Hello, my name is Jean-Pierre Détrie, I am Professor emeritus of strategy in HEC and I will look over the essentials of strategy for a technological company with you. You want to create a technological company. Congratulations! But, do you know what to expect? Do you know where to go? Do you know where to start? We will help you ask the right questions. This is indeed a crucial point. Most of the mistakes that people make in management don't come from wrong answers to clever questions, but from right answers to wrong questions. Yet, people tend to spend more time looking for the answer than identifying the relevant questions - you probably already noticed that. So, I suggest you to lay down a few milestones to guide your reflection. First, three fundamental pillars for your project. Then, a few instructions. Finally, a very important question; the understanding of the market. There are three fundamental pillars for your strategic project which are like a tripod on wich your project can be stable. I called this three pillars, by semantic analogy, "savoir faire", "pouvoir faire" [can do] and "vouloir faire" [want to do]. Let's start with what seems to be the most important to me; "vouloir faire". What is it about? Everyone has fundamental aspirations. People probably have a vague idea of the desired configuration of the project, they usually have a more precise idea of undesirable situations. For example, I don't see myself being head of a factory - would it be a high tech one, or a distribution network or a luxury one. I don't see myself leading a business army. There is no way that I will give up my research atcivity. I don't want to depend on financiers who would tell me what I have to do. We keep working on design, this is where we are the best. You already heard those remarks, or you maybe even pronounced them. It is obvious that those wishes will have an important affect on the construction of the project. "Vouloir faire" expresses the aspirations of the management team. The second pillar of the project is "savoir faire". It is the heart of the project, its most visible expression. The planned offering is based on "savoir faire", the skills of the founding team. As this is about technological projects, scientific and technical skills are the essence of the project. However, a fundamental question will need to be quickly asked: will the pictured configuration be implemented without any additional competence missing at the beginning? Most of the time these are businnes competences and sometimes financial competences. Finally, you will have to judge if these missing competences are enough important to be held by a co-founder or if you just need to employ a collaborator. Finally, the last pillar is "pouvoir faire". It refers to available means and ressources. Human ressources, financial ressources. Time is often a forgotten question. How much time do we have to complete this project? Who in the founding team will have time to develop the offer, seek funds, contact the first costumers? We must distinguish the available ressources and the ressources that we can acces and that we can use if needed. Finally, here is a question to keep in mind. What should prevail? The available means or the conducted strategy? Should we adapt the strategy according to the mean or, on the contrary, determine strategy and then define the mobilised means? In a technological project - priority of the founding team - financial means are generally limited and way below the requirement. So it's important to be conscious that the founders won't be able to remain predominant for a long time as they will need investors to help them complete the project. I urge you to ensure the overall coherence of the project, to check that the three fundamental dimensions are well balanced. This will allow you to clarify the market position of your offer so identify the best place to occupy, the one that corresponds to your tripod. In the value chain - design, manufacturing, sale, costumer service - you will define what can or can't be done. Are we present throughout the chain? Is it better to specialise and outsource? Let's now talk about some fundamental principles. I selected four. The first one is aim for victory. If you decide to enter a particular industry, on a specific market, this isn't to have a marginal position, to keep being a small player. You are rightly convinced of the quality of your innovation, so you must convince a large percentage of your potential costumers to choose your solution. Of course, you need the required reccources and competences to do this. If you don't have them, or you can't get them, then give up. Your goal musn't be to be a marginal competitor, you wouldn't go through the knock-out stage. Be careful, don't confuse ambition and projection. For the sake of prudence, the founding team often makes a business plan that often has objectives way below the ambition. Expecting to hold 2% of the market three years after launch is having the ambition to be marginal. But it is also admiting implicitly that innovation is not so attractive. The second principle is to build on its strengths. Identify the key strengths of your project, the caracteristics that make it a competitive offer. Look for the points of differentiation which will make the difference with competitors. Invest on these key strenghts to increase the difference. Your project obviously has some weaknesses. Try to identify the ones that create a real handicap in front of your competitors and, only in this case, invest to eleminate them. You can ignore the weaknesses which are not a handicap. The third point is to estimate the riks. This can be a delicate question. Of course, any creative project includes risks, so this is not about eliminating them, but comprehend them and minimise them as much as possible. Two dimensions can be taken into consideration for this. Visibility: how reliable can changes in the environment be predicted? What is the degree of technological uncertainty? So, do we see clear enough through space and time? With this more or less important state of uncertainity, what is the degree of flexibility of the project? Can it be easily reoriented, by changing the structure? It is easily understandable that a flexible project in a predictable environment carries a few risks, whereas a non very flexible project in an unpredictable environment is very risky. Visibility might be an external data on which the team can't do much, but it can act on flexibility by avoiding irreversible decisions by limiting the overly rigid investment. Thus, outsourcing specific fonctions can be a good mean to increase the flexibility of the project. The last principle is to be ready to question your own strategy. There is nothing worse than to keep going on a strategy that is already known to be doomed. You can't win against the market, against the costumers, against more powerful competitors. First, you'll try to adapt the project to environmental conditions by redifining the target costumers, the ways to touch them, or even by changing the business model. In some cases, it is very wise to stop a project at the right time, as instead of wearing yourself out persuing an elusive goal, you can redirect the energy for a new project. To get visibility for the project, you must understand the market dynamics, understand what will influence its development. This is a first notion that is easy to understand, but that can lead to many traps. First, it is very important to distinguish volume growth and value growth. The evolution of prices is between these two. This distiction is very important to organise a project. If the market is in volume growth the offer has to follow. It is therefore necessary to invest in capacity and financing of working capital. To finance these investments, the company should be able to rely, at least partially, on its own profitability. So, it should be supported by a favorable price behaviour. But it can be a strongly volume growing market and have a low value growth. In this case, you need to be able to invest while its margins decrease, unless the costs are reduced. So it is crucial for the success of the project to closely monitor the evolution of the volumes, of the prices and costs. The growth of a market usually follows an S-curve. Let's concentrate on the first two phases; start and growth. The growth dynamics depend on two phenomena: penetration and consumption. In other words, the number of costumers and the consumption of each of them. So the market can grow either by increasing the number of costumers using the product, or by increasing their consumption. Two fundamental questions remain: how fast will the offer enter the market? And, second question: at what level of penetration will growth slow down? Knowing that a market is rarely 100% saturated, what is the maximum level of penetration that can be reached? Finally, subsidiary question: On what timescale? Will we saturate very fast or very slowly? Another fundamental phenomenom is substitution. Generally, a start up arrives on the existing market with a more or less innovative offer. So it will present a subsitute of what already exists, and careful, something always exists. You may think that your innovation will solve a very important health or safety problem, for example. So the costumers should rush to buy your offer and leave their old behaviours behind. You will have to manage to subsitute your offer to the old one, even if the old behaviour was not to do anything. You will have to convince people to change. The growth of your project will depend on the speed of this substitution. So it is important to understand the obstacles, the reluctances and to deeply analyse the decision-making process of the buyers. Be aware of the psychological obstacles. Habits are hard to change, because the customer must unlearn a practice that always satisfied him/her and adopt a new techonology, a new way of doing that carries risks which are sometimes too important. This is a topic that Pofessor Santi will tell you about. But all this must be qualified. Indeed, costumers don't have homogeneous behaviours. Of course, there are different kinds of costumers so several distinct markets, several targets. So you must segment in order to refine the analysis and your business model. What consequences can a forecasting error have? Let's imagine that the initial plan is represented by the blue curve and that reality is represented by the red curve. Two major consequences appear. On a given date, incomes are not realised. The number of costumers, and so the sales revenue, are way below the forecast. Moreover, if the company has commited the ressources to cope with the anticipated level of activity, it suffers industrial and business overcapacity. The situation can be dramatic. You will have to be flexible and market-driven. To do this, pamper your first costumers. They will be demanding, but they will help you develop your offer, they will make you progress. Furthermore, they will be your most loyal defenders, and often your most efficient commercials. Finally, as a last recommandation, Time horizon management can be a delicate problem. You will need to insure, at the same time, short-term success, that the first products work correctly, that you get approvals, that the first clients are satistfied. And, at the same time, make the necessary decisions to ensure the development and the continuity of the project, which means to work with technich to perfect the development of the offer, write a partnership project and take part in the different events aiming to raise funds.
