BIG Big Idea Group Grou Gr oup p 5 – MT MTII
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Company Overview
Big Idea Gr G roup at a Glance
Founded 2000 Intermediary company between investors and idea-buying companies Assist large manufacturing & retail companies in their innovation efforts Use holistic process to use ideas as resource and transform them into valuable products Start business in Toy industry
Offering companies a new way of managing innovations
People Be Behind the Scene Michael Collins (CEO & Founder) Deep insights in venture capital industry due to former job at a leading VC firm Founder of a specialty toy company with award-winning product lines MBA from HBS Entrepreneurial spirit & innovation George d’Arbeloff (Chairman of AB) Deep insights in equipment manufacturing & service industry Established manager with long business experience
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BIG’ss Philosophy of Inventions & Problems of Large Companies BIG’ BIG‘ss Ph BIG‘ Phil ilos osop ophy hy & Understa Unde rstandi nding ng of Inv Invent ention ionss
Problems Proble ms of Prod Product uct Dev Develo elopme pment nt Departments Departm ents of Large Compani Companies es
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Inventions are popping-up in different places
Concentration on own ideas to evolve existing product lines
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Inventions are unpredictable
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Inventions don’t only come via well-founded product develop departments within large companies, but also from independent thinkers
Wrong investment decisions because employers are emotionally down & drained by their product category
Different companies need different investments in product development (e.g. for creating prototypes)
Exclusion of thousands of individual “tinker-ers” & independent innovators generating new product ideas
BIG taps into & seeks for entrepreneurial power of legions of individual inventors
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Toy Industry as Starting Point for BIG – An Overview
Toy In Industry at at a Glance
Market size: prox. $ 30 bn. (in 2000) Multiplicity of industry segments Video games Fashion dolls Plush toys Skating accessories … Retailer: from large, well-known retailers (e.g. Toys Toys “R” us) to smaller retailers Retailers purchase toys from many different distributers & wholesalers Toy producers range from large companies like Hasbro or Mattel to small niche players like Kid Galaxy
Trends in Toy In Industry
Kids behavior and wishes are changing due to faster development, replacing toys with sport & music earlier
Introduction of high-tech gadgets and products (e.g. CD or cell phone) gaining attention from kids and stimulating kids wishes & demand
Personalization & niche markets becoming a new trend and tackle traditional mass market
Toy manufacturers and retailer lacking new innovation & fresh content 4
BIG’s innovation process
STEP 1
ST EP 2
ST EP 3
ST EP 4
Hunts Outsourced Flow Professional Inventors Industry Outreach
WINNOWING
L A E D
REFINING
CAPTURING VALUE
20-30
5-6 deals per year per vertical
Orphane Orphaned d Product Productss & Ideas Internet Request Programms s a e d I
1000 +
100+
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STEP 1 Over Ov ervi view ew of El Elem emen ents ts Hunts
Roadshow for finding ideas and entrepreneurs Inviting local entrepreneurs showing their concepts to industry experts + pooling inventors
Outsourced Flow
Cooperation with major toy companies Unsolicited idea submissions each month, BIG helps in evaluating, winnowing and refinement + avoids good ideas from “ slipping through the cracks”
Professional Inventors Inventors
Network of professional investors through hunts and WOM + Helped BIG connect with more inventors
Industry Outreach
Publishing research on industry trends + Giving BIG awareness and validation of trends
Orphaned industries and Ideas
Products never brought to market/ stopped developed/ promotion + Products are revitalized through BIG process
Internet request programs
Solicitation of suggestions from inventors through website and newspaper +helping big adding ideas to lines under consideration, more targeted concepts 6
STEP 2 & STEP 3
STEP 2: WINNOW
STEP 3: REFINE
Manageable number of ideas for refinement Pursue highest potential ideas Hunts: Evaluation by panel of industry experts incl. Collins
Breadth of knowledge Reduced personal bias New mix of panelists for each event Approximately 15 panelists Short form filled out for every invention
Other idea sources: same criteria
Close cooperation with inventor Make concepts more appealing to kid’s companies
Draw on BIG’s knowledge of what companies look for Production of appropriate presentation material
3-6 months of refinement
Company research Repositioning Design Engineering Field testing etc.
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STEP 4 & Key Success Factors
STEP 4: CAPTURING VALUE
Key Success Factors of Process
Three ways of monetizing the product
Licensing the product to a company Develop the concept internally as a private label Bundle several concepts to sell to entrepreneur
Network of professional inventors Broad variety of backgrounds and perspectives in panels Constantly looking for new “athletes” Collins himself
Monetized 35 different products through five contracts (Sept. 2001) Licensing deals:
Advance payment Royalty Guarantee
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Why does BIG seem better able to identify and bring to market innovative toy concepts, whereas the major toy companies feel they are in a period of “lack of innovation”
How proprietary or defensible is i s BIG’s system? Could one of the major toy companies replicate it? Why or why not?
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Dimension
Definition
Example
Offerings
Develop innovative new products or services.
Looks for innovation from the most unpredictable ways. Captures the power of parallel processing for innovation from people from outside an organization who might not be affected by the organization’s orga nization’s critical data like sales information, etc
Platforms
Use common components or building blocks to create derivative offerings.
Designed the business model like that of a venture capital business with little overhead.
Solutions
Create in integrated and cu customized of offerings that solve end-to-end customer problems.
Raw ideas , unsolici unsolicited ted inventor inventor and vendor submissions submissions which toy companies companies get frequently frequently are forwarded to BIG BIG then performs a feasibility check and refining of the ideas
Adapted from : Sawhney et, al. (2006). The 12 different different ways for companies to innovate.
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Dimension
Definition
Example
Value Capture
Redefine how company gets paid or create innovative new revenue streams.
Licensin Licensingg a product product to compan companyy (advances, royalty, guarantee for both BIG and inventor) Subcontract a product as a private-label Bundling of many concepts to sell to entrepreneurs
Processes
Redesign core operating processes to improve efficiency and effectiveness.
Acts as a intermediary intermediary between inventors and idea-buying companies (manufacturers/retailers)
Supply Chain
Think differently about sourcing and fulfilment
“Innovation “Innovation engine” engine” tries to capture innovation and idea flows from the broadest range possible : hunts, outsourced flow, etc.
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Dimension
Definition
Example
Networking
Create network-centric intelligent and integrated offerings
According to Collins, “…you can’t replicate the human side of business.” Backed by his own charismatic personality, personality, inventor’s approach and good relationship with inventor communities, BIG has created a valuable network of manufacturers, retailers, entrepreneurs, inventors, etc.
Brand
Leverage a brand into new domains
With the foray into the Home and Garden business, BIG would be venturing into a bigger market and would turn profitable profitable provided provided it applies applies the the business sense that has has enabled it to succeed in the toy industry
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How proprietary or defensible is BIG’s system? Could one of the major toy companiePersonality, s replicateCreativity, i t? W h y o r w h y n o t ? Intelligence
VC experience
Collins Domain experience
Perspective of the Inventor: Higher probability of ‘idea to revenue’ conversion with BIG than any single toy company Perspective of a Toy Company: Engaging with BIG would provide readymade and better solutions cost effectively compared to trying to replicate the model on its own More cost effective for the toy companies to pay for licences than take up the entire work on its own – huge work and time involved in idea screening to idea refining, testing, customizing. Even if it could, the solutions would not be as great and out of the box
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How proprietary or defensible is BIG’s system? Could one of the major toy companies replicate it? Why or why not? Lower Transaction Costs and Economies of Scale: Analogous to distributor or wholesaler in SCM Company1
Inventor1
Inventor2 Inventor3 Inventor4
Company2
BIG
Company3 Company4
• Ad-hoc rotating panel sourced sourced from multiple associations associations and companies across the industry -> Impossible I mpossible to replicate for a single company owing to (i) Industry competition, (ii) Full time employment (HR issues) • In absence absence of ad hoc rotating rotating panel, panel, seasoned seasoned thinking thinking sets in Brand already established as an idea incubator incubator company Finally, Finally, even BIG is facing considerable challenges trying to t o replicate its own model for a different different industry – just about sums it up! 14
Can BIG replicate its system in other industries such as lawn and garden?
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Major Constraints Availability of a pool of large inventors: Products which involve high costs like engines etc., find less tinkerers than low cost items like toys. Hence the pool of ideas is inve invers rsel ely y prop propor orti tion onal al to cost costs s invo involv lved ed Finding the right Screeners/ winnowers : Winnowing is the crucial aspect of this model. It requires, different personality with vast industry experience, intuition, know knowle ledg dge, e, judg judgme ment nt and and tast taste e Tacitness and specificity Involved: The process involves application knowledge which is tacit in nature which cannot be simply transferred to all industries and is more subjective tive The The config figurat ration of people, proc rocess, ss, scree reeners, rs, Managers , Innovators tors and giving them a fair share , companies all involved form an ecosystem Idiosyncratic nature of these eco systems : The technologies involved, level of manufa manufactu cturin ring g capaci capacitie ties, s, constra constraint ints s Network Netwo rk Extern Externali alitie ties: s: Externalities play a huge role in these system and carries risk of netw networ orke ked d syst system ems s 16
Adoption of Process for Garden and lawns lawns
Basic process applicable in any industry Sponsorship gives a more solid base compared to angel funding Low Revenue/High profit model combined with low investment in assets gives BIG good flexibility Garden and lawns apparently have a large pool of inventors
Finding “Mike Collins” in the home and garden segment is crucial for success Right of first refusal for Skil-Bosch might handicap BIG’s process of finding the right partner for the right product ROFR for Skil-Bosch might limit the will of cooperation from inventors and/or potential qualified panelists
BIG may replicate with w ith gardens and lawns, however, however, success is i s subject to the leadership and people involved involved 17
THANK YOU !!
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