Boom & Bust….Doing a start-up company from ground zero

Peter Cochrane

SciTech 2003John Innes Conference CentreNorwich Research ParkNorwich, UK

29 January 2003

The Big Issues!• Population - Migration• Ageing - Health - Care• Energy - Pollution - Ecosytem - Climate• Raw Materials Availability - Limits• Logistics - Transport - Constraints • Education - Complexity - Understanding • Wealth Distribution• Globalisation - Deregulation• Political Stability

Thriving in business depends on new visions for making the transition from “atoms to bits” Small entrepreneurs will restructure industry

Large organizations have to restructure themselves

Mastering the entrepreneurial process is a must

New ventures are not optional…

Company Founder Director NED Advisor Investor

ConceptLabs USA 1998 x x xeBookers UK 1998 x x xNomadix USA 1998 x xPSPL USA 2000 x xRTC USA 2000 x xShazam UK 2000 x iSolon UK 2000 x xEtenna USA 2001 xKVector USA 2001 x x xEZD UK 2002 x x   Venture Capital FundsPortview Israel 1999 x xCreateVentures UK 2000 x x x

Failures = 5

he basis of my observations….

Example - eBookers

0

20

40

60

80

100

120

140

160

180

1999 2000 2001 2002

£M

Energy and time expended…

0

10

20

30

40

50

60

70

80

90

Idea Science Technology Engineering

FinanceManagementMarketingSalesDeliverySupport

The in…•Identify an opportunity

•Identify a customer and market

•Search for the competition

•Understand every aspect

•Locate a suitable technology

•Engineer a solution/prototype

•Formulate a plan

•Raise money & create the company

•Spend every $ as if it were your last!

The out…

•Create a corporation

•Create something a corporation will buy

Customer Driven Exponentiation

Hotmail

- No cost to user

- Easy to sign up

-Every message sent advertises the product

1) Don’t enter a sector with competition

2) Get to market in < 9months

3) Only start things that have huge potential

4) Only work with friends

My basic rules…

In my experience we should…

Make sure every single facet of any business start is in place and fit for purpose: technology, design, product, plant, production, market, marketing, sales, delivery, support, aftercare, people, finance etc

All have to be 100% at the same time If one element fails then so does the whole

In my experience we should…

1. Never assume people understand 100% anything you say 2. Never assume people do anything 100% you ask of them 3. Never believe or trust a customer 100% 4. Never believe or trust a banker 100%. 5. Identify all competitors - and their state of play 6. Look out for oblique threats from outside the sector 7. Not be blinded by enthusiasm for a technology or idea -

especially if it is yours

8. Not let pride get in the way9. Identify the out - as well as the in! 10. Realize it is never too late to shout stop!

Business = Wealth Generation

$Science

Technology

Knowledge

Engineering

Products

Services

Education

Employment

Change

Markets

Sustainability

ROI

$T

Technology

People

Employment

Product

Market

Sustainability

Return On

nvestment nnovationideas

The have a problem they need solving They have money to spend

They have desperation in their eyes

Identifying the customer…

I happen to like…

The Bell-Mason Model

New VenturesDeveloping new technologies, products, and businesses imply:

-a basic vision-a sound business model-a mature technology-an eager market-the right resources at the right times-a good team-good leadership & management-sufficient money

Bell-Mason Model & Diagnostics

A system for ...

• Measuring risk

• Predicting course

• Tracking progress

• Improving the odds of success

Evolution of the “Ideal State”

Business PlanManufacturing

ProductDevelopment

Technology/Engineering

Control

FundabilityCash

Board of Directors

Team

CEO

Sales

MarketingStage III.Product Development

Stage II.Seed

Stage I.Concept

Stage IV.Market Development

Where is all the action?

BusinessPlanningStrategy

OrganisationOperations

RelationshipsSalesetc

PeopleFamilyFriendsHomeHealthHobbiesetc

TechnologyScience

EngineeringPrototypesProduction

SupplyInstallation

etc

Business

TechnologyPeople

HotSpot

Society

So innocent looking…

y= ex

…it is compound interest on steroids!

Time

Technology$

The ‘S’ Curve Continuum

CassetteTape

CD

DVD

Tape

Moore’s Wall

ThermionicTube

Transistor

IC1

IC2

IC3

IC4

IC5

ICn

1915 46 59 2010 2025

3D ICsMolecularQuantumGeneticBiologicalOptical Computing

NewSensorsNetworksSoftwareLifeformsIntelligences

Log Scale

Lifecycle of Emerging Technologies

0

10

0 9

Source: Gartner Group, Monthly Research Review, April 1997

Vis

ibil

ity

Time

TechnologyTrigger

InflatedExpectations

Disillusionment Enlightenment Productivity

WearableComputers

Biometrics

VRML/Avatars

E-CashSmartcards

Java - the Platform

Cable Modems

Agents

Interactive / Web TV

PDAs

Desktop Videoconferencing

Speech RecognitionApplication Sharing

Database Mining

Java- the Language

WWW

Imaging

Abundance ScarcityProfit $

Ever-IncreasingAvailability

Ever-DecreasingCost

ConsumerGoods

PowerProfit

Availability

Cost

AppsTransistorProfit

Availability

Cost

AwarenessBandwidthProfit

Availability

Cost

IndustrialRevolution

PersonalComputer

Age

Age ofPersonal

Bandwidth

Rec

ycle

Trash

Consumer

Trash Consumer

Distribution ManufactureRaw

MaterialsRETAIL

Ecosystem

The Eco-model…

Rec

ycle

Trash

Consumer

Trash Consumer

Distribution ManufactureRaw

MaterialsRETAIL

Ecosystem

B-B B-B B-B

B-CC-CC-BMobile

Business Value…

• Research 99.9%• Development 5%• Conferences• Legal• Finance• Admin• Patents• Sales

99.9 0.1

10.0 90.0

99.0 1.0

95.0 5.0

99.0 1.0

100.0 0.0

80.0 20.0

0.0 100.0

%Value Add-ve +ve

Key parameters…• Investment• Burn rate• Time to market• Time to break even/profit• Market share• RoI• Efficiency• Profitability

Company/Organis/zation Size

What determines the size of any company or organis/zation?

Size = CAPEX + OPEX

Transaction costs tend to dominate

GDP of Planet Earth = 47%Telco ~ 60 - 80%Healthcare ≥ 95%

Interval between an innovation & competitive entry

0

5

10

15

20

25

30

35

1887-1906

1907-1926

1927-1946

1947-1966

1967-1986

1987-1996

1997-2006

Com

pet

itio

n -

yea

rs

RelationshipsTasksDeveloping People

Achieving Results

EmpoweringStretchingPromoting Change

Realizing Values

CoachingSharing“Gut and Heart”“Brain and Pencil”

CompassionateRationale

VisionMotivationConsistencyExampleActionsQualitiesOutcomesMaking DecisionsCommunicating

DecisionsImplementing

DecisionsAreas of LeadershipDeterminationOpennessKey Leadership Actions& Qualities

Leadership Actions Qualities Outcomes

Rel

atio

nsh

ips

Thinking

Outside The Box

Society

Changes slowly!

The dotcom bust!

• Greed

• Stupidity

• Naivety

• The old economy torpedoed the new

• No bandwidth in the local loop!

But this is just a glitch - the internet is very young - so are mobile phones, PDAs, PCs, wearables, things & people on line etc

EU ON LINE SALES

0

20

40

60

80

100

120

2000 2001 2002 2003 2004

$Bn

Projection

Network Laws - Internet

1

2

3

4

n

< n/2

Broadcast Telephone

< n(n-1)/2 ~n2

1

3 4

5

2

1

2

N

3

4

5

1 2 …n

Nn

Always - customer control

Availability >95%

"Nothing is more difficult than to introduce a new

order. Because the innovator has for enemies all

those who have done well under the old conditions

and lukewarm defenders in those who may do well

under the new"

Nicolai Machiavelli, 1513 A.D.

Nothing much has changed….

A world of opportunity & risk….

Thank you

cochrane.org.ukconceptlabs.net

what you do best….outsource the rest…