BIG

Big Idea Group

Group 5 MTI

AAKASHDEEP - PGP/14/126, AMEYA - PGP/14/004, ARIFUDDIN - PGP/14/014, EMILIA - IE/14/05, GERHARD - IE/14/06, GOUTHAM - PGP/14/143, KUMARESAN - PGP/14/150, MORTEN - IE/14/10, OBULESU - PGP/14/156, TOBIAS - IE/14/11, UMESH - PGP/14/310 SHARATH PGP/14/ 241 VARUN-PGP/14/ 122

Company Overview

Big Idea Group at a Glance

Founded 2000 Intermediary company between investors and idea-buying companies Assist large manufacturing & retail companies in their innovation efforts Use holistic process to use ideas as resource and transform them into valuable products Start business in Toy industry

People Behind the Scene

Michael Collins (CEO & Founder) Deep insights in venture capital industry due to former job at a leading VC firm Founder of a specialty toy company with award-winning product lines MBA from HBS Entrepreneurial spirit & innovation George dArbeloff (Chairman of AB) Deep insights in equipment manufacturing & service industry Established manager with long business experience

Offering companies a new way of managing innovations

BIGs Philosophy of Inventions & Problems of Large Companies

BIGs Philosophy & Understanding of Inventions Problems of Product Development Departments of Large Companies
Concentration on own ideas to evolve existing product lines Wrong investment decisions because employers are emotionally down & drained by their product category Different companies need different investments in product development (e.g. for creating prototypes) Exclusion of thousands of individual tinker-ers & independent innovators generating new product ideas
3

1 2 3

Inventions are popping-up in different places Inventions are unpredictable Inventions dont only come via well-founded product develop departments within large companies, but also from independent thinkers

BIG taps into & seeks for entrepreneurial power of legions of individual inventors

Toy Industry as Starting Point for BIG An Overview

Toy Industry at a Glance

Market size: prox. $ 30 bn. (in 2000) Multiplicity of industry segments Video games Fashion dolls Plush toys Skating accessories Retailer: from large, well-known retailers (e.g. Toys R us) to smaller retailers Retailers purchase toys from many different distributers & wholesalers Toy producers range from large companies like Hasbro or Mattel to small niche players like Kid Galaxy

Trends in Toy Industry

Kids behavior and wishes are changing due to faster development, replacing toys with sport & music earlier Introduction of high-tech gadgets and products (e.g. CD or cell phone) gaining attention from kids and stimulating kids wishes & demand Personalization & niche markets becoming a new trend and tackle traditional mass market Toy manufacturers and retailer lacking new innovation & fresh content
4

BIGs innovation process

STEP 1
Hunts Outsourced Flow

STEP 2

STEP 3

STEP 4

Industry Outreach Orphaned Products & Ideas Internet Request Programms

WINNOWING

REFINING

CAPTURING VALUE

1000 +

100+

20-30

5-6 deals per year per vertical

5

Ideas

DEAL

Professional Inventors

STEP 1
Overview of Elements
Hunts
Roadshow for finding ideas and entrepreneurs Inviting local entrepreneurs showing their concepts to industry experts + pooling inventors

Industry Outreach
Publishing research on industry trends + Giving BIG awareness and validation of trends

Outsourced Flow
Cooperation with major toy companies Unsolicited idea submissions each month, BIG helps in evaluating, winnowing and refinement + avoids good ideas from slipping through the cracks

Orphaned industries and Ideas

Products never brought to market/ stopped developed/ promotion + Products are revitalized through BIG process

Professional Inventors
Network of professional investors through hunts and WOM + Helped BIG connect with more inventors

Internet request programs

Solicitation of suggestions from inventors through website and newspaper +helping big adding ideas to lines under consideration, more targeted concepts
6

STEP 2 & STEP 3

STEP 2: WINNOW
Manageable number of ideas for refinement Pursue highest potential ideas Hunts: Evaluation by panel of industry experts incl. Collins
Breadth of knowledge Reduced personal bias New mix of panelists for each event Approximately 15 panelists Short form filled out for every invention

STEP 3: REFINE
Close cooperation with inventor Make concepts more appealing to kids companies
Draw on BIGs knowledge of what companies look for Production of appropriate presentation material

3-6 months of refinement

Company research Repositioning Design Engineering Field testing etc.

Other idea sources: same criteria

STEP 4 & Key Success Factors

STEP 4: CAPTURING VALUE

Three ways of monetizing the product
Licensing the product to a company Develop the concept internally as a private label Bundle several concepts to sell to entrepreneur

Key Success Factors of Process

Network of professional inventors Broad variety of backgrounds and perspectives in panels Constantly looking for new athletes Collins himself

Monetized 35 different products through five contracts (Sept. 2001) Licensing deals:
Advance payment Royalty Guarantee

Why does BIG seem better able to identify and bring to market innovative toy concepts, whereas the major toy companies feel they are in a period of lack of innovation

How proprietary or defensible is BIGs system? Could one of the major toy companies replicate it? Why or why not?

Dimension Offerings

Definition Develop innovative new products or services.

Example Looks for innovation from the most unpredictable ways. Captures the power of parallel processing for innovation from people from outside an organization who might not be affected by the organizations critical data like sales information, etc Designed the business model like that of a venture capital business with little overhead.

Platforms

Use common components or building blocks to create derivative offerings.

Solutions

Create integrated and customized offerings that solve end-to-end customer problems.

Raw ideas , unsolicited inventor and vendor submissions which toy companies get frequently are forwarded to BIG BIG then performs a feasibility check and refining of the ideas

Adapted from : Sawhney et, al. (2006). The 12 different ways for companies to innovate.

10

Dimension Value Capture

Definition Redefine how company gets paid or create innovative new revenue streams.

Example Licensing a product to company (advances, royalty, guarantee for both BIG and inventor) Subcontract a product as a private-label Bundling of many concepts to sell to entrepreneurs

Processes

Redesign core operating processes to improve efficiency and effectiveness. Think differently about sourcing and fulfilment

Acts as a intermediary between inventors and idea-buying companies (manufacturers/retailers) Innovation engine tries to capture innovation and idea flows from the broadest range possible : hunts, outsourced flow, etc.

Supply Chain

11

Dimension
Networking

Definition
Create network-centric intelligent and integrated offerings

Example
According to Collins, you cant replicate the human side of business. Backed by his own charismatic personality, inventors approach and good relationship with inventor communities, BIG has created a valuable network of manufacturers, retailers, entrepreneurs, inventors, etc.

Brand

Leverage a brand into new domains

With the foray into the Home and Garden business, BIG would be venturing into a bigger market and would turn profitable provided it applies the business sense that has enabled it to succeed in the toy industry

12

How proprietary or defensible is BIGs system? Could one of the Personality, it? Why major toy companies replicateCreativity, or why not?
Intelligence

VC experience

Collins Domain experience

Perspective of the Inventor: Higher probability of idea to revenue conversion with BIG than any single toy company Perspective of a Toy Company: Engaging with BIG would provide readymade and better solutions cost effectively compared to trying to replicate the model on its own More cost effective for the toy companies to pay for licences than take up the entire work on its own huge work and time involved in idea screening to idea refining, testing, customizing. Even if it could, the solutions would not be as great and out of the box

13

How proprietary or defensible is BIGs system? Could one of the major toy companies replicate it? Why or why not?
Lower Transaction Costs and Economies of Scale: Analogous to distributor or wholesaler in SCM
Inventor1 Company1 Company2

Inventor2 Inventor3 Inventor4

BIG

Company3 Company4

Ad-hoc rotating panel sourced from multiple associations and companies across the industry -> Impossible to replicate for a single company owing to (i) Industry competition, (ii) Full time employment (HR issues) In absence of ad hoc rotating panel, seasoned thinking sets in Brand already established as an idea incubator company Finally, even BIG is facing considerable challenges trying to replicate its own model for a different industry just about sums it up!
14

Can BIG replicate its system in other industries such as lawn and garden?

15

Major Constraints
Availability of a pool of large inventors: Products which involve high costs like engines etc., find less tinkerers than low cost items like toys. Hence the pool of ideas is inversely proportional to costs involved Finding the right Screeners/ winnowers : Winnowing is the crucial aspect of this model. It requires, different personality with vast industry experience, intuition, knowledge, judgment and taste Tacitness and specificity Involved: The process involves application knowledge which is tacit in nature which cannot be simply transferred to all industries and is more subjective The configuration of people, process, screeners, Managers , Innovators and giving them a fair share , companies all involved form an ecosystem Idiosyncratic nature of these eco systems : The technologies involved, level of manufacturing capacities, constraints Network Externalities: Externalities play a huge role in these system and carries risk of networked systems
16

Adoption of Process for Garden and lawns

Basic process applicable in any industry Sponsorship gives a more solid base compared to angel funding Low Revenue/High profit model combined with low investment in assets gives BIG good flexibility Garden and lawns apparently have a large pool of inventors

Finding Mike Collins in the home and garden segment is crucial for success Right of first refusal for Skil-Bosch might handicap BIGs process of finding the right partner for the right product ROFR for Skil-Bosch might limit the will of cooperation from inventors and/or potential qualified panelists

BIG may replicate with gardens and lawns, however, success is subject to the leadership and people involved
17

THANK YOU !!

18