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Internet and technology new venture development using Soft OR
European Journal of Operational Research 152 (2004) 571–585 www.elsevier.com/locate/dsw
Internet and technology new venture development using Soft OR Sohail Gondal
1
eBusiness, Barclays Solutions, Barclays Bank, 54 Lombard Street, London EC3P 3AH, UK Received 1 September 2001; accepted 9 September 2002
Abstract The purpose of this paper is to demonstrate how the selective mixing of Soft OR methodologies and traditional strategic management tools cans enhance and enrich the process of new ventures development. This approach, inspired by OrmerodsÕ use of Soft OR techniques in developing an information strategy for Sainsburys [Journal of Operational Research 46 (1995) 277], was developed for the commercial purpose of assisting entrepreneurs build and validate business opportunities in the internet and technology space. The objective of this paper is not to provide the reader with a new methodology, but rather to demonstrate an alternative way in which an OR practitioner can selectively apply different components of methodologies and to share experiences of mixing methods to enrich the process of business model development for any new venture. 2003 Elsevier B.V. All rights reserved. Keywords: Internet; Strategic planning; Soft OR methodologies; New venture development and business models
1. Introduction The late 1990s saw one of the greatest periods of new capital formation in the stock markets history, prompting John Doerr, a partner at venture capital firm Kleiner Perkins Caufield & Byers with over two decades of experience funding industry defining start ups in the technology and internet space, to call the internet [21] ‘‘the largest
E-mail addresses: [email protected], gcs-ltd@ consultant.com (S. Gondal). 1 Work conducted at 179 Santa Louisa, Irvine, California 92626, USA.
legal creation of wealth in the history of the planet.’’ Between 1998 and 2000, 790 technology companies were taken public [19], generating more than $81.5 billion of investment in the process. To put this figure into perspective, this was more money than was raised by technology companies in the United States in the prior 15 years. The fall of these internet ventures, however, has been just as dramatic. Unable to sustain unprofitable venture stage companies, the market has drastically eroded the value of under performers that cannot define their business models or path to profitability. Meeker and Cascianelli [22] estimate that, between the end of 1999 and the end of 2001, $1.7 trillion in market value had been lost by technology companies that had gone public since 1980.
0377-2217/$ - see front matter 2003 Elsevier B.V. All rights reserved. doi:10.1016/S0377-2217(03)00058-4
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The fall of dot-comÕs has lead some to believe that the internet is dead too. Unfortunately, it seems that conventional wisdom has sheepishly followed the hype surrounding the death of the internet in the same manner it did with the internetÕs rise. Daly [13] argues ‘‘the collapse of a few ill conceived or poorly executed business models must not blind anyone to the larger picture.’’ The larger picture according to Fortune Magazine [35] is that the real wealth creation, not the paper profit from artificially and unsustainably high stock prices, is yet to come. Comparing the current internet crash with the Personal Computer industry crash in 1985, when the PC was also written off as a fad, Fortune goes onto to argue that ‘‘the big winners on the internet probably are not even in business yet’’ as Dell, Oracle, Sun or Cisco were not in 1985. As with the end of any period of euphoria, a return to basics has been called for. In part, this view has been derived from the ill-placed notion that the ‘‘old economy’’ model was the way to do it all along. CitigroupÕs first attempt at e-commerce lost the company millions with ‘‘some reports putting the losses in the hundreds of millions of dollars’’ states Mitchell-Moore [25]. This is not uncommon in large organizations according to a study by Albrink et al. [1], who suggest that organizations go through a distinct phase of activity without coordination or direction before evolving to a cohesive internet strategy in line with business strategy. A return to basics would also mean that the lessons from the dot-com era, some good and some bad, would be lost. The ‘‘dot-comÕs were an experiment––a nexus of hypotheses, really––that tested radical new ways of starting companies, managing them, and investing in them’’ surmises Useem [35]. Even before the dot-comÕs, Drucker [14] had argued ‘‘no new theories on which a big business can be built have emerged. . . but the old ones are no longer dependable.’’ This paper will propose that Soft OR, if used selectively, can offer a new approach to defining and validating the foundations on which new internet and technology ventures can be built. The paper will begin by describing the lifecycle of a new venture and highlighting the Seed/Start
Up phase in which the ventures business model is formed. In order to set the context for the approach taken, the challenges of the Start Up phase for internet and technology ventures will be discussed. This will make clear the rationale for selectively applying Soft OR and strategic management methodologies. The case study will demonstrate this approach in practice and the paper will finish with some lessons learnt, which may be of use for practitioners in similar situations.
2. The process of new venture business model development The purpose of this section is to set the scene for the work to be described in this paper. The lifecycle of a new venture can be broken up into the following phases: Start Up, Growth, Maturity and Decline. This paper will focus on the Start Up stage of new venturesÕ development and its key output: the definition of the new ventures business model that will enable the entrepreneur to manage the venture, investors to appreciate the investment potential and for employees to understand its purpose. In the Start Up phase, the entrepreneurÕs main focus is on the new venturesÕ adaptability in line with feedback from peers, potential customers, alliance partners and investors when evolving the initial idea from proof of concept to launch. In the Growth phase, the entrepreneurÕs main focus is on the venturesÕ scalability to as many different organizations, industries and application areas as possible without needing to make costly fundamental revisions to the product. In the Maturity phase, the entrepreneur should be in a position to defend his venture from competitors in order to reap the rewards of his efforts. Before the Decline phase, the entrepreneur should be looking to evolve the venture in order to move onto new environments that can generate further wealth. The Start Up phase can be broken into two financing rounds: Seed/Start up and First Round. At the Seed/Start up financing stage, the entrepreneur is usually putting in his own money and any raised from friends, family and angel inves-
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tors––individual investors with enough money to make a substantial investment in an early stage or Start Up company––to research, assess and develop the initial idea in order to prove the concept as a viable business. By the First Round financing stage the venture should have many of its key positions filled, a working beta product, and some form of customer validation such as signed letters of intent to buy or agreements to beta test the product from customers.
3. The challenges of new venture business model development The purpose of this section is to outline the challenges faced when developing new internet and technology ventures in order to set the context for the discussion on the potential role for Soft OR methodologies. At first glance it may seem that some of these challenges are equally pertinent to non-technology start ups, but there are specific issues with this space that are worth noting. The challenges of starting a new internet and technology venture are nowhere more apparent than in the disastrous last 24 months which have been full of stories about dot-com layoffs and bankruptcies. Many reasons are given for the failure of these ventures, including poor management, lack of funding, lack of planning or entrepreneurial ego, but these all miss the underlying causes. These are discussed below.
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further contradictions and further confusion. Describing AmazonÕs business model as a ‘‘virtual bookstore’’ would only capture how they do business. Conveying PricelinesÕ business model as a ‘‘name your price travel agent’’ would only describe its value proposition. A business model needs to capture these things and more. The Millennium Group, therefore, conclude that RappaÕs definition is one that captures all of the essential components of a business model: ‘‘A business model is a method of doing business by which a company can sustain itself––that is be profitable.’’ This rather broad and all encompassing definition, while being the best available, still leaves a gap in understanding exactly what the components of a business model should be. A ‘‘method of doing business’’ implies the discussion of the product or service offering, the target customers, operating plans on how orders will be fulfilled and the management team that will deliver this venture. To ‘‘sustain itself’’ implies an understanding of the ventures financials and the drivers of revenue and cost. However, should the business model also capture how the new venture will sustain itself before it makes any money? Should the business model also include a discussion of the ventures business strategy or product development strategy? Should the business model also discuss the prevalent risks and uncertainties of the ventures competitive landscape, the impact of these risks and how these will be managed? 3.2. Poor handling of risk and uncertainty
3.1. What is a business model? Quindlen [30] contends that a new ventures business model may be the ‘‘single most important element’’ of the new business and that getting it wrong can only ultimately lead to failure. However, for something so fundamental, there seems to be a lack of clarity on exactly what a business model is. Rappa [31] points out that ‘‘business models are perhaps the most discussed and least understood aspect of the web.’’ Research carried out by the Millennium Group [23] reveals that the use of the term ‘‘business model’’ varies considerably in the business world as a whole, not just in the technology and internet space, resulting in
Hatch [18] argues that the business environment is no more uncertain and complex than it has always been and the only change is decision makers now have the means to appreciate how dynamic and complex the environment is. However, Duncan [15] would counter that perceived uncertainty is increased by two sets of factors: complexity, the number of variables that can impact the firm and the degree of interrelationship between these variables, and dynamism, the rate of change in the business environment. The technology space specifically affects the business environments complexity and dynamism in ways that other forms of new ventures do not.
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The internet and technology space has been characterized by a spectacular level of dynamism, and consequently a high degree of uncertainty. Bornheim [5] has used the following laws to explain this. GilderÕs Law suggests that communications capacity will triple every twelve months at constant cost. On its own, the consequence of this law is to increase the level of complexity decision makers will face by increasing the number of variables available to them and the speed with which details of changes to these variables will reach them. As an example, the recent emergence of numerous electronic day trading sites, such as Yahoo Finance, now provide investors with voluminous amounts of information in the form of real time stock prices, historical performance charts, complete Securities and Exchange Commission fillings, Analysts research and even discussion group boards. MooreÕs Law observes that computer processor performance doubles every eighteen months at a constant cost. The consequence of this law is that ÔeÕ technologies are creating new capabilities, previously unavailable or unaffordable mere months ago, as the catalyst for business transformation. For example, Businessweek report the emergence of ‘‘Wi-Fi’’ technology that not only introduces wireless broadband internet connection, but also at a fraction of the cost. Businessweek [7] quote an example of consulting firm Adventis, who spent $30,000 to wire its Boston office last year. A similar Wi-Fi installation today would cost only $500. However, the consequence of these laws together is to supercharge another law quoted by Bornheim: MetclafeÕs Law. This law suggests that the value of a network is the square of its participants. Therefore, networks that can generate positive feedback can quickly dominate smaller networks and GilderÕs law and MooreÕs law speed up these feedback mechanisms. The example given for this phenomenon is dominance of MicrosoftsÕ Windows operating system over ApplesÕ Mac operating system. For the internet and technology space, this is further seen in the shortening of product lifecycles and the speed with which technology advantages become obsolete. The speed with which Hotmail, a web based email service founded in 1996, was emulated by the likes of
Yahoo, and the rate at which new complementary products, like instant messaging, voice chat, address book and calendar are introduced is an example of this. 3.3. Conflicting objectives Jim Collins, the author of ‘‘Built to Last’’, recounts a story from one of his Stanford MBA students [11] who, after taking his course on building enduring, great companies, presented her business model to venture capitalists only to be told to come back when she had an idea that ‘‘you can do quickly and that you can take public or get acquired within 12–18 months.’’ Many entrepreneurs would state that an initial public offering of the companies stock to the public or acquisition by a larger company, as Microsoft did with Hotmail, was not the objective of their venture. However, the prospect of achieving the financial success in months as opposed to years was understandably too tempting to pass up. Consequently, many ventures suffered from a lack of clarity. Who was the customer? The investor or the end user? The marketing messages start ups placed on the billboards in Silicon Valley did not help clarify this question. The more stakeholders there are involved in a new venture, the more scope there is for conflicting agendas. Internet or technology ventures comparatively require a large investment in the form of IT hardware, software and scarce specialized technical skills. Consequently, funds need to be raised from the investment community, often on the condition that seats on the Board of the company are given. Investors may care only for financial returns as Jim CollinsÕ example. Compare this to the perspective of the Founders of the venture who, while also being motivated by financial return, do not want to give away, especially not for an offer price that reflects the ugly duckling the investor see––an early stage high risk venture––rather than the swan––an established and successful enterprise––the founders envisage. Add into the equation employees, suppliers, alliance partners and the picture just gets worse! While all types of organizations have varied and vocal stakeholders, but the specific problem with
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internet and technology ventures is the need to bring many of these in at a very early, and therefore formative, stage. 3.4. Simplistic, clich ed or rigid mental models George Colony, the CEO of Forrester, interviewed CEOs of traditional and internet companies [12] to determine how the internet would change business only to be surprised at the low quality of the latter. In ColonysÕ opinion, the mixture of inexperience, an absence of depth or common business sense and a short term commitment meant that venture business models were built on simplistic mental models and consequently lacked fundamental ingredients for success. Colony quotes the most amusing examples of these simplistic mental models: ‘‘Be like Amazon!’’, ‘‘Advertise, advertise, advertise!’’, ‘‘ItÕs a land grab!’’, ‘‘We donÕt want to be profitable too fast.’’ and ‘‘B2B (business to business) is the place to be.’’ Just as common, and just as dangerous, were rigid mental models based on the snippets of data. ‘‘We desperately try to measure all the things that worry us’’ argues Boyle [6] but ‘‘the trouble is that numbers cannot capture the sheer complexity of life.’’ It is as if numbers, no matter how pertinent, accurate or complete, provided a security blanket that would guard the venture against risks and uncertainties prevailing in the market. Schibsted [34] points to one of the most widely used statistics in new venture business plans, the size of the US consumer e-commerce market and the $87 billion difference between the highest and lowest estimate prevailing at that time. ‘‘You would be better off throwing darts at a spreadsheet’’ she concludes.
4. The role of Soft OR in new venture business model development This section proposes the approach of selectively applying components of Soft OR and traditional strategic management methodologies as a way of dealing with the challenges identified in the previous section. Rather than using any one approach from start to finish, the practitioner could
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use a component of a methodology that best emphasizes the particular aspect of the problem in that given situation. This point is emphasized by Lane [20] who states that ‘‘attaching oneself to a single method only, especially if the underlying assumptions of that method are not clear and apparent, is a dangerous enterprise.’’ Apart from the work of Ormerod [27], Matthews and Bennett [3] and Bennett [2,4] mentioned in this paper, Rosenhead and Mingers [33] and Mingers [24] books on Soft OR and Multi methodologies demonstrate the value of this approach. 4.1. How mixing methodologies can enrich the venture business model development process Matthews and Bennett [3] state that ‘‘one of the first lessons an OR practitioner learns is that real problems rarely have a single ÔcorrectÕ solution. Usually somewhat later comes the realisation that there may be no such thing as the Ôcorrect problemÕ either’’. It is this level of complexity that has, according to Bennett [4], focused interest on the possibility of linking Soft OR techniques to assist in decision making. The first wave of the internet has been characterised by the search for better business models, instances with no single correct solution, and totally new business models, instances with no single correct problem. Bennett [2] categorises three forms of linkage: comparison, enrichment and integration. Comparison, questions how the approaches are theoretically or practically similar?; how do they complement each other? And; how are they incompatible? Enrichment involves using theoretical or practical aspects of one method to improve another without producing a new approach. Enrichment can be compared with integration where a new approach is developed as a consequence of linking principles of existing approaches. The approach to be described in the case study was one of enrichment and the rationale for this is identified in Fig. 1. While each methodology had something to offer to one of the identified challenges, it would equally proved inadequate on others. The Uncertainty Space and Commitment Package tools from the Strategic Choice approach were especially useful
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Defining the business model Section 3.1
Handling risk / uncertainty Section 3.2
Dealing with conflict Section 3.3
Challenging mental models Section 3.4
Strategic Choice Approach [17] Soft Systems Methodology [8], [9] and [10]
SWOT Analysis
PEST Analysis [28] and [29]
Porter,s Generic Strategies [28] and [29]
Porter,s Five Forces Model [28] and [29]
Critical Success Factors [32] / Scenario modelling Low/None
Medium
High/Large
Fig. 1. The applicability of methodologies to the challenges of new venture development.
for handling risk and uncertainty while there were no adequate tools in the approach to deal with the definition of the business model. Similarly, while the Root Definition from the Soft Systems Methodology provided all the base components to complete the business model, it did not offer a mechanism to manage progress in the face of all the unknowns in the environment. This is not a criticism of the methodologies as many are very clear on the appropriate application areas. Rather, this illustrates BennettsÕ assertion that different aspects of the problem can be emphasised by the application of a particular approach and ‘‘that is why putting them together in some way seems to hold out the promise of something ÔbetterÕ than any approach on its own.’’
5. The case study This case study assumes a knowledge of the methodologies used. Detailed explanations of the methodologies can be found in [8–18,28,29,32] (see Fig. 1). This paper will describe the work done at the Start Up phase for four ventures, one of which was co-founded by the author, in late 1999 to early 2000. As this work is still governed by non-disclosure agreements, no discussion of actual commercial issues or strategic outcomes will be made. These start ups included: • An integrated e-procurement solution that would seamlessly link with private trading exchanges and open marketplaces, allowing orga-
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nizations to leverage underutilized, idle, redundant and obsolete assets and thereby tackle the extremely problematic and cost inefficient processes. • An offshore software services house that aimed to break the ‘‘cheap but good’’ reputation of offshore development with a commercial model based on joint ventures, outsourcing or consultancy arrangements to provide innovative and tailored technical solutions. • An online solution to automate the cumbersome and error prone Workers Compensation process. Electronically linking doctors, lawyers, employers, regulators and injured employees would significantly reduce processing times, transactional costs and delays in providing medical care. • A services supply chain management solution to enable end user customers to buy, merchants to sell and vendors provide technical and specialist skills cost efficiently and effectively. As of March 2002, of the three of these ventures that progressed past the Start Up stage, all are still in business. However, to assume this is just because of the approach to be described in this paper would be doing a severe injustice to the hard work, determination and vision of the entrepreneurs involved. The approach taken in this case study is illustrated in Fig. 2. The Strategic Choice Approach was used as the overriding methodology with other tools and techniques being used to enrich each stage. 5.1. The shaping stage Objective: Produce a set of succinct definitions, each representing different views of the perceived opportunity, that can then be subjected to more rigorous analysis in the next phases. Approach: Step 1: Use the e-root definition to start filling in components of business model. Step 2: Start with different points to generate different views of the opportunity.
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Step 3: Use different ÔworldviewsÕ as starting points to the e-root definition. Step 4: Agree a handful of e-root definitions to progress with. Timescale: Two half day sessions held over 1 week. The root definition was an ideal tool for getting the participants to think through all of the relevant components of their business concept. However, the definition of these components caused confusion amongst the participants who struggled to see the relevance of some of them. Consequently, a change of semantics resulted in the following ‘‘eroot definition’’ as illustrated in Fig. 3. The most difficult obstacle of this phase was the insistence of the entrepreneurs that they were clear on their idea, even though it was apparent that some components of the e-root definition had not even been considered. To deal with this, the e-root definitions were used to test the robustness of the entrepreneursÕ concept by, firstly, experimenting with the starting component of the definition, and secondly, by using different worldviews as a basis for the answer to the remaining components of the e-root definition. A very useful way of stretching the participants understanding of the business opportunity was to take different components of the e-root definition as reference points for the remaining components. For example, starting with the worldview––What is our competitive advantage?––as opposed to the transformation process––What is our product/ service offering?––would invariably lead to different answers for the remaining components and, consequently, a new way of looking at the opportunity. The second method of exploring different worldviews was very insightful for all the participants too. For example, do the strengths of the venture lend themselves more naturally to the organization providing a product, a physical CD much like Microsoft packages its Office product, or to a service, as Amazon is doing by ÔrentingÕ its software to other retailers akin to the way a utility company would provide electricity? Fischer [16] points out that both of these approaches have fundamental ramifications for the organisation.
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Shaping
Strategic Choice Approach
Designing
Comparing
Choosing
Commitment Package Provides a framework for maintaining momentum in the face of complexity and uncertainty
Uncertainty space Identify and categorise risks
Uncertainty space Develop betterr understanding of risks
Outline key componentss tthat make up the business model
Develop new scenarioss using different worldviews
Uncertainty space Evaluate consequences of risks
Uncertainty space Weigh ig risks against potential reward
Enrich with
Soft Systems Methodology – n eRoot definition SWOT analysis
PEST Analysis
Porter,s Generic Strategies Porter,s Five Forces Model Critical Success Factors / Scenario modellingg
Elevator Pitch
Understanding the ventures internal environment
Evaluating g rrisks and uncertainty associated with thee iinternal environment
Understanding thee ventures external environment
Evaluating risks and uncertainty associated with the external environment
Focus the business model
Determine whether focus creates a viable opportunity
Identify market consequences of, and impact on, business concept
Determine whether market can be managed to create a more favourable scenario
Identify factors required for success
Quantify and understand impact of options
Determine likelihood of factors requiredd for f success
Fig. 2. The approach taken in the case study.
Continuing with the Microsoft/Amazon example, a product based organisation would need a significant field sales force whereas a service based organization would require a large IT network to handle usage. Most of the discussion revolved around the customer, transformation process and worldview components of the e-root definition. Very little emphasis had been given to the actors, owners or environmental constraints components. Using the e-root definition forced the participants to develop a more thorough definition of their idea. Conse-
quently, Fig. 4 illustrates the line of questioning developed from the group discussions. As this stage required two half day sessions stretched over a week, the commitment package provided the focus and clarity by categorising action that could be performed now, explorations or further research requirements, deferred decisions dependant on outcomes of actions or explorations, and contingency plans for any issues and risks identified. The participants expressed the value the commitment package provided.
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Root definition
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eRoot Definition
Customers (C)
Who are the customers / victims / beneficiaries of the system?
What is our target market? Who will pay for our offering?
Actors (A)
Who are the actors/participants in the system?
Who will make this happen and who will hinder progress? What intellectual capital and alliances will be required and who are the competitors ?
Transformation process (T)
What inputs are transformed into what outputs by this system?
What business “pain” are we the solution to? How much will people pay for the benefit our product / service brings to them ?
Weltanschauung , or usual translation is Worldview (W)
How we make sense of the world, based on our origins and experiences. What is the decision makers worldview underlying the system?
What is our competitive advantage? Basically, why us ?
Owners (O)
Who are the owners of the system, who has the power to stop the system?
How much money will we need and when will we need it? What will be the effect on the equity distribution of our company?
Environmental Constraints (E)
What are the environmental constraints that cannot be altered and which need to be considered?
What are the environmental constraints that cannot be altered and which need to be considered?
Fig. 3. An amendment of the root definition.
Fig. 4. The ordering of questions for the e-root definition.
5.2. The designing stage Objective: Expose the ideas to the internal capabilities that will have to deliver this venture and the external market in which it would have to operate. Approach: Step 1: Take an e-root definition.
Step 2: Apply PorterÕs Generic Competitive Strategies and the SWOT analysis. Step 3: Apply PorterÕs Five Forces Model and the PEST analysis. Step 4: Complete uncertainty space and commitment package as you progress. Step 5: Identify the e-root definitions Critical Success Factors.
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Timescale: Three half day sessions held over 2–3 weeks. PorterÕs Generic Competitive Strategies model was a thought provoking tool. The worldview component of the e-root definition was usually answered by a claim of industry knowledge or access to cutting edge technological intellectual capital. PorterÕs Generic Competitive Strategies model added value by asking the participants to think about the focus––would the proposition transfer to other industries and problem situations?––and differentiation––would the proposition optimise an existing business model with a ‘‘better/faster/cheaper’’ solution or develop a new business model with a ‘‘brave new world’’ solution?––of their propositions. The distinction between these potential approaches is vital in understanding the challenges the venture would face. The Generic Competitive Strategies approach was supplemented by the SWOT analysis to understand the gap between where the venture currently was and where it needed to be to be able to deliver the desired competitive strategy. The SWOT analysis was super-imposed onto the Uncertainty Space tool from the Strategic Choice Approach. However, as with the root definition an internet centric version proved more valuable. Instead of capturing uncertainty on guiding values (UV), the working environment (UE) and related choices (UR), uncertainty and risks associated with Strengths (US), weaknesses (UW), opportunities (UO) and threats (UTe) were captured. Once a view on the venturesÕ competitive advantage was formed, PorterÕs Five Forces model was applied to provide an external test and validation of the perceived competitive advantage. This was a recognized method of identifying the market reaction to the business concept. The participants noted that this stage would not have been possible without the clarity given by the e-root definition. As demonstrated in Fig. 5, the Five Forces model was supplemented by applying the PEST analysis, to provide an external view of risks and uncertainties (Fig. 5). As with the SWOT Uncertainty Space, the PEST Uncertainty Space was
changed to capture uncertainty and risks associated with political factors (UP), economic factors (UE), socio-cultural factors (US) and technological factors (UT) were captured as illustrated in Fig. 6. The Commitment Package from Strategic Choice approach was updated along the way and was the only way of keeping an acceptable level of momentum by focusing the participants on what needed to be done. The structure of the commitment package was well received by the participants who had begun to feel overwhelmed with the enormity of the issues that needed to be resolved. Finally, the work in this phase was distilled into the identification of a number of Critical Success Factors. Defined by its originators, Rockart and Hoffman [32], Critical Success Factors are ‘‘the limited number of areas in which results, if they are satisfactory, will enable successful competitive performance’’. In the approach given by Rockart and Hoffman, the critical success factors are derived from the core competencies of the organization. In this instance, they were derived from the SWOT Uncertainty Space and the PEST Uncertainty Space. These would later be quantified and tested in the scenario models to be developed in the next phase. 5.3. The shaping/designing iteration There were two main causes of iteration at this early stage. Firstly, as little thought seemed to have been given by participants to the actors, owners or environmental constraints components of the root definition, it was hardly surprising that the components of the Five Forces model required a lot of work. Consequences of industry focused competition or easily available substitute products caused the most iterations back to the shaping phase for a tweak to the e-root definition. As competitors were unearthed, and their products evaluated, the participants had to determine the best course of action. Would the root definition need to be tweaked or was the value proposition strong enough? Secondly, outcomes of research carried out as a result of explorations noted in the Commitment Package caused, in some cases major reworking of
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Lower likelihood
UP
UE Revenues dependant on one product
Taxation on internet sales Lower likelihood
Acceptance of internet as a viable business tool
Uncertainty Space Internet at early stage development
Dependant on ability to raise additional funding
Attracting & retaining Technical staff
New market ⇒ uncertainty
on take up
Lower likelihood
Bugs in Software
Delays in future software releases
Robustness of Back end technology
US
UT Lower likelihood
Little or no influence on risk
Medium Impact
High Impact
Low
Fig. 5. An example of the modified uncertainty space––PEST Uncertainty Space.
Most favourable e-root definitions
Abandon immediately
Favourable only if risk's can be managed
Risk
Favourable only if rewards can be managed up
know’’. Where no data was available, the entrepreneur had to be helped determine whether the benefit of specially commissioned research outweighed the risk of letting his idea ‘‘out of the bag’’ before he was ready to do so.
High
5.4. The comparing stage
Low
Reward
High
Fig. 6. Evaluating root definitions against their potential risks and rewards.
the e-root definition. The entrepreneur was guided on decisions regarding which market research reports were essential and which were ‘‘nice to
Objective: To determine whether any of the e-root definitions identified could translate into an economically viable venture. Approach: Step 1: Develop a financial model in Excel. Step 2: Build scenarios using the Critical Success Factors. Step 3: Compare each e-root definition against likelihood of scenarios. Timescale: Three half day sessions held over 2–3 weeks.
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The financial model developed in this phase had two layers. Firstly, the complete set of financials: balance sheet, profit and loss and cashflow statement. Secondly, a number of models based on the Critical Success Factors identified in the previous phase. For example, the revenue figure was derived from the pricing model which focused on two Critical Success Factors: price of the product and the number of units sold. These models were then used to produce a number of scenarios each reflecting a degree of factors turning favourably for the venture. Three scenarios were developed each on a scale from ‘‘Doom and Gloom’’ to ‘‘Expected’’ to ‘‘Jackpot!’’ Each e-root definition was judged against these scenarios. The model was also attached as a disk to the business plan to allow potential investors to make up their own scenarios. 5.5. The comparing/designing/shaping iteration The main cause for iterations between the comparing, designing and shaping phases was an unsustainable financial scenario where the revenue generated by supplying and servicing customers would not sufficiently, if at all, exceed the cost. This caused a re-examination of the e-root definition, the risks and the uncertainties to determine whether anymore could be influenced and managed into a more favourable way. The Critical Success Factors that had a high impact and that could not be managed to any great extent, would either cause a revision of the opportunity or would just be left in the commitment package to review at a later date. 5.6. The choosing stage Objective: Choosing a definition of the ventures business model. Approach: Step 1: Map each e-root definition onto the risk/reward matrix. Step 2: Select most favorable e-root definition. Timescale: Two half day sessions spread over a week.
Any investment decision is based not just on the potential reward, but also on an assessment of the risk incurred to achieve that reward. A simple matrix was used to plot the results of the financial model and the SWOT and PEST uncertainty spaces. As, in most cases, the e-root definitions developed by the previous three stages, still suffered from a level of uncertainty and risk, any choice of root definition would be in light of the current set of circumstances. If these circumstances were to change, as identified in the deferred decisions and contingency section of the commitment package, then a root definition abandoned at this stage may become more favourable. 5.7. The next steps At the end of this process the entrepreneur would be left with the following: • An Elevator Pitch: Combining the customer, transformation process and worldview components of the e-root definition would produce a concise sentence describing the venture. • A Business Model: The complete e-root definition would form the ventures business model. • Investor Materials: A small amount of additional work was required to have a business plan and investor presentation ready for fund raising.
6. Lessons learnt 6.1. Deciding on how to mix methodologies Mintzberg argues, ‘‘search all those strategic planning diagrams. . .and nowhere will you find a single one that explains the creative act of synthesizing ideas into strategy. Everything can be formalized except the very essence of the process itself.’’ This is even more evident in the case of new venture development, which does not afford the luxury of plotting a course on day one that will be broad enough to facilitate the generation of ideas; specific enough to distil desired outcomes; and robust enough to maintain progress in a dynamic and uncertain environment.
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However while mixing Soft OR methodologies and strategic management tools does seem a feasible way forward, there is no panacea to this problem. To further complicate matters, certain tools that work in certain circumstances with certain participants may fail miserably with others. However, the approach used by the author, illustrated in detail in Fig. 2, to mix methodologies may be of use to the reader. The first step is to understand the problem situation in order to choose an overarching methodology. In the case of the work described in this paper, the key issue was one of handling the complexity and uncertainty inherent in the new venture development process. Consequently, the iterative and flexible approach of Strategic Choice offered the most in this problem environment. Ormerod [27] used Ackoff Õs interactive planning as the overarching methodology for developing an information systems strategy for Sainsburys where the key issue identified was to develop creative solutions based on a shared understanding. Alternatively a more generic strategy development approach could be used, if the practitioner deemed it appropriate. The second step is to continually assess whether the overriding tool is able to manage the specific issues of the problem situation and, if not, to determine how alternative methods and tools can be used to enrich the process. The author did not restrict the choice of potential enrichment tools to the OR toolkit alone, but also used strategic management tools such as the SWOT analysis and PorterÕs Five Forces model. The choice of these enrichment tools was based on the authorÕs assessment of his own ability to best apply the tools and the participantsÕ receptiveness to ‘‘new’’ approaches. This point is very important and will be covered in the next lesson learnt. The value an OR practitioner should bring is the understanding of a variety of tools and techniques that can best assist in the decision making process. Rather than hiding behind a ‘‘standard’’ methodology, the practitioner must take responsibility for understanding his clients and their particular problem situation and take ownership of ensuring the most appropriate selection of tools and techniques to meet this need.
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6.2. ‘‘Bedside manners are no substitute for the right diagnosis’’––Alfred Sloan, Chairman of General Motors Mixing methodologies is inherently a dangerous enterprise that can have dire consequences for the success of the project and the reputation of the methodologies applied. Lane [20], in his discussion of linking system dynamics with Soft OR, warns of the dangers of applying techniques to inappropriate problems. Lane goes on to quote Jackson and Keys who argue ‘‘difficulties are almost certain to occur when methodologies suited to particular problem contexts are transferred and adopted for use in problem situations for which they were not designed.’’ Another danger to the concept of mixing methodologies may be the hijacking of the approach to cover a lack of discipline in applying methodologies properly. It is essential that a practitioner, before attempting to mix methodologies, have proper training and the opportunity to apply them in practice as they were meant, before attempting to pick and choose components in a mixed approach. Lane [20] makes this point when he states, ‘‘it is vital to have a clear and critical understanding of the assumptions underlying any technique.’’ The author was fortunate enough to have had this opportunity while studying for his MasterÕs degree and during his MasterÕs dissertation. However, there is also a growing number of literature and courses available, both from the methodological schools where the tools were developed and from other institutions as well. 6.3. Focus on the people not just the process The cliched management consultants or newly graduated MBA students are rightfully criticized for their desire to fit any problem into their standard model. This may also be true for OR practitioners with only a working knowledge of certain Soft OR methodologies. Some of the entrepreneurs that participated in the work described in this paper detested the approach of having methodologies ‘‘inflicted’’ on them. A participant described the approach of keeping the problem in the limelight and the tool or methodology behind the
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scenes as ‘‘refreshing but overdue’’. Modifying the language of tools, for example the e-root definition or overlaying the SWOT and PEST analyses on top of the Uncertainty Space, also proved very successful. Feedback given by a participant was that ‘‘when things made sense to us, we didnÕt need to waste time that we didnÕt have trying to understand the tool that was going to help us reach our objective.’’ Consequently, the successful of a project may be better measured by the perceived value gained by the participants rather than whether the methodology applied perfectly. In Morecroft et al.Õs work [26] with a bio-technology Start Up, the authors noted that the New Ventures Manager felt that the process of building the System Dynamics model to develop a growth strategy for the firm may have been more useful than the model itself.
7. Conclusions Developing any new venture is fraught with uncertainty and risk. The technology sector, with its rapid rate of change where products can be introduced and become obsolete within a matter of months, is an extreme case of new venture development. This mix of uncertainty and rapid change together with the lack of data on which to make sound business decisions further complicates the whole process. It is difficult in these circumstances not to freeze in the face of uncertainty or to produce business models that ignore vital risks. Individual methodologies in the Soft OR toolkit have evolved in the discipline of OR to specifically handle uncertainty and conflict. However, linking these approaches in order to accentuate different aspects of the problem ‘‘seems to hold out the promise of something better than any approach on its own’’. This paper demonstrates an application of the Strategic Choice approach as the overriding methodology with a number of Soft OR and management tools used to enrich the approach. The tools and techniques used to enrich the process were chosen with the audience and circumstances in mind, so may or may not be used again. However, the Soft OR toolkit was instrumental in
the process of developing robust business models for four start ups, three of which are still in business in early 2002. Acknowledgements The author would like to thank Azhar Hameed for his support, guidance and inspiration during this work and Adam Clark and Jake Riat for their helpful comments. References [1] J. Albrink, G. Irwin, G. Neilson, D. Sasina, From bricks to clicks: Four stages of evolution, Strategy & Business, Issue 20, 2001. [2] P.G. Bennett, Mixing methods: Combining conflict analysis, SODA & Strategic Choice in Eden & Radford, Tackling Strategic Problems, 1990. [3] P.G. Bennett, L.M. Matthews, The art of course planning: Soft OR in action, Journal of Operational Research Society (1986) 37. [4] P.G. Bennett, On linking approaches to decision aiding: Issues and prospects, Journal of Operational Research Society (1985) 36. [5] S.P. Bornheim, e-Roadmapping, Digital Strategising for the New Economy, Palgrave, 2001. [6] D. Boyle, The Sum of Our Discontent: Why Numbers Make US Irrational, 2002. [7] Businessweek, 2002, Wi-Fi: ItÕs Fast, ItÕs Here––and It Works, Businessweek Special Report, April 2002. [8] P.B. Checkland, Systems Thinking, Systems Practice, Wiley, Chichester, 1981. [9] P.B. Checkland, Soft systems methodology: Overview, Journal of Applied Systems Analysis 15 (1988) 27–30. [10] P.B. Checkland, Systems thinking in management: The development of soft systems methodology and its implications for social sciences, in: H. Ulrich, G.J.B. Probst (Eds.), Self-Organisation and Management of Social Systems, 1984. [11] J. Collins, Built to flip, Fast Company Issue 32, March 2000. [12] G. Colony, 2001. Hollow Dot Com, My View. Available from:. [13] J. Daly, Perception––vs- Reality, Business 2.0, February 6, 2001. [14] P. Drucker, The decline in the advantage of being big, Wall Street Journal, 1991. [15] R. Duncan, Characteristics of organisational environments and perceived environmental uncertainty, Administrative Science Quarterly 17 (1972) 313–327. [16] L.M. Fisher, Product or service? Internet infrastructureÕs battling business models, Strategy and Business, Fourth Quarter, 2000.
S. Gondal / European Journal of Operational Research 152 (2004) 571–585 [17] J.K. Friend, A. Hickling, Planning Under Pressure: The Strategic Choice Approach, Pergamon, Oxford, 1987. [18] M.J. Hatch, Organisational Theory: Modern, Symbolic and Post Modern Perspectives, Oxford University Press, 1997. [19] S. Lacey, Q&A: GoldmanÕs tech chief talks IPOÕs, Red Herring, April 2001. [20] D.C. Lane, With a little help from our friends: How system dynamics and soft OR can learn from each other, System Dynamics Review 10 (2-3) (1994) 101–134. [21] M. Mandel, Restating the Õ90s, Businessweek, April 2002. [22] M. Meeker, F. Cascianelli, 2002. The Tech IPO Yearbook, eighth ed., 22 Years of Tech Investing, Morgan Stanley Dean Witter Report. Available from. [23] Millennium Group, Workshop 1 Briefing Paper, Discovery 2000 Programme, 2000. [24] J. Mingers, A. Gill, Multimethodology, 1997. [25] M. Mitchell-Moore, Turn on a dime, Darwin Magazine, October 2001. [26] J. Morecroft, D. Lane, P. Viita, Modelling growth strategy in a biotechnology startup firm, System Dynamics Review 7 (2) (1991) 93–116.
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[27] R. Ormerod, Putting Soft OR methods to work: Information systems strategy development at SainsburyÕs, Journal of Operational Research 46 (1995) 277–293. [28] M.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors, The Free Press, New York, 1980. [29] M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, New York, 1985. [30] R. Quindlen, Confessions of a Venture Capitalist––Inside the High Stakes World of Start Up Financing, Warner Books, New York, 2000. [31] M. Rappa, 2001. Business models on the web––managing the digital enterprise. Available from. [32] J.F. Rockart, J. Hofman, Systems delivery: Evolving new strategies, Sloan Management Review 33 (4) (1992) 21–31. [33] J. Rosenhead, J. Mingers, Rational Analysis of a problematic world revisited, 2001. [34] E. Schibsted, The numbers game, Business 2.0, June 2000. [35] J. Useem, Dot coms: What have we learned? Fortune Magazine, October 30, 2000.
Internet and technology new venture development using Soft OR Sohail Gondal
1
eBusiness, Barclays Solutions, Barclays Bank, 54 Lombard Street, London EC3P 3AH, UK Received 1 September 2001; accepted 9 September 2002
Abstract The purpose of this paper is to demonstrate how the selective mixing of Soft OR methodologies and traditional strategic management tools cans enhance and enrich the process of new ventures development. This approach, inspired by OrmerodsÕ use of Soft OR techniques in developing an information strategy for Sainsburys [Journal of Operational Research 46 (1995) 277], was developed for the commercial purpose of assisting entrepreneurs build and validate business opportunities in the internet and technology space. The objective of this paper is not to provide the reader with a new methodology, but rather to demonstrate an alternative way in which an OR practitioner can selectively apply different components of methodologies and to share experiences of mixing methods to enrich the process of business model development for any new venture. 2003 Elsevier B.V. All rights reserved. Keywords: Internet; Strategic planning; Soft OR methodologies; New venture development and business models
1. Introduction The late 1990s saw one of the greatest periods of new capital formation in the stock markets history, prompting John Doerr, a partner at venture capital firm Kleiner Perkins Caufield & Byers with over two decades of experience funding industry defining start ups in the technology and internet space, to call the internet [21] ‘‘the largest
E-mail addresses: [email protected], gcs-ltd@ consultant.com (S. Gondal). 1 Work conducted at 179 Santa Louisa, Irvine, California 92626, USA.
legal creation of wealth in the history of the planet.’’ Between 1998 and 2000, 790 technology companies were taken public [19], generating more than $81.5 billion of investment in the process. To put this figure into perspective, this was more money than was raised by technology companies in the United States in the prior 15 years. The fall of these internet ventures, however, has been just as dramatic. Unable to sustain unprofitable venture stage companies, the market has drastically eroded the value of under performers that cannot define their business models or path to profitability. Meeker and Cascianelli [22] estimate that, between the end of 1999 and the end of 2001, $1.7 trillion in market value had been lost by technology companies that had gone public since 1980.
0377-2217/$ - see front matter 2003 Elsevier B.V. All rights reserved. doi:10.1016/S0377-2217(03)00058-4
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The fall of dot-comÕs has lead some to believe that the internet is dead too. Unfortunately, it seems that conventional wisdom has sheepishly followed the hype surrounding the death of the internet in the same manner it did with the internetÕs rise. Daly [13] argues ‘‘the collapse of a few ill conceived or poorly executed business models must not blind anyone to the larger picture.’’ The larger picture according to Fortune Magazine [35] is that the real wealth creation, not the paper profit from artificially and unsustainably high stock prices, is yet to come. Comparing the current internet crash with the Personal Computer industry crash in 1985, when the PC was also written off as a fad, Fortune goes onto to argue that ‘‘the big winners on the internet probably are not even in business yet’’ as Dell, Oracle, Sun or Cisco were not in 1985. As with the end of any period of euphoria, a return to basics has been called for. In part, this view has been derived from the ill-placed notion that the ‘‘old economy’’ model was the way to do it all along. CitigroupÕs first attempt at e-commerce lost the company millions with ‘‘some reports putting the losses in the hundreds of millions of dollars’’ states Mitchell-Moore [25]. This is not uncommon in large organizations according to a study by Albrink et al. [1], who suggest that organizations go through a distinct phase of activity without coordination or direction before evolving to a cohesive internet strategy in line with business strategy. A return to basics would also mean that the lessons from the dot-com era, some good and some bad, would be lost. The ‘‘dot-comÕs were an experiment––a nexus of hypotheses, really––that tested radical new ways of starting companies, managing them, and investing in them’’ surmises Useem [35]. Even before the dot-comÕs, Drucker [14] had argued ‘‘no new theories on which a big business can be built have emerged. . . but the old ones are no longer dependable.’’ This paper will propose that Soft OR, if used selectively, can offer a new approach to defining and validating the foundations on which new internet and technology ventures can be built. The paper will begin by describing the lifecycle of a new venture and highlighting the Seed/Start
Up phase in which the ventures business model is formed. In order to set the context for the approach taken, the challenges of the Start Up phase for internet and technology ventures will be discussed. This will make clear the rationale for selectively applying Soft OR and strategic management methodologies. The case study will demonstrate this approach in practice and the paper will finish with some lessons learnt, which may be of use for practitioners in similar situations.
2. The process of new venture business model development The purpose of this section is to set the scene for the work to be described in this paper. The lifecycle of a new venture can be broken up into the following phases: Start Up, Growth, Maturity and Decline. This paper will focus on the Start Up stage of new venturesÕ development and its key output: the definition of the new ventures business model that will enable the entrepreneur to manage the venture, investors to appreciate the investment potential and for employees to understand its purpose. In the Start Up phase, the entrepreneurÕs main focus is on the new venturesÕ adaptability in line with feedback from peers, potential customers, alliance partners and investors when evolving the initial idea from proof of concept to launch. In the Growth phase, the entrepreneurÕs main focus is on the venturesÕ scalability to as many different organizations, industries and application areas as possible without needing to make costly fundamental revisions to the product. In the Maturity phase, the entrepreneur should be in a position to defend his venture from competitors in order to reap the rewards of his efforts. Before the Decline phase, the entrepreneur should be looking to evolve the venture in order to move onto new environments that can generate further wealth. The Start Up phase can be broken into two financing rounds: Seed/Start up and First Round. At the Seed/Start up financing stage, the entrepreneur is usually putting in his own money and any raised from friends, family and angel inves-
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tors––individual investors with enough money to make a substantial investment in an early stage or Start Up company––to research, assess and develop the initial idea in order to prove the concept as a viable business. By the First Round financing stage the venture should have many of its key positions filled, a working beta product, and some form of customer validation such as signed letters of intent to buy or agreements to beta test the product from customers.
3. The challenges of new venture business model development The purpose of this section is to outline the challenges faced when developing new internet and technology ventures in order to set the context for the discussion on the potential role for Soft OR methodologies. At first glance it may seem that some of these challenges are equally pertinent to non-technology start ups, but there are specific issues with this space that are worth noting. The challenges of starting a new internet and technology venture are nowhere more apparent than in the disastrous last 24 months which have been full of stories about dot-com layoffs and bankruptcies. Many reasons are given for the failure of these ventures, including poor management, lack of funding, lack of planning or entrepreneurial ego, but these all miss the underlying causes. These are discussed below.
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further contradictions and further confusion. Describing AmazonÕs business model as a ‘‘virtual bookstore’’ would only capture how they do business. Conveying PricelinesÕ business model as a ‘‘name your price travel agent’’ would only describe its value proposition. A business model needs to capture these things and more. The Millennium Group, therefore, conclude that RappaÕs definition is one that captures all of the essential components of a business model: ‘‘A business model is a method of doing business by which a company can sustain itself––that is be profitable.’’ This rather broad and all encompassing definition, while being the best available, still leaves a gap in understanding exactly what the components of a business model should be. A ‘‘method of doing business’’ implies the discussion of the product or service offering, the target customers, operating plans on how orders will be fulfilled and the management team that will deliver this venture. To ‘‘sustain itself’’ implies an understanding of the ventures financials and the drivers of revenue and cost. However, should the business model also capture how the new venture will sustain itself before it makes any money? Should the business model also include a discussion of the ventures business strategy or product development strategy? Should the business model also discuss the prevalent risks and uncertainties of the ventures competitive landscape, the impact of these risks and how these will be managed? 3.2. Poor handling of risk and uncertainty
3.1. What is a business model? Quindlen [30] contends that a new ventures business model may be the ‘‘single most important element’’ of the new business and that getting it wrong can only ultimately lead to failure. However, for something so fundamental, there seems to be a lack of clarity on exactly what a business model is. Rappa [31] points out that ‘‘business models are perhaps the most discussed and least understood aspect of the web.’’ Research carried out by the Millennium Group [23] reveals that the use of the term ‘‘business model’’ varies considerably in the business world as a whole, not just in the technology and internet space, resulting in
Hatch [18] argues that the business environment is no more uncertain and complex than it has always been and the only change is decision makers now have the means to appreciate how dynamic and complex the environment is. However, Duncan [15] would counter that perceived uncertainty is increased by two sets of factors: complexity, the number of variables that can impact the firm and the degree of interrelationship between these variables, and dynamism, the rate of change in the business environment. The technology space specifically affects the business environments complexity and dynamism in ways that other forms of new ventures do not.
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The internet and technology space has been characterized by a spectacular level of dynamism, and consequently a high degree of uncertainty. Bornheim [5] has used the following laws to explain this. GilderÕs Law suggests that communications capacity will triple every twelve months at constant cost. On its own, the consequence of this law is to increase the level of complexity decision makers will face by increasing the number of variables available to them and the speed with which details of changes to these variables will reach them. As an example, the recent emergence of numerous electronic day trading sites, such as Yahoo Finance, now provide investors with voluminous amounts of information in the form of real time stock prices, historical performance charts, complete Securities and Exchange Commission fillings, Analysts research and even discussion group boards. MooreÕs Law observes that computer processor performance doubles every eighteen months at a constant cost. The consequence of this law is that ÔeÕ technologies are creating new capabilities, previously unavailable or unaffordable mere months ago, as the catalyst for business transformation. For example, Businessweek report the emergence of ‘‘Wi-Fi’’ technology that not only introduces wireless broadband internet connection, but also at a fraction of the cost. Businessweek [7] quote an example of consulting firm Adventis, who spent $30,000 to wire its Boston office last year. A similar Wi-Fi installation today would cost only $500. However, the consequence of these laws together is to supercharge another law quoted by Bornheim: MetclafeÕs Law. This law suggests that the value of a network is the square of its participants. Therefore, networks that can generate positive feedback can quickly dominate smaller networks and GilderÕs law and MooreÕs law speed up these feedback mechanisms. The example given for this phenomenon is dominance of MicrosoftsÕ Windows operating system over ApplesÕ Mac operating system. For the internet and technology space, this is further seen in the shortening of product lifecycles and the speed with which technology advantages become obsolete. The speed with which Hotmail, a web based email service founded in 1996, was emulated by the likes of
Yahoo, and the rate at which new complementary products, like instant messaging, voice chat, address book and calendar are introduced is an example of this. 3.3. Conflicting objectives Jim Collins, the author of ‘‘Built to Last’’, recounts a story from one of his Stanford MBA students [11] who, after taking his course on building enduring, great companies, presented her business model to venture capitalists only to be told to come back when she had an idea that ‘‘you can do quickly and that you can take public or get acquired within 12–18 months.’’ Many entrepreneurs would state that an initial public offering of the companies stock to the public or acquisition by a larger company, as Microsoft did with Hotmail, was not the objective of their venture. However, the prospect of achieving the financial success in months as opposed to years was understandably too tempting to pass up. Consequently, many ventures suffered from a lack of clarity. Who was the customer? The investor or the end user? The marketing messages start ups placed on the billboards in Silicon Valley did not help clarify this question. The more stakeholders there are involved in a new venture, the more scope there is for conflicting agendas. Internet or technology ventures comparatively require a large investment in the form of IT hardware, software and scarce specialized technical skills. Consequently, funds need to be raised from the investment community, often on the condition that seats on the Board of the company are given. Investors may care only for financial returns as Jim CollinsÕ example. Compare this to the perspective of the Founders of the venture who, while also being motivated by financial return, do not want to give away, especially not for an offer price that reflects the ugly duckling the investor see––an early stage high risk venture––rather than the swan––an established and successful enterprise––the founders envisage. Add into the equation employees, suppliers, alliance partners and the picture just gets worse! While all types of organizations have varied and vocal stakeholders, but the specific problem with
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internet and technology ventures is the need to bring many of these in at a very early, and therefore formative, stage. 3.4. Simplistic, clich ed or rigid mental models George Colony, the CEO of Forrester, interviewed CEOs of traditional and internet companies [12] to determine how the internet would change business only to be surprised at the low quality of the latter. In ColonysÕ opinion, the mixture of inexperience, an absence of depth or common business sense and a short term commitment meant that venture business models were built on simplistic mental models and consequently lacked fundamental ingredients for success. Colony quotes the most amusing examples of these simplistic mental models: ‘‘Be like Amazon!’’, ‘‘Advertise, advertise, advertise!’’, ‘‘ItÕs a land grab!’’, ‘‘We donÕt want to be profitable too fast.’’ and ‘‘B2B (business to business) is the place to be.’’ Just as common, and just as dangerous, were rigid mental models based on the snippets of data. ‘‘We desperately try to measure all the things that worry us’’ argues Boyle [6] but ‘‘the trouble is that numbers cannot capture the sheer complexity of life.’’ It is as if numbers, no matter how pertinent, accurate or complete, provided a security blanket that would guard the venture against risks and uncertainties prevailing in the market. Schibsted [34] points to one of the most widely used statistics in new venture business plans, the size of the US consumer e-commerce market and the $87 billion difference between the highest and lowest estimate prevailing at that time. ‘‘You would be better off throwing darts at a spreadsheet’’ she concludes.
4. The role of Soft OR in new venture business model development This section proposes the approach of selectively applying components of Soft OR and traditional strategic management methodologies as a way of dealing with the challenges identified in the previous section. Rather than using any one approach from start to finish, the practitioner could
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use a component of a methodology that best emphasizes the particular aspect of the problem in that given situation. This point is emphasized by Lane [20] who states that ‘‘attaching oneself to a single method only, especially if the underlying assumptions of that method are not clear and apparent, is a dangerous enterprise.’’ Apart from the work of Ormerod [27], Matthews and Bennett [3] and Bennett [2,4] mentioned in this paper, Rosenhead and Mingers [33] and Mingers [24] books on Soft OR and Multi methodologies demonstrate the value of this approach. 4.1. How mixing methodologies can enrich the venture business model development process Matthews and Bennett [3] state that ‘‘one of the first lessons an OR practitioner learns is that real problems rarely have a single ÔcorrectÕ solution. Usually somewhat later comes the realisation that there may be no such thing as the Ôcorrect problemÕ either’’. It is this level of complexity that has, according to Bennett [4], focused interest on the possibility of linking Soft OR techniques to assist in decision making. The first wave of the internet has been characterised by the search for better business models, instances with no single correct solution, and totally new business models, instances with no single correct problem. Bennett [2] categorises three forms of linkage: comparison, enrichment and integration. Comparison, questions how the approaches are theoretically or practically similar?; how do they complement each other? And; how are they incompatible? Enrichment involves using theoretical or practical aspects of one method to improve another without producing a new approach. Enrichment can be compared with integration where a new approach is developed as a consequence of linking principles of existing approaches. The approach to be described in the case study was one of enrichment and the rationale for this is identified in Fig. 1. While each methodology had something to offer to one of the identified challenges, it would equally proved inadequate on others. The Uncertainty Space and Commitment Package tools from the Strategic Choice approach were especially useful
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Defining the business model Section 3.1
Handling risk / uncertainty Section 3.2
Dealing with conflict Section 3.3
Challenging mental models Section 3.4
Strategic Choice Approach [17] Soft Systems Methodology [8], [9] and [10]
SWOT Analysis
PEST Analysis [28] and [29]
Porter,s Generic Strategies [28] and [29]
Porter,s Five Forces Model [28] and [29]
Critical Success Factors [32] / Scenario modelling Low/None
Medium
High/Large
Fig. 1. The applicability of methodologies to the challenges of new venture development.
for handling risk and uncertainty while there were no adequate tools in the approach to deal with the definition of the business model. Similarly, while the Root Definition from the Soft Systems Methodology provided all the base components to complete the business model, it did not offer a mechanism to manage progress in the face of all the unknowns in the environment. This is not a criticism of the methodologies as many are very clear on the appropriate application areas. Rather, this illustrates BennettsÕ assertion that different aspects of the problem can be emphasised by the application of a particular approach and ‘‘that is why putting them together in some way seems to hold out the promise of something ÔbetterÕ than any approach on its own.’’
5. The case study This case study assumes a knowledge of the methodologies used. Detailed explanations of the methodologies can be found in [8–18,28,29,32] (see Fig. 1). This paper will describe the work done at the Start Up phase for four ventures, one of which was co-founded by the author, in late 1999 to early 2000. As this work is still governed by non-disclosure agreements, no discussion of actual commercial issues or strategic outcomes will be made. These start ups included: • An integrated e-procurement solution that would seamlessly link with private trading exchanges and open marketplaces, allowing orga-
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nizations to leverage underutilized, idle, redundant and obsolete assets and thereby tackle the extremely problematic and cost inefficient processes. • An offshore software services house that aimed to break the ‘‘cheap but good’’ reputation of offshore development with a commercial model based on joint ventures, outsourcing or consultancy arrangements to provide innovative and tailored technical solutions. • An online solution to automate the cumbersome and error prone Workers Compensation process. Electronically linking doctors, lawyers, employers, regulators and injured employees would significantly reduce processing times, transactional costs and delays in providing medical care. • A services supply chain management solution to enable end user customers to buy, merchants to sell and vendors provide technical and specialist skills cost efficiently and effectively. As of March 2002, of the three of these ventures that progressed past the Start Up stage, all are still in business. However, to assume this is just because of the approach to be described in this paper would be doing a severe injustice to the hard work, determination and vision of the entrepreneurs involved. The approach taken in this case study is illustrated in Fig. 2. The Strategic Choice Approach was used as the overriding methodology with other tools and techniques being used to enrich each stage. 5.1. The shaping stage Objective: Produce a set of succinct definitions, each representing different views of the perceived opportunity, that can then be subjected to more rigorous analysis in the next phases. Approach: Step 1: Use the e-root definition to start filling in components of business model. Step 2: Start with different points to generate different views of the opportunity.
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Step 3: Use different ÔworldviewsÕ as starting points to the e-root definition. Step 4: Agree a handful of e-root definitions to progress with. Timescale: Two half day sessions held over 1 week. The root definition was an ideal tool for getting the participants to think through all of the relevant components of their business concept. However, the definition of these components caused confusion amongst the participants who struggled to see the relevance of some of them. Consequently, a change of semantics resulted in the following ‘‘eroot definition’’ as illustrated in Fig. 3. The most difficult obstacle of this phase was the insistence of the entrepreneurs that they were clear on their idea, even though it was apparent that some components of the e-root definition had not even been considered. To deal with this, the e-root definitions were used to test the robustness of the entrepreneursÕ concept by, firstly, experimenting with the starting component of the definition, and secondly, by using different worldviews as a basis for the answer to the remaining components of the e-root definition. A very useful way of stretching the participants understanding of the business opportunity was to take different components of the e-root definition as reference points for the remaining components. For example, starting with the worldview––What is our competitive advantage?––as opposed to the transformation process––What is our product/ service offering?––would invariably lead to different answers for the remaining components and, consequently, a new way of looking at the opportunity. The second method of exploring different worldviews was very insightful for all the participants too. For example, do the strengths of the venture lend themselves more naturally to the organization providing a product, a physical CD much like Microsoft packages its Office product, or to a service, as Amazon is doing by ÔrentingÕ its software to other retailers akin to the way a utility company would provide electricity? Fischer [16] points out that both of these approaches have fundamental ramifications for the organisation.
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Shaping
Strategic Choice Approach
Designing
Comparing
Choosing
Commitment Package Provides a framework for maintaining momentum in the face of complexity and uncertainty
Uncertainty space Identify and categorise risks
Uncertainty space Develop betterr understanding of risks
Outline key componentss tthat make up the business model
Develop new scenarioss using different worldviews
Uncertainty space Evaluate consequences of risks
Uncertainty space Weigh ig risks against potential reward
Enrich with
Soft Systems Methodology – n eRoot definition SWOT analysis
PEST Analysis
Porter,s Generic Strategies Porter,s Five Forces Model Critical Success Factors / Scenario modellingg
Elevator Pitch
Understanding the ventures internal environment
Evaluating g rrisks and uncertainty associated with thee iinternal environment
Understanding thee ventures external environment
Evaluating risks and uncertainty associated with the external environment
Focus the business model
Determine whether focus creates a viable opportunity
Identify market consequences of, and impact on, business concept
Determine whether market can be managed to create a more favourable scenario
Identify factors required for success
Quantify and understand impact of options
Determine likelihood of factors requiredd for f success
Fig. 2. The approach taken in the case study.
Continuing with the Microsoft/Amazon example, a product based organisation would need a significant field sales force whereas a service based organization would require a large IT network to handle usage. Most of the discussion revolved around the customer, transformation process and worldview components of the e-root definition. Very little emphasis had been given to the actors, owners or environmental constraints components. Using the e-root definition forced the participants to develop a more thorough definition of their idea. Conse-
quently, Fig. 4 illustrates the line of questioning developed from the group discussions. As this stage required two half day sessions stretched over a week, the commitment package provided the focus and clarity by categorising action that could be performed now, explorations or further research requirements, deferred decisions dependant on outcomes of actions or explorations, and contingency plans for any issues and risks identified. The participants expressed the value the commitment package provided.
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Root definition
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eRoot Definition
Customers (C)
Who are the customers / victims / beneficiaries of the system?
What is our target market? Who will pay for our offering?
Actors (A)
Who are the actors/participants in the system?
Who will make this happen and who will hinder progress? What intellectual capital and alliances will be required and who are the competitors ?
Transformation process (T)
What inputs are transformed into what outputs by this system?
What business “pain” are we the solution to? How much will people pay for the benefit our product / service brings to them ?
Weltanschauung , or usual translation is Worldview (W)
How we make sense of the world, based on our origins and experiences. What is the decision makers worldview underlying the system?
What is our competitive advantage? Basically, why us ?
Owners (O)
Who are the owners of the system, who has the power to stop the system?
How much money will we need and when will we need it? What will be the effect on the equity distribution of our company?
Environmental Constraints (E)
What are the environmental constraints that cannot be altered and which need to be considered?
What are the environmental constraints that cannot be altered and which need to be considered?
Fig. 3. An amendment of the root definition.
Fig. 4. The ordering of questions for the e-root definition.
5.2. The designing stage Objective: Expose the ideas to the internal capabilities that will have to deliver this venture and the external market in which it would have to operate. Approach: Step 1: Take an e-root definition.
Step 2: Apply PorterÕs Generic Competitive Strategies and the SWOT analysis. Step 3: Apply PorterÕs Five Forces Model and the PEST analysis. Step 4: Complete uncertainty space and commitment package as you progress. Step 5: Identify the e-root definitions Critical Success Factors.
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Timescale: Three half day sessions held over 2–3 weeks. PorterÕs Generic Competitive Strategies model was a thought provoking tool. The worldview component of the e-root definition was usually answered by a claim of industry knowledge or access to cutting edge technological intellectual capital. PorterÕs Generic Competitive Strategies model added value by asking the participants to think about the focus––would the proposition transfer to other industries and problem situations?––and differentiation––would the proposition optimise an existing business model with a ‘‘better/faster/cheaper’’ solution or develop a new business model with a ‘‘brave new world’’ solution?––of their propositions. The distinction between these potential approaches is vital in understanding the challenges the venture would face. The Generic Competitive Strategies approach was supplemented by the SWOT analysis to understand the gap between where the venture currently was and where it needed to be to be able to deliver the desired competitive strategy. The SWOT analysis was super-imposed onto the Uncertainty Space tool from the Strategic Choice Approach. However, as with the root definition an internet centric version proved more valuable. Instead of capturing uncertainty on guiding values (UV), the working environment (UE) and related choices (UR), uncertainty and risks associated with Strengths (US), weaknesses (UW), opportunities (UO) and threats (UTe) were captured. Once a view on the venturesÕ competitive advantage was formed, PorterÕs Five Forces model was applied to provide an external test and validation of the perceived competitive advantage. This was a recognized method of identifying the market reaction to the business concept. The participants noted that this stage would not have been possible without the clarity given by the e-root definition. As demonstrated in Fig. 5, the Five Forces model was supplemented by applying the PEST analysis, to provide an external view of risks and uncertainties (Fig. 5). As with the SWOT Uncertainty Space, the PEST Uncertainty Space was
changed to capture uncertainty and risks associated with political factors (UP), economic factors (UE), socio-cultural factors (US) and technological factors (UT) were captured as illustrated in Fig. 6. The Commitment Package from Strategic Choice approach was updated along the way and was the only way of keeping an acceptable level of momentum by focusing the participants on what needed to be done. The structure of the commitment package was well received by the participants who had begun to feel overwhelmed with the enormity of the issues that needed to be resolved. Finally, the work in this phase was distilled into the identification of a number of Critical Success Factors. Defined by its originators, Rockart and Hoffman [32], Critical Success Factors are ‘‘the limited number of areas in which results, if they are satisfactory, will enable successful competitive performance’’. In the approach given by Rockart and Hoffman, the critical success factors are derived from the core competencies of the organization. In this instance, they were derived from the SWOT Uncertainty Space and the PEST Uncertainty Space. These would later be quantified and tested in the scenario models to be developed in the next phase. 5.3. The shaping/designing iteration There were two main causes of iteration at this early stage. Firstly, as little thought seemed to have been given by participants to the actors, owners or environmental constraints components of the root definition, it was hardly surprising that the components of the Five Forces model required a lot of work. Consequences of industry focused competition or easily available substitute products caused the most iterations back to the shaping phase for a tweak to the e-root definition. As competitors were unearthed, and their products evaluated, the participants had to determine the best course of action. Would the root definition need to be tweaked or was the value proposition strong enough? Secondly, outcomes of research carried out as a result of explorations noted in the Commitment Package caused, in some cases major reworking of
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Lower likelihood
UP
UE Revenues dependant on one product
Taxation on internet sales Lower likelihood
Acceptance of internet as a viable business tool
Uncertainty Space Internet at early stage development
Dependant on ability to raise additional funding
Attracting & retaining Technical staff
New market ⇒ uncertainty
on take up
Lower likelihood
Bugs in Software
Delays in future software releases
Robustness of Back end technology
US
UT Lower likelihood
Little or no influence on risk
Medium Impact
High Impact
Low
Fig. 5. An example of the modified uncertainty space––PEST Uncertainty Space.
Most favourable e-root definitions
Abandon immediately
Favourable only if risk's can be managed
Risk
Favourable only if rewards can be managed up
know’’. Where no data was available, the entrepreneur had to be helped determine whether the benefit of specially commissioned research outweighed the risk of letting his idea ‘‘out of the bag’’ before he was ready to do so.
High
5.4. The comparing stage
Low
Reward
High
Fig. 6. Evaluating root definitions against their potential risks and rewards.
the e-root definition. The entrepreneur was guided on decisions regarding which market research reports were essential and which were ‘‘nice to
Objective: To determine whether any of the e-root definitions identified could translate into an economically viable venture. Approach: Step 1: Develop a financial model in Excel. Step 2: Build scenarios using the Critical Success Factors. Step 3: Compare each e-root definition against likelihood of scenarios. Timescale: Three half day sessions held over 2–3 weeks.
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The financial model developed in this phase had two layers. Firstly, the complete set of financials: balance sheet, profit and loss and cashflow statement. Secondly, a number of models based on the Critical Success Factors identified in the previous phase. For example, the revenue figure was derived from the pricing model which focused on two Critical Success Factors: price of the product and the number of units sold. These models were then used to produce a number of scenarios each reflecting a degree of factors turning favourably for the venture. Three scenarios were developed each on a scale from ‘‘Doom and Gloom’’ to ‘‘Expected’’ to ‘‘Jackpot!’’ Each e-root definition was judged against these scenarios. The model was also attached as a disk to the business plan to allow potential investors to make up their own scenarios. 5.5. The comparing/designing/shaping iteration The main cause for iterations between the comparing, designing and shaping phases was an unsustainable financial scenario where the revenue generated by supplying and servicing customers would not sufficiently, if at all, exceed the cost. This caused a re-examination of the e-root definition, the risks and the uncertainties to determine whether anymore could be influenced and managed into a more favourable way. The Critical Success Factors that had a high impact and that could not be managed to any great extent, would either cause a revision of the opportunity or would just be left in the commitment package to review at a later date. 5.6. The choosing stage Objective: Choosing a definition of the ventures business model. Approach: Step 1: Map each e-root definition onto the risk/reward matrix. Step 2: Select most favorable e-root definition. Timescale: Two half day sessions spread over a week.
Any investment decision is based not just on the potential reward, but also on an assessment of the risk incurred to achieve that reward. A simple matrix was used to plot the results of the financial model and the SWOT and PEST uncertainty spaces. As, in most cases, the e-root definitions developed by the previous three stages, still suffered from a level of uncertainty and risk, any choice of root definition would be in light of the current set of circumstances. If these circumstances were to change, as identified in the deferred decisions and contingency section of the commitment package, then a root definition abandoned at this stage may become more favourable. 5.7. The next steps At the end of this process the entrepreneur would be left with the following: • An Elevator Pitch: Combining the customer, transformation process and worldview components of the e-root definition would produce a concise sentence describing the venture. • A Business Model: The complete e-root definition would form the ventures business model. • Investor Materials: A small amount of additional work was required to have a business plan and investor presentation ready for fund raising.
6. Lessons learnt 6.1. Deciding on how to mix methodologies Mintzberg argues, ‘‘search all those strategic planning diagrams. . .and nowhere will you find a single one that explains the creative act of synthesizing ideas into strategy. Everything can be formalized except the very essence of the process itself.’’ This is even more evident in the case of new venture development, which does not afford the luxury of plotting a course on day one that will be broad enough to facilitate the generation of ideas; specific enough to distil desired outcomes; and robust enough to maintain progress in a dynamic and uncertain environment.
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However while mixing Soft OR methodologies and strategic management tools does seem a feasible way forward, there is no panacea to this problem. To further complicate matters, certain tools that work in certain circumstances with certain participants may fail miserably with others. However, the approach used by the author, illustrated in detail in Fig. 2, to mix methodologies may be of use to the reader. The first step is to understand the problem situation in order to choose an overarching methodology. In the case of the work described in this paper, the key issue was one of handling the complexity and uncertainty inherent in the new venture development process. Consequently, the iterative and flexible approach of Strategic Choice offered the most in this problem environment. Ormerod [27] used Ackoff Õs interactive planning as the overarching methodology for developing an information systems strategy for Sainsburys where the key issue identified was to develop creative solutions based on a shared understanding. Alternatively a more generic strategy development approach could be used, if the practitioner deemed it appropriate. The second step is to continually assess whether the overriding tool is able to manage the specific issues of the problem situation and, if not, to determine how alternative methods and tools can be used to enrich the process. The author did not restrict the choice of potential enrichment tools to the OR toolkit alone, but also used strategic management tools such as the SWOT analysis and PorterÕs Five Forces model. The choice of these enrichment tools was based on the authorÕs assessment of his own ability to best apply the tools and the participantsÕ receptiveness to ‘‘new’’ approaches. This point is very important and will be covered in the next lesson learnt. The value an OR practitioner should bring is the understanding of a variety of tools and techniques that can best assist in the decision making process. Rather than hiding behind a ‘‘standard’’ methodology, the practitioner must take responsibility for understanding his clients and their particular problem situation and take ownership of ensuring the most appropriate selection of tools and techniques to meet this need.
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6.2. ‘‘Bedside manners are no substitute for the right diagnosis’’––Alfred Sloan, Chairman of General Motors Mixing methodologies is inherently a dangerous enterprise that can have dire consequences for the success of the project and the reputation of the methodologies applied. Lane [20], in his discussion of linking system dynamics with Soft OR, warns of the dangers of applying techniques to inappropriate problems. Lane goes on to quote Jackson and Keys who argue ‘‘difficulties are almost certain to occur when methodologies suited to particular problem contexts are transferred and adopted for use in problem situations for which they were not designed.’’ Another danger to the concept of mixing methodologies may be the hijacking of the approach to cover a lack of discipline in applying methodologies properly. It is essential that a practitioner, before attempting to mix methodologies, have proper training and the opportunity to apply them in practice as they were meant, before attempting to pick and choose components in a mixed approach. Lane [20] makes this point when he states, ‘‘it is vital to have a clear and critical understanding of the assumptions underlying any technique.’’ The author was fortunate enough to have had this opportunity while studying for his MasterÕs degree and during his MasterÕs dissertation. However, there is also a growing number of literature and courses available, both from the methodological schools where the tools were developed and from other institutions as well. 6.3. Focus on the people not just the process The cliched management consultants or newly graduated MBA students are rightfully criticized for their desire to fit any problem into their standard model. This may also be true for OR practitioners with only a working knowledge of certain Soft OR methodologies. Some of the entrepreneurs that participated in the work described in this paper detested the approach of having methodologies ‘‘inflicted’’ on them. A participant described the approach of keeping the problem in the limelight and the tool or methodology behind the
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scenes as ‘‘refreshing but overdue’’. Modifying the language of tools, for example the e-root definition or overlaying the SWOT and PEST analyses on top of the Uncertainty Space, also proved very successful. Feedback given by a participant was that ‘‘when things made sense to us, we didnÕt need to waste time that we didnÕt have trying to understand the tool that was going to help us reach our objective.’’ Consequently, the successful of a project may be better measured by the perceived value gained by the participants rather than whether the methodology applied perfectly. In Morecroft et al.Õs work [26] with a bio-technology Start Up, the authors noted that the New Ventures Manager felt that the process of building the System Dynamics model to develop a growth strategy for the firm may have been more useful than the model itself.
7. Conclusions Developing any new venture is fraught with uncertainty and risk. The technology sector, with its rapid rate of change where products can be introduced and become obsolete within a matter of months, is an extreme case of new venture development. This mix of uncertainty and rapid change together with the lack of data on which to make sound business decisions further complicates the whole process. It is difficult in these circumstances not to freeze in the face of uncertainty or to produce business models that ignore vital risks. Individual methodologies in the Soft OR toolkit have evolved in the discipline of OR to specifically handle uncertainty and conflict. However, linking these approaches in order to accentuate different aspects of the problem ‘‘seems to hold out the promise of something better than any approach on its own’’. This paper demonstrates an application of the Strategic Choice approach as the overriding methodology with a number of Soft OR and management tools used to enrich the approach. The tools and techniques used to enrich the process were chosen with the audience and circumstances in mind, so may or may not be used again. However, the Soft OR toolkit was instrumental in
the process of developing robust business models for four start ups, three of which are still in business in early 2002. Acknowledgements The author would like to thank Azhar Hameed for his support, guidance and inspiration during this work and Adam Clark and Jake Riat for their helpful comments. References [1] J. Albrink, G. Irwin, G. Neilson, D. Sasina, From bricks to clicks: Four stages of evolution, Strategy & Business, Issue 20, 2001. [2] P.G. Bennett, Mixing methods: Combining conflict analysis, SODA & Strategic Choice in Eden & Radford, Tackling Strategic Problems, 1990. [3] P.G. Bennett, L.M. Matthews, The art of course planning: Soft OR in action, Journal of Operational Research Society (1986) 37. [4] P.G. Bennett, On linking approaches to decision aiding: Issues and prospects, Journal of Operational Research Society (1985) 36. [5] S.P. Bornheim, e-Roadmapping, Digital Strategising for the New Economy, Palgrave, 2001. [6] D. Boyle, The Sum of Our Discontent: Why Numbers Make US Irrational, 2002. [7] Businessweek, 2002, Wi-Fi: ItÕs Fast, ItÕs Here––and It Works, Businessweek Special Report, April 2002. [8] P.B. Checkland, Systems Thinking, Systems Practice, Wiley, Chichester, 1981. [9] P.B. Checkland, Soft systems methodology: Overview, Journal of Applied Systems Analysis 15 (1988) 27–30. [10] P.B. Checkland, Systems thinking in management: The development of soft systems methodology and its implications for social sciences, in: H. Ulrich, G.J.B. Probst (Eds.), Self-Organisation and Management of Social Systems, 1984. [11] J. Collins, Built to flip, Fast Company Issue 32, March 2000. [12] G. Colony, 2001. Hollow Dot Com, My View. Available from:
S. Gondal / European Journal of Operational Research 152 (2004) 571–585 [17] J.K. Friend, A. Hickling, Planning Under Pressure: The Strategic Choice Approach, Pergamon, Oxford, 1987. [18] M.J. Hatch, Organisational Theory: Modern, Symbolic and Post Modern Perspectives, Oxford University Press, 1997. [19] S. Lacey, Q&A: GoldmanÕs tech chief talks IPOÕs, Red Herring, April 2001. [20] D.C. Lane, With a little help from our friends: How system dynamics and soft OR can learn from each other, System Dynamics Review 10 (2-3) (1994) 101–134. [21] M. Mandel, Restating the Õ90s, Businessweek, April 2002. [22] M. Meeker, F. Cascianelli, 2002. The Tech IPO Yearbook, eighth ed., 22 Years of Tech Investing, Morgan Stanley Dean Witter Report. Available from
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[27] R. Ormerod, Putting Soft OR methods to work: Information systems strategy development at SainsburyÕs, Journal of Operational Research 46 (1995) 277–293. [28] M.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors, The Free Press, New York, 1980. [29] M.E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance, The Free Press, New York, 1985. [30] R. Quindlen, Confessions of a Venture Capitalist––Inside the High Stakes World of Start Up Financing, Warner Books, New York, 2000. [31] M. Rappa, 2001. Business models on the web––managing the digital enterprise. Available from