Chapter Four

Product or Services Development

Outlines:
Introduction: Technology
Important aspects of Technology in Business
Formation, development, and growth of TB new
enterprises
Technology transfer for business development
Innovation in TB business
Promotion & commercialization of TB innovations
1 Legal and regulatory frameworks
 Starting Technology based new venture
Introduction

 Advances in technology are the only source of permanent increases in

productivity. Technological changes are basically the results of
innovations which in turn are the outputs of innovative
Entrepreneurs.
 Many businesses are using technology to
 stay competitive, they create new products and services using
technology, and they also use technology to deliver those products and
services to their customers on time.
 A good example is, mobile phones companies like Apple & Samsung, ----
---use high end technology to create new smartphones and other
2
electronic devices to stay competitive.
 What is Technology ?
– Meaning, Examples & Its Use in Business
Meaning
 The term ‘Technology” is wide and everyone has their own way
of understanding the meaning of technology.
 We use technology to accomplish various tasks in our daily lives,
in brief; we can describe technology as products, processes or
organizations.
 Technology is human knowledge which involves tools, materials and
systems. The application of technology results in artifacts or products.
If technology is well applied, it can benefit humans, but if it is
wrongly applied, it can cause harm to human beings.

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 What is Technology ?
– Meaning, Examples & Its Use in Business
Type & use
 Communication Technology:
 Construction Technology: heavy tractors, design software
 Assistive Technology: used by people with disabilities
 Medical Technology: to diagnose infections, treat diseases and to
make research
 Information Technology: e.g. Big financial institutions like
“BANKS” use information technology to operate their entire
businesses as well as serve their customers.
 Entertainment Technology:
 Educational Technology:
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 Starting Technology based new venture
Use…

business technology encompasses a wide range of

hardware, software and services that keep companies
running and enhance operations.
Technology plays into every aspect of a business, from
accounting to customer communications to product
design and development.

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 Advantages & Disadvantages of Technology in Business
Advantages

 Increases production:
 Saves time:
 Accelerates innovation: create new product/service
 Promotion & help SME to gain competitive advantage
 It improves sharing of information:
 It improves on data storage:
 Simplifies business communication:
 Improve productivity

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 Advantages & Disadvantages of Technology in Business
Disadvantages
…..Discuss
 It’s expensive: investment and maintenance cost
 Not Safe:
 due to hackers, cyber attacks …business secret data will be lost
 Industry wastes for environmental pollution
 Disconnectedness:
 Due to dependency on communication technologies, it kill face-face
communication…reduce cultural & social aspects
 due to automation less people involvement even unemployment

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 Important aspects of Technology in Business

Technology Intelligence for Business

 Technology intelligence is technology-related information that

is useful and utilized by firms during strategic decisions.
 Intelligence gathering may be deployed at the macro level,
industry or business level, and/or at the program or project
level.
 The process of gathering external data and analyzing it to
derive intelligence for major strategic decisions is referred to
as mapping the technology environment.
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 Important aspects of Technology in Business …
Conceptually, this process consists of four interlinked steps:

 (1) scanning the environment,

 (2) monitoring specific environmental trends,
 (3) forecasting future environmental changes, and
 (4) assessing current and future environmental changes for their
impact on organizational strategy.

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 Important aspects of Technology in Business …

Technology and Competition

 Technological change includes both the processes of innovation and

diffusion. Although technological change results in the emergence
of new products and processes into the marketplace, it
simultaneously results in the eradication of the existing order.
Competitive rivalry is dynamic and is constantly being influenced
by characteristics of competitive domains.
 Resource requirements, collateral assets, institutional
milieu/setting, and speed are all important characteristics of
competitive domains that frequently influence the development of
technological strategies. Just as technology evolves over time,
these characteristics also change with the evolution of the
10 innovation.
 Important aspects of Technology in Business …

Appropriation of Technology
 The appropriation of technology refers to the acquisition of
technology in both of the following two ways: in-house research
and development and from external sources by acquisition or
strategic alliances. Technology appropriation serves the function of
creating new businesses, altering the rules of rivalry in existing
competitive domains, or supporting existing businesses.
 Choosing to adopt a portfolio of technology appropriation projects
involves some basic principles.
 First, technological opportunity and appropriability of the project are
determined by the competitive impact of technology.
 Second, firms should undertake projects only in areas where they are
competitively strong.
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 Third, risks and rewards need to be considered in terms of the
portfolio.
 Important aspects of Technology in Business …

 Finally, external sourcing needs to be considered as an alternative

implementation mode. However, external sourcing should only be
used when it is a speedier or a less-costly alternative for the
appropriation of a specific technological capability relative to internal
R&D, without compromising the competitive advantage of the firm.

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 Important aspects of Technology in Business …

Deployment in New Products

 The development of new products has always been a considerable
generator of sales and profits for businesses. New products range
from products that are entirely new to the world to repositioning
of already-existing products.
 The process of developing new products is characterized by two
phases: the strategic phase and the operational phase. The strategic
phase is critical in the process in that it determines the profit
potential and ultimate success of the product.
Furthermore, the strategic phase offers top management greater
leverage in influencing the success of the development process. The
operational phase is just as crucial in that it results in the actual
production of the new product.
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 Important aspects of Technology in Business …

 A continuum of research and development is an important process

before new products are physically exist for the market.
Figure 2.1 Development Continuum

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 Formation, development, and growth of technology-based
new enterprises

Introduction

 The innovative capacity of an entrepreneur and more accurately, of

companies operating in that field, is a key determinant of its
capability to enhance the economic development and to upgrade
the standard of living of a country. It is widely accepted that one of
the indicators of this innovative capacity is the rate of creation of
New Technology-Based firms (NTBF).

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 Introd.Cont’d
 The nurturing of small firm formation and growth has become
increasingly important to the health of developed economies in
general, and to the creation of new innovative industrial sectors in
particular.

 Technology incubators, which play a role in accelerating the

commercialization of R&D outputs and the transfer of
technology, have contributed to startups of high technology-based
enterprises in the newly industrializing economies of developing and
developed economies of the world.
 Strengthening and promoting technology based ventures through
incubation programmes for new technology based enterprises is
necessary for them to survive in a competitive society.

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 How to form and develop Technology based ventures?

 What is required?
 Entrepreneurship studies have identified three critical factors
linked to successful creation of technology ventures:
 Innovative technology,
 Entrepreneurial talent and
 Capital/money.

• The strategic focus of new ventures is to facilitate the effective

fusion of innovative technology, strong scientific, entrepreneurial
and management talent, and investment capital to create a
successful venture.
• However, these by themselves will not be sufficient for the
successful development of technology based ventures; sound
national policies and strategies are always at the heart of such
development programs.
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 How to form and develop Technology based ventures? …
 Government policies:
 Credit programmes with State-subsidized rates
 Share programmes by Government venture-capital companies
 Grants by the Government, especially for creating jobs and for research
 Security programmes by the Government for taking over part of the risk of the
credit institutions for enterprises
 Advisory services.

 Other support activities for enterprises with both public and

private sector involvement, include:
* Business consulting services: Assistance with business development,
developing business plans, tax advice, and so forth;
*Technical consulting services: More specialized services are
provided such as networking assistance between enterprises and science
and technology organizations, technology transfer, the exchange of similar
experiences and the identification of potential for cooperation
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 Cont’d
 Financing support activities: Offer optimal conditions to
enterprises, especially SMEs, in terms of rent and costs of
spaces, infrastructure and services. Offer also assistance with
accessing and using financial sources such as corporate
financing, business angels, venture capital, and so forth;
 Intellectual property assistance: Assistance with
developing and patenting new and improved technology,
including bringing it to the market for profit;
 International assistance: Assistance with the global
networking of incubation and innovation centres for
information exchange and technology transfer

The focus in all the assistance is to increase the self-reliance of the

enterprises so that they can survive SUSTAINABLY.

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 Factors contributing to the Success of High Technology
based Enterprises

The main catalytic factors for the success of high technology-based

enterprises are :
 national policies,
 research and development institutions
 technological entrepreneur development
 innovative finance support systems & protecting intellectual
property
 science and technology parks
 promoting and developing strategic business alliances and
networking
 standardization, quality control and marketing.
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 Factors to success of TBNE …
Some methods of ensuring such catalytic factors for developing
economies are:
a. Technocratic leadership should be given, a national vision on the creation of
knowledge-based enterprises should be boldly articulated and incentives for
innovation and risk-taking should be provided;
b. The microeconomic framework, together with a master plan prepared
in consultation with local communities, entrepreneurs and stakeholders, should
stimulate innovation and markets for new goods and services;
c. Commensurate investments should be made in scientific research and
technology development, engineering and management consultancy, technical education
and continuous learning, entrepreneurial development, quality assurance and
environmental preservation, transport and communications infrastructure;
d. Long-term plans should be formulated for developing convergent
enterprise support systems encompassing the full range of small business
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development services, anchored possibly in a business incubator and
technology park;
 How to form and develop Technology based ventures? …

e. A proactive supervisory board and a carefully selected and trained

management team are critical to success. They should make efforts to
mobilize broad community support and networks of external
professional service providers;

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Fig. Technology based business development process
 How to form and develop Technology based ventures? …
 Although there are different ways to formulate the formation and
development process of a NTBF, there are four fundamental
dev’t/growth stages that most entrepreneurs should focus on:
Stage 1: Conception and development

Stage 2: Commercialization

Stage 3: Growth

Stage 4: Stability

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 How to form and develop Technology based ventures? …
Stage 1: Conception and development
 The primary focus of the entrepreneur is on the product
development, the securing of adequate financial backing and the
identification of market opportunities.

 Dominant problems of NTBF at this point include construction of

a product prototype and selling of the business idea to investors.

 In this stage, there are many problems or barriers related to

conception that reduce the chance for new ventures. Barriers
related to: Lack of opportunities , Lack of well qualified
entrepreneurs and Lack of entrepreneurial culture

 Developing the new idea includes writing a business plan that

evaluates all aspects of the economic viability of the business venture
24
including a description and analysis of the business prospects.
 How to form and develop Technology based ventures? …

Stage 2: Commercialization
 In this stage, the major focus of new ventures is on
commercializing the product itself. The dominant problems at this
point include acquiring adequate facilities, establishing a vendor
network, and developing product support capability.
 Some of the programs carried out by the different administrations
are oriented to:
§ Simplify proceedings for the creation of a new company
§ Accessibility to different resources (financial and facilities) and
services in advantageous conditions.
§ Training entrepreneurs to enable them its new challenges
§ Creating incubators which are organized in order to support and
facilitate processes of enterprise creation.
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 How to form and develop Technology based ventures? …

Stage 3: Growth
 This stage is characterized by high growth in both sales and
employees. The major problems of the firm at this stage are to
produce, sell, and distribute the product in volume while attaining
profitability.
 Important barriers are related to the lack of financial resources to
maintain the rapid growth of the enterprise and difficulties in
managing internally the effects of the growth
Programs to overcome above-mentioned problems have to do with:
 Training entrepreneurs in new managing techniques; special attention to
internationalization.
 Processes of clustering companies of the same industry in order to facilitate the
interchange of experiences and best practices
 Access to financial resources
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 How to form and develop Technology based ventures? …

Stage 4: Stability
 The growth rate of the firm slows to a level consistent with market
growth. The major problems of the firm at this point are to maintain
growth momentum and market position. Therefore, the entrepreneur
should focus on the introduction of second-generation product for
acquiring new opportunities and the expansion of the business into new
geographic territories and markets. Therefore the programs that can be
carried out have to do with:
 Enhancing the innovative capacity of firms.
 Facilitating their internationalization

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 Drive for acquire new technology
 Discuss…why we need towards it?

 Cost: Technology can cut costs in many ways: reducing material, labor or
distribution costs. Example: material costs can be reduced by replacing
lower cost material or by reducing the material required to make a
product.
 Speed of delivery: The key competitive priority may be the speed of
delivery, as measured by lead time required to deliver a product. Example,
Automated guidance vehicle(AGV), Electronic Data Interchange(EDI)
 Quality: Technologies help to improve the quality and reduce the production costs.
 Flexibility and customization: The global market place of 1990s is
characterized by short product lifecycles, increased product variety, and extensive
customization. To retain and increase market share in such competitive environment,
firms have to be more flexible in their operations.
* Increased production volume
28 *Higher living standards
 Examples:
Technology in manufacturing Technology in service

Numerically controlled (NC) machines Office automation

Industrial robots Image processing system

Computerized Aided Design (CAD) Electronic data interchange
Computer Integrated Mfg (CIM) Decision support system and
Automated Materials Handling (AMH) expert system
Flexible Manufacturing System (FMS) Networked computer system and
expert system

 Successful innovation depends on the development, acquiring and

integration of new knowledge in the innovation process. In order to
successfully innovate, a firm usually combines different innovation
activities. In addition to doing own research and development,
firms typically are engaged in the acquisition of knowledge on the
technology market and cooperate actively in R&D with other firms
29 and research organizations.
 Technology transfer for business development
 Technology transfer is the process by which existing
knowledge, facilities or capabilities are utilized and marketed to
fulfill public and private needs.
 It is the process by which basic science research and
fundamental discoveries are developed into practical and
commercially relevant applications and products.
 Technology transfer processes constitutes technology transfer,
technology promotion, technology deployment, technology innovation,
technology development, technology research, technology assessment,
technology information and communication, technology investment,
technology collaboration and technology commercialization

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 Process in Technology Transfer
 It is clear that any technology transfer process has three parallel
components that need to be taken into consideration.
Science and Technology: which is responsible for ensuring that a
particular idea or invention is assessed for its technological feasibility
and translated into a marketable product for commercialization.
Marketing: The marketing component covers the business angle,
assessing the market conditions and developing a business plan. It is
also concerned with the business planning in terms of developing a
comprehensive marketing strategy - to ensure a clear market capture
for the new product.
Financing: This is the third component that identifies and procures
funds for seed capital, expansion, market penetration etc. in order to
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make sure that the return-on-investments is good.
 Steps in Technology Transfer…

 Each of the above components requires the inputs of different

organizations in a market, bringing to the process different resources
and skills that will eventually lead to the success of the technology
and product being developed.

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 Steps in Technology Transfer…

four phases/steps involved in the technology transfer

process. These are as follows:
1. Technology acquisitions
 Selection of appropriate technology
 Selection of collaborators
 Finalization of agreement
2. Technology Absorption
 Preparation of detailed project report
 Interrelation and implementation of various rights and obligations
 Pre implementation
3. Technology Adaptation
4. Technology Improvement
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 Innovation in Technology based Business
 Innovation refers both to the output and the process of arriving at a
technically feasible solution to a problem triggered by a
technological opportunity or customer need. Innovation process is
driven by the exchange of technical, market, and other
environmental information in the face of a high degree of
uncertainty. Innovations are new ways to achieve tasks.
 It is useful to distinguish between process innovations and product
innovations
 Product innovation: results in new or improved products. An
example of this might be a new type of razor blade that is sharper
and lasts longer than previous blades.

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 Innovation in Technology based Business …
 Process innovation: occurs when the manufacturing processes are
improved to make the production of existing products cheaper, or
when new processes are developed specifically for making a new or
improved product.
 Service innovation: occurs when new ways of delivering services are
developed e.g. the use of automatic telling machines (ATMs) in banks
to replace human tellers, drive through take-out lines.
 The innovation process, which leads to useful technology, requires:
– Research
– Development (up-scaling, testing)
– Production
– Marketing and – Use
• Experience with a product results in feedback and leads to improved
innovations.
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 Innovation in Technology based Business …
 The process of innovations can also be classified as Market-pull and
Technology-push innovation:
a. Market-pull innovations: advancement of technology
oriented primarily toward a specific market need
 a) Occur when customers are technologically sophisticated
 b) Occur more frequently with older technologies
 c) Tend to be incremental innovations
b. Technology-push innovations: advancement of technology
oriented primarily toward increased technical
performance
 a) Require that the firm’s scientists, engineers, and inventors have direct
experience with users
 b) Occur more frequently with new and emerging technologies
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 c) Tend to be the major source of breakthrough innovations
 Innovation in Technology based Business …

 The

Figure: Market-pull and Technology-push innovation processes

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 Summary on Technology, Products, and Markets
Technology Push

Technology

Market Feedback
Modifies Products
Technology and
Products

Markets

Market Pull
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 Promotion and Commercialization of
technology-based innovation

 The process of taking an invention from idea to business concept

and then to market is called technology commercialization.

 Consequently, products must be developed faster, prototyped earlier,

and brought to market in record time.
 The promotion of technology appears to be essential to the process of
industrialization. Though transfers of technology can temporarily be
beneficial, potentialities of technology promotion are believed to lie
in a systematic utilization of research and development.

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 Assignment-1
 Write about Intellectual Property Rights
-consider Ethiopian case and world one,
-include definitions, types, requirement to get property rights,
examples
-include reference/source

Reading Assignment
- Promotion and Commercialization of technology-
based innovation
- Intellectual property

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 Entrepreneurship and Technological Change

41
 Summary… Technology, Entrepreneurship and
Innovation
 The role of the Engineer in Entrepreneurship

 Engineers drive technological entrepreneurship, as inventors,

researchers, designers, and as managers
 Engineers make up the largest percentage of:
 Most start-up founders and early employees
 Chief Executive Officers
 Engineers are often the first hires and an important part of the
technical (and management!) team
 “Technically, engineers are well-qualified in many respects for this
activity, but often lack the necessary business skills and
entrepreneurial mentality.”
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 Summary… Technology, Entrepreneurship and Innovation…

 Entrepreneurship and Innovation

“Innovation is the specific tool of the

entrepreneur”
 Peter F. Drucker

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 Summary… Technology, Entrepreneurship and Innovation…

 What is Technological Innovation?

“An Innovation is an idea, practice, or object that is perceived as
new by an individual or other unit of adoption…if an idea is new
to an individual, it is an innovation.”
 Rogers, Diffusion of Innovations, 4th Edition, 1995

“Creativity is thinking up new things. Innovation is doing new

things.”
 Theodore Levitt

“Innovation: the process of bringing new goods and services to

market, or the result of that process.”
 Public Investments in University Research: Reaping the
44
Benefits, Advisory Council on Science and Technology
45
 Summary questions
1. What is technological entrepreneurship and its impact of on
society/country?
2. What is the role of the engineer in new ventures?
3. What is technological innovation?
4. Describe Creativity, Innovation, Technology and
entrepreneurship
5. Discus the process of innovation (market pull and technology
push innovations)
6. Discuss technology transfer, promotion and commercialization
of technology based innovation
7. What are the Drives for acquiring new technology
8. Factors contributing to the Success of High Technology based
Enterprises
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9. Discuss the development/growth stages of new Tech. Based firms?
Comment/Questions?