEL factors Each of these factors can then be given two or three contrasting development path scenarios to identify ways of minimising their negative influence and maximising the potential that each path might have. The combination of PESTEL analysis and scenario planning techniques can be used to generate a picture of the anticipated future environment which the business may have to operate
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Key point summary

There are numerous growth strategies that can be used on the route to commercialisation for the Biosciences Collaborative research, Licensing ,Selling IP outright, Strategic alliances, Joint venture and start-up Growth strategies change over the development of the business SWOT analysis enables the identification of a range of strategies that will allow the business to grow and defend itself against potential threats RISK analysis enables the key external factors to be identified and prioritised according to their probability and severity of impact Scenario planning can be used to prepare the business for a range of risks that are perceived in the external environment
8. Marketing Strategy
Defining the Marketing Mix for your Business
Learning outcomes
By the end of this session students should be able to: Recognise the elements required in developing a marketing strategy For the assessment students should: Develop a marketing strategy through formulation of the marketing mix for their product/service
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TLA framework
Business planning
The pitch
The marketing mix

The 7Ps
The marketing mix: 7 Ps

Product
The traditional mix elements
Price Place Promotion People Process Physical
Additional service organisation specific mix elements
Source: Bitner, M. J., Boom, B. H. and Tetrealt (1995)

Unique Selling Proposition (USP)

The marketing mix blended together becomes your USP Typically business add and subtract ingredients from the mix to keep the product/service in the customers mind
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Product 1
Comprising of: Product architecture and design Product positioning Product development and planning There is no right price for the wrong product
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Product 2
Consider the following for you business plan: Product variety Quality Design/Features Brand name Packaging/Sizes Services Warranties and Returns
Price
PRICE provides PROFIT Profit indicates your success in finding, satisfying and keeping customers. However, for your customers its not just about the monetary price of your offering. Customers also consider the other costs of the purchase that they may incur, including:
Time involved in selecting purchase Physical effort involved in selecting purchase. Sensory and psychic costs
Customers perceptions are all important

Price 2
Needs to cover costs Cost + approach i.e. total cost/ number of products sold PLUS something for profit may be too rigid How does your price compare with the competition Consider whether your customer will pay a premium based on their perception of the product/service - reassuringly expensive
How profit is defined
Cost of sales Sales Gross profit
Operating costs Net profit
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Place
Place is about having your product or service in the right place at the right time Making it as easy as possible for customers to buy 3 main methods: Transported direct to the user Using one distribution channel, stockist or retailer Using multiple distribution channels including factors, concessionaires, wholesalers, retailers and franchisees
Promotion
What many new businesses consider as the sum total of the marketing effort, it includes:
Traditional mass media advertising, press, T.V., radio, posters, etc Sales promotion Personal selling Public relations Sponsorship Direct marketing Telemarketing Electronic media channels
The timing of responses to promotion investments

Rapid Return on Investment Delayed Return on Investment Advertising Personal Selling
Increases in Sales Time After Investment

Public Relations Promotions
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People
All the people directly involved in the consumption of a service Knowledge workers, employees, management and other consumers often add significant value to the total product or service offering, including:
Staff attitudes and internal relations Consistency of appearance of staff The level of service mindedness of the organisation Accessibility of people Customer to customer contacts
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Process
The procedures, mechanisms and flow of activities by which services are consumed (customer management services) are an essential element of the marketing strategy, including:
The degree of customer contact Application of quality assurance methods and control standards The convenience of payment methods Lead or waiting times
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Physical evidence (ambience)

The ability and environment in which the service is delivered Tangible goods that help communicate and perform the service and intangible experience of existing customers The ability of the business to relay that existing customer satisfaction to potential new customers For example:
Building design and layout Furnishings and dcor Goods associated with the service (e.g. packaging and promotional material)
Customer behaviour and the importance of service
Market type, customer behaviour & indicators

Market Type Customer Behavior Principle Motivation Indicator Embryonic Early Adopters Security Belonging Esteem Mature Followers Security Belonging Esteem Declining Traditionalist Security Belonging Esteem
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The loyalty ladder The customer loyalty continuum

Enterprises should aspire to be continually developing their relationship with customers. From the first point of contact as Suspects moving up the loyalty continuum to Advocate status
Advocates
Clients
Customers
Prospects Suspects
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Reasons for customer erosion

68% Move because of poor customer service Move because of the poor quality of offering Are claimed by aggressive competitors 5% Develop other business relationships Relocate
14%
3%
9%
1%
Death of principal contact
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Reasons why business fail?

42% Poor marketing 6% 18% Poor cash flow 10% Compliance 9% 9% Raising finance Tax problems 3% 2% 1% Skills gap High interest rates Bad management Materials
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Key point summary

The traditional view of the marketing mix is to determine the product, price, place and promotion The Service element is vital in the overall approach to defining a product and therefore the mix has been extended to include people, physical evidence and process It is possible to outsource aspects of the marketing activity such as promotion/ packaging/brand building to ensure that the business can focus on core activities e.g. R&D/technical development
9. Operational Strategy
Determining How Your Business Will Run and How It Can Be Simplified
Learning outcomes 1
By the end of this session students should be able to: Recognise the key elements of operations using a value chain framework Recognise the role incubators in supporting Biotechnology/Bioscience start-up Consider the role of outsourcing to simplify business operations
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Learning outcomes 2
For the assessment students should: Determine their product/service operational requirements
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TLA framework
Business planning
The pitch
Operational planning
Many new starts in the biotechnology sector will require some funding from external sources (e.g. banks, business angels, venture capitalists) It is essential that owners/managers can convince those potential professional investors that every aspect of the businesss operations has been planned, costed and will be managed in the most effective and efficient manner
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It might sound obvious but anyone who starts a business needs to plan how their business will work and how the individual elements of that business will be managed to produce the desired resultsGoods and services that can be sold to enthusiastic and loyal customers for as much as they will pay This is especially true if the business is capital intensive, operates in a very competitive market place and requires significant amounts of time and cash investments before it turns a profit Unfortunately many new starts dont have as comprehensive an operational plan as they should have and suffer the consequences
Porter has developed a framework that can be used to examine how the various elements of a business should interact along the whole business value chain from:
1. 2. 3. The selection and purchase of raw materials Through the process of adding value to Getting the goods or services to customers then managing their satisfaction
He describes five primary activities and four support activities or cross cutting themes which can be applied to any business
Source: Porter, 1985
Porters value chain: Overview

Understanding Where To Explore
Support Activities
Infrastructure Financial Human Resources Management
Primary Activities
Inbound logistics
Outbound Process Logistics
Sales & Aftercare Marketing

Source: Porter,1985
Porters value chain: Primary activities

The primary business activities are: Inbound logistics: Including purchasing systems, raw material quality and continuity of supply contingency Process: Including administration systems, plant and equipment maintenance, quality assurance Outbound Logistics: Including ordering mechanisms, customer delivery Aftercare: Including complaints and warranty management Sales and Marketing: Including marketing and communications strategies, sales force management, CRM, intelligence gathering
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Porters value chain: Support activities

The support activities, or cross cutting themes, are: Infrastructure elements: Including buildings, operational equipment, administrative systems, plant, tools and vehicles Financial elements: Including capitalisation, purchasing systems, debt management systems, cash management Human Resources elements: Including selection procedures, HR policies and procedures Management elements: Including compliance and monitoring systems, management structures, management and staff skills mix, staff development & training
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Porters value chain

The value of the Porter model is that it provides a framework to: Break down the business proposal into five major elements or primary activities Examine each individual primary activity against each support activity and make an assessment about whether they are robust enough for the purpose of running and managing the business
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Porters value chain 1

Infrastructure
Inbound logistics

Infrastructure Financial
Inbound logistics

Infrastructure Financial Human Resources
Inbound logistics

Infrastructure Financial Human Resources Management
Inbound logistics
Outsourcing
Simplifying the business by using external resources
In house or outsource ? To make or buy ?

It is very unlikely that a new start business in the biotechnology sector will possess all the capabilities and resources it needs to develop its offering ready for market It may be more economical and time efficient to subcontract some development work or processes out to other businesses However the decision to outsource must be given careful consideration especially if the new offering is particularly innovative and will offer significant competitive advantage
Outsourcing in Pharmaceuticals
800M UK outsourcing in pharmaceutical industry Used for clinical trails, software and applied research Driven by lack of expertise, time and cost reduction Concerns over unintentional IPR leakage, R&D too central to outsource
Source: Howells, 2006
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Factors for successful outsourcing

Potential subcontractors obviously must be subject to an initial screening process through the application of a due diligence test, to examine their capability to complete the required contract Although contracts are subject to stringent legal terms and conditions, it is the mutual trust between principal and subcontractor and similar organisational cultures that are key success factors when outsourcing
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Incubators
Business incubator defined

Business incubation is a unique and highly flexible combination of business development processes, infrastructure and people designed to nurture and grow new and small businesses by supporting them through the early stages of development and change
Source: UK Business Incubation, 2004
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Business incubators
Business incubation is a process to deliver stronger new businesses, create jobs and produce firms developing new ideas and technology Incubators usually consist of a property with small units Provides support, access to a range of business skills
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Key features of incubators

Some form of selection or entry qualification based on business viability and growth potential via a business plan The incubator director has close, hands on relationship with client business Businesses are encouraged to leave on graduation when they have established sufficient market share or maturity Judged not just by number of companies but on their performance
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Incubator services: Benefits to clients 1

Incubator directors and staffs knowledge, experience and skills as well as emotional support Close proximity to other entrepreneurs from whom experience and skills can be gained Access to business training and educational programmes Access to systems which can provide financial support or investment
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Incubator services: Benefits to clients 2

Knowledge, skills and experience of a network of experts in business or technology Physical services of incubator Atmosphere of business innovation and growth Clear and marketable image which adds credibility and enhances image with clients
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Location of Bioincubators in the UK

E.g. Manchester Liverpool Imperial College, London Cambridge Oxford Porton Down York Norwich
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Considerations for your business plan 1

Location and premises
Why that location? Own or rent the property or Bioincubator? Why?
Production/Research facilities
What equipment will you be using? How modern is it? Does it have the capacity to meet expected demand? In house or outsource activities?
Management Information systems

How are you managing stock control, financial accounts, product information? How are you sharing information with partners?
Considerations for your business plan 2

Key suppliers
Who are they and why choose them?
Quality control
What legislative requirements, procedures and protocols will you be using in ensuring product and service quality?
Health and safety

What health and safety concerns are there and how are you dealing with them?
Staff
What staff do you need to operate the business?
Key point summary

Porters value chain allows the systematic considerations of the operational requirements of the business. Research into best practice in each of these areas is required. Both outsourcing and use of Bioincubators are prevalent in the Bioscience industry Consider using incubators or outsourcing activities to simplify operational aspects of your business Ensure that all elements of operations are effectively costed
10. The Management Team

Building a Credible Management Team
Learning outcomes
By the end of this session students should be able to: Appreciate the scope and difficulty of setting up a credible management team
For the assessment students should: Determine proposed titles, duties and responsibilities of the management team Determine external support e.g. advisory panel and consultants Demonstrate their credibility through the inclusion of CVs
TLA framework
Business planning
The pitch
The importance of a strong management team
It is extremely difficult to grow a higher potential venture by working single handily. Higher potential entrepreneurs build a team, organisation and a company Source:
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The Limited Liability Company

Treated as an individual in law with rights and responsibilities.
External Stakeholders Traditional Hierarchy Shareholders Collaborators Competitors Customers Funders Government Suppliers Regulatory Authorities Board Senior Management Team Middle and Junior Management Workers Roles Own The Company Identify Strategic Objectives Have Overall Responsibility Interpret Strategic Objectives Develop Tactical Response Implement Tactical Response Do The Graft
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The management team

Board of directors Usually five or six members Elected by stock holders Set and approve management policies Consider results on operating results Declare dividends Brings supplementary knowledge Non-executive director
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Who could be a director?

Lawyer Banker Accountant Other Business Executives Local management consultants Expert in the field Often paid through an annual retainer, board meeting fees and pay for committee work Share option packages offered depending on industry practice and plans for growth The due diligence test also applies to potential directors. Checks for disqualification and character references are essential.
What is due diligence?

Process where your business, your financial records and your business plan in minute detail, checking the validity of almost every known fact about your business - including your past performance and the credentials of you and your fellow directors Investigation of the records to support its value and find out whether there are "skeletons in the cupboard" Process is covered by confidentiality undertakings
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Management the reality

Finding good directors and CEOs is not easy Founding scientists rarely make good CEOs Management needs evolve as company develops Long-term vision from the start: identify skill gaps Plan ahead: be receptive to learning opportunities Use experienced help from the start (e.g. mentors, consultants etc)
Typical profile of a CEO

Board experience in technology-based company. Fund raising experience. Deal maker with a successful track record. Marketing and business development skills. Ability to work with academic and industrial scientists. Strong presentation and inter-personal skills. Strategic vision. International experience, preferably in the US market. Ability to take products from R&D to market. Entrepreneurial spirit !!!
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5 Phases Of Growth
Phase
Large
Source: Greiner, 1996 4 2 3
5
Crisis Of ???
Evolution (Growth) Stages

Crisis Of Red Tape
Crisis Of Control Crisis Of Autonomy Crisis Of Leadership Growth Through Creativity Growth Through Delegation Growth Through Coordination
Revolution Stages
Growth Through Collaboration
Stage Of Organisation
Growth Through Direction
Age Of Organisation
Small
Typical CEO start-up package

Salary: 120-150k p.a. (full time) Share options: 5-10% vesting with time Bonus: 10-20% of annual salary Relocation package: up to 7.5k tax-free Additional benefits: pension, health insurance etc
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Your external support team

Professional advisors Consultants Advisory board
Can be an alternative to a board of directors Qualified outsiders are asked to serve on the council
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Key point summary

It is important to create a support team for the business through assigning a board of directors, identifying consultants and /or an advisory board Roles of the management team and staff must be clearly defined It is unlikely that scientists will have the capability of managing their own business making the team approach vital The skills required to establish a company may not be the same as those required to steer it through the early stages of growth The selection procedures for managers and other key staff take this into account
10. Financial Planning

Funding in the Biosciences and Projecting Financial Performance of the Business
Learning outcomes 1
By the end of this session students should be able to: Determine possible funding sources appropriate to the stage of development List and cost the resources required to establish an enterprise Understand the purpose of the three financial forecast documents
1. Cash flow forecast 2. Profit and loss 3. Balance sheet
And break even analysis and establish loan requirements

Learning outcomes 2
For the assessment students should: Estimate sales projections and other sources of income Estimate costs Demonstrate funding required through a cash flow forecast Identify funding sources Demonstrate the attractiveness to investors through calculation of payback and breakeven Justify all assumptions made in determining the financial requirements of the business
TLA framework
Business planning
The pitch
What investors want

You will need to be able to provide potential investors with : Estimated sales projections based on the marketing strategy and estimates of anticipated share of targeted market Estimated start up and initial running costs Cash flow forecasts (usually three - five years) Profit & loss and balance sheet forecasts Any other potential sources of finance
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What do potential funders want to know about your business ?

The eventual choice of funder will depend on many different objective (and some subjective) factors, including: Attitudes to risk Application of the due diligence test Experience of lending to the sector Expected return on investment Institutional lending policy Rapport between lender and borrower
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Funding enterprise development in the Biosciences
Funding the Biosciences

The creation of top tier US Bioscience companies has historically required $600-700 million dollars prior to profitability Companies need these finds to finance lengthy, risky drug development Even in the US, the best funded Bioscience market in the world, Bioscience companies have historically taken 10 years to reach profitability
Source: DTI, BIGT,2003

Funding rounds for the Biosciences
Formation
Initial finance
Seed finance
1st VC round
Founders, family & friends
Business angels; University Challenge Funds; specialist Venture capitalists Source: Ithaka Life Sciences, 2004
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Sources of funding
Self, family and friends Shareholders and directors Internal company sources Banks Second tier finance Special financial institutions Venture Capitalists Mergers and Acquisitions Grants Business Angels
Funding sources in Bioscience commercialisation process
1: Idea development and validation

Requires typically 50,000 to 1 million University Challenge Seed Funds: up to 250,000 Family/friend/angel funding (e.g. Cambridge Angels): typically 100,000 Venture Capital (seed specialists e.g. Avalar, Sitka and some broader biotech specialists e.g. Merlin, Apax, Advent BBSRC Small Business Research Initiative: grants of 100,000 -200,000 over 2-3 years, second call of 1.4M Investment funds aligned alongside research bodies
Catalyst BioMedica (Wellcome Trust) Cancer Research Technology Ltd (CRC) MVM (MRC)

2: Early stage Start up/first stage venture capitalists
Requires typically 1M -10 million Start-up focused on broader venture capitalists e.g. Abingworth Schroder Ventures, Apax, Merlin, Advent Very high net worth angels SMART: grants for 50,000 - 400,000, out of a ttal funds of 2 million LINK programme: collaboration between industry and research base funding 50% of R&D costs over 2-3 years
3: Later stage
Multiple rounds of venture capital funding 10 -50 million per round Institutions willing to invest in private companies Pharma/biotech partners Public markets: AIM,LSE,NASDAQ
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Business Angels
Who are business angels?

One of the sources of funding available to businesses with high growth potential is through Business Angels, high net worth individuals with cash to invest and skills that can be utilised Attracting investment from these individuals requires more than a high quality business plan Business angels examine every aspect of a business proposal before they decide to invest The disciplines required to prepare an investment case for these individuals can be applied to other potential funders
Business angels Who are they? 1

High net worth individuals with cash to invest on their own or as part of a syndicate in high growth businesses They also make their own skills, experience and contacts available to company They rarely have previous connections with companies before they invest but will have very a strong experience of its industry or sector The motives for their investment may be purely financial but there may be many more reasons why a business angel will choose to invest
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Business angels - Who are they? 2

A typical business angel may have investments which last for three years under the Enterprise Investment Scheme (EIS) In the UK most business angels belong to a trade association The British Business Angel Association all of whose members will have signed up to the BBAA best practice Code of Conduct
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Business angels - What do they look for? 1

A return of between 35% and 40% per year through dividend and share value growth An opportunity to influence the strategic direction of the enterprise and also operational issues The enthusiasm, expertise, motivation, track record and integrity of the business founders The business competitive edge and growth potential of the business target market
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Business angels - What do they look for? 2

Compatibility between the management, business proposal the business angel skills and investment preferences The financial commitment of the business founders An exit strategy i.e. How you wish to reap the benefit of your business in the long term E.g. closing the business, selling the business, floating the business, merging
353
Business angels What should you look for?!

That the enterprise management team and business angel are compatible and will be able to work together That the business angels skills match the companies needs You are within your rights to apply the due diligence procedure to any potential BA or other investor
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Business angels What should you provide?

Basic information about the business product and service range, number of employees and trading history A comprehensive business plan containing all the essential elements Historical trading and financial information the previous 3-5 years (where applicable) Amount of money sought and its use Access to your financial and legal representatives to enable the Business Advisor to conduct a due diligence test A valuation of the enterprise
The financial forecast documents and Break even point

Costing start up Cash flow forecast Profit and loss forecast Balance sheet forecast Break even point
The financial forecast documents

Whoever is approached to provide the cash for enterprise start up and early trading will want to evaluate the business plan including the comprehensive financial forecasts and the assumptions used in their construction
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Costing the start up
Costing the start up: The shopping list

The enterprise shopping list will consist of five elements: Premises Operational needs Administrative needs Intangible needs Working capital
1. 2. 3. 4. 5.
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Costing the start up Premises

Example selection criteria: Floor size Location Rateable value Security Service costs Utility costs
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Costing the start up Operational needs

Communications hardware Health and Safety equipment Marketing costs Monitoring equipment Process equipment Tools: hand, powered and associated consumables Pre start and early trading trading
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Costing the start up Administrative needs

Office equipment Communications systems ICT Systems for compliance monitoring, customer relationship management (CRM) financial control and process quality measurement Stationery and consumables
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Costing the start up 4 Intangible needs

Critical breakdown covers Insurances Licences and permissions Professional fees, legal, accountancy, surveying etc.
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Costing the start up Working capital and contingency needs

Cash in the bank to fund the running of the business and the additional contingency element
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Costing the start up

The costing exercise will require subsequent review as the business plan is developed and more options become available: Leasing equipment rather than outright purchase of new or second hand examples Subcontracting some less critical parts of the business process may be an alternative to doing everything in house providing that subcontractors can meet both the hard and the softer sub contracting qualifications
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Cash flow forecast

What is it for? How do we construct one?
What are cash flows for? 1

An attempt to forecast the future viability of the business in terms of cash flowing into and out of the business, utilising the most realistic assumptions possible Remember Measuring the business performance by turnover is insanity Profit is vanity Cash is reality
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You are trying to predict the future performance of your business over a 12, 24, 36 month or even longer period of time The longer the prediction period the less the probability of accuracy The finished result should be consistent with all other elements of your business plan and obviously convince you (the entrepreneur) of potential viability
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To anticipate the amount of working capital (cash in the bank) required to start the business Most businesses do not make enough provision for working capital at the start of trading and never recover from that initial lack of investment Bioscience based businesses have long gestation periods. There must be a commitment to the provision of sufficient working capital until revenues flow into the business from sales

To anticipate the flow of cash into and out of the business. The timing of inflows and outflows of cash from the business account are as important as the quantities involved To anticipate when net cash flows and more importantly, monthly closing balances are likely to be negative The business manager can arrange supplementary short term loans (overdrafts) or additional injections of cash well before they are needed
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Cash flow forecast construction 1

Identify how much money you need to cover the cost of your shopping list, in terms of: Premises requirements Operational needs: Tools, equipment, staffing requirements, marketing, etc Administration needs: ICT systems Intangible needs: Professional fees etc Working capital: Cash in the bank
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Determine how you will fund your start up shopping list including all the important elements: Will it be from grants, soft unsecured loans, secured loans, your own money or a mix of all four? If funding is from loans from external sources what is the rate of interest demanded by lenders? What is the probability of interest rates rising during the loan period?
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Start the cash flow forecast by determining what it will cost to run the business in terms of: 1. Direct Costs The raw materials and other consumables that are used at a rate directly proportional to income (takings) from sales 2. Indirect Costs or Overheads All other business expenses that are not directly proportional to income (takings)
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One of the easiest overheads to work out is your own monthly drawings or salary requirement: The amount you need to draw out of the business to meet your own personal, survival budget requirements An example survival budget layout is shown in the word document that accompanies this presentation
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By calculating your total business costs you can then work out how much income you need to generate from your customers Be generous with your business cost forecasts!! Then be conservative with your business income forecasts!! If your first draft cash flow doesnt look viable (and you may need to do more than one) start looking at:
Ways to reduce your costs Increase income by positioning your product or service at markets that might provide better returns (takings)
Applying sensitivity analyses [Looking at the what ifs???]

An examination of the sensitivity of the business to fluctuations in costs and income from sales The longer the forecast period the more valid the application of this analysis
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Cash flow forecast assumptions

Cash flows are only as valid as the assumptions made in their construction Potential investors, business angels and venture capitalists will always question the validity of all the assumptions made during the construction of the forecast State them in your business plan
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Profit and Loss forecast
Profit and Loss (P&L) forecast 1

The P & L forecast or income statement captures, over a specific period all the sales and costs associated with achieving either a profit or loss for that period Sales Revenue (recorded net of any tax) relates to all sales in a specific trading period (in this case 1 year) Costs of Sales are the direct costs associated with achieving the sales revenue Gross Profit = Sales revenue - Costs of sales
Profit and Loss (P&L) forecast 2

Operating Costs also known as indirect costs or overheads do not vary with the volume of sales
Operating profit = Gross Profit Total Operating Costs However there are other non-operating costs and income sources that need to be taken into account:
Depreciation and amortisation Interest charges and interest derived income
Profit before tax take these non operating costs into account and this is the figure that is subject to corporation tax leaving Profit after Tax
Profit and Loss account - Typical layout

ACME Pharmaceutical s Ltd
Profit & Loss for the year ended 31 March 2006
Cost ()
Sales Income Cost of Sales Raw materials Sub Contract Costs Gross Profit (Sales less Cost of Sales) Overheads Employment Costs Depreciation Other Operating Costs Profit before interest and tax Interest payable Profit before tax Tax Profit after tax Dividends Net profit or retained earnings 5,000 15,000 10,000 50,000 120,000 170,000
Income ()
500,000
330,000
150,000 20,000 80,000 250,000

80,000
70,000
55,000
50,000
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The Balance Sheet

See Excel example
What is the balance sheet?

It is a financial snap shot that summarises the value of the business at a particular point in time although it is usually carried out on annual basis. The balance sheet does provide an indication of The accounting value of the business, (assets less liabilities). How the business is financed and How solvent the business is i.e. how quickly assets can be converted into cash
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The balance sheet 2 What it doesnt do

Balance sheets do not: Show the profitability of the business Represent the true market value of assets which may be more or less than the figures on the balance sheet Show the market value of the business which depends on many other factors including profitability and the current value of assets
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How to build a Balance sheet

Estimate value of fixed assets at year end (asset) Estimate value of stock if any (asset) Estimate how much is owed to the business including VAT (liability) Estimate how much the business owes to suppliers of materials and services including unpaid VAT, PAYE and NI (liability) Estimate borrowings from bank and other sources (liability) Calculate net current assets by deducting current liabilities from current assets
Balance Sheet Typical Layout

BALANCE SHEET AS AT 31 MARCH 06
Fixed Assets (1) Tangible Assets Equipment Buildings Intangible Assets Goodwill 5,000 140,000 Current Assets (2) Stock Debtors Cash at bank 10,000 20,000 5,000 35,000 Current Liabilities (3) Loans Creditors 23,000 7,000 40,000 95,000
Tax
2,000
32,000
Net Current Assets (2 minus 3) Total assets minus current liabilities (1 + 2 minus 3) Creditors (Falling due after one year) Net Assets Capital and reserves Shareholders Reserves Net Worth
3,000 143,000 (100,000) 43,000
30,000 13,000 43,000
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Break Even Point
What is Break Even Point (BEP) ?

The point at which the cost of producing an offering, a good or service equals the income made from selling that particular offering
Total costs of production consist of two elements: 1. Fixed costs (remain fixed whatever the output) 2. Variable costs (vary according to output) Income increases with increased output (sales) Break Even Point occurs when total costs equal income
Break Even Point

Income
Break Even Point s
Total Costs
Variable Cost Element
Fixed Cost Element Number of units output

Break Even Point 1
Fixed Costs
Selling Price Unit Variable Costs
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Break Even Point 2

Gross Profit = Sales - Cost of Sales
Gross Profit % =
Gross Profit x 100 Sales
Break Even
= Total Fixed Costs x 100 Gross Profit %
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Key point summary

There are numerous sources of income for the Bioscience start up firm which vary overtime depending on the amount of money required and the stage development of these products A number of documents are needed to present the business case to investors inc. cash flow, P&L and balance sheet The most important document for the business plan is the cash flow forecast as it determines whether the business has money or not and funding requirements
12. Pitching the Idea

Presenting the Business Case to Potential Investors
Learning outcomes
These notes should enable students to:
Recognise needs of investors Define the scope of a presentation of a business plan Recognise factors that make a successful presentation For the assessment students should: Prepare and present their business plan to potential investors
TLA framework
Business planning
The pitch
The Pitch What is it?

A presentation of your business plan to attract potential investors, staff, collaborators, management team Each stakeholder will require different aspects of the business to be explained to them to determine whats in it for them?
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The Pitch Who are potential investors?

Could possibly be drawn from: Friends Family Bank Business Angel Venture Capitalists For this learning framework you need to consider presenting your business plan to potential investors
397
Preparation
Know your investor Decide how much money you want What else do you want contacts, management expertise Know your business inside out and cover any weak points What are you giving in return? A share of the business how much are you prepared to give away?
398
What are investors looking for?

Maximising potential return on investment through cash flows that will be received, while minimising risk exposure World class management - proven track record Products that address major needs
399
Content of business presentation

1. The companys background and its product and services 2. A market analysis and description of the opportunities present 3. The companys competitive edge and the marketing strategies it will use to promote that edge 4. The management team and its members qualifications and experience 5. The financial analysis that shows lenders and investors an attractive payback or pay off
Successful presentation
Be enthusiastic but not over emotional Quick upfront explanation of the new venture the Hook! Discuss benefits and the opportunity rather than detailed aspects of the product/service Avoid detailed technical discussion Use visual to punctuate the presentation rather than to explain all Be sure to answer the question whats in it for the investor Follow up with each investor
Key point summary

Preparation as with any presentation is key here Investors want to know that any investment they might make offers an attractive reward and is off set by recognition and action against potential risks Do not attempt to present your entire plan. Pick out the key elements that investors will want answers to i.e.. the following questions
what is your product/service why will it succeed what is in it for the investor
Good luck!
If you want to take it further

University Business Support Unit Business Link www.businesslink.gov.uk YES Young Enterprise Scheme in the Biosciences www.Bioscienceyes.co.uk/ NES Programme New Entrepreneur Scholarship programme www.nesprogramme.org/
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A Framework for Enterprise Development and Entrepreneurship

A Resource Pack for Bioscience Lecturers and students

Study Pack Guide

Study pack aims 1

A Framework for Enterprise Development and Entrepreneurship

Study pack aims 2

Either as independent entrepreneurs

A Framework for Enterprise Development and Entrepreneurship

Teaching, Learning & Assessment (TLA) framework 1

Business plan and presentation

A Framework for Enterprise Development and Entrepreneurship

Teaching, Learning & Assessment (TLA) framework 2

Study pack content

A Framework for Enterprise Development and Entrepreneurship

Where observation is concerned, chance favours only the prepared mind

A Framework for Enterprise Development and Entrepreneurship

A Framework for Enterprise Development and Entrepreneurship

Business plan and presentation

A Framework for Enterprise Development and Entrepreneurship

What is Bioscience and why is it important?

The Biosciences: Definitions

A Framework for Enterprise Development and Entrepreneurship

DTI classification of business sectors for biotechnology pharmaceuticals and healthcare

A Framework for Enterprise Development and Entrepreneurship

What is Biotechnology and why is it important?

Difficulties in defining Bioscience/ Biotechnology

A Framework for Enterprise Development and Entrepreneurship

What is Biotechnology? Some definitions

Traditional v new Biotechnology

A Framework for Enterprise Development and Entrepreneurship

Classification of modern Bioscience

Suppliers and service companies:

Diagnostic and device companies:

UK performance in the biotechnology

A Framework for Enterprise Development and Entrepreneurship

What key technological developments are driving the Bioscience revolution?

Technology drivers of the Bioscience revolution

Technology drivers of the Bioscience revolution

A Framework for Enterprise Development and Entrepreneurship

Intrapreneurship is entrepreneurship by employees in existing organisations

A Framework for Enterprise Development and Entrepreneurship

What businesses do entrepreneurs create?

Businesses as legal entities A classification

Classification of Social Enterprise

A Framework for Enterprise Development and Entrepreneurship

What is limited liability?

A Framework for Enterprise Development and Entrepreneurship

Company evolution in the Biosciences

Stages of company evolution in the Biosciences

Source: DTI, BIGT, 2003

1. Idea development and validation

Source: DTI, BIGT, 2003

2. Early stage - Start up

Source: DTI, BIGT, 2003

3. Late stage Expansion/public company

Source: DTI, BIGT, 2003

Example: Typical route of commercialisation from university

A Framework for Enterprise Development and Entrepreneurship

Difficulties and success factors for Bioscience start ups

Difficulties for Bioscience start-ups 1

Difficulties for Bioscience start-ups 2

Success factors for Bioscience 1

Success factors for Bioscience 2

The importance and nature of business planning