Strategic Focus Field - Part 2 > Business Concept build up
Updated: Jun 25, 2021
We have described in a previous blog article an intrapreneurship program to generate innovative concepts within Strategic Focus Fields. A group a 4 intrapreneurs in a 6 weeks time is proposing a list of 4-6 early concepts with clear
user identified
problem defined
solution proposed
that has good score in key innovation dimensions
desirability
feasibility
viability
to the company strategy.
That is the starting for a 6 weeks concept build-up intrapreneurship program. From here you'll attract candidates capable to turn the most attractive concepts into a full business proposal. You are ideally looking for two intrapreneurs per concept. Ideally some subject matter experts surounded by few key advisors.
Similar to what we described in previous blog article, you have different channels to attract and recruit intrapreneurs. In many cases, participants are already identified from the company existing network of experts and advisors. Also, former talents identified among several innovation campaigns can join a pool. Some of the creative innovators who contributed to generate concept in the first place could also consider to join a second residency, in case their profile match well the maturation requirement and with manager approval. The recommended profiles often show
strong science and technology background in the area of the solutions
some experience with product management
entrepreneurial behaviors such as autonomy, grit, resilience, calculated risk taking
A few weeks before joining onsite, remote meetings will help getting to know the resident skills and personality, interact with key advisors and build initial knowledge. Then, when joining onsite, having a day for onboarding and team building helps participants to get familiar with the innovation process, identify the key stakeholders and clarify expectations.
The program starts by reflecting how each resident is connected to the concepts. For that we use the “effectuation” framework and its starting principle: background of participants brougth to the table that would enrich concepts. They need to answer the following questions:
Who they are – Their personality and intellectual traits
What they know – Their education and experience
Who they know – Their network
Where they see synergies - Their joint engagement
A second principle of effectuation is to identify intrapreneurs affordable loss. In this context we would exclude from the first discussion all input that residents do not wish to engage at this stage. As an example, some connections with an important decision maker in the company, when activated too early could burn the participant.
This initial exercise aim for the two residents to put together their available & affordable resources. This will make emerge obvious area where concept build-up could speed up as well as identify gaps of skills that can be covered by extended team members. Every time a new team member will join, we will re-iterate the effectuation. Ideally, at the end of the 6 weeks, we aim to have 4-5 team members with the two residents and additional experts/advisors. At this stage, it is key how complementary the team is.
Illustration: The fridge of an entrepreneur (effectuation)
Concept value proposition: problem/solution fit
We dedicate the first two weeks of the program to look at the 4-6 first concepts and explore further their value proposition. It is an iterative approach for matching the most appropriate solution to the most critical problem. This adjustment aims to achieve the highest problem/solution fit and is measured by the value generated to the customer. Often, value proposition statements are struggling between defining the solution features and their benefits. By talking only in term of features, the focus is too much on what the solution is capable of doing and forget to explain for which benefits the customer buys it. The task is about defining the customer value proposition and in particular what is the unique selling point of the concept. A two steps approach is proposed:
1 - the Value Generation - Here intrapreneurs need to focus on the customer pain points. For each user/customer segments and each of the pain points, the proposed solution should bring a clear gain while showing differentiation from the competitors. This is achieved by identifying the most differentiating customer benefits provided by your solution. Here, the Strategic Focus Field overall knowledge, learning and insight provide usually enough input in term of unmet need, job to be done etc... Working on the Value creation requires a very clear solution that connects the needs of the customer. Then, the clearer the solution benefits, the more value is perceived, in particular when showing superiority to the competition. A first exercise, is to list many benefits and, for each, compare our solution to the competitors. We would focus on that benefit that addresses a clear gap from the competition. Additionally, we would like to have a second benefit that reflects a blind-spot of the competition. By selecting those most relevant benefits and plotting on 2x2 matrix, we can highlight the unique selling point that differentiate from the competition.
2 - the Value Capture - Here Intrapreneurs need to explain how to generate revenue from the solution. To propose a high price level for the solution, some differentiated benefits from competition need to be perceived by the customer. This is what we call value based pricing: If value can not be measured, price will be driven by the manufacturing cost. Also, multiplying revenue streams would help to navigate between competitors prices and cost of manufacturing. The 'Value Extraction' consist thus to define what do we sell to who, at which price corresponding to which benefits. It is important to list the constraints and limits of the concept and how to possibly overcome them. For the remaining unknown, we need to formulate hypothesis and assumptions and what experiments we need to conduct to build our knowledge.
In many cases, Innovation Facilitators would follow the approach described by Alex Osterwalder in its bestseller book: the value proposition design
For the 4-6 concepts, taking 1-2 days consolidating the value proposition will keep intrapreneur busy for two weeks. Then, a 2h meeting will offer the intrapreneurs to present each concept in front of the review board with the following items:
Customer Pain and unmet needs for a targeted group
Customer Gain and benefits of the solution in a competitive landscape
Value Extracted by the company from the unique solution to the problem
Hurdles to overcome and assumptions covering proposal gaps
Identify internal experts, advisors and internal users
With 20minutes per concept including Q&A, the review board can assess the problem/solution fit and some time at the end to rank the most promising concepts. The review board will help to identify which concepts are aligned with the company strategy and decide on 1 or 2 worth investigating further.
Consolidating the concept proposals
Now, Intrapreneurs can finally start to dig deeper into the one concept they will pitch. They have a solid concept value proposition in hand and 4 weeks to get to a full business proposal and will follow a classical diverge and converge approach. The diverging process starts with a week dedicated to gather information and data necessary to consolidate the concept proposal. Often business intelligence specialist is here to guide and help reduce the assumptions and the knowledge gaps. Intrapreneurs need to differentiate between:
Data already available
Data to be gathered
Data impossible to deliver.
It is important to find the right data, at the right place and with the right level of precision. Evidence and data are usually collected, analysed and compiled around three domains:
Customer/Desirability - market size (number of customers and volume of sales), the adoption speed and the willingness to pay / gather data for every customer sub-segment / access internal reports from business units, collect data from survey, interviews / access external market research reports, companies’ annual reports, start-up pitch decks, stock market and investors public information
Solution/Feasibility - how it works both from the scientific rationale but also the technical components and their maturity / what is to be proven and what is already validated / competitors current offering and underlying technology / scientific research papers, expert conference presentations, patents and technology transfer offices offering / other databases are of interest such as clinical trial or regulatory approval in the life science or R&D funded projects by government grants
Costing/Viability - cost for scaling and manufacturing / margins calculation / volume growth rate / selling price decrease over time / CAPEX required and existing capabilities possible to leverage / cost to access the market and commercialization partners / ballpark for the recurring operational expenses / number of full-time employees necessary
At this stage teams start to extend from the two intrapreneurs with additional advisors and experts. Internally, some business units advisors join on a part time the build-up of the concept. Externally, we recommend intrapreneurs to liaise with key opinion leaders and discuss their views on most recent research papers and conference presentations without confidentiality agreement. Intrapreneur only take information to understand what the latest breakthroughs are, why it is important and into what kind of solutions it will transform. Very transparently, they can explain that if concepts are selected for further investigation, a “non-disclosure agreement” will be sign between parties to discuss potential collaboration.
Business concept proposal: product/market fit
After diverging for collecting and analyzing the data, then starts the converging phase for consolidation. Here, the task is to put the business concept together and build a story that can be present to an investment committee for pre-seed funding. A full week is dedicated to define and design the business model proposition, then there are two remaining weeks to improve and improve the proposal and the pitch preparation.
In many cases, Innovation Facilitators would follow the approach described by Alex Osterwalder in two of its bestseller book:
Value proposition for the market - The starting point is on defining the project ambition: the “Why” of the project, its aspiration and the link with the intrapreneur motivation. Then it is easier to define the key achievements and milestones necessary to reach that goal. The message should translate complex problems in understandable choice, be realistic while creating a sense of urgency. A key aspect of it to show it is the right timing and that the scope is in line with our company strategy.
Then the market can be described, with two aspects: Qualitative - What business are you in? / Quantitative – How much is the business worth? The Market definition looks at the customer groups, the customer problems/needs, the solution uniqueness, differentiating from competition, the size, relevance, access, profile of early adopters and expansion. The solution uniqueness can be defined using the S.C.A.M.P.E.R. blue ocean strategy: Substitute, Combine, Adapt, Modify, Put to another use, Eliminate and Reverse. For the quantification of the market, the top-down approach starts with a size of the whole industry and established an addressable target percentage, an hypothetic number usually difficult to justify. A preferred approach is bottom-up looking at a few customers of a niche segment and their willingness to pay. Here, assumption is about the growth rate from early adopters to larger population. In both case a ballpark would look at the number of units per year and the price per unit with a 3-5 years post launch realistic growth. The more the assumptions the higher chance the case will be challenged, better to use facts and data already collected.
Business Model of choice - As soon as ambition and market definition are clarified we can start to ask the following questions: What is the value proposition for the chosen target segment? How will we deliver value to our customers? What do we need to do to create value? How will we monetize/price? The strategic options are developed with the use of Alexander Osterwalder “Business Model Canvas”. It starts from the middle with the Value Proposition previously defined: Which customer needs/problems do we promise to solve? What bundle of products or services do you offer to each customer segment? Why our solution has better benefits than the competition? From there it can be expended on right side side while looking at desirability with customer relationship, the channels and how we generate revenue from them. We will look at the quality of the brand, the early adopters and how to create awareness, to measure satisfaction and loyalty. We will look at the value chain and if we reach the end customer directly or if we provide an intermediate offer in the middle of the supply chain, or if we need to build a digital solution associated to our offering. The revenue streams would then depends on: Who will pay? What will they pay? and How will they pay? The value will drive the price, avoiding competitor pressure or negotiation based only on cost. The breakdown of revenues also allows indirect income for instance from services, consumables or access to valuable data. Then we can address the left side on feasibility, looking at the core technologies and assets, the partners providing new resource including suppliers or distributors and the overall costs. First, we will create value by leveraging some exiting internal resources and assets. We will need patents, know-how, capabilities, user experience and feedback. On top, we will need to consider some technological choice. We have to ask ourselves how suitable and scalable those platforms are. We have to consider which activities we want to keep at our core and which ones you will outsource. In the middle, there will be some very critical activities outsourced and this will require strategic partners. And last, we have to understand our costs and how dependent you are to internal or external expensive activities.
The viability is mainly driven by revenue and cost can. Some business models can maximise the viability but are sometime difficult to implement for cultural reasons. It is therefore recommended to align with business models of existing products of the company. Innovation management theory has listed up to 55 existing business model. We recommend to multiply scenarios and options with different customer target, revenue streams and business models. Comparing options will reveal some offering to avoid with high desirability but low viability. In a context of industry deeptech, we recommend those with proven technology feasibility, it will be seen as a strong driver for a realistic business implementation.
Planning the most critical experiments - The project roadmap is usually a mix of the ambition trajectory with key milestones and a focus on the first critical experiments to conduct in first 3-6 months. The ambition trajectory would help to get an idea of how much funding such a project would require to the next value inflexion point. Are we talking about investing 1 or 10 millions euros in the next five years? Then, the priority is to list the gaps, assumptions and the related critical experiments required to reduce uncertainties during the first 3 to 6 months. We moved away from the 5 years GANTT charts to adopt more iterative framework called Learning plan and developed by Gina O'Connor. The framework suggests starting with the most critical assumption to test at the lowest cost/effort. More resource will therefore be allocated along the several iterations. It is similar to the Lean-start-up but extending from start-up to large corporation by taking into account the company fit aspects of resource and organization. After the first learning the concept will be reshaped or pivoted. Next iteration on derisking starts with new experiments to run. Such an hypothesis testing framework reflects the entrepreneurial practices necessary to mature a concept under uncertainties. The difficulty of this exercise is to align the short-term experiments and long-term ambition in one proposal.
The roadmap should also explain why it is the right time to invest. If project is mature in 5 years, what will the landscape looks like ? Here, timing to comit funding is key: Is it not too early, or too late? Wha are the economical, societal, technological trends as well as competitors moves? What is the company strengths, assets, capabilities, market access, know-how, expertise, countries location, internal users and customers?
Building a solid line of arguments around the company existing unique advantages should help answering the following questions:
Should the company do it, is the opportunity worth it?
Can the company do it, do we have a right to play?
Can the company win against the competition and based on what advantage?
Pitch success factors and stakeholders buy-in - The decision to fund further the maturation of the concept is taken by an investment committee based on the presentation of the business concept proposal. Knowing that stakeholders are all the time evaluating data to make decision, you need your proposal that is memorable with a good brand, a logo, a catch-phrase. Also, in review board meetings sometime half dozen proposal are presented and jury has very little time to read information upfront. The proposal will require clear content, easy to understand by a diverse audience, ideally very descriptive with images and prototypes to manipulate. We recommend you work with a fab-lab to produce 3D design and 3D printed mock-up as well. Explaining the science and technology is a key aspect that will require to go into detail and describe precisely. Here, the credibility comes also from the experts and advisors in your team that are often connected with the jury business units. It worth the effort to convince one or two senior manangers influencial to the jury and who will commit some support if proposal is selected. Another topic of importance is to explain how you will overcome obstacles and stay realistic, in particular in term of beating competition, delivering in time, reaching predicted sales. Being honest on critical assumptions and how to derisk them is better perceived than overselling. The pitch preparation usually focus on getting smooth transition between the different 4 elements of the proposal:
The value proposition including the problem/solution fit
The solution feasibility, technical description, intellectual property, company fit
The business model, revenue and market and competition
The roadmap and budget, key assumptions, team and long term vision
Business concept proposal clinic - Covering all mentioned topic in a week is intense and often some gaps are prominent while only two weeks remain to get the business proposal ready for pitching. This week exercise is a stress tests leading to the first pivots. Having a 'clinic' at the end helps to review each concepts and identify what need to be addressed urgently. At this stage, intrapreneurs need to prioritize their effort. For instance, some will look deeper at the Intellectual Property and get supported by a patent attorney. For some other teams, a market analysis could be extended with few interviews of potential customers. In another case the internal manufacturing colleagues will be involved with intrapreneurs to make a ballpark of product cost, scalability and timeline.
Review of business concept and closing of the program
During the last two weeks the intrapreneurs and advisors will rework their business concept proposal and their story, prepare back-up detailed information, refine messages, conduct dry runs, rehearse until they are ready. Usually they meeting with the investment committee is about 1hour duration with 20 minutes to present the business concept proposal, 20 minutes for Q&A and finally 20 minutes, only with the committee to decide to proceed or not with the investment. Here, an individual jury member scorecard can help driving the discussion. At this stage we are talking about financing the first cycle or critical experiments for an average of 50K euros. The final decision is often communicated a few days later after a few internal alignements with key stakeholders are conducted to answer some of the committee's questions.
This usually ends the 6 weeks residency program. Intrapreneur would usually celebrate their effort and outcome on the evening of the pitch presentation. They have the feeling it went really fast, it was intense and are amazed how much you can do in such a short time. On the final day, in the morning, a graduation usually take place with certificate acknowledging the development of new skills, followed by a lunch with the review board, experts and facilitators. In the afternoon, you start to see intrapreneurs leaving one by one, catching their flight and getting ready to return to their business units departments. For facilitators, already another residency program is in preparation...
The conclusion
A few days later, in case of positive final decision, intrapreneurs will start to organize with the support of dedicated project manager and they will initiate the derisking of critical assumptions. It will take between 6 and 18 months nd 3 or 4 iterations to derisk and be ready to attract significant funding and recruit full-time employees. For innovation projects, the failure rate is still important. Of course in the context of a Strategic Focus Field, resource on a project could easily be transferred to another one together with the accumulated learning.