Business unit development as intrapreneurship task at MSU and FhG CCD

Index:

1. Introduction:

2. Literature Review:

3. Research design & methodology:

4. Findings / results:

5. Analysis, discussion, interpretation:

6. Conclusions:

7. Recommendations:

8. Bibliography & References

Abstract: If you are an engineer with a great idea and if you have the wish to develop this idea to a great business opportunity, this thesis might be for you. Also, this work can help, if you like to develop a new business and profit center within your company as intrapreneurship task or if you need to develop a new business unit, because it summarizes basic, essential and modern business tools to start your business with. The starting point in my case is an excellent multi-million diamond technology which business shall be diversified. A sustainable business unit and profit center within Fraunhofer in East Lansing and Michigan State University as non-profit organizations shall be established. Starting from an idea generation by using mind-maps the identified ideas will be successively analyzed and developed to business opportunities till a business plan in form of a lean business plan canvas is designed. This work also considers challenges a medical device development typical faces. Market research was applied and typical market research phases and their activities are explained. Modern business approaches are introduced and motivate to fresh up the way engineering research is currently done.

by Tom Zimmermann

1. Introduction:

My very current task is to establish a thriving business unit diversifying the existing multi-million dollar diamond technology at the Fraunhofer Center for Coatings and Diamond Technologies USA and Michigan State University. Diamond research was established 3 decades ago. Due to its attractive properties (transparent, very hard, wide-bandgap semiconductor and excellent heat conductor with large electrochemical potential window and chemical inert and biocompatible) engineers and physicists tried hard to synthesize diamond. But single-crystal diamond bigger than 5x5 mm2 was hard to produce. Electronic diamond devices were produced on small and expensive substrates. The lack of large high-quality single-crystal wafers limited the efforts of many research groups around the world. Nowadays, there are only a few groups left worldwide trying to overcome the technological barriers. There are only 4 research groups in the United States and very few in Europe and Japan. Recently, large scale manufacturing of diamond gem stones was established in Singapore, and China is planning similar production facilities. Those diamond crystals are still small sized and poor in quality. Yes, synthetic diamond is qualitatively far better than natural diamond but the quality is still too poor for electronic applications. Potential applications would be first and foremost high-power devices (DC-DC switches) for electrical cars enabling passive cooling at a compact size. Therefore, reliable mobile power converters with high efficiency could be realized for a multi-billion market. Fraunhofer CCD’s and MSU’s ambition is to be the leading supplier of high-quality 2 inch single crystal diamond substrates for electronic devices. Within three years first substrates shall be commercialized by establishing R&D contracts with the customers. This intrapreneurship task shall expand the diamond applications into strategical economic fields of high potential growth and industrial relevance. If we look into Drucker’s Seven Sources of Innovation [Drucker 2002] with following sources: 1. The unexpected 2. Incongruities 3. Process need 4. Industry and market structures 5. Demographics 6. Changes in perception 7. New knowledge - then I could conclude that changes in the population of an increasingly older demographics ask for process needs in biomedical technology, which generates innovation. Tidd & Bessant identified 10 sources of innovation [Tidd 2015], and one of the sources confirms Drucker’s findings: The need pull – necessity as the mother of invention and innovation. And like Drucker states: “Purposeful innovation begins with the analysis of opportunities”, thus, this thesis looks into the opportunities of potential business fields in diamond technology. Diamond is a great semiconductor material but diamond research is well established over several decades and breakthrough applications are still quite rare. A consequent translational approach shall transform promising research results into commercially available products. Since my business unit will be of a size of estimated 12 employees in foreseeable future the business activities need to focus on the most promising diamond applications considering also the technological background, experience, and network of my newly established unit.

This question shall be answered: Is a sustainable business model in diamond technology possible and how should it be designed?

The hypothesis is: Diamond, with its outstanding unique material properties combined with targeted applications of this material through market research, can solve technical, medical and environmental issues, resulting in a commercially successful and sustainable business model. Whereas the main objective of this work is the development of a Business Model CANVAS for the new business field, the development of "smarter" (Specific, Measurable, Acceptable, Realistic, Timely) targets in economical as well as psychological aspects, and to formulate the strategic positioning of the business field.

2. Literature Review:

The task to establish a business field within an organization is a so-called “intrapreneurship” task and shall be approached by applying classical tools of strategic management and marketing, first. Recent developments related to those analysis tools will be discussed.

Relevant classical business tools are a SWOT- and PESTLE-analysis, the portfolio matrix BCG (Boston Consulting Group Matrix), Porter’s Five Forces, and a value curve competitor analysis.

SWOT analysis (Business-Level) – is a matrix to determine the strengths, weaknesses, opportunities, and threats which leads to an analysis of internal and external factors that can affect a business. Internal factors like patents, location, and reputation are your strengths and weaknesses. You can change them over time. External factors, e.g. market prices, competitors, and suppliers, are the threats and opportunities. You can’t change them. This analysis of the business potential is considering

- external macro-environmental factors (market potential, market volume)by applying PESTLE,
- looks into the potential customers (customer target group, decision centers),
- is doing a self-analysis (know-how, image), and
- identifies the competitive situation (strategy, finances).

This analysis may be worth to apply in developing a new business or to assess a changing environment and can be a component of a strategic planning process, introduction of new products into the market, and establishing new strategic business fields as an independent profit center with a dedicated portfolio (see BCG analysis). The SWOT analysis looks into four dedicated factors:

- Strengths describe the internal positive and controllable attributes of your business and shall be maximized to positively influence the business. Typical questions shall be answered: What internal resources do you have (knowledge, background, education, credentials, network, reputation, or skills and capital, credit, existing customers or distribution channels, patents, or technology)? What do you do good, what adds value to your business and costumer, and what competitive advantages and unique selling points (USP) do you have over your competition? Are you strong in research and development or in manufacturing?
- Weaknesses are internal aspects of your business that detract from the offered value or place you at a competitive disadvantage and shall be minimized. Enhancement of those particular aspects is needed to level with your best competitor. Questions shall be answered: What does your business lack? What factors within your control detract from your competitiveness?
- Opportunities are external factors that represent a great chance for a successful business. Important questions are: How is the recent market growth or have there been changes in the market which create an opportunity? Is timing critical and is there just a limited time window of opportunity or is the opportunity expected to be ongoing for decades?
- Threats are external factors beyond your control that could place your business at risk. Although, you don’t have control over those threads, you might be able to mitigate the risks by a frequent risk control assessment. Who are your competitors (new, existing, potential)? Are there unfavorable trends (supplier prices, availability of raw materials, consumer behavior) or policy/regulatory changes? Risks can be identified by the probability of a risk and its consequences.

With help of those four factors of the SWOT analysis, questions shall be answered, how could we:

a. Use the Strengths?
b. Stop the Weaknesses?
c. Exploit the Opportunities?
d. Defend against the Threats?

Assumptions and critiques: A SWOT analysis can be very subjective and should be just considered as one out of several tools. But simple rules for a successful SWOT analysis can be followed: be realistic, be specific, analyze in relation to competition (there is no point listing an opportunity or strength if the same opportunity or strength is available to competitors) [Clardy 2013]. The analysis should start by identifying product competitors and the core customer values in making buying decisions. Product comparisons are based on empirical assessments, followed by the internal and later on the external analysis [Guerel 2018]. The qualitative examination of internal and external factors should be complemented by quantitative techniques. Still, this analysis can be considered dated and even problematic. The problem is due to its mixture of different time perspectives (strengths and weaknesses are performances of the past whereas opportunities and threats in the market are future characteristics) [Jones 2017] and it mixes idea generation with evaluation, thus it might reduce the range of possible strategies which could be found valuable for the business [Hill-Westbrook 1997]. Also, the simple SWOT analysis will potentially not protect against the next economic crisis or disruptive technology. An appropriate risk management should be in place to identify and protect against complex risks. SWOT analysis should be used with other strategic analysis techniques like Porter's five forces and TOWS analysis [Watkins 2007].

Further development: Once the SWOT is developed and prioritized, you can use them to identify short-term and long-term business strategies. To do so you can overlap all four quadrants with each other in a so called TOWS matrix or Conflicted SWOT [Weihrich 1982]. This results into [fig. 1]: strength-opportunity strategy (use strengths to maximize opportunities), strength-threats strategy (same strengths used to minimize threats), weakness-opportunity strategy (opportunities minimize weaknesses) and weakness-threats strategy (same opportunities avoid threats).

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Fig. 1: Conflicted SWOT or TOWS matrix [https://articles.bplans.com/how-to-perform-swot-analysis/].

Since the biomedical and health industry is considered a potential key industry in the R&D activities, a closer look in applying the SWOT into the health care sector shall be provided. To be suitable for the health care industry the SWOT need to comprise sector specific empirical data. An alternative model should be founded on three pillars (see fig 2): stakeholder expectations, resources, and contextual developments [Wijngaarden 2012].

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Fig. 2: SWOT model for the health care sector comprises stakeholder expectations, resources and contextual factors [Wijngaarden 2012].

Considering the expectations of stakeholders in the operational characteristics of the organization or its performance are central for the survival of care organizations. A stakeholder-analysis, a competition-analysis, or consumer research could identify these stakeholder expectations. Furthermore, it need to be verified if available resources can meet the stakeholder expectations. And contextual factors, like a health network to share resources or trends like economic growth, which influences the budget available to health care, need to be involved in the analysis, since those factors may influence the stakeholder expectations or the available resources. Additional tools like the PESTLE analysis could help to identify relevant trends. A strategic analysis in health care should confront stakeholder expectations with resources and the contextual factors to identify strengths, weaknesses, opportunities, and threats. The required resources can be assessed as strengths or weaknesses. Stakeholder expectations and contextual factors can be assessed as opportunities or threats.

PESTLE analysis (Macro-Level) – PESTLE and SWOT are related approaches to business analysis. Whereas SWOT is a situational analysis tool, PESTLE stands for political, economic, social, technological, legal, and environmental influences on a business (see fig. 3).

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Fig. 3: External environmental factors on a business [http://www.murphymarketing.ie/wp-content/uploads/2015/09/pestle.jpg].

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