The purpose of this research is to explain the innovation and the disruptive innovation of a business idea and identifying the innovation life cycle stags with effective theories, also to evaluate the position of the idea in the innovation life cycle and the possibility of taking money from banks or any alternative sources. This business report has been prepared and focused only on six indicators of the index of performance of two countries.
Table of contents
Contents
Executive Summary
Table of contents
Introduction
Research Task 1
Research Task 2
Research Task 3
Research Task 4
Research Task 5
Research Task 6
Research Task 7
Conclusion
References
Appendix
Executive Summary
The purpose of this research is to explain the innovation and the disruptive innovation of a business idea and identifying the innovation life cycle stags with effective theories, also to evaluate the position of the idea in the innovation life cycle and the possibility of taking money from banks or any alternative sources. This business report has been prepared and focused only on six indicators of the index of performance of two countries.
Introduction
Bob Brains who completed his PhD from UWOD, has created a home testing kit for the coronavirus. He thinks his new idea is a disruptive idea and not sure by the meaning of disruptive innovation. However, he registered a patent on his innovation.
This study will define the meaning of the disruptive innovation and explain to Bob whether his idea is disruptive. Moreover, the study identifies the innovation life cycle stages and evaluates the current position of his innovation and suggests the best position he will be selling the small company. Also, it discusses the sources of funding availability whether from banks or other alternatives. Furthermore, it highlights the U.A.E innovation strategy and the supported sectors.
An index of performance has been created based on six indicators only for U.A.E and U.S to recommend to Bob in which country he can promote his innovation.
Disruptive innovation is an innovation where the process of creating new business with value, is somehow able to challenge the traditional businesses. Big companies usually focus on sustaining innovation and upgrading existing products and services to attract higher paying customers and thus more profit. The disrupter creates a new market, improves the product to appeal to more people by commercializing it, where the product could start at a lower quality and cost, and later covers the market by improving quality. Examples are, Netflix, Amazon and Facebook.
We figure here in Bob's idea that creating home testing kits for the coronavirus is a disruptive innovation idea. At home, the testing kits might be the key to ending the hassle of going to hospitals, clinics and laboratories, also it will help people not to be exposed to the virus outside their home, in addition it could be at average price or less, where it gives unambiguous results within minutes, just like a home simple pregnancy test. By the time, these kits will appeal to the market and will start positioning itself in every home.
Bob has to know that the innovation life cycle encompasses different essential stages as the following:
1- The seed, before the startup exists, this stage is the very beginning in every innovation lifecycle. At this point, Bob should gather opinions and advices and conduct researches of his business idea from as many sources as possible: business associates, friends, colleagues or any industry specialists and he has to focus on the kit's economic viability, market potential and technical feasibility (Figure A, Appendix A) (Laurent Potet).
2- The start-up, once Bob has thoroughly tested the idea and he is satisfied that it is ready to go, it's time to make it official and launch his startup. Bob has to be careful at this stage since many business experts believe it is the riskiest of the entire lifecycle which is called Valley Of Death (Figure A, Appendix A). “In fact, it is believed that mistakes made at this stage impact the company years down the line, and are the primary reason why 25% of startups do not reach their fifth birthday.” (Neil Petch, 2016, P1).
3- The early growth, Bob's business should be generating new customers and having a consistent source of income. Cash flow also has to improve as recurring revenues help to cover ongoing expenses and he should be looking forward to seeing his profits improve steadily and slowly. Bob's challenge at this stage is dividing time between the customers' demands, managing the revenue, dealing with the competition if any, hiring smart people with complementary skills, etc. Bob's job here is to “start establishing real order and cohesion as he mobilizes the teams according to clearly defined and communicated goals.” (Advisor, CFO Business Partner, 2017)
4- The expansion (Figure A, Appendix A), at this stage his business has a market impact and it is firmly established within the industry. Bob might start to think by broadening his horizons with expanded offerings and entry into new geographies. Public stock markets and Loans are very possible at such a stage based on the business review and revenue.
Based on the given scenario, we can see that Bob still doesn't have money to develop his idea nor that he owns hard assets yet. In addition, he wants to establish his innovation idea, which means he is still at the earliest stage, where he only came up with the idea, asked a friend and registered a patent on his innovation. Based on all facts mentioned above, his business is still at the Seed stage of the business life cycle.
If Bob's dreams and expectations turn out to be true, and he wants to sell his small company, he has to prove that his innovation started to be successful and passed the Valley Of Death stage, and started to move from the Start-Up stage into the Early Growth stage. Here, if Bob is willing to sell his small business before it converts into the Expansion stage, he has a higher possibility of achieving that through Venture Capital Funds.
But to give Bob a better advise, he shouldn't consider an Exit at such a stage, instead he should sell part of the company like a small or negotiated percentage against funds which will help him to achieve his dream as per the scenario “he wants to make as much money as possible from his idea”. In other words, the selling of a successful idea is possible at the Early Growth and Expansion stages, but the selling amount will be different, because he can achieve Loans at the last stage to expand more and become global, where Bob can make more money as per his dream.
As per the previous explanations in Task 3, we can see that Bob can achieve bank loans at the Expansion stage. That is to say, when the business is in the early stage, banks are reluctant to lend but when it grows to Expansion stage with proved operations and acceptable turnover, they are ready to support, because banks are not ready to take risk if the project or proposal is not convincing. “Banks usually take many precautions when it comes to lending to SME sector due to the risk associated with this” (Business Loan And Trade Facility, CompareGulf.com, 2019).
The alternative sources of funding available if banks are not yet willing to risk and support with loans, is basically the Venture Capital funds like HUB71 in Abu Dhabi at Start-up and Early Growth stage. But for Bob to achieve that he has to know that Venture Capitals are not also easy to please without a clear plan or a proved running business.
As per the scenario provided “he does not have money to develop and commercialize the new product”, Bob might consider at Seed stage an initial fund through his circle of friends, family, UOWD colleagues and small investors, where he can learn that Eduardo Saverin, invested $1,000 in Facebook with Mark Zuckerberg when he was at the Seed stage. But, since nowadays Venture Capitals are willing to enter even at earlier stages because of successful stories, Bob has a higher chance to achieve a Venture Capital fund by developing a full convincing plan of the business model to support the Venture Capital's early decision.
UAE Leadership believes that innovation is the future of human investment and emphasizes the importance of innovation across all sectors through the country. “In October 2014, Sheikh Mohammed launched the UAE National Innovation Strategy with the aim of making the U.A.E one of the most innovative nations in the world within seven years” (NIS, www.u.ae, 2020). People in U.A.E believe in innovation as it helps them to increase the standard of living and improved their lives. In the month of February every year all U.A.E celebrates the U.A.E INNOVATION MONTH.
Seven main sectors are supported by the U.A.E innovation strategy namely, Health, Space, Water, Education, Technology, Renewable Energy and Transportation. These sectors are provided with a lot of facilities like direct investments, incentives, prizes and rewards, funds and direct government and Cabinet support.
As a start the Health sector today with the help of Abu Dhabi Vision 2030, provided many innovations like the Abu Dhabi Telemedicine Centre, which is involved in researching life sciences, developing pharmaceuticals and anti-cancer drug manufacturing. In addition, the Space sector, with its current famous U.A.E Mars Mission by Mohammed Bin Rashid Space Centre is another important sector which has other examples too like the U.A.E Space Agency and Emirates Institution for Advanced Science and Technology. Moreover, the Water sector which is globally becoming very crucial is also supported through solutions done by the Water Aid Foundation, and Masdar Institute Center for Water and Environment (iWater).
Furthermore, the Technology sector is already providing research centers and smart initiatives such as iSmart, KSRC, iMicro, The Smart Government and The Smart City initiatives. Also, the
Education sector with many innovative projects founded in Mohammed bin Rashid Smart Learning Program, Think Science by the Emirates Foundation and Emirates Skills by ACTVET. Additionally, Renewable Energy innovations can be found in great institutes like Masdar, Mohammed bin Rashid Al Maktoum Solar Park, and The Emirates Nuclear Energy Corporation. Lastly, Transportation sector, has great references too like reshaping travel by Etihad and Emirates, and continuous projects involving drones, unmanned cars and trains development.
As per my review for The Global Competitiveness Report 2019, following is how I have calculated the index of performance for U.A.E and U.S., based on provided six indicators, where the numerical value was calculated by multiplying Score of every indicator of each country against the relative percentage weight. Then I have added the sum of value results to achieve the Index of Performance at the bottom.
Abbildung in dieser Leseprobe nicht enthalten
I do recommend for Bob to promote his innovation idea in United States, because the Index of Performance table shows that it has higher score than U.A.E by five indicators out of six. However, U.A.E is higher than United States in Number of Days to start a business since it supports innovation ideas with high quality strategy and smart models, and U.A.E leadership encourages people to innovate and produce smart ideas. To put it in a nutshell, United States is stronger to absorb change and take new ideas by monitoring global innovation developments and they have a strong system that retains substantial and powerful capabilities to foster innovation.
Table 2
Abbildung in dieser Leseprobe nicht enthalten
Conclusion
Bob wasn't sure how to start his new idea, but now with the economic definitions and theories were discussed in the report, Bob understood that his innovation idea is disruptive and its success depends on recognizing the innovation life cycle, and the expectations of selling his small enterprise at highest amount of money depends on the growth and the ability to reach to the startup and early growth stage to achieve funds and loans. He also learned that when it comes to the decision of choosing one of the two countries (U.S. or U.A.E) that have been recommended for promoting his business, he is at a better position to proceed with U.S. due to the higher value of Index of Performance.
References
Neil Petch, 2016, P1, The Five Stages Of Your Business Lifecycle: Which Phase Are You In?
Available at: https://www.entrepreneur.com/article/271290 [Accessed on 22nd April 2020]
Advisor, CFO Business Partner, 2017, Available at: https://cfobusinesspartner.com/tag/business-intelligence/ [Accessed on 23rd April 2020]
Business Loan And Trade Facility, CompareGulf.com, 2019, Available at: https://www.comparegulf.com/business-loans.php [Accessed on 23rd April 2020]
NIS National Innovation Strategy, U.AE, Available at: https://u.ae/en/about-the-uae/strategies- initiatives-and-awards/federal-governments-strategies-and-plans/national-innovation-strategy [Accessed on 24th April 2020]
Appendix
Appendix A
This image was removed by the editorial team due to copyright issues.
Figure A
Source: http://international-entrepreneurship-in-cee.blogspot.com/2005/11/business-angel- network-in-cee.html
Frequently asked questions
What is the purpose of this research?
The purpose of this research is to explain the innovation and the disruptive innovation of a business idea, identify the innovation life cycle stages, evaluate the position of the idea in the innovation life cycle, and discuss potential funding sources (banks or alternatives). The report focuses on six performance indicators for two countries.
What is disruptive innovation according to this text?
Disruptive innovation involves creating a new business with value that challenges traditional businesses. It often starts with a lower-quality, lower-cost product that improves over time to appeal to a wider market. Examples include Netflix, Amazon, and Facebook.
How does the text describe Bob Brains' coronavirus home testing kit idea?
The text suggests that Bob Brains' home testing kit for the coronavirus could be a disruptive innovation. It could simplify testing, reduce exposure risks, provide quick results, and potentially be more affordable.
What are the stages of the innovation life cycle described in the text?
The innovation life cycle stages are: 1) The seed, 2) The start-up, 3) The early growth, and 4) The expansion.
What is the "Valley of Death" in the innovation life cycle?
The "Valley of Death" refers to the start-up stage, considered the riskiest part of the innovation lifecycle, where mistakes can have long-lasting negative impacts.
At what stage should Bob consider selling his company?
The text suggests that Bob should consider selling his company when it has successfully moved from the start-up stage into the early growth stage. Venture Capital Funds are a higher possibility when this is achieved. Selling part of the company to keep a portion of the profits is also mentioned as an option.
When can Bob expect to receive funding from traditional banks?
Bank loans are more likely to be available during the expansion stage, when the business has proven operations and acceptable turnover.
What are some alternative funding sources besides banks?
Alternative funding sources include Venture Capital funds (like HUB71 in Abu Dhabi), funding from friends, family, UOWD colleagues, and small investors.
What is the U.A.E.'s stance on innovation?
The U.A.E. emphasizes the importance of innovation across all sectors and aims to be one of the most innovative nations in the world. They celebrate U.A.E. Innovation Month every February and support several key sectors.
Which sectors are supported by the U.A.E. innovation strategy?
Seven main sectors are supported: Health, Space, Water, Education, Technology, Renewable Energy, and Transportation.
What is the Index of Performance and how is it used in the text?
An Index of Performance is created based on six indicators to compare the innovation environment of the U.A.E. and the U.S. It is used to recommend to Bob in which country he can promote his innovation.
Which country does the text recommend for Bob to promote his innovation?
The text recommends that Bob promote his innovation in the United States due to its higher Index of Performance score.
What key factors influenced the recommendation for the United States?
The United States is considered stronger in absorbing change, monitoring global innovation developments, and possessing substantial capabilities to foster innovation, leading to the recommendation.
- Quote paper
- Sara Alkfiri (Author), 2021, Innovation Life Cycle of a Business Idea, Munich, GRIN Verlag, https://www.grin.com/document/1278994
