6. Miscellany

6. Miscellany

6. Welcome to “Miscellany”, the Home of Additional Items Worth a Look

Classification of German Generals by Kurt Von Hammerstein-Equord 

von Hammerstein-Eqod Served from 1930 to 1934 as Commander-in-Chief of the Reichswehr—Germany’s Military Establishment that Lasted from 1919 to 1935 

He is Famous for Being an Ardent Opponent of Hitler and the Nazi regime. 

His Classification of German Generals is of Wide Interest Today—His Name Brings up almost 30,000 Google Hits

von Hammerstein-Equord’s Classification, “I Divide my Officers into four Groups:

There are Clever, Diligent, Stupid, and Lazy officers. Usually two Characteristics are Combined” 



Thoughts on Established Corporations and Startup Companies 

Expectations of Corporations—The Tools for Innovation

Expectations of Established Corporations—and Startups

  • Create Substantial Value and Grow the Business

    • Meet Consequential Human / Market Needs 

    • Generate New Products, New Business and Expanded Operations

  • Achieve Exceptional Profitability 

    • Deliver Superior Value Propositions and Operational Efficiencies

  • Assure Growth and Sustainability 

    • Succession of Successful New Offerings

    • Viable Commercial Construct—Development and Operations

  • Secure Protectability 

    • Competitive Advantage; Via IP, Market Leadership and Other Protections

The Corporation, a Powerful tool for Innovation

  • The Corporation Gives Birth to Commercial Innovation DuPont Gave Birth to Teflon

  • Breakthrough Science and Engineering Give Birth to Corporations, Markets and Industries

    • Teflon Science gave Birth to  GoreTex

    • GorTex gave Birth to W.L. Gore and Associates, $3.7B Sales, 2019 

    • Universities Gave Birth to Genetic Engineering

    • Genetic Engineering gave Birth to Genentech and Many Other Companies

Corporations Have a Life Cycle: Birth to Growth to Death

Idea: Conception and Validation

    • Technical Feasibility, Viability and Scalability

    • Attractive Value Proposition Satisfying Unmet Market Need

    • “Whole-System” Profitability Prospect

Founding and Startup

    • Compelling Business Case

    • Resource Availability

    • Competitive Advantage

Commercial Viability

    • Profitable Operation

    • Operational Stability

    • Scalability Demonstration

  • Expansion

    • All Profitable Markets / Territories Targeted

    • Reinvestment to Capture Growth Opportunities—for Sustainability

  • Maturity

    • Cash Generation (Stockholder Value Maximization)

    • “Financial” Solutions: Mergers, Acquisitions, Spin Outs

    • Discontinuities in Markets / Technology Present Challenges

  • Decline

    • Loss of Competitive Advantage: Victim of Discontinuities, Technical, Market, Cultural

Established Corporation Vs Startups

Established Company: Extract Value, Grow Incrementally

  • Utilize Existing Capabilities to Exploit Proven Value Sources 

  • Tap Range of Functional Specialists and Ample Resources

  • Incorporate Justifiable New Value Sources

  • Add Incremental Productive Capacity—Human and Capital Resources Readily Available

  • Perpetuate Structure—Insure Profitability, Viability, Sustainability

Dynamic Tension in an Established Corporation

Efficient Exploitation of Current Value-Producing Assets

  • Maximizes Cash Flow —> Increases Dividends for Shareholders —> Drives Share Price
  • Achieves Corporate Purpose: ”Increase Shareholder Value”

Declining Assets and Reduced Competitiveness Lead to “Financial” Solutions—Spin Outs, Divestitures, Mergers 

Versus…

Addition of New Properties to Replenish Declining Assets

  • Consumes Cash Resources
  • Commands Management Attention
  • Requires Innovation Culture & Risky Development
  • Successful Companies Balance and Manage Both for Long-Term Sustained Performance

Startup: Identify Value, Build an Exploitation Capability

  • Target Sources of Value

  • Secure Investment for Initial Development 

  • Define Functional Requirements, Acquire Access to Resources

  • Build Initial Structure with Specialists who Double as Generalists

  • Secure Substantial Investment for Commercial Venture

  • Transition Initial Structure and Build Out Commercial Structure

  • Gain Profitability and Self-Fund or Give Up Substantial Ownership

Challenges of a Startup Company

  • Conceive &  Elaborate Fundamentally Sound Technological Assets that Create Commercial Value

    • Meet Important Human/Market/Customer Needs, Creates Multiple Offerings, Provides Competitive Advantage (e.g., IP, superior value propositions), Attracts Investment and Enables Business Expansion

    • Obtain Long-Term, “Patient” Investment & Build “Fundamental” Team—Failure can Result from Insufficient Rigor—Business Opportunity Loss from Excessive “Polishing” 

    • Be “Right at the Start,” with Viable Concept—Midcourse Change Difficult after Substantial Development

                • ➢AND

  • Develop Commercial Scale Production & Delivery

    • Requires “Practical Team,” Operational Organization Structure

    • Timing is Critical—Investment at Risk if Fundamentals Change

  • Resource Demands for Development

      • Dramatic Increase in Investment as Launch Nears

                  • AND

  • Building Corporate Framework to Support Venture, and Developing Markets for Products and Services

                • ➢AND

  • Need to Secure Funding Throughout Venture Life  to Sustain Operations

                • ➢AND

  • Race to Profitability to Minimize Debt and Dilution

Successful Companies Demonstrate High Value Creation and Deploy Enduring Competitive Advantage, i.e. Margin of Safety

 

Startup Company Challenges in Summary

  • Build an Airship while You’re Flying it

    • Land it Safely,

    • Identify the Most Desirable Destinations,

    • Build a Fleet and Launch a Profitable Passenger Service,

    • Grow to Accommodate Increasing Traffic;

      • OR, Said Differently…

  • Craft an Air Transport VISION—Wherein Enormous Value Lies

  • Dedicate Yourself to the PURPOSE of Providing Rapid Transport

  • Undertake a MISSION to Create Value for all Stakeholders

  • Establish a STRATEGIC INTENT of Building a Profitable Business (define scope, magnitude, timing, technology, value proposition, markets, customers, risk, rewards, cost, competitive advantage)

  • Define the STRATEGIC OBJECTIVES that Must be Achieved

  • Build the CORPORATE STRUCTURE

  • Build and MANAGE According to Your Intent Within Your VALUES

  • Never Give up—Climb the Wall to Catch the Ball!

  • Successful Companies Demonstrate High Value Creation and Deploy Enduring Competitive Advantage—Margin of Safety

Building a Corporation is a Supreme Case of Intellectual Downstreaming!

Ninety Percent of Startups Fail, why Bother?

Some Entrepreneurs may Build for Personal Reasons, but…

Startups that Succeed Bring Great Value!

Have an Idea for a Startup Company and Want to be a Founder?

Here’s an Excellent Book for Startup Founders and a Sampling of its Message 

Take time to get to Know the Work of Noam T. Wassermanm, Dean of the Yeshiva University Sy Syms School of Business. Previously, he held the position of Professor of Clinical Entrepreneurship at the University of Southern California and the director of USC’s Founders Central Initiative.

His Book, Available from Amazon.com and other Booksellers

The Founder’s Dilemmas: Anticipating and Avoiding the Pitfalls That Can Sink a Startup (The Kauffman Foundation Series on Innovation and Entrepreneurship)

  • Founders Usually have to Choose Between Becoming “Rich” Versus Remaining “King”

    • Outside Resources Help a Founder to Reach Maximum Potential, but Reduce Control

    • Lack of Outside Resources may Limit Success

  • Success as Founder-CEO can get the Founder Fired

    • More Likely in Fast Growing Company

      • Skills Can’t Keep Up

      • Fast Growth Fueled by Outside Capital Externalizes Control

  • >50% Founders Replaced as CEO by 3rd Round of Financing

    • Leading to More Outside Control

Can Nature Teach us Anything about Finding new Business Opportunity?

A Brainless Single-Celled Organism Just Might Teach Us  a Thing or Two.

Physarum polycephalum, Commonly known as Slime Mold is Highly Systematic, Efficient and Effective in Finding new Opportunity–Food is its Opportunity. This, Easily Visible to the Naked Eye, Single-Celled Organism feeds on Microorganisms that live in any type of dead plant material. To find Food it Systematically Extends its Tendrils to Investigate the Entire Search Area. Where Food is not Found the Organism Leaves Behind a Slime Marker as a Reminder not to Waste Energy Going there Again. It then Grows on the Shortest Path to the Food Source. Watch Nova scienceNow Video.

For Physarum polycephalum, Oatmeal is a Special Treat, one that Scientists use to Study its Behavior.

Light Damages the Organism, so it Prefers Dark areas—and Exhibiting Behavior not Entirely Unlike Business Development Personnel—it Senses and Always Prefers the most Lucrative (highest concentration) Opportunity (illustration at left below.)

Also, not Unlike Profit-Focused Business Development Personnel, it will Risk Incurring Damage to Pursue a Truly Exceptional Opportunity (illustration at right below).

Okay, so what might this Organization Teach that Could Apply to Industrial Innovation?

  • Cast New Opportunity Net Widely to “Map” all Likely Areas Initially without Investing Excessive Resources

  • Mark Location of  Areas of Promise, Remember the Unpromising Areas and Don’t Cover that Ground Again Unless Some Beneficial Change Occurs

  • Take Prudent Risk for High Value Opportunities 


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