enterprise dann

A Framework for Enterprise Development and Entrepreneurship

A Resource Pack for Bioscience Lecturers and students

By Zoë Dann and Jeff Gaskell(Version June 06)

Funded by the Centre for Bioscience

Study Pack Guide

Aims, Learning Outcomes, Content, Session Structure,

Syllabus

A Framework for Enterprise Development and Entrepreneurship 3

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


Teaching, Learning & Assessment (TLA) framework 1

Context & Group

Formation

Self Awareness

Idea/Concept Generation

Idea/Concept Selection

Project Management

Proposal

Business plan andpresentation


Teaching, Learning & Assessment (TLA) framework 2

Business planning

Intellectual Property Rights

Business strategy and risk

Market and competitor

analysis

Marketing strategy

The management

team

Operations and commercial

strategy

Financial forecasting

The pitch


Study pack content

1. Learning material for 12 teaching sessions – Lecture slides with deliver’s notes– A short illustrative video clip – Suggested small group exercise – Extended exercise - Part completion of the Business

plan assignment

2. An assignment: Development, presentation of a business plan in Biosciences

3. Resources and references4. Guide for deliverers


Study topics x 12

1. The context and group formation2. Self awareness3. Idea generation and selection4. Project management 5. Intellectual property rights: Patents and Trade Marks6. Market and competitor analysis7. Business strategy and risk analysis8. Marketing strategy 9. Operational strategy10. The management team11. Financial forecasting planning12. ‘Pitching’ the idea


“Where observation is concerned, chance favours only the prepared mind”

Louis Pasteur (1854)

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


TLA frameworkContext and

Group Formation

Self awareness


Idea/Concept selection

Project management

Proposal


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”


DTI classification of business sectors for biotechnology pharmaceuticals

and healthcare

• Pharmaceutical• Biotech• Medical Devices and Diagnostics• Industrial• Agri• Non-Food crop and • Marine Biotechnology


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


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


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

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)


Intrapreneurship defined

Intrapreneurship is entrepreneurship by employees in existing organisations

Source: Antoncic and Hirsh, 2003

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


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

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

University Incubator Start-up

Seed capital Venture Capital

Technology Transfer

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 company’s 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?


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


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


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


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


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

2. Self Awareness

Entrepreneurial Traits and Motivation


Learning outcomes


• 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 frameworkGroup

Formation and Context

Self awareness



Project management

Proposal


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)


Well known entrepreneurs

• Julian Richer – Richer sounds

• Richard Branson– Virgin

• Stelios – Easy Jet

• Alan Sugar – ‘You’re fired

• Anita Roddick – Body shop

Less well known women

• Meg Whitman – founder of e-bay

• Ann Gloag – Stage coach


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


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’– A product that finally works after many years e.g.

Dyson• ‘Eureka’

– An idea out of the blue, but which is often simply a new way of packaging old ideas e.g. Ben and Jerry’s Ice Cream

• ‘If only’– Dissatisfaction with existing goods and services. ‘If only

I could buy products in smaller packages’ (Anita Roddick, Body Shop)

• ‘High Comfort Level’– Goal fulfilled with lots of support from family and friends


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

ProfitFinancial gain

proportionate to personal achievement

Personal Satisfaction

Enjoyment of a satisfying way of life

IndependencePower to make own

decisions

Personal Fulfilment

Contribution to the community

Freedom

Escape from undesirable situation

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

What skills/traits/characteristics do entrepreneurs have?


Building blocks of successful entrepreneurship

Technical Skills

• Product/service knowledge

• Market/industry understanding

Management Competencies

• Marketing• Finance• Human relations

Personal Attributes

• Innovation

• Determined

• External focus Source: Stokes, 2002


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


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/questionnairenewse

ction1en.asp– http://www.wid.org/equity/2004/05/Entrepreneurs%20Quiz.doc

http://www.potentielentrepreneur.ca/client/questionnairenewsection1en.asp

http://www.potentielentrepreneur.ca/client/questionnairenewsection1en.asp

http://www.wid.org/equity/2004/05/Entrepreneurs%20Quiz.doc


Observed characteristics of entrepreneurs: The 10 I’s model

‘I’ Characteristics

• Independence• Interest• Insight• Ideas• Invention

‘I’ Characteristics

• Inspiration• Involvement• Instigation• Insistence• I - will


The 10 I characteristics in action in the entrepreneurial process

Step I Characteristic

A Recognition Independence Insight

B Formulation Interest Ideas Invention

C Initiation Inspiration Involvement

D Development and Growth

Instigation Insistence I - will


Mapping the ten ‘I’ characteristicsPlotting overall average scores for a sample of 20 successful entrepreneurs. Indicated by

1 Independence2 Interest3 Insight4 Ideas5 Invention6 Inspiration7 Involvement8 Instigation9 Insistence 10 I will

10

9

8

76

5

4

3

21

0


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


• 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


TLA frameworkGroup

Formation and context

Self awareness

Idea/concept generation

Idea/concept selection

Project management

Environmentalscanning

Drucker’s seven sources

of innovation

Proposal

Business plan

‘Creative swiping’

Idea Generation


Sources of start up ideas

• Personal experience – work or home• Hobbies• Accidental discoveries - serendipity• Deliberate search

– Drucker’s seven sources of opportunity/innovation

– Environmental scanning– Creative swiping


Technology push or market pull?

Str

uct

ure

d/P

lan

ned

Big Bang

Op

portu

nistic

Completely NewProcess Or Product

Major Strategy Shift eg Switch To

E.Business

Add New Features To

Products

Add New Brands Or Styles

To Range

Major Product & ProcessInnovation

Response To AMajor Order In

New Market

New Products In Existing

Markets

Existing Products In New

Markets

Most MinorProduct & Process

InnovationIncremental

Idea Generation

Drucker’s 7 sources of innovation


Drucker’s seven sources of opportunity/innovation

1. Unexpected happenings2. Incongruous happenings3. A need for process improvements4. Changes in industry or market structures5. Changes in population demographics6. Changes in perception, mood and meaning7. New knowledge


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!


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


4b. Changes in industry or market structures + examples

Porter’s Five Forces Model

SupplierBuyingPower

Suppliers

PotentialEntrants

Substitutes

Buyers

Industry Rivalry

SubstituteThreat

BuyerBuyingPower

NewEntrantThreat


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


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


What environmental influences are there on a business?

BusinessSocial

Political Economic

Technology

Demographics

InfrastructureEnvironment

E.g. Tsunami, green products

E.g. aging population

E.g. Internet, ‘genetic engineering’ E.g. Employment law

e.g. Low Interest rates, Taxes

E.g. Discerning customer, greater disposable income

E.g. More roads, cheap flightsbroadband


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 forcesEconomic forcesSocial forcesTechnological forcesEnvironmental forcesLegal and regulatory forces


The PESTEL framework

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)


The PESTEL framework

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


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


Technological forces

• New developments & discoveries• Reducing product life cycles• Increasing rates of obsolescence • Rates of technological diffusion

E.g. rDNA manipulation, digital technology


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


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”

“It’s 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

Source: Wheelwright, 1992

Screen 1

Screen 2


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


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

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



• 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



• 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


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


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

• Drucker’s 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


• 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 FrameworkContext &

Group Formation

Self awareness



Project Management

Proposal


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

http://www.ecbp.org/glossary.htm


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


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


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

MilestonesGantt charts

Responsibility chartsTeam 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

http://www.smartdraw.com/tutorials/gantt/index.htm


What is a responsibility chart?

• Helps you determine “who-does-what-and-who-helps”

• Can be useful as teams are forming, or as new work emerges as part of a team’s responsibilities

• Can be used to clarify understandings, improve the distribution of work, and build agreements that involve all and therefore can last


Responsibility charts – How are they used? 1

• By the team as a group – This method may be somewhat time-

consuming 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 involved3. 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 Person or role

Person A Person B Person C

Ideageneration

r c a

Conceptselection

c r a

TechnicalFeasibility

c c r

Patent Search r c a

etca r a


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


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


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 outcomesBy 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 planning




analysis

Marketing strategy

The management

team


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


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 nation’s policy to encourage innovation

and dissemination of knowledge


Types of IPR

Registered IP Rights

• Patents• Designs• Trade Marks• Plant Breeder’s Rights

Unregistered IP Rights

• Copyright • Unregistered Design

Rights• Trade Marks and

Reputation• Traditional Knowledge• Database rights• Publication rights


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

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 EuropeFor 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 worldIf 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


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


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 invention’s 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

Develop idea and examine viability. PO conducts search.

Application published. If any attempt made to copy invention

damages can be sought.

Submit detailed examination of invention, form 10/77 and fee.

Within 12 months

Within 18 months

Within 24 months

Form 1/77 submitted to Patent Office (PO)

Application terminated if no further action taken

Submit set of claims, abstract and form 9A/77 request for PO

search

Third parties can petition PO to reject application

Detailed examination must be submitted within 6 months of publication

Within 36 months PO examines application and petitions from third parties

Application republished as granted

Initial Application


Patent application process 1

Making the application It takes between three and four years to obtain a UK patent.

The first step in submission1. 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 specificationThe 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


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


On-line patent databases

Extensive list of country and region specific databases can be found at:

World Intellectual Property Associationhttp://www.wipo.int/ipdl/en/resources/links.jsp

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 countriesUK applications can be used as a basis for international applications through the World Intellectual property Organisation (WIPO)


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 Agent’sTrade mark registration Trade Mark Attorney’s & 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 Agent’s• Trade mark registration -Trade Mark Attorney’s &

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


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

6. Market Research and Competitor Analysis

Identifying your Target Market, Market Attractiveness and

Competitive Advantage


Learning outcomesBy 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


TLA framework

Business planning




analysis

Marketing strategy

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


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


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?

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


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


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


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


Measurable Measurable

AccessibleAccessible

SubstantialSubstantial

DifferentialDifferential

ActionableActionable

• 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.

Criteria for successful segmentation


Positioning

• Positioning = Segmentation + Differentiation– Segment = a division of the market– Differentiation = how your product is different from the

competition

• Slotting the product in the consumer’s mind– Who am I? – Why buy me?


Positioning

• Against competition e.g. ‘Pepsi Challenge’ in Pepsi vs Coca Cola

• Position with the competitione.g. Dixon’s own brand for electronic equipment

• Grab an unoccupied position i.e.market nichee.g. SMART cars

• Using your endowment e.g. Number one position - Microsoft

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

TIME

Sales Trend Line

Profits Trend Line

0

Revenue

Str

eam

+

Develo

pm

ent

Gro

wth

Matu

rity

Satu

rati

on

1.

Decl

ine

2 3 4 51Phase

2.

Sta

gnati

on

3.

Renovati

on

-


Changes in industry or market structures:

Porter’s five forces model

SupplierBuyingPower

Suppliers

PotentialEntrants

Substitutes

Buyers

Industry Rivalry

SubstituteThreat

BuyerBuyingPower

NewEntrantThreat


Industry life cycle & competitive forces

Intro. Growth Maturity Decline

New Entrants

Few Bandwagoneffect

Consolidate Exit

Power ofBuyers

Low Low, It’s a sellers market

Increasing High, It’s a buyers market

Power ofSuppliers

Medium High Declining Low

Threat ofSubstitutes

Non Existent

Low Growing Substitutes may cause decline

Rivalry amongst Firms

Low Low, focus on growth

Intense, firms grow at rivals expense

Declining as firms exit.

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


Analysing competitors 3Key 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


Analysing competitors 4Key Success Factors (KSF)

Aaker’s Key success factors• A model for measuring a business against

competitor’s 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


Analysing competitors 5 Key Success Factors (KSF)

Graphic representation of firm’s 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 imageService delivery• Responsiveness• Consistency• Flexibility

Source: BBSRC, 2006



Customers• Customer inertia –general unwillingness or

lack of propensity to change• Customer ‘lock in’ – customer investment

in competitor’s system/products so great as to make switching difficult/costly or otherwise unattractive

Source: BBSRC, 2006

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!


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 – What information you need to know • Carry out – Desk (secondary) research using library

sources

• Establish – Field (primary) research method best suited to your needs

• Develop – Your primary research study methodology & test thoroughly!

• Carry out – Field research• Analyse – The collected data• Incorporate – The results in the marketing plan


Primary market research methods

• Focus groups: – Gathering a representative sample of potential

customers together and measuring their reaction to your offering

• Observations: – Watching and recording what potential customers

are buying and what competitors offer• Surveys:

– Formalised information gathering exercise that provide valuable intelligence on potential customers

• Test marketing: – Developing your offering as fully as possible and

then letting it loose in a restricted market place• Web based news groups:

– A useful way of gauging customers reaction to offerings and reaching potential customers cheaply

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:

– Media, product & consumer intelligence for UK Europe & US markets

• Euromonitor: – Consumer, industrial and service sector intelligence worldwide

scope• Key Note:

– Information on 370 UK sectors• Jordans Ltd:

– Information on UK industry• Frost and Sullivan:

– High specification research on industrial sectors world wide• MSI Marketing Research for Industry:

– 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 databasesWorld 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

• Benn’s Media• Clover Newspaper Index• Wilings Press Guide • McCarthy Cards: Indexing national and

regional newspapers• Trade Associations• Chambers of Commerce• Dun and Bradstreet


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• Kelly’s Business Directory

– Listing a wide range of suppliers, products and contact details


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 business’s 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

7. Business Strategy and Risk Analysis

Exploiting IPR and Establishing Routes to Market in the

Biosciences


Learning outcomes 1


• 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


TLA framework

Business planning




analysis

Marketing strategy

The management

team


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?

Preparing a road-map ofhow to get to where you want to be

Knowing where you are now

Knowing where you want to be


Emergent and realised strategies

Source: Brunet, J.P.,Mintzberg,H and Water J.(1986)

Intended Strategy Deliberate Strategy

Emer

gent

Stra

tegy

Realised Strategy

Unrea

lised

Stra

tegy

Impo

ssib

le to

impl

emen

t

The plannedstrategy

Applied throughforce

What actually happens

Exte

rnal

Envi

ronm

ent

Rando

m a

nd

power

ful


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

Corporate

e.g.Marketing

e.g.Marketing Communications BottomUp

Top Down

directivesresults

Porter’s 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.


Porter’s generic strategies

Segmentation (Or Focus)Strategy

DifferentiationStrategy

Cost LeadershipStrategy

Narr

ow

Mark

et

Bro

ad

Mark

et

UniquenessCompetency

Low CostCompetency

Strategic Strength

Str

ate

gic

Sco

pe

3. Cost Leadership Strategyemphasises efficiency, through

economies of scale and experience.Constant focus on cost reduction.Requires market share advantageor easy access to important raw

materials. e.gEasyjet, Kwik Save

2. Differentiation StrategyInvolves 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.

1.Segmented Or Focussed StrategyFirms concentrate on a select few

target markets targeting effort on one or two segments.

A strategy most suited to relativelysmall firms

Growth strategies in the Biosciences


What are growth strategies?Organic v Acquisition Growth strategies

Acquisition Growth

Outright Purchase Joint Ventures Strategic Alliances

Internal/Organic Growth

R&D: new and improved products

Exporting and licensing

Expanding capacity: new premises, equipment

Improving efficiency: making processes faster, cheaper and more accurate


Key strategic options for the Biosciences development

1. Collaborative research2. Licensing 3. Selling IP outright4. Strategic alliances5. Joint venture 6. Start-up


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. LicensingAllowing 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


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 IPSource: BBSRC, 2006


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


6. Start-up 2Disadvantages• 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

ImpreciselyDefined

Applications

Core Technology Status

WellDefined

Fluid Well Developed

Early stage licensing

Research partnerships:Government/universities/companies

Test & development agreements with licence option

Licence agreements and joint ventures

End-customer & supplier alliances

Source: Ithaka Life Sciences, 2004

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


The 10 ‘P’s 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 ‘P’s of internal risk analysis

• People: – Skill training, creation of apt organisational culture, risk

reduction and supervision• Protection:

– People premise, materials, intellectual property, data• Procedures:

– Are they apt for organisation, monitored, measured and evaluated

• Purchasing: – Continuity of supply, quality standards of suppliers,

manual handling • Performance:

– Benchmarked against others in sector, measurement of risk


Opportunities and threats

• These can be established through environmental scanning:– PESTEL analysis– Market analysis– Industry forces – Porter’s five forces


TOWS Matrix

WT Strategies

Minimise weaknesses and

avoid threats

ST Strategies

Use strengths to avoid threats

Threats

WO Strategies

Overcome weaknesses by

taking advantage of opportunities

SO Strategies

Use strengths to take advantage of opportunities

Opportunities

WeaknessesStrengths


Example: BioBurp

• See example in pack (In class exercise, page 8)

Risk analysis and scenario planning


Risk analysis matrixP

rob

ab

ilit

y

ImpactHighLow

Low

Hig

h

High Impact High ProbabilityPESTEL Factors

High Impact Low ProbabilityPESTEL Factors

Low Impact High ProbabilityPESTEL Factors

Low Impact Low ProbabilityPESTEL Factors


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


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


• 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


TLA framework

Business planning




analysis

Marketing strategy

The management

team



The pitch

The marketing mix

The 7Ps


The marketing mix: 7 ‘P’s

Physical

People

Promotion

Place

Price

Product

Process

Source: Bitner, M. J., Boom, B. H. and Tetrealt (1995)

The traditionalmix elements

Additional service organisation specific

mix elements


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


Product 1

Comprising of:

• Product architecture and design• Product positioning• Product development and planning

There is no right price for the wrong product


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 it’s 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

Sales

Cost of sales

Grossprofit

Operatingcosts

Net profit


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

Increasesin

Sales

Time AfterInvestment

PersonalSelling

PublicRelations

Promotions

Advertising

Rapid Return on Investment

Delayed Return on Investment


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


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


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 décor– Goods associated with the service (e.g. packaging and

promotional material)

Customer behaviour and the importance of service


Market type, customer behaviour & indicators

MarketType

Embryonic Mature Declining

Customer Behavior

Early Adopter’s

Follower’s Traditionalist

PrincipleMotivationIndicator

SecurityBelongingEsteem




The loyalty ladder –The customer loyalty continuum

Advocates

Clients

Customers

Prospects

Suspects

Enterprises shouldaspire to becontinuallydeveloping theirrelationship with customers. From the first point of contact as Suspects moving up the loyalty continuumto Advocate status


Reasons for customer erosion

68% Move because of poor customer

service

5% Develop otherbusiness

relationships

14% Move because of the poor quality of

offering

3% Relocate

9% Are claimed by aggressive competitors

1% Death of principalcontact


Reasons why business fail?

42% Poor marketing 6% Skills gap

18% Poor cash flow 3% High interest rates

10% Compliance 2% Bad management

9% Raising finance 1% Materials

9% Tax problems


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


Learning outcomes 2

For the assessment students should:• Determine their product/service operational

requirements


TLA framework

Business planning




analysis

Marketing strategy

The management

team



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 business’s operations has been planned, costed and will be managed in the most effective and efficient manner



• 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 results…Goods 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 don’t 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. The selection and purchase of raw materials 2. Through the process of adding value to 3. 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

Porter’s value chain: Overview

Understanding Where To Explore

Infrastructure

Financial

Management

Human Resources

Sales &

Marketing

OutboundLogistics

ProcessInboundlogistics

Aftercare

Sup

port

Act

iviti

esP

rimar

y A

ctiv

ities

Source: Porter,1985


Porter’s 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


Porter’s 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


Porter’s 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

Porter’s value chain 1


Infrastructure

Sales &

Marketing

OutboundLogistics


Aftercare



Infrastructure

Financial

Sales&

Marketing

OutboundLogistics


Aftercare



Infrastructure

Financial

Human Resources

Sales&

Marketing

OutboundLogistics


Aftercare



Infrastructure

Financial

Management

Human Resources

Sales&

Marketing

OutboundLogistics


Aftercare

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


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

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


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


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


Incubator services: Benefits to clients 1

• Incubator director’s and staff’s 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


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


Location of Bioincubators in the UK

E.g.• Manchester• Liverpool• Imperial College, London• Cambridge• Oxford• Porton Down• York• Norwich


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


• 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




analysis

Marketing strategy

The management

team



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:


The Limited Liability Company

Treated as an individual in law with rights and responsibilities.

Senior ManagementTeam

Senior ManagementTeam

WorkersWorkers

Middle and Junior Management

Middle and Junior Management

BoardBoard

ShareholdersShareholders

Identify Strategic ObjectivesHave Overall Responsibility

Identify Strategic ObjectivesHave Overall ResponsibilityInterpret Strategic ObjectivesDevelop Tactical Response

Interpret Strategic ObjectivesDevelop Tactical ResponseImplement Tactical ResponseImplement Tactical Response

Do The GraftDo The Graft

CollaboratorsCompetitorsCustomersFundersGovernmentSuppliersRegulatory Authorities

CollaboratorsCompetitorsCustomersFundersGovernmentSuppliersRegulatory Authorities

Own The CompanyOwn The Company

External Stakeholders Traditional Hierarchy Roles


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


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


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 !!!



5 Phases Of Growth Source: Greiner, 1996

Age Of Organisation

2 3 4 51Phase

Sta

ge

Of

Org

anis

atio

n

Large

CrisisOf

Leadership

CrisisOf

Autonomy

CrisisOf

Control

CrisisOf

Red Tape

CrisisOf ???

GrowthThroughCreativity

GrowthThroughDirection

GrowthThrough

Delegation

GrowthThrough

Coordination

GrowthThrough

Collaboration

Small

Revolution Stages

Evolution (Growth) Stages


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



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


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


• 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 documents1. Cash flow forecast2. 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




analysis

Marketing strategy

The management

team



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


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

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

Initial finance


Formation Seed finance

1st VC round

Founders, family & friends

Business angels; University Challenge Funds; specialist

Venture capitalists


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


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


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


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


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 termE.g. closing the business, selling the business, floating the business, merging


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


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 upCash flow forecast

Profit and loss forecastBalance 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

Costing the start up


Costing the start up:The ‘shopping list’

The enterprise shopping list will consist of five elements:

1. Premises2. Operational needs3. Administrative needs4. Intangible needs5. Working capital


Costing the start up - Premises

Example selection criteria:• Floor size• Location• Rateable value• Security• Service costs• Utility costs


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


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


Costing the start up 4 -Intangible needs

• Critical breakdown covers • Insurances • Licences and permissions • Professional fees, legal, accountancy, surveying

etc.


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


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

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



• 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



• 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


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



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?



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 OverheadsAll other business expenses that are not directly proportional to income (takings)



• 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



• 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 doesn’t 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


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

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 (£) Income (£)

Sales Income 500,000

Cost of Sales•Raw materials•Sub Contract Costs

50,000120,000170,000

Gross Profit (Sales less Cost of Sales) 330,000

Overheads•Employment Costs•Depreciation•Other Operating Costs

150,00020,00080,000

250,000

Profit before interest and tax 80,000

Interest payable 10,000

Profit before tax 70,000

Tax 15,000

Profit after tax 55,000

Dividends 5,000

Net profit or retained earnings 50,000

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


The balance sheet 2 -What it doesn’t 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


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

Fixed Assets (1)

Tangible Assets

Equipment 40,000

Buildings 95,000

Intangible Assets

Goodwill 5,000

140,000

Current Assets (2)

Stock 10,000

Debtors 20,000

Cash at bank 5,000

35,000

Current Liabilities (3)

Loans 23,000

Creditors 7,000

Tax 2,000

32,000

Net Current Assets (2 minus 3) 3,000

Total assets minus current liabilities (1 + 2 minus 3) 143,000

Creditors (Falling due after one year) (100,000)

Net Assets 43,000

Capital and reserves

Shareholders 30,000

Reserves 13,000

Net Worth 43,000

BALANCESHEETAS AT

31 MARCH 06

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

Break Even Point

Variable Cost Element

Fixed Cost Element

Income£££

£’s

Number of units output

Total Costs


Break Even Point 1

= Fixed Costs

Selling Price – Unit Variable Costs


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 %


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




analysis

Marketing strategy

The management

team



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 ‘what’s in it for them?’


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


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?


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


Content of business presentation

1. The company’s background and its product and services

2. A market analysis and description of the opportunities present

3. The company’s competitive edge and the marketing strategies it will use to promote that edge

4. The management team and it’s member’s 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 – what’s 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 programmewww.nesprogramme.org/

http://www.businesslink.gov.uk/

http://www.bioscienceyes.co.uk/

http://www.bioscienceyes.co.uk/

http://www.nesprogramme.org/

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