Virtual business models entrepreneurial risks and rewards

Virtual Business Models Entrepreneurial Risks and Rewards KARIN BRYDER ANKI MALMBORG ESKIL SƯDERLIND Avena Partners Amsterdam • Boston • Cambridge • Heidelberg London • New York • Oxford • Paris • San Diego San Francisco • Singapore • Sydney • Tokyo Woodhead Publishing is an imprint of Elsevier Woodhead Publishing is an imprint of Elsevier The Officers’ Mess Business Centre, Royston Road, Duxford, CB22 4QH, UK 50 Hampshire Street, 5th Floor, Cambridge, MA 02139, USA The Boulevard, Langford Lane, Kidlington, OX5 1GB, UK Copyright © 2016 Elsevier Ltd All rights reserved No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage and retrieval system, without permission in writing from the publisher Details on how to seek permission, further information about the Publisher’s permissions policies and our arrangements with organizations such as the Copyright Clearance Center and the Copyright Licensing Agency, can be found at our website: www.elsevier.com/permissions This book and the individual contributions contained in it are protected under copyright by the Publisher (other than as may be noted herein) Notices Knowledge and best practice in this field are constantly changing As new research and experience broaden our understanding, changes in research methods, professional practices, or medical treatment may become necessary Practitioners and researchers must always rely on their own experience and knowledge in evaluating and using any information, methods, compounds, or experiments described herein In using such information or methods they should be mindful of their own safety and the safety of others, including parties for whom they have a professional responsibility To the fullest extent of the law, neither the Publisher nor the authors, contributors, or editors, assume any liability for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use or operation of any methods, products, instructions, or ideas contained in the material herein ISBN: 978-0-08-100141-7 (print) ISBN: 978-0-08-100182-0 (online) British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data A catalog record for this book is available from the Library of Congress For information on all Woodhead Publishing publications visit our website at http://store.elsevier.com/ Publisher: Mica Haley Acquisition Editor: Glyn Jones Editorial Project Manager: Harriet Clayton Production Project Manager: Omer Mukthar Designer: Greg Harris Typeset by TNQ Books and Journals ABOUT THE AUTHORS Karin Bryder has extensive experience as project manager within the fields of pharmaceuticals and med tech and has acted as IP manager and CEO of companies using a Virtual Company format Karin holds a PhD in medical science with a focus on immunology Her academic work also includes studies of DNA vaccines and virus genetics Anki Malmborg-Hager has extensive experience in business development within life science She has worked for several small biotech companies, both as CEO and board member and as an investment director Anki has an MSc in chemical engineering and PhD in immunotechnology from Lund University, and a Pharma-MBA from Falconbury Eskil Söderlind has extensive experience in the business arena with a focus on life science He has past and present experience as an investment director, CEO, and a board member Eskil’s formal education includes a PhD in molecular biology from Uppsala and an associate professorship at Lund University; he also has an executive MBA diploma xv FOREWORD If you are reading this Foreword, then you have already taken an important step toward mitigating entrepreneurial risks and maximizing entrepreneurial rewards Specifically, you are intrigued by and interested in the experiences and insights that Karin Bryder, Anki Malmborg, and Eskil Soderlind have to share regarding Virtual Business Models Perhaps you are contemplating pursuing a new career opportunity, one that would take you away from the traditional company setting Perhaps you are struggling with a new way of working having made the switch or having been made to switch from the traditional to the virtual business model Or, perhaps you are doing well in the virtual business model and have a sense that you could be doing better For individuals in all of these circumstances, I encourage you to set aside time to read and to fully assimilate the many teachings in this book Edward O Wilson, the noted Harvard Professor Emeritus of Biology, ignited a firestorm of a controversy in the 1970s when he introduced the concept of sociobiology.Wilson defined sociobiology as “the systematic study of the biological basis of all forms of social behavior.” His theories and ­supporting evidence grew out of his many years as a myrmecologist, studying the organized behaviors of ants and other social insects He posited that a­ nimal behavior, including human behavior, is the product of heredity, environmental stimuli, and past experiences My point in referencing sociobiology is neither to agree with nor disagree with Wilson’s theories, but to borrow them, to repurpose them to the consideration of organized human behavior In this immediate instance, human behavior is organized in the form of a business Businesses, being composed of human beings doing what human beings in the ways that human beings them, manifest many of the same traits of their living constituents With this being the case, businesses’ behaviors are likely to be the product of heredity (business culture), environmental stimuli (competitive forces), and past experiences (lessons learned distilled into conventional wisdom) The authors of this book have observed that these ­elements have combined in an adaptive manner to produce new business behaviors to manage entrepreneurial risks and rewards of the present day as manifested in the Virtual Business Models they discuss Organized human behavior as reflected in business models has been evolving for millennia In the Middle Ages, scribes conducted their business xvii xviii Foreword affairs by keeping records on scrolls in chanceries In the 17th and 18th centuries, the thriving business model of mercantilism and the rise of the “military-industrial complex” of the day, the Royal Navy, led to the creation of the first offices where the work of administrative personnel could be coordinated by managers and overseen by supervisors Later in the 18th and 19th centuries, the Industrial Revolution saw the emergence of large, highly complex businesses in the financial, transportation, energy, and manufacturing sectors These complex businesses were made possible by the introduction of vastly improved productivity tools, such as the mechanized factory, the telegraph, the typewriter, and the first digital electronic communications medium, the ticker tape In the 20th century, even greater strides in automation and telecommunication were made to enable ever larger and ever more complex businesses In those decades, the concentration of work into purpose-built, bricks and mortar facilities was the prevailing practice There were many advantages to having a centralized workplace, whether it be a factory or an office First, coordination, management, and supervision were made easier as all members of the workforce were in the same place at the same time Furthermore, a single individual was able to monitor the activities of many others more efficiently Second, resources and infrastructure could be shared among many employees, thereby lowering fixed costs Third, businesses could more easily control the quality and uniformity of the goods and/or services they provided to their customers It was felt that physical presence and in-person interactions were absolutely required to ensure that work was purposeful and productive It was feared that if these structures and the structured environment they provided were missing, then gross inefficiencies and delinquencies would arise After all, it is not possible to run an assembly line (or Adam Smith’s pin factory) effectively if the laborers are not all in their assigned places at the appropriate time performing their highly repetitive and very limited tasks Complex businesses distribute work through extremely hierarchical organizations having multiple levels of management and working groups residing within various silos or departments To their credit, these complex businesses have incredible resources that can be deployed in research, in discovering and developing new products, and in selling and marketing their products and services In the life sciences, large international pharmaceutical companies (big pharma) serve as prime examples of hierarchical organizations Big pharma spends billions of US dollars each year in R&D and billions more in marketing campaigns, employing tens of thousands of scientists and sales representatives Managing a big pharma with all of its Foreword xix myriad sites, activities, and employees is a daunting task and one that may still best be accomplished using a conventional business model Although this may be so, it is important to consider that this organization comes at a cost Hierarchical organizations, in general, and big pharmas, in particular, have a truly abysmal record of innovation The culture and conventional wisdom in these companies tends to combine to create a condition of institutional sclerosis that is antithetical to innovation How then are we to reinvent existing businesses so as to foster innovation? How are we to manage businesses that are emerging or evolving rapidly? How are we going to harness the talents of a geographically dispersed workforce to build new businesses that eclipse the old? The authors of this book make the compelling case that the answers to these questions can be found, at least in part, in Virtual Business Models Entrepreneurship is neither a new concept nor a new phenomenon It can be argued that throughout human history there have been intrepid individuals willing to take risks to innovate, to pursue a bold new vision in the face of unmeasured uncertainty and brutal skepticism Why then is it that in the last several decades we have seen the rise of entrepreneurship and lauded the innovation that has accompanied it? Why is it that the entrepreneur has entered into the contemporary mythos as a modern day hero? What factors exist now that foster entrepreneurship? Entrepreneurship is flourishing today largely because of our unprecedented ability to build human networks It is somewhat counterintuitive to appreciate that such a highly individual-dependent activity as entrepreneurship occurs best in a context of extensive interconnections and cooperation And yet, it is the relationships that an entrepreneur establishes and maintains that lead him/ her to success Networking is of paramount importance When applied to entrepreneurship, the African proverb that “It takes a village to raise a child” might more aptly be stated as “It takes an ecosystem to nurture an entrepreneur.” In this book, the elements of the entrepreneurial ecosystem are described in detail on a chapter-by-chapter basis First, the features of a Virtual Business Model that distinguish it from a more traditional, hierarchical business model are defined Also discussed are the advantages that such a model can provide to an entrepreneurial enterprise Subsequently, the roles of founders, core team members, External Resource Providers, and investors are explained in a clear, easy to follow style that is concise, specific, and thorough The importance of handling communication, business development, competitive intelligence, and intellectual property xx Foreword issues properly is stressed and many illustrative examples are provided that show exactly how these issues can be addressed I particularly appreciated the authors’ authenticity as they are speaking to the reader with the voice of experience, hard earned, and highly prized I will be ever grateful to Scott Rocklage, Managing Partner of 5AM Ventures, for having approached me to work with him to set up a Virtual Business spanning the east and west coasts of the United States This was in 1990, the year that saw the first release of Microsoft Office for PCs and years before Google was founded There were no Blackberrys, and phones were not at all smart At that time, the thought of having a distributed workforce composed of External Resource Providers and managed by a small core team was viewed as unorthodox, at best, and irresponsible, at worst Undaunted, Scott and I felt that given the connectivity afforded by “faxes and FedEx,” it would be possible to build and manage such an entity As it turned out, that opportunity did not materialize and I continued to pursue a career in big pharma It was not until 10 years later that I decided to take my career in a new, more entrepreneurial direction By that time,Virtual Business Models were much more mainstream Many life sciences start-ups had successfully managed to evolve into fully integrated biotech companies developing and marketing important, life-enhancing products Others had been acquired by larger entities, and in many instances investors were handsomely rewarded for the risks that they had taken Still others languished or failed The experiences gained in aggregate from these businesses constituted an informal body of knowledge that was shared only among the cognoscenti of the entrepreneurial community As a novice and as an outsider, I found it incredibly difficult to break into the inner circle of this particular entrepreneurial community and avail myself of the knowledge that I knew was there and that I needed With much perseverance and perspiration I was eventually able to so How I wish that I had a copy of Karin Bryder, Anki Malmborg, and Eskil Soderlind’s book at that time Even though it is true when it comes to life sciences start-ups that “if you’ve seen one, you’ve seen one”, meaning that each start-up is its own species, the fundamental truths disclosed and discussed in Virtual Business Models are widely applicable For Virtual Business Models to prosper, there must be a ready source of talented individuals capable of serving as External Resource Providers Fortunately, the pool of talent available today is both broad and deep In part, this is due to the availability of amazingly useful productivity tools Now, more than ever, it is easy to collaborate productively across great Foreword xxi distances, spanning multiple time zones, and encompassing different cultures Just as important as the productivity tools is the desire for talented people to engage in meaningful, challenging, and fulfilling endeavors in an environment that affords for self-definition and self-determination For many, working in a more formal, more restrictive hierarchical organization is too limiting, too stultifying, too confining Talented individuals are finding that their desires to be recognized, respected, and rewarded (compensated) appropriately are better satisfied working in a Virtual Business Model They realize that they will be spending at least half of their waking hours as adults working, and they require that this be time well spent Given that the success of the emerging, knowledge-based economy will depend largely on the contributions of these individuals, business people of all stripes would be well advised to understand this trend Already, it is estimated that upwards of 53 million individuals in the United States, one third of the labor force, are employed as independent workers, that is, consultants, independent contractors, and other self-employed individuals Once you have read and assimilated the content of Virtual Business Models, you may wish to extend your reading on the topic I recommend either of Craig Shimasaki’s books Biotechnology Entrepreneurship: Starting, Managing, and Leading Biotech Companies or The Business of Bioscience, Michael Salgaller’s Biotechnology Entrepreneurship from Science to Solutions, and Yali Friedman’s Building Biotechnology Innovation and creativity abound in the life sciences The field is ever evolving The wisdom and doctrine that we embrace fervently today, we will replace with the new insights and revelations that tomorrow brings As such, I see the need for Virtual Business Models to be a living document, one that can help entrepreneurs to grasp these new concepts yet to come I eagerly await subsequent editions of this gem of a book M Carvlin August 2015 ACKNOWLEDGMENTS This book would not have been possible without the contributions of numerous people First, we would like to thank our families, especially in the late stages of the writing process, for being patient and understanding We wish to thank • the following for generously reading and commenting on sections of the book within their specialities: Olle Bergman at Bergmans bokstäver, Carl Borrebaeck at Lund University, Göran Conradson at Venaticus, Sebastian Hansson at bulb Intelligence, Malin Håkansson and Linda Lundin at Valdia, Carl-Henric Nilsson at Kunskapspartner, and Steve Smith at Potter Clarkson • our experienced colleagues for their generous and valuable discussions and input: Jan Alenfall, Sven Andréasson, Mats Clarsund, Johan Evenäs, Cristina Glad, Nina Herne, Daniel Ozanne, and Lars Persson • Mark Carvlin and Janice Mitrovich for valuable discussions on the US perspective of the Virtual Company concept, and a special thanks to Mark for the foreword • Sten K Johnson Foundation, which provided a generous grant that contributed to the writing of this book • Grand Hotel in Lund for harboring our thoughts and discussions, and feeding our stomachs What better place would there be for writing a book than the Piratensalen? • Annika Wilhelmsson and the crew at the Club House restaurant at Öresund Golf course and conference facility in Häljarp for all of their service during the last intensive writing sessions While the summer heat was on, the ­conference room was kept at a perfect temperature and the lunches were delicious xxiii CHAPTER Introduction THE VIRTUAL COMPANY—A CONCEPT FOR INNOVATIONBASED BUSINESS The Virtual Company is a company format adapted for a business climate characterized by innovation driven business and rapid change It has a limited number of employees and a small but dedicated core staff that operates the company’s development by strategic alliances with external resource providers The Virtual Company is an especially attractive format during a start-up phase as it allows increased flexibility, makes good use of financial resources, and can promote development of new ideas and inventions In this way, the utilization of the financial resources can be optimized with cost-effective product development as a result During its continued development, the company may remain in its virtual format or be restructured into an integrated, traditional company The initiation and operation of a Virtual Company will meet several challenges and we will here describe opportunities, difficulties, suggest solutions, and inspire to a company startup and also successful business development THE VIRTUAL COMPANY—A MODEL ADAPTED TO A CHANGING WORLD During the last decades, there has been a climate shift on the savannah of the knowledge-based industry.The big elephants are still roaming the grasslands, but have adapted to the new circumstances and are substantially slimmer and more agile than before Besides them, leaner and smaller business constellations have developed, provided they can move fast enough and be adaptable We call it the Virtual Company format—small, flexible, and dexterous, remarkably strong and aggressive, and at the same time innovative The Virtual Company business model is an attractive way to organize innovative processes in a company This format ensures flexibility, makes good use of the financial resources, and stimulates productive innovative processes.The flexibility is based on the management possibility to organize Virtual Business Models ISBN 978-0-08-100141-7 http://dx.doi.org/10.1016/B978-0-08-100141-7.00001-3 Copyright © 2016 Elsevier Ltd All rights reserved 148 Virtual Business Models that is, a sense of urgency is needed Note the distinction Dr Christophersson makes between “Not Slow” and “Fast.” When starting up a company, his primary requirement is that you have to know what the product will be Good science does not necessarily translate into a commercial value and potential His advice is to recruit a Business Development manager very early on If you consider that such a manager is not needed, it is probably too early to start the company! “It is all about the mind-set Academic persons not in general think commercially,” Dr Christophersson concludes Dr Christophersson puts a high value on persons who have experience from starting up small companies For example, the first Starbucks coffee shop was said to liquidate twice before the company eventually turned into today’s success This reflects a mindset of “never give up.” He continues and tells the story of a major US-based car manufacturer, where one of the Divisions managers made a serious mistake that cost the company millions of dollars, and the CEO was asked when to get rid of that person His response is very illustrative, according to Dr Christophersson The CEO said, “Get rid of him? He now has invaluable experience of how not to things.” Benefits and challenges with the Virtual Company As a founder of companies with a Virtual Company organization, Dr Christophersson describes the benefits of this kind of organization: • Fast decision processes due to the small core management team • Highly active, since the company is newly started and the team is small and dedicated The benefit in the start-up phase of the company turns into challenges as the company grows and new competences are required and the need for the company to continue to evolve becomes evident Other challenges that he mentions are as follows: • To clearly define responsibilities if there are few people on the team.The consequence might otherwise be that an individual becomes responsible in an area where the person is not very qualified • Control of human resources is a challenge as people are not employed by the company and are sometimes not in the same location as the company • Project management is a challenge if the company’s project group is not fully dedicated to the Virtual Company’s goals but rather its own goals Good communication is essential and requires face-to-face meetings and telephone conferences Dr Christophersson’s experience is that in some cases consultants not located at the company site are not controllable and Case Studies 149 not deliver as agreed He believes that not only the physical distance might be a productivity factor but also the consultant’s and the employee’s different legal relationship to the company In Dr Christophersson’s view, the employee has a stronger connection to the company that makes them more dedicated and productive as compared to the consultant Another strong suggestion from Dr Christophersson is never to engage friends as consultants From Dr Christophersson’s experience as a board member of several Virtual Companies, he notes that the board easily is used as a consultant network This should in his opinion be avoided, as the board should be a steering organ and not act as an operational consultancy group:“It is important that there is someone with the ultimate responsibility”.Within a Virtual Company the CEO has a communication advantage and the board is dependent on that he or she is completely honest In a traditional organization, the board can ask anyone involved in the project to present at a meeting, but in a Virtual Company, the consultants are rarely asked to present “Scientists are rarely good businessmen” In start-up situations, the inventor can be involved as a founder and have different positions as owner, board member, external resource, and consultant In Dr Christophersson’s experience, it is a challenge as they may mix their interests at different time points A scientist/inventor has in many cases a difficulty in letting go of the project and has a micromanagement tendency He says, “Very few scientists are good businessmen and they not get that results can be ‘good enough’ They always strive to be best in class.” Dr Christophersson’s experience is that in many cases it can be the optimal to expand the company without the founding scientist, as soon as possible Final words For a start-up company, as this is the only time in Dr Christophersson’s mind that a virtual organization is useful, it is important to define • Responsibilities – who is doing what? • Ways to manage and control resources • The strategic way forward Mr Swanson Gender:   Male Age:     60 Location:   Europe Current role:  Investment Director in a venture capital company 150 Virtual Business Models Mr Swanson’s experiences in the industry Mr Swanson has a background in the traditional chemical industry in various leading positions, mainly as Chief Financial Officer, but also as project manager in technology development departments He left the industry some 15 years ago and started working in the financial sector, from which he has acquired vast experience in investments in university spin-outs and in the process of transforming new ideas into companies He is now the member of several boards of Virtual Companies representing the Investor Mr Swanson’s thoughts on Virtual Companies Mr Swanson defines Virtual Company as a small company with a core team that buys external competences into the Virtual Company According to Mr Swanson, the core team is crucial for the success of the Virtual Company and should be tightly tied to the company Although he has never worked within a Virtual Company himself, his experience from dealing with and investing in Virtual Companies has given him a clear and detailed view on the same According to him, the minimum core team, in its optimal appearance, consists of three members: • CEO to coordinate the operations • Market-orientated person • Technology-oriented person to deal with development, logistics, and production Ideally, these three persons should have the entire knowledge and competence regarding all aspects of the Virtual Company and thus be able to identify and acquire all external competence needed A Virtual Company is strongly driven and developed by external factors like customer’s need and markets changes Thus, the driving force in the development of a Virtual Company comes from the outside projected to the inside This is, according Mr Swanson, a difference compared to a more traditional company An independent chairman is always needed in the Virtual Company, in order to balance all interests in an unbiased way Mr Swanson’s reflections on advantages and challenges for Virtual Companies The advantage with a Virtual Company is that it is more flexible It has the possibility to listen to external comments and adjust the development Case Studies 151 and modify the business plan with short notice when needed It is cost effective and flexible, and has the ability to react rapidly on external demands The challenge, however, is to have enough core competence and to have the possibility to buy in external competences It is essential for the core team in the Virtual Company to understand and make use of the external competences.The core team must be “good buyers” and thus have the competence to buy the right resources A further challenge is the potential difficulty in controlling the resources, as compared to a larger and traditional organization, which has larger internal competences and can control the operations better Another challenge, according to Mr Swanson, is to establish enough competence in the core team of the Virtual Company and thus not have to rely too much on external consultants for essential and strategic tasks With respect to communication with a Virtual Company, he thinks that the challenge is that some entrepreneurs have an attitude of “knowing everything themselves” and reaching through to these types of persons might be difficult On the other hand, he also has seen that many entrepreneurs are ready to listen and to learn, which establishes a creative climate and often proves successful for the company Other aspects of a Virtual Company When doing business in the Virtual Company, for example, out-licensing a product, it is very important to have access to all competence to perform the licensing External competences, for example, legal, are needed, and it is important to show the licensee that the Virtual Company has enough competences to carry out the negotiations and agreement preparations in a professional way Mr Swanson’s experience from virtual work in the 1980s During the 1980s, a Swedish chemical company, Perstorp AB, made a, for that time, unusual move in its ambitions to look for new products and markets It wanted to work “outside the box” and formed a Virtual Company called Pernovo, loosely linked to Perstorp The idea was to prevent building large structures within Perstorp in their process of scouting for new technology 152 Virtual Business Models The Pernovo structure was entirely virtual based on the conviction that specialist competence was needed that was not accessible in the region but in other parts of the world Pernovo reported directly to the CEO of Perstorp but worked with visionary tasks in order to gain new technology and new market segments Pernovo was set up with a central core competence that utilized external competencies around the world Its goal was to identify new products and start up new companies The result of the work by Pernovo was the establishment and acquisition of several new companies, whereof Perstorp Pharma is one example Perstorp Pharma is a pharmaceutical company, and the virtual setting was used to acquire knowledge and understand the details in pharmaceutical development, which was not present in the mother company Perstorp Pharma was established in 1983 and its IP was sold 1997 to British Smith&Nephew, for whom Perstorp Pharma later became a producer Perstorp Pharma today has 55 employees Dr Pearson Name:        Dr Pearson Gender:        Female Age:         46 Current role in industry: Project director (responsible for pharmaceutical projects in clinical development) in a Virtual Company of very international nature Dr Pearson’s experience in industry Dr Pearson has worked for 15 years in leading positions in the biotech industry, having roles as team leader, expert, Head of CMC, and project manager She has worked in companies with pharmaceutical projects in phases from early discovery phase to clinical development Of these, two are spin-outs from university, and she joined these companies early in the product development The company where she holds her current position has made a transition from outsourcing parts of the product development to a situation where now basically everything is out-sourced This transition took place when the company was acquired by another company Her present company collaborates with many ERPs and a substantial part of the persons Case Studies 153 involved in the company are consultants They have collaborators and consultants from about 10 different countries with people involved covering 10–15 different cultural backgrounds Reflections on advantages and challenges for a Virtual Company According to Dr Pearson, the greatest advantage with a Virtual Company is the possibility to get access to highly qualified persons when they are needed, and to the extent needed A small company is often prevented from having highly skilled experts employed on a full-time basis over the years, when they are only needed in certain situations and times The virtual setting creates a great advantage in these situations, through its flexibility.There is also an advantage for the individual consultants, who are given the possibility to work without the regulation of certain office hours and more individually The challenge is to make the external resources deliver the right things and in time For example, a document to be sent to a regulatory authority before a certain deadline, and there are three to five persons at different locations involved This requires a diligent project management in order to coordinate the work and get the process right The flexibility in a Virtual Company may be turned into a disadvantage if the organization and communication does not work In order to function, a Virtual Company requires good leadership and clear communication, which may be hard to establish Special leadership skills are required in a Virtual Company The individual may also experience the flexibility in working hours as stressful It is not feasible for everybody to be accessible at all times during the day and night, a situation that may evolve in a global Virtual Company that utilizes consultants from different time zones Someone is always awake and at work and potentially seeking the attention of the other employees and/or consultants The organization should take different locations and time zones into account when forming the project team The ultimate challenge is thus, according to Dr Pearson, to form a team despite the fact that few are full-time employees and few are located in the same place The key to success is here to create an organization that makes sense to everybody involved and adapt it to the operations that are carried out The definition of responsibilities and defining ways of reporting are challenges in the Virtual organization The organization often consists of 154 Virtual Business Models highly educated, competent, and committed individuals with strong willpower This is often an asset but can turn into a disadvantage if these people are not led efficiently toward the mutual goal of the company However, if you succeed with this leadership there is an extremely strong team created that can be very productive in a short time A challenge that Dr Pearson has experienced is that the management does not take the creation of a clear organization structure and reporting routes seriously enough, with the consequence that the Virtual Company will not work in an optimal manner Everybody must know what he or she is allowed to do, not allowed to and also should Everybody must know who takes what decision This is rarely a problem with an ERP since the roles of the ordering company (the Virtual Company) and supplier (the ERP) is very clear In the work with consultants, there might be a problem if there is no clear structured organization and the individual consultant might be unsure of their roles and responsibilities The tools for communication in a Virtual Company are quite blunt (telephone, e-mail, and video conferences); consequently the structure must be very clear to all involved for the project to be successful This organizational structure must come from the company management and be carefully implemented, understood and accepted by all involved A challenge is to fully engage the consultants despite the fact that they are located at different locations One way to solve this is to treat everybody in the company in the same way when it comes to incentives and bonus programs This makes the consultants recognized and committed to the Virtual Company in a long-term manner, providing a good basis for the relationship and increasing the likelihood of success of the company A clear organization and committed consultants prevent unnecessary time spent at the project meetings discussing organizational issues.The team can instead then focus on reaching the goals Dr Pearson’s thoughts on communication in a Virtual Company In Dr Pearson’s experience, board meetings in a Virtual Company have the practical function as in any other board meeting in any company, with individual attendance and set agendas In the contrary, the project teams hardly ever meet in person, but rely on telephone meetings and videoconferences A clearly structured organization Case Studies 155 promotes consultants to freely communicate to each other directly, without the involvement and supervision of the project management at all occasions This will work well if the consultants are truly committed However, it is not advised to let different ERPs talk directly to each other outside the project group GLOSSARY Term Explanation business angel An individual that invests in a (start-up) company business plan A description of a business’s goals and the plan for reaching these goals, including organization and description of the financial means cap table A table presenting the ownership and equity value in an investment round CDA/NDA Confidentiality agreement/nondisclosure agreement claim A text that defines the extent of the protection by the patent CMO Contract manufacturing organization consumer End user, for example, a patient CRO Contract research organization customer Buyer of product or product prototype from the company dilution New shares are issued and the existing shareholders’ ownership in the company is reduced down payment Payment made by the buyer or licensee to the seller or licensor when signing an agreement due diligence An analysis by the buyer or licensee of the seller’s or the licensor’s business before signing an agreement elevator pitch A very short message (often orally communicated) that summarizes the company’s activities end user A company that will sell the product to a customer that will use the product EPO European Patent Organization ERP External resource provider ex parte An ex parte decision is one decided by a judge without requiring all of the parties to the controversy to be present exit The sale or out-licensing of a product to an external company go-to-market strategy The company’s strategy and tactic for the process of product market presentation to product sale hard money Investments that require the issuing of new shares in the company infringement Intrution upon the rights of a patent, making use of a patented innovation without having the rights to that patent innovation An innovation is the improvement/development of an existing invention/idea/product inter parte A legal relationship that is between specified parties only and does not concern others invention An invention is something created for the first time and represents an inventive step inventive step A patentability requirement: the invention must be nonobvious and adequately inventive IP Intellectual property 157 158 Glossary IPO Initial public offering ISR International search report JSC Joint steering committee jumping alliances A manner to manage human resources in a Virtual Company lead candidate Intermediate product in development licensee The company that in-licenses a project licensor The company that out-licenses a project milestone payment Payment made by the buyer or licensee to the seller or licensor when a predetermined development stage is reached MTA Material transfer agreement net present value The present value of a project based on an anticipated future value (often when the project is completed) and adjusted for risks in the product development process novelty A patentability requirement: the invention must be new and not known to the public patent protection The commercial right a patent gives to the patent holder PCT Patent cooperation treaty prior art In the patent system, prior art are all existing public information that can be relevant for a patent application prototype A version of the product not fully developed and not to be sold to the end user return on investment An investor’s profit from making an investment royalty Payment made by the buyer or licensee to the seller or licensor when the product is on the market Royalty is often a percentage of revenues of the sale during a time period SHA Shareholders agreement soft money Grants and other financial supports that not require the issuing of new shares in the company specification The written description and disclosure of the invention term sheet An overview of the terms and conditions of a business agreement TTO Technology transfer organizations up-front payment See “down payment” valuation Estimation of the financial value of a project or a company INDEX ‘Note: Page numbers followed by “f ” indicate figures and “t” indicate tables.’ A Academic innovator, 15 Agreements arbitration, 70–71 characteristics, 59 confidentiality agreement, 63–65 disputes, 69 governing law, 69 material transfer agreement, 62–63 nondisclosure agreement, 63–65 public courts, 70 role, 59 sale and licensing, 68–69 service agreement background invention, 66–67 defined, 65 inventions, 66 vs MTA, 65 shareholders agreement general parts, 61 preference shares/golden shares, 62 purpose, 60 rights and obligations, 62 technology transfer agreement, 67–68 An enabling way, 91 Apple, 43 AstraZeneca, B Business development alternative solutions, problem, 41 budget, 50 business plan/communication, 41 business concept and strategy, 46–47 company description, 49 competitor analysis, 48 executive summary, 45–46 financing and exit scenarios, 49–50 intellectual property, 48–49 market overview, 47 organization, 49 problem, 47–48 competitive intelligence, 51–55 market position, 42, 42f nonvirtual company, 39–41, 40f patent filing details, 50 product definition, 41 product development plan, 50 setting up, 44 team coordination, 44 value proposal, 42 Business intelligence, 77–78 Business plan business concept and strategy, 46–47 company description, 49 competitor analysis, 48 executive summary, 45–46 financing and exit scenarios, 49–50 intellectual property, 48–49 market overview, 47 organization, 49 problem, 47–48 C Cap table, 102, 102t Communication/control, 38 common goals, 30–31 documentation system, 36 external communication, 36–37 internal communication, 36–37 resources manage external competence, 35 non-Virtual Company, resources A-D house at different departments, 32, 33f normal distribution, 34, 35f project, different parts of company, 31, 32f 159 160 Index Communication/control (Continued) project, outside organizations, 31, 32f recruit external competence, 35 Virtual Company, resources A-D external resource providers, 32, 33f stakeholders board, 29–30 consultants, 28–29 core team, 26–27 CROs, 30 founders, 27–28 investors, 28 project leader/CEO, role, 26–27 Competitive intelligence communication, 80 competitors, 74–75 customers, 75 databases, 77, 79–80 defined, 73 market information, 75–76 personnel experience, 80 reports, 80–81 scope definition, 80 soft information, 76–77 Competitor analysis, 48 Confidentiality agreement (CDA), 63–65 Contract research organizations (CROs), 30 Core value, 85 Coca Cola’s, trade secret, 83–84 patentability, 85–86 Craftsmanship, 43 Created value, joint development activity, 4, 5f new technology development companies, 4, 6f D Deal making due diligence, 120–121 initial public offering, 117–118 licensing deal, 118–120, 119t negotiation process, 120–121 trade sale, 118 Drag along, 61 Dr Andersson view, 136–138 Dr Christophersson view, 146–149 Dr Donald view, 144–146 Dr James view, 141–144 Dr John view, 133–134 Dr Lind view, 131 Dr Pearson view, 152–155 E Equity investment bridge investment, 103–104 conditioned shareholder contribution, 103–104 defined, 101 governmental and nongovernmental institutions, 104 loans, 104 making, 102–103, 103t starting company, 101–102, 102t Excellent performance, 30 Exit deal making due diligence, 120–121 initial public offering, 117–118 licensing deal, 118–120, 119t negotiation process, 120–121 trade sale, 118 market communication, 113–114 company/project, 111–113, 112t, 113f defined, 109 material, 114–117 product, 109 return on investment, 110 risk, 110–111 External resources providers (ERPs), F Financial resources, Financing access to bank accounts, 107 account distribution, 107–108 banks, 105 bookkeeping, 106–107 defined, 99 equity investment bridge investment, 103–104 conditioned shareholder contribution, 103–104 defined, 101 governmental and nongovernmental institutions, 104 Index loans, 104 making, 102–103, 103t starting company, 101–102, 102t financial accounting, 106–107 hard money defined, 99 investment, 100 loan and sale, 100 investors, 104–105 invoice payments and certification, 107 soft money, 101 G Golden shares, 62 H Hard money defined, 99 investment, 100 loan and sale, 100 I IKEA, 43 Industrial application, 86 Infringement, 92 Initial public offering (IPO), 117–118 Intellectual property (IP), 48–49 Intelligence, 78–79 business intelligence, 77–78 competitive intelligence communication, 80 competitors, 74–75 customers, 75 databases, 77, 79–80 defined, 73 market information, 75–76 personnel experience, 80 reports, 80–81 scope definition, 80 soft information, 76–77 continuous process, 78 Internal communication, 36–37 Inventive step, 86 J Joint Steering Committee (JSC), 119–120 Jumping alliances, 31 161 K Karolinska Development AB, L Lead Candidate, 109 Licensing deal, 118–120, 119t M Manage external competence, 35 Market, 114 communication, 30, 113–114 company/project, 111–113, 112t, 113f defined, 109 position, 42, 42f presentation forms confidential dossier, 117 confidential presentation, 116 flyer, 116 headline presentation vs historicalchronological order presentation, 114, 115t nonconfidential dossier, 116 nonconfidential presentation, 116 Material transfer agreement (MTA), 62–63 Mr Jones view, 138–141 Mr Swanson view, 150–152 N Net present value (NPV), 113 Networking, Nondisclosure agreement (NDA), 63–65 Novelty, 85–86 P Patents, 5–6 biotechnology company, case study, 93–96 claims, 91 core value, 85 Coca Cola’s, trade secret, 83–84 patentability, 85–86 costs, 89–91 freedom-to-operate, 89 infringement, 92 invention to public, 83 monopoly/market exclusivity, 83 national court cases, 96–97 in parallel, 97 162 Index Patents (Continued) patenting process, 86–89 post grant, 92–93 settlement, 97 skilled in the art, 91–92 small company impact, 97–98 specification, 91 Patentable idea, 17 Patent Cooperation Treaty (PCT) application, 88 claim priority, 87–88 National/Regional Phase, 88 Pfizer, Preference shares, 62 Private inventor, 15 Product definition, 16, 109 R Recruit external competence, 35 Redemption right, 61 Rewards cost-effective, 123 fast decisions, 124 rapid access to best competence, 124 rapid up/down-sizing, 125 high flexibility, 123 opportunities, 125 Right of first refusal, 61 Risks communication over time and space, 126 delegate outside, company, 127 identify and enroll ERPs, 126 no in-house technical competence, 126–127 second opinion, 127 short sighted investments, 125–126 threats, 127–128 S Service agreement background invention, 66–67 defined, 65 inventions, 66 vs MTA, 65 Shareholders agreement (SHA) general parts, 61 preference shares/golden shares, 62 purpose, 60 rights and obligations, 62 Soft money, 101 Split loyalties, Startup company innovations, academic institution within company, 22–23 ownership, 19 private inventor, 21–22 TTO, functions, 19–20 Virtual Company, 20–21 new and patentable ideas, 15 requirements defined product, 16 development plan, 18 established and documented rights, 17 experimental data, 16–17 financial plan, 18 freedom to operate, 17 market for product, 18 patentable idea, 17 T Tag along, 61 Technology transfer agreement, 67–68 Technology transfer organization (TTO), 19–20 V Valuation, 105–106 Value creation, communication, competitive intelligence points, patents, 5–6 split loyalties, value growth and project valuation, well-written agreements, Value proposition, 41 Virtual Company created value joint development activity, 4, 5f new technology development companies, 4, 6f defined, flexibility, 1–2 innovation potential, 7–9 Index networking concept, 3–4 use of resources ERP, 10 hierarchical organization, 11–13 nonhierarchical organization, 11–13 value creation, communication, competitive intelligence points, 163 patents, 5–6 split loyalties, value growth and project valuation, well-written agreements, W Well-written agreements, ... business behaviors to manage entrepreneurial risks and rewards of the present day as manifested in the Virtual Business Models they discuss Organized human behavior as reflected in business models. .. mitigating entrepreneurial risks and maximizing entrepreneurial rewards Specifically, you are intrigued by and interested in the experiences and insights that Karin Bryder, Anki Malmborg, and Eskil... is its own species, the fundamental truths disclosed and discussed in Virtual Business Models are widely applicable For Virtual Business Models to prosper, there must be a ready source of talented