Business Management & Entrepreneurship
Introduction
Goal: teach scientists and engineers the basics of business engineering so if they want to start up a (tech)
company, they have some experience (vocabulary, mindset, …) in the field and a higher chance of
success.
Chapter 1: Business Ecosystems
1.1 Definition
“A business ecosystem is a community of interacting organizations and individuals that affect each
other. The community produces goods and services of value to customers, who are themselves members
of the ecosystem.
The community includes suppliers, producers, distributors, government, competitors, and other
stakeholders. Over time, they co-evolve their assets and roles and tend to align themselves with the
directions set by one or more central companies.” - J. Moore
1.2 Sector, industries & markets
1.2.1 CLASSIFICATION
• Primary Sector
o Extracts or harvests products from the earth: production of raw material and basic
foods.
o Activities: agriculture, mining, forestry, farming, grazing, hunting and gathering,
fishing, and quarrying. + the packaging and processing of the raw material associated
with this sector
o 70% mid-nineteenth century 3% in US today
• Secondary Sector
o Manufactures finished goods
o All of manufacturing, processing, and construction lies within the secondary sector.
o Activities: metal working and smelting, automobile production, textile production,
chemical and engineering industries, aerospace manufacturing, energy utilities,
engineering, breweries and bottlers, construction, and shipbuilding.
• Tertiary Sector
o Service industry
o Provides services to the general population and to businesses
o Activities: retail and wholesale sales, transportation and distribution, entertainment,
restaurants, clerical services, media, tourism, insurance, banking, healthcare, and law.
1
, o In the U.S., more than 80%
• (Quaternary Sector)
o The quaternary sector consists of intellectual activities. Activities associated with this
sector include government, culture, libraries, scientific research, education, and
information technology.
o Others limit quaternary sector it to not-for-profit sector
1.2.2 INDUSTRIES
= collections of similar companies or of companies conducting similar activities.
Top-down classification: large sectors, split into smaller subsegments
1.2.3 MARKETS
= meeting places where products and services are traded. They are the interfaces between customers
and suppliers.
Segments = subsets of a wider market (size)
Niches = smaller and more specialized segment (specialization)
Over time markets can merge (GSM + MP3 + camera + gaming console = smartphone); split
(‘Computers’ → hardware, operating system, software, storage, peripherals, internet...); (dis)appear
(Analog photography) or be encapsulated in others where changes in one overall markets unavoidably
impacts encapsulated markets.
• Horizontal markets: offering goods and services to multiple groups of customers with common
needs; generally broad markets
Examples: cars, washing powder, search engines
• Vertical markets: offering goods and services specific to a group of customers with specialized
needs. This implies thorough understanding - often a seasoned professional is a must - to
succeed in a vertical market (examples of failures, a/o, for this reason: Iridium, WebVan).
Examples: software for film post-production, biotechnology patent lawyers, vision systems for
industrial automation, software for cultural centers → niches
Optrima = Company with core technology: 3D imaging → enormous range of application areas:
television, gaming, security,…
Business to business (B2B) vs Business to consumer (B2C):
B2B far larger than B2C market → several layers and dimensions of B2B behind each consumer product
+ most companies are business to business
Comparing B2B and B2C: 3 main differences with implications on marketing strategies and tactics
1. Market segmentation
2. Market structure and demand
2
,3. Decision making process
B2B: More sober & rational criteria, can be linked to clear, concrete, understandable performance
criteria (objective) → e.g. industrial use of 3D cameras (Optrima) is based on water resistance, cost,
ease to use, mass manufacturing possibility,…
B2C: Psychological, demographical, sociological criteria (subjective) → e.g. clothes, food are chosen
by the consumer based on personal taste
Structure & demand:
• Fewer, larger customers: amount of potential customers for for example newspaper printing
presses; bulk buying of regular goods
• Scale and strategic importance of contract for all parties: e.g. building the Oosterweel
connection
• Interdependence between buyer and seller
• Long term relationship: close interaction (joint problem analysis, developments); operational
integration... but risk of overdependence!
• Geographic clustering of activities
• Derived demand: if the overall consumer demand for printed media diminishes then so will the
demand for ink and plates
• Price inelasticity in short term
• Fluctuation of demand: close link to economic situation
• International scope of sales: most B2B companies act on international scale
Decision making:
• Much depends on importance of decision
• More professional attitude in B2B
• More complex, more people involved → decision process takes longer
• More formalized → contracts
• The role of the industrial buyer: market research, competitor analysis, product evaluations and
testing → planning, selecting and buying merchandise
• Decision making flavored by national cultures: individualistic decision making (US) vs
consensus building within organization (Europe)
• Who takes the decision? Decision making unit:
Users (often initiate the process, can be anybody in organization), Influencers (often technical
department), Buyers (dedicated department), Decision makers (depends on importance of
decision), Gate keepers (protect decision makers from unwarranted influence of sellers)
3
, ➔ One must consider things from the perspective of their customers
1.3 Supply chains & value chains
1.3.1 SUPPLY CHAIN
A supply chain is a network between a company and its suppliers to produce and distribute a specific
product to the final buyer. This network includes different activities, people, entities, information, and
resources. The supply chain also represents the steps it takes to get the product or service from its original
state to the customer.
Example:
Supply chains: how step by step the product is being built and brought to the customers → value
increases as value is added by players in every step → can be extraordinarily complex (e.g. iPhone) or
very straightforward
Many elements are needed, many steps are taken before an end user need is fulfilled. Your contribution
is only small part of the whole picture. Different roles are possible, your role generally impacts many
aspects like the competitive position, capital needs (e.g. supporting app), minimum size and scalability
(e.g. service company).
Example: production of e-reader
E-Ink = ink-based display system → bullets of ink on (potentially flexible) substrate → Intellectual
property (IP)
Production of charged ink & roles of “e-paper” → Component
Cut to right size, add display driver electronics & laminate → subsystem
Create operating system: e-reader → device
4
Introduction
Goal: teach scientists and engineers the basics of business engineering so if they want to start up a (tech)
company, they have some experience (vocabulary, mindset, …) in the field and a higher chance of
success.
Chapter 1: Business Ecosystems
1.1 Definition
“A business ecosystem is a community of interacting organizations and individuals that affect each
other. The community produces goods and services of value to customers, who are themselves members
of the ecosystem.
The community includes suppliers, producers, distributors, government, competitors, and other
stakeholders. Over time, they co-evolve their assets and roles and tend to align themselves with the
directions set by one or more central companies.” - J. Moore
1.2 Sector, industries & markets
1.2.1 CLASSIFICATION
• Primary Sector
o Extracts or harvests products from the earth: production of raw material and basic
foods.
o Activities: agriculture, mining, forestry, farming, grazing, hunting and gathering,
fishing, and quarrying. + the packaging and processing of the raw material associated
with this sector
o 70% mid-nineteenth century 3% in US today
• Secondary Sector
o Manufactures finished goods
o All of manufacturing, processing, and construction lies within the secondary sector.
o Activities: metal working and smelting, automobile production, textile production,
chemical and engineering industries, aerospace manufacturing, energy utilities,
engineering, breweries and bottlers, construction, and shipbuilding.
• Tertiary Sector
o Service industry
o Provides services to the general population and to businesses
o Activities: retail and wholesale sales, transportation and distribution, entertainment,
restaurants, clerical services, media, tourism, insurance, banking, healthcare, and law.
1
, o In the U.S., more than 80%
• (Quaternary Sector)
o The quaternary sector consists of intellectual activities. Activities associated with this
sector include government, culture, libraries, scientific research, education, and
information technology.
o Others limit quaternary sector it to not-for-profit sector
1.2.2 INDUSTRIES
= collections of similar companies or of companies conducting similar activities.
Top-down classification: large sectors, split into smaller subsegments
1.2.3 MARKETS
= meeting places where products and services are traded. They are the interfaces between customers
and suppliers.
Segments = subsets of a wider market (size)
Niches = smaller and more specialized segment (specialization)
Over time markets can merge (GSM + MP3 + camera + gaming console = smartphone); split
(‘Computers’ → hardware, operating system, software, storage, peripherals, internet...); (dis)appear
(Analog photography) or be encapsulated in others where changes in one overall markets unavoidably
impacts encapsulated markets.
• Horizontal markets: offering goods and services to multiple groups of customers with common
needs; generally broad markets
Examples: cars, washing powder, search engines
• Vertical markets: offering goods and services specific to a group of customers with specialized
needs. This implies thorough understanding - often a seasoned professional is a must - to
succeed in a vertical market (examples of failures, a/o, for this reason: Iridium, WebVan).
Examples: software for film post-production, biotechnology patent lawyers, vision systems for
industrial automation, software for cultural centers → niches
Optrima = Company with core technology: 3D imaging → enormous range of application areas:
television, gaming, security,…
Business to business (B2B) vs Business to consumer (B2C):
B2B far larger than B2C market → several layers and dimensions of B2B behind each consumer product
+ most companies are business to business
Comparing B2B and B2C: 3 main differences with implications on marketing strategies and tactics
1. Market segmentation
2. Market structure and demand
2
,3. Decision making process
B2B: More sober & rational criteria, can be linked to clear, concrete, understandable performance
criteria (objective) → e.g. industrial use of 3D cameras (Optrima) is based on water resistance, cost,
ease to use, mass manufacturing possibility,…
B2C: Psychological, demographical, sociological criteria (subjective) → e.g. clothes, food are chosen
by the consumer based on personal taste
Structure & demand:
• Fewer, larger customers: amount of potential customers for for example newspaper printing
presses; bulk buying of regular goods
• Scale and strategic importance of contract for all parties: e.g. building the Oosterweel
connection
• Interdependence between buyer and seller
• Long term relationship: close interaction (joint problem analysis, developments); operational
integration... but risk of overdependence!
• Geographic clustering of activities
• Derived demand: if the overall consumer demand for printed media diminishes then so will the
demand for ink and plates
• Price inelasticity in short term
• Fluctuation of demand: close link to economic situation
• International scope of sales: most B2B companies act on international scale
Decision making:
• Much depends on importance of decision
• More professional attitude in B2B
• More complex, more people involved → decision process takes longer
• More formalized → contracts
• The role of the industrial buyer: market research, competitor analysis, product evaluations and
testing → planning, selecting and buying merchandise
• Decision making flavored by national cultures: individualistic decision making (US) vs
consensus building within organization (Europe)
• Who takes the decision? Decision making unit:
Users (often initiate the process, can be anybody in organization), Influencers (often technical
department), Buyers (dedicated department), Decision makers (depends on importance of
decision), Gate keepers (protect decision makers from unwarranted influence of sellers)
3
, ➔ One must consider things from the perspective of their customers
1.3 Supply chains & value chains
1.3.1 SUPPLY CHAIN
A supply chain is a network between a company and its suppliers to produce and distribute a specific
product to the final buyer. This network includes different activities, people, entities, information, and
resources. The supply chain also represents the steps it takes to get the product or service from its original
state to the customer.
Example:
Supply chains: how step by step the product is being built and brought to the customers → value
increases as value is added by players in every step → can be extraordinarily complex (e.g. iPhone) or
very straightforward
Many elements are needed, many steps are taken before an end user need is fulfilled. Your contribution
is only small part of the whole picture. Different roles are possible, your role generally impacts many
aspects like the competitive position, capital needs (e.g. supporting app), minimum size and scalability
(e.g. service company).
Example: production of e-reader
E-Ink = ink-based display system → bullets of ink on (potentially flexible) substrate → Intellectual
property (IP)
Production of charged ink & roles of “e-paper” → Component
Cut to right size, add display driver electronics & laminate → subsystem
Create operating system: e-reader → device
4
