Struggling Proprietary
The Struggling Proprietary type venture experiences the paradox of being so closely held (i.e. having such unique Core Competence or proprietary secrets, etc.) that it fails to generate sufficient "business."
Hence, when viewing the prototype "Bulls-eye" diagram, one can see that all the "Can You Keep It?" variables (Scarcity, Non-Appropriability, and Flexibility) are high, while all the "Is It a Business?" variables (Innovation, Value and Persistence) are lower--more in the medium range.
Examples of the Struggling Proprietary type of venture include the inventor- or engineer-based business that has a protected technology, but is not utilizing the technology to produce a fully commercial product.
Figure 1: "B/K" Diagram
ADVICE:
The key here is marketing (increasing Product Market Match), with the logic going as follows:
Increased Product Market Match implies increased Net Buyer Benefit, which implies increased Volume, which in turn implies the potential to increase Margins. This, then, further implies increases in Persistence, represented by Purchase Frequency, Product Longevity, and access to Resources.
In short, this approach can turn the Struggling Proprietary venture into one with much higher potential, because it adds base business strength to already existing strategic strength.
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
Iris M. Eisen had been intrigued with Internet and its potential 15 years ago when she worked for a catalogue publishing house in Denver. Her job at the time was to co-ordinate catalogue production for Falcon Chemical, a large distributor of chemical products throughout the country. She worked closely with Falcon in designing their catalogue layout, organizing the final camera-ready product, and supervising printing activities. Iris also oversaw the distribution of the catalogues to thousands of purchasing agents throughout the U.S. and Canada. After 5 years on the job she knew Falcon Chemical management, their products, and their distribution networks.
As electronic commerce and on-line catalogues gained popularity she approached her boss and founder of the company, Joe Doherty, about moving into the electronic catalogue business to leverage their catalogue expertise. Joe wasn't interested; he was nearing retirement and didn't want to complicate his life. His company had been in the publishing business for 35 years and catalogues made up only a small percentage of his revenues.
Upset about being rebuffed, Iris talked to her husband that evening about her ideas on how Falcon Chemical, with her knowledge of both the chemical business and Internet-based commerce, could move forward. He suggested that Iris's Internet hobby could potentially turn into a lucrative career. After many long family discussions about her plans, Iris left the publishing company and approached Falcon with her idea for an online catalogue. She leveraged her pitch on the ease with which updates could be incorporated, the freedoms of keeping prices current to deal with variations in inventories and volume, and the security she could offer individual clients in downloading the most current prices. As a result of her knowledge and contacts, it didn't take long to convince Falcon to change catalog systems. Within a year she had a signed contract with Falcon to organize a new e-catalogue.
Iris started small, soliciting off-hours help from family and friends to get things going. By the time she got Falcon up to full speed, e-commerce was big business and there were software packages in the market enabling large firms to do much of the work in house if they so desired. Iris's big advantage was her knowledge of Falcon's business. As a result, she was a low-cost supplier.
Iris had some concerns about her reliance on a single client. She knew that her contract security with Falcon was rooted in remaining a low-cost supplier. She often thought about expanding and attracting other clients, however it would be difficult. She would be faced with new, steep learning curves, which made it hard to compete with the in house capabilities of these new clients. She also had to dedicate most of her time to Falcon to meet their needs. This left her with little free time for new clients, preventing her from increasing volume to a level that could generate the high profits she anticipated upon leaving the publishing company.
Falcon was aware of Iris's position, and sometimes used it to their advantage by working her price down. Falcon did recognize that the services offered by Iris were going to be needed for a long time, however they had a few alternative options available. Software development had improved to the point where completing the tasks in house was viable if the appropriate training systems were put in place, and two other companies were knocking at Falcon's door offering similar services. Iris wasn't particularly concerned about loosing the contract to a competitor, due to her intimate knowledge of Falcon Chemical. She was sure that Falcon wouldn't consider publishing it on their own, due to the automation support systems that would have to be set up within the company.
Iris was making reasonable money, but privately she felt a bit constrained. She couldn't really look for new clients, due to the time required for the Falcon contract. The money from the contract brought her a reasonable living, and the freedom she wanted to work at home. She was proud of her little business, and satisfied with her accomplishments.
