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