Welcome back to 10types of innovation!
I have always loved the science course when I was in high
school and I still remember the first principle of science: everything that
grows, dies. Don’t worry, I will not bore you with science and biology, this
concept, in fact, can be applied also to every product or service innovation.
Every innovation, including the product HuskyBand and the new Njabini website
follows a life cycle. Keep in mind the scheme above, because I am going to
re-analyze it later. Now let’s start our journey, from when we stopped in the
previous blog: the idea is ready to be launched into the market and it has
become an innovation.
The first step is the embryonic stage. The innovation is
newly born and, as a little child, it has to be feed and groomed, The HuskyBand
and the new Njabini website are still in this stage. Only few people are able
to recognize the potential of these innovations: these people are the
innovators and the early adopters. Then the innovation grows and the early majority
starts adopting it; when the late majority knows about the innovation, it means
that it has reached the maturity stage. In conclusion, the innovation declines
and in this period, the laggards start using it. The figure above shows the
shape of the lifecycle, while in terms of market share, an innovation follows an
S curve. It reaches the 100 % of market share when everyone has adopted the
innovation including the laggards. The almost saturation of the market means
the beginning of the decline phase.
The blue line is the life cycle of the innovation, while the
orange line is the adoption of the innovation in terms of market share
The S curve is really useful for the companies because it
shows the accumulation of the adoption of their innovation. When it reaches the
100 % of market share, companies should be able to change S curve, starting a
new innovation and a new life cycle.
As a child needs his mom, an innovation needs people behind
it. The figure of the entrepreneur is the mother of every product/service
innovation and he is also the one who takes the risk of launching an idea into
the market. There are different types of entrepreneurs: small business owners,
professional and fast growth entrepreneurs, intrapreneurs or social
entrepreneurs. Cognitions and experiences determine what type of entrepreneur
you are.
The intersection between great ideas and people results in
the ventures. There are different types of venture but every venture follows
the science principle explained (and drawn) before: everything that grows,
dies. Similarly to the innovation itself, ventures follow a general life cycle;
obviously a small business venture doesn’t have the same lifecycle of a start-up
or of a large company. A small business company has a less impact and it stays
in the maturity phase more than in the embryonic and growth stage. A start-up,
instead, has more impact and it has to put its large efforts in the embryonic
phase. That’s why it is more interesting focusing on the lifecycle of
start-ups.
From the scheme above, we can see that the embryonic phase
for a start- up is essential because it is the stage in which a venture needs
money to become a successful company. We can divide the embryonic stage into
five developmental phases: idea, feasibility, verification, demonstration and
commercialization.
Each following phase need more money to be implemented. If
1 $ is needed to develop an idea, 1,000 $ is needed in the demonstration phase
while 10,000 $ is needed in the commercialization. Start-ups and ventures have
many ways to raise fund depending on the stage in which they are. (Frank Demmler, Raising money for new and emerging companies)
In the idea/feasibility phases, start- ups usually raise
funds with debt (from family and friends) or they are helped by government
programs. In the next phase the Angel investors enter to help the new company,
while in the demonstration and commercialization phase, Venture capital
replaces the Angel investors. Only in the last phase, the company enters in the
stock market with an IPO (Initial public offering).
In this scheme, it is important to underline the difference
between Angel investors and Venture capitals. The Angels are usually an
invisible group of wealthy managers who gives money in exchange of a percentage
of the company. Usually the angels fund the company for 3/5 years and then they
left. Venture capitalists are instead investment managers who raise money and
invest in other companies. Similarly to the angels, they have a percentage of
the company but they expect more than the angels because they are more involved
in the management of the company and they fund the venture for 7/10 years.
Angels Investors vs. Venture capitalists
The new venture has to face another important problem in the
embryonic stage: its products/services have to be protected and the owners need to be granted with certain
exclusive rights for their innovations. In the USA, There are four
different types of Intellectual Property depending on what is the
tangible/intangible asset the company wants to protect: Trade secret, Utility
or design patent, copyright and trademark. The HuskyBand would need a design
patent while Njabini new website would be protected by a trademark. The problem
of IP is not present only in the embryonic stage; when the product reaches its
maturity stage for example, some other companies could ask for technology
licensing, and the venture should be prepared for negotiating its license.
While the embryonic stage is essential for start-ups, the
maturity phase is important in large companies because they need to re-innovate
continuously themselves in order to avoid the decline stage. One way to
innovate a large company is to create an internal corporate venturing or a spin
off. A spin off is when a company splits off a section of itself or when some
employees leave to form an independent start-up firm. If we continue on our
“biological” comparison, a spin-off is the teenager who leaves his house to go
to college. In addition, an internal
corporate venturing or a spin off allows large companies to go outside their
comfort zone. They, in fact, have to be able to create other lifecycles, innovating
their products/services continuously. If
I were an employee of a large company, I would probably try to create a spin
off using new ideas in order to innovate my company and start a new lifecycle. It
could be hard and I will probably fail but maybe, in few years, I will become
the new CEO of an internal corporate venturing!
So, employees don’t be shy and
get out of your comfort zone!
