Technology-based Success

The success of this type of venture comes from high levels of Core Competence, Product Market Match, Net Buyer Benefit, Margins, Volume, Purchase Frequency, Long-term Need , and access to Resources.

Ironically, the reason that it is not higher on the "Keep It" axis stems from its source of strength: technology. And, since the pace at which many technologies change is rapid, levels of Scarcity and Non-appropriability erode as the "newness" of an initial New Combination fades. Thus, this type of venture most likely will have medium levels of New Combination and Ambiguity, supported by quite low levels of Uncertainty (insurable risk).

Figure 15: "B/K" Diagram

Figure 16: Target "Bulls-eye" Diagram

ADVICE:
To foster the longevity of successful technology-based ventures, the key is to utilize presently plentiful resources to work "on" the business--creating a venture that encourages more New Combination-based Innovation , which in turn forms the foundation of Scarce, Non-appropriable products and/or services.

This approach starts with an aggressive approach toward the management of Ambiguity, which if addressed while the venture is thriving, will continue to generate adaptations of the venture to its rapidly changing environment.

CASE STUDY EXAMPLE:

Millennium Software -- Technology-Based Success
Eric Schmidt was reflecting on the tremendous success that his high tech software company had enjoyed from humble beginnings. But even in success, he could not let up, and this was beginning to tire him out. Millennium produced software for the high flying telecommunications industry. Millennium products were part of the computer telephony business; a new but tremendously competitive market, growing exponentially, with five or six firms competing to be the industry leader.

After graduating in computer science in 1989, Eric thought that a rest was in order and took up residence in Colorado to devote his main efforts to skiing and mountain biking. To help pay for his choice of lifestyle he took a job in a local computer store selling computers and keeping his skills current. During this time, Eric began to appreciate the substantial changes on the horizon when telephones and computers would merge.

The merging of telephony and computers became his passion and he devoted most of his spare time towards developing software for the integration. His first real business break came when he was able to convince a fellow classmate who worked for a large telecom supply company, that his software could open up new markets. The telecom supply company liked the idea and within two years Millennium had four other major accounts under development. Although his product was new to the market when it was introduced, the competition was close behind and had developed a comparable product within months. The battle for development of the best product was fierce. The field was revolutionary and would be around for a long while, but the individual products had a relatively short life cycle. The customers loved Eric's products because they incorporated greator flexibility at a lower cost.

Millennium generated large profits, increasing substantially each year. Although competition was intense, the demand was incredible. Rivals competed on product and not price. Eric felt that if Millennium stumbled and didn't keep near the top of the heap with their product, they would run out of clients quickly. Competition, industry mergers, and government policy could create major threats very quickly. Eric generated a network of allies who made a point of keeping him up to date on competitors' products, government policies and corporate gossip. There was no room for complacency in this business.

Millennium's software was not copyright protected. Protection in software was a lengthy process and by the time a competitor could reverse engineer the product it would be outdated and replaced with a new version. Millennium had a little breathing room with its clients, as compatibility and retraining issues made switching products costly. However, Millennium only had a few very large customers, so there was always a risk that a merger or strategic alliance could reduce the number of clients and lead to demands for lower pricing.

Eric was slightly uncomfortable with the work habits of his crew, there seemed to be a lot of paid break time and unnecessary perks. But, projects were always changing, crews were switching personnel to adapt to the new projects, and the stress level was high, so Eric kept his thoughts to himself and took consolation in the high profits Millennium was making.