Model Venture
When a venture is built so that each of the key elements is optimal, it is a Model Venture. This does not mean, however, that the venture is perfect. Instead, it means that the venture is optimally situated to fully take advantage of (1) venturer expertise, and (2) stakeholder support.
Figure 1: "B/K" Diagram
ADVICE:
Model Ventures by definition are self-observing, self-evaluating, and self-reinforcing. Hence, these behaviors should be encouraged.
Also, entrepreneurs should utilize the foundation provided by a Model Venture to support refinements in venturer expertise, and in better managing relationships within their stakeholder environment.
Figure 2: Target "Bulls-eye" Diagram
Venture Example:
This case was prepared by Team Lynx as an entrepreneurship project at the University of Victoria. It is designed to illustrate the venture archetypes used in the New Venture Template through story and case description. Though the case is based on a true story and actual businesses, its name and likeness has been altered. The case is quite brief, so you should be able to read it quickly
In a thick, Hungarian accent, Nick Habsburg addressed a smartly dressed group of MBA students in a classroom at the University of California, Berkley campus, in 1993. "Japan is staged to turn the US into a third-rate techno-colony." His fears were well founded. A number of Japanese firms had managed to reverse engineer the D-RAM chip, which his company pioneered. D-RAM chips became commodity items, and the Board of Directors pointed this out succinctly, allowing Sultan Circuits to take decisive action before they began to lose profits. Sultan Circuits was left with no other option but to abandon the market in search of more favorable climes. The favorable climes were found in the microprocessor industry. Sultan made a high stakes gamble, and it seemed to be paying off.
BACKGROUND
Twenty year-old Nick Habsburg arrived on American soil in 1956, after fleeing civil and political unrest in Hungary. When he stepped off the ship he had $20 in his pocket, the clothes on his back, and a razor badly in need of sharpening. Nick found work quickly, and managed to support himself through an engineering degree. Upon graduation from college, Nick worked on a number of small electrical engineering projects. In 1964, Nick teamed up with fellow classmates Gino Mardi and Stephen Loyce, to work on a revolutionary new technology. The following year, the threesome had successfully created the first integrated circuit. Recognizing this as a monumental accomplishment, Nick, Gino and Stephen set up Sultan Circuits to market their discovery. Sultan was quickly taken under the wing of IBM, as its main supplier of integrated circuits.
TODAY
Sultan Circuits developed a simple strategy--lead the market by force, speed, and technological development. Take no prisoners, and take no crap. The Japanese, the clone makers, Congress, and the rest of Silicon Valley listened when Nick spoke. His firm had dug in successfully on a number of occasions, fighting off legal battles and suppressing firms that infringed upon Sultan's patents. Sultan shuddered at the thought of a proposed merger between IBM and Apple to create a new crop of chips called RISC- for 'Reduced Instruction Set Computing', to be used in desktop workstations. Sultan developed the Selenium line of chips, which integrated all of the RISC features, and successfully halted the advance. Today, at least 70% of the new computers sold contain a Selenium microprocessor, and every computer on the market has at least one chip made by Sultan.
Microprocessor development was a lucrative business. Microprocessor speed increased as the number of transistors on the chip increased. To accomplish this, the transistors had to be packed closer and closer together. This required intensive engineering research and design. Sultan lead the market, introducing a new line of microprocessors every three years. The blistering pace left clone makers further and further behind with each line change. By the time the clone makers reversed engineered the chip and caught up with Sultan, a new line was ready to go to market. The new chip lines were consecutively faster, more reliable, and cheaper to produce than the last, factors which erected larger and larger barriers to would-be clone manufacturers.
Sultan's development and technological refinement of the microprocessor outpaced even the former industry leader in the field, IBM. The new Selenium chips put the power of a mainframe into a desktop system. To keep IBM and other computer manufacturers on side, Sultan spearheaded a new combination in the computer industry. A series of promotions developed name brand recognition for Sultan's line of microprocessors. A 'Sultan Powered' sticker adorned all of desktop systems using the latest technology. The name brand recognition made this a key selling feature; consumers wouldn't purchase anything else. Sultan's componentry was the industry standard, and there were few others left in the market to compare with.
Sultan has it critics though. A number of competitors alleged the strategic alliances Sultan made with desktop manufacturers were restraining competition. The Federal Trade Commission investigated this and numerous other complaints. Sultan pointed to its superior research and development divisions, and the fact that their microprocessors were significantly better than those of the competition. The strategic alliances benefited both Sultan and the manufacturers. They ensured manufacturers access to the limited supply of the fastest microprocessors on the market, and gave Sultan the financing and futurity to continue developing the technology. Sultan argued that their 70% share of the market was natural, that it was due to their technological leadership, and not to anti-competitive practices. The courts agreed.
Stephen Loyce was killed in 1996 in a skiing accident in Sweden. The initial market reaction was rather hash, but quickly corrected itself upon realizing the precautions Sultan had made for such an eventuality. The ownership was able to recover quickly, and management was relatively unaffected. Sultan completed the year with profits up 20% over 1995.
Sultan's share price has doubled in the past nine months. Sultan outspends all other microprocessor manufacturers, domestic and foreign alike. In 1993, they poured $2.5 billion (about 43% of 1992 revenues) into plant improvements, research and development. When talking about the high-flying share price, one Sultan employee summed up the atmosphere like this; 'The higher the stock price goes, the harder I seem to work.' This hard work is paying off. Today, Nick Halsburg smiles when he comments on his statements five years ago. 'Perhaps I was a bit pessimistic.'
Sultan seems poised for a bright future, leading Silicon Valley, gathering up further market share, and glimmering in the eyes of its shareholders, employees, and Nick Halsburg himself.
