• shift: managerial to entrepreneurial
  • change far more sweeping than Future Shock or Megatrends
  • model of technology:
    • biological process, not mechanical; organized around information, not energy; not high tech, but new tech: new applications of knowledge to human work; i.e, entrepreneurial management -- which does not include high tech's "build a better mousetrap" mentality because the focus is on demand (rather than supply)
  • innovator, not inventor
  • entrepreneur, not speculator
  • management as the technology of interest

• innovation & entrepreneurship
  • high tech is but one area
    • low tech provides the capital for high-tech ventures
  • innovation + management + strategies
  • purpose, direction, control -- yet decentralized

• opportunity demands:
  • search for innovation
  • venture is organized for it
  • venture is managed so as to exploit it

• look for the unexpected success/failure/outside event (symptoms of change)
  • what if it were exploited?
  • where could it lead?
  • what's needed to convert it into an opportunity?
  • how do we go about it?

• look for incongruity
  • between producer-supplier and actual-customer values & expectations
    • i.e, what does a product/service/process truly represent to a customer?
    • because no customer buys what the producer/supplier delivers
  • listen: what do customers find uncomfortable or even missing?
    • because the purpose of a product/service/process is to satisfy the customer

• process need
  • program research: production of new knowledge to satisfy a process need
    • first step -- identify what is needed (listen and articulate)
    • 5 criteria and 3 constraints/caveats (see pp. 73-75)
  • systematic search & analysis --> process-need opportunities for innovation

• changes in industry structures
  • rapid growth is an indicator (esp. when companies are reluctant to change existing practices to accommodate evolving industry structure -- which renders those practices inappropriate)

• new knowledge
  • other sources exploit a change that has already occurred
  • this one effects the change
  • drawback: 25-35 years until new knowledge applicable (and then still more time until product)
    • chemotherapy (1910) --> sulfa drugs (1936)
    • diesel engine (1897) --> diesel propulsion (1935)
    • computer technology (1918) --> first computer (1946)
    • paradigm-acceptance and convergence (cross-disciplinary) times
  • three requirements:
    • careful analysis of all necessary factors (and determination of whether missing factors can be produced; i.e, whether the innovation is feasible); ask, "What does this knowledge-based innovation require?"
    • choose a clear focus for entrepreneurial strategy
      • market focus: the knowledge-based innovation can aim at creating the market for its products (e.g, DuPont)
      • complete system: not only a product, but an entire industry
      • strategic position: (see Chapter 18, under Ecological Niches)
    • entrepreneurial management, which substantially reduces risk in knowledge-based innovation (see Chapter 15)

1. analysis of opportunities (sources given above)
2. go out and look, ask, listen
3. small, simple, focused, purposeful
4. aim for leadership
5. innovate for the present
6. build on your strength (don't diversify)
7. must be market-driven
8. minimize risk:
   1. define risks and then confine them
   2. opportunity-focused (the only characteristic that entrepreneurs share; re: their certainty) -- not risk-focused

1. not personality, but willingness:
   1. to learn, to work hard & persistently, to exercise self-discipline,
   2. to apply the right policies & practices, and to adapt
   3. hungry for new things: rerum novarum cupidas
      1. product abandonment must be corporate policy to make innovation natural and acceptable to employees; which will motivate them and encourage entrepreneurship
2. questions
   1. don't only focus on problems (e.g, unexpected failure), but also ask about unexpected successes -- and focus on them as sources of innovative opportunity
   2. what did you do that turned out to be successful?
      1. how did you find the opportunity?
      2. what have you learned, and what entrepreneurial plan do you now have in hand?
   3. what are your aspirations?
      1. where do you see opportunities for your company?
      2. where do you see threats?
      3. what are your ideas for trying to do new things and develop new products?
   4. how do you plan to gain innovative leadership? (and thereby have the freedom to lead rather than being obliged to follow)
   5. there's scientific R&D -- but what are you doing to D(evelop) scientific and technical people?
3. projects
   1. focus on results, not size of budget
   2. at the beginning, ask:
      1. what results do we expect from this project?
      2. when do we expect them?
      3. when do we appraise the progress of the project, so that we have control?
   3. build in a feedback loop between results & expectations in order to identify and correct the gap between them
   4. develop a systematic review of innovative projects all together

entrepreneurial management for new venture requires:

1. focus on the market
   1. anything genuinely new creates markets unimagined, thus one cannot do market research for something genuinely new -- for something that is not yet on the market
   2. consequently, the new venture must pay particular attention to the creation of unimagined markets -- and determine what opportunities they present (through unexpected failure/success)
   3. this is "market-driven"
      • need to spend time "outside", looking and listening: the customer defines the product/service/process
2. financial foresight (cash flow, capital needs)
   • simply develop good financial habits
3. building management team before it's needed
   • assigning responsibilities to founders and other key people, so that they begin to work as a team -- and eventually become a management team
4. founder to decide upon own role, one which matches a company need (e.g, scientific innovation)

management: practices & policies within the enterprise

strategies: practices & policies outside, in the marketplace

1. being "fustest with the mostest"
   1. aims for a permanent leadership position
   2. carries the highest risk: intolerant of mistakes (no second chance)
   3. Mayo clinic:
      1. built on teams of outstanding specialists working together under a team leader
      2. attracted clients capable of paying outrageous fees
   4. aims at creating something genuinely new
      1. thus favors outsiders and nonexperts
      2. "paradigm-acceptance time" provides a big window of opportunity
2. creative imitation
   1. perfecting someone else's approximation
   2. like "fustest", aims for market leadership
   3. unlike "fustest", less risky because approximation already in the marketplace -- and market research is possible
   4. thus, it exploits the mistakes of those trying to be "fustest"
   5. entrepreneurial judo
      1. least risky, most likely to succeed
      2. exploits bad habits of established companies:
         • "not invented here" arrogance (something new cannot be any good unless they thought of it)
         • "creaming" (serving only the high-profit part of the market)
         • believing "quality" can be added (rather, it is what the customer gets out)
         • higher profits from premium prices
         • maximizing (trying to satisfy everyone) rather than optimizing
      3. requires:
         • analysis of industry; producers and suppliers and their habits (esp. bad) and policies
         • then look at the market and pinpoint the niche where an alternative strategy would succeed with the least resistance
         • finally, build on this foothold
3. niches
   1. aim at control rather than leadership
   2. "specialty skill" niche
      1. offers greatest opportunity in the early stages of a major new development
      2. search for a place where a specialty skill can be developed and give a new venture a unique controlling position
4. changing values & characteristics
   1. in the above strategies, the aim is to introduce innovation
   2. presently, the strategy itself is the innovation
   3. the ultimate purpose of a business (and economic activity, in general) is to create a customer by:
      1. creating utility
         • what do customers need for a service to be useful?
         • e.g, convenience and availability
      2. pricing
         • price what the customer buys, not what the provider sells
      3. adaptation to customer's socio-economic reality
         • whatever the customer lacks to buy the product should be included in the product (e.g, financing)
      4. delivering a system based on your product/service/process
   4. elementary marketing provides the basis for strategy

Outline of articles that appeared in The Wall Street Journal:

the development of a body of organized knowledge of entrepreneurship and innovation is why America has so many jobs; this knowledge base is incompatible with Kondratieff's mechanical model (1/24/84)

because there has been no depression, the mechanical model is invalid and the economy is information based (1/9/85)

"The only competitive advantage the U.S. -- and every other developed country -- can have lies in making productive its one abundant resource: people with long years of schooling who are available only for white-collar work." (11/26/85)

All are responses to the emergence of the highly competitive and world-wide knowledge economy:

1. leadership rests on the control of brainpower
   1. blue-collar manufacturing is a gross misallocation of resources of a developed nation (education investment is too high)
   2. research investment preferable
      • not for financial return, but access to knowledge
      • knowledge which becomes proprietary
   3. corporation organized around its research institute
2. organizing the systematic abandonment of a product
3. Zero-Defects Management (see drucker.laboratory)

overall economy must be entrepreneurial: high tech is distinctly unprofitable for a long time, so not an economic savior and doesn't produce enough capital

[EuroTechno Pork complements this article]

1. one cannot conduct market research on something not in the market (11/20/90)
   • of a product, ask "What is the market for what it does?"
     1. customer defines the market
     2. think of noncustomers as potential customers
2. don't ask, "What is most likely to happen?" (7/22/92)
   • rather, [predict the present]
     1. "What has already happened that will create the future?"
        • demographic change offers the greatest, least risky opportunity
     2. "What do the accomplished facts mean for our business?"
     3. "What opportunities (or threats) do they create?"
     4. "What changes (in organization, goals, products, services, policies) do they demand?"
     5. "What changes in industry & market structure, in basic values, in science & technology have already occurred, but have yet to have full impact?"
     6. "What are the trends in economic and societal structure and how do they affect our business?"
     7. "How do consumers distribute their disposable income?" (telecomms)
3. "What is this company good at? What does it do well? In other words, what strengths give it a competitive edge? Applied to what?"

• these are the questions, but where do we get the data to form answers?
  • strategic decisions need data about what goes on outside the company (12/1/92)
    • noncustomers always outnumber customers
    • nonmarket information scant
  • Market by Walking Around -- Outside the Company (5/11/90)
    • only way is to go out and ask "dumb" questions

organizing around the research institute: (10/2/91 above)

• organizing around external/outside information, around the flow of information (9/24/92)
  • rather than things and money (the typical approach)
  • because the economy is changing structure

how to measure loss of market standing or failure to innovate? (4/13/93)

innovative performance: equal to market standing? (10/30/86)

in other words, what are the costs of not doing? (9/20/85)

• everyone knows the score in the Information-Based "Orchestra" (6/4/85)
  • more available information (3/26/85)
    • result: need fewer levels of management, but more specialists of all kinds (the old structure was such that workers didn't need a broad range of skills)
  • attracting and holding entrepreneurial/innovative people requires new structures with new relationships and new policies
    • compensation/benefits/rewards appropriate to entrepreneurship (e.g, J&J, P&G, 3M)
    • rethink Old Personnel Department for knowledge workers (5/22/86)
• success due to marketing & emphasis on accountability (9/8/88)
  • There's More Than One Kind of Team (2/11/92)
    • Baseball, football/orchestra, and tennis doubles.

TQM's defect rate > 10%

• instead, return to Frederick Taylor's Scientific Management
  • studying the task, the work, the tools
    • with computer simulations (witness Disneyland Japan)

concept of a company lab is questionable (2/10/88)

1. assumes that one material/product/service is uniquely right for a given market; thus, the lab is primarily concerned with what goes on in its traditional technology
   • but what is needed is awareness of and concern with science and technology outside of one's own lab, field, and industry
2. assumes that the lab produces all the technology needed by the company and that the company can put to profitable use everything that the lab produces
   • e.g, the transistor: developed by a telephone company, but main applications are outside of telephony; and more and more new telephone technology is coming from outside of the telecommunications industry and its labs
3. technological streams no longer run parallel (as shown in the case of the transistor/telephony example above)
   • research lab as freestanding company, doing research for a multitude of clients: each with a "technology manager" rather than a "research director," who can develop business objectives based on the potential of technology and technology strategies (in turn based on business and market objectives: Business-Driven) and who then defines and buys the technical work needed to produce the business results.
     1. But no one today knows how to teach technology management -- or even where to start [but what about the examples given earlier in the article?]
   • from Dangerous Liaisons to Alliances For Progress (9/8/89):
     1. all parties must think through their objectives and those of the alliance before consorting (objectives should be revised every 3 - 5 years)
     2. how will it be run and who will manage it? (the alliance has to be managed by one partner -- not by committee -- whose responsibility is to the alliance, not the partner)
     3. each partner should have one senior executive accessible by the alliance
     4. agree on an arbitrator, in advance of any disputes

design/conceptualize a product and then work out the science and technology

What to Do

1. obsolescence begins at "break even" point
2. be the one to make your own product obsolete
3. ignore distinction between "pure" and "applied" research: either may be required
4. project leader must know when/how to call on what specialist
5. research is:
   1. improvement (asking people who make the product or deliver the service; sales people; and the users -- then convert the suggestions into product/process/service changes; goal: 3 - 5% annual improvement in cost, quality, and customer satisfaction)
   2. managed evolution (each successful new product is the stepping stone to the next; goal: one significant new product market or application each year)
   3. innovation (systematic use of changes in society & economy, demographics, and technology as opportunity)
      • DuPont & nylon: began immediate improvement; expanded its use from stockings to tire cord
   4. knowledge applied to existing products, processes, services is productivity; knowledge applied to the new is innovation

How to Do It

1. set high research goals
   • trivial corrections as difficult to implement as fundamental changes (product size, performance, price)
2. long-term research can benefit the short-term merely by re-reading lab notes (retrospective analysis)
3. these two must go hand in hand:
   • research -- the search for new utility
   • development -- putting research results into products/processes/services
4. organized abandonment of products/processes/services and research projects; every few years: knowing what we now know, would we start this product/project?
   • abandon when:
     1. there are no more significant improvements
     2. managed evolution no longer produces new products/processes/markets/applications
     3. research produces only "interesting" results
   • organizing the systematic abandonment of a product (10/2/91)
     1. most important factor in determining success in a competitive market
     2. set deadline for abandonment on first day of sale
     3. alternative: wait for competitor to shift life-cycle
     4. "writing off" development costs is self-delusion
        1. not investment, but "sunk cost"
     5. three tracks toward abandonment: goal is three products from one -- developed simultaneously under the same cross-functional team, with the same investment of time and money that usually only produces one
        1. kaizen: organized work on improvement with specific goals and deadlines -- enough to result in a truly different product (e.g, 10% improvement in reliability within 15 months)
        2. leaping: develop a new product out of the old (e.g, Sony Walkman out of the portable tape recorder)
        3. genuine innovation
     6. innovation demands systematic product-abandonment because the latter provides the vacuum for the former
5. measurement of research
   • innovations: did they make a difference in wealth? were they commensurate in numbers, quality, impact with a leadership position? what will innovation results have to be in the next few years?

Last modified: 12/11/98