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biz plan market

There is significant demand for a protective case for high dollar jet engine parts. With parts that can
cost over $100K a piece that are extremely susceptible to scratches, just saving one  part can pay for a bunch
of protective cases. The market of protective cases spans multiple industries. Customers vary from
the music and television to maritime to manufacturing industries. The addressable market for our product is the
OEM jet engine manufactures. There is a large opportunity to compete against the current competition
because OEMs are seeking a better solution than the current cardboard and wood boxes. For our
company we targeted PW because we know they will have a large ramp up in vulnerable parts and
currently don’t like their protective cases. That is why we projected them to be our first customer.

class

I enjoyed some aspects of our class and was disappointed in others. It was interesting to have a class
full of engineers. They brought a different prospective to class than I’m used to. A good example of is
the business plans. All the products or IP formulas were so well thought out. If this was a class full of
business students I don’t think the products would have been nearly as functional. The models would be
solid but what the product actually did would be pure fiction. It is good to have people from other
disciplines in class to teach me how they look at the world.

Another thing I liked about class was watching people grow and become more comfortable with
the language of business. I enjoyed seeing people who were shy at first really blossom and become
more confident by the end of class.

Unfortunately, I didn’t have the greatest group project experience. Everyone didn’t contribute
equally and my group never really got past the storming phase of a team. We were never on the same
page probably because we only had 2 short meetings the whole class where everyone actually talked to
each other. This was really the first project in my scholastic career where my group didn’t come through
in the end. I’m going to say this was a onetime issue and believe that future group projects will be
smoother.

corporate entrepreneurship

As spelled out in the reading, corporate entrepreneurship has been a difficult nut to crack for
many large companies. I think the key reason large companies haven’t solved this issue is they are all run with the short term in mind. So much emphasis has been put on hitting the numbers because that is what
drives compensation. The people in decision making positions are worried about their pay check. They
are incentivized to hit quarterly or annual metrics not 5 and 10 year numbers. There is little concern
about 10 or 20 years from now because the people in the decision making positions will be gone by then
and their compensation isn’t tied to performance that far out.

Another problem is big companies are big. They have large overhead and G&A expense. When
large companies look to acquire smaller innovative company those small companies have to absorb all
the extra cost of the acquirer. Not all companies’ models are built to withstand costs like union pensions
and all the administrative costs of a big company. For this reason I think a lot small companies are
passed over.

I don’t have a great solution for the first problem and if I did I would be making a lot of money
as a consultant and not writing this blog. The second problem I think can be handled a few ways. One is
to purchase the company but keep them as a wholly owned subsidiary until they are big enough to be
rolled in to the core business. Basically own them but let them operate themselves with guidance from
the parent company. Another solution is to acquire the company in stages as they become more
successful. This will allow the company to run on its own until the acquiring company is convinced the
smaller company’s model is a good fit.

ice hotel

My blog this week is about the building competition between ice hotels. These are hotels that offer the
experience of sleeping in a hotel made completely of ice. Of course these hotels aren’t for everyone but
there seems to be a niche market of people looking for a completely unique experience. Canada is home
to the only 2 ice hotels in North America, the Hotel de Glace in Quebec City and the Snow Village near
Montreal. Since, there is a small niche market for this type of hotel the two competitors are fighting
hard to differentiate themselves. Hotel de Glace offers rooms at $350 and up which is much higher
than Snow Village which offers individual igloos starting at $195 and larger rooms as well. Both hotels
have bars made of ice and serve drinks in ice mugs. Snow Village’s proximity to Montreal has made it
popular with the thriving night life of Montreal. What I found most interesting about this competition
is that Hotel de Glace states that its location is an advantage because it is located further north than
Montreal. This northern location has cooler weather which provides less risk of melting. In this mild
winter, weather could be the deciding factor of success at least this season. If Hotel de Glace can stay
open longer because the weather is cold enough it will be able to accommodate more people in the
season. One major problem the article pointed out is that many of the guests believed the experience
was great, but they would only do it once. This means the hotels have to constantly entice new guests
because there are little or no repeat guests.

creative abrasion

I found this article to be interesting. I can see how creative abrasion would work in the proper environment; however, I also think creative abrasion can backfire easily. Putting two completely different people together and asking them to create something is risky. The results can be spectacular if both people can respect each other and appreciate what the other brings to the table. That respect and appreciation is hard to come by and not everyone will reach it. A manager has to be willing to accept that an environment of constant friction is not for everyone and not all teams will succeed in generating anything of use because they can never come to agreement.  

If I was a manager there are a few things I would consider before deciding to use creative abrasion to solve my problem. First, what type of problem am I looking to solve. Not all problems require a completely new and creative solution. As I was saying previously there is a higher risk that a creative abrasion team will not generate a solution than a more homogenous team. If I’m looking for a fast and effective solution a homogenous team is probably more conducive for that type of problem. However, if I’m a manager and I have a large, complicated problem where I’m looking for a new direction or out of the box idea a creative abrasion team maybe best. When picking my team I would look for two people who approach a problem from different angles, but also have personalities that are not at complete odds with each other. I would not put a competitive, strong minded person in one of these teams. If someone always thinks they are right, they will have trouble reaching a point where they respect and appreciate their partner. This type of person would bully a meeker personality and butt heads with anyone like themselves. I think creative abrasion teams work best when the teammates have different perspectives but are not so accretive that they are unwilling to see the others point of view.

Creative abrasion is a valid way of problem solving and idea creation, but it is not always the best method for all situations. Many factors need to be taken into consideration like the type of problem, desired solution, team makeup and time available to solve the problem.  I would avoid using creative abrasion for everything because I think it would create an unpleasant work environment.

michael porter and the internet

Michael Porter’s article about how the Internet greatly reduced profitability is hard to refute in many cases. I agree with him that the Internet has affected different industries differently. The Internet’s main use is a tool to gather timely information. It is really the availability to information that is at the heart of his argument. When buyers have timely access to information it makes competition difficult. This information hurts many middlemen services. Businesses like insurance agencies, travel agencies and car dealerships have all suffered from the Internet. As the internet allowed consumers the ability to go directly to the source for policies and tickets there was no room for insurance and travel agencies to compete and therefore make profit. Car dealerships were not driven out of business but they saw a dramatic increase in competition. They were not only competing against local dealers but dealers from around the country via the internet.

Price was thrust to the front of consumers mind. Companies’ ability to justify their economic value or premium to supply and demand derived price started to erode. An example is, if I want to buy a book, preinternet a bookstore could justify their economic value because they were bringing a product to me that I couldn’t get elsewhere. However, when the Internet arrives and allows me to search and find a list of companies that will all ship to me the same book for less money, it now becomes difficult for that bookstore to justify a price premium to the Internet retailer. It is hard to avoid commoditization of products with the internet around. When competition is based solely on price there is little room for economic value. A good example of this is a farmer. Farmers can grow their crops but the market sets the price. It would be hard for one farmer to justify a higher price based on economic value when another farmer is selling the exact same thing at market value.

Another good example of the internet’s affect on different industries is the stock market. Previously, few individuals had brokerage accounts and if they did all transactions went through a phone call with a broker. As the internet increased the availability of information on companies and online brokerage account developed more individuals started investing. Nonprofessional investors gained easy access to all the same data professional investors were using. However, the ability to execute trades online greatly reduced the need for a personal broker. In this example the Internet increased individuals’ ability to invest but put great pressure on brokerage fees. Today brokerage fees are around $6-8 dollar where only a few years ago they were $10, which is a 20% reduction in price with little reduction in cost. Further, evidence that the Internet has made profitability much harder to come by and in some cases made certain businesses unsustainable.

first mover advantage

First move advantage

Pros

Ability to establish a brand with no direct competition

Brand gets perceived as new and fresh which can generate hype

Pricing power

Ability to set the expectations of the customer

First to IP rights

Cons

Expensive from both a marketing and R&D perspective

First movers must figure everything out on their own. They don’t have past mistakes to draw on. Following competion has the advantage of learning from the first mover’s mistakes

Risk that the product doesn’t succeed

If it is a new market/product and the company is reliant on outside investors it can be difficult to get them to buy into the idea. If the company is large it can be difficult to convince the board of directors that the new product/service is worth the investment instead of dividends. Basically the company bears the burden of having to prove its idea with no history to support it.