The art of designing a new technology venture

Abstract

Every company, successful or not, starts with one bright idea in an entrepreneurial mind. Through actions of the entrepreneur – let’s call these actions design - this initial idea transforms into a firm that did not exist before. Because the Delft University of Technology wants to improve its support to technology-based entrepreneurs, the aim of this Master thesis is to create a better understanding of how entrepreneurs design a new technology venture through answering the following main research question: How does the design of a new technology venture evolve until the firm reaches maturity? In order to discover how technology entrepreneurs design their new venture, an empirical approach was chosen that aims to develop a tentative theory about the evolution of the start-up’s design during the new technology venture creation process based on experiences in the field: the grounded theory method of Glaser and Strauss (1967; Glaser 1992). It is concluded that the new technology venture creation process consists of three main stages: 1) the exploration stage in which the entrepreneur discovers business opportunities and verifies the potential of these opportunities, 2) the realisation stage, in which the entrepreneur develops both the market and the value proposition and acquires all the required resources and capabilities for creating, manufacturing and offering the envisioned value proposition to the target market, and 3) the exploitation stage in which the new firm engages in exchanges with the created market in order to create true value from all prior efforts. Furthermore, it was found that throughout these stages the entrepreneur is creating an integrated business model, consisting of three main components: 1) the value proposition, 2) the target market, and 3) the competencies that enable the new firm to perform its business activities properly. This business model is not created in a linear fashion, as it is also found that entrepreneurs learn through reflection on their performed actions. This means that the entrepreneur iterates between the exploration, realisation and exploitation stage until the initial business hypotheses have been sufficiently verified, resulting in a well-functioning business model. This entire process in not happening in isolation. The entrepreneur should always be attentive to developments in the micro and macro environment, which enable or obstruct the functioning of the business model. Based on an integration of these insights, it is concluded that, firstly, the new technology venture creation process can be described as the survival of the fitting: to ensure its survival, the business model of the new technology firm should demonstrate a good fit between the firm’s solution and the problem in the market that this solution intends to solve. Secondly, the process of creating this problem-solution fit can be described as the co-evolution of problem (the market needs) and solution (the value proposition and required competencies). At the start of the new venture creation process, both the problem and solution are indeterminate. More information needs to be gathered to define what the needs in the market are and how the entrepreneur can satisfy them. Through iterative cycles, the problem-solution pair becomes gradually fixed, until the new product can be launched onto the market and the new venture can start exploiting the discovered business opportunity. During this new venture creation process the nature of the process changes. Where the exploration and realisation stages are focused on creating a good problem-solution fit through co-evolution of the problem and solution, the exploitation stage is aimed at maintaining and optimising this fit through rational problem solving. Finally, the entrepreneur who executes the new venture creation process has a large influence on the outcomes of this process. As the new venture creation process is not a linear process that flows from the problem to the solution, it depends on the artistry of the entrepreneur which actions are taken when in order to tackle the new venture design problem. These findings have several implications for the theory and practice of technology-based entrepreneurship. Technology-based entrepreneurs: As the creation of a new technology venture is in essence a design problem, technology-based entrepreneurs should learn from the approaches designers use to solve wicked problems: next to developing a technological product, entrepreneurs must actively frame the need in the market. An effective strategy to develop the product and gain insight in what the market needs, is through co-creation with prominent stakeholders in the targeted market. TU Delft: The results of this study indicate that the artistry of the entrepreneur by which the new venture creation problem is tackled, can be fostered by the accumulation of experience. The TU Delft should support this accumulation of experience through simulation games in which students encounter the real challenges of new venture creation. YES!Delft incubator: The findings of this study can support YES!Delft in the assessment of applicants for the incubation program and they can support YES!Delft in assessing the progress of its client companies. Future research into entrepreneurship: The findings of this study provide promising new perspectives and directions for future entrepreneurship research.