Model Venture

When a venture is built so that each of the key elements is optimal, it is a Model Venture. This does not mean, however, that the venture is perfect. Instead, it means that the venture is optimally situated to fully take advantage of (1) venturer expertise, and (2) stakeholder support.

Figure 27: "B/K" Diagram

Figure 28: Target "Bulls-eye" Diagram

ADVICE:
Model Ventures by definition are self-observing, self-evaluating, and self-reinforcing. Hence, these behaviors should be encouraged.

Also, entrepreneurs should utilize the foundation provided by a Model Venture to support refinements in venturer expertise, and in better managing relationships within their stakeholder environment.

CASE STUDY EXAMPLE:

Sultan Circuits -- A Model Venture
In a thick, Hungarian accent, Nick Habsburg addressed a smartly dressed group of MBA students in a classroom at the University of California, Berkeley campus, in 1993. "Japan is staged to turn the US into a third-rate techno-colony", he declared.

His fears were well founded. His company, Sultan Circuits, had pioneered D-RAM chips – but a number of Japanese firms had managed to reverse-engineer his product to the point that D-RAM chips had become an everyday commodity. Sultan Circuits' Board of Directors demanded that the Company take decisive action before they lost more profits. Sultan Circuits was left with no other option but to abandon the market that they had pioneered in search of more favorable climes. The company fely that the computer industry was turning toward microprocessor circuits. As a result, Sultan made a high stakes gamble to pursue that emerging market, and it seemed to be paying off.

BACKGROUND
Twenty year-old Nick Habsburg arrived on American soil in 1956, after fleeing civil and political unrest in Hungary. When he stepped off the ship he had $20 in his pocket, the clothes on his back, and a shaving razor. Nick found work quickly, and managed to support himself while he earned an engineering degree. After completing the degree, Nick worked on a number of small electrical engineering projects. In 1964, Nick teamed up with fellow classmates Gino Mardi and Stephen Loyce, to work on a concept that would become revolutionary. Nick, Gino, and Stephen successfully created the first integrated circuit. Recognizing this as a monumental accomplishment, the threesome set up Sultan Circuits to market the products. Sultan was quickly taken under the wing of IBM, as their main supplier of integrated circuits.

TODAY
Sultan Circuits developed a simple strategy: lead the market by force, speed, and technological development.The Japanese, the clone makers, Congress, and the rest of Silicon Valley listened when Nick spoke. When required, his firm successfully fought legal battles and suppressed firms that infringed upon Sultan's copyrights.

The Sultan Board shuddered at the thought of a proposed merger between IBM and Apple to create a new crop of chips called RISC- for 'Reduced Instruction Set Computing' - to be used in desktop workstations. In response to the threat, Sultan designers developed the Selenium line of chips, which integrated all of the RISC features, and successfully halted the advance. Today, at least 70% of all new computers sold, contain a Selenium microprocessor, and every computer on the market has at least one chip made by Sultan.

Microprocessor development was a lucrative business. Microprocessor speeds increased as the number of transistors on the chip increased. To accomplish this, the transistors had to be packed closer and closer together. This required intensive engineering research and design. Sultan was the market leader, introducing a new line of microprocessors every three years. The blistering pace left clone makers further and further behind with each Sultan advancement. By the time the clone makers reverse engineered the chip in an attempt to catch up with Sultan, a new line was ready to go to market. Each new chip was faster, more reliable, and cheaper to produce than the last; factors which erected larger and larger barriers to would-be clone manufacturers.

Sultan's development and technological refinement of the microprocessor even outpaced IBM, the former industry leader. The new Selenium chips put the power of a mainframe into a desktop system. To keep IBM and other computer manufacturers on their side, Sultan spearheaded a new combination in the computer industry. A series of promotions developed name brand recognition for Sultan's line of microprocessors. A 'Sultan inside' sticker adorned all desktop systems using the latest technology. The name brand recognition made this a key selling feature; consumers wouldn't purchase anything else. Sultan's components became the industry standard, with few other competitors.

Sultan had it critics though. A number of competitors alleged that strategic alliances Sultan had made with desktop manufacturers were restraining competition. The Federal Trade Commission investigated this and numerous other complaints. Sultan pointed to its superior research and development divisions, and the fact that their microprocessors were significantly better than those of the competition. The strategic alliances benefited both Sultan and the manufacturers. They ensured manufacturers access to the limited supply of the fastest microprocessors on the market, and gave Sultan the financing and futurity to continue developing the technology. Sultan argued that their 70% share of the market was natural; that it was due to their technological leadership, and not to anti-competitive practices. The courts agreed.

In 1996, Stephen Loyce was killed in a skiing accident in Switzerland. The initial market reaction was rather harsh, but quickly corrected itself upon realizing the precautions Sultan had made for such a calamity. The ownership was able to recover quickly, and management was relatively unaffected. Sultan completed the year with profits up 20% over the previous year.

Sultan's share price doubled in nine months. Sultan outspent all other microprocessor manufacturers, domestic and foreign alike. In 1993, they poured $2.5 billion (about 43% of 1992 revenues) into plant improvements, research and development. When talking about the highflying share price, one Sultan employee summed up the atmosphere like this, 'The higher the stock price goes, the harder I seem to work.' This commitment is paying off. Today, Nick Halsburg smiles when he comments on his statements five years ago. In a classic understatement, he admits, 'Perhaps I was a bit pessimistic.' Sultan seems poised for a bright future, as a leading Silicon Valley tech firm, garnering greater market share, and shinning in the eyes of its shareholders, employees, and Nick Halsburg himself.