Mti The Big Idea Group

BIGBig Idea Group

AAKASHDEEP - PGP/14/126, AMEYA - PGP/14/004, ARIFUDDIN - PGP/14/014, EMILIA - IE/14/05, GERHARD - IE/14/06, GOUTHAM - PGP/14/143,

KUMARESAN - PGP/14/150, MORTEN - IE/14/10, OBULESU - PGP/14/156, TOBIAS - IE/14/11, UMESH - PGP/14/310 SHARATH –PGP/14/ 241 VARUN-PGP/14/ 122

Group 5 – MTI

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Company Overview

� Founded 2000� Intermediary company between

investors and idea-buying companies� Assist large manufacturing & retail

companies in their innovation efforts � Use holistic process to use ideas as

resource and transform them into valuable products

� Start business in Toy industry

Big Idea Group at a Glance People Behind the Scene

Michael Collins (CEO & Founder)� Deep insights in venture capital industry

due to former job at a leading VC firm� Founder of a specialty toy company with

award-winning product lines� MBA from HBS� Entrepreneurial spirit & innovation

George d’Arbeloff (Chairman of AB)� Deep insights in equipment

manufacturing & service industry � Established manager with long business

experienceOffering companies a new way of

managing innovations

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BIG’s Philosophy of Inventions & Problems of Large Companies

Inventions are popping-up in different places

BIG‘s Philosophy &

Understanding of Inventions

Problems of Product Development

Departments of Large Companies

� Concentration on own ideas to evolve existing product lines

Inventions are unpredictable

Inventions don’t only come via well-founded product develop departments within large companies, but also from independent thinkers

BIG taps into & seeks for entrepreneurial power of legions of

individual inventors

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3 � Different companies need different investments in product development (e.g. for creating prototypes)

� Exclusion of thousands of individual “tinker-ers” & independent innovators generating new product ideas

� Wrong investment decisions because employers are emotionally down & drained by their product category

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Toy Industry as Starting Point for BIG – An Overview

� Market size: prox. $ 30 bn. (in 2000)� Multiplicity of industry segments

� Video games� Fashion dolls� Plush toys� Skating accessories� …

� Retailer: from large, well-known retailers (e.g. Toys “R” us) to smaller retailers

� Retailers purchase toys from many different distributers & wholesalers

� Toy producers range from large companies like Hasbro or Mattel to small niche players like Kid Galaxy

Toy Industry at a Glance Trends in Toy Industry

� Kids behavior and wishes are changing due to faster development, replacing toys with sport & music earlier

� Introduction of high-tech gadgets and products (e.g. CD or cell phone) gaining attention from kids and stimulating kids wishes & demand

� Personalization & niche markets becoming a new trend and tackle traditional mass market

Toy manufacturers and retailerlacking new innovation & fresh content

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BIG’s innovation process

STEP 1 STEP 2 STEP 3 STEP 4

Hunts

Outsourced

Flow

Professional

Inventors

Industry

Outreach

Orphaned Products

& Ideas

Internet Request

Programms

WINNOWING REFININGCAPTURING

VALUE DEAL

1000 + 100+ 20-305-6 deals per year

per verticalIde

as

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STEP 1

Hunts� Roadshow for finding ideas and entrepreneurs� Inviting local entrepreneurs showing their

concepts to industry experts� + pooling inventors

Overview of Elements

Outsourced Flow� Cooperation with major toy companies� Unsolicited idea submissions each month, BIG

helps in evaluating, winnowing and refinement� + avoids good ideas from “ slipping through the

cracks”

Professional Inventors� Network of professional investors through hunts

and WOM� + Helped BIG connect with more inventors

Industry Outreach� Publishing research on industry trends� + Giving BIG awareness and

validation of trends

Orphaned industries and Ideas� Products never brought to market/

stopped developed/ promotion� + Products are revitalized through BIG

process

Internet request programs� Solicitation of suggestions from inventors

through website and newspaper� +helping big adding ideas to lines under

consideration, more targeted concepts

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STEP 2 & STEP 3

STEP 2: WINNOW STEP 3: REFINE

� Manageable number of ideas for refinement

� Pursue highest potential ideas� Hunts: Evaluation by panel of industry

experts incl. Collins� Breadth of knowledge� Reduced personal bias� New mix of panelists for each event� Approximately 15 panelists� Short form filled out for every invention

� Other idea sources: same criteria

� Close cooperation with inventor� Make concepts more appealing to kid’s

companies� Draw on BIG’s knowledge of what

companies look for� Production of appropriate presentation

material

� 3-6 months of refinement� Company research� Repositioning� Design� Engineering � Field testing etc.

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STEP 4 & Key Success Factors

STEP 4: CAPTURING VALUE Key Success Factors of Process

� Three ways of monetizing the product� Licensing the product to a company� Develop the concept internally as a

private label� Bundle several concepts to sell to

entrepreneur

� Monetized 35 different products through five contracts (Sept. 2001)

� Licensing deals:� Advance payment� Royalty� Guarantee

� Network of professional inventors� Broad variety of backgrounds and

perspectives in panels� Constantly looking for new “athletes” � Collins himself

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Why does BIG seem better able to identify and bring to market innovative toy concepts, whereas the major toy companies feel they are in a period of “lack of innovation”

How proprietary or defensible is BIG’s system? Could one of the major toy companies replicate it? Why or why not?

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Dimension Definition Example

Offerings Develop innovative new products or

services.

Looks for innovation from the most unpredictable

ways.

Captures the power of parallel processing for

innovation from people from outside an organization

who might not be affected by the organization’s

critical data like sales information, etc

Platforms Use common components or building blocks

to create derivative offerings.

Designed the business model like that of a venture

capital business with little overhead.

Solutions Create integrated and customized offerings

that solve end-to-end customer problems.

Raw ideas , unsolicited inventor and vendor

submissions which toy companies get frequently

are forwarded to BIG

BIG then performs a feasibility check and refining of

the ideas

Adapted from : Sawhney et, al. (2006). The 12 different ways for companies to innovate.

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Dimension Definition Example

Value Capture Redefine how company gets paid or

create innovative new revenue

streams.

Licensing a product to company

(advances, royalty, guarantee for both

BIG and inventor)

Subcontract a product as a private-label

Bundling of many concepts to sell to

entrepreneurs

Processes Redesign core operating processes

to improve efficiency and

effectiveness.

Acts as a intermediary between

inventors and idea-buying companies

(manufacturers/retailers)

Supply Chain Think differently about sourcing and

fulfilment

“Innovation engine” tries to capture

innovation and idea flows from the

broadest range possible : hunts,

outsourced flow, etc.

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Dimension Definition Example

Networking Create network-centric intelligent

and integrated offerings

According to Collins, “…you can’t replicate the human side

of business.”

Backed by his own charismatic personality, inventor’s

approach and good relationship with inventor communities,

BIG has created a valuable network of manufacturers,

retailers, entrepreneurs, inventors, etc.

Brand Leverage a brand into new domains With the foray into the Home and Garden business, BIG

would be venturing into a bigger market and would turn

profitable provided it applies the business sense that has

enabled it to succeed in the toy industry

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How proprietary or defensible is BIG’s system? Could one of themajor toy companies replicate it? Why or why not?

VC experience Domain experience

Personality, Creativity, Intelligence

Perspective of the Inventor: Higher probability of ‘idea to revenue’ conversion with BIG than any single toy company

Perspective of a Toy Company: Engaging with BIG would provide readymade and better solutions cost effectively compared to trying to replicate the model on its own

More cost effective for the toy companies to pay for licences than take upthe entire work on its own – huge work and time involved in idea screeningto idea refining, testing, customizing. Even if it could, the solutions would notbe as great and out of the box

Collins

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How proprietary or defensible is BIG’s system? Could one of themajor toy companies replicate it? Why or why not?

• Ad-hoc rotating panel sourced from multiple associations and companies across the industry -> Impossible to replicate for a single company owing to (i) Industry competition, (ii) Full time employment (HR issues)• In absence of ad hoc rotating panel, seasoned thinking sets in

Lower Transaction Costs and Economies of Scale: Analogous to distributor or wholesaler in SCM

BIG

Inventor1

Inventor2

Inventor3

Inventor4

Company1

Company2

Company3

Company4

Brand already established as an idea incubator company

Finally, even BIG is facing considerable challenges trying to replicate its own model for a different industry – just about sums it up!

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Can BIG replicate its system in other industries such as lawn and garden?

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Major Constraints

Availability of a pool of large inventors: Products which involve high costs likeengines etc., find less tinkerers than low cost items like toys. Hence the pool of ideas isinversely proportional to costs involved

Finding the right Screeners/ winnowers : Winnowing is the crucial aspect of thismodel. It requires, different personality with vast industry experience, intuition,knowledge, judgment and taste

Tacitness and specificity Involved: The process involves application knowledgewhich is tacit in nature which cannot be simply transferred to all industries and is moresubjective The configuration of people, process, screeners, Managers , Innovators andgiving them a fair share , companies all involved form an ecosystem

Idiosyncratic nature of these eco systems : The technologies involved, level ofmanufacturing capacities, constraints

Network Externalities: Externalities play a huge role in these system and carries riskof networked systems

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Adoption of Process for Garden and lawns

BIG may replicate with gardens and lawns, however, success is subject to the leadership and people involved

� Basic process applicable in any industry� Sponsorship gives a more solid base

compared to angel funding� Low Revenue/High profit model

combined with low investment in assets gives BIG good flexibility

� Garden and lawns apparently have a large pool of inventors

� Finding “Mike Collins” in the home and garden segment is crucial for success

� Right of first refusal for Skil-Bosch might handicap BIG’s process of finding the right partner for the right product

� ROFR for Skil-Bosch might limit the will of cooperation from inventors and/or potential qualified panelists

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THANK YOU !!