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The Entrepreneurial Manager Harvard Business School 20 April 2001

Entrepreneurial Manager Tool Kit Managing Relationships. The Entrepreneurial Manager Harvard Business School 20 April 2001. The Business Development Puzzle. Five years ago no one had heard of business development. Today - Critical function for many companies

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The Entrepreneurial Manager Harvard Business School 20 April 2001

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  1. Entrepreneurial Manager Tool Kit Managing Relationships The Entrepreneurial Manager Harvard Business School 20 April 2001

  2. The Business Development Puzzle • Five years ago no one had heard of business development. • Today - Critical function for many companies • 12% of 199 HBS grads went to business development (higher than marketing or general management) • VP Biz Dev key member of management team • Why?

  3. Partnerships have become... • More numerous • More strategic • More diverse • More novel • More varied in form • depth (gold, silver and bronze partners) • duration • type (licensing, investment, alliance, acquisition)

  4. The Business Development Process Develop Business Model Identify Opportunity Identify/Screen Potential Partners Structure Deal Manage Relationship Clearly Articulate Opportunity Evaluate Opportunity Map needed resources/skills Decide which to do in-house and which outsource Identify potential partners Apply preliminary screen Evaluate finalists on key criteria Evaluate alternative forms -Licensing -Equity investment -Alliance -Joint-venture -Acquisition Structure contract to manage risks -Transfer -Reduce -Share Negotiate Deal Manage portfolio of ongoing partnerships -Key metrics -Individual and portfolio level Manage relationships -Ownership -As they evolve -Multiple points of contact

  5. Map Keurig’s Business Model Office Manager Brewer Vendor (Vandelay) Office Coffee Supply Distributors Brewers $650-$825 Brewers $1000 Brewer at ? K-cup @ $0.50 ea.. Line Vendor (MTS) $500k-$700k Premium Coffee $0.04 Royalty per K-Cup K-Cups @ $0.25 ea.. Filler Line Out of Pocket Cost = $0.13 per K-cup Coffee Drinking Employee Starbucks Alternative = $.75-$1.00

  6. Identify Gaps in Guidant Value Chain Distribution, Tech, IP Source Wire Catheter Afterloader ? Guidant Neocardia Novoste Nucletron X ? X X X ? X X

  7. Simple Rules for Screening Partners eBay's Partner Rules Cisco's Acquisition Rules • Have I heard of the company? • Is it a top website as measured by Media Metrix? • Is it backed by sophisticated venture capitalists? • Is it headquartered in a technology-savvy location? • Have they been referred by someone I know? • Shared vision on where industry is going. • 75 employees/75% engineers. • Able to create short-term and long-term wins. • Similarities in culture and chemistry. • Geographic proximity to current locations.

  8. Structuring Deals for Experiments • Neither marriage nor one night stand. • Where are we headed? • What will each party contribute? • What can each party expect? • How do we get there? • Ways to communicate, discuss and interpret. • Governance including decision rights. • What is the timing? • Benchmarks, milestones, targets and penalties. • What is forbidden? • What can we not do? • How do we get out? • e.g., buyout, divorce, shotgun

  9. Managing Relationships • Ongoing management is required because reality is too complex to fully contract. • Guidant’s Approach - Ginger Howard: • Identify an Owner on each side responsible for the contract, negotiation and deliverables. • Philosophical Alignment of People and Business Processes. • Formal Reviews - Milestones, etc. • Constant Communication - Talk every day… • Ruthless Honesty.

  10. Outstanding Questions • How can managers assess whether business development is right for their organization? • How can managers articulate a clear vision for the business development group and tie it to concrete performance metrics? • What are best practices in optimizing each step in the process of identifying, evaluating, negotiating and managing partnerships? • What are the key design considerations for a biz dev group? • Organize by technology, market or deal type? • Optimal level of centralization? • How best to bridge the boundaries between business development and other staff and line units? • How to identify the best candidates, evaluate and compensate staff? • How to use contracts to capture and consolidate learning?

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