L1: Introduction / Entrepreneurial Mindset (Cases (Google Glass (Other…
L1: Introduction / Entrepreneurial Mindset
PM is an entrepreneur, strategist, technical visionary, cross-functional team leader, customer and end user advocate (Bussgang /Eisenman / Go (2015).
Interacts with all departments, channels and general public
Sets priorities, plans activities, defines new product to be build, establishes support in organisation, manages development, launch, ongoing improvement
Product Investment decisions
Net Present Value (NPV)
Sum of discounted cash flows for each period
Difference between the present value of cash inflows and the present value of cash outflows over a period of time.
If NPV is positive, investment is sensible
Internal strategy evaluation, uncertainties, trends/risks in market, macro-environment (economy/politics)
Hyper-and global competition
Gap between internal available resources and externally required resources
Too broad targeting
Inconvenient to wear
Socially not accepted
Not fashionable enough
Culture: Investments into high-risk/high-reward projects (10%, 1 billion earning potential. Does not constraint itself by short-term earning pressure.
Google Page Creator
Experimental 'seed'/real option investment 'Retailer Experiment'
AA vs JetBlue
P&G Japan: SK-II
Zara Fast Fashion
Unpredictability of environmental or organisational variables that impact corporate performance
General environmental uncertainty
Input (quantity, quality, supply) market
Which ones are exogenous/endogenous?
Unpredictability in coprorate outcome variables (return instability)
Mitigation of Risks
Forward or future contracts, insurance, hedging (not topic)
Divest, delay entry
Lobbying, vertical integration, M&A, advertising
Diversification, operational flexibility
Different features into product to broaden customer segment
Apple as fast follower with big phones
Sensitivity of a firm or project's cash flow to changes in a any of a number of interrelated uncertain variables
Real Options (McGrath)
Creating the 'right but not the obligation to undertake further investmetn'
Initial investment, followed by either scale or divestment; more flexibility to acquire, divest and switch resources
Option Premium: 'Increased value through flexibility under uncertainty'
Initial investment which can lead to growth
Diversification into different markets
Abandonment or sale of options
Staged investments e.g. movie launch into various cities
Limit downside risks while maximising potential value on upside
Upside potential must be big
Small investments first to determine
Develop/invest into idea portfolio, use stages/sequences
Stop and abandon options if not feasable
Escalation of commitment 'bias, emotional investment'
Overconfidence/ illusion of control
Disadvantages of internal social networks 'Relationship bias'
Career consequences after 'failure'
Review: knowledge transfer, sale
Stakeholder management: Deal with disappointment/disappointment
Future growth options
Invest into new technology / capability development
Stepping Stone options
Series of small stage investment (Nanotechnology): Skills development, Consumer learning
Core enhancement launch
New platform, product line (e.g. P&G Swiffer)
Marketing Capabilities Gap
Problem: Capability Gap
Solution: Risk mitigation, Entrepreneurial mindset
Recommendation: Not only look on NPV (can be attractive when negative / Inverse risk return relationship)