Finding Fertile Ground: Identifying Extraordinary Opportunities for New Ventures: A book by Scott A Shane

  Hasnain Zaheer recommends Finding Fertile Ground: Identifying Extraordinary Opportunities for New Ventures a ‘must read’ for (Web) technology entrepreneurs. Read his full review.      A shorter and simpler version of this review appears on Hasnain Zaheer’s Web site.

Scott A. Shane’s book on founding a new technology based venture is a potential goldmine for anyone involved in a technology enterprise and especially one who is contemplating a high tech venture (including Web technology enterprise).

The principal premise of the book is that your success as an entrepreneur is substantially determined by the industry you enter, the characteristics of the industry or the products pre-ordains it to a higher degree and better chances of success.

The book, in its subsequent chapters guides you to find if the venture or product that you have in your mind has the attributes that places it favourably for success. It probably looks quite simple here but the book explains its concepts and argues its points very well. The logic throughout the book is simple but solid. An audio CD with the author’s interview accompanies the book which contains a succinct explanation of all key points by the author.

10 major actions and conditions determine the success of a new technology venture. As a new technology entrepreneur, have you answered these 10 questions?
1. Is the venture in the right industry?
The author used research to show that ventures in certain sectors invariably have a higher success rate than others. Restaurant is his favourite example of a venture that has a higher failure rate.

The following conditions determine whether the industry is dominated by creative destruction or accumulation and high degree of former suits a technology based venture:  

• Knowledge conditions - A suitable industry for a technology based venture is one which where there is low complexity of production processes (think Boeing as opposite), continuous new knowledge creation (think Web technologies) and high codification (think open source)
• Demand conditions - size growth and segmentation
• Stage of product life cycle - Age of the market, dominant design is not fixed meaning there are no dominant protocols and standards
• Market structure – A suitable industry for technology venture is one with labour intensity rather than capital intensity, low advertising requirement, less concentrated and small average size of firms. 

 
2. Have you identified a valuable opportunity?
New opportunities are thrown by technological changes, political regulatory changes especially those driven by deregulation, social and demographic changes and a discussion of where the locus of innovation is located.
3. Are you managing technological evolution?
Are you targeting technological transitions or just incremental change? There is a discussion of Foster’s S-curve and tip not to enter too soon or too late in the technology evolution. Can you make your product a dominant design? There is a discussion of technical standards, switching costs and network externalities.

4. Have you identified and are satisfying real market needs?
Market research cannot get information about the needs for truly new products and intuition is often helpful. However, unsolved problems, complaints and unfulfilled wishes provide windows to the market, among others. Personal selling is key and be ready to lower the prices to transition to mainstream markets.

5. Have you taken care of adoption?
There is a detailed review of diffusion and substitution, transition of sales from innovators to majority or ‘crossing the chasm’ and S-shaped curve.

6. Have you exploited established company weaknesses?
Established companies have several positives of cash flows, learning curve, reputation, scale but they leabve gaps in terms of their focus on existing capabilities, need to satisfy existing clients, constraints of organisational structure, need to reward people to do their job well not think out-of-the-box, and product development in a bureaucracy. New firms can outcompete them by capitalising on discreteness, people intensive processes and exploit general purpose technology.

7. Are you managing your intellectual property?
Deter imitation by secrecy. Tacit knowledge is difficult to imitate as compared to documented knowledge. Protect your trade secrets by NDAs, secrecy policies and non-patented IP. Evaluate patents as a means of protection but recognise that ideas and business methods are often hard to defend.

8. Have you got a plan to appropriate returns from innovation?
There is a discussion on obtaining control over resources, reputation, learning curve, first-mover advantage, complementary assets and competitive advantage.

9. Have you chosen the right organisation form?
Depending on the cost of exploitation, an entrepreneur may choose to own the whole value chain or use market based methods such as licensing their inventions. There is a discussion of information problems, disclosure paradox, franchising, share of profits, and points to think about.

10. Are you managing risk and uncertainty well?
Besides a discussion of real options and scenario analysis, start-up problem and its issues of search for information, disconfirming information, variable costs and fixed costs and risk perception are covered.

Each of the above are their own chapters in the books, so a few lines of summary for each chapter is surely not enough information but I hope the depth and value of information in the book is just right for any Web entrepreneur.

Do you know of any other similar books or resources? Let the community know. Please mention your resources and tips in comments.

Rate this article

Posted in categories: Web business and marketing strategies  

Tags: finding fertile ground scott shane technology based venture technology enterprise tech venture

Leave a comment

Thanks for your comment. It would appear in this space soon.

Please login to add your comments

First Name:

Last Name:

Email:

Website:

Comments:

  Make me a member in WebBusinessAge