New Business Creation: Two Similar Companies; Two Different Results   How commitment, top management support, and most of all, a desire to make money, made all the difference in new business development of two similar tech-based companies. By Richard A. Siegel First, let's talk money. I hope the notion of this doesn't offend you, but if your business development programs aren't driven by the goal to make more money, there's a problem. "Of course they are," you say. "Why else would I be supporting them?" Well some issues are not so obvious as I will explain. But first we need to accept that the motivations of people interested or involved in commercial development programs of a company or government agency can vary considerably. It depends who you are. If you're the CEO of the business or division, a board member, the head of marketing, technology, business development or technology transfer, you probably do operate by this goal. At least you do. Old-fashioned profit The trouble is, business development project managers often receive mixed messages from management. In many cases, they're totally isolated from senior management and receive few, if any, messages at all. The profit incentive is not always obvious. And in government agencies, universities and institutes, a profit motive doesn't exist - but a revenue generation one should. These organizations need to generate more of their own funds to reinvest in research and development programs - and to become increasingly less dependent on subsidies (your taxes, for example). Even here, perhaps especially here, there needs to be a drive to make money by exploiting the commercial potential of technology, just as in the private sector. What do I mean by "make money?" Well. I'm talking about making old fashion profit; creating economic value; achieving an attractive net present value. You get the idea. The bottom line is finding new ways to increase shareholder value - whomever the "shareholders" happen to be. Sometimes the journey gets more attention than the destination. As a business or technology manager, you may have installed a structured product or commercial development process in your organization. Some of these approaches are referred to as stage gate processes - a disciplined system of incremental work steps, objectives and milestones that need to be addressed before the next set of objectives is tackled. These are processes that manage product development or technology commercialization from the idea stage through to market launch. They're disciplined systems that are monitored at each of five or six stages by a small group of managers sitting in judgement of incremental results and determining if projects will proceed to the next stage. I support such systems. Technology-based companies must have a systematic way of navigating through business development and technology commercialization processes. Done well, this crucial business discipline is just too complex and cross-functional to manage without some sort of structured and monitored process. I'm also aware of how challenging these processes can be to manage. Project myopia One problem is that many project managers and project teams often get caught up in the process and lose sight of the primary objective - to make money! In a stage gate, or any structured process, some of the problems our clients encounter are: Market assessment work must often be redone or is not well analyzed. Project teams are intimidated by the process and its staged reviews. Lab or prototyping work continues, and continues until results are perfect. Some key process steps are neglected and the project must backtrack. Project teams are unskilled at commercial development and believe they see opportunities that don't really exist. An unbridled level of enthusiasm over certain quickly found product or application opportunities prevents discovery of the real block buster, high volume, high value business opportunities. Project leaders lack risk tolerance, essential to managing such projects and retaining one's composure. There exists no consensus vision of the future of the division, area or company. Precise goals, objectives and commercialization criteria are not established at the outset, or adhered to during the work, so it's difficult to know how to measure success when you see it. Top management and project teams are not sharing the same vision. Insufficient resources have been allocated, or anticipated. Analysis on a strategic level is not being performed, or performed very well. At the end of the day, no one seems willing to take those first critical commercial actions with the market, read, "talk to customers!" No more excuses The list goes on. Let's have a look at some actual case histories demonstrating how two sets of project teams advanced or retarded results of their commercial development programs. We used versions of Market-Driven Development (MDD) to guide the business development programs for both companies. Both conducted precision planning for their programs. The market was engaged for both companies to examine the technical and capital assets of both firms. During that part of the work, new business and product opportunities were identified and validated directly with the participating marketing leading companies who stood to be the first customers (strategic partners) in commercialization of the new business opportunities. High-level executives of prospective customers were committed and enthusiastic to take first commercial actions with both Company A and B. Company A could see more than $300 million/yr. in business opportunity in markets served by the prospective customers. More than $600 million/yr. in business opportunities was identified by Company B. Looks pretty good so far, yes? Well, there's good news and bad news. In the past six years, Company A has grown in annual sales from $25 million to more than $200 million, while Company B is still at less than $40 million. What happened? In the accompanying table, we can see some critical differences in the way these companies managed business development, their people and their growth opportunities. Just one more time - why do we invest in business development and technology commercialization? If you've got a management issue concerning technology commercialization and business development that you'd like to see addressed in this column, let me know. Company A (winner) Company B (loser) Had upper management involved in the project throughout. Kept upper management out of the project for political reasons Had top management input at the outset to help establish direction. No top management input in planning the effort. At the back end, the project team exposed top management to several attractive choices, thus enabling a focus on directions that would receive financial support and other resources. No top management input at the back end either (they were really flying blind; was it just their fault?) Project team worked closely and well together. Did whatever it took to get the job done. Project team comprised of disparate members; not clear on a common mission; would debate issues without clear resolutions. Project team seized the opportunity to work rapidly and closely with market leading companies involved in the MDD approach to demonstrate feasibility. Project team couldn’t agree on who would lead the effort to develop relationships with the market leading companies involved in the MDD approach. They even involved new people at the end who were unfamiliar with work done to date, but who had "organizational responsibility" for market development. (Did they pass the buck?) These new people wound up dropping the ball on several opportunities for lack of knowledge. (Should they have been on the team from the beginning?) Project team and top management created a new division to commercialize program results. The division was structured according to market requirements. The strategic positioning of the new division conformed to the market’s expectations. Company B had the opportunity to create a new identity and company positioning as well, but instead struggled with any changes to the way they did business. (Did they really want this level of commercial opportunity? Did they personally care? Did they expect to have to change anything?) As results were produced, project team members had lots of commitment, enthusiasm and they ensured that they would have top management support to move forward. Most of all, they really did want to make lots of money and grow the business. As results were produced and became real, the project team members clearly became uneasy and varied in their levels of commitment and enthusiasm. They were comfortable remaining inside the business development process per se, but far less comfortable using the process results and getting in front of customers. They had no apparent top management support nor sought it. They treated the work as an academic study - avoiding the need to actually take commercial actions and do what was necessary to make money. They had the opportunity to create a new future for their business (but was it really their business?) Company A followed the market’s directions and closed multimillion dollar contracts within a year or so of the program’s end. They’re making more money. Company B didn’t plan for the success they achieved. They were poorly motivated and managed, and were ill equipped to seize opportunities. Since their MDD approach was effectively implemented, a "market-pull" was created and some of the market-leading companies involved in the work pushed for relationships with Company B to gain access to their material technology. Some new business was realized, but most of their sales today come from their original business. (Were they focused on making more money?) Score Cards: Company A started with $25 million/yr. sales. Discovered over $300 million in new opportunity for their process technologies. In six years, have grown to over US$200 million/yr. sales.   Company B started with $25 million/yr. sales. Discovered over $600 million in new opportunity for their material technologies. In four years, have grown to $35 million/yr. sales (mostly through original business). Richard Siegel is founder and CEO of ISIS International Inc., a Connecticut-based international consultancy specializing in strategic planning, new business development and international technology commercialization. He can be reached at 203/261-5300, Fax 203/261-4911 or rsiegel@isisusa.com. Article republished with permission of Technology Business Magazine. Copyright © 1999 Richard A. Siegel. All rights reserved. RETURN TO ISIS ACTIONABLE ADVICE