Business Ecosystem A White Paper describing a business model focused on growing companies moving from prototypes to profitTM. Kassandra Oakland Vice President Chestnut Innovation Center Moving from Prototypes to ProfitTM 11 Chestnut Street Amesbury, MA 01913 Table of Contents ABSTRACT 3 CHALLENGES GROWING COMPANIES FACE 3 YOUNG COMPANIES MATURE COMPANIES 3 4 BUSINESS ECOSYSTEM ELEMENTS 4 FLEXIBLE SPACE AND LEASES SHARED COMMON AREAS AND AMENITIES KNOWLEDGE TRANSFER MANUFACTURING AND SERVICE CAPABILITIES SUSTAINABILITY 4 4 5 5 5 BUSINESS ECOSYSTEM WORKING 6 WATCHING A BUSINESS ECOSYSTEM IN ACTION BENEFITS TO THE COMMUNITY 6 6 CONCLUSION 6 “Moving from Prototypes to Profit” is a Trade Mark of the Chestnut Innovation Center. 2 Business Ecosystem Abstract This white paper will describe the challenges that many growing companies face reaching profitability, what a Business Ecosystem is, and how joining a Business Ecosystem can assist companies in innovation and growth to achieve profitability. While many are aware of the mission and benefits of a Business Incubator, the Business Ecosystem is less well known. A Business Ecosystem is positioned to assist companies post Incubator graduation. The needs of a growing company are different from start-‐ups; a Business Ecosystem helps companies moving from prototypes to profit. In addition to young growing companies, a Business Ecosystem will assist mature companies that have reached a point in their life cycle that requires innovation to grow. Challenges Growing Companies Face “Successful entrepreneurs know that the lifeblood of their business is found in making the right connections. Whether it is for potential business alliances, sales, marketing, supply chain management or just to escape the loneliness of being a solopreneur, making connections is vital for business growth.” Forbes Magazine Young Companies For young companies (e.g., a graduate from an incubator), creating a working prototype and getting initial funding is quite a different challenge from getting a product economically manufactured, marketed, packaged, sold, and shipped. The initial product innovation is just the first step—innovation from prototype to profit is the next challenge. After leaving an incubator the first challenge young companies often face is to find affordable space that allows them to manufacture and grow. Often commercial real estate is looking for long, inflexible leases. Also, leasing space requirements that allows for optimistic growth can be very risky for them to bite-‐off initially. These expensive, non-‐
flexible leases are a large contributor to failure rates. In addition, young growing companies face equipment costs and legal costs when intellectual property and other legal considerations arise. Marketing know-‐how, including Business Ecosystem 3 positioning, messages, pricing, advertising, and creating a sales pipeline, are all challenges young companies face. Also, a big question is with whom to partner. Having the right partnerships early in a company life cycle is often key to sustainable growth. Manufacturing partners, development partners, partners for packaging and/or distribution, or many other functions can smooth a company’s go-‐to-‐market abilities, ease costs, and spur innovation. In can take months to identify the ‘right’ partner with which to work. Whether in an early growth, or rapid growth phase, young companies can find going-‐it-‐
alone daunting, and the only available option. Mature Companies Markets change. Many mature, successful companies can suddenly find that they are no longer positioned squarely for their target markets, or those markets have contracted. New market challenges such as regulatory requirements, sustainability requirements (many customers now require that their suppliers be ecologically sustainable), customer concentration risk (too much of their business coming from one or a few key customers), emerging industries, customers off-‐shoring business, and next generation products as competition to name just a few. Growth can slow, or stagnate all together. When this happens, they must innovate to stay competitive. This requires new thinking, new product ideas, new partnerships, new customers, new channels, a new way to do things. It might require new investment. Business Ecosystem Elements A Business Ecosystem is a place for business to join with the above challenges in mind. It is a place designed to encourage innovation, partnership, ideas, and growth. The goal is to help companies reach profitability. Flexible Space and Leases A Business Ecosystem will allow companies to enter into flexible, shorter-‐term leases that will have room to accommodate growth. Shared Common Areas and Amenities Often a growing company cannot afford to lease spaces such as kitchens, dining areas, and conference rooms. A Business Ecosystem will include such shared space. Amenities that help businesses can include loading docks, high-‐speed network and free parking. 4 Business Ecosystem Knowledge Transfer Business knowledge is a valuable thing, and being in an environment with other knowledgeable business people can spur innovation. This can take the form of seminars or even formal or informal encounters. Manufacturing and Service Capabilities Having a network of willing partners/suppliers can be key to a growing business’ success. This creates the ability to tap into existing expertise and develop innovative strategies to get products to market faster and more cost effectively. A robust network of partners and suppliers addresses a number of problems plaguing both new businesses and new product strategies – the cost of equipment to produce products, lack of expertise in materials management, and ineffective supply chains. By tapping into willing specialty manufacturers in the area, companies can obtain access to equipment and expertise they do not have internally. These specialists can also produce short production runs at reasonable costs and availability, and by staying local – the inefficiencies and lack of quality in global supply chains can be avoided and time to market expedited. Often knowing who to contact can save a lot of legwork—valuable time for entrepreneurs. For example, prototypes often require multiple iterations with changes required by early customers. Finding partners and suppliers with required expertise can take months. The business connections that a Business Ecosystem provides can be invaluable, and can be in many areas such as: • Manufacturing • Development • Prototypes • Packaging • Consulting • Legal • Financial • Clerical Sustainability Ecological sustainability needs to be part of everyone’s business plan now. Being “green” has moved from being good for business, to be essential for business; it is required both in expanding markets and caring for our environment. A Business Ecosystem contributes to this on all levels. It could be including companies that have new products that help the environment, but also that the manufacturing processes are environmentally sustainable. Using recycled materials when possible, and non-‐toxic chemicals and materials help create a sustainable environment. Business Ecosystem 5 The building itself can be made sustainable by moving to “net zero” status. Solar panels to produce electricity, biomass for heating, and lighting upgrades are some examples of a net-‐
zero building. This can also represent branding opportunities. Also, recycling can be a cornerstone of the Business Ecosystem. The facility can be a place where all members of the ecosystem from which they can source (such as a packaging company that uses recycled cardboard), as well as recycling their waste and lessoning their environmental footprint. Business Ecosystem Working A Business Ecosystem is a place of vibrant energy: ideas being exchanged, solutions found, partnerships being formed, and information and ideas flowing. Watching a Business Ecosystem in Action From engaging a fellow tenant for a business solution to finding a needed partner or supplier, a Business Ecosystem is a place where companies grow. Companies will find ways to help one another, share what has worked for them and what has not; they make suggestions to each other based on their experience. Help with finding a partner or supplier is one important way to shorten time-‐to-‐market. Be it a consulting partner, or a key supplier to a needed piece of the manufacturing puzzle, knowing who to call reduces risk and saves a lot of valuable time. Benefits to the Community Business Ecosystems help growing companies thrive. It brings companies and jobs to the community. Because of the “multiplier effect”, it creates many more jobs that are actually located at the Business Ecosystem itself. This can often be a catalyst for investment in the community. Bringing businesses to a community helps to increase the tax income to that city or town. This can have a positive impact on all the residents by reducing real estate taxes for property owners. Conclusion A Business Ecosystem brings many elements together to help move growing companies move from prototypes to profits. It provides what growing companies need to innovate, partner, and grow. Business Ecosystems achieve a productive balance between proven expertise and new opportunities. It is an environment designed specifically to help growing companies with the challenges that they face. Whether an early growth company, a rapid growth company, or a mature company looking to innovate and grow, Business Ecosystems provides a unique environment to help them move from prototypes to profits. 6 Business Ecosystem