PRODUCT€CONCEPT€AND€BUSINESS€VENTURE IDEATION...
Transcript of PRODUCT€CONCEPT€AND€BUSINESS€VENTURE IDEATION...
HELSINKI UNIVERSITY OF TECHNOLOGY
DEPARTMENT OF ELECTRICAL AND COMMUNICATIONS ENGINEERING
THESIS FOR THE MASTER OF SCIENCE IN TECHNOLOGY
PRODUCT CONCEPT AND BUSINESS VENTURE
IDEATION: PLANT TERRARIUM
Mikko NykänenSunantie 14 A 4102760 Espoo+358 50 358 1599
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ACKNOWLEDGEMENTS
This thesis was researched at the Communication Laboratory of Helsinki
University of Technology. I thank my instructor and supervisor professor Timo O.
Korhonen and ideation partner Inga MathiesenBuinevits for their valuable
suggestions and professor Korhonen also for guidance throughout my thesis work. I
also thank Paulo Pinho M.Sc. from HUT Lighting Laboratory and my godfather and
uncleinlaw Erkki Rantalainen for their advice on the subject of LED utilization.
Having a good network of relevant contacts is essential when building a business
venture. My special thanks go to the Venture Cup, Mari Lymysalo from Provestum
Ltd, and to Risto Paajanen from the Foundation for Finnish Innovations. Special
thanks also go to Arabus Design, Media and Art Business Center, Tuomas Mennola
and Erik Furu from Otaniemi Innovation Center, and to Niko Venäläinen from the
University of Art and Design, Helsinki, who participated in the Venture Cup team
that competed in the business plan contest with a concept I ideated for this study.
Finally, I thank my parents Marita and Pekka Nykänen for their continuous
encouragement.
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CONTENTS
ACKNOWLEDGEMENTS.......................................................................... 2TIIVISTELMÄ............................................................................................... 5SUMMARY.................................................................................................... 6ABBREVIATIONS........................................................................................ 7
1. INTRODUCTION............................................................................. 81.1 SCOPE OF THE THESIS........................................................................... 81.2 KEY DEFINITIONS.................................................................................. 81.3 STRUCTURE OF THE THESIS................................................................ 9
I THEORETICAL FRAMEWORK
2. IDEATION RELATED TECHNIQUES......................................... 102.1 IDEA GENERATION................................................................................ 102.2 IDEA CULTIVATION.............................................................................. 112.3 IDEA EVALUATION AND SELECTION................................................ 133. COMMERCIALIZATION PROCESS........................................... 153.1 INTRODUCTION...................................................................................... 153.2 COMMERCIAL POTENTIAL OF A BUSINESS IDEA.......................... 193.3 ORGANIZATION MANAGEMENT........................................................ 283.4 FINANCIAL PLANNING......................................................................... 363.4.1 GENERATING AND MANAGING INTELLECTUAL PROPERTY... 413.5 SUMMARY AND CONCLUSIONS FROM COMMERCIALIZATION.. 444. PROMISING RESEARCH RESULTS TO BE COMMERCIALIZED 474.1 POWER LINE COMMUNICATIONS........................................................ 474.2 LIGHT EMITTING DIODES...................................................................... 494.3 LEDS AND PLANTS.................................................................................. 52
II PROCESS DESCRIPTION
5. IDEATION.......................................................................................... 565.1 IDEA GENERATION.................................................................................. 565.2 IDEA CULTIVATION................................................................................. 595.3 IDEA EVALUATION.................................................................................. 655.4 IDEA SELECTION...................................................................................... 686. PLANT TERRARIUM IMPLEMENTATION PLAN.................. 706.1 INTRODUCTION....................................................................................... 706.2 INNOVATION STUDIES, MARKET RESEARCHES & COMPETITIONEVALUATION................................................................................................. 716.2.1 PLANT TERRARIUM MARKET POSITION....................................... 756.3 BUSINESS VENTURE.............................................................................. 776.4 PRODUCT SPECIFICATIONS................................................................. 806.5 PROTOTYPE BUILDING......................................................................... 826.6 PROTOTYPE TESTING............................................................................ 836.7 COMMERCIALIZATION......................................................................... 866.7.1 SUPPLIER SELECTION........................................................................ 866.7.2 THE FIRST FINANCING ROUND (PRESEED)................................. 87
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6.7.3 VALUE CHAIN AND PRODUCTION SETUP.................................... 876.7.4 PILOTING AND PRODUCT LAUNCH............................................... 906.7.5 INTERNATIONAL ROLLOUT............................................................ 916.8 SUMMARY AND CONCLUSIONS FROM THE IMPLEMENTATION 93
III COMPARATIVE STUDIES AND PROCESS OUTPUTS
7. VENTURE CUP............................................................................... 957.1 THE FIRST ROUND................................................................................ 987.2 THE SECOND ROUND........................................................................... 1007.3 THE THIRD ROUND............................................................................... 1087.4 CONCLUSIONS FROM THE VENTURE CUP...................................... 1188. FUTURE OPTIONS.......................................................................... 1198.1 TECHNOLOGICAL OPTIONS................................................................. 1198.2 COMMERCIALIZATION OPTIONS....................................................... 1209. CONCLUSIONS............................................................................... 12210. DISCUSSIONS................................................................................ 123REFERENCES...................................................................................... 124
APPENDICESAPPENDIX I, SOME TRIGGER QUESTIONS FOR SYNETICSAPPENDIX II, ENTREPRENEURIAL UNIVERSITIESAPPENDIX IIIA, VALUATION METHODSAPPENDIX IIIB, MAKING AN ACCURATE ESTIMATEAPPENDIX IV, GOVERNMENT LOANS AND GRANTSAPPENDIX V, LED CHAMBERS FOR SCIENTIFIC USEAPPENDIX VI, THE RESULT SHEET FROM MINDMAPPINGAPPENDIX VII, THE RESULT SHEET FROM SYNETICS APPLICATIONAPPENDIX VIII, FIRST ROUND VENTURE CUP QUESTIONS AND ANSWERSAPPENDIX IX, REJECTED IDEASAPPENDIX X, BUSINESS PLAN BASED ON A NOVEL PLANT TERRARIUMAPPENDIX XI, NOVELTY RESEARCH RESULTSAPPENDIX XII, PROJECT PLAN: TERRA RIO LTD BUSINESS ESTABLISHMENT
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TEKNILLINEN KORKEAKOULU Diplomityön tiivistelmä
Tekijä: Mikko Nykänen
Työn nimi: Tuotekonseptin ja kasvuyrityksen ideointi: kasviterraario
Päivämäärä:30.05.2006Sivumäärä: 127 + 29
Osasto: Sähkö ja tietoliikennetekniikan osasto
Professuuri: S72
Työn valvoja ja ohjaaja: Prof. Timo O. Korhonen
Tiivistelmäteksti:
Tutkimuksen tarkoituksena oli ideoida yleisvalaistus LED (LightEmitting Diode) ja/tai PLC (Power Line Communications)teknologioita hyödyntävät tuotekonsepti ja liiketoimintasuunnitelmakasvuyritykselle. Liiketoimintasuunnitelman tavoitteena oli tullapalkituksi Venture Cup–liiketoimintasuunnitelmakilpailussa. Tämäntutkimuksen ensimmäinen osa, Teoreettinen viitekehys, esittääideoinnissa käytetyt menetelmät (Kappale 2) ja kasvuyrityksenkehittämisen teoreettisen taustan (Kappale 3). Se myös esitteleeuudet tutkimustulokset joille tässä tutkimuksessa ideoidaankaupallistamismenetelmiä (Kappale 4).
Tämän tutkimuksen toinen osa, Prosessikuvaus, esittääideointiprosessini edellä kuvatuilla menetelmillä (Kappale 5).Ideointi päätyi kolmeen parhaaseen ehdokkaaseen, joista valitsinedelleen kehitettävän tuoteidean sen perusteella kuinka hyvin kukinkonsepti pystyi vastaamaan Venture Cupin ensimmäisen kierroksenkysymyksiin. Prosessikuvauskappale päätyy kasvuyrityksenkehittämissuunnitelmaan ideoidulle kasviterraariotuotteelle (Kappale6).
Lopulta tutkimuksen viimeinen osa, Vertailevat tutkimukset japrosessin tuotokset, esittelee tämän tutkimuksen arviointiprosessinliiketoimintasuunnitelmakilpailun avulla (Kappale 7). Ennenjohtopäätöksiä (Kappale 9) ja pohdintaa (Kappale 10) esitännykyisen näkemykseni kasviterraariotuotteen teknologisista jakaupallistamismahdollisuuksista (Kappale 8).
Avainsanat: LED, PLC, tuotekonsepti, ideointi, kasvuyritys,kasviterraario
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TEKNILLINEN KORKEAKOULU Abstract of Thesis for the
HELSINKI UNIVERSITY OF TECHNOLOGY Master of Science in Technology
Author: Mikko Nykänen
Name of the Thesis: Product Concept and Ideation: Plant Terrarium
Date: 30th May 2006 Pages: 127 + 29
Department: The Department of Electrical and Communication Engineering
Chair: S72
Supervisor and instructor of the thesis: Prof. Timo O. Korhonen
The aim of this study was to develop a product concept and businessplan for a business venture utilizing general lighting LED and/orPLC technologies. The aim of the business plan was to win an awardin the Venture Cup business plan contest. The first part of this study,Theoretical Framework, discusses the ideation methods (Chapter 2)and the theoretical background for business venture development(Chapter 3). It also introduces some new research results that formthe bases on which to ideate the commercialization methods (Chapter4).
The second part of this study applies the presented ideationmethodology to create the Process Description (Chapter 5). Theideation resulted in three main candidates from which I chose thebest one to be further developed based on its ability to give a strongresponse to the Venture Cup's first round questions. The processdescription ends with the Business Venture Development Plan for thePlant Terrarium Product Concept (Chapter 6).
Finally, the last part of this study, Comparative Studies andProcess Outputs, presents the evaluation process of this studythrough the Business Plan Contest (Chapter 7). Before conclusions(Chapter 9) and discussions (Chapter 10), I conclude the thesis bypresenting my own view about technological and commercializationoptions for the Plant Terrarium Product Concept (Chapter 8).
Keywords: LED, PLC, product concept, business venture, ideation,plant terrarium.
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ABBREVIATIONS
3DES Triple Data Encryption StandardAFE Analog Front EndBTG British Technology GroupCAD Computer Aided DesignCM Common ModeCCS Producer of Japanese plant incubatorCCT Correlated Color TemperatureCRI Color Rendering IndexEMI Electromagnetic InterferenceEPO European Patent OfficeFEC Forward Error CorrectionFFA Force Field AnalysisHNCP Home Network Control ProtocolHKKK/ Helsingin KauppakorkeakouluHSEB Helsinki School of Economics and Business AdministrationIP Internet Protocol (technology) / Immaterial Property (legal)IPR Immaterial Property RightLED Light Emitting DiodeLCTL Longitudinal Conversion Transfer LossMAC Media Access ControlOFDM Orthogonal Frequency Division MultiplexingPAR Photosynthetically Active RadiationPCT Patent Cooperation TreatyPLC Power Line CommunicationsPRH Patentti ja Rekisterihallitus
National Board of Patents and Registration of FinlandR&D Research and DevelopmentRGB Red, Green, BlueSWOT Strengths, Weaknesses, Opportunities, ThreatsQoS Quality of ServiceRC4 Stream Cipher Security protocol named after a Vietnamese roadSITRA Suomen Itsenäisyyden juhlarahasto
Finnish National Fund for Research and DevelopmentSOK Suomen Osuuskauppojen Keskuskunta
Union of Finnish Cooperative StoresTAIK/UIAH Taideteollinen korkeakoulu / University of Arts and Design HelsinkiUV UltravioletTEK Tekniikan akateemisten liitto
The Finnish Association of Graduate EngineersTEKES Tekniikan Edistämiskeskus
Finnish Funding Agency for Technology and InnovationTKK/HUT Teknillinen korkeakoulu / Helsinki University of TechnologyTULI Tutkimuksesta liiketoimintaa / from Research to BusinessUPnP Universal Plug and PlayVC Venture CapitalistX10 Industry standard for home automation (1975)
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KEY CONCEPTS
Product concept The product and the acceptability and productability issues
related to it.
Product Tangible artifact or services offered for sale by an
organization or business. For example, computers and
telephone exchanges are tangible products. Management
consultancy, education and transport are examples of service
products.
Acceptability Comprises the attributes usability, usefulness, price,
compatibility and reliability of product.
Usability Comprises the attributes learnability of use, efficiency of use,
memorability of use, error rate in use, and user satisfaction.
Productability Attribute defining the possibility of production. Production is
the process of manufacturing or assembling the product from
its components.
Business venture A startup business with a high growth potential that
distinguishes itself from existing companies through
innovation, through, for example, an innovative product or
service, an innovative production process, a new business
model, or a new market. Here, innovation means a
commercially utilized invention.
Invention An object, process or technique that displays an element of
novelty and enables the solution of a problem unsolved so
far. To be patentable, the invention has to be sufficiently
novel and useful.
Ideation The process of idea generation, idea cultivation, idea
evaluation and idea selection. Idea generation is the first
phase of ideation where the freedom of creativity is at its
highest. Idea cultivation refines the valuable ideas from those
created and evaluation analyzes the factors for and against
developing each product concept to a business venture. Idea
selection gives the best concept for further development.
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1. INTRODUCTION
1.1 SCOPE OF THE THESIS Product concept and business venture ideation is a challenging creative process.
The target was to make a successful business plan for the Venture Cup Business Plan
Contest, the business plan showing a way of commercializing current achievements
in the research of bright LEDs and/or PLC (Light Emitting Diodes and/or Power
Line Communications) through a new business venture.
New growth business formation in Finland is rather low compared to other
countries. Especially, only a few highly educated people are interested in starting
their own businesses and most potential entrepreneurs are not willing to take the risk
that entrepreneurship inevitably involves. Yet, innovativeness is the key to the
continuity of the Finnish success story; the further creation of new startup ventures
could be a highly effective means of benefiting from individual and university
research efforts. More formally, the need for this kind of study is recognized in a new
statute of university law that states technology transfer to society is, after education
and research, the third objective of universities (Finlex 2006, Kaataja 2005).
1.2 STRUCTURE OF THE THESISIn the first part of this thesis, I present the theoretical framework of the study.
This includes ideation techniques (Chapter 2), analysis of commercialization and
new venture formation processes in general (Chapter 3) and discussion of promising
research results to be commercialized (Chapter 4). In the second part, I present the
process description of the practical framework of the study. This includes
implementation of the ideation process by the given techniques (Chapter 5). The
practical part also includes the business venture development plan (Chapter 6) for the
selected idea. In the third part, I present comparative studies to assess which product
idea represents the best outcome of the ideation process. I present the business plan
development for the Venture Cup and the evaluative Venture Cup feedback (Chapter
7). Then I discuss the future options of the business idea from both the technological
and commercial points of view (Chapter 8). Finally, I draw conclusions and
summarize the results (Chapters 9 and 10), which some material related to this study
is left for the appendixes such as the detailed business plan for the Venture Cup in
Appendix X and a plan for business establishment project in Appendix XII.
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I THEORETICAL FRAMEWORK
2. IDEATION TECHNIQUES
The ideation process applied in Chapter 4 of this thesis consists of Idea
Generation, Idea Cultivation, Idea Evaluation and Idea Selection processes.
Theoretical descriptions of these processes are presented and analyzed in this
chapter. In the ideation of the new venture related to this study, the
applicability of different academic, scientific and artistic disciplines was
considered with an open mind.
2.1 IDEA GENERATION
Idea Generation is the first phase of ideation where the freedom of creativity is
at its highest. To be creative, according to perhaps the most widely recognized
Finnish creativity researcher Jussi T. Koski, it is most important to downplay all
criticism in the starting phase (Koski 2005). There are methods to practice doing this
with a "freely flying imagination" in a manageable way (Laningan 1992). The idea
generation phase should start with brainstorming to outline the problem dilemma
and/or to generate many potential solution candidates. To classify the problems
and/or solutions found, techniques such as Mind Mapping (Buzan 1977, Korhonen
2003) or Fish Bones can be used (Mindtools 2006, Korhonen 2003).
To be effective, the brainstorming should involve both individual and group
work. There should be a session leader to define the startup point and give some
broad limits to the problem and to the discussions. The brainstorming session
participants should have divergent orientations towards the problem being considered
and their backgrounds should be as different as possible. In individual brainstorming
sessions, many ideas and unresolved questions tend to arise (Korhonen 2003).
Divergence is key to creativity (Florida 2002). Following group brainstorming, ideas
develop more efficiently and into more elaborated forms (Korhonen 2003).
To differentiate the roles of brainstorming participants and to improve group
brainstorming, Edvard de Bono has introduced the Six Thinking Hats method. With
this method, each session participant defines his/her view of the problem or solution
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being considered according to his/her individual role, as defined by a hat below. The
hats can be circulated within the group. A participant can have many hats or a
number of participants can have the same hat if the numbers of hats and participants
are not equal.
Figure 1 Method of Six Thinking Hats (Korhonen 2003)
In Edvard de Bono’s Method of Six Thinking Hats, the engineer type of member
of Fact Hat presents figures, information needed, gaps and focuses on details. The
artisttype Creativity Hat member presents alternatives, proposals, criticisms and
changes. Feelings and emotions is the field of the societyaware member. The logical
positive entrepreneur type of member finds justifications for things that work, while
the logical negative investor type finds the risks involved as justifying judgment and
caution (Bono 1985, Korhonen 2003).
2.2 IDEA CULTIVATION
According to its international definition, creativity is an ability to make new and
appropriate things (Koski 2005). Creativity is a human mental phenomenon based
around the deployment of mental skills and/or conceptual tools, which, in turn,
originate and develop innovation, inspiration, or insight (Wikipedia 2006). Idea
cultivation methods are used to refine the valuable from the created ideas. A good
method of doing this is the Synetics method of developing creative capacity. By
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Synetics, the generated idea can be cultivated according to the following picture
(Korhonen 2003, Synetics 2005).
Figure 2 The Synetics Method (Korhonen 2003)
The Synectics method utilizes synectic thinking, which is the process of
discovering the links that unite seemingly disconnected elements. It is a way of
mentally taking things apart and putting them together to give new insight into all
types of problems. It is a creative problemsolving technique, which uses analogies.
This method is used to encourage the ability to live with complexity and apparent
contradiction, stimulate creative thinking, and mobilize both sides of the brain to
catalyze new thoughts, ideas and inventions.
Synectic thinking is like a mental pinball game. The stimulus input, bounced
against the Trigger Questions, is transformed. Ordinary perceptions are turned into
extraordinary ones; the familiar or prosaic is made strange. Synectic play is the
creative mind at work. First of all, you must identify the problem you have and write
it down. Next, you must gather information about it to mix with the information
already stored in the brain. Take creative action by using the trigger questions to
transform your ideas and information into something new. These questions are tools
for transformational thinking and may lead you to some great solutions when parts of
the generated idea concept are substituted, or simplified alternatives can be found.
When the generated concept is handled according to all twenty synetics dimensions,
essentially all aspects of the concept become creatively considered and discoveries
are found in a structural way (Synetics 2005). Some examples of synetics dimensions
are presented in Appendix I.
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2.3 IDEA EVALUATION AND SELECTION
IDEA EVALUATION When different generated ideas are cultivated to their
best forms of practical acts, the factors for and against each act should be analyzed.
A method of doing this is FFA, Force Field Analysis, by which the factors forming
the problem are described and the process state is altered in the preferred direction.
All the relevant forces are described, allowing the planning of contra strategies for
negative forces and supporting strategies for positive forces. The different forces
relating to the act are identified, sorted and graded (Ugur 2004, Korhonen 2003). The
diagram below illustrates analysis of a problem by using FFA.
Figure 3 A Force Field Analysis conducted later in this study
The first result describes the current state. Alteration of the forces can change
the current state to more justified and further on to the most desirable state. In the
initial state of this force field analysis, pros of starting a voice chat for seniors
exceeded the cons of the same act. The act was supported by the fact that the seniors
need company, the project group had the knowledge for implementing cheap talk
services through IP calls and by a growing market among the seniors. Anyway, they
are quite conservative and might not be willing to change their behavior on the scale
needed.
IDEA SELECTION When there are a number of cultivated and evaluated ideas,
but immediately available resources to proceed only with a single idea, the best one
should be selected. Decission tree is a method to do this selection. It is a structure
where the value of each idea is calculated. There probabilities of different monetary
outcomes for implementing each idea are estimated to the tree structure. The value of
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each idea is counted by the sum of the possible monetary outcomes weighted by their
probabilities (Korhonen 2003). A decision tree provides a good selection
methodology when the monetary amounts of the different choices can be estimated
with a significant probability. However, professor Korhonen and I tailored a better
method of idea selection in order to better consider the requirements of this project.
The method is presented later in Chapter 4, where it is implemented.
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3. COMMERCIALIZATION PROCESS
The purpose of this chapter is to present general knowledge about the
commercialization of research results and newbusiness formation processes
that are usable in productconcept and businessventure ideation, the topics of
this thesis.
3.1 INTRODUCTION
The purpose of this section is to present the framework of Chapter 3. Section 3.2
discusses known commercial potential evaluation and development mechanisms for
business ideas, especially those with a university background. Section 3.3 discusses
organization management and Section 3.4 financial planning, including immaterial
property rights.
Commercialization of research applies transfer of research generated
knowledge, and applied research to the design, development, and production of
new/improved products, services and/or processes. The transfer process emphasizes
the value and protection of the intellectual product of the researchers (Waugaman,
2004, Day 2002).
Newbusiness formation requires three main factors: a business idea,
management team and capital, as can be seen from picture below. These
requirements are analyzed in detail in the following (Sjöstedt 2004, Venture Cup
Handbook 1998).
Figure 4 Requirements for New Business Formation
When going to the market, all of the above have to be high quality in order to
succeed in business. At the beginning, however, some of these parts can be weak and
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subsequently improved during the new venturedevelopment process. First, very
good business ideas are attractive to good management and investors; second, capital
tempts business ideas and management; and third, people with skills needed for the
management team are likely to attract business proposals and financing. At least
some of these have to be strong at the beginning if one is to create a successful new
venture (Venture Cup Handbook 1998).
The business idea at hand can be classified according to its type of innovation or
innovation potential. New product is one form of innovation. In the box diagram
below, the forms of business innovation are presented. Innovation means invention
marketing of that which has been successful.
Figure 5 Types of Business Innovation (Venture Cup Handbook 1998)
Instead being just a new product, entrepreneurial innovation that is “new
commodity” or shows a “new quality of a commodity”(Schumpeter, 1934) can be
a base for a whole new industry (Schumpeter, 1934), as Netscape was with its
graphical web browser (Venture Cup Handbook, 1998). Innovation can also be a new
business system (Schumpeter, 1934) as Dell was with its most efficient logistics
system in PC assembly and delivery (Venture Cup Handbook, 1998). Innovation can
be a new method of production, a new market for an existing good or a new source
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of supply. New means here new to the industry or market involved— not to the
world. These three ideas provide potential for high growth startups. Starting a
business from scratch in an existing industry with an existing business model is not
likely to have a high growth potential (Venture Cup Handbook 1998).Management Team Flat organizations with a minimal number of hierarchy
levels are recommended nowadays (Venture Cup Handbook 1998, Laningan 1992).
In discussions about people at work, organizing is defined as partitioning people
into activity groups, each with a specific subtask, and providing coordination
within and between the groups so as to achieve the whole task. An organization is
any group or set of related groups established with such a structure and purpose
(Laningan 1992)
Figure 6 Simple Organization for a StartUp Company (adapted from the
Venture Cup Handbook 1998)
When creating the team, the needed social capital, and also the drivers of interest
of that social capital, has to be analyzed (Sjölander 2005). A prime purpose of any
organization is to encourage optimum job performance, both from individual
members and from the whole group. The factors involved in the quality of the
performance of individuals include:
1. Their understanding of the job requirements and the performance standards
expected.
2. Their ability to deliver those requirements following the required standards.
3. The degree to which the necessary tools and facilities are available.
4. Their motivation to give the best performance.
It is the duty of management to provide an environment with all of these factors
(Laningan 1992).
The management team should have the mindset of entrepreneurial learning. It is
the process by which entrepreneurial competence in identifying and creating
opportunities and growing new businesses is acquired. The entrepreneurial function
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is what drives innovation. That gets things done and is a major driver of resource
transformation. There has to be ability in the form of judgmental decision making
and realtime execution under uncertainty. The learning process should be focused
on identifying, developing and exploiting opportunities. The team should be able to
adjust its strategy and business model and change its technology and product
accordingly (Sjölander 2005).
Capital Financing is one of the three main factors in developing new companies
(Figure 4). In addition to private or commercial financing, the public sector in
Finland is a significant financer of new business venture development. The sums of
public money available are very limited, however, and that makes the cost control of
a new business very challenging. The size of investment of the entrepreneur in the
form of work and capital correlates with the willingness of all financers to support
and invest to the new business (Tekes 2005, Sitra 2005). The figure below presents
sources of available financing by the maturity of the business (Venture Cup
Handbook 1998).
Figure 7 Sources of financing for a startup company
Public grants and loans for product development are largely available if growth
expectations and/or social benefits are considered high enough. Even when the
public investments are largely available for technology development, financing for
related business development has mostly to be found from the private sector.
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However, there are now also in the public sector new early phase seed equity
financers. This kind of financing is for general business development and has a high
expectation of return on investment. Some people who have performed well in
business life operate as business angel mentors and finance new entrepreneurs.
Venture capitalists are institutional risk financers operating with funds formed with
other people’s money. Bank loans and bonds require a business to have some
property to be used as a guarantee, thus they are not suitable financing rapid growth
(Tekes 2005, Siplä 2000).
3.2 COMMERCIAL POTENTIAL OF A BUSINESS IDEA
Section 3.2 presents known commercialpotential evaluation and development
mechanisms for business ideas, especially those with a university background. They
are important because the target of this study is to make a winning business plan
from a university background.
The concept of a business plan originated in the 1950’s and 1960’s USA when
the banks started to be interested in funding entrepreneurs and wanted information
from all relevant aspects of the potential business presented in a compact form (max.
30 pages) to justify their possible investment (Pohtola, 2004). The objectives should
be structurally presented in the business plan for the commercialization of the idea.
Making a sound business plan has been shown to be useful for entrepreneurs’ own
purposes as well (Pohtola 2004, Rantatulkkila, 2004).
General requirements of a successful business plan In order to make a
winning business plan, it is absolutely essential to know who is going to be the
customer, what is going to be the product delivered, and how the delivery turns into a
cash flow to the company. When the ideation process is ready, market research is the
next tool in commercialization of business idea (Venture Cup handbook 1998).
Below is an example of a result form of a market research project. It depicts the Plant
Terrarium project that was the outcome of the product development process
described in this thesis. In the form like Figure 8 opinions about size and qualities of
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plant terrarium market, its preferable features and expected price were collected from
the interviewed organizations.
Figure 8 Example of a market research result sheet
Market research is carried out to ensure and/or decide whether the market has
enough potential to justify the ideation project being followed by a product
development project. The market potential for the product has to be large enough and
the earning logic in the business plan has to justify the product development project
(Venture Cup Handbook 1998). From the market research results, potential customer
groups can be analyzed, and the product concept be evaluated by the customers. To
have good value from the market research, the research questions have to be clearly
defined according to the requirements of strategic business planning (Wilson 2003).
Market research is essential in order to understand the different aspects of the
market for the product. The qualities of the market can be analyzed economically by
interviewing potential distributors. The aspects are, for example, whether there is a
market for the product, who would be the buyers, what would be the best price for
the product and whether the distributors would be interested in putting the product on
sale and on what conditions (Kitcho 1998). Also, a numerical analysis of the market
size is good for planning. Doing that reliably needs a fairly large number of samples.
The offered product also needs a very clear definition in order to have reliable
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numerical results. Market research results can be used to decide the markets where
the product is going to be marketed or if it is going to be marketed at all (Mattson
2005, Kotler 1980).
Figure 9 Markets
Beginning with the total population, various terms are used to describe the market
according to narrowness of its definition. A potential market consists of those in the
total population who have an interest in acquiring the product. An available market
consists of those in the potential market who legally are permitted to buy the product.
A target market consists of the segment of the qualified available market that the
firm has decided to serve. A penetrated market consists of those in the target
market who have purchased the product. The sizes of the markets above are not
necessarily fixed, but they can be affected by pricing and product design decisions by
the company. Market segmentation is useful in order to select the groups within the
market that the firm will serve (NetMBA 2005, Kotler 1980, Mattson 2005).
Customers for consumer goods can be segmented by, for example, geographic
criteria such as country or other such entity. Population density can be a
segmentation criterion as well. Demographic factors such as age, gender, income,
profession and suchlike are useful in segmentation. Lifestyle, usage or purchase
behavior of the potential customers can be also used for segmentation. For an
industrial goods company, size, sector and location are examples of demographic
segmentation criteria. The technologies a particular company uses are an example of
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operational segmentation criteria. Purchase decisionmaking procedures, timing, and
dimensioning are examples of behavioral or situational customer segmentation.
Anyway, the above mentioned customer segmentation criteria are already so widely
used that utilizing them does not give a particular competitive advantage. Sensitivity
to market signals is a tool to further improve the marketing success of a product.
There are strong signals and weak signals of market development. Examples of
strong market signals are commercial investments in some market or the technical
feasibility of some product. Strong signals include also patent and literature citations
of certain technologies and competitors actions (Pohtola 2005, McNaughton. 2005).
To notice and prepare for the coming market trends, it is important to analyze so
called weak market signals. They can be generally found somewhere other than in
organized actions and large organizations. Possible sources are, for example, notices
in newspapers and magazines, chat pages, hobbies and citizen movements. These
weak signals have no time series and they are not generally recognized. They need to
be collected from many sources and systematically monitored to help noticing the
coming trends (Jorma Pohtola 2005). The weak market signals can be received from
public sources, graduate students, alums or searched by professional service firms
(McNaughton 2005).
Strategic planning Commercialization of technology takes a long time. Those
who are most adept in the options new technology has made possible tend to be the
most competitive. To market a product, in addition to knowing the technology
related to it, it is necessary to know who else is doing the same, what the target
application for the technology is going to be, and what the characteristics of the
industry using the technology are (McNaughton 2005). Instead of new species of
technology, new application domains of old technology can give an advantage. For
setting strategic objectives, the experts have recommended using opportunity
orientation instead of technology orientation (Drucker 2002, McNaughton 2005,
Kotler 2000). In this context, opportunity means forthcoming products and a suitable
market for them (McNaughton 2005). An American management guru Peter Drucker
describes the major sources of opportunities for innovation. Within a company or
industry, opportunities can be found in unexpected occurrences, incongruities of
various kinds, process needs, or changes in an industry or market. Outside a
company, opportunities arise from demographic changes, changes in perception, or
23
new knowledge. These seven sources overlap, and the potential for innovation may
well lie in more than one area at a time. Innovations based on new knowledge, of
course, tend to have the greatest effect on the marketplace. However, it often takes
decades before the ideas are translated into actual products, processes, or services
(Drucker 2002). Market development usually follows the development model shown
below. The timeframe in this development varies, but this is the shape (Moore 1991).
Innovators (technology enthusiasts)
Early adopters (visionaries)
Early majority (pragmatists)
Late majority (conservatives)
Laggards. (skeptics)
Figure 10 Market Development model (Moore 1991)
Moore's idea is that the market strategy should focus on one group of
customers/users at a time, using each group as a base for marketing and diffusion to
the next group. The groups adopt innovations for different reasons. Those who are
early adopters of either new species of technology or a new application domain of
old technology search the distinctive functionality of the product and can tolerate the
product being in a crude form in other than its distinctive field. The later the targeted
user group is, the more it appreciates complete solutions against adjustability. Early
adopters are perhaps project managers looking for a radical shift, where the early
majority wants a productivity improvement in old operations. The late majority will
just keep up with general development (Moore 1991, Wikipedia 2005).
In opportunity orientation, it is essential to know thoroughly what customers
really value. Technology space knowledge is also important in order to understand
vertical markets, which means markets at the same stage of value in the chain of
business processes (McNaughton 2005). Below is an example of a value chain.
.Figure 11 Example of a Value Chain
24
A value chain describes the customer value creation process and its stages. The
example value chain describes the process suggested in my Venture Cup business
plan for a company developing and marketing plant terrariums. A more advanced
model, value network model, is succeeding the value chain model. In this, the
vertical markets have been included. Value networks are the human and technical
resources in a business that work together to form relationships and add value to a
product or service. Included in a company’s value network are research,
development, design, production, marketing, sales, and distribution. These
components work interchangeably to add to the overall worth of a product or service
(Wikipedia 2005). The value network is a graphic representation of all of the
organizations, groups, and individuals that are, or could be, involved in the
development, marketing, and use of a technology. The value network is derived from
the value chain concept (Software Engineering Institute 2005).
In developing value creation processes, understanding the overall market
environment is essential. The more favorable the forces that shape a market’s
competitive environment, the greater the business’s profit potential. The higher the
entry barrier to business, the more attractive the competitive environment is. The
lower the other industry forces, the more favorable the competitive environment. The
competitive environment is commonly described in terms of the forces shown in the
following picture.
Figure 12 The more favorable the forces that shape a market’s competitive
environment, the greater a business’s profit potential.
25
A relatively high barrier to entry means less competition. A low barrier to
exiting means that competitors go easily from the field when competition becomes
too intense and thereby lighten the competitive pressures. Low buyer power means
that the buyers are not able to bargain the prices down very much, while low supplier
power means that they are not able to bargain their prices up very much. The rise in
the availability of substitutes makes the competition more intense, as does the
competitive rivalry. High, intense competition among industry members drives the
profit potential down. When finding a niche for a product, it is essential to analyze
close markets for potential substitutes. Customers’ need should be understood
broadly in order to understand the forces that shape unserved market demand (Porter
1980, Kotler 2000). For technology markets, it should be noted that they are usually
business markets and thus there are fewer buyers in the niche and they tend to be
more relationshipdriven than the consumer markets. It is also characteristic of the
technology market that it is easier to target a different market than to change
technology. An interdisciplinary approach can bring new markets. For example, the
base of the Yahoo search engine was ideated in cooperation with English researchers
and technology departments of the University of Waterloo, Canada. A toonarrow
market definition in the early development phase limits market opportunities. When
taking an example from the consumer market, to competitors of a beer brand, all
other alcoholic and nonalcoholic drinks are its competitors in an overall view. When
further increasing the range of the view, all entertainment can be seen in competition
to beer (McNaughton 2005).
In addition to taking into account the quantity of competition, it is also important
to analyze quality factors. To understand the position of one’s product in the market,
the differences between it and the competing product should be analyzed. A
recommended tool for this is a simple matrix chart, of which there is an example
below. Knowing the differences in products gives rise to the possibility of targeting
marketing to customers who gain the highest benefit or advantage from one’s
product compared to competing products (Kitcho 1998).
26
COMPETITIVE MATRIX FOR THE PLANT TERRARIUM PRODUCT(VENTURE CUP 04/05 BUSINESS PLAN)
Product/Feature Adjustability Automation Lighting Warming IrrigationPlant Terrarium Design decision
What is needed?Increasing Adjustable
colortemperatureplant by plant
Adjustableplant by plant
Adjustableplant by plant
Artificial LightingAppUS2001048598
Controllingcapability on lightquantity, quality,frequency and dutyratio (Closest PriorArt)
NA Plant levelnotmentioned
Plant level notmentioned
Notmentioned
Kodin YkkönenGlass Box
Fixed solution No No No No
SemiautomaticTerrarium (hippieV.)
Self made User reaction to measurements,Can run a weekwithout user
Spot Light Spot Light exists*
AutomaticTerrarium(Korean Version)
Not mentioned Fixed Fixed /Adjustablebox level(They mayeven meanfixed)
Fixed /Adjustablebox level(They mayeven meanfixed)
Fixed / Adj.box level(They mayeven meanfixed)
Plant Raising byLEDJP2004113160
Not mentioned Hard to say Mixed redand blueincreasingplantabsorptionratio.
Tube of asingle plant inthe picture
Watershowered
Table 1 Example piece of a competitive matrix
In a competitive matrix, competing products are differentiated according to their
features. Marketing to customers who gain the highest benefit or advantage from
one’s product compared to competing products means positioning one’s product in
the market. The following path to successful positioning has been recommended.
First, identify relevant customer needs or problems. Second, define clear customer
segments of sufficient size. Third, design an attractive proposition in terms of
products or services. Fourth, define your uniqueness by differentiating against the
competition. Fifth, address the subjective perception of your potential customers, and
sixth, ensure customer satisfaction after the purchase (McNaughton, 2005). Factors
that influence purchase decisions depend on the importance and use of the product to
the customer. Attitudes of others, unanticipated situational factors and perceived risk
are important when purchasing consumer goods (Kotler 2000). For institutional
buyers, a relative advantage that can be gained from the product, its compatibility
and complexity are key factors. Also, the observability of the product benefits to the
customer using the new product are important, as is the ability to communicate the
product benefits to prospective customers (McNaughton 2005). To be able to
communicate product benefits to the customer, it is essential to know what the
27
product is. Even when your business is knowledgebased, productization can be
useful to utilize. In a Venture Cup lecture, productization was defined as follows:
“Productization means transforming the idea to a form in which the customer
understands its value and which it is easy for her to buy.” A product has a name,
product features, guarantee, responsibilities, design and package. An essential base
for productization is the set of distribution channel practices. Productization is ready
when there is a fixed price, defined implementation, ease of purchase, a
knowledgeable team, product brand, multipliable reproduction, and developing
expertise. Productization is likely to better succeed if pilot customers are used in
development and as a reference. References are important, because removing the
uncertainties of buyers is essential in marketing. Because the best 10 % of
practitioners have usually at least ten times higher production efficiency than the
weakest 10 %, the effort should be put to developing a niche where the entrepreneur
can be among the best. Webcasting, a digital video solution for the web, is one
example of productized expertise. When there are clearly defined solutions, it is
easier for the buyer to understand it and buy. In any case, productization isn’t
applicable to everything (Apunen 2004).
It is important to plan the product launch well and resource it with sufficient
money and people in order to have the right offering in terms of product definition,
strategic objectives and positioning. Marketing programmes, public relations, and
advertising have to be included in the marketing plan (Kitcho 1998). When planning
the launch, comparisons to similar products will have to be made and the identity of
the customers, their problems, and the methods used to solve them will have to be
discovered and analyzed (Vehviläinen 2004). Legal advice on the product launch
can be found from TE Centers. There are written guides for contracts for TEK
members (Kauppi 2004). Before the product launch, the risks have to be carefully
analyzed. There are risks in terms of market risk and in earning–logicrelated risks.
Market risk arises from factors such as market size, willingness pay, trends and
fashions. Earninglogicrelated risk relates to factors such as components, logistics,
and partnerships (Artto 2002). Then there are also people risks and financial risks,
which are more the subject of the following sections.
Commercialization of UniversityOriginated Business Ideas. There has been
evolution in the core business of universities through the centuries. Before the 19th
28
century, the core business of universities has been teaching conducted by priests. In
the 19th century, research became the second core business. Starting from the 20th
century, the US and UK commercialization of research results gained more
importance in universities and is now the third core business of universities; this is
also the case in the Nordic countries. Learning is the unifying process of all these
core businesses (Sjölander 2005). Commercialization pressures for research have
been harder than in Finland for decades in countries where the government’s role in
the economy in general, and in research funding in particular, has been smaller than
in Finland. This motives me to present in this chapter some real life examples from
Canada and the UK to add to the discussion of these matters. Rod McNaughton from
Waterloo, the leading Canadian university in technology commercialization, gave a
presentation about the reasons of its success at the TKK Entrepreneurs Programme
on February 2005. Waterloo is coop university where industry and Industrial
Property issues are taken very seriously in research activities. The main rule is that
the IP (Industrial Property) is given to the actual inventor and the patents are applied
before publishing anything with high commercial value (McNaughton 2005). In
Appendix II, there are examples of how Chalmers and Waterloo encourage the
entrepreneurial learning process.
3.3 ORGANIZATION MANAGEMENT
Section 3.3 presents known organization management mechanisms for business
organizations, especially those who are targeting rapid growth. They are important
because the target of this study is to make a winning business plan. A highquality
team implementing such a plan is one the three key elements of a successful
company; a strong business idea and adequate financing are the other two key
elements.
The Individual Characteristics of talented people are classified in the
following picture by personal qualities: youth vs. experience, chaos vs. order, quick
decision making vs. informationintensive decision making, traders vs. risk managers
and big picture vs. details are qualities to consider, depending on the need of the
particular company and project (Pfaff 2004).
29
Figure 13 Classification of intellectual capital – people (Pfaff 2004)
Diversity and good balance between all aspects is likely to make the strongest
team (Florida 2002). For managing a startup venture, entrepreneurial qualities are
required over administrative (Sjölander 2005). Differences between entrepreneurial
and administrative approaches are presented in the Table 2.
ENTREPRENEUR VS. ADMINISTRATOR
Start with perception of anopportunity
Start with resources in hand (budget)
Bias toward action Bias toward analysisMake adjustment as they go Resist deviations from planBuild teams and informal networks Work in hierarchies with clear
authorityExhibit flexible perseverance Value bureaucratic proceduresFocus on results Focus on survival and organizational
growthTable 2 Entrepreneur vs. Administrator (Dees 2004)
As organizations grow bigger and older, the administrative approach tends to
develop. Most organizations have an unified or, at least, a dominant culture. Some
30
can lack ideological cohesion within the staff. The main camps are likely to be: the
programme staff, who tend to be creative, entrepreneurial, and disdainful of rules; the
finance staff, who tend to be literal, numerical, and respectful of rules; and the
administrators, who tend to be political, managerial, and enamored of rules. The
programme staff thrives best in an environment that is openended, messy, even
chaotic; the finance staff thrives best in an atmosphere that is closed, neat and tidy;
the administrators thrive best in an atmosphere that is defined and predictable.
Inevitably, conflict ensues among these camps, for one person’s air of innovation is
another’s anarchy. Startup organizations tend to be entrepreneurial and mature
corporations administrative, but many others do not have the luxury of being one or
the other – they have to try to be both (Orosz 2002). The definition of the term
entrepreneur has been evolving as following.
1. In the late 18th century, Jean Baptiste said: “Entrepreneurs shift economic
resources out of areas of lower, and into areas of higher, productivity and
yield”
In the 20th century, Joseph Schumpeter stated that “The function of
entrepreneurs is to reform or revolutionize the pattern of production”
2. In the 21st century, Peter Drucker stated: “The entrepreneur always searches
for change, responds to it, and exploits it as an opportunity”and
3. Howard Stevenson, from Harvard Business School, held that
“Entrepreneurship is the pursuit of opportunity without regard to resources
currently controlled”.
Based on these definitions, we can say that entrepreneurs are change friendly,
opportunity oriented, innovative, resourceful and value creating when successful
(Dees 2004). Entrepreneurial competence is said to be acquired by the formula
Competence = (knowledge + skills)*attitude*will. Here entrepreneurial means
knowing what and how to build a growing business based on some novel concept
and the ability to get things done. Key competence domains there are the business
model and technology to accomplish the offering (Sjölander 2005).
“Life as an entrepreneur is stimulating, absorbing, challenging, rewarding, and it
requires risk taking, leadership, vision and being tough. Commercialization is an
adaptive process. In growing pains an entrepreneur should be able to delegate,
accept second best, continually reinvent, and practice hard cashflow management”,
31
stated experienced entrepreneur and business angel Paul Atherton in the TKK
Entrepreneurs Programme lecture on 17th February 2005.
To build the business model of a new business venture, answers to the following
organizationrelated questions have to be provided: Who shall the firm supply with
what? How can the product and/or service of the firm create value when in the use of
the customer and user? How and by what mechanisms can the firm, in competition,
secure a sustainable and fair share of that value (Sjölander 2005)?
Recruiting and managing people. Later in the evaluation process of this study,
McKinsey’s methods of managing 5year business plans are utilized. The earlier
mentioned conflict between administrative and entrepreneurial approach can be
recognized from the following critics.
Figure 14 Citations (Pfaff 2004)
As I see it, a business plan is a good tool if it is not taken as a fundamental truth,
but as a framework for discussion, planning and adjustments. If the
interdependencies of choices and actions are well analyzed, the business plan can
offer a framework to find the best way for an entrepreneur to proceed in the changed
environment. However, the critic above was writing from the point of view of an
investment bank financing an entrepreneur. Above, the managing director of Morgan
32
Stanley Philip Purcell is encouraging backing by great people, rather than sticking to
the plans the same great people have presented and through which they have been
given their original financing. So, who might be those great people to back?
According to Sören Sjölander, the fundamental process in resource transformation
and economic growth is entrepreneurial learning. It is the process by which
entrepreneurial competence is acquired for identifying and creating opportunities and
growing new businesses. The entrepreneurial function is what drives innovation and
gets things done, and is thus the major driver of resource transformation.
Entrepreneurial skills include specialization in judgmental decision making and real
time execution under conditions of uncertainty, and keeping learning and the effects
of learning in focus. The skill set should include the ability to: maintain the
relationship between opportunity identification and its development and exploitation;
make related changes in strategy and the business model; make related changes in
technology; and, using these abilities, offer a meaningful product and/or service
(Sjölander 2005). Hence, it seems that great people chosen to back projects should
have entrepreneurial skills and the motivation to undertake entrepreneurial learning.
Job satisfaction and motivation are not synonymous. Job satisfaction reflects a
person’s attitude to the job and the level of interest it holds. This results more in
increased organizational loyalty and commitment than in increased performance.
Motivation, on the other hand, concerns the desire to perform well, which is likely to
lead to increased effort and higher performance (Hill 2000). Hygiene factors such as
physical conditions, security, pay and relationships lead to dissatisfaction if not
maintained. Aspects of work such as responsibility and achievement are classed as
motivators (Herzberg 1959). Thus, when choosing great people to back those who
concentrate more on objects of work than hygiene factors seem to be more motivated
and thus more likely to give increased effort and higher performance. Organizational
loyalty is needed at some level and an appropriate level of hygiene factors is required
to develop that (Laningan 1992). Ability to transfer knowledge and commitment to
company objectives are personal characteristics, and when interviewing applicants
these motivational factors have to be analyzed. The wrong person might not carry the
project through to the end, and, if he does, he might not do it well (Artto 2002). The
technical skills or intelligence of an applicant are not enough to ensure he is the right
choice. For an applicant to be hired for the entrepreneurial team, the ability to learn,
33
motivation, and personal characteristics and chemistry are also important matters that
affect usefulness and personnelrelated risk of the potential recruit (Sarvadi 2005).
Hannu Seristö, from the Helsinki School of Economics and Business Administration,
encouraged the recruitment of well traveled people for internationalization,
underlining the importance of knowing the business culture of target markets (Seristö
2006).
New technology ventures need to be developed experimentally. The board has to
understand this and act upon it. Company partners and cooperators have to support
and contribute to this. Management must understand and drive this learning process.
However, simultaneously experimenting with too many things, such as business
models and technology, is unlikely to succeed. There has to be a balance between
stable elements and elements to be experimented with (Sjölander 2005).
Figure 15 The Logistical Process (Sakki 1997)
Operation development Cooperation with component suppliers and the
distribution channel, instead of maintaining a lot of secrets and tensions, is to be
recommended in order to enable maximum efficiency and smooth logistics in the
value chain. Necessary market and production information should be openly shared
between the parties and the whole delivery chain should be optimized instead of the
operations of a single player, as shown in the figure above (Sakki 1997). Building
partnerships is a way to get stronger resources behind the business idea or innovation
in hand than it would be possible alone (Kotler 2000). Cooperators or partners in
supply or delivery do not necessarily need to be especially entrepreneurial. The
modern behavioral view suggests the average person shows the following
characteristics.
34
1. He/she is not inherently idle, and, in the right working environment, will
derive satisfaction from the work and deliver good performance.
2. He/she will exercise selfdirection, selfcontrol and selfcriticism in jobs
relating to objectives to which the person is committed
3. He/she will have a level of commitment that depends on rewards, which
are not just money, for effort and achievement
4. He/she will accept additional responsibility in the right environment, and
may actively seek it.
This is particularly so in relation to nonroutine jobs (Laningan 1992). In addition
to the selfmotivated, for whom work is challenging, and who wish to complete the
work well, there are many who need to be motivated by others to work well. Many
people go to work for reasons based on custom and necessity and may not have the
opportunity to choose challenging work. Improving people’s jobs, creating
opportunities for them to influence their working environment and linking their
contributions to business outcomes must be provided and sustained (Hill 2000)..
Role of the university In the TKK Entrepreneurs Programme starting event on
30th November 2004, the TKK innovation manager, Panu Kuosmanen, said that in
August 2005 a new statute in university law of Finland will state that scientific
research, education, cooperation between business and society must aim to transfer
knowledge into practical use (Finlex 2006, Kaataja 2005). A key university
management question in newventure creation is how can the leaning mission
covering teaching, research and the third mission be organized and driven for mutual
reinforcement. Synergies between entrepreneurial learning and the traditional core
business research and teaching have to be found and developed, because
entrepreneurial learning is the fundamental process in resource transformation and
economic growth. If the full answer to the questions of what it is that entrepreneurs
know that others don’t, and how they acquire that knowledge, were known, then the
actions taken could be greatly improved (Sjölander 2005). It has been said that the
initial assessment of an opportunity is highly dependent on an individual’s capacity
to clarify the ways a technology can be used to access a market of sufficient size.
This requires access to people with many different skill sets to test early
assumptions, and multiple waves of opportunity recognition (O’Connor and Rice
2001). So it is to be recommended that labs should be involved with entrepreneurs
35
rather than faculties turned into entrepreneurs. Platforms should be created for joint
business models and technology learning. Emergent learning processes should be
encouraged. So questions arise as to how the university can build highquality
networks to help drive entrepreneurial learning in its own processes, what the drivers
to participate in such networks among university management, faculty, students and
external partners are, and what is attractive for different parties and how is
entrepreneurial learning rewarded (Sjölander 2005). It has been recommended that
ownbusiness startups after university should not be too hasty, and that several years
experience in working life should be gained first. However, work experience can also
be acquired during studies if they are related to the correct kind of education
(Yrityskustannus TAF 1992). How they approach these matters in Waterloo, Canada
is by cooperation programmes, contract research, and grants that require industry
participation in research institutes; they also have advisory boards and conferences,
alums, and professors moving between university and industry (McNaughton 2005).
These all are present in Finland also. Our innovation system, which brings public
sector and private sector players together, is recognized world wide for its ability to
help creating innovations, according to TULI programme manager Erik Furu, who
enabled funding for market research for the product concept ideated in this study.
Altogether, improving the entrepreneurial process, which is most effectively
achieved by widening local bottlenecks, has implications for owners, VCs,
executives, university management, and the management and conduct of support
units, as well as for national policy. The process of macroeconomic benefits is
analogical to the macroeconomic effects of, for example, steel cooking (Sjölander
2005). Chalmers in Sweden, and Waterloo in Canada are technical Universities that
are focusing on encouraging entrepreneurship. Appendix II briefly presents their
processes.
36
3.4 FINANCIAL PLANNING
Section 3.4 presents known financial planning mechanisms for business ideas.
These are important because the target of this study is to make a winning business
plan. In addition to a strong business idea, and a high quality team, proper financial
planning is required to enable implementing the plan. Adequate financing is one of
the three key elements of a successful company.
Financial planning is needed if the business management is to keep the cash
above zero, eventually making a satisfactory profit, while satisfying critical
stakeholders and increasing company resources and value so that lasting longevity is
secured and its stakeholders’ expectations of returns are met (Sjölander 2005). From
the riskmanagement point of view, the payback period of an investment is
important. It means the time in which an investment is paid back as revenues or as
savings. Usually private investments are not made if it is likely that the payback
period is longer than five years (Venture Cup Handbook 1998). Appendix III
presents methods of valuation and estimation. An example of determining a payback
period can be seen from Figure 16 below.
Figure 16 Financial terms (Venture Cup Handbook 1998)
37
Another important time is brakeeven. This is the time when the revenue rate of an
investment exceeds the cash consumption rate of the investment, and thus the
financing requirement of the investment starts to get smaller. Hence, the stronger the
justifications that the payback period is short enough, the better the financial risk is
under control. This is a reason why private investors are not willing to finance
development projects in their early stage, as can be seen from the illustration above
showing the sources of capital of a new venture. It is difficult to estimate whether a
new project will become profitable at all, not to mention reliably estimating the
timeframe of the payback period (Venture Cup Handbook 1998). Thus, despite the
globalization of the capital markets, the domestic financing institutions have not
become useless, because the information, crucial especially for financers of small,
medium and startup enterprises, is often local (Hyytinen 2003).
Under the Finnish innovation system, public grants and loans for business
establishment and R&D are quite widely available, as can be seen from Figure 17.
Figure 17 Finance sources (Tekes 2005)
38
The figure represents Tekes’ view about financing sources for new ventures. TEKES
(Tekniikan Edistämiskeskus, the National Technology Agency) is the main public
financing organization for research and development in Finland. Tekes finances
industrial projects, as well as projects in research organizations, and especially
promotes innovative, riskintensive projects. Tekes offers partners from abroad a
gateway to the key technology players in Finland. According to material from Tekes,
such as Figure 17, (Tekes 2005) and discussions with Tekes officer Martti Huolila,
there are several sources of public financing that share the risk of an entrepreneur.
These financing instruments each have a specific purpose. The entrepreneur has to
make a plan for Tekes about using a particular instrument. The plan should be set out
on a project form and the project should fill the requirements of that instrument. One
requirement usually is own financing from the company. If own financing were
asked of the company then the amount of this would vary between 20 and 85 % of
the total project cost. When financing is approved, money is paid to the entrepreneur
after the project or some part of it. Actual spending is compared to the plan before
the money is paid to the entrepreneur. Since the purpose of Tekes is technology
development, they focus on financing it only, and other company costs have to be
financed by somebody else (Tekes 2005). However, there are a few Tekes
instruments that are for general business development. TULI (TUtkimuksesta
LIiketoimintaa, from Research to Business) is a fast and flexible instrument, by
which expert services for developing new researchoriented businesses can be
bought. The maximum TULI financing is 10.000 € + value added tax per project;
exceptionally it is a 100 % grant. Typically TULI has been used to draw up business
plans or parts of them, market analysis or research, financing plans, evaluation of the
level of technology or the competitive advantages, novelty studies or other actions
preceding patenting or other protection (Tuli 2006). Also, some other public
organizations such as Sitra, Finnvera and the Foundation for Finnish Innovations
give loans or grants for entrepreneurial functions. More about these loans and grants
is presented in Appendix IV.
When looking at Figure 7 on page 18 about sources of financing by maturity of
the business, and going to one step further to public seed equity investments, one
very interesting tool for earlyphase companies, startup fund Vera (aloitusrahasto
Vera), has was created on 7th September 2005.
39
The fund concentrates on the early phase of business operations as part of a renewing
strategy by the Ministry of Trade and Industry for seed financing and a service
system for startup innovation companies. The fund is patching the financing gap
between R&D and private equity investments in the development of startup
companies. The targets for Vera investments are primarily startingphase technology
companies and technologyintensive service companies. The target companies have
to have growth potential. By now, Finnvera is the only owner of the new
Aloitusrahasto Vera Ltd. The Ministry of Trade and Industry gave Finnvera 11,5
million euros worth of equity for the Vera fund as a main loan. A daughter company
of Finnvera, Veraventure Ltd, specialized in equity investments, administrates the
Vera fund. To be a potential target of investment from the fund, the product of the
company has to have a clear market potential and it should have a significant
advantage compared to competing products. If possible, the innovation should be
protectable by a patent. The companies are not required to have a strong
management, but it is important to aim at building one. The professional and
technology skills in the company have to be wide enough. Also, the following
criteria for targets of investment have to be met.
– The company should be in the early phase of its lifespan, the preference being
younger than three years.
– The business plan has to be drawn up.
– The action of the company should utilize intensity of knowledge and skills.
– The company should have genuine willingness to grow, and
– The entrepreneur should control it (Veraventure 2005).
The next step in the figure showing sources of financing on page 18 is business
angel financing. This is private risk financing by people who have been
entrepreneurs and succeeded. In addition to money, they are valuable sources of
strategic help. One channel to look for private angel to assist one’s company is
INTRO tool, presented in Appendix IV. The business angel concept has been
adapted for Finland from countries where it has for decades been a key financing
source for startup companies targeting rapid growth. Such countries are, for
example, the US and the UK. To share this experience, a successful business angel,
Mr. Paul Atherton, visited the TKK Entrepreneurs Programme. Mr. Atherton, being a
Ph. D in physics, started his first company by providing components for space
40
research. The market was not sensitive to price and offered good profitability. In any
case, it was narrow and did not have the option of growth. What made him rich was
that their core product could later be used in the telecom industry, which grew
rapidly. He also managed to sell at the right time. More generally, he says, the
pioneers tend to have arrows in their back. Another warning he gave concerned
venture capitalists. He recommended avoiding venture capitalists if possible, and to
make them compete. Even when he had good experience of one VC named 3i, which
utilizes longterm thinking and has no pressure to exit, he still said that a typical VC
is hasty. Generally, the VCs read 25 000 business plans, have 800 meetings, 200
followup meetings and they invest in twenty. According to Peter Kelly, teacher of
entrepreneurship at TKK, a typical Venture Capitalist reads 2000 business plans, 200
of which are moderately credible. A hundred of them are interesting enough to read
and 40 undergo deeper evaluation. Only ten get financing and one has been a
commercial success (Kelly 2005). Due to heavy expectations of venture capitalists,
Mentor Capitalism is a form of financing Atherton and Kelly recommend for
entrepreneurs. A mentor capitalist is a person who works as mentor and business
angel at the same time.
Going further into the figure showing the sources of financing, venture
capitalists can be discussed. Venture Capitalists are institutional risk financers
operating with funds formed from money of other people. In the following, the
requirements of a typical venture capital investment case in Finland are presented.
Figure 18 Characteristics of a VC case and its life span at Eqvitec Partners
VCs (Venture Capitalists) need a general description of the product or service on
which the business idea is based. They are not able to analyze technical details.
Information about the target market, customers, enduser needs and benefits are
important. VCs are also willing to know the business model, meaning the mechanism
whereby money is made through the business idea. Competition has to be analyzed
41
in terms of the ways to satisfy the particular endcustomer need; this is often not just
a matter of competition between technologies. Competitive advantage has to be
shown, along with the aims and ambitions of the project. The most favorable
investment size by Eqvitec is 2 – 5 M€. Investments under 0,5 Me are considered
small (Jokinen 2005). The general profit target of VCs is to increase tenfold their
investment in five years. In order to get a VC to invest 1 M€ in a project, there has to
be strong evidence that the investment will pay back 5 M€ in five years. So, VC
money is very expensive money, and thus useful only for very expansive purposes
(Jokinen 2005, Kelly 2005). Jon Unnerus, an attorney from Roschier Holmberg,
spoke about the targets of venture capitalists. They are maximizing the value increase
of their investment through growth companies. The additional value venture
capitalists can provide to a company is financing, knowledge about a particular
business or business in general and working on the board of management. However,
a company should carefully consider whether they are willing to host a venture
capitalist, because they will get a huge share of the company and want contracts that
provide them with a great deal of decision power in the company. Thus, for an
entrepreneur, knowledge of the motives of the investor is very important. Otherwise,
investor and shareholder agreements can be uncomfortably limiting and even spoil
the business from the point of view of the entrepreneur, or overall (Unnerus 2004).
In the Venture Cup Business Plan Education Event, Mr. Ruohonen, the
representative of the Venture Capital company Holtron, stated that the VC often does
not understand what the entrepreneur is talking about. Customer needs define the
competitors, not the technology. The business plan should include answers to the
questions What? Why? How? and When? The business plan should include
information as to how big the benefit is, whether there is a market, whether there is
competition, after checking these matters from the customers, the net, investors, large
enterprises and competitors. According to Mr. Ruohonen, the appendices of the
business plan can include the product definition, drawings, the slide for the
marketing plan, buying criteria, implementation plan, milestones, profitability,
financing and cashflow calculations (Ruohonen 2004).
42
3.4.1 GENERATING AND MANAGING INTELLECTUAL PROPERTY
Section 3.4.1 presents known methods for managing intellectual property. They
are important because immaterial property is defining to an ever greater extent the
possibilities in the strategic planning of a technology company and, especially, in a
hightechnology company.
Different kind of immaterial property rights A patent is the most widely
known IPR (Immaterial Property Right). It gives the right to the owner to stop other
people using his invention commercially. A patent does not give the right to use the
invention (Harvey 2004). Requirements for an invention to be patentable are its
novelty and industrial applicability. The invention should also include inventive
steps, rather than being just an aggregate of existing technologies (National Board of
Patents and Registration of Finland (PRH) 2003). There are three available systems to
apply patents. National patent systems, international PCT system for almost 200
countries, and EPO (European Patent Office) system that offers patents that can
cover most European countries by a single application (PRH 2006). Patents should
be filed in China too (Harvey 2004). For example, in entrepreneurial universities,
patents and academic publications are appreciated equally as research results
(Sjölander 2005, McNaughton 2005). A key question in combining commercial and
academic objectives relates to when to publish academically, not to whether to
publish or not (McNaughton). There are also other kinds of IPRs, trademark,
copyright, utility model and legal protection of design. The trademark is an identifier
of product or producer that can be renewed after every ten years. Copyright is the
producer’s right to the product as such. The utility model is like a patent, but the
requirement for an inventive step is smaller, validity time is shorter and it is not
applicable in every country. Legal protection of a design takes the form of protecting
the appearance of a product or part of it (PRH 2006). The owners of IP must decide
how they want to use IP, identify where inventions may arise, and have a structure
for deciding about those matters. The figure below presents the available possibilities
of utilizing patentable inventions (Harvey 2004).
43
IPR DEVELOPMENT PROCESS
Figure 19 IPR development process (Harvey 2004)
Creation of IPRs The experts recommend patenting inventions widely and at an
early stage (Harvey 2004). Invention can come from the most unexpected people and
places. In any case, the market place should be monitored and the losses killed early.
A protectable innovation may turn out to be not valuable enough to justify the
protection costs (Harvey 2004). However, it is also possible that after patenting an
invention and developing the technology related to it, it turns out that something
patentable and valuable has been found again. Then the patent application can be
amended or a new application filed. Also a patent family, a set of patent publications
covering the same invention in different geographical areas, can be made. These
actions are called patent enrichment in the figure.
Choices with IPR When the applied IPRs are approved, the company’s interest
in licensing might be low if the negotiation is about the protection of the company’s
core business. Anyway, the company should be prepared to litigate if it is not willing
to license at all. Matters concerning how much to litigate, where and against whom
have to be considered. Enemies should be picked wisely in litigation. Winning easier
cases first acts as a warning sign to others. IPRs, especially those outside the
company’s core business, can be licensed to generate revenues. New business
ventures or activities can be founded in order to exploit the innovation, or the
innovation can be developed to a condition in which it can be sold (Harvey 2004). If
somebody clearly commercially utilized the technology of a company that had been
patented, and the company decides to ask license fees, the one who has not paid
should be sued. Even the US Department of Defense has been beaten in the court on
44
these issues. Remove uncertainty, prevent investment, be creative, accept a smaller
piece of bigger cake, don’t be greedy, aim for win – win, If doesn’t work bring in the
heavy artillery; have enough money for shells and people to aim the guns, write good
legal arguments, enforce your agreements, be creative, laterally and in scale, write
good patent term extension clauses in agreements (Atherton 2005).
Choices with own development A company having newly approved or applied
IPR can choose to build a new venture or new activity of its own for utilization of
that IPR. For making these choices there are two recommended alternatives for
action: a soft start and a hard start. The softstart utilization of the IPR can start with
a project structure, and it can be run and funded as a virtual company. A specialist
team can run and manage the project up to defined milestones and develop the IP
further if needed. After the project is ready, a decision can be made whether to hard
start an actual venture or license the project outcome. In a hard start, a company is
build through active investment, the management team is recruited, and the presence
of the company is established through communication with different stakeholders.
Additional investors are brought in if the capital investment is needed (Harvey 2004).
Assistance to build a company utilizing an invention can be found in several
places in Finland, as presented in the preceding section. In addition to the sources
mentioned there, IPRrelated assistance and financing can be applied for from the
Foundation for Finnish Inventions (Keksintösäätiö). The applicable risk financing
per invention usually is from 2000 to 100 000e from the foundation. The financing is
applicable to patenting, product development and commercialization costs related to
the invention. The foundation also offers advisory services, innovation evaluation,
legal services, commercialization services and marketing. The foundation offers its
services for patentable inventions that have reasonable commercial potential. They
offer also prototype workshop and licensing help if their requirements related to
patentability and commercial potential are met. The Finnish government is the major
financer of the foundation (Foundation for Finnish Innovations 2005, Jutila 2004).
Grants to cover legal fees can be applied for from Tekes also. By their LIKSA
instrument they are able to cover 100 %. A loan for starting a new company covers
up to 80%.
IPR Trade Sometimes it is easier, or more valuable, to sell IPR instead of
licensing or utilizing it (Jutila 2004, Harvey 2004). Many companies have
45
intellectual property rights that are out of their core business scope (Harvey, 2004).
Keeping the irrelevant intellectual property rights active is expensive. However, the
rights might be valuable to some other companies that operate in different segments,
areas or markets (Iprbox 2005). The easiest way to find potential buyers is through
brokers. The Foundation for Finnish Inventions has a small innovation brokering
service, but also private companies act in the field. A Finnish company, Iprbox,
claims that it is the pioneer in commercialization of IPRs in Europe. It is a very
strong statement from a newly founded company, given that BTG has been in the
field from 1991 onwards (Wikipedia 2006). Iprbox identifies potential customers and
estimates the value of the intellectual property rights, introduces the technology to
the buyer candidates and negotiates the deal. It has already signed an intellectual
property rights capitalization agreement with a number of companies, both with
global corporates and small technology startups (Iprbox 2005).
Both companies sell, madiate and license intellectual property rights of
companies and private inventors. The merchandise is a patent or any other protected
immaterial property right (Iprbox 2005, BTG, 2005). Iprbox also invests in patenting
and prototyping of the invention especially for private inventors in order to turn their
ideas into marketable IPRs (Iprbox, 2005). The British Technology Group (BTG) is
creating value through buying and selling IPR. Immaterial property is enforceable in
the courts. Thirty five per cent of the technologies they buy come from the USA, 35
per cent from the UK and 30 per cent from the rest of the EU. On the other hand, 80
per cent of their revenues come from the USA (Harvey 2004).
Product development through startups Large enterprises can outsource their
product development by backing promising startups. For Nokia’s own projects,
there has to be market potential from 100 M€ for the project outcome to start a
product project. Nokia has product development through startups and a new
business plan template. IPRs are important, even when patenting software is difficult.
Source code can be quite easily protected. There are innomediary companies that
make innovations and patents. Big companies tend to be bad in innovating
(Kemppainen, 2004). Yet the main methods to gain from innovation differ a lot
country by country. In Finland and elsewhere in Europe, commercialization of
innovations is mainly done through own production or subcontracting and sales or by
selling the invention exclusively (Jutila 2004, Harvey 2004). In the US,
46
commercialization goes very much through licensing the technology. IPRs are also
important weapons in the US. When going to international market with a technology
product, strong IPRs are required. Patent portfolios should be built, but even when
completed, too much greed may spoil them. It is better to make a big cake with a
strong value network and have a just piece of it. Gaining from innovations requires
commercial, technical and patent thinking and partners should be found to make each
field strong enough (Harvey 2004).
3.5 SUMMARY AND CONCLUSIONS FROM
COMMERCIALIZATION This chapter presented general knowledge about commercialization of research
results and new business formation processes usable in product concept and business
venture ideation, the topics of this thesis. The chapter showed commercial potential
evaluation and development mechanisms for business ideas, especially those with
university background, and presented tools to develop and improve product and
business concepts in this study. The theories on building successful organizations
were presented as a basis on which to plan and create a successful businessventure
organization. Financial management theory, including immaterial property rights,
was presented to show known economic requirements and options concerning new
business ventures. When having a business idea, market and patent research and
competitor analysis are applicable tools for evaluating its commercial potential. They
also give the background for planning the best path to proceed with a new
innovation. A skilled entrepreneurial management team is needed to lead the new
company through the first years when the company is most likely making a loss. The
company business plan should justify highenough profit potential to motivate risk
investors to finance that loss. An innovative company can also use immaterial
property rights as their merchandise, in addition to protecting their investments.
47
4. PROMISING RESEARCH RESULTS TO BE
COMMERCIALIZED
The purpose of this chapter is to present the research results commercialization
of which is ideated in this study. Section 4.1 presents achievements in the
research related to PLC (Power Line Communications), Section 4.2 presents
achievements in the research related to LED (Light Emitting Diodes), Section
4.3 presents achievements in the research related to utilization of LEDs for
growing plants.
4.1 POWER LINE COMMUNICATIONSThis section introduces achievements in PLC (Power line Communications)
technology to be utilized as background information for the product ideation. PLC is
the technology that enables the transmission of data over a power line that carries
and supplies electric power. First, I present modemrelated problems and
achievements, then I do same analysis for coupling and performance and, finally, for
data security. I have visualized the associations between these subjects in the mind
map below.
Mind Map on Power Line Communications
Figure 20 Dimensions in the development of PLC, presented on a Mind Map
48
Modems The performance of PLC modems has been increasing. Compared to
widely used X10 standard systems offering 0,05 bps, new PLC modems can reach
even 600 Mbps in ideal conditions (Amirshahi 2005) and 200 Mbps in standardized
commercial products (Homeplug Powerline Alliance, 2006). DSP (Digital Signal
Processing) enables improvement of QoS and broadband (Estopinan, 2004, Sanz,
2004). Despite the good network utilization mechanisms developed, limited signal
power makes broadband sensitive to disturbance. Anyway, a reservation MAC
(Media Access Control) protocol has been developed to adapt to the disturbance
(Hrasnica 2004, Stihi, 2004).
There are some key challenges in PLC development. Noise caused by, for
example, the power line network and devices connected to it or close to it weakens
performance. Devices like branches and distribution panels cause attenuation.
Furthermore, factors like varying power load and impedance mismatching cause
distortion. To overcome these challenges, OFDM (Orthogonal Frequency Division
Multiplexing) scheme is proposed to replace old FDM (Frequency Division
Multiplexing) (Sanz 2004). Inexpensive narrow band (0,1 – 30 kbps) modems
offering an Analog Front End (AFE) and Forward Error Correction (FEC) are
implemented on a single chipset (Ariane Controls 2006). HNCP (Home Network
Control Protocol) have been implemented to control home devices through PLC and
there is also a UPnP bridge to connect these devices to the external IP (Internet
Protocol) network (Lee 2004).
Coupling is a fundamental function in PLC modems and transformers that links
two systems together with data transfer. Capacitive coupling is the traditional and
most common technique. With capacitive coupling units, the information flows by
means of voltage between line and earth or line and line. An inductive coupling unit
measures and induces a current into the line or shield. The inductive coupling units
are easy to install, no shut down is needed on installation, but inductive coupling is
very location sensitive – the quality of transfer depends on the location of the
coupling unit – from no transmission to several kilometers. When implementation
has been completed, lower noise inductive coupling can enable even better
transmission than capacitive (Bumiller 2004). Generally, in order to design an
effective coupling circuit, internal impedances have to be designed correctly, as they
49
can have a detrimental effect on coupling by communication signal filtering or wave
form saturation (Van Rensburg 2004, The Role of Magnetizing). The size and cost of
the transformer must be traded against reduced performance. Modem impedance
should roughly equal power line impedance (Van Rensburg 2004, StepbyStep
Design).
Performance of a PLC system can be evaluated by the level of physical
security, performance of coupling and modems, electromagnetic interference (EMI)
to and from the PLC network and signal weakening through Longitudinal
Conversion Transfer Loss (LCTL), as presented in the mind map above. Physical
security of own implementations has to be checked with electric power specialists. In
coupling, internal impedances are essential. The OFDM technique decreases
interference disturbing data transfer (Ma 2004, See 2004). A turbo decoding has been
implemented to lower the error rate under EMI (Umahara 2004). There are also
leakage reduction techniques, i.e. new signal injection techniques, to reduce EMI
(See 2004, Morimoto 2004), Longitudinal Conversion Transfer Loss (LCTL)
(Furukawa 2004, Hensen, 2004) to measure for unnecessary radiation and a Common
Mode (CM) propagation model to study radiation mechanisms (See 2004).
Data Security is practical to implement through algorithms such as RC4 and
3DES with password protection (Anderson 2004), as the transmitted data spreads in
all directions in the power line network. In any case, information leakage stops at the
next transformers if there is no coupling unit (Haddad 2004).
4.2 LIGHT EMITTING DIODES This chapter is for introducing achievements in development of general lighting
LED (Light Emitting Diode) technology that are possibly applicable to our plant
terrarium product. LED is a special diode that converts forward current into light
(Sedra 1998). As shown in Figure 21, a clear, or often colored, epoxy case encloses
the heart of an LED, a semiconductor chip (Arizona State University 1999).
50
Due to the manufacturing process, dominant wavelength, peakwavelength, correlated color temperature, flux and forwardvoltage of LEDs are varied. Manufacturers measure these valuesand categorize LEDs according to them. These categories arecalled bins. The picture above presents three colors and “border”wavelengths. Each of these colors is divided into six bins. Whenthe dominant wavelength is, for example, 482 nm, the color isblue and the bin is 5 (Moisio 2005).
Figure 21 Light Emitting Diodes
LED light output varies with the type of chip, encapsulation, efficiency of the
individual wafer loss and other variables. There is no industry standard for LED
brightness. The luminous intensity is roughly proportional to the amount of current
supplied to the LED. The greater the current, the higher the intensity is. Generally,
LEDs are designed to operate at 20 milliamps. LEDs are designed to provide long
life operation because of optimal design currents considering heat dissipation and
other degradation factors (Theledlight.com 2000). LEDs that emit different colors are
made of different semiconductor materials, and require different energies to light
them (Arizona State University 1999).
There are several ways to make LEDs emitting white light. Adding different
colored LEDs together is rarely used nowadays. Most white LEDs in production
today use a 450 nm – 470 nm blue GaN (gallium nitride) LED covered by a
yellowish phosphor coating. Since yellow light stimulates the red and green receptors
of the eye, the resulting mix of blue and yellow light gives the appearance of white,
the resulting shade often called "lunar white". The newest method used to produce
white light LEDs uses no phosphors at all and is based on homoepitaxially grown
zinc selenide (ZnSe) on a ZnSe substrate, which simultaneously emits blue light from
its active region and yellow light from the substrate. A new technique just developed
by Michael Bowers, a graduate student at Vanderbilt University in Nashville,
involves coating a blue LED with quantum dots that glow white in response to the
51
blue light from the LED. This technique produces a warm, yellowishwhite light
similar to that produced by incandescent bulbs (Wikipedia 2006).
White light is commonly described according to its color temperature. The color
temperature is the temperature in Kelvins at which the heated blackbody radiator
matches the hue of the lamp. A blackbody radiator is a theoretical object that
absorbs all electromagnetic radiation that falls onto it. Light sources, such as
fluorescent lamps or LEDs, of which the color temperature cannot be approximated
by blackbody radiatiors, are assigned a mathematical approximation known as the
correlated color temperature and Color Rendering Index (Wikipedia 2006).
LEDs offer some advantages compared to traditional light sources. When
mixing different colors emitted by a few LEDs, the color and the correlated color
temperature (CCT) can be easily adjusted. LEDs are binned for dominant
wavelength. Variation of wavelength can be 30 nm. When mixing colors, these
variations can affect CCT and CRI. In the worst case, the CRI can drop from over 90
to under 30 and CCT can change over 20 %. The real color rendering can still stay
good, even if CRI drops dramatically. Changes in CCT are however very real and
visible (Moisio 2005, Wikipedia 2005). CCT and CRI are applicable when we want
to give certain color experiences to the human eye. Plants, naturally, react to actual
physical wavelengths, according to a Finnish machine vision expert, Erkki
Rantalainen (Wikipedia 2005, Nurturelite.com 2005). On the other hand, plants are
not very picky and a broad wavelength spectrum can be used that includes the
frequencies needed for different biological purposes. Even when the color
temperature and color rendering index part in the LEDPLC project does not seem to
be very usable for our plant growing purposes, a method designed to adjust and
stabilize the light emission of LED lighting seems to be usable in our plant terrarium
presented in the next chapter. Currently, high energy consumption and large heat
formation are problems in lightaided plant growing (Helsingin Sanomat, 2005). By
using LEDs, problematic heat formation can be decreased by producing only the
required wavelengths of radiation.
Instead of lumens, CCT or CRI, PAR (Photosynthetically Active Radiation) is
an important measure when dimensioning lighting for plants. PAR radiation is used
to refer to the portion of the light spectrum optimal for plant growth, namely about
400 to 700 nanometers in wavelength (Progressivegardens.com 2005).
52
Recommended PAR / square meter is 150 W. According to my contact in the
Foundation for Finnish Innovations, Risto Paajanen, the failures in plant growing
experiments by LEDs in Finland are very probably caused by too weak a PAR.
However, the limits of practically useful PAR are not strict and discussion where the
measurement limits should be is ongoing (Pinho 2004). Furthermore, there is a better
measure for plantusable light than PAR, PPF (photosynthetic photon flux) that is
presented in the next section.
4.3 LEDS AND PLANTS There has been a long lasting research project coordinated from the University
of Vilnius to develop LED lighting for efficient food production. Their experiments
have produced more knowledge about the best applicable wavelengths for
photosynthesis, phototropy and photomorphosis (Zukauskas 2004). The inspection of
this project is important in order to be able to use LEDs of right wavelength spectrum
for plant growing. A possible application is the Mini Greenhouse concept, which is
included in the topic of this thesis and presented later, on page 65.
Benefits from LED utilization with plants are the improved ability to control
radiation at plants and to position the LEDs close to plants, enabling better energy
efficiency (Pinho 2004). The development of measures of useful lighting at plants
have led to the measurement of, not only the usable radiation energy at plants, but the
ability of the radiation to create photosynthetic activity, photosynthetic photon flux
(PPF) in 12* −− smmolµ (Pinho 2004, Laitilan Elektrovalo 2005). In
photosynthesis, the plants capture solar energy, extract carbon dioxide from the air
and combine it with water to produce organic substances. Through this process,
plants release oxygen. A supersimplified formula for photosynthesis is the
following. CO2 + H2O + solar Energy = CH2O + O2 (Luzenberger 2004, Wikipedia
2006). Phototropy is a biological concept describing the force that keeps organisms
or organs, such as bacteria or plants, following the light in order to get nutrition, and
hence, to survive (Sommerer, C. 1997). Photomorphosis describes the process by
which an organism changes, or experiences metamorphosis under the influence of
light. It is a natural process in the realm of photosynthesis, photolysis, etc., indicating
the importance of light on living things (Bogarte 2001). Photolysis refers to any
53
chemical reaction in which a compound is broken down by light. The direct process
is defined as the interaction of one photon interacting with one target molecule
(Wikipedia 2006). The recommended wavelength spectrum for growing plants
according to the research results of the University of Vilnius is presented in Figure
22 below on the left side. The applied wavelength spectrum for a commercially
available plant incubator by LEDs is presented in the Figure 22 below on the right.
Figure 22 The recommended wavelength spectrum for growing plants (Hortiled
project and CCS Corporation 2005).
The figures are otherwise the same, but the Japanese in the right picture have a
double peak in blue wavelengths and only a single peak above 650 nm. Furthermore,
the Japanese have a green peak and a wide peak of visible light, most likely to make
the light comfortable to the eye. The double peak in blue might be there due to the
fact that there is no single LED light available in exactly the required wavelength. In
the red side, on the other hand, available LED might cover both the required
chlorophylls. The incubator of the right picture is available only in Japan and
presented more thoroughly in Appendix V.
The first peak at 455 nm is required for light absorption in phototropy. The
second peaks at 640 nm for chlorophyll a and 660 nm for chlorophyll b are required
conditions for photosynthesis. Chlorophyll is the green pigment in all plants.
Chlorophyll a is the most common type of chlorophyll (Zukauskas 2004, Wikipedia
2006). Chlorophyll b is also an important type of chlorophyll, but unlike chlorophyll
a, it is not vital to photosynthesis. Chlorophyll b is found in green algae and certain
plants; it is yellowgreen. Chlorophyll b absorbs light of a different wavelength than
chlorophyll a, but ultimately transfers it to chlorophyll a for conversion into chemical
54
energy (MSN Encarta 2004, Wikipedia 2006). The last peak at 735 is best known for
light absorption in photomorphology. The required wavelength spectrum for plants
according to the Hortiled project and Japanese incubator manufacturer are presented
above. We can see a clear difference when comparing them to the wavelength
spectrum of the best commercially available growth lamps presented below, i.e.
highpressure sodium lamps (Zukauskas 2004, Lamptech 2003).
Figure 23 Wavelength spectrums of highpressure sodium lamps (Hortiled
project and Lamptech Ltd 2005)
To achieve good reliability, researchers at Vilnius University have used in their
growthexperiment instruments for measuring the photosynthetic activities of plants
(Baker 1998). They have applied dedicated apparatuses for plant irradiation (Ignatius
1991) realized by optoelectronic devices (Ignatius 1997) and to provide plant
accommodated lighting by an array of carefully selected LEDs. For young plants,
they have used tailored artificial lighting apparatuses using light emitting diodes as
the light source (Fang 2002).
There are research projects targeting essentially the functionality of our plant
terrarium idea presented later, in the ideation chapter. In Japan, research is being
conducted in ways to irradiate plants with lasers at the required wavelengths for
growth. These technologies are designed for industrial food production. However, in
the Japanese experiments in 2004, the plants did not look normal according to a
phone conversation about ongoing research with Eino Tetri in the fall 2004. The
reason may be that, according to the project description, they are missing a spectral
component of radiation at 735 nm for photomorphosis, which is the frequency
requirement found by the Lithuanians and presented in the results of their Hortiled
55
project. This frequency is presented in Figure 22 above. Another alternative is that
they are using too weakly emitting LEDs, as was the case in the later mentioned
Helsinki University research in Mikkeli. Japanese lasers are advertised as in the
figure below.
Agri Photonics — The positive correlation between light and plantsPlants that receive the bounties of naturein abundance in order to grow, in turnprovide food for human beings. Researchis being conducted in ways to irradiateplants with lasers at the optimumwavelength for growth. If forcedcultivation can be used to provide food insufficient amounts, we will no longerhave to fear hunger. Even if that goalremains out of reach for the present, wecan still boost the amount of food grownper unit of surface area, freeing the landused for rice fields and farm fields to beused for other purposes.
Our Photonics Vision for the field of agriculture depends onthe development of semiconductor lasers with the necessaryoutput to achieve these goals. This technology may give usa good dream to be able to obtain industrial materials fromplants (HPK, 2005).
Figure 24 The positive correlation between light and plants (Agri Photonics)
The first practical implementations of the researchers at Helsinki University to
use LED light for growing plants have performed poorly. This is because they have
had too weakly emitting LEDs, according to information from the Foundation for
Finnish Innovations and my telephone conversation with Helsinki University
research scientist Anne Piirainen in the spring of 2005 about their ongoing research.
After my ideation of the plant terrarium product presented later, researcher Paulo
Pinho from the lighting laboratory presented me with the published successful cases
of plant growing by LEDs for scientific use presented in Appendix V. Furthermore,
in the novelty research of my plant terrarium concept presented in Chapter 6, a
commercially available LEDbased industrial incubator from Japan was found.
However, there is still a lot unknown about the behavior of plants related to the light
they are receiving; research is ongoing at universities, organizations and private
companies, the main emphasis of which being improving the efficiency of food
production.
56
II PROCESS DESCRIPTION
5. IDEATIONMy ideation process consisted of separate idea generation, idea cultivation, idea
evaluation and idea selection processes. Events related to these processes are
presented and analyzed in this chapter. Theoretical descriptions of these
processes are presented in Chapter 2 of this study.
The ideation of this project started after my product development coursework
turned out to be well appreciated. In my coursework, novel LED (Light Emitting
Diode) lighting and PLC (Power Line Communications) were the technologies out of
which an innovative product and business idea had to be developed in a group of six
course participants. Our product development product and business idea was a well
adjustable home lighting system.
In order to find the best applicable business idea from the LED and PLC
technologies, and in order to have a more individual approach, the ideation was
started from the beginning once more. This time the ideation was done as pair work
with Inga MathiesenBuinevits, a student of industrial management from the product
development course group, who was interested in joining in the ideation. We took the
ideation topics in a form supporting the needs of progressing the LEDPLC project of
the Communications and Lighting Laboratories. As mentioned in the introduction,
the aim of this study is to make a successful business plan, utilizing LED and PLC
technologies, for the Venture Cup contest. This study is also designed to evaluate the
possibility of starting an own business, and, given that possibility, to enable one to be
started up.
5.1 IDEA GENERATION The purpose of idea generation was to find best applicable business plan for a
startup company utilizing bright LEDs controlled by PLC Technology. We
performed the idea generation with methods I presented in Section 3.1. Suggested
tools for idea generation were Mind Manager Mind Mapping software, Palo Alto
Project Plan software, and Microsoft Project. The possibility of having CADdemos
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and rendering was also suggested. For the design aspect of this effort, a contact,
Lauri Repokari, was suggested, because he has contacts with UIAH (University of
Arts and Design, Helsinki) and HSEB (Helsinki School of Economics and Business
Administration) and also with the University of Bremen in the designintensive
business area and also knowledge of applying for funding. In the actual process, we
joined the TaiK entrepreneurs club directly, instead of operating via Mr. Repokari,
drew the Mind Maps by hand and brought in a UIAH student to the Venture Cup
team to do the demos.
Before the first Venture Cup deadline some action points were planned:.
mapping the fuzzy front end, design, lighting needs, potential user groups and
network technologies, the lack of present systems and the additional values of LED
lighting. That was the starting point for our vision cultivation. The purposes of the
vision cultivation, assembled with the help of supervisor professor Korhonen, are
presented in the following table.
THE PURPOSES OF MY VISION CULTIVATION
To find an applicable target groupTo define a few key applicationsTo do a critical analysis
To consider design, work lighting, workresearch, ergonomy, industrialproduction, and the price of the controlnetwork and modems
Mindmanager and power point were the suggested toolsTable 3a The Purposes of my vision cultivation
We started with mindmapping on paper with keywords: LED; PLC and
Bluetooth; services including adjustable color, availability and /or monitoring; users
at home, at work, ordinary or interior design users; places of usage, indoors,
outdoors, vehicles or ambient. The mindmapping resulted as presented in Appendix
VI. We continued to organize the mindmapping results in the Fish Bone structure
below. We found the following groupings of the usages: Entertainment, Style,
Animals, Space, Security, Benefit and Saving.
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Figure 25 Our idea generation result using the Fish Bones method
To continue from the fish bones, professor Korhonen presented lighting
magazines as a potential information source, as well as people working with lighting
in the lighting laboratory, Eino Tetri and Liisa Halonen. From the point of view of
developing the business idea, considering home networking and researching the
Chinese markets were thought meaningful. Chinese modems are cheap and usable
components and PLC is at its best between rooms. Some keywords to be considered
were PLCcore, Home Networking, services, LEDs, lighting adjustability,
recordability, UBI.com and user surveillance. Some application places to be
considered were theatres and display windows, hospitals, elderly care locations,
health care locations, and intelligent carpets. It is better that old people live in their
own homes as long as possible, even with motion detectors. I started VentureCup
related meetings with Inga MathiesenBuinevits. Together with professor Korhonen,
I complemented the framework for idea cultivation with following dimensions. For
the idea cultivation towards a Venture Cup business idea, we added the following
concepts for consideration.
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IDEATION FRAMEWORKWork lighting Organic lightingProfessionbased situation forexample cleaning
Home interior design adaptively with lighting, there has to besubstance
UBIadaptibility Targeting according to the time of the day aestheticallyLighting adaptive to thedaylight
Work lighting at homes and at offices, interior + outside, In vehiclescars + boats
Table 3b Ideation framework
5.2 IDEA CULTIVATION We performed idea cultivation using the methods presented in the Section 3.2.
Taking the groupings of the usages of the fish bones result and the framework from
the table above, i.e. entertainment, style, animals, space, security, benefit and saving,
four general concepts from our product development course were taken as platforms
for spinoffs and further development. A control box is an adjusting device for home
lighting, a control system for greenhouse lighting is a PLC intermediated control
system for greenhouse lights and entertainment industry lighting is stage equipment
utilizing PLC and LED technologies. Our aim was to refine our ideas by looking at
them from different perspectives, using Synetics according to the table of Appendix
VII, which summarizes this idea cultivation process.
For the development process, it is important to go through how the results were
achieved. This time the goal was to have many converged suggestions and their
usage scenarios. The idea cultivation gave fourteen convergent proposals for ideas to
continue with. They are briefly presented in the following table by their origin. Some
of them are presented more closely in the following and the rest of them in Appendix
IX.
CONVERGED PROPOSALS BY THEIR SOURCECompletely New ideas from This Ideation
a) Talk Chat for Seniorsb) LED Gamesc) Visual Queue Routed) Dynamic Place to be Seated
Candidates to be the Course Workof the Product Development Course a) Automatic Greenhouse b) Home Lighting System c) Stage Equipment
Now Cultivated Coursework Candidatesa) Mini Greenhouseb) PLC Mini Labc) Remote Guard and Cared) Portable Film Studioe) Portable Switchf) Control Switch
Preliminary Candidates to be theCourse Work of the ProductDevelopment Course
a) Tourist, Architectural Attractions & Street Design
b) Illumination Optimization in Industry / Buildings
Table 4 Converged proposals by their source
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After the vision cultivation, I had completely new ideas from mind mapping,
candidates from the product development course, preliminary candidates from the
product development course and newly cultivated ideas by the synetics method. With
this idea base, I started idea evaluation to find the best product concepts having the
potential to become the successful business plan in the Venture cup. Some of the
convergent proposals are presented in the following. The possible killer
qualifications have been met in the evaluation after the force fields analysis.
Table 5 Mini Lab
Laboratories are willing to remotely adjust their equipment. We can fit controls
on PLC. Even though the idea first sounded good, we killed it idea because of our
limited understanding and knowledge of microbiology, scientific and research needs,
medicine, laboratory equipment and requirements. Current medical/scientific
activities focus on testing and measuring. Petri dishes seem to be usually sufficient
for growing.
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Table 6 Talk Chat for Seniors
The oldest population has remained out of Internet communities. Those
communities have given to youth the possibility of participating in social interaction
in a locationindependent way. My idea is to apply Internettype chat services with
an IP phone. Commercial and social sector phone services can also be integrated to
the interface. Internet type of shopping is also applicable by an IP phone with a
display. The chat service is especially useful to the people who are spending their old
age in a different language environment from that of their mother tongue. With an
inexpensive IP chat service, they can easily keep contact with their home culture.
The chat service and virtual environments are also good services for people that are
unable to move on their own, or if their movement capabilities are very limited.
Instead of being bored lying in bed and thinking about their death, they can keep in
contact with people or have entertainment or information through a virtual
environment by means of the user interface of the IPphone. The demand for this
product and service is large in all developed countries and increases when the aging
of the population in industrial countries is further progressing. The purchasing power
of the old population is better than ever, and this product and service is quite
straightforwardly applicable by utilizing the features of the existing services.
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Table 7 Control Switch (PLC Lite)
Citizens of modern communities are spending a great proportion of their time in
artificial light. It used to be clear and clean, but, at the same time, quite boring. The
user currently lacks the ability to adjust the color of lighting from the switch. With
bright LEDs, additive RGB lighting is possible, and with our control switch we can
bring flexibility of colors to homes and offices. Prior art solutions are not fit for daily
lighting purposes. There are, for example, color controllable LED nodes for
selectable holiday color schemes. X10 solutions are clumsy and slow. A twosecond
delay is uncomfortably long for adjustment, and that is why this would never succeed
with X10. In any case, it turned out that the color adjustment method we were going
to use seems to be patented in US 4 962 687, but luckily the patent expires in 2008.
Current PLC technology is especially suitable in scope for a building or a few
buildings.
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Table 8 PLC Stage Equipment
The entertainment industry utilizes movable stage equipment. Each band or
entertainment group is willing to use its own equipment and material. Many mass
events are organized in public parks where the stage equipment is installed
temporarily for the time of the event. Equipment faster to install and lighter to
transport can ease the background work needed in organizing stage events or enable
organizing more spectacular events with the same resources for the background
work. Bright LEDs can be utilized in stage lighting and PLC for light control.
Normally there are cables everywhere, but we can combine electricity and control
cables and in that way speed up the installation of the equipment and bring savings in
energy and material and, at the same time, bring more flexible and adjustable color
controls. Furthermore, LED lamps consume less than conventional ones. Even if the
installation and energy bills are not meaningful for international stars, national stars
and new performers often have to manage with tight budgets. In any case, there are
always risks relating to the market size and the savings, which might not justify the
investment in this idea.
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Table 9 Mini Greenhouse
Urban citizens are often lacking close contact with the nature. As most of the
people have satisfied their basic needs, people are more and more interested in
comfort factors. Many people are willing to grow herbs and beautiful orchids. The
interior design trend and the use of colors are increasing. With our plant terrarium,
they can easily grow demanding and/or beautiful plants and have a miniature piece of
nature in their indoors environment at home, office or public place. The growing
conditions can be easily adjusted and remote control can be applied in the future. The
growth season in balcony use is short, but with plant terrarium it can be prolonged to
spring and fall. Currently there are no applicable systems for indoor use other than a
few glass houses with no technology. Plant terrarium supplies indoor plants the UV
light they require, even in dark places. Additional LED lights are used to create an
attractive environment. The full version of the plant terrarium will be able to control
irrigation, heat, brightness of the light, nutrition and enable different conditions for
different plants. Later, many of these can be combined with PLC and the control
database can be set to the Internet, for example. Connecting the terrarium to smart
home products can be considered.
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Table 10 Portable Film Studio
Document film makers are dependent on the film group traveling with them. The
cost of the crew increases the cost of making documentary films. The cost increase
the latency between the documentary idea and actual film making, if it is not to be
too high a barrier and totally stop the implementation of the documentary idea. With
our portable film studio, the film makers could carry the equipment needed with a
smaller crew.
5.3 IDEA EVALUATION
I carried out the idea evaluation by the methods I presented in Section 2.3. I
evaluated the fourteen convergent proposals with the Force Fields method. The idea
of Force Field analysis is to use a common measure to support and resist forces on
the action to be considered. Kurt Ugur has done valuable teaching evaluation with
Force Fields (Ugur 2004). With this background material, our business idea
candidates were also evaluated with Force Fields. In this fuzzy phase, it was
considered to be better than the SWOT analysis. The issues I considered when
numerically evaluating the convergent proposals are the following.
LIST OF ISSUES TO BE CONSIDERED IN MY IDEA EVALUATIONWhat is the product composed of? Risk considerationsTechnology behind the product? Company positioning (consider
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Market: Target Customers competition and dependence on suppliersdistributors etc.)
Existing solutions (this is very important)Possibility of adding complementaryservices / products in the future(competitiveness)
Up front and continuous investmentrequired from you as the seller of theproduct and your potential customer,(manufacturing development etc.)
Table 11 List of issues to be considered in my idea evaluation
The force field evaluations of some candidates are shown in brief below. The
evaluations of the rest of the candidates are presented in Appendix IX. The Talk Chat
for Seniors, evaluated below, is a favorably priced, easytouse, communication
system for the elderly, young, children or lonely based on IP voice calls. It enables
multiplepoint calls, which, in practice, are group calls. The Control Switch concept,
also evaluated below, consists of the user interface, being a hand and/or wall device,
a loudspeaker, centralized server, and a broadband connection. The switch is for
adjusting colors in RGB dimensions. The concept includes three tuners, one for each
color dimension. The concept has memory for preset colors and control through
PLC.
Figure 26 Our FFAs of the Talk Chat for Seniors and of the Control Switch
According to the force field analysis, Talk Chat for Seniors seems to be a strong
concept. It is clearly implementable and the market exists. Control Switch is
implementable by relatively cheap components and it enables the advantageous
possibility of adjusting the color of lighting with its easytouse programming
interface. It also seems good.
The PLC Stage Equipment concept consists of combined control and electric
wires for lamps, replaceable LED bulbs in different colors, a PLC control unit and
design of entertainment industry solutions. It is evaluated below. A PLC Mini Lab,
also evaluated below, is a closed environment or a box for microorganism growing.
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Targeted users are scientists, hospital labs, industrial laboratories in, for example, the
food and chemical industries.
Figure 27 Our FFAs of the PLC Stage Equipment and of the PLC Mini Lab
PLC Stage Equipment was considered straightforward to implement in itself, but
the additional value in terms of revenue potential was unknown. Laboratories were
dropped due to the fact that the light is not needed for the bacteria and such.
The Mini Greenhouse concept, presented below, consists of a small greenhouse
for consumers suitable for apartments, balconies or other limited spaces. It comprises
a glass box with UV LED lights and utilizes PLC control if reasonably possible. A
display is added if no centralized PLC control is available. Additional, potentially
green, LEDs can be added for user attraction / interior design. The Portable Film
Studio concept, also presented below, comprises compact recording equipment
combined with data storage via PLC and over the Internet if reasonably possible.
PLC controllable LEDs are used as an easy way to carry lighting equipment that
enables better picture quality for recordings of a small filming group.
Figure 28 Our FFAs of the Mini Greenhouse and of the Portable Film Studio
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There were many dimensions with the initial Mini Greenhouse effort supporting
implementation. In my initial approach, lack of PLC utilization was a strong enough
minus to consider it as a killing criterion. However, in discussions with professor
Korhonen, we saw the potential of PLC utilization in controlling a network of mini
greenhouses or controlling one mini greenhouse in part of a smart home entity. The
evaluated potential of a portable film studio was dubious for many reasons, mostly
because of a lack of market was likely. In addition, presented in Appendix IX, there
were four proposals, which were killed immediately.
5.4 IDEA SELECTION Instructor Korhonen asked me to select three best proposals to be analyzed
against Venture Cup firstround questions. Korhonen and I developed a selection
point method to put numerical value on the characteristics presented in the
presentations of the converged concepts. Each characteristic got a ratio according to
its importance; this ratio was multiplied by a utility or risk factor from 1 to 10,
according to the importance of the characteristic.
First, I analyzed the ten converged proposals still in the game in terms of the
issues below, to make sure that they met the requirements of being a successful
business idea utilizing given technologies shown below. I searched especially so far
unnoticed killing criteria, i.e. unavoidable barriers to success, for the proposals.
LIST OF ISSUES TO BE CONSIDERED IN OUR IDEA SELECTIONBenefits from an integrated home networkThe key applications have to be
recognized, titles have to bedefined more precisely
Applicable network technology, usabledatabases4G possibilitiesThe ease of design, novelty,
difficulties have to be considered Competitive Edge (potential)Lighting and control needs The additional values from LED control systemLacks of current systems Earning logic, user and payerUser groups, object and subject Killer qualifications (for example no markets)
Table 12 List of issues to be considered in our idea selection
The killing criteria found are presented in Tables 5 – 10 for the proposals
presented here, and in Appendix IX for the rest of the proposals. The four best
proposals that survived from the final search for killing criteria are: Mini
Greenhouse, Talk Chat for Seniors, PLC Lite, and the Stage Equipment. The
numerical idea selection process is presented below.
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Ratio Selection dimension Max. Min. Mini Gr. Talk Chat PLC Lite Stage Eq.10 User advantages 10 0 3 7 5 310 Existing systems 10 10 0 3 5 28 Deficiencies of existing systems 10 0 7 3 5 36 Design (ease/difficulty, novelty, +/) 10 10 3 3 3 54 Lighting & control needs 10 0 5 0 5 104 User groups (user, payer, use case) 10 0 2 3 3 36 Applicable network technology 10 0 4 5 5 32 Availability & connection to databases, 10 10 5 2 2 22 Benefits of integrated home network 10 0 3 2 2 02 Possibilities of 3G & 4G (bluetooth, WLAN, etc.) 10 0 3 2 2 36 Value added by LED lighting & control system 10 0 6 0 5 36 Competitive edge 10 0 3 5 3 36 Business model (user, payer) 10 0 5 5 3 3
Killer qualifications?8 Risks, scales 0 10 7 3 5 8
Total 186 136 158 74Table 13 Selection points and results
Figure 29 Value of selection dimensions measured in Selection Points
I finalized the ideation part by the idea selection method according to the tables
above. Each selection dimension was given an importance ratio, maximum value 10
and minimum value 0, or – 10 if a negative impact was considered possible. The
ideas were evaluated according to the selection dimensions; the total selection points
for an idea were counted by multiplying evaluations with their importance ratios and,
finally, these multiplications were summarized. The Mini Greenhouse idea received
the best selection points, but the Talk Chat for Seniors and PLC Lite were very close.
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6. PLANT TERRARIUM IMPLEMENTATION PLAN
Previously, in Chapter 4, I selected Mini Greenhouse to be the business idea to
be developed further. In this chapter, in keeping with the subject of this study, I
present my process and plan for implementing a plant terrarium product
concept and business venture, refined from the previously ideated Mini
Greenhouse.
6.1 INTRODUCTION The product concept here is the ideated and further developed plant terrarium.
It is a relatively small aquarium type of cabin for growing plants. At the same time, it
is an aesthetic and practical interior design element. It can have automatic control of
lighting, warmth and humidity. To my knowledge, after the ideation phase in the
summer of 2004, there were no mini greenhouses available for consumers.
Furthermore, the plant terrarium was going to utilize LED and PLC technologies
because LED lighting is very economical. It is possible to use it for a decade without
replacing the lamps and it is very effective as a spotlight. The PLC technology was
planned to transmit the controls to set configured conditions for the cabin, alarm the
user if needed and to transmit the information about the actual conditions, or required
actions, to a control screen.
I evaluated the commercial potential by the commercial potential evaluation
methods presented in Section 3.1. Novelty, and innovativeness of the concept, was
searched through innovation studies. Acceptability issues, price and usefulness of
the plant terrarium product were searched by market research. The innovation studies
and market research and competition evaluation based on the studies and research are
presented in Section 6.2.
Business venture development is done through commercial potential evaluation
and development, financial planning and planning of the organization management.
Tools for the development are business plans, project plans and market and
patentability research. The product specification plan is presented in Section 6.3, the
plan for prototype building and its testing in Sections 6.4 6.5 and the
commercialization plan is presented in Section 6.6. Finally, conclusions drawn from
this chapter are presented in Section 6.7.
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6.2 INNOVATION STUDIES, MARKET RESEARCHES AND
COMPETITION EVALUATION The overall innovation study process started in the ideation phase of this project
in the summer of 2004. By my own research of databases, I found the related
technologies presented in Appendix XIa, but I did not find a concept similar to plant
terrarium from the databases. Further on. I presented the terrarium idea to an
innovation agent at TKK, Panu Kuosmanen, and he conducted further research into
the related technologies from the patent databases. Many LED solutions for plants
were patented, as can be seen from Appendix XIb, but not this kind of chamber
giving just the frequencies plants require. With instructor Korhonen, we ideated that
using a piece of LED screen to illuminate plants could be unique and patentable if
the whole concept is impossible to protect. With this strategy, a formal application
and the following example figures I designed, I contacted the Foundation for Finnish
Innovations in the spring of 2005, because I was interested in using the foundation’s
prototype forge for the building of the plant terrarium prototype.
Unfortunately, in the innovation study of the foundation, it turned out that, from
the patenting point of view, there is a Japanese industrial incubator from CCS
Incorporated, which ruled out the possibility of patenting the concept I considered,
and thus closed the possibility of utilizing the prototype forge of KS to build the
plant terrarium prototype. The Japanese incubator utilizes the beneficial LED light
frequencies I presented in the last chapter to grow plants and, furthermore, to grow
them in an incubation cabin. Because patenting became impossible to legally protect
the concept, I decided to apply a utility model for the plant terrarium when its
prototype is ready.
Market research was needed because the existence, size and shape of the
market for the terrarium were unsure. According to my discussions with my ideation
partner Inga MathiesenBuinevits, Mari Lymysalo in Provestum Ltd, formerly
Replicon Ltd, conducted market research about customer need and retail
channels. The aim of the first research was to find preliminary information to answer
questions related especially to this project. The questions were as follows.
1. Is there a market for home greenhouses –is there an unsatisfied customer
need where the product idea responds?
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2. What are the features that the consumer wants out of the product and for
which the company is prepared to pay?
3. If there is customer demand, at what price can the end product be sold to
consumers (price interval or a comparison)
4. Methods and resources:
Based on my instructions, discussions with Inga MathiesenBuinevits and the
product description of the plant terrarium in Appendix X (Business Plan Appendix I)
six domestic distributors in the gardening industry were interviewed between 17th
November 2004 and 31st January 2005. The discussions concerned the possibilities
of the product idea, customer need in general and the price expectations of the
consumers relating to a similar type of product. The results from this first research
are presented in the following table.
CUSTOMER NEED AND RETAIL CHANNELS
Table 14a Market research about customer need and retail channels
MaybeN/AAesthetics, price,functioning
N/AStockmann
YesN/AVentilation, size, sidedoors, lighting,irrigation, spraying,reliable automation
600 members,200 of whichhave cabins, theamount increases
Finnish OrchidUnion
YesHälvä: 50100 €+ technology /Kovasiipi: 150€
Selfinstallable bycustomer, able to becarried from the shelf
Consumermarkets
SOK: Prisma &Multasormi
Yes30 €The right ratio oftemperature / light,automatic irrigation
Marginal product,anyway, dependon marketing
Plantagen
NoEven 50 € ismuch for ourcustomers
Have to be manysizes
For demandinguse, not forordinaryconsumers
Pirilän kukkatalo
Yes39 – 99 €Easy to care,ventilation, irrigation,lighting, decoration
Interior designelement forconsumers
Bauhaus
InterestPricingFeaturesMarketsSuspect
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As can be seen from the results above, the interviewed retailers were interested
in the product, but the prices they were hoping for were quite low. The research also
showed that the Orchid Union is interested in cooperating in the prototype building.
In any case, this first research showed good enough feedback to justify funding
for extended research among retailers and businesstobusiness florists, the
research of which used the same method as the first research. The market researches
were funded by the TEKES’s TULI (Tutkimuksesta Liiketoimintaa) programme.
The objectives of the extended research were to advance the plant terrarium
commercialization project by the following actions:
1. Meeting the people responsible for the gardening products of SOK (Suomen
Osuuskauppojen Keskuskunta) for further ideation, development and analysis
of possibilities for cooperation.
2. Mapping the companies offering plantrelated interior design, information
and analysis of possibilities for cooperation.
3. Starting the negotiation to have the Orchid Union as a partner for product
development.
4. Outlining of the value chain required: What is the knowhow and resources
required, and what kind of companies are needed to cooperate in production,
logistics and marketing.
5. Suggestive operating plan for commercialization.
The extended research was implemented on March and April 2005, and the
results from it are presented in the following table.
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THE VIEW OF RETAILERS AND BUSINESS TO BUSINESS FLORISTS
Table 14b Market research among retailers and businesstobusiness florists
Also the extended research encouraged continuing to build the business. SOK
was interested in putting the product on sale when ready, known from some
magazines and when we had the ability to deliver large volumes. Results of the
market researches can be summarized as following:
• According to the study, the market can be divided to three parts based on the
target group and the product features.
o Ordinary consumers – stylish interior design element, of which the most
important is aesthetics and trendiness.
o Demanding hobbyists – growing cabin with special features, of which the
most important is functionality and practicality.
o Companies – a large and stunning interior design element, which is
maintained by a company providing plant services. In addition to
YesBest potential innew environments(better pricing, con. to architects)
1. Appearance2. As automatic aspossible, minimalmaintenance
Some bigcompanieslooking forspecial solutions
LuwasaHydroviljely
YesDo not knowIn addition todust, preventionof plant emittedallergenics
Could be a futurething
Espoon Viherkasvipalvelu
NoToo expensive assuch, manageableas a part of aninterior design plan
Reasonablemaintenanceinterval
Very difficult tosell this tocompanies
Dix Point Oy
YesDo not knowStyle and (opt.)functioning, noteviolence prevntnallergics, interiorair.
Much moreinterest in theEurope
VihersisustusBueno Ky
Not yet,let’s keepeye onthis
Do not know, tooexpensive anyway
Possibilities, ifautomation enablelong maintenanceinterval for plants
Not working inthe companysegment,previously tried
VihersisustusO Valo Oy
YesLeasing model atschools & offices
Functionality andstyle
Do not know, anew thing.
CityScenarioConsulting Oy
InterestPricing /channel
Features /notions
MarketsSuspect
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appearance, technology must function to offer a longenough maintenance
interval.
• Existence of the market need and the market potential
o Ordinary consumers – practically the market does not exist yet. The
potential is moderate, but requires low production costs, large marketing
efforts and distribution channel cooperation
o Demanding hobbyists – there are about 600 organized orchid hobbyists in
Finland, 200 of whom have selfmade or tailored orchid cabins. The
target group is also demanding in relation to the cabin, but market
potential among them does exist. A very good partner in the product
development phase, but the market is very limited
o Companies – e.g. fast food restaurants, medical appointments, company
lobbies and public places. There are a lot of target companies: the best
way to the market is through the distributor of plantrelated interior
design solutions. Suitable marketing channels are interior designers and
architects.
6.2.1 PLANT TERRARIUM MARKET POSITION
In addition to the professional market and innovation studies, I have studied
research results concerning using LED lights with plants. The most relevant of them
are presented in Appendices VI??? and VIII???. I have also searched for direct and
potential competitors from the web and from related shops. There has been interest
around the world in the enchantment of gardening technologies. Even the number of
patented LED growing solutions is impressive. The quality and performance of the
latter, however, is not yet completely satisfactory, as can be seen in prior art
comparison tables in Appendix XI. The researches and studies have shown the
following market position to the plant terrarium.
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Figure 30 Market position of the plant terrarium
The following definition presented in my business establishment loan application for
the business venture combined with the picture above summarizes the position of the
plant terrarium in the market. More prior art of the plant terrarium, including the
novelty research results of Foundation for Finnish Inventions, is presented in
Appendix XI.
EXERPT FROM THE TERRA RIO LTD BUSINESS ESTABLISHMENT LOAN APPLICATION
Target Customers Plant enthusiasts like people who grow orchids or herbs are interested in plantterrarium. Interior designers are also interested. Later also ordinary consumers are possible.
Competition and competitive position Kodin ykkönen and IKEA sell products that have noinfrastructure, but are in nature based on similar product idea. Also, there is a Japanese plant incubatormeant for industrial use, but meant for a totally different target group. There is also Swedish LevandeFilter, but again, the product is meant for a specific use – for air purification. It is, however, of largesize and expensive compared to our plant terrarium, which makes in unattractive for our targetcustomers.
Competitive advantage. We intend to be first in the market combining design with greenhousefunctionality. Currently there is no such product available. We intend to protect our idea by legalprotection of design and by selling first to niche markets like orchid union in Finland that has rootsand networks also abroad. The loan is applied from Tekes
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6.3 BUSINESS VENTURE
In addition to product concept ideation, the objective of this thesis is to also to ideate
a business venture from the concept. Since the Venture Cup business plan contest is
the evaluation process of the ideation, and since the capabilities and structures of
participating teams include the evaluation criteria, I started to build the right team at
the beginning of the process. Inga MathiesenBuinevits participated to the ideation
phase and my Venture Cup team.
In discussions with instructor Korhonen, we considered the knowledge about
design, greenhouses and plant growing that was still lacking in the team at the
beginning of the Venture Cup process. We also considered contacts related to
usability, PLCLED technologies and international culture trends worth developing.
Thus I gave a presentation at the University of Art and Design Helsinki (UIAH,
Taideteollinen korkeakoulu) to find a design person possibly with some of the
qualities above. I also searched through the Venture Cup intranet to find suitable
additional members for the Mini Greenhouse team, my Venture Cup team. However,
not until the business plan of my twomember Mini Greenhouse team was considered
the best in the fields of media, arts and culture in the second round of the Venture
Cup, did I find interior and furniture designer Niko Venäläinen from the University
of Arts and Design, Helsinki; he was willing to join us. After interviewing several
candidates I took him into the team. He outlined the visualization graphs below
relating to our plant terrarium for the Venture Cup jury.
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Figure 31 Visualization of the Plant Terrarium for the Venture Cup jury
The idea of the plant terrarium product needed good visualization, since it was
considered so strongly to be a design project according to the jury. Later we scaled
up the planned size for the first product, but these pictures were for giving a good
looking, but rough, idea of one applicable usage situation.
The need of biological and greenhouse knowledge for the team was also
satisfied after being apprized in the second round of the Venture Cup contest. After
interviewing a few candidates, I selected Satu Simpanen, who will soon be an M.Sc.
in greenhouses, to assist the Mini Greenhouse team’s project basis if needed. The
contacts for the interviewees for designers and greenhouse experts were gained
through the Mini Greenhouse team’s notices on the employment website of the
Ministry of Labor.
In Chapter 7, I present the moredetailed business plan development process of
the Mini Greenhouse team, but the plant terrarium implementation plan of the Mini
Greenhouse team was presented in our final oral presentation to the Venture Cup
jury. As response to the business plan, including the following implementation plan,
the Mini Greenhouse team was awarded a prize as the best business plan in the field
of industrial arts, design, media and culture in the Venture Cup 04/05 prize giving on
25th May 2005.
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Figure 32 Implementation plan for the plant terrarium product
This chapter is arranged to go through the most important stages of the
implementation plan in the order of the plan presented above. Section 6.4 presents
the product specification plan, Section 6.5 presents the prototype building plan,
Section 6.6 the prototype testing plan, and Section 6.7 the commercialization plan.
At the time the plan was presented, the innovation and market researches presented
in the Section 6.2 had been completed and the competitive matrix had been made.
The schedule above required financing for two fulltime workers and one parttime
worker. When the actual financing possibilities are lower, the actually possible rate
of implementation is also lower. I applied for 200 000 € financing for TEKES
according to the Venture Cup business plan in PKyritysten teemahaku for our
company Terra Rio Ltd that the Mini Greenhouse team founded on 1st July 2005 to
implement the awarded business plan. For the reason that the project applied for
lacked the possibility of the required own financial investment of the same
magnitude, my application was rejected. After discussions of the reasons for the
rejection of the original application on October 2005, I applied for a 60 000 €
business establishment loan according to the company establishment project plan
defined in the following. The Terra Rio Ltd Business Establishment Project has
essentially the same objectives as the awarded business plan, but in a more protracted
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schedule. The project is divided into five stages as listed below. Timeframes for the
phases are given in brackets.
1. First terrarium prototype design and building (based on existing technologies)
(Q2Q4/06)
2. First terrarium prototype testing (Q4/06Q1/07)
3. First product launch (piloting) to get knowledge of the customer and market
requirements (Q2/07)
4. Research project for developing and studying LED lighting for plants (in
terrarium environment). The research includes developing lighting control
and power supply devices usable in the development project of plant
terrarium starting after this establishment project. The research project forms
the basis for the advanced product development and is planned to take place
in parallel with project phases 13 (Q2/06Q2/07).
5. Second (advanced) prototype design and building based on the LED lighting
research project (Q1Q2/07).
This product development project lasts from the second quarter of 2006 to the third
quarter of 2007. User centric design and piloting with the Orchid Union is utilized
for setting the product development objectives for the advanced LEDbased
terrarium. The LEDbased plant terrarium is expected to have a potential for
international rollout at a later stage of the business expansion. The terrarium LED
lighting development project is intended to be launched in cooperation with Helsinki
University of Technology Lighting and Communication Laboratories and also with
Arabus and Technopolis Business Incubation Centers. The whole Business
Establishment Project plan for TEKES is shown in Appendix XII.
6.4 PRODUCT SPECIFICATIONSThis section is about product specifications following market and innovation
studies mentioned in Figure 32. The product specification in the figure means
specifying the prototype to be developed. In a broader sense, the product
specification process started in summer 2004 by ideating the best concept to be
developed further. In the summer of 2004, I decided that the plant terrarium product
should be developed step by step. By that time, I considered that the easiest version
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of plant lighting should be UV lamps in series. The layout of the terrarium cabin was
the next thing to be designed. Specification continued through thinking the answers
to the questions of the first round in the Venture Cup. These and my answers to them
are summarized in Appendix VIII.
Consideration of exact modularity and technological features, such as lighting,
irrigation, ventilation and biotopes are not presented here because of patenting
reasons. The consideration has been made to suit with an idea of having an adjustable
display matrix as a lighting element. Using a piece of LED display matrix, utilized,
for example, in the stadiums, would have been a good solution to the problem of
combine adjustable warming, lighting and interior design. The theoretical studies
presented on page 49 showed that the additive color theory with Color Rendering
Index and color temperature, which the matrix is utilizing, is an art of manipulating
the color experience of the human eye and is not suitable to meet the purely physical
wavelength requirements of the plants. However, for decoration purposes, with
different LED elements such as fibers, plates and even the display matrix, utilization
of the CRI is fully applicable. At the start of the broader specification process, the
needs of specifying some applicable plants, their distribution and growing were
pointed out. They are discussed in Appendix X. The questions about differences to
terrariums and utilization of aquariums and terrariums in different countries were
pointed out in the initial consideration of the product specifications. The interest in
the sizes of global aquarium and terrarium markets was pointed out.
From the beginning, I have intended to employ usercentered design to study
the product size and features required. Thus the functionality of our prototype is
designed in cooperation with our pilot customer, Eeva Kairaluoma, a board member
of the Orchid Union from the spring of 2005 on. By interviewing Eeva, and also our
possible retailers, in the market study, we outlined the suitable product size and
features for our prototype and later for our commercial product. By the spring of
2005, the view of interior design was also taken more sharply to the specification
process, when Niko Venäläinen was taken to the Mini Greenhouse team.
Compatibility to plants used and usability development is done through usercentered
design and the expertise of gardening expert Satu Simpanen. A product series is
considered. Piloting projects to new customer groups are planned to ensure usability
and compatibility. The piloting projects are for improving usefulness of the product
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and its usability parameters, i.e. learnability of use, efficiency of use, memorability
of usage, the error rate in usage and user satisfaction (Nielsen 1993).
Reliability tests for the components are going to be carried out before the
product launch. Productability things are going to be discussed with our suppliers,
the target being an easy assembly. In the time of writing, December 2005, the
blueprint of the prototype is under design. At the same time, extended mapping of
material, component suppliers and production costs has been started.
6.5 PROTOTYPE BUILDING The prototype is going to be built according to the specification process defined
above. Initially, in the spring of 2004, its being assembled in the prototype forge of
the Foundation for Finnish Innovations was mentioned, but when they found the
Japanese incubator, technologically a concept very close to the plant terrarium, they
declined to finance plant terrarium development in any form, if we do not present a
stronger invention. Thus, when selecting the designer candidates for Mini
Greenhouse, the team put value on our ability to arrange and implement a prototype
building. Niko Venäläinen can utilize the forge of the University of Arts and Design
Helsinki as a student of UIAH. He is also able to get some guidance there if needed.
According to the Venture Cup business plan, the basic version is going to be
assembled from existing components. This prototype is going to be designed to
satisfy the needs of the pilot customers, members of orchid union. Taking their
feedback into account the later versions are developed considering a user centered
design process. The expected launch of the first version was planned for the spring of
2006. Knowledge of all biological aspects is gained from our pilot customers in order
to satisfy the needs of the customers with the most demanding plants.
The basic prototype is for presenting the basic functionality of the product and
for being a concept to develop with the usercentered design process. The prototype
should be in the size of the most preferable product size and it should at least include
on/off controls for the lights and basic irrigation methods. The result from the basic
version development is going to be the platform product of the Terra Rio plant
terrarium series. The temperature control in terrariums is possible to implement both
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warming and cooling directions with peltier elements. Spraying and ventilation
methods should be implemented for humidity control.
We founded our company, Terra Rio Oy, when starting specification of the first
prototype on June 2005. Operating in a limited company (osakeyhtiö) form gives
official and legal structure to the plant terrarium product and business venture
development. Also, taxation of the prize money from the Venture Cup was lighter
when it was taken by the company rather than individually. In the company, I am the
CEO (Chief Executive Officer), Inga Mathiesen is COB (Chairman of the Board) and
CMO (Chief Marketing Officer) and Niko Venäläinen is designer.
6.6 PROTOTYPE TESTING Prototype building and testing is interrelated as the prototype testing is
implemented through the following usercentered design process. When testing the
first prototype, our plant terrarium is tested with actual plants that are going to be
grown there and the most applicable control settings are going to be searched. The
first prototype is for testing product functionality and features. Orchid Union people,
herb people and Venture Cup people have shown interest to cooperate in the testing
phase.
Figure 33 UserCentered Design Lifecycle
S72.124 Product Development in TelecommunicationsSanna Belitz 2003
UCD Lifecycle (ISO 13407)
Identify need forhumancentred design
Understand and specifythe context of use
Specify the user andorganizational requirements
Produce design solutions
Evaluate designs againstrequirements
System satisfies specifieduser and organizational
requirements
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According a usability specialist, Jakob Nielsen, usability is not a single, one
dimensional property of a user interface. Usability has multiple components and is
traditionally associated with these five usability attributes:
1. Learnability: The system should be easy to learn so that the user can rapidly
get some work done with the system.
2. Efficiency: The system should be efficient to use, so that once the user has
learned the system, a high level of productivity is possible.
3. Memorability: The system should be easy to remember, so that the casual
user is able to return to the system after some period of not having used it,
without having to learn everything all over again.
4. Errors: The system should have a low error rate, so that the users make few
errors during the use of the system, and so that, if they do make errors, they
can easily recover from them. Further, catastrophic errors must not occur.
5. Satisfaction: The system should be pleasant to use, so that users are
subjectively satisfied when using it; they should like it (Nielsen, 1993).
HUT usability researcher Sanna Belitz agrees with Nielsen’s components, but adds
two more:
6. Effectivity: Experienced users can operate fast and without effort, e.g.,
shortcuts.
7. Easy Recall: An occasional user does not have to learn the use again. The
user is set to recognize rather than to remember details (Belitz, 2003).
APPEARANCE DESIGN Appearance is an important aspect, and prototype testing is also going to give
feedback about user satisfaction with the appearance design. At the beginning of this
section, there was an example picture about the appearance of the plant terrarium.
APPLICABLE PLANTS Herbs and orchids are used to dimension the initial and basic versions. There is a
growing customer demand for products related to growing orchids and herbs.
Conditions required for them are going to be examined by literature review, practical
tests and usage experiences. Satu Simpanen, who has prepared her Masters Thesis
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around gardening experiments, is going to help in defining the required conditions in
the terrarium for different plants in cooperation with our pilot customers, orchid
hobbyists.
ADVANCED MODULESUser requirements, tests and pilot user experiences are taken into account when
designing advanced modules to increase the automation level of the plant terrarium.
There is going to be constant development of advanced modules based on physical
and decorative customer requirements.
LED COLOR CONTROL –Adjustable color control is novel in greenhousetype
functions. It is not necessary to include LED lighting in the basic product, but it
could be offered as an advanced module. The basic version could go to the market
with a simpler lighting solution to get it earlier to the market.
PLANT LEVEL TARGETED LIGHTS – Individual lamps could have individual
lighting settings in the advanced versions, in contrast to combined settings of lighting
utilized in the basic version.
COOLING – According to Eeva Kairaluoma from the Orchid Union, most of the
orchids especially like a cooler environment during the night. For some orchids, it is
necessary. Anyway, for most of the plants cooling is not necessary. Furthermore,
adding cooling functionality to the plant terrarium is rather expensive, because it
consumes hundreds of watts. These factors support the decision to implement the
cooling function as an additional module.
TECHNOLOGICAL RISK ELIMINATION
New technology always has “children’s diseases”. Proper testing and piloting
before the actual product launch enable the smooth operation of the actual consumer
product. That is also why it could be wise to implement plant terrarium with the LED
solution as late as in the second prototype and conduct the initial marketing with a
simpler solution. By the second prototype phase, our suppliers for the final product
are going to be selected and the components and materials are going to be those used
in our commercial end product. Reliability tests for the components are going to be
made before the product launch.
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6.6 COMMERCIALIZATIONThis section presents the commercialization plan for the plant terrarium. I have
applied for TEKES funding for establishing the Terra Rio Ltd business and for
developing the plant terrarium product, offering better growing conditions for
flowers, exotic plants or herbs. The terrarium is also going to be easy to use. The
terrarium will enable to place plants into corners of limited daylight or leave at home
alone for a long period. The terrarium will take care of the plants. With the business
idea related to that terrarium, my Mini Greenhouse team won the prize for the best
team in the fields of industrial arts and design in the Venture Cup on 2005.
According to the Venture Cup business plan, the plant terrarium is targeted at plant
enthusiasts like people who grow orchids and are interested in a plant terrarium, but
also design friends, offices and average consumers (Appendix X, Venture Cup
business plan).
To start successful commercialization, supplier selection and relationship
building for subcontracting and retail are crucial. Product Development is conducted
mostly by our own team, but for some difficult tasks, such as complicated control
devices, LED light control functions and gardening experiments some outside help is
needed. Production of the terrarium is going to be entirely outsourced. Finland and
Estonia have been considered as production countries for the first phase. The most
suitable production partner is chosen on the basis of costs and the quality
requirements of the final product. Marketing and Sales is the own effort of Terra Rio
Ltd and consists of sales and marketing to its distributors.
6.7.1 SUPPLIER SELECTIONComponents should be chosen according on the basis of customer demand for
the end product. There already is some research information about customer
valuations, see market research results on pages 70 72, and there also exist general
information about consumer market behavior. The components for the initial version
should be chosen according to criteria different from those relating to the
components for the following basic and advanced versions. The initial version should
be made from components on generally sale, but tailoring should be increased in
later product versions. Power supplies and LED lighting matrixes are examples of
components that can be worthwhile tailoring. An alternative to tailoring the power
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supply is utilizing more than one power supply in a single plant terrarium to meet the
power requirements of existing components. Instead of an LED lighting matrix, the
first marketed product versions can utilize conventional lighting.
6.2 FIRST FINANCING ROUND (PRESEED)Tekes, Sitra and/or Finvera financing and business angel financing are most
suitable for the first external equity investments or the financing of a loan. Normal
banks are not interested in risk financing. The requirement of own financing,
however, has made the financing of this project quite challenging. However, there
are applicable financing tools such as VERA fund and other public sector financing
instruments; these are presented more closely in Section 3.4 of this study. The
utilization of financing sources will proceed according to Figure 7 as the terrarium
business develops and meets the presented requirements of the presented financial
structures.
6.7.3 VALUE CHAIN AND PRODUCTION SETUPIn order to achieve smooth business operations, value chain partners have to be
carefully chosen. To make the right choices, theories presented in Section 3.3 about
human behavior are considered in order to place suitable people in different
functions. However, the best balance between the price and reliability has to be
found. Research and development and marketing and sales are going to be the parts
in the value chain we are going to focusing on. Other parts are outsourced as much as
possible. In R&D, our focus is going to be mostly in development, as described
earlier in this chapter, and in marketing and sales mostly in marketing to our
retailers. The value chain described above is visualized below.
Figure 34 Our value chain in the Venture Cup competition work
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RESEARCH AND DEVELOPMENT Terra Rio Ltd does the most of the product development work, but for some
difficult tasks, relating to, for example, complicated control devices, LED light
control functions, gardening experiments, outside help is needed. A daughter
company of Philips Idman Ltd has been developing plantapplicable LED lighting
solutions. Currently, in December 2005, I have asked them about an LED lighting
matrix for our plant terrarium prototype.
According to our Terra Rio Ltd business plan, we design and develop the
product and do marketing together with sales channels. We outsource production,
assembly, logistics, and aftersales activities. In October 2005, we started to build
our prototype in UIAH (University of Arts and Design, Helsinki). Terra Rio Ltd
handles its three customer groups one by one. The company has a team with a
technology, design and marketing background. It also has a gardening expert to help
us. HUT Communications and Lighting Laboratories are willing to cooperate, so are
Helsinki University of Art and Design, Arabus new business incubation center, and
Technopolis incubation center.
PRODUCTION Finally, production of the terrarium is going to be entirely outsourced. Finland
and Estonia have been considered as production countries for the first phase. The
most suitable production partner is chosen on the basis of costs and the requirements
of the final product. Initially, i.e. upto early marketing in 2007, however, the
company is going to do the assembly itself.
PRODUCT MARKETING The Terra Rio Ltd business plan states that the company is targeting business
where marketing and sales is its own effort and that consists of sales and marketing
activities in relation to our distributors. It is utilizing as much channel marketing as
possible. The design aspect has an important role in our marketing. The company is
going to present the plant terrarium idea in the context of homes, plants, gardening
and interior magazines. In the business establishment project, the company is going
to pilot the Orchid Union. After that, the company will sell through specialists like
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B2B florists and interior designers. During the business establishment project, the
company builds aftersales service relationships and operations.
In a wider view, product marketing includes marketing to retailers and designers,
aftersales outsourcing partner selection and certification from electric appliances
authorities TUKES (Turvatekniikan keskus). The prototype is going to be presented
to retailers and interior designers. In the preseed financing round, the first external
financing round in the form of loan or equity is planned to be applied for, and taken
from, Finnvera, Tekes, and/or a business angel. The marketing plan is going to be
carried out and implemented. Safety of the electrical appliances is regulated in the
following way in Finland.
SAFETY REGULATION FOR ELECTRICAL APPLIANCES
According to the law covering electrical security in Finland, all electrical deviceshave to be designed, built, produced and repaired in a way that meets the followingconditions.
1) They do not cause danger to anybody’s life, health or property;2) They do not cause immoderate disturbance in electrical or electromagnetic way;and3) Their function is not going to be easily disturbed electrically orelectromagnetically.
The producer, importer or seller of the device has to be able to show that the deviceis designed and produced to be safe. The most essential safety information aboutthe products already in the market is included in the producer’s assurance and inpossible certification documents where the applied safety standards are mentioned.Despite the producer being able to put the CEbrand on a device without testing,somebody in the company has to be responsible for the safety of the device. Hence,a new electrical appliance is recommended to be tested in an independent testingfaculty that is able to give a known certification brand. This kind of voluntary brandimmediately tells the user of the device that a sample of the product has passedprecise safety tests and that the compliance of the product to the safety claimsrelating to it is controlled (Rautkari 2001).
DISTRIBUTIONDistribution channels are going to evolve side by side with the evolution of the
market. In the Mini Greenhouse team final presentation to the Venture Cup jury we
presented a strategy of three phases. Target markets are selected according to the
theory presented in Figure 9. Initially the terrarium is marketed to knowledgeable
hobbyists, as members of the Orchid Union. Distribution is conducted through direct
sales and special boutiques. Based on experiences from the initial market, the
product is developed and marketed to professional businesstobusiness florists and
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interior designers. They can use it as a part of their offering to their end customers.
Through the pilot projects involving professional florists and designers, our product
can get visibility and thus a market among a wider audience. Finally, when the
production cost is low enough, the product will be offered to a mass market through
department stores and supermarkets. There are professional companies that
specialize in distribution from door to door; with them we can make competitive
distribution agreements without an own distribution system. At least at the
beginning, our office in Arabus can function as a storage place also, although, in the
longer run, no huge storage places will be needed. The need to develop plant
distribution mechanisms is evaluated in the piloting process. The Orchid Union has
its own supply mechanisms and conventional florists have a good selection of plants
to start with.
SERVICE In the initial marketing and usercentered development phase, Terra Rio is
willing to receive all user feedback directly. When the commercial product is ready
and the user questions are repeating themselves, the after sales service will be worth
outsourcing. A service number in a call center in Estonia, financed by its minute
charge, is a scalable solution. However, the Venture Cup jury criticized the idea of
outsourcing the whole aftersales service. Limited calling hours to our own staff, in
addition to the outsourced number, seems worth arranging. Of course, in addition,
there has to be return mechanism for the products that are not in proper condition,
and a feedback channel for requests for further development.
6.7.4 PILOTING AND PRODUCT LAUNCH After the product is ready and the value chain is set up, the pilot projects can be
started. These pilot projects are made to test the whole value chain and, in successful
cases, to be used as reference to the following customers. Totalvalue chain piloting
includes piloting product, cooperation between suppliers and distributors, quality,
delivery times, and aftersales customer support.
Piloting the interior design project Interior designers have shown interest in
our product. All new and renovated buildings are potential targets. According to our
market study, an interior design program tolerates best the price of our product.
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Customer resource management setup Customer relations are going to be
managed to take the user experiences into account. Relations with the initial
customers are managed through our usercentered development programme and later
through our distributors.
Marketing campaign Consumer marketing is going to be conducted together
with our distributors. Terra Rio focus in its marketing will be on direct marketing in
the early phase and later marketing to its distribution channels.
Product launch To achieve significant income, the product is going to be put to
serial production and launched to the mass market if feasible. There are going to be
additional functions complementing the basic product. In the Venture Cup business
plan of May 2005, the first product launch was planned for the winter of 2006. The
plan, however, was based on substantial financing, which is not possible to get in real
life. As far as we know currently, the earliest practical possibility of the product
launch for piloting is in the second quarter of 2007. See page 80 about the business
establishment project plan for Tekes.
6.7.5 INTERNATIONAL ROLLOUT The Venture Cup competition has been developed to encourage growth
companies, and internationalization is often the only option for significant growth for
a company that is targeting a narrow market niche. I made the calculations for
internationalization for the Venture Cup because they were asked for, but, at the
same time, knowing the difficulties and inaccuracies in estimating far ahead. The
sales objectives had to be put high in order to be successful in the competition and
methods to achieve those had to be considered. I drew a parallel between aquarium
ownership in Finland and stated that a profitable business case with the terrarium
would require market penetration of below only one percent of households –
compared to aquarium ownership in Finland, which is over 20 %. Our justifications
were considered good enough for the biggest global sales figure we dared put, 10
MEUR annually in the mature market. Even this high figure was considered too
small to win the open series or to achieve a venture capital investment, although this
was considered the best business case among the teams of arts and design.
Internationalization requires strong partners. Finnpro could be one and international
companies others. International rollout is also the phase where the venture capitalists
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are usually willing to come up with finance. They expect a return on investment of at
least 40 % per year. Some figures and justifications of our international rollout plan
for the Venture Cup and for TEKES are presented below (with reference to the
business plan).
2000
0
2000
4000
6000
8000
10000
12000
2006 2007 2008 2009 2010 2011 2012
Year
1000
e
Sales Income Gross Profit Operating Profit Accum. Op. Profit
Figure 35 Profit Estimation
Financing need We need 0.1 MEUR for prototype building and testing in 2005. For piloting andproduct launch we need 0,3 MEUR in 2006 – 2009. Later on we need 1 MEUR for internationalrollout. We expect a return on investment of 40% per year [1st TEKES APPLICATION FORRESEARCH FUNDING].
How do we sell? First we sell to Orchid Union. After that, we sell through specialists like B2B floristsand interior designers. Finally, we launch Terrarium to the mass consumer market and sell throughvolume retailers. Eva Kairaluoma, Orchid Union’s board member, is very interested in buying andtesting our product. Also, SOK, Bauhaus and Vihersisustus Bueno are very interested [1st TEKESAPP].
Income and market penetration 23% of Finnish homes have aquariums. By selling Terrarium firstas a highend design product, we make a business case with less than half a percent of marketpenetration. We breakeven in 3 years. But this is only in Finland. However, Terrarium has globalmarkets (Venture Cup Business plan, see Appendix X).
INTERNATIONAL SALES PEAK
I have estimated in the business plan that the international sales peak is going to be
around 2010. Now I am of the opinion that it has to be at least a few years later,
because Terra Rio Ltd growth rate expectations were considered too optimistic
according to Venture Cup judges and other evaluators. Also the resources available
to develop the product are very limited.
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6.8 SUMMARY AND CONCLUSIONS FROM THE
IMPLEMENTATIONThe ideation process of Chapter 5 ended by selecting Mini Greenhouse as the
best concept for further development. The Mini Greenhouse concept also gave the
best answers of my three best candidates in the Venture Cup first round, as can be
seen from Chapter 7. This chapter starts where Chapter 4 ended. In this chapter, I
presented my business venture ideation on the basis of the selected concept. I also
showed the start of its implementation. The ideation lead to the Venture Cup
awarded business plan, which was the objective of this study. The market study made
for the Mini Greenhouse team by Provestum Oy creates interest among our potential
distributors. The patentability of our invention turned out to be lower than expected,
because, in the novelty study, the Foundation for Finnish Inventions found a
Japanese product of very close technology. However, from the market and
competition point of view, the Japanese product is totally different. It is a product for
industrial use, whereas the plant terrarium is an interior design product. Even when
the concept is not patentable, the utility model still exists as an applicable mode of
legal protection. Thus, combining technology design and plant growing in the ideated
plant terrarium concept gives an opportunity for the commercialization of current
achievements in the research of bright LEDs and PLC through our new business
venture. To implement the business plan, I, together with the Mini Greenhouse team,
founded Terra Rio Ltd on 1st July 2005.
Prototyping is going to be conducted in cooperation with our pilot customers,
initially with the Orchid Union. Usercentered design methods will be utilized. The
prototyping has technological targets to implement an interior design element
wherein the lighting element is going to be set to provide essentially optimal light
frequencies for plants to be grown, mainly orchids and herbs. There is also going to
be temperature control, since cooling solutions are important for orchids. The first
prototype is going to be tested with plants in the terrarium. Humidity control and
automatic watering and the most applicable control settings are going to be searched.
Appearance is an important aspect, and prototype testing is going to give feedback
also about appearance design. In addition to the basic functions of the terrarium,
advanced modules can be designed. Most technological risks can be eliminated by
prototyping in two phases. In the first prototype, the general technical function and
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general operation with plants is tested. The second prototype includes LEDlighting
and is implemented with actual suppliers of the commercial product.
To start successful commercialization, supplier selection and relationship
building for subcontracting and retail play key roles. Product Development is carried
out mostly by Terra Rio Ltd, but for some difficult tasks, such as control devices,
LED light control functions and gardening experiments, outside help is needed.
Production of the Terrariums is going to be entirely outsourced. Finland and Estonia
have been considered as production countries in the first phase. The most suitable
production partner is chosen on the basis of costs and the requirements of the final
product. Marketing and Sales is an own effort of Terra Rio Ltd and consists of sales
and marketing activities to its distributors. The company is utilizing as much channel
marketing as possible. The design aspect has an important role in plant terrarium
marketing. Terra Rio is going to present the plant terrarium concept in homes, plants,
gardening and interior magazines. Before this campaign, Terra Rio will pilot with
Orchid Union and interior designers. The magazine campaign is in the phase of
selling through specialists like B2B florists and interior designers. Aftersales service
is going to be outsourced to a call center. The plant terrarium commercialization plan
includes supplier selection, financing rounds, value chain and production setup,
piloting, product launch and international rollout. Piloting is going to be done with
the interior design project and it also includes piloting quality, delivery times and
aftersales customer support. Before product launch, we also need a way to manage
customer relations and a marketing campaign. The Mini Greenhouse business plan
was intended to include international rollout also, even if it is now out of the clearly
foreseeable future. Strong partners are needed for internationalization, but the profit
requirement of venture capitalists, for example, is relatively high. In any case, our
business plan has international potential, according to many experts. Possible
methods for financing are Finnvera or Tekes business startup loan and a new fund
“Aloitusrahasto Vera”.
Altogether, my product concept and business venture ideation about plant
terrarium has received very positive feedback from potential customers and different
players in the Finnish innovation environment. The following chapter describes the
evaluation process of the business plan according to my product concept and
business venture ideation concerning the plant terrarium.
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III COMPARATIVE STUDIES AND PROCESSOUTPUTS
7. VENTURE CUPIn this chapter, I present my business plant development under an evaluative
Venture Cup process, which is the evaluative process of this study. The Venture
Cup competition consisted of three rounds. The first round was for the business
ideas, the second for the business plan drafts and the third for the complete
business plans of the competing teams. Events and work related to these
processes are presented and analyzed in this chapter.
The Venture Cup is a joint effort of the private and public sectors to encourage
entrepreneurship in Finland by means of a businessplan competition. The main
sponsors are McKinsey & Company and Tekes. According to the opening speech of
EevaRiitta Siitonen, the mayor of Helsinki in 2004, the Venture Cup is a good social
event for networking. The Finnish Ministry of Trade and Commerce also sponsors
the Venture Cup and, according to minister Pekkarinen, sees it as a great
environment to develop opportunitybased business ideas. McKinsey & Company,
and also the Venture Cup project manager Anne Sormunen, sees the basic purpose of
the Venture Cup being the creation of Finnish growth companies by bringing
together implementers, ideas, financing and knowledge about growth companies in
order to develop the innovation field. The Venture Cup is going to be a meeting point
of people, especially academic people, and organizations interested in
entrepreneurship (Venture Cup Opening, 2004).
In the period 2000 – 2004, the Venture Cup has helped to refine 178 far
developed business plans out of 1000 ideas. Out of these plans, 61 operating
companies have been recognized. The first of them show clear evidence of growth
and promising plans. Antti Kari from McKinsey has researched the performance of
Venture Cup projects after the cup. A significant portion of entrepreneurs
participated in the study stated that the Venture Cup was having a significant effect
on starting an actual business; the Venture Cup made the business plans clearer and
brought about belief in own ideas of the Venture Cup teams, which, in turn, lowered
the entrance barrier to become an entrepreneur and getting finance. The companies
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that have participated in the Venture Cup are still young, but the development of
these has been fast. This is because the early steps of companies like this take place
in parallel. The companies represent many industries and are among the top talents in
their fields. A great portion of the companies is in product development phase or
entering the market (Kari 2005). The figure below compares the performance of
different projects in the Venture Cup and their reallife success.
Figure 36 The ability of the Venture Cup to recognize the most promising
projects (Kari 2005)
In the publication event of the research, the most successful Venture Cup
companies were awarded. The jury criteria for the most promising companies were
performance so far, such as actual growth, internationality, innovativeness of the
concept, general maturity of the operations and future growth potential. The
candidates for the award of bestsofar Venture Cup Company were Ellibs Ltd, CTT
Cancer Targeting Technologies Ltd, FogScreen Inc, Ilmi Consulting Ltd, Trueflaw
Ltd, and Firstbeat Technologies Ltd (Poppius 2005).
Ellibs Ltd distributes nonfiction books provided by the publishers as electronic
books. Ellibs’ main product is Ellibs Web Library, which enables copyright
administration of electronic books and the borrowing of the books through
communications networks (Laiho 2004). CTT Cancer Targeting Technologies Ltd
is concentrates on accurate control of peptidebased cancer medicines. The key
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technologies of the company are phase display and peptide liposome technologies by
which the medicine can be directed accurately to the cancer cells. FogScreen Inc.
provides a patented innovation of presentation technology, the FogScreen. Ilmi
Consulting Ltd is developing, selling and marketing piling computers for the
optimization of piling work and its quality monitoring. Trueflaw Ltd produces
experimental cracks in materials for inspection purposes. The customers are nuclear
power plants, who need artificial cracks for quality control of periodical inspections,
qualifications and education. Then there is Firstbeat Technologies Ltd who got the
5000 e recognition, being the bestsofar Venture Cup awarded company. The
company is specialized in heart beat analysis software development. Their products
are based on physiological measurements, accurate and versatile information about
the operations of human body, and the health effects of life styles. By the method
used by the company, the load of work, stress states threatening health, and the
recovery of resources can be recognized. The method is operable in monitoring
physical exercise and supporting weight control. The background knowledge of the
products has come from longlasting scientific research into sports physiology and
the stress measurements of employers. The company provides software to be
integrated in wrist computers, heart beat meters, and training devices. Currently, the
company employs fourteen people. FBT got a mention of honor in the Venture Cup
in 2001 / 2002. It was called Heartware at that time. (Poppius 2005).
Viralg Ltd, winner of the previous Venture Cup in 2003 / 04, provides anti
piracy software. Their solution can protect against digital material shared in peerto
peer networks. Thus they state they are a soldier for the entertainment industry
operating anonymously in communication networks, and claim that their turnkey
innovation gives superior advantages to fight against peertopeer piracy. They claim
that independent tests show that their US and EU patented overwrite technology is
currently the most effective solution available. The chief executive Matti Vakkala
stated that their major achievements have been a market share increase of 15 % > 25
% in one year, winning the Venture Cup in 2004, and new customers that the win
helped them gain. Their future goals are economic independency, internationalization
and movement towards being a real company. Many might think they already are a
real company, but Vakkala wants to have a sustainable establishment and position
(Vakkala 2004).
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The approved prizes available from the Venture Cup are as follows.
In the first round, the twenty best teams are selected as candidates for awards;
ten out of these are awarded 1.000 €. One additional 1.000 € prize is given to the best
team in the special field of that year, being media, arts and culture in 2004 / 2005 and
welfare and healthrelated technologies in 2005 / 2006.
In the second round, the twenty best teams are selected as candidates for awards;
of these, ten are awarded 2.000 €. One additional 1.000 € prize is given to the best
team in the special field of that year.
In the final round, the ten best teams are selected as candidates for awards. Three
out of them are ranked as having the best business plans of the year, with a 25.000 €
prize going to the team which is ranked first, 15.000 € prize to the second best and
10.000 € to the third. One additional 10.000 € prize is given to the best team in the
special field of that year.
In the first round, the evaluation focuses on the innovativeness of the markets
and implementability of the business idea. In the second round, the evaluation also
focuses on customer benefit, marketing, business model and the organization,
profitability, financing potential, summary and the layout of the business plan
presented. The twenty teams who are candidates for the awards also give an oral
presentation and answer questions from the judges. In the final round, the evaluation
also considers the improvements made after the feedback from the second round and,
in addition, to the management team and the risks the final business plan include.
Ten candidates for the awards give their presentations and answer questions from the
judges (Venture Cup Opening, 2004).
7.1 THE FIRST ROUND
I evaluated the three best performers using the selection point method used in
ideation and according to the firstround Venture Cup checklist. Based on this
evaluation, I chose Mini Greenhouse to be the Venture Cup project. Later, the Mini
Greenhouse team also gave a presentation about our project in the Venture Cup Idea
forum. There, a twominute opening speech is given to present and justify the quality
of ones business idea. The Appendix IX my evaluation of the three best candidates
from the idea selection. The table in the Appendix IX evaluated the three best
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candidates from the ideation chapter against Venture Cup firstround questions. The
Mini Greenhouse and Home Lighting system light concept could give most complete
answers to the questions, but, as mentioned on page 62, HLS lighting had a
significant patent as an entry barrier to international markets and thus Mini
Greenhouse was the best candidate to enter to the Venture Cup. On the first round of
the Venture Cup, two judges evaluated the Mini Greenhouse business idea as
following.
EV. STRENGTHS DEVELOPMENT AREAS1st A trendy future product. The analogy to
aquarium hobby OK.Problems in the areas of sales, distribution andoverall in marketing area. In real life, sales arestarting pretty slowly.
2nd It clearly appears that components forreal hobbyists exist, but no readymadeproducts do.
Is there a market? If there was market, why aren’tthere products available? Will hobbyists continueto build these from components by themselves asthey’ve done this far? How easy is this to copy?How to protect it?
INNOVATIVENESS AND CUSTOMER BENEFITEvaluations 1st/2nd evaluator Comments
Innovativeness of the idea Good / TolerableIdea matches customers’ needs Good / SatisfactoryProduct’s / service’s and/or businessmodel’s excellence in relation toalternative solutions
No evaluation / Noevaluation
Table 16 Innovativeness and customer benefit
MARKET POTENTIALEvaluations 1st/2nd evaluator Comments
Definition of the customer segment Good / SatisfactoryRealistic estimation of market size andshare
Tolerable / Weak
Size of market potential Tolerable / Tolerable
Bringing a new idea to themarket, does not followmathematical rules. Market size is hard to estimate.
Table 17 Market potential
IMPLEMENTATIONEvaluations Best/Worst/Median Comments
Business model is implementable Tolerable / GoodTable 18 Implementation
PROFITABILITYEvaluations Best/Worst/Median Comments
Earning potential: Satisfactory / TolerableGrowth potential: Good / Tolerable
Table 19 Profitability
OVERALL GRADE1st/2nd evaluator Satisfactory / TolerableTable 20 Overall grade
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7.2 THE SECOND ROUND
Having the feedback from the first round gave us hints about the weakest parts of our
business idea and we put more effort to develop them further. We took a closer look
at competitors. IKEA is selling a cupboard for growing herbs to be used on
balconies. As a customer, I managed to find out their sales. They are selling two
cupboards per week. In Kodin Ykkönen, I found another competing product. Their
class chamber is very small and neither of these included infrastructure in them. A
third competing alternative is to buy a tailored terrarium from a pet shop. In the
second round, seven Venture Cup judges evaluated the Mini Greenhouse business
plan (Appendix X) as following.
STRENGTHS AND DEVELOPMENT AREAS OF THE BUSINESS PLANEV. STRENGTHS DEVELOPMENT AREAS1st Market exists (aquarium users, household
and office plant users). New idea and newproduct. Piloting and product developmentphases are considered (Orchid Union).Innovative LED control system. Relevantrisk considerations are brought up in thebusiness plan. Collaboration with HUTCommunication and Lighting Laboratories isa strength. Interest already shown byretailers. Could become a hit product ifmarketed right, use a known designer, TVdesign programmes etc…
Do people want to have static glass chambersin their homes? In aquariums fish and plantmove, which is interesting. Household andoffice plants are usually free standing, whichgives a sense of freedom and flow. Is the LEDtechnology patentable / protected? Requiredapprovals could delay the productpilotingphase and thus the launch.
2nd Innovative idea Implementation, will it work and how easy isthe maintenance really?
3rd Technically well written business plan.Market in existence.
Do the entrepreneurs know anything aboutplants?
4th An innovative concept. Market potential. The marketing team and contacts to retailers.5th Well prepared business plan, addressing
everyday life application in an innovativeway
Consumer market is difficult, alternatively thefocus at the beginning could be better in thebusiness office sector, where the need fordecoration is, but lack of plant maintenance.The market penetration figures are veryoptimistic. The starting point is the number ofhouseholds, estimated to be 23 %. That isperhaps too high. (I have one, but in ourfamily house area there are three aquariumsout of 38 households).
6th Good presentation of the idea. The marketexists in home decoration and plants. Anovel idea to commercialize a product suchas this.
Analysis of the market, more facts thatsupport that it exists and can be reached bythe product. Profitability calculations.Marketing and R&D cost appear to be low.
7th The team has studied the potential marketthoroughly and has realistic understandingof many aspects of it.
Analyze further how many units can be soldin the beginning. Figures were a bitoptimistic.
Table 21 Strengths and development areas by Venture Cup secondroundevaluation
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BUSINESS MODEL
Venture Cup gave all the teams checklist questions to develop and improve the
business model they were going to present in their competing plans. In this section,
how the Mini Greenhouse secondround business plan answers these checklist
questions is briefly presented. For moredetailed information, there are pointers to
the business plan in Appendix X. After the answers, there is summarized feedback
from seven Venture Cup evaluators about the business model presented in the Mini
Greenhouse secondround business plan.
Business Model Questions and Answers by Mini Greenhouse
Question Which functions in the business model is the company is going to shelve, and which onesis it buying? What is the company focusing on?
Answer
According to the value chain picture, the company is focusing on R&D and Marketingand Sales. Service, Distribution and Production are outsourced. The company value chainis explained in more detail in Appendix X, Chapter 4, all sections.
Question What partners are the company operating with? What benefits does the cooperationprovide to the company and its partners?
Answer Aftersales service for the terrariums is going to be outsourced to a company giving helpdesk services (Appendix X, Chapter 4, Section Service).We enable our retailers to do the delivery with their own processes if they can get costsavings that way. We can also ask for an offer to do our delivery from the delivery systemof some of our retailers. They may have significant scale benefits and possibly offer avery attractive price (Appendix X, Chapter 4, Section Distribution).
Blumat irrigation system manufacturer is a potential marketing partner of TerraRio Oy.Blumat can gain an extra market for irrigation systems with plant terrariums. TerraRio Oyon its behalf can get a well tested and moderately priced watering system in its devices.There are also cooperation possibilities with innovative greenproduct vendors anddesigners such as TaiK graduate Katriina Määttä’s Else Design Oy. Määttä was veryinterested in our product when we presented it to her. The plant terrarium is going to haveappealing cooperation possibilities for interior designers (Appendix X, Chapter 4, SectionMarketing & Sales).
Production Smallscale electronics manufacturer, Candeo Effect, is our initialmanufacturing partner candidate. They can use a government financed test factory forelectronics manufacturing and thus also economically produce a small series of electronicdevices. That helps TerraRio Oy to perform well with low inventory levels (Appendix X,Chapter 4, Section Production).
HUT Communications and Lighting Laboratories are willing to help us in the early design(Appendix X, Chapter 4, Ssection Design).
Table 22 Mini Greenhouse business model answers in the second round of theVenture Cup
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Evaluations Best/Worst/Median CommentsDescription of the business model Good/Tolerable/
SatisfactoryInternal functions are focused,decisions concerning partners andoutsourcing are logical:
Good/Tolerable/Satisfactory
Various selling channels aredescribed. Risks are alsoconsidered in the business plan. Inhouse functions are thoughtout anddescribed.
Table 23 MG Business model grades by Venture Cup secondround evaluation
INNOVATIVENESS AND CUSTOMER BENEFIT
The Venture Cup gave all the teams checklist questions to develop and improve the
innovativeness and customer benefit or utility of the offerings the teams were going
to present in their competing plans. In this section, how the Mini Greenhouse second
round business plan answers to these checklist questions is briefly presented. For
moredetailed information, there are pointers to the business plan in Appendix X.
After the answers, there is summarized feedback from seven Venture Cup evaluators
about the innovativeness and customer benefit of the offering presented in the Mini
Greenhouse secondround business plan.
Business Idea Questions and Answers by Mini Greenhouse
Question What is novel in the product or service? Why hasn’t anybody done it yet?Answer Novelty Compared to the existing products and solutions, the novelty of the terrarium lies
on the fact that it is an interior design element targeted to the consumer and officesegment and not for industrial use and agricultural production. Also, the terrariumincludes an innovative LED control system, currently not available in the market, thatoffers adjustability, decorative small size, energy savings, spot lights and color lights. Theterrarium enables the growing of difficult plants with minimal effort. It enables the growthof plants that otherwise would be impossible to grow in a home or office environment.Currently available products do not include lighting and automatic irrigation; they justgive a somewhat isolated place to grow plants with a limited temperature and humiditycontrol possibility via a manually adjustable cover for air circulation. The existingproducts are not meant to be an attractive interior design element that offer automaticallyadjustable optimal growing conditions for plants (Appendix X, Chapter 2, SectionNovelty).
Question How unique is the product or service? Can the uniqueness be protected somehow? (Forexample, by patents)?
Answer Competitive Advantage According to recent interviews with retailers, innovations relatedto home decoration, flora and consumer market are rare, but highly appreciated. Ourcompetitive aspect comes from the innovative approach to combine the interior designaspect to a greenhouse type of functionality. We are enabling easy growing of demandingplants such as orchids and offering a possibility of growing herbs for personal use. Thereis no greenhouse infrastructure or functionality available for apartments. Greenhouses thatare available are made either for outdoors or industrial use. The existing products lack theinterior decoration aspect almost entirely. We can bring the benefits of a greenhouse tosmallscale and indoors use. Patenting the terrarium will protect our business and give uscompetitive advantage. The initial version might not be patentable, but the advancedversions with our novel LED control mechanism are. Because patents are hard and slow,getting exclusive sales contracts is one way of protection, as well as agreements,partnership building and joint activities. We build competitive advantage by
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our business model through our own research and development and though wellinterlocked and performed activities and partnerships (Appendix X, Chapter 2, SectionCompetitive Advantage).
Table 24 Mini Greenhouse innovativeness and customer benefit answers in thesecond round of the Venture Cup
Evaluations Best/Worst/Median CommentsInnovativeness of theidea
Good/Tolerable/Satisfactory
Idea matches withcustomer’s needs
Good/Tolerable/Satisfactory
Product’s / service’sand/or business model’sexcellence in relation toalternative solutions
No Evaluation/No Evaluation/No Evaluation/
It is innovative to combine interior designwith greenhouse functionalityVariable uses of this system. Growing exoticplants, preservation of seasonal plants, storagefor longer times etc. Innovative LED controltechnology While there is market demand, I am less thansure about the smartness of market positioning
Table 25 Mini Greenhouse innovativeness and customer benefit grades byVenture Cup secondround evaluation
MARKET POTENTIAL
The Venture Cup gave all the teams checklist questions to develop and improve the
market potential of the offerings the teams were going to present in their competing
plans. In this section, how the Mini Greenhouse secondround business plan answers
these checking list questions is shortly presented. For moredetailed information,
there are pointers to the business plan in Appendix X. After the answers, there is
summarized feedback from seven Venture Cup evaluators about the market potential
of the offering presented in the Mini Greenhouse secondround business plan.
Marketing Plan questions and answers by Mini Greenhouse
Question Company estimation of total market size? How large are those markets the company isinterested in? How are they developing?
Answer Sales Estimation Selling moderately; 2 % penetration of households, 46 000 devices inFinland in five years with 100 % sales growth / year would mean that we should sell 1484devices in the first sales year. Realistic middle term (5 yrs) sales estimation is likely to beclose to the moderate one (1 % penetration) and in the longer term the possibilities ofreaching the optimistic 5 % penetration increases. First the terrarium is going to be soldmainly to plant enthusiasts, later more and more to ordinary consumers. (Appendix X,BUSINESS PLAN BASED ON A NOVEL PLANT TERRARIUM, Chapter 6, SectionSales Estimation)
Question Who is the paying the customer and what is paid for?Answer The product is especially suitable for urban customers who are in a hurry and are missing
contact with the nature. The plant terrarium creates a miniature piece of nature thatfunctions as an interior design element with decorative lights and fashionable form(Appendix X, Chapter 2, Section User Benefits).
Basic Customer types There are three types of customers: demanding florists likemembers of the Orchid Union, ordinary consumers and offices, and stylish business usersin their offices. (Appendix X, Chapter 3, Section Basic Customer Types)
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User Benefits The terrarium enables people to enjoy a larger variety of plants and widensthe decorative usage of flora. It enables people to grow exotic and demanding plants andalso to have plants in places of limited daylight. The product prolongs the plants’ beautyand growth season. Any kind of plants, including herbs and mushrooms, can be easilygrown. This product can also be used to preserve seasonal plants over winter. Automatedcontrol of lighting, heating and humidity secures user comfort and ease of use. It enablesthe plants to be let at home alone, even for a long time. The plants in terrarium do notneed any external help (Appendix X, Chapter 2, Section User Benefits).
Question Who are the competitors? What substitute products / services are available?Answer Presented only in Chapter A2 of Appendix X. Weakest part of Mini Greenhouse round2 plan.
Question How is the market share and sales volume estimated to be developing?Answer Market Share & Sales. The market study confirmed that, currently, there are no directly
competing products; there are products without infrastructure or products that can bemade as specially ordered products, but no consumer product easily available. Gainingmarket size would thus be achieved without direct competition; another issue is to educateconsumers to accept the new product.
Sales volume is estimated on the basis of a market study that showed retailers had a stronginterest. The sales volume is greatly influenced by retail price. Based on the consumerretail price of 150 EUR, the estimated sales are about 1484 units in 2006 and increasing100 % / year to 2010 (Appendix X, Chapter 3, Section Market Share & Sales).
Question How is the product or service priced?Answer Pricing The market study identified that a consumer product can have a price of EUR 150
as maximum. It was noted, however, that the additional features and components can besold separately on top of that. Based on the market study with major retailers and OrchidUnion, the different consumer types seem to need a “modular” pricing – basic productwith minimal infrastructure to provide the cheapest price product and sell additionalinfrastructure components on top of that according to consumer needs. The basic set thenconsists of a glass chamber, irrigation and LED lighting. The components soldadditionally are control elements for irrigation, humidity, ventilation, temperature, andradiation qualities. Also, different decoration sets are going to be on sale (Appendix X,Chapter 2, Section Pricing).
Pricing Strategy. In the first few years, when we are selling mainly to plant enthusiasts,they were easily willing to pay our initial consumer price of 149,5 € on average. When themarket among the enthusiasts saturates, we are going to take advantage of modularpricing with the ordinary consumers. The basic installation can cost 149 e on average.With that consumer price, we get a 42 e operating margin per device. That is enough tokeep the operations running, but the potential to make a venture capitalist smile comesthrough the modular structure of this terrarium. When consumers get locked on to ourproduct platform, components to add adjustability and to maintain functionality are soldwith better than satisfactory profit. That profit can easily be, for example, 100 e / devicesold in the following 5 – 10 years. There are successful examples among manufacturers ofshaving blades, computer printers and hoovers who are performing well with this kind ofmodular pricing. The modular product structure enables updating the basic version of theplant terrarium to a more advanced one. The precise additional components we are goingto design with the usercentered design process first among the demanding orchidhobbyists and later among the ordinary consumers (Appendix X, Chapter 6, SectionPricing Strategy).
Question Is the unique sales phase accurate and made from a customer perspective?Answer Our customer gets the message of attraction and easeofuse through our marketing
slogan: “Nice & easy nice to look at and easy to take care of, TerraRio.” (Appendix X,Chapter 3, Section Advertising)
Question What kind of customers does the target segment comprise? Why is this segment interestingfor the company?
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Answer Demanding plant growers and florists need an advanced version of the product withalmost the maximum feature set that is available. This customer group is not big, around acouple of thousand people in the metropolitan area are involved with orchids; however,these are customers are willing to pay more for the product, 200 € at least. This customergroup will also be willing to participate in the productdevelopment phase as a pilotgroup. There is a need for orchid glass chambers that are currently sold by an animal shopin Turku as a specially ordered product where the customer can choose between differentsizes.Consumers’ customer group is somewhat less demanding, but needs a product that isassembled. Offices are close to consumers, but they are served by the floraserviceprovider who sells the terrariums and takes care of the aftersales activities (Appendix X,Chapter 3, Section Basic Customer types).
Question What distribution channels is the company going to use?Answer Distribution Channels The market study interviewed as potential distribution channels
Bauhaus, Pirilän Kukkatalo, Plantagen, SOK, including Prisma & Multasormi, Stockmannand Suomen Orkideayhdistys ry. From these contacts all but Pirilän Kukkatalo wereinterested in further partnership and becoming a retail channel for the product. PirilänKukkatalo does not fit a profile due to the fact that their sales strategy is to offer thecheapest flowers and plants available in the metropolitan area. The companies can bereached by Vihermaailma, which offers services for offices and belongs toRuohomäki Yhtiöt. TerraRio Oy is buying its storage services. There is not going to behuge amounts of terrariums in the inventory, but just the amount to ensure smoothdelivery without toolong delays. Delivery services we can choose, based on bid contents,where to evaluate the price, flexibility and reliability tradeoffs to choose the best offering.We enable our retailers to make the delivery with their own processes if they can get costsavings that way. We can also ask for an offer to do our delivery from the delivery systemof some of our retailers. They may have significant scale benefits and the possibility of avery attractive price (Appendix X, Chapter 3, Section Distribution Channels).
Question What kind of advertising is going to be used? What will it cost?Answer Advertising The marketing programmes will be divided into two – independent
marketing done by TerraRio and marketing campaigns related and coordinated by theretail channels. The latter is mainly related to superstore newsletters’ direct marketing toconsumers and onthespot marketing campaigns and materials in stores. Independentmarketing is started with homerelated journals targeted mostly to females such as homedecoration, kitchen, health and other female magazines. Our direct marketing budget isaimed at marketing for our distribution channels; it is 5000 € in 2006 and increases by5000 € / year, being 25000 € in 2010. Personnel and office expenditure is also used formarketing (Appendix X, Chapter 3, Section Advertising).
Question What kind of barriers are there related to entering the market and how are they passed?Answer Marketing is expensive; consumers need to be educated. It is time consuming. There are
lots of flowers and plants that do not necessarily need terrarium. We are taking advantageof the interior design trend and set our sales objectives moderately (Appendix X, Chapter3, Section Advertising).
The basic version’s prototype can be manufactured in a few months. The basic version isgoing to be assembled from existing components. This prototype is going to be designedto satisfy the needs of the pilot customers. Taking their feedback into account, the laterversions are to be developed by a usercentered design process. The basic version will bethe first to be produced on an industrial scale and its production and sales is planned tostart at the beginning of 2006. Knowledge on all biological aspects is gained from ourpilot customers to satisfy the needs of the customers with the most demanding plants(Appendix X, Chapter 2, Section Implementation).
The approval from authorities of a new electrical appliance will also take some time (sixmonths maximum) before the product can be sold (Appendix X, Chapter 2, SectionRisks).
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Question How are customer relations going to be managed?Answer Service After sales service for the terrariums is going to be outsourced to a company
giving help desk services. The help desk company charges the customers directly on theirphone bills. We give a guarantee with our products as a vendor and in case ofmanufacturing error the end customer can replace her/his product at our distributionpartner. Our customer relationships are relatively easy to handle because our customersare retail channels and the number of these channels is quite small (Appendix X, Chapter3, Section Service).
Table 26 MG market potential answers in the second round of the Venture Cup
Evaluations Best/Worst/Median CommentsDefinition ofcustomer segment
Good/Weak/Satisfactory
Realistic estimationof market size andshare
Good/Weak/Satisfactory
Size of marketpotential
Good/Weak/Tolerable
Mapping ofcompetitiveenvironment
Good/Weak/Tolerable
Marketing strategy(Pricing, CustomerAcquisition,Distribution)
Good/Tolerable/Satisfactory
Has the market study been conducted in differentcustomer segments? The market study showedretailers were interested in the product. The groupwill get help for the pricing strategy from SOK. Theycould use TV interior design programmes and knowndesigners for promotion.Something about plants would be nice. Manypotential customers believe plants are about “nature”not about “technology” in terms of market demand.However plants are all but excluded from thebusiness plan, with the main emphasis put onlighting.Consumer behavior is hard to predict in this case; isthe market really there? Test marketing couldprovide better results using a sample of the maintarget market rather than specialists. Is aquariumpenetration really 23 % in Finland?
Table 27 MG market potential grades by the Venture Cup secondroundevaluation
ORGANIZATION AND IMPLEMENTATION
The Venture Cup gave all the teams checklist questions to develop and improve the
organization and implementation the teams were going to present in their competing
plans. How the Mini Greenhouse secondround business plan answers these checklist
questions is briefly presented in this section. For moredetailed information, there are
pointers to the business plan in Appendix X. After the answers, there is a
summarized feedback from seven Venture Cup evaluators about the organization and
implementation presented in the Mini Greenhouse secondround business plan.
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Organization and Implementation Questions and Answers by Mini Greenhouse
Question Who belong to the organization? Do the knowledge and skills required exist in theorganization or is it necessary to recruit new talents to the team?
Answer Marketing manager Inga MathiesenBuinevits and technology manager Mikko Nykänen(Appendix X, Chapter 5, Section Organization and Company Values).
The first to recruit is a biologist familiar with the conditions needed for different plants.The second to recruit is an engineer familiar with controlling the LED lights (Appendix X,Chapter 5, Section Organization and Company Values).
Question How is the idea going to be implemented?Answer Implementation As students of HUT, the owners of the business idea can utilize
cooperation with the HUT Communication and Lighting Laboratories. The cooperation iscurrently ongoing in designing the control system for LEDs with Communications andLighting Laboratories. The product development is carried out versionbyversion – firstthe basic and afterwards the advanced product version will be launched. Functionality isgoing to be increased based on demand, and as we generate sales from initial products andgain a reputation to get more funding for the venture.
The basic version’s prototype can be manufactured in a few months. The basic version isgoing to be assembled from existing components. This prototype is going to be designedto satisfy the needs of the pilot customers. Taking their feedback into account, the laterversions are developed by a usercentered design process. The basic version is the first tobe produced on an industrial scale and its production and sales is planned to start at thebeginning of 2006. Knowledge of all biological aspects is gained from our pilotcustomers to satisfy the needs of the customers with the most demanding plants. The basicversion’s prototype can be manufactured in a few months. The basic version is going to beassembled from existing components. This prototype is going to be designed to satisfy theneeds of the pilot customers. Taking their feedback into account, the later versions aredeveloped by a usercentered design process. The basic version is the first to be producedon an industrial scale and its production and sales are planned to start at the beginning of2006. Knowledge of all biological aspects is gained from our pilot customers to satisfy theneeds of the customers with the most demanding plants.
There are glass chambers suitable for our product, LED lights, and the control mechanismis available, but need testing in our environment. The greatest challenge in the productdevelopment is keeping the production and retail channel costs low enough to beprofitable at prices that customers are willing to pay for the terrariums. The first keymatter is to define the basic product with minimum functionality to keep the price low.The huge Finnish retailer SOK has shown interest in helping us define the basic product(Appendix X, Chapter 2, Section Implementation).
Table 28 Mini Greenhouse organization and implementation answers in thesecond round of the Venture Cup
Evaluations Best/Worst/Median CommentsOrganization hasall requiredcompetencies:
Good/No Evaluation/Tolerable
Collaboration with HUT Communications andLighting Laboratories is a strength. They are lookingfor a plant / greenhouse specialist. What about havingan interior designer in the team?
Business model isimplementable:
Satisfactory/Weak/Tolerable
Table 29 Mini Greenhouse organization and implementation grades by VentureCup secondround evaluation
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Best/Worst/Median Good/Tolerable/TolerableTable 30 Mini Greenhouse overall grade by VentureCup secondround evaluation
Despite the grade above, the Mini Greenhouse team was placed among the ten best
business plans in the second round of the Venture Cup and received a special award
of best team in the fields of media, art and culture. Thus Mini Greenhouse got all the
awards available, together with 4000 e in the secondround prize giving in March
2005. However, the evaluation showed that there was still much to improve.
7.3 THE THIRD ROUND
My focus in phase 3 was on improving development areas found in the second round.
I was also focusing on team building and on the additional checklist questions for
round three, the final phase of the Venture Cup. These additional questions and my
and my team’s responses to them are briefly presented in the following.
Responses in the third phase to points raised about development areas and comments givenafter the second phase.
DEVELOPMENT AREAS RESPONSEDo people want to have static glass chambers in their homes?In aquariums, fish and plants move, which is interesting.Household and office plants are usually free standing, whichgives a sense of freedom and flow. Is the LED technologypatentable / protected? Required approvals could delay theproduct piloting phase and thus its launching.
There are tuners, decorators, andgrowers. The interior does notneed to be static, but there can bebutterflies, scorpions, and awaterfall, for example. Legalprotection of design or utilitymodel is applicable.
Implementation, will it work and how easy is the maintenancereally?
It is under development withOrchid Union member EevaKairaluoma
Do the entrepreneurs know anything about plants? We are building contacts and newmarket research wasimplemented.
The marketing team and contacts with retailers. We are building contacts and newmarket research was implemented
The consumer market is difficult, alternatively the focus on thebeginning could be better in the business office sector, wherethere is the need for decoration, but a lack of plant maintenance.The market penetration figures are very optimistic. The startingpoint is the number of households, estimated to be 23 %. Thatis perhaps too high. (I have one, but in our family house areathere are three aquariums out of thirty eight households).
Lower magnitude anyway, only 1% is lot to us. The figure was inTalouslehti magazine. The growthis planned to improveinternationally in the final plan.
Analysis of the market, more facts that support that it exists andcan be reached by the product. Profitability calculations.Marketing and R&D cost appear to be low.
We budgeted more in the finalplan
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Analyze further how many units can be sold at the beginning.Figures were a bit optimistic.
We reduced the amount
CRITICISM GIVEN IN COMMENTS RESPONSEWhile there is market demand, I am less than sure about thesmartness of market positioning
Shift to green design companiesand experts
Has the market study been conducted in different customersegments? Something about plants would be nice. Manypotential customers believe plants are about “nature” not about“technology” in terms of market demand. However plants areall but excluded from the business plan, with the main emphasisput on lighting.
We built contacts with OrchidUnion and interviewed candidatesfor the team who have studiedplant growing.
What about having an interior designer in the team? Niko Venäläinen joined from theuniversity of arts and design
Table 31 Mini Greenhouse responses to the Venture Cup secondroundevaluation
ThirdRound Evaluations
OVERALL GRADEBest/Worst/Median Good/Satisfactory/GoodTable 32 MG overall grade by Venture Cup thirdround evaluation
EV. STRENGTHS DEVELOPMENT AREAS1st Innovative approach to a traditional subject,
home decoration is an increasing trend,market segmentation is well formulated
Market penetration is very optimistic; could ahigher price with lower volume be achievedwithin office segment (comparison withartificial plants)?
2nd Innovative idea, matches a trend that existsin the target market (interior decoration,nature)
Product and production knowledge; thebusiness model requires an excellent design,more startup R&D investment and financingneeded
3rd Innovative idea, product and business modelare well defined
How to achieve rapid growth (resourcesneeded), consumer product always verychallenging to market
4th Concrete product, good marketunderstanding
How to deliver the special plants that can takethe full benefit of the product => significantlimitation to penetration
5th Originality and design ideology –it’screative
Retail and mass marketing are killers. Needsfocus. Distribution should be internationaland niched.
6th Greenhouses indoors –why not. If designednicely, functioning automatic and sold inreadymade packages, they could be morepopular than at the moment
Is the new product enough to create a newmarket, as expected here (especially in the 5yearplan)? No pictures of the designs, excepta borrowed picture of an aquarium (!). Heavyexpectations on market development.
7th Evaluator wrote nothing Evaluator wrote nothing8th A very novel and good business idea. The
business plan is well written and gives agood impression. Also the team seems to becomplete with a different kind of know howand background needed for this business.
The question that rises is the market size.Comparing the potential market to penetrationof aquariums is a good idea, but does it givethe right information? An aquarium is veryoften bought for children like a pet. It staysinteresting for some years and then very often
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forgotten. Mini Greenhouse is sold to adultsinterested in difficult flowers and interiordesign. How to create a lasting advantage?
Table 33 Mini Greenhouse strengths and development areas by Venture Cupthirdround evaluation
Current Comments: There is a lot to improve and a lot of risks. I agree with
the comments, but this was awarded the best plan in the fields of culture, art and
design.
LAYOUT AND SUMMARY
Layout and Summary Final VC Evaluation(Best/Worst/Median)
Comments
Layout gives a good impression Excellent/Satisfactory/Good
Summary contains the essentials ofthe plan.
Excellent/Tolerable/Good
Clear, easy to find key points, butwordy and long.Presentation is too long and lackspictures of interior design aspectsand the led lights.When talking about interior designpictures would be very informative.
Table 34 Mini Greenhouse layout and summary grades by Venture Cup thirdround evaluation
Current Comments: Mini Greenhouse business plan was considered technically
well written in the second round. We continued using the same writing style and
complemented those parts that were considered development areas.
BUSINESS IDEA – INNOVATIVENESS AND CUSTOMER BENEFIT
The Venture Cup gave all the teams checklist questions to develop and improve the
business ideas teams were going to present in their competing plans. How the Mini
Greenhouse thirdround business plan answers these checking list questions is briefly
presented in this section. After the answers there is summarized feedback of eight
Venture Cup evaluators about the business idea presented in the Mini Greenhouse
thirdround business plan.What problem does the business idea solve and what customer needs does it satisfy?Business IdeaWhat are you going to sell and, specifically, what is the customer going to get?
KeyResponse inthe BusinessPlan
Product Our innovative product is a compact decorative plant terrarium forhouseholds. The terrarium can be used in apartments, balconies, offices or otherlimited interiors. It is an appealing interior design element with a functionality of amini greenhouse that enables to grow decorative and useful plants. The terrariumoffers optimal humidity, lighting, and temperature for plants. It combines colorlighting for decoration purposes with the beauty of plants.
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The Business Idea is to sell plant terrariums meant for households, offices andflorists. We design and sell terrariums to plant enthusiasts and florists like membersof Orchid Union and service providers who take care of plants in offices. At a laterstage, we plan to sell it also to volume retailers who sell it to consumers. Weoutsource manufacturing and after sales activities..
User Benefits The terrarium enables customers to enjoy a larger variety of plantsand widens decorative usage of flora. It enables them to grow exotic and demandingplants and to have plants also in places of limited daylight. The product prolongs theplants’ beauty and growth season. Any kind of plants, including herbs andmushrooms can be easily grown. This product can also be used to preserve seasonalplants over winter. Automated control of lighting, heating and humidity secures usercomfort and ease of use. It enables the plants to be left at home alone even for a longtime. The plants in terrarium do not need any external help. The product is especiallysuitable for urban customers who are in a hurry and are missing contact with thenature. The plant terrarium creates a miniature piece of nature that functions as aninterior design element with decorative lights and fashionable form
Table 35 MG business idea answers in the third round of the Venture Cup
Innovativeness & CustomerBenefit
Final VC Evaluation(Best/Worst/Median) Comments
Innovativeness of the idea: Excellent/Satisfactory/Good
Idea matches with customer needs: Good/Tolerable/Satisfactory
Product’s / service’s and/orbusiness models excellence inrelation to alternative solutions:
No Evaluation
Special plants to the product?
Table 36 Mini Greenhouse business idea related innovativeness and customerbenefit grades by Venture Cup thirdround evaluation
Current comments: First customers will be members of the Finnish Orchid Union
as soon as we can get the product tested. The tested prototypes we are going to
market to retail chains and interior designers. There is a building boom in Finland.
Compared to the squaremeter price of a new building, interior design solutions,
including our plant terrarium, are relatively inexpensive. The Japanese have a new
LED plant growing solution for industry, but interior design can be our niche. Usage
of bright colors is a new trend for interiors, in Finland as well as elsewhere. With
plant terrarium, part of the coloring can come from colorful exotic flowers. During
this project, a lot of people have shown interest in growing herbs. They could emerge
as one significant user group.
MARKETING PLAN
The Venture Cup gave all the teams checklist questions to develop and improve the
marketing plans they were going to present in their competing business plans. How
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the Mini Greenhouse thirdround business plan answers to these checking list
questions is shortly presented in this section. After the answers, there is summarized
feedback of eight Venture Cup evaluators about the marketing plan presented in the
Mini Greenhouse thirdround business plan.What kind of consideration is the buying decision of the customer based on?What is the pricing strategy based on?
MarketingPlan
How do you reach the customers?Key Responsein the BusinessPlan
Competitive Advantage According to recent interviews with retailers, innovations relatedto home decoration, flora and consumer market are rare, but highly appreciated. Ourcompetitive aspect comes from the innovative approach to combine the interior design aspectwith a greenhouse type of functionality. We are enabling the easy growing of demandingplants such as orchids and other exotic plants and offering the possibility of growing herbs forpersonal use.There is no greenhouse infrastructure or functionality available for apartments. Greenhousesthat are available are made either for outdoors or industrial use. The existing products lack theinterior decoration aspect almost entirely. We can bring the benefits of a greenhouse to smallscale and indoors use. Patenting the terrarium will protect the product to a certain extent. Thepatentable part is a novel LED control mechanism to be used with plants. Because patents arehard and slow, to get exclusive sales contracts is one way of securing protection, as well asagreements, partnership building and joint activities. We built a competitive advantage by ourbusiness model through own research and development and though wellinterlocked andperformed activities and partnerships.
Compared to existing products, we position ourselves between the currently existing twoedgecases. There are cheap products without any infrastructure and expensive tailormade productsmanufactured to order. We offer a masscustomized product that is easier to acquire and offersthe required infrastructure combined with style and design needed from the interior designperspective. We do not expect to be much cheaper than the tailormade products, but we offera readymade working concept in a shorter delivery time with exceptional design and looks.Mass customization is achieved by using modular components that determine product size.Also, we sell additional valueadded components on top of the product that has a basicfunctionality.
Pricing We expect to use that challenge by modular pricing – we intend to sell an expensiveproduct and also make a reasonable profit from the additional components sold on top of thechamber that has basic functionalities. If a customer is willing to, he can buy our additionalcomponents, such as additional lighting controls, cooling element and automatic control unitsto be used also in other contexts.
The market study identified that a consumer product can have a price of EUR 500 minimum.It was noted, however, that the additional features and components can be sold separately ontop of that. Based on the market study with major retailers and Orchid Union, the differentconsumer types seem to need a “modular” pricing – basic product with minimal infrastructureto provide the cheapestprice product and sell additional infrastructure components on top ofthat according to consumer needs. The basic set, then, consists of glass chamber, irrigation andLED lighting. The components sold additionally are control elements for irrigation, humidity,ventilation, temperature, and radiation qualities. Also, differently decorated sets are going tobe on sale.Distribution Channels The market study interviewed as potential distribution channelsBauhaus, Pirilän Kukkatalo, Plantagen, SOK including Prisma & Multasormi, Stockmann andSuomen Orkideayhdistys ry. From these contacts, all but Pirilän Kukkatalo was interested infurther partnership and becoming a retail channel for the product. Pirilän Kukkatalo does notfit the profile due to the fact that their sales strategy is to offer the cheapest flowers and plantsavailable in metropolitan area. The companies can be reached by Vihermaailma, which offersservices for offices and belongs to Ruohomäki Yhtiöt. The limiting factor is that it is currentlyunclear whether any of these retailers would demand exclusive rights. Most likely they will,but it is a question of negotiations and committed sales volumes then. SOK reaches practicallyanybody in Finland through its different chains.
Table 37 MG marketing plan answers in the third round of the Venture Cup
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Market potential Best/Worst/Median CommentsDefinition ofcustomer segment:
Good/Satisfactory/Good
Realistic estimationof market size:
Satisfactory/Tolerable/Tolerable
Size of the marketpotential:
Satisfactory/Tolerable/Satisfactory
Mapping ofcompetitiveenvironment:
Good/Weak/Good
Marketing strategy(Pricing, customeracquisition,distribution):
Good/Tolerable/Satisfactory
Estimates demonstrate good knowledge of themarket. 23 % penetration for aquariums is not abelievable figure. The initial average retail price of499 is high.Getting 50 % of all Orchid Union members in thefirst year is optimistic.Is aquarium penetration really that high? Goodconcrete analyses?I think that the main issue here is too broad and toodomestic. It would be more interesting to see thedemand and competition for a narrow niche ininternational markets.Customer need is the thing to be verified. Is thismore a niche thing or is the market size reallycomparable to aquarium markets?
Table 38 MG marketing plan grades by Venture Cup thirdround evaluation
Current comments: Everything cannot be known in advance, but everything is
negotiable. Having options and alternatives open enables us to target resources to the
markets that are developing.
IMPLEMENTATION PLAN
Venture Cup gave all the teams checklist questions to develop and improve the
implementation plans teams were going to present in their competing business plans.
How the Mini Greenhouse thirdround business plan answers to these checklist
questions is briefly presented in this section. After the answers, there is summarized
feedback from eight Venture Cup evaluators about the implementation plan
presented in the Mini Greenhouse thirdround business plan.What are the key operations from the point of view of starting the business?What are the critical milestones from the point of view of the company’s survivaland how should they be reached?What operations and milestones are interrelated?What is the critical path?
ImplementationPlan
What immediate decisions should be made?Key Response inthe BusinessPlan
Implementation As students of HUT, the owners of the business idea can utilizecooperation with the HUT Communication and Lighting Laboratories.Communications and Lighting Laboratories at HUT have achieved a method ofadjusting a color temperature spectrum of LED lighting; we can use this in ourplant terrarium.
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The cooperation is currently ongoing in designing the control system for LEDs.The product development is carried out versionbyversion – first the basic, andafterwards the advanced, product version will be launched. Functionality is goingto be increased on the basis of demand, and as we generate sales from initialproducts and gain a reputation to get more funding for the venture.The basic version’s prototype can be manufactured in a few months. The basicversion is going to be assembled from existing components. This prototype isgoing to be designed to satisfy the needs of the pilot customers, members oftheOrchid Union. Taking their feedback into account, the later versions aredeveloped using a usercentered design process. The first version is expected tobe launched in spring 2006. The knowledge on all biological aspects will begained from our pilot customers to satisfy the needs of the customers with themost demanding plants. Implementation of the business plan with the mostimportant milestones is shown in Appendix III. There are glass chambers suitablefor our product, LED lights, and the control mechanism is available, but needstesting in our environment. Major Finnish retailer SOK has shown interest inhelping us to define the first consumer product.
Table 39 Mini Greenhouse implementation plan answers in the third round ofthe Venture Cup
Implementation Best/Worst/Median CommentsBusiness model is implementable Good/Tolerable/ GoodImplementation plan is realisticand credible:
Good/Tolerable/Satisfactory
Growth estimations are optimistic. Thereis not yet any plan how to reach foreignmarkets.It will be a very tough road.Development phase of prototype testingtogether with the specialists is a very niceidea.
Table 40 Mini Greenhouse implementation plan grades by Venture Cup thirdround evaluation
Current comments: The foundation for Finnish Innovations found a Japanese
invention, which is very close to the invention we wanted to patent. So, in the
starting phase, we are going to put more emphasis on the interior design aspects than
the technology. We are going to present the prototype version of the Terrarium to a
board member of the Finnish Orchid Union this summer.
RISKS
The Venture Cup gave all the teams checklist questions to develop and improve the
risk estimations they were going to present in their competing business plans. How
the Mini Greenhouse thirdround business plan answers to these checklist questions
is briefly presented below in this section. After the answers there is summarized
feedback from eight Venture Cup evaluators about the risk estimations presented in
the Mini Greenhouse thirdround business plan.
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What risks are threatening the company?How does the company prepare for the risks and how does it minimize theirnegative impact?What kind of quantitative impact does the individual risks have (different scenarios)?
Risks
How does the company survive if the worst scenario occurs?KeyResponse inthe BusinessPlan
Risk. The rather fundamental risk in the form of competition against terrariumcomes from existing home plants and flowers that grow easily without dedicatedassistance. People used to select plants that can be grown in a normal homeenvironment. However, for these plants, terrarium can offer extended usability:plants can be grown in places of limited daylight (they can moved from window tothe darkest corners of home or office) and limited irrigation possibilities can eovercome because Terrarium takes care of irrigation, even for longer periods of time.
There also are logisticschainrelated risks although we have a product that takescare of demanding exotic plants, the entire logistics chain involved in growing,importing, and transporting such demanding plants might not be able to offer therequired care. The approvals from authorities for a new electrical appliance will alsotake some time (six months maximum) before the product can be sold.Also, it might be difficult to patent the initial product version. Technology risks arerelated to the development of bright LEDs there is not enough practical experienceof using bright LEDs with plants. Experiments take some time and are expensive
Table 41 MG risk evaluation answers in the third round of the Venture Cup
Business model & Risks Best/Worst/Median CommentsDescription of the business model: Good/Satisfactory/GoodInternal functions are focused, decisions concerningpartners and outsourcing are logical:
Good/Tolerable /Good
Essential internal and external risks have beenanalyzed and contingencies have been identified:
Good/Weak/Satisfactory
Realisticity of the sensitivity analysis: Good/Satisfactory/Satisfactory
Table 42 MG risk evaluation grades by the Venture Cup thirdround evaluation
Current comments: Risks can be handled by not making commitments that are
too binding. The success of the product in an actual market cannot be known before
it is actually marketed.
PROFITABILITY ESTIMATION AND FINANCING
The Venture Cup gave all the teams checklist questions to develop and improve the
profitability estimations and financing plans that the teams were going to present in
their competing business plans. How the Mini Greenhouse thirdround business plan
answers to these checklist questions is briefly presented in this section. After the
answers, there is summarized feedback of eight Venture Cup evaluators about the
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profitability estimation and financing plan presented in the Mini Greenhouse third
round business plan.What assumptions is your financing plan based on?How much capital is the company going to require before reaching the critical point(also in the worst case)?What financing sources are going to provide the required capital?What are you offering to the Venture Capitalist?
ProfitabilityEstimation &Financing
What kind of gain can the investor expect and how can it realize its gains?KeyResponse inthe BusinessPlan
According to the plan, TEKES and Keksintösäätiö are potential earlyphasefinancers. They are going to finance 0,2 – 0,4 M€. Venture Capitalists are going tofinance 1,0 M€. We are offering the Venture Capitalist 50 % of the company sharesand a 40 % annual profit rate to the end of 2010. At the end of 2010, the VentureCapitalist can sell its shares at 2,4 M€ to a bigger player.
We presented following table in the business plan:2006 2007 2008 2009 2010 2011
AssumptionsNumber of People (full time eqv.) 2 3 4 5 6 7No of Systems Sold (1000 units) 0,3 1 3 10 33 70Variable Cost per System (€) 140 120 100 80 60 40System Avg. Retail Price (€) 499 399 299 299 299 99Retail Margin (€) 134,18 103,18 72,18 72,18 72,18 21,18VAT / device (22%) 89,82 71,82 53,82 53,82 53,82 17,82Gross margin Starter (€) 135 104 73 93 113 20
Sales Income 82,5 306,5 743 2249 7439 9909 Starter device 82,5 224 519 1730 5709 4200 Additional ware 82,5 224 519 1730 5709
Operating Profit 127 94 480 246 2955 2500 Accum. Op. Profit 127 220 700 455 2500 5000
Acc. Financing needed (1000 €) 253 441 1401 910 0 0
Table 43 Mini Greenhouse profitability estimation and financing answers in thethird round of the Venture Cup
Profitability Best/Worst/Median CommentsEarning potential: Good/Tolerable/
SatisfactoryGrowth potential: Good/Weak/
SatisfactoryQuality and realisticity of the costand profitability calculation:
Good/Tolerable/Satisfactory
Quality and realisticity of incomestatement, balance sheet and cashflow statement:
Excellent/Tolerable/Satisfactory
Quality and realisticity of financingplan:
Good/Tolerable/Satisfactory
The model assumes too high incomeand too low cost at the beginning.More R&D at the beginning, less atthe end.For the near future, the estimationmay be realistic, but, for example, in2011 you have seven employees andturnover is 10 Meuros. Thoseresources are not in balancecompared to your goals.How could they be made muchlarger? Good first cut on valuation.
Table 44 Mini Greenhouse profitability estimation and financing grades byVenture Cup thirdround evaluation
Current comments: The prize money, 9 000 € from the Venture Cup, can surely
be used and a small incubation grant of 10 000 € for companies in business
incubation centers is very likely to be awarded to us also. I have applied for a 60 000
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€ loan from Tekes to help establish the business. However, that tool is not the best
for small businesses such as this, and thus likely to be declined. Finnvera loans are
applicable, such as offered by the new VERA fund for start up companies presented
earlier.
MANAGEMENT TEAM AND ORGANIZATION
The Venture Cup gave all the teams checklist questions to develop and improve the
management team and the organization plans that teams were going to present in
their competing business plans. How the Mini Greenhouse thirdround business plan
answers to these checking list questions is briefly presented in this section. After the
answers, there is summarized feedback from eight Venture Cup evaluators about the
management team and organization plan presented in the Mini Greenhouse third
round business plan.Who are the members of the management team and what essential merits do theyhave in implementing the business plan (education, work experience, success)?What experience and what skills is the management team lacking?What should be added to the team and how are the lacking skills going to be found?How committed to the project are the team members, and what motivates them?What kind of organization does the company have and how is it going to operate?
ManagementTeam andOrganization
What kind of values is the operation of the company based on?KeyResponse inthe BusinessPlan
Organization and Team Values In the starting phase, the Plant Terrarium team hasthree members: Mikko Nykänen, Niko Veneläinen, and Inga MathiesenBuinevitš.Mikko has a background in networking technologies. He has studiedtelecommunications management in Helsinki University of Technology with thefocus on product development and usability. He has five years work experience froma local private patent agency. Mikko is concurrently writing his Master’s Thesis onproduct development and launching the current Plant Terrarium. Niko is studying atthe University of Art and Design in Helsinki and has a special interest in junglerelated design concepts. Inga has studied business administration with the focusbeing on marketing, strategy and international business. Inga has work experience inthe financial sector; she worked with open investment funds in Trigon Capital, theBaltic Investment Bank, headquartered in Tallinn. She has also worked as a creditanalyst and sales agent with Connectus Ltd, in Tallinn. Currently, she holds aposition of Business Analyst in Nokia Customer and Market Operations. During herstudies in HUT to get her second degree, Inga has been involved in a startupbusiness monitoring and casewriting project (Shadow Project). Inga is currentlyfinalizing her Master’s Thesis in furniture retailing written in 2004 in the area ofproduct launch and strategic segmentation of the market. Given the small team,everyone is involved in everything, but the responsibilities are divided on the basisof members’ background: Mikko taking care of technical, technology and supplierrelated issues and innovation, Niko takes care of product outside and inside design(composing a complete solution of living elements), and marketing towards theinterior designer and architect community. Inga is responsible for sales andmarketing, business setup, financing, and value chain coordination.
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All team members can be characterized as hardworking and committed. Ifconsidered individually, Mikko is hardworking and always punctual with deadlinesand promises, Niko’s strengths are in creativity and imagination and Inga is good asan ideas initiator, coordinator and organizer. While Niko joined the team justrecently, Mikko and Inga had been working together on the Terrarium idea for overtwo years. Another potential recruit is a biologist familiar to the conditions neededfor different plants. We have a strong candidate to become our biologist: SatuSimpanen. She is doing her Master’s Thesis in plant growing science and greenhouseprocesses. She has conducted growing experiments for her thesis in Viikki laboratorygreenhouses. She is willing to search and provide us with the information we needabout the conditions required if we decide to take her in our team.
Table 45 Mini Greenhouse management team and organization answers in thethird round of the Venture Cup
Organization Best/Worst/Median CommentsOrganizationhas all requiredcompetencies:
Excellent/Tolerable/Satisfactory
Good concrete ideas on parties.Service providers working on ad hocbasis is not a workable solution.Sales experience and knowledge ofconsumer markets would be beneficialIf the project starts well, the organizationwill soon need more sales power.
Table 46 Mini Greenhouse management team and organization grades by theVenture Cup thirdround evaluation
Current comments: We have also contacted people in different organizations
willing and able to cooperate with us with this terrarium project. Our success in the
second phase of the Venture Cup has made people interested. With some financing,
we will surely be able to buy all the necessary skills for the team.
7.4 CONCLUSIONS FROM THE VENTURE CUP The aim of this study has been achieved. The Plant Terrarium business plan was
successful in the second phase of the Venture Cup where it won the best available
awards – 2000 €, which was awarded to the ten best business plans, and the
additional 2000 € prize which was given for the best business plan in the field of arts
and design. However, the feedback from phase two gave a lot of areas to improve. In
phase three, the team was stronger, further market studies had been done and growth
and profitability strategies had been made more ambitious by an internationalization
plan. The final thirdround business plan won the award for the best business plan in
the field of art and design and 5000 €. It also won office space for half a year in the
Arabus incubation center. As a reference in the beginning of this chapter, I have
mentioned a study about the companies that have been successful in earlier Venture
Cups, and also some example companies.
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8. FUTURE OPTIONS
8.1 TECHNOLOGICAL OPTIONS
It seems that in the near future PLC technology will be too complicated for the
plant terrarium product. Later on, when utilization of the smart home concept
proceeds, it will be possible to include plant terrarium there with PLC technology. At
the beginning, the controls of plant terrarium devices are most practically
implemented by timers and controls reactive to the environmental conditions.
Growing plants with LEDs is on the edge of becoming economically justified.
The technology is still new and a reasonable amount of successful tests need to be
performed before the product can be offered to the open market. Tests should control
the technical performance and reliability, the performance with plants and usability
issues. To undertake experimental marketing with the plant terrarium, one option is
to test and educate the market in terms of the plant terrarium concept with the
solution of having more conventional lighting. The radiation power / price ratio of
LEDs available is increasing on a logarithmic scale. The current energy efficiency of
LEDs is weaker than with conventional fluorescence tubes if a panel is formed from
individual LEDs and used as plane radiator. However, LEDs enable non
conventional positioning of lighting and thus enable energy saving. Certain
commercially available components give a good base for development of the plant
terrarium lighting solution. Philips Idman has a product line of LEDs for plant
growing, which is still quite inefficient. The MKillumination company is offering
components for decorative LED solutions, has a light inexpensive power supply
converting the mains power directly to the DC current required for 1,5 m long LED
chains. A research and development effort to adjust the MKillumination power
supply to the one which an LEDlights plant terrarium requires would be beneficial.
For humidity control there are ultrasound moisturizers on the market. However,
according to my quick tests, if the terrarium is well insulated, the evaporation from
the water pool inside can keep the humidity over 50 %, if that is enough. In addition,
the area of the water pool surface can be controllable to adjust the humidity of the
air. For automatic watering, there is an inexpensive series in the market. The system
is based on a sensor reactive to the humidity of the ground and no external power is
needed. It turned out that temperature control is important for the orchids, but not in
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the direction I was expecting at the beginning. Many orchids demand cooler air at
nights. The plant terrarium can be cooled with peltier elements. A Russian company
Kryotherm, for example, is offering airtoair cooling assemblies and a free design
programme to build a peltier cooling solution from components.
The terrarium cabin itself can be made mainly from glass and glue. The
insulation can be offered with a multilayer structure with insulation between the
cooler plates and the glass walls. Most of the electronics can be hidden above and
below the glass cabin and also behind the insulation walls. The conditions required
for the orchids inside the plant terrarium are well presented in a new book by Katja
Uski, presented in the reference list.
8.2 COMMERCIALIZATION OPTIONS
To improve the applicability of LED lighting for plant research cooperation with
Terra Rio Ltd, Orchid Union and the TKK Lighting laboratory and suitable industrial
partners such as MKillumination, Philips Idman, Osram or Laitilan Elekrovalo
should be strengthened. Given that the financial resources of Terra Rio Ltd are
limited, the most suitable role for it is a role as a customer for a stronger industrial
player. Terra Rio can contribute to the research process by bringing in a user
centered design process, because Terra Rio Ltd is developing its products in
cooperation with its future customers. There is interest in the plant terrarium product
concept in different parts of the Terra Rio value chain. However, the prices
component suppliers are currently charging are higher than expected and the prices
the interviewed retailers are hoping are lower than expected. The answers to those
challenges are developing ways to utilize less expensive technology, some examples
of which are mentioned in the technological options, and focusing on customers that
are willing to pay more. The customers can be orchid hobbyists who are willing to
pay for their hobby or normal consumers willing to spend on interior design. The
customers can also be interior designers of new, renovated or styled interiors.
However, it is unavoidable that the prices of components are essential when
choosing the commercialization method. Furthermore, these prices determine
whether the commercialization is possible at all. The functions and components
chosen affect the production cost of the product marketed. If a product with a useful
set of basic functions can be sold at a reasonable profit, the remaining functions can
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be sold as additional modules. If the component and production cost is high, Terra
Rio has to use direct sales in order to get profit for itself. The lower the component
and production cost, the longer the delivery chain after Terra Rio. It is likely that the
production cost will be high in the market early on, while later it will decrease when
the amount of sales increases. Thus it seems the best practice is to start with direct
sales to orchid hobbyists, business–tobusiness florists and interior designers and to
continue with distribution partners when the demand increases. In the case of the
component and production cost being very high, there is an option to make a
functional product with a fancy design and apply for legal protection for the design.
Then the design can be sold to a bigger company.
The Venture Cup encouraged planning an international rollout. Without having
an internationalization plan in the Venture Cup business plan it would have been
impossible to predict a high enough profit potential. To be tempting for venture
capital investments, market potential has to be at least in tens of millions. Maybe to
encourage me, former Innopoli business advisor Petro Suvanto expressed the opinion
that the plant terrarium product concept could have a market potential of 100 Me.
Other external advisors have been positive, but more skeptical, towards the
plant terrarium concept. The teacher of entrepreneurship at TKK, Peter Kelly,
pointed out that the plant terrarium concept comprises many dimensions and, from
the point of view investors, is a “magic sauce”, in contrast to an invention in a
narrow technological niche. The Foundation for Finnish inventions was interested in
cooperating until they found a commercially available Japanese plant incubator
utilizing LEDs to grow plants. Tekes found the plant terrarium development project
fundable in principal, but denied Terra Rio Ltd’s application because of the lacking
portion of its own investment. Orchid hobbyists were divided in their interest. Some
were interested in the utility the plant terrarium concept was going to offer, but some
were not willing to mix technology with plants. All herb growers I have talked to
have shown interest, but they seem to be more sensitive to the price than the orchid
people. Interior designers are more interested in the plant terrarium product than
businesstobusiness florists, who value big plants in the lobbies. For all customers, it
is essential to accept Plant Terrarium as an interior design element, rather than just a
technological device, in order to accept the fact that its price is higher than that of a
massproduced product.
122
9. CONCLUSIONS
The objective of the study has been achieved. The evaluation process of this
study, involving the Venture Cup business plan contest, has awarded the study, i.e.
my business plan based on my ideated plant terrarium concept, with money prizes,
office premises and by naming the team I formed and led in the Venture Cup as the
best team of the year in the fields of industrial arts and design. The study has shown
potential commercialization options for the new research results in LED and PLC
technology. In addition to the awarded plant terrarium, the improved home lighting
system presented in Chapter 4, for example, is still a potential business case, despite
the US patent 4 962 687 limiting the options, but expiring in 2008. Here ideated Talk
Chat concept can also be a business case.
The Venture Cup jury evaluated our business idea and design ideology
innovative and creative, showing the capability of the innovation tools I presented
here, and also my capability to utilize them. Product, business model and team
received good feedback on many of its dimensions, showing that I have presented
and understood the essentials of the theory needed for commercialization of research
results and new business formation. The third fundamental requirement for new
business formation, in addition to a management team and business plan, funding for
marketing and rapid growth, is a challenge, as it is for most of the Venture Cup
awarded business projects. The investors are willing to see justifications for high
enough market potential, as well as for significant own financing from the company.
According to the novelty study for my plant terrarium product concept, there is a
Japanese plant incubator utilizing LED lights in the wavelengths I was going to use
and adjusting the conditions in the growth cabin just as I have planned for the plant
terrarium. That limits the possibility of legally protecting the product concept and the
innovative step it would have otherwise been possible to show to potential investors.
However, it also shows that it is realistic to implement the plant terrarium presented
here. The fact that the appearance of the Japanese incubator was not a matter of
interior design, but designed for industrial purposes, and in Japan only, show that it is
not any kind of entry barrier to the market in the marketing sense.
.
123
10. DISCUSSIONS
The target of the study, achieving an awarded business plan showing a way of
commercializing current achievements in the research of bright LEDs and/or PLC,
has been met. The research of Antti Kari presented on page 96 shows that there is
strong correlation between success in the Venture Cup and reallife performance.
However, although the starting point was LED and PLC technologies, the role of
PLC technology in the awarded plan played only a small role. LED technology is
currently still relatively expensive, but its lumens / euro prices are dropping, as
would be predicted by the Moore formula, offering a good commercial potential for
an LEDlit plant terrarium, not immediately, but in the coming years. The utilization
of PLC technology in the Plant Terrarium concept can come to fruition in the future
if the introduced Home Network Protocol spreads well and offers the plant terrarium
a widely spreading control interface in a smart home environment.
The precision of financial planning is not exact in business plans, especially on
the revenue side, and thus justifications for hockeysticklike growth expectations are
required. The risk financers want to multiply their investments in order to
compensate their losses elsewhere. The result of the study showed the capability of
the used ideation process and methods to assist in the ideation of valuable concepts.
The used selection method, even when being numerical, is somewhat subjective in
the phase where the qualitative features get numeric values. However, it is a good
practical tool here in idea evaluation, which is not an exact science in the first place.
There is good business potential also in other successful candidates in the ideation.
The ideated Talk Chat Concept for Seniors, or other special groups, presented in
Chapter 4, may have good potential as an additional service in the VoiP calling
system. Also, the idea of a light and scalable system for providing decorative lighting
for homes and offices by PLC and LED technology is still a potential business case.
This study has successfully combined the dimensions of the planned innovation
university – technical, commercial and design. Thus, by continuing research and
development cooperation with Terra Rio Ltd, the company formed to implement the
discussed awarded business plan, TKK can develop cooperation between the
dimensions of the planned innovation university and perform its third mission of
technology transfer and encouragement of entrepreneurship.
124
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Conference ProceedingsAMIRSHAHI, P., KAVEHRAD, M. 2005. Medium Voltage Overhead Powerline BroadbandCommunications; Transmission Capacity and Electromagnetic Interference: The Pennsylvania StateUniversityPINHO, P., MOISIO, O., TETRI, E. HALONEN, L. Photobiological aspects of crop plants grownunder light emitting diodes TKK, Espoo: CIE Symposium 04, LED light Sources. PhysicalMeasurements and Visual and Photobiological Assessment, Tokyo, Japan pp 7174
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APPENDIX I, SOME TRIGGER QUESTIONS FOR SYNETICSTRANSFERMove subject into a new situation. Howsubject can be converted, translated,transfigured?
EMPATHIZESympathize with subjectWhat if subject has human qualities?Relate to subject emotionally, subjectively
ANIMATEMobilize the visual and psychologicaltensions. Control the pictorialmovements and forces. Apply factorsof repetition and progression
CHANGE SCALEMake subject bigger or smaller, Changetime scale seconds, minutes, hours, days,weeks, months, yearsChange proportion, relative size, ratios,dimensions
SUBSTITUTEExchange, switch or replace. Whatother idea, image, or material can yousubstitute? What alternate orsupplementary plan can be employed?
COMBINEBring things together, Connect, arrange,link, unify, mix, merge, rearrange.Combine ideas, materials and techniques
ISOLATESeparate, set apart, crop, detachWhat element can you detach or focuson?
FRAGMENTATESeparate, divide, split, dissect. How tomake it appear discontinuous?
HYBRIDIZECrossfertilise wed subject with animprobable mate. What would you getif you crossed a ___ with a ____?Crossfertilise color, form and structureCrossfertilise organic and inorganicelements. Crossfertilise ideas andperceptions
CONTRADICTContradict the subject's original function.Contradict visually and intellectually, yetremain structurally integrated. Contradictlaws of nature such as gravity, time,human functionsContradict normal procedures, socialconventions, ritualsDeny, reverse
APPENDIX II, ENTREPRENEURIAL UNIVERSITIESThe following picture describes an example from Sweden.
Evolution graph for path from idea to a company in Chalmers School of Entrepreneurship.
In Sweden at Chalmers School of Entrepreneurship students study to Barchelor’s Degree in
order to have basic scientific background and after that they start their own business plan
development and their course program is tailored according to the needs of the business plan. The
best business plans of the students are financed by Chalmers Innovation system preseed funding to
become start up businesses according to the process of picture below (Sjölander, 2005). The process
presented continues from the idea to patenting and company start. Closer look to patenting and
company starting process overall is given in the financial planning section 3.4.
The chart in the next page shows how they evaluate commercial potential of a business idea in
the University of Waterloo. Evaluating idea’s potential to bring money to ones laboratory and to ones
own use is needed for decision to continue commercialization effort or not. If the selfscreening in
the laboratory gives an impression that they may have a very good idea university’s
commercialization experts opinion is asked. Positive sign drives to putting strong effort to reviews of
related technologies and literature to have enough to feed in for strategic evaluation. Technology,
market and legal environments are separately analyzed.
CHART TO EVALUATE RESEARCH ORIGINATED BUSINESS IDEAS
Figure xx The chart of Waterloo University to evaluate research originated business ideas
Technology environment consists in addition to technical structures the processes to develop them,
and processes to use them. In the market environment cost for the idea development and
implementation is evaluated. Markets are evaluated in order to find if there are enough potential
users and revenue sources having some need that can be satisfied with the idea at hand. Perceptions
of stakeholders in the value chain of the idea are also evaluated. And that includes market research
among potential customers. Knowing all this aspects enables doing the final evaluation with co
operative industry experts if needed and thus having Conclusions and Recommendations for future
actions (McNaughton, 2005).
APPENDIX IIIA, VALUATION METHODS
THE DISCOUNTED CASH FLOW METHOD (DCF)
The DCF method uses these to determine the value of the business, using the total of the discountedcash flows minus the debt.
1. Determining the current value of future cash flowsa) Deccide the period for which you can make reasonably certain forecasts of yourcash flow
(forecast period). For startups this would typically be a period of 5 to at most 10 yearsb) Determine the free cash flows for these years. These are the same as the operational cash
flows indirectly derived for the business planc) Set a discount rate for each year that reflects the risk level. This rate should be reduced by 5–
15% per year in subsequent years, as the initial risk level will fall continuously (e.g.: r1 =65%, r2 = 55%, … ). At the end of the forecast period, the rate would typically not be morethan 10–20%.
d) To set the discount factor for each year, use the general formula:
Discount factor =( )tri +
1 where r = discount rate in percent & t = the year in which
_ e.g. the cash flow occurs
In our example, the discount factors for the first years are:65,01
1+
,( )255,01
1+
,( )365,01
1+
e) The current value of the free cash flow for each year is given by multiplying the free cash flowby the discount factor for the year in question.
2. Calculating the continuing valuea) To take account of the cash flows after the forecast period, what is known as a continuing
value is used. This is approximated with the following formula:
grgFCF
FW tt −
+=
)1(
where FCFt = free cash flow at the end of the last forecast year (in theexample t = 5), r = discount rate, and g = annual rate of growth of the cash flow for thesubsequent period (in the example 6%). As this continuing value applies for the end of year 5or the beginning of year 6, it must be discounted with the appropriate discount rate (r) for year5, so you should multiply the continuing value by:
525,11
3. Determining the actual value of the business (“equity value”)The value of the business is the total of all the discounted cash flows during the forecast period plusthe continuing value minus the debt.
MULTIPLES
The value of the business is often also approximated on the basis of comparable values fromestablished businesses, known as multiples. Frequently used multiples are the price/earnings ratio(PER) and the market value to sales ratio.
3. Determining the future value of the business using multiplesa) Deccide the period for which you can make reasonably certain forecasts of yourcash flow
(forecast period). For startups this would typically be a period of 5 to at most 10 yearsb) Search the market for companies as like your business as possible, in terms of sector, product
range, risk, growth rate, capital structure, and cash flow forecasts. Good sources are the annualreports of listed companies, or the analysts’ reports of banks.
c) For the comparable company, form the desired multiple for the year in which it was listed onthe stock exchange: for example the PER. It is a necessary condition for using the PER thatthe company is profitable.
GPPER =
, wheresharesofno
profitnetG__.
_= = earnings/share, & P = current stock price
If you have identified several companies, you can form an average. Consider for what reasons, if any,your multiple might be higher or lower in the year of stock exchange listing and if necessary, adjustthe multiple. Multiply the net profit shown in your business plan for the time of the investor’s exit by the
comparable PER. The future value of the business (FV) is PER x net profit. Alternatively, use other multiples , e.g
isalesequitytheofvalueMarketFV
_____
= x sales_j, where i = comparable business & j =
_ your business or
""_______
clicksiofnoAverageequitytheofvalueMarketFV = x no of j “clicks” per week
Possible multiples result from the relationship between the market value of the equity and thenumber of customers or staff, or the R&D costs.
2. Discount the value of the business to current valueThe calculated figures represent the value of the business in the year of exit of your investor (e.g.year 5). Set a discount rate that reflects the risk invoked, r, and calculate the appropriate discountfactor e.g.
( )565,011
+
The current value of the business (“equity value”) is reached by multiplying the calculated futurevalue of the business by the discount factor.
APPENDIX IIIB, MAKING AN ACCURATE ESTIMATE
Estimating is an important part of the planning and decisionmaking processes. This applies to both
the startup and the growth phases ofbusinesses. Stick to the following principle: “It is better to be
approximately right than precisely wrong”. It is better to produce a roughly accurate estimate, than to
calculate to several decimal points a supposedly exact figure that cannot possibly be right given the
uncertainty in the assumptions. This applies in particular to estimates of the size of a market or
customer segment. Some helpful hints when estimating:
a) Start from a solid basis: there may be many unknowns, but if you use easily verifiablefigures as a basis, you will build your estimate on solid foundations
b) Follow a logical path: the logic of an estimate should be clear – there should be no breaksin the chain or unspecified assumptions
c) Compare your sources: wherever possible, check information, such as statements in aninterview, against other sources
d) Be creative: the shortest distance is not always a straight line. For example, if one value isunknown, try to find a substitute value that relates to the one that is missing
e) CheckCheck for plausibility: for every estimate always ask yourself: “Does the resultactually make sense?
A SAMPLE ESTIMATE
How many disposable diapers are currently used per day in the Netherlands?
Possible procedure:a) Basis: the population of the Netherlands is 15.6 million (Centraal Bureau voor de
Statistiek)b) Assumption: an average child wears diapers for 2 years (ask parents)c) Basis: average life expectancy in the Netherlands is 77 (geography textbook)d) Calculation: at a rough estimate, the number of Dutch diaperwearing children is 2/77 =
2.6% of the population, or 405,000 childrene) Refinement of assumption: the population is not distributed evenly across agegroups,
since the current birth rate is relatively low and the number of people per age groupdecreases with increasing age. We assume that these effects roughly cancel each otherout, and account for this uncertainty by choosing a range of 385,000425,000 diaperwearers.
f) Assumption: daily consumption of diapers (ask parents again): 46 diapersg) Result: estimated average daily consumption of diapers in the Netherlands
= 1.52.6 million, (Actual figure: 2.0 million)
APPENDIX IV, GOVERNMENT LOANS AND GRANTS
Under the Finnish innovation system public grants and loans for business establishment and R&D
are quite widely available if the entrepreneurs can finance a portion, which is usually of the same
magnitude as the public grants and loans. TEKES (Tekniikan Edistämiskeskus, the National
Technology Agency) is the main public financing organization for research and development in
Finland. TEKES finances industrial projects as well as projects in research organizations, and
especially promotes innovative, riskintensive projects. TEKES offers partners from abroad a
gateway to the key technology players in Finland. TEKES’ view related financing sources for new
ventures is presented in figure 18 in the figure 19 in the main document and described more detailed
below.
According to material from TEKES and discussions with them there are several sources of
public financing which are sharing the risk of an entrepreneur. These financing instruments each are
for some specific purpose. Entrepreneur has to make a plan for TEKES about using a certain
instrument. The plan should be in a project form and the project should fill the requirements of that
instrument. One requirement usually is self financing. If it is asked it varies from 20 – 85 %. When
the financing is approved money is paid to the entrepreneur after the project or some part of it.
Actual spending is compared to the plan before the money is paid to the entrepreneur. Since the
purpose of TEKES is technology development they focus to financing only it and other company
costs have to be financed by somebody else. Anyway there are a few TEKES instruments which are
for general business development.
TULI (TUtkimuksesta LIiketoimintaa, from Research to Business) is a fast and flexible
instrument, by which expert services for developing new research oriented business can be bought.
The maximum TULI financing is 10.000 € + value added tax per project and it exceptionally is 100
% grant. Typically TULI has been used to draw up business plans or parts of them, market analysis
or researches, financing plans, evaluation of the level of technology or the competitive advantages,
novelty studies or other actions preceding patenting or other protection, studies about barriers for
production competition analysis, partner mappings or agreements or other jurisprudence. TULI can
not be used for the salaries for entrepreneurs. In this study we used TULI for market analysis and for
doing shareholders agreement for a company to implement plans of this study, Terra Rio Ltd, where I
am the chief executive and one of the main shareholders. The process description part of this study
presents more details about the market research.
There are also some other TEKES related tools for more general business evaluation and
development. Start up phase equity loan (Perustamisvaiheen pääomalaina) is an instrument of
TEKES (TEKES 2005). LIKSA is a instrument offered in cooperation with TEKES and SITRA
(TEKES 2005, SITRA 2005). SITRA (The Finnish National Fund for Research and Development)
describes itself being an independent public foundation under the supervision of the Finnish
Parliament. Its activities are designed to promote the economic prosperity of the Finnish people. The
methods of SITRA are, research and training, innovative projects. business development and
corporate funding. SITRA’s activities are financed by the yield from its own endowment capital and
the return on its venture capital investments (SITRA 2005).
TEKES’ reasoning for the start up phase equity loan is the huge challenge the new technology
companies meet when searching financing in their early phase. Start up phase equity loan is offered
for founding a technology company targeting to growth. The loan is for risk sharing and lowering the
entry barrier of founding a new company. Start up phase equity loan can be applied by limited
companies from Finland, which are going to be founded or are newly founded and whose business
has not yet started. The business idea of the company should be based on new technology and
knowledge or innovative application of technology. The people who are working in the company
should own at least third of the company. Start up phase equity loan is for financing a project by
which business operations of the company is started. Financing is tied to project costs, which can be
moderate salaries of the entrepreneur and workers, devices and services bought. Loan can be
approved for 80 % of acceptable costs of the start up project, for 100 000 e at maximum. The interest
is about 4 % and no guarantees are needed (TEKES 2005). Terra Rio Ltd applied that loan and the
problem was that the loan is tied to preparation costs of product development, when we wanted to
have a version of the complete product by that amount of financing. Furthermore the one year time
limit of the project where the start up phase loan should be used is a problematic for Terra Rio. We
would rather like to tie our spending to the actual progress in the product and market development.
LIKSA is a joined project financing of SITRA and TEKES for acquiring information, and
services, from Finland and abroad, related to commercialization of technology projects. The result of
the project is a high quality business plan being the base of the financing decisions in the future
(SITRA 2005). LIKSA, is for start up technology companies, people who are founding a technology
company and companies who are entering the phase of rapid growth. It is meant for refining the
business plan. Maximum LIKSA financing is 40 000 € out of which, at maximum, 35 000 € is
approved for expert services and 5000 € for the costs of a process consult. The service is managed by
technology centers and in TEKES’ point of view it is a tool to help for example successful TULI
projects to get further (TEKES 2005). Later it will be usable also for Terra Rio Ltd, when our
product development have progressed enough to require a deeper study of our markets or when if
there is a ready market and we want to fasten our growth LIKSA can be used a project to look for
venture capital financing.
In SITRAs point of view LIKSA is a part of the PreSeed services. These are for fastening
business creation. PreSeed service is a process for supporting good business ideas getting equity
financing. PreSeed service has three tools: LIKSA, INTRO and DIILI. INTRO is a market place
which presents early phase companies to equity investors as a target of investment. The basic
requirement is a convincing business plan and a balanced team which is ready to commit to the
company. Financing applied through INTRO is mostly based on equities of private persons. SITRA
is ready to share the risk and responsibility by participating to the joined investments of private
investors. In addition to the capital the investors offer there knowledge and skills in controlling the
business of the company. DIILI is a channel to the INTRO market place. Through DIILI the
entrepreneur can found experienced business experts, who are ready to share the risk as an
entrepreneur. Recruiting occurs by “sweat equity” principle, meaning that work is counted as equity
investment when dividing company profits. There business expert trade their knowledge to business
ownership, often related to the target. Through DIILI people looking for a new carrier commit to be
employed by entrepreneurs and are ready to invest their money in addition to their time to the
company as their partners (SITRA 2005). In the future Terra Rio Ltd needs both entrepreneurial
people and financing. So INTRO and DIILI seems to be worth of trying in the future of my
company.
APPENDIX V, LED CHAMBERS FOR SCIENTIFIC USE
German Plant Climatics Ltd. States on its webpages on September2005 that their supplier Percival offers the only commerciallyavailable plant growth chamber that utilises Light Emitting Diodes(LED's) as a sole light source. However, that is not entirely truebecause there is, among the others, a Japanese product presentedcloser in the next chapter, which has similar functionality and whichThe Foundation for Finnish Inventions found in its novelty study onApril 2005. That product is on sale only in Japan, but there are alsoother products as can be seen later in this Chapter. Percival’s systemhas been designed to provide exceptional spectral quality with highirradiance for plant physiology applications and phytochromeresearch.
Features of the German product
• Lamp bank with six free combinable LED modules of470, 670 and/or 735 nm
• no spectral contamination
• precise control of irradiance from 1% to 100%
• Specially designed interchangeable lampbank (easyreplacement of LED lampbank with an optionalfluorescent/incandescent lampbank)
• Lights are thermally completely isolated from the growthenvironment
• Upward airflow through a perforated diffuser floor
• Air circulation speed is adjustable
• Very low vertical temperature gradient
• Easy programmable and flexible controllerOptionsadvanced Intellus controller, recorders, interchangeable fluorescentlampbank, CO2. Each chamber is handcrafted and Customisedmanufactured.
Space projects. Plant growing LED chambers from an Italian company, Acies Instrument., are
utilized in European Space Administration (ESA) projects. Plant growing LED chambers of an
American company, Quantum Devices Ltd., are utilized in “United States Manned Space Program”.
Any hints about the relation of those projects were not shown. Prior to the development of the
wavelength specific LED lighting systems, scientists were faced with the arduous task of trying to
filter out all of the unwanted spectral energy from a given photon source. This often resulted in a
significantly reduced photon energy level at the wavelength of interest.
According to Quantum Devices, it has been estimated that more than 80% of the energy load found
in most common life science environmental chamber applications is the result of attempting to
remove the unwanted IR energy imparted by the light source.[xx] It is reasonable to believe that,
because when thinking about any other lamp than LED light, they are mostly emitting warmth.
Quantum Devices further states that the solid state monolithic lighting technology was developed for
the United States Manned Space Flight Program to provide and energy efficient monochromatic light
source for illuminating the life science research habitats on board the Space Transport System (STS)
and for future habitats being developed for the International Space Station (ISS).
The European Space Administration (ESA) project is for setting up of a complete, lightweight
sensing system for monitoring the ambient conditions of plant growth in space missions. A complete
sensor system will be developed, basing on a deep knowledge of plant needs, and on the typical plant
behaviour in stress conditions. A system below is utilized in the experiments.
ILLUXIT light system –to provide equilibrate amounts and quality of light forplant photosynthesis support, exploiting LED technology.The plant facility is illuminated by means of theIlluxit light system, developed by Acies Instrumentalong with University of Torino scientific andtechnical support.
There is a 1 cubic meter growth chamber,thermostatable and illuminated with the IlluxitLEDbased light system.
Regulation of temperature was provided byconventional thermocouple, whereas Illuxit wascontrolled by a computer via WEB connections.(see ACIES Report for details). A WEBCamprovides realtime images of the internal PGFillumination.
LIGHT PARAMETERS
The software developed by ACIES srl providesuseful tools in order to vary light intensity andduration during the circadian cycle. In order toevaluate the light intensity of each wavelength as afunction of distance from the leaf surface, thePhotosynthetically Active Radiation (PAR) wasmeasured by means of a commercial PAR sensorand expressed as micromoles per second per squaremeter (mmol s1 m2).
The following figure shows the light intensity foreach wavelength as a function of the distance fromthe leaf surface:
The light system is based on two wavelengthscentered on the maximum peak of chlorophyllabsorbance (blue and red) and gives the appropriatelight quality and quality for ideal plant growth. Inorder to evaluate the potential of the new IlluxitPGF system several plant species have been tested.
http://www.ient.it/users/checs/checs site/illuxit.html
The American product, on September 2005, is almost similar and it is described according tofollowing:
CERES 2010 has combined the best of terrestrial and spaceenvironment technologies into a completely solid state table toplife science environmental chamber that uses less electricalenergy than most household microwave ovens. The CERES2010 energy efficiency is a result of combining severalinnovative technologies developed for the United StatesManned Space Program into one energy efficient compact unit.http://www.quantumdev.com/
These technologies include the SNAPLITE solid state modularLED lighting system, the solid state thermoelectric heating andcooling modules and the solid state hygrothermoelectrichumidity control system. All of the systems have been designedto be monitored and controlled by a simple but powerfulcomputer interface that can be driven by a small laptopcomputer. The innovative control software is user friendly andredily adaptable for most life science applications.A new innovative solid state lighting system developed for theUnited States Manned Space Program is now available toreplace the high thermal profile of conventional lamp systemsused by the environmental chamber industry for life scienceresearch.
Light Output: The SNAPLITE is constructed with the latest stateoftheart high efficiency Light Emitting Diodes(LEDs). Each 15 x 15 cm (6 x 6 in.) module has a irradiance power output that is continuouslyvariable from 0 to 400 umol/m2 /sec.
SpectralQuality:
The SNAPLITE monochromatic spectral quality is determined by the selection of wavelengthspecific narrow band pass LED die. The half power spectral bandwidth is typically +/ 15 nanometersof the peak wavelength.
BichromaticSpectral Output:
Each SNAPLITE module has been designed to accommodate two separate channels of wavelengthspecific LED die in order to provide the means to produce a bichromatic spectral output.
ComputerInterface:
The power of the irradiance and the ratio of spectral mixing can be addressed and controlled in eachof the SNAPLITE modules through a patented Analog Power Buss (APB) distribution system. Eachchannel of the APB can be addressed through convenient BNC connectors provided on the mainpower supply. The APB is available in two building block formats, 1 to 9 SNAPLITE modules and 1to 18 SNAPLITE modules.
Pulsed or FlashOperation:
The SNAPLITE APB has been designed with an innovative feature that allows both channels to bepulsed or flashed independently. This feature has broad applications for florescence or geneexpression research. The pulse time has been designed to be computer controlled and has aminimum response time of 0.2 sec.
The Japanese INS96 Incubator controls four essential environmental factors –light, temperature,
humidity, and CO2 concentration – for plant cultivation and tissue culture. Employing LED as the
light source, this system can provide flexible control of the quality of light from wavelength to pulse
emission that is not easy to control by fluorecents lamps or highpressure sodium lamps.
Additionally, there is a software that allows for intensive supervision of multiple units with one PC
in order to provide plant cultivation researchers with full capabilities.
Incubator for plant cultivation INS96 (Only sale in Japan)Optical Environment Control with LED Color (Wavelength Selectable).You may select emitting color(s) (wavelength) appropriate to your researchsubject since emission spectrum of an LED is narrower than that of other lightsources such as fluorescent lamps or highpressure sodium lamps..
The LED spectrum is mostly compatible with the lightabsorption peaks ofpigments related to plant photosynthesis.
Pulsed Emission by Frequency. It is known that pulsed light irradiationincreases the efficiency of photosynthesis.LED can light in pulse because LED responds quickly.Taking advantage of this characteristic, various waveforms can be modulated.
Lighting Intensity Control by Voltage Level. Since LED are microscopicilluminants, their brightness changes with a slight difference in voltage. The
High Accuracy Humidity Control. Drying functions by a Peltier device andmist supply with ON/OFF control are equipped.
Intensive Control with only one PC. Up to four units are centrally controlledby one PC, and the units can be according to your plans.
CO2 Control with Solenoid Valve. An optional CO2 control unit can beinstalled.
Easy Scheduling. The four environmental factors can be set up and changedindividually according to parameters, and sequence programs in units can beinstalled on time schedule. luminous power of each color can therefore beminutely controlled with voltage adjustments. This excellent control functionallows for the irradiation of only the required light in the necessary quantitywhile conserving energy.
Moderate Temperature Control. Peltier device is employed for moderatetemperature control.
Incubator – LED Lighting panel Option – CO2 concentration control unitOption
The light source is placed outside a thermostatic chamber, which preventsemissions from thermally influencing in a chamber.
Standard Emission ColorsWhite/Blue (475 nm)/Green (525 nm)/Red (660 nm)/Farred (735 nm)Note:Please inquire for combinations or other emission wavelengths.
Pulsed Emission by Duty Ratio. The duty ratio per color can be set. TheON/OFF ratio in one wavelength cycle can be changed for each color within apanel.
APPENDIX IX, REJECTED IDEAS
Queuing is frustrating and boring. Efforts to make it smoother is likely to add customer comfort.
Considerations to resource needs of the project however killed this.
Our Force Field analyses on the Dynamic Place to be seated and on the Visual Queue Route
Portable switch plugged in any power outlet could control through PLC for example games based on
LED lights, that flash, signal, give information, etc. PLC can be used to connect to players over
Our Force Field analyses on the Portable Switch and on the LED Games.
electric cable over short distances (for example players in different rooms or apartments). However
there seemed to be to many unknown variables in the case of the Portable Switch concept. Game
industry is out of our competences. Portable switch for all is too general and thus very difficult to
implement. It would be better as a feature of some more narrow application.People who need guarding like to stay in their own home environment. At the same time keeping
them in their own homes as much as possible saves the resources of the society compared to
organizing them separate places with guard and care.
Figure X. Our Force Field analyseon the Remote Guard and Care
Remote guard and care vision was killed mainly because its complex construction and even if
the construction would be achieved the risk of unreliable behaviour of the device is likely to be too
high. Bugs are very critical in guarding solutions. Portable film studio was mainly dropped because
of its very limited market potential.
THE FOLLOWING ONES DID NOT PLACE AMONG TEN BEST CANDIDATES IN THE
INITIAL FORCE FIELD EVALUATIONS AND THUS GOT LIGHTER ANALYSIS.
APPENDIX X, BUSINESS PLAN BASED ON A NOVEL PLANTTERRARIUM
1. Summary
Our innovative product is a compact decorative plant terrarium for households and offices. The terrarium
can be used in apartments, balconies, offices or other limited interiors. It is an appealing interior design
element with a functionality of a mini greenhouse that enables to grow decorative and useful plants. The
terrarium offers optimal humidity, lighting, and temperature for plants. It combines color lighting for
decoration purposes with the beauty of plants.
The Business Idea is to sell the plant terrarium meant for households and offices. We design terrariums and
sell them through volume retailers who sell it to consumers; and through interior designers and service
providers who sell and take care of flora in offices. We outsource both manufacturing and after sales
activities while keeping sales and marketing, customer relationship management and product development
inhouse. Competitive advantage comes from combining interior design with greenhouse functionality. The
existing products lack the interior decoration aspect almost entirely. We bring the benefits of a greenhouse
to a small scale and indoors use.
Our first target customer group are people from orchid union who, according to the market study, are
interested in helping developing and piloting the product. This offers an ideal opportunity while still
developing the product sell and test it in order to find the right mix of components and define the
appropriate size for the product. After the development and piloting phase, a simple version of the terrarium
could be made for a mass production and sold through supermarkets like SOK to consumers and through
designers and service companies to offices.
Market potential estimate for terrarium is based on market study that showed retailers strong interest.
Based on the consumer retail price of 150 EUR, the estimated sales is about 1500 units in the first year and
showing strong increase during the next years. The breakeven point is reached with 6000 units in 3 years.
As there are no comparable product available, a parallel can be drawn with aquarium, market penetration of
which is as high as 23% of Finnish households. Finnish statistics about consumer spending on flowers,
plants and home decoration is encouraging showing strong increase over the recent past years. Consumption
studies show consumers’ intention to continue spending at home decoration and leisure articles. The similar
trend is evident in Western Europe and Nordic countries. Our business idea has already received two rounds
of financial support for market study from Otaniemi Innovation Center (TULI).
2. Business Idea
Product. Our innovative product is a compact decorative plant terrarium for households. The
terrarium can be used in apartments, balconies, offices or other limited interiors. It is an appealing
interior design element with a functionality of a mini greenhouse that enables to grow decorative and
useful plants. The terrarium offers optimal humidity, lighting, and temperature for plants. It
combines color lighting for decoration purposes with the beauty of plants. Product description and
composition are presented in Appendix I
The Business Idea is to sell plant terrariums meant for households, offices and florists. We design
and sell terrariums to volume retailers who sell it to endcustomers or service providers who take
care of plants in offices. We outsource manufacturing and after sales activities.
User Benefits. The terrarium enables to enjoy larger variety of plants and widens decorative usage
of flora. It enables to grow exotic and demanding plants and to have plants also in places of limited
daylight. The product prolongs plants beauty and growth season. Any kind of plants, including herbs
and mushrooms can be easily grown. This product can also be used to preserve seasonal plants over
winter. Automated control of lighting, heating and humidity secures user comfort and ease of use. It
enables to leave the plants home alone even for a long time. The plants in terrarium do not need any
external help. The product is especially suitable for urban customers who are in a hurry and are
missing the contact with the nature. The plant terrarium creates a miniature piece of nature that
functions as an interior design element with decorative lights and fashionable form.
Novelty. Compared to the existing products and solutions, the novelty of the terrarium lies on the
fact that it is interior design element targeted to consumer and office segment and not for industrial
use and agricultural production. Also, the terrarium includes an innovative LED control system,
currently not available in the market that offers adjustability, decorative small size, energy savings,
spot lights and color lights. The terrarium enables to grow difficult plants with minimal effort. It
enables to grow plants that otherwise would be impossible to grow in home or office environment.
Currently available products do not include lighting and automatic irrigation, they just give a
somewhat isolated place to grow plants with a limited temperature and humidity control possibility
via manually adjustable cover for air circulation. The existing products are not meant to be an
attractive interior design elements that offer automatically adjustable optimal growing conditions for
plants.
Competing products. Competition towards plant terrarium mainly comes from three angles: first,
from existing consumer products; second, from components that when combined offer similar
functionality than the terrarium and third, from research projects that intend to utilize similar
technological solutions for growing plants. Although the current research projects are mainly
focusing on industrial solutions, when solved, it is only a matter of time when they start to spread to
consumer market. Related and competing products are presented in detail in Appendix IIA. A
comparison charts of the known technologies is presented in Appendix IIB.
Risk. An important business related risk is that plants grow by themselves, and not all of them need
a special treatment or chamber. People have used to select plants that can be grown in normal home
environment. There also are logistics chain related risk although we have a product that takes care
of demanding exotic plants, the entire logistics chain how to grow, import, and transport such
demand plants might not be facilitated to offer required care for demanding plants. The approval
from authorities to a new electrical appliance will also take some time (six months as maximum)
before the product can be sold. (It is the same for all appliances.) Also, it might be difficult to patent
the initial product version. Technology risks are related to the development of bright LEDs there is
not enough practical experience with using bright LEDs with plants.
Implementation. As students of the HUT, the owners of the business idea can utilize cooperation
with the HUT Communication and Lighting laboratories. The cooperation is currently going on in
designing the control system for LEDs with Communications and Lighting Laboratories. The product
development is done version by version – first the basic and afterwards the advanced product version
will be launched. Functionality is going to be increased based on demand, and as we generate sales
from initial products and gain reputation to get more funding for the venture.
The basic version’s prototype can be manufactured in a few months. The basic version is going to be
assembled from existing components. This prototype is going to be designed to satisfy the needs of
the pilot customers. Taking their feedback into account the later versions are developed by a user
centered design process. Basic version is the first to be produced in industrial scale and it’s
production and sales is planned to be starting in the beginning of 2006. The knowledge on all
biological aspects are gained from our pilot customers to satisfy the needs of the customers with the
most demanding plants.
There are glass chambers suitable for our product, LED lights, and the control mechanism is
available, but needs testing in our environment. The greatest challenge in the product development is
keeping the production and retail channel costs low enough to be profitable at prices that customers
are willing to pay for the terrariums. The first key question is to define the basic product with
minimum functionality to keep the price low. Huge Finnish retailer SOK has shown interest in
helping us to define the basic product.
Pricing. We expect to meet that challenge buy modular pricing to sell inexpensive product and
make the most profit from the additional components sold on top of the chamber with basic
functionalities. If a customer is willing to, he can buy our additional components, such as additional
lighting controls, automatic control units to be used also in other contexts.
Competitive Advantage. According to recent interviews with retailers, innovations related to
home decoration, flora and consumer market are rare, but highly appreciated. Our competitive aspect
comes from the innovative approach to combine interior design aspect to greenhouse type of
functionality. We are enabling easy growing of demanding plants such as orchids and offering a
possibility to grow herbs for personal use.
There are no greenhouse infrastructure or functionality available for apartments. Greenhouses that
are available are made either for outdoors or industrial use. The existing products lack the interior
decoration aspect almost entirely. We can bring the benefits of a greenhouse to the small scale and
indoors use. Patenting the terrarium will protect our business and give us competitive advantage. The
initial version might not be patentable, but the advanced versions with our novel LED control
mechanism is. Because patents are hard and slow to get exclusive sales contracts is one way of
protection as well as agreements, partnership building and joint activities. We build competitive
advantage by our business model through own research and development and though well
interlocked and performed activities and partnerships.
3. Marketing Plan
Market Size. The company intends to pilot the business idea in Finland which offers rather ideal
preconditions for the business – long and dark winter season, strong interest among consumers
towards growing flowers. In urban areas so called “balcony flowers’ culture” is popular. Currently
there is strong interest and spending on interior design and home decoration. Statistics from the last
decade shows extremely strong growth in flower and home plant market in Finland. It is well visible
in growing number of summer garden shops like Kesäpiha, Prisma Puutarha and large plant stores
such as Plantagen, and Bauhaus Garden.
It is hard to estimate the exact market size of Finland, but given that the preconditions are strong, a
parallel can be drawn with the aquarium market in Finland. According to the statistics, the share of
Finnish households that owns aquarium is as high as 23%. It is also important to note that a market
study specially conducted for the plant terrarium by Replicon Consulting in association with Finnish
TULIproject in January 2005 concluded that 5 out of 6 volume retailers who were presented the
product idea were keen on taking the product to be sold in their supermarkets or department stores.
In the future, given that the products will be well accepted by customers, an international rollout can
come under consideration. Urban consumers especially in the countries of higher per capita spending
and cold climate zones could be the first expansion areas.
The markets for plants and household decoration and currently showing very strong growth with
consumer spending studies indicating increasing interest to spend on these items in Finland. At the
same time there is also a growth in new office buildings construction that would need interior
decoration, including plants. The trend on spending on home decoration has been strong in Western
Europe and Nordic countries already for a couple of years and seems to continue.
Basic Customer types. There are three types of customers: demanding florists like members of
orchid union, ordinary consumers and offices, and stylish business users in their offices. They are
presented in Appendix III.
Demanding plant growers and florists need an advanced version of the product with almost
maximum feature set that is available. This customer group is not big, around a couple of thousand
people in metropolitan area involved with orchids, however, these are customers that are willing to
pay more for the product 200 € at least. This customer group will also be willing to participate in the
product development phase as a pilot group. There is a need for orchid glass chambers that are
currently sold by an animal shop in Turku as a special ordered product where customer can choose
between different sizes.
Consumers’ customer group is somewhat less demanding, but needs a product that is assembled.
Offices are close to consumers, but they are served by the floraservice provider who sells the
terrariums and takes care of the after sales activities.
Our customer relationships are relatively easy to handle because our customers are retail channels
and the number of those channels to us quite small.
Advantage from Customer Segmentation. According to the results of the market study, the
first target group will be demanding customers like orchid union people who could help to test the
product and find the right combination of components and define the appropriate size of the product.
Furthermore, they have shown interest in this product. Target group that offers smallest sales
volume, but is willing to spend more and help in product development as peoples interest in growing
orchids as a hobby is increasing.
After the development and piloting phase a simple basic product could be made for a mass
production and sold through SOK for example, a retailer that should interest already participating in
the product development phase. This is one of the most important market segments because of the
volume and economies of scale gained through high production volumes.
Cocurrently with consumer market the product is offered to service companies and interior
designers who take care of office space plants. This is the wealthiest segment that offers good sales
potential. Also, the product can be combined with the service offered by service providers or florists
that makes it easier to set up winwin partnerships with the service providers. Currently TerraRio has
already received one interesting partnership offer from a interior & flowers related design service
company.
Market Share & Sales. The market study confirmed that currently there are no directly competing
products, there are products without infrastructure or products that can be made as a specially
ordered products, but no consumer product easily available. Gaining a market size would thus be
gained without direct competition, another issue is to educate consumers to accept the new product.
Closest competing products and technologies are presented in Appendix I.
Sales volume is estimated based on market study that showed retailers strong interest. The sales
volume is grately influenced by retail price. Based on the consumer retail price of 150 EUR, the
estimated sales is about 1484 units in 2006 and increasing 100 % / year to 2010. The sales
estimations of our platform product are presented in Appendix IV and justified in the profitability
chapter.
Pricing. The market study identified that a consumer product can have a price of EUR 150 as
maximum. It was noted, however, that the additional features and components can be sold separately
on top of that. Based on the market study with major retailers and orchid union, the different
consumer types seem to need a “modular” pricing – basic product with minimal infrastructure to
provide the cheapest price product and sell additional infrastructure components on top of that
according to consumer needs. The basic set then consists of glass chamber, irrigation and LED
lighting. The components sold additionally are control elements for irrigation, humidity, ventilation,
temperature, and radiation qualities. Also different decoration sets are going to be on sale. Market
and cost basis for pricing is presented in Appendix V.
Distribution Channels. The market study interviewed as potential distribution channels Bauhaus,
Pirilän Kukkatalo, Plantagen, SOK including Prisma & Multasormi, Stockmann and Suomen
Orkideayhdistys ry. From these contacts all, but Pirilän Kukkatalo were interested in further
partnership and becoming a retail channel for the product. Pirilän Kukkatalo does not fit to a profile
due to the fact that their sales strategy is to offer the cheapest flowers and plants available in
metropolitan area. The companies can be reached by Vihermaailma that offers services for offices
and belongs to Ruohomäki Yhtiöt. The limiting factor is that it is currently unclear whether any of
these retailers would demand exclusive rights. Most likely will, but it is a question of negotiations
and committed sales volumes then. SOK practically anybody in Finland through its different chains.
Advertising. The marketing programs will be divided into two – independent marketing done by
TerraRio and marketing campaigns related and coordinated by the retail channels. The latter is
mainly related to superstore newsletters’ direct marketing to consumers and onspot marketing
campaigns and materials in stores. Independent marketing is started with home related journals
targeted mostly to females such as home decoration, kitchen, health and other female magazines. Our
direct marketing budget is aimed to marketing for our distribution channels and it is 5000 € in 2006
and increases by 5000 € / year being 25000 € in 2010. Personnel and office expenditure is also used
for marketing.
There are barriers entering to market with a new product. Marketing is expensive, consumers eed to
be educated. It is time consuming. There are lots of flowers and plants that do not necessary need
terrarium. We are taking advantage of the interior design trend and set our sales objectives
moderately. Our customer gets the message of attraction and ease of use through our marketing
slogan: “Nice & easy nice to look at and easy to take care of, TerraRio.”
4. Business Model, Organization shortly
Customers and the Respective Channels to the Market. Endusers of the Plant Terrarium
can broadly be divided into three user groups. The most probable users of the product are plant
enthusiasts who are reached through specialized florist shops, and gardening outlets. Plant
enthusiasts will most likely be less price sensitive than an average consumer. The broad consumer
segment is reached via retailers like supermarkets. Companies and offices are reached via
professional florists. Internet marketing and online shopping will be differentiated and targeted to all
customers. Enduser profiles are described in more detail in Appendix III.
Service. After sales service for the terrariums is going to be outsourced to a company giving help
desk services. The help desk company charges directly the customers on their phone bills. We give
guarantee to our products as a vendor and in case of manufacturing error end customer can replace
her/his product at our distribution partner.
Distribution. TerraRio Oy:s end customers are flower enthusiasts or hobbyists who are willing to
decorate their homes or work environments with our fancy terrarium. They use the terrarium to easily
light and water even the demanding plants. End customers are buying the terrariums from retailers,
who are green product outlets such as Bauhaus and department stores such as Stockmann. TerraRio
Oy is buying its storage services from a storage along Kehä III. There is not going to be huge
amount’s of terrariums in inventory, but just the amount to ensure smooth delivery without too long
delays. Delivery services we can choose based on bid contents where to evaluate price, flexibility
and reliability tradeoffs to choose the best offering. We enable our retailers to do the delivery with
their own processes if they can get cost savings that way. We can also ask an offer to do our delivery
from the delivery system of some our retailer. They may have significant scale benefits and
possibility to a very attractive price.
Marketing and sales. TerraRio Oy itself is going to design plant terrariums and market them to
retailers. It is going to buy components needed for the terrariums. It is also going to buy the
manufacturing of the terrariums as a service. Replicon OY has done a market research for TerraRio
OY the results of which are presented in the Appendix VIII. Blumat irrigation system manufacturer
is a potential marketing partner of TerraRio Oy. Blumat can gain extra market for irrigation systems
with plant terrariums. TerraRio Oy on its behalf can get well tested and moderately priced watering
system in its devices. There are also cooperation possibilities with innovative green product vendors
and designers such as TaiK graduate Katriina Määttä’s Else Design Oy. Määttä was very interested
in our product when we presented it to her. The Plant Terrarium is going to give appealing
cooperation possibilities for interior designers.
Production. Small scale electronics manufacturer, Candeo Effect, is our initial manufacturing
partner candidate. They can use a government financed test factory for electronics manufacturing and
thus economically produce also small series of electronic devices. That helps TerraRio Oy to perform
well with low inventory levels.
Design Our initial product version can be implemented by the team of two. More people are used to
design the more sophisticated product versions. HUT Communications and Lighting laboratories are
willing to help us in the early design. There are new research results in the laboratories around the
field of controlling LED lighting and they are interested in commercial exploitation of the novel
results. We have good relations to these laboratories and more formally, a new law sets 3rd mission to
the universities in addition to education and research. It is cooperation to business and society to
transfer the knowledge to practical use. More people are recruited as the sales and development goes
on.
Organization and Company Values. Plant Terrarium Organization includes in the starting
phase marketing manager Inga MathiesenBuinevits and technology manager Mikko Nykänen. Our
CV:s are presented in Appendix VI. We are offering a nice working environment and target to
growth at a speed it is still fun to work. We appreciate good taste and style. According to current
plans we are recruiting new people to our firm at a rate one per year. The first to recruit is a biologist
familiar to the conditions needed for different plants. The second to recruit is an engineer familiar
with controlling the LED lights.
6. Profitability Estimation
Market Potential Basis. As many as 23% of Finnish households have an aquarium. The plant
terrarium is interesting for masses, but to take conservative approach we considered half the
penetration of aquariums 11,5 % of all households to be maximum potential for the terrariums. If the
product launch succeeds it is likely that there will be some direct competitors even when we have
patented our product. Thus our optimistic scenario is to achieve with our terrarium 5 % penetration
of households in Finland and the Nordic Countries. The plant terrarium is likely to sell best in
wealthy dark, cold, dry or wet regions where outdoor conditions does not enable large variety of
decorative plants. In Finland our target penetration in five years is 2 % of households. Anyway in EU
level the same 2 % penetration of households is optimistic. It is not as bad climate in the Middle and
Southern Europe as in the North. The EU markets are slower to enter and we are likely to face more
direct or indirect competition.
Global markets of the terrarium is estimated by Global / Finland GDP ratio to consider also the
wealth differences. It is beneficial for our sales a fast growing number of urban citizens around the
world want to make their relatively small apartments fancy looking. Our plant terrarium enables
them to do it with more flowers and closer contact to nature. Global GDP amounted 213 times the
Finnish GDP in 2001. Thus even the Finnish climate is among the most favorable conditions for
terrarium sales it is safe to estimate that the global market potential exceeds the Finnish market
potential in orders of magnitude.
Cost Basis. Variable costs per device amounts 72 e, Appendix VC. Personnel cost is estimated to
be 50 000 e / person year, office cost 10 000 e / person year. External R&D cost, R&D cost in
addition to personnel & office related R&D costs, starts from 5000 e year and rises 5000 e per year.
External Marketing cost do the same. The amount of personnel is counted to rise 1 per year.
Lowering that rate we can use the funds budgeted to their personnel cost to external R&D and
marketing services if that looks more advantageous to us.
Sales Estimation. Selling moderately, according to 2 % penetration of households, 46 000 devices
in Finland in five years with 100 % sales growth / year would mean that we should sell 1484 devices
in the first sales year. Realistic middle term (5 yrs) sales estimation is likely to be close to the
moderate one (1 % penetration) and in longer term the possibilities to reach the optimistic 5 %
penetration increases. First the terrarium is going to be sold mainly to plant enthusiasts later more
and more to ordinary consumers. The profitability calculations are done according to the
conservative market estimations in Appendix IV.
Pricing Strategy. In the first few years when we are selling mainly to plant enthusiasts they are
easily willing to pay our initial consumer price 149,5 € on average. When the market among the
enthusiasts saturates we are going to take advantage of modular pricing with the ordinary consumers.
The basic installation can cost 149 e on average. With that consumer price we get 42 e operating
margin per device. That is enough to keep the operations running, but the potential to make a venture
capitalist smiling comes through modular structure of this terrarium. The consumers get locked to
our product platform and components to add adjustability and to maintain functionality are sold with
better than satisfactory profit. That profit can easily be for example 100 e / device sold in the
following 5 – 10 years. There are successful examples among manufacturers of shaving blades,
computer printers and hoovers who are performing well with this kind of modular pricing. The
modular product structure enables updating the basic version of the plant terrarium to a more
advanced one. The precise additional components we are going to designing with user centered
design process first among the demanding orchid hobbyists and later among the ordinary consumers.
Profitability. We are going to turn profitable on 2009 even when counting the platform product
only. About 12 000 plant terrariums are going to be sold and 5 people are going to be working in our
company in that year. By 2007 fixed / costs per device is going to sink below the amount of variable
costs per device, 72 e. In the later half of 2008 our fixed cost / device will sink below our operating
margin 42 e. The death valley of our platform product is going to end in 2009 when our accumulated
net profit turns positive by almost 60 000 e. By the end of this planning period, in the end of 2010 we
are going to achieve over 0,6 million euro as accumulated net profit. That can be seen in Appendix
IV. Furthermore when production volumes scales up we can get the component and production cost
per unit down and enhance the profitability or enchance our markets by lowering the consumer price
of our platform product. In Finnish markets only there is potential to make over 4 million euro profit
on additional modules in 5 – 10 years, if an average customer produces 100 e profit from additional
modules.
Business Plan APPENDIX I, Product Description
Simple version Advanced version UVlightened chamber, Automatic irrigation with timing, Temperature and humidity meter, Manual adjustment of the UV lighting, warmingand cooling (different adjustability from modules), On/Off switch with timing for the lights, Irrigation water tank, and Decorative lighting and fancy design.
Features of the Simple version, Automatic irrigation based on humiditymeasurements, Precise temperature and humidity meter, Programmable and automatic timely variation ofthe UV light intensity (different modules), Automatic temperature adjustment based onmeasurements (different modules), Humidity control of the chamber
Optimal wavelength spectrum for Wavelength spectrum of the best conventional growing plants (Lithuanian Hortiled technology, high pressure sodium lamp. project) We can do it with LEDs!
Business Plan Appendix IIA, Competing Products and SolutionsConsumer products. There are currently a couple of products targeted to broad consumer market.Kodin Ykkönen sells a small (20x30x30cm) glass chamber for 20 EUR. It is meant for balcony anddoes not have any infrastructure such as lighting or irrigation. Ikea offers high (180x80x30cm) glassshelves of metal body and glass chamber for 130 EUR. Again, it is meant to be used in balcony toachieve a longer growth season. A pet shop in Turku makes tailored closets for orchids. The closetsare rather expensive and timely to wait for.There are information in the Internet about Korean automatic terrariums including lighting, warmingand irrigation, but no precise information about their qualities or price is available. There are alsoseveral patents that all related to some part of the terrarium, but none of them or any pair our of themdescribe our whole solution or solution with corresponding benefits.Components. Except our novel and innovative LED control system people can buy all componentsof the terrarium separately and combine them by themselves as a hobby. It is however timeconsuming and otherwise hard to do. The components needed are Lighting, chamber, irrigation withtiming, temperature and humidity meter, warming and cooling, On/Off switch with timing for thelights, and irrigation water tank. A hippie presented in the net a way to grow mushrooms in an oldaquarium. Lighting and warming were performed by spot lights and humidity were increased byweekly watering. This kind of add hoc solutions would do better than our product for a consumerwho valuate the cheapest price over minimal installation efforts, adjustability and fancy appearance.For example Helle Oy in Turku sells components to take care of plants.Related research elsewhere: There are research projects targeting essentially to the functionality ofthe plant terrarium. However, these projects are focusing to agricultural production in industrialscale, not for interior design. In recent research it has been found out what is the optimal colortemperature range for growing plants with LED lamps. This is achieved in Lithuania in a projectcalled Hortiled. They know the optimum spectrum, but do not know how to achieve it with LEDs. InJapan research is being conducted in ways to irradiate plants with lasers at the optimum wavelengthfor growth. However these technologies are designed for industrial food production. Anyway, in theJapanese experiments the plants did not look normal, most likely because they are missing a spectralcomponent of radiation at 735 nm for photomorphosis Lithuanians found. Researchers of HelsinkiUniversity have achieved weak performance in their current practical implementations of using LEDlight for growing plants. This is because they either do not know the optimum color temperaturerange or how to achieve it.Our advantage: Communications and lighting laboratories in the HUT have achieved a method howto adjust a color temperature spectrum of LED lighting and we can use that in our plant terrarium.
Business Plan Appendix IIB, Comparison of Products and TechnologiesProduct/Feature Adjustability Automation Lighting Warming IrrigationPlant Terrarium Design decision
What is needed?Increasing Adjustable color
temparature plant byplant
Adjustable plant byplant
Adjustable plantby plant
Artificial LightingAppUS2001048598
Controlling capability onlight quantity, quality,frequency and duty ratio(Closest Prior Art)
NA Plant level notmentioned
Plant level notmentioned
Not mentioned
Kodin YkkönenGlass Box
Fixed solution No No No No
SemiautomaticTerrarium (hippieV.)
Self made User reaction to measurements,Can run a weekwithout user
Spot Light Spot Light exists*
AutomaticTerrarium(Korean Version)
Not mentioned Fixed Fixed / Adjustablebox level(They may evenmean fixed)
Fixed / Adjustablebox level(They may evenmean fixed)
Fixed / Adj. boxlevel(They may evenmean fixed)
Plant Raising byLEDJP2004113160
Not mentioned Hard to say Mixed red and blueincreasing plantabsorbtion ratio.
Tube of a singleplant in the picture
Water showered
LED Light SourceJP2002027831
Not mentioned Not mentioned LED + Twofluorescent layers toproduce frequencypeak in shortwavelengths
LED +Twofluorescent layers toproduce frequencypeak in longwavelengths
No
Cultivator andControl US672558(JP Invent)
Plant cultivator forresearch purposes, LEDs +control
Growth detectors+ monitor
LEDs + illuminationwindow
LEDs + cabinets +illuminationwindow
Not mentioned
Illumination ofPlantsGB2382014
Controlling capabilities CCTV camera+monitoringsystem controlby movement ofplant, time, dateor demand fromoperator.
LED groups toprovide 1. WL peakat 510 – 535 nm and2. WL peak at 605 –645.
Light intensityprefereablyrestricted to no morethan 15mW/sqrm atplant
Not mentioned
Indoors PlantRisingJP2003009662
Room environment Hard to say LED forphotosyntesis evenround the day
Room + LED Not mentioned
Self WateringDeviceGB2240453
Very likely to be goodenough
Automaticwatering
No No Sensor detectsthe need
SW Cultivation BedGB1400450
Possible with knowledgeabout the purposes of themeans of the structure
Physical solution No No Physicalcultivation bedunder the plants
Adj. LightingUS2001047618
Combining adjustable redand blue lights SameInventors as in US ’598
Hard to say Claims are put in theform of ”at least oneplant”
By controllableLED frequency
Not mentioned
Mountable LEDdeviceJP925651
A integrated LED lightsource structure to beutilized for plantcultivation
Fixed Including red 630 –680 nm and blue380 – 480 nm LEDelements
Seems to be byLEDs
Not mentioned
Nestable MGHUS4711051
Nestable structure forindoors or outdoors
Mechanical Sunlight / Out offocus
Sunlight / Out offocus
Not mentioned
Humidity ControlFR2600230
Looks modifiable Physical /Mechanicalsolution
No No Keeps thegreenhousewalls clear
Air PurificationDE19501195
Looks like any airpurification
Biological No No No
Product/Feature Nutrition AirConditioning
Interior Design
Aspect
Availability Price
Plant Terrarium Maybe Adjustable boxlevel
Important Marketing toenthusiasts,there shopsand media.
249,6 €
Artificial Lighting AppUS2001048598
Not mentioned Not mentioned Not mentioned NA NA
Kodin YkkönenGlass Box
No Door Some Summers inFinland
6€ – 20€
Semiautomatic Terrarium (hippieV.)
Manual exists Price over looks Self made Competitive
Automatic Terrarium(Korean Version)
Manual Adjustable boxlevel
Not mentioned Not inFinland
NA
Plant Raising by LEDJP2004113160
Not mentioned Vent holes Not mentioned NA NA
LED Light SourceJP2002027831
No No No NA NA
Cultivator and Control US672558(JP Invent)
Not mentioned Not mentioned Out of focus NA NA
Illumination of PlantsGB2382014
Not mentioned Not mentioned Out of focus NA NA
Indoors Plant RisingJP2003009662
Not mentioned Not mentioned Not mentioned NA NA
Self Watering DeviceGB2240453
No No No NA NA
SW Cultivation BedGB1400450
Not mentioned No No Patent time isover
NA
Adj. LightingUS2001047618
Not mentioned Not mentioned Not mentioned NA NA
Mountable LED device JP925651 Not mentioned Not mentioned Not mentioned NA NANestable MGHUS4711051
Not mentioned By physicalstructure
Size NA Can be found
Humidity ControlFR2600230
No No Exists NA NA
Air Purification DE19501195 No Ambient air isfinely dividedand led througha microbiologicallyseeded layer ofwater
Smell control NA NA
Also plants without terrariums are competitors as well asaquariums. There is also pet shop in Turku where they tailor closetsfor orchids and other plants. Helle Oy in Turku is specialized tosell equipment to take care of plants and a solution can be tailoredout of their components. SOK is selling a greenhouse for gardenuse at 179 e without any technology.
Development Plan4 5 6 7 8 9 10 11 12 2006 2007 2008 2009
Development Prototype X Initial Version X X Basic Version X X X X X X Advanced Versions X X X XMarketing Initial Version X X X X X X X X Basic Version X X X X X X X Advanced Version X X X XProduction Initial version X X X X X X X Basic Version X X X X Advanced Versions X X XManagement F1/ CE Approval X X ? ? ? ? ? ? Supply Contracts Initial X Basic X X XAdvanced X
Business Plan Appendix VI, Curriculum Vitaes
Mikko NykänenBorn 1977+358 50 3581599 [email protected]
Inga MathiesenBuinevitšBorn 1973+358 40 8031443
EducationSeptember 1996 –Helsinki University of TechnologyExpected graduation in 2005
• Master's program in Telecommunications Management,• Technical minor in Networking Technology• Studies directed to product development
and user interfaces
EducationSeptember 2000 –Helsinki University of TechnologyExpected graduation in 2005
• Master's program in Strategy and International Business• Technical minor in Telecommunications Technology• International Business Linkage Program 2000/2001• Shadow Project (sixmonth project, prepared two case studies in a
Finnish startup company)• GPA 4.5/5.0
September 1992 – June 1997Tallinn Technical UniversityDiploma in Business Administration (5year program)
• Specialization in Marketing and International Business
Work Experience May 1999 – Aug. 2004Seppo Laine Ltd., Helsinki, FinlandTrainee to be a patent agent
• Patent applications, patenting process, translationchecking
June 1998 – July 1998Phoenix Contact Ltd., Helsinki, Fin.Assembly worker
• Assembling automation products as customer service
Work ExperienceSeptember 2004 –Nokia Ltd., Helsinki, FinlandBusiness Analyst
• Prepared marketing studies in network services
April 1998 – July 2000Trigon Funds Ltd., Tallinn, EstoniaChairman
• Prepared prospectuses and reports for investment funds under management• Proposed investment decisions for equity funds under management• Advised Hansa Investment Fund, an openended Baltic equity fund, listed
on the Helsinki Stock Exchange
September 1997 – April 1998Trigon Investment Management Ltd., Tallinn, Est., Chief equity analyst
• Appraised investment opportunities in Baltic companies• Monitored the performance of existing portfolio investments• Developed tool for quick appraisal of investment opportunities in public
companies
June 1993 – September 1997Connectus Ltd., Tallinn, EstoniaCredit information analyst
• Appraised Estonian companies• Collected and analyzed company credit information• Developed company appraisal methodology• Made marketing research
Language skillsNative FinnishGood knowledge of English and SwedishElementary knowledge of German
Language skillsFluent in Estonian, English, FinnishGood knowledge in RussianElementary knowledge of Japanese
HobbiesTravelling, jogging, hiking in nature stock markets, biographies
HobbiesTravelling, sports, arts and design
APPENDIX XI, NOVELTY RESEARCH RESULTSIn this appendix novelty research results of prior art technology to the plant terrarium ideated
are shortly presented. Appendix VIIa presents my preliminart novelty research results before mycontact to Otaniemi Innovation Center. Appendix VIIb presents novelty reseach results of PanuKuosmanen from the Innovation Center. Appendix VIIc presents Swedish levande filter prioe artproduct found in our market research, and finally Appendix VIId presents the results of novelty studyof Risto Paajanen from the Foundation for Finnish Inventions.
APPENDIX XIA MY PRELIMINARY NOVELTY RESEARCH, FALL 2004Product/Feature Adjustability Automation Lighting Warming IrrigationPet Shop product Production Phase No Conventional Available AvailableArtificial LightingAppUS2001048598
light quantity,quality, frequencyand duty ratio
NA Plant level notmentioned
Plant level notmentioned
Notmentioned
Kodin YkkönenGlass BoxIKEA MiniGreenhouseIKEA Herb device
NO
SemiautomaticTerrarium (hippie V.)
Self made User reactiontomeasurements,Can run a weekwithout user
Spot Light Spot Light exists*
Illumination ofPlantsGB2382014
Controllingcapabilities
CCTV camera+ monitoringsystem controlby movementof plant, time,date or demandfrom operator.
LED groups to provide 1.WL peak at 510 – 535nm and 2. WL peak at605 – 645.
Light intensityprefereablyrestricted to nomore than15mW/sqrm atplant
Notmentioned
Nestable MGHUS4711051
Nestable structurefor indoors oroutdoors
Mechanical Sunlight / Out of focus Sunlight / Outof focus
Notmentioned
Humidity ControlFR2600230
Looks modifiable Physical /Mechanicalsolution
Keeps the greenhouse wallsclear
Air PurificationDE19501195
Looks like any airpurification
Biological No
Self Watering DeviceGB2240453
Very likely to begood enough
Automaticwatering
Sensor detects the need
SW Cultivation BedGB1400450
Possible whenknowledge
Physicalsolution
NO
Physical cultivation bed underthe plants
Adj. LightingUS2001047618
Inventors ofUS2001048598Here adjustable redand blue lights
Hard to say Claims are put in theformof ”at least one plant”
By controllableLED frequency
Notmentioned
Mountable LEDdeviceJP925651
A integrated LEDlight sourcestructure for plantcultivation
Fixed Including red 630 – 680nm and blue 380 – 480nm LED elements
Seems to be byLEDs
Notmentioned
Product/Feature Nutrition Air Conditioning Interior Design Availability PricePet Shop product Manual Available No Pet Shops 500 €Artificial Lighting AppUS2001048598
Notmentioned
Not mentioned Not mentioned NA NA
Kodin YkkönenGlass Box
No Door Some Summers inFinland
20€
IKEA Mini Greenhouse No No No IKEA 129 €IKEA Herb device No No Some IKEA 14 €SemiautomaticTerrarium (hippie V.)
Manual exists Price over looks Self made Competitive
Illumination of PlantsGB2382014
NA Out of focus NA NA NA
Nestable MGHUS4711051
Notmentioned
By physicalstructure
Size NA Can befound
Humidity ControlFR2600230
No No Exists
Air PurificationDE19501195
No Ambient air treated microbiologically
Smell control
Self Watering DeviceGB2240453
No No No
NA
SW Cultivation BedGB1400450
NA No No Patent timeis over
NA
Adj. LightingUS2001047618
Not mentioned
Mountable LEDdeviceJP925651
NANot mentioned
NA
APPENDIX XIB NOVELTY RESEARCH BY OTANIEMI INNOVATION CENTER, PANUKUOSMANEN OCTOBER 2004Product/Feature Adjustability Automation Lighting Warming IrrigationPlant Terrarium Design decission
What is needed?Increasing Adjustable
colortemparatureplant by plant
Adjustable plantby plant
Adjustableplant byplant
Plant Raising by LEDJP2004113160
Not mentioned Hard to say Mixed red andblue increasingplant bsorbtionratio.
Tube of a singleplant in the picture
Watershowered
LED Light SourceJP2002027831
Not mentioned Notmentioned
LED +Two fluorescent layers toproduce frequency peak in longwavelengths
No
Cultivator and ControlUS672558 (JP Invent)
Plant cultivator forresearch purposes,LEDs + control
Growthdetectors +monitor
LEDs +illuminationwindow
LEDs + cabinets +illuminationwindow
Notmentioned
Indoors Plant RisingJP2003009662
Room environment Hard to say LED for photosyntesis evenround the day
Room + LED Notmentioned
Product/Feature Nutrition Air Conditioning Interior Design Availability PricePlant Terrarium Maybe Adjustable box
levelImportant Marketing to
enthusiasts, thereshops and media.
199 €
Plant Raising by LEDJP2004113160
Notmentioned
Vent holes Not mentioned
LED Light SourceJP2002027831
No No No
Cultivator and ControlUS672558 (JP Invent)
Out of focus
Indoors Plant RisingJP2003009662
NANot mentioned
NA
APPENDIX XIC, NOVELTY RESEARCH BY MARI LYMYSALO FROM PROVESTUM LTDAND MY INTERIOR DESIGNER CANDIDATE INTERVIEW OF TIINA KRUKOFF APRIL2005Product/Feature Adjustability Automation Lighting Warming IrrigationLevande Filter(closest prior art)
Production Phase Aurtomaticdevice
Conventional Some gradescooling
Yes
Product/Feature Nutrition Air Conditioning Interior Design Aspect Availability PriceLevande Filter(closest prior art)
With water Yes Exists, mainly forcleaner room air
Marketed allover Europe
Thousandsof euros
APPENDIX XIC NOVELTY RESEARCH BY FOUNDATION OF FINNISH INVENTIONS,RISTO PAAJANEN, APRIL 2005Product/Feature Irrigation Automation Lighting Warming AdjustabilityPlant Terrarium Plant level Increasing Adjustable
colortemparatureplant by plant
Adjustableplant byplant
DesigndecissionWhat isneeded?
Japanese incubator Good Good Good Good GoodUS20040230102_Efficient led lamp forenhancing_Commercial and home plant growth
No Frequencyforphotosyntesis
No Lights
EP1479286_Method_and_apparatus forirradiation of plants using light emittingdiodes
No Yes NA Supportingfreqs fornatureal light
FI88245 Menetelmä ja_laite siementen taikasvien valaisemiseksi
No Close to plant No No
US20010048598 Artificial lighting apparatusfor young Plants using light emitting diodesas light source
No OK forincubation
No No
US20030005626 Plant cultivator and controlsystem therefor
Some Complex NA Growth sensors(complex)
US20030162288 Led array for illuminatingcell well plates and automated rack systemfor handling the same
NO
No DifferentStructure
No No
Product/Feature Nutrition AirConditioning
InteriorDesign
Availability Prize
Plant Terrarium Maybe Adjustable boxlevel
Important Marketing toenthusiasts, thereshops and media.
199 €–499 €
Japanese incubator Good Good Not exist Japan only muchUS20040230102 Efficient led lamp for enhancingCommercial and home plant growthEP1479286 Method and apparatus for irradiationof plants using light emitting diodesFI88245 Menetelmä ja laite siementen tai kasvienvalaisemiseksiUS20010048598 Artificial lighting apparatusf oryoung plants using light_emitting diodes as lightsourceUS20030005626 plant cultivator and Controlsystem thereforUS20030162288 Led array for illuminating cellwell plates and automated rack system forhandling the same
NO
APPENDIX XII, PROJECT PLAN: TERRA RIO BUSINESS
ESTABLISHMENT
The Product – Plant Terrarium
Terra Rio business idea is to sell a product – plant Terrarium that offers optimal growing
conditions for flowers, exotic plants, or herbs. The terrarium is easy to use and it is an attractive
interior design element. The terrarium enables to place plants into corners of limited daylight or leave
them home alone for a long period of time. The terrarium is of compact size, still accommodating,
for example, a couple of orchids with the height of 60 cm.
Terra Rio Ltd.
Terra Rio Ltd. was established on July 1, 2005 in Espoo, shortly following the successful
participation with Terra Rio business idea in Venture Cup 2005. In Venture Cup final prize ceremony
the business plan was awarded with 5000 € as the best team of the year in the field of arts, design,
media and culture. The business plan won also a special prize from Arabus New Business Incubation
Center – the right to use office premises for six months free of charge. In the second phase of
Venture Cup the business plan was warded also 2000 € for being short listed among top 10 business
plans and another 2000 € as the best business plan of arts, design, media and culture. Terra Rio was
founded by the Venture Cup team of three: Mikko Nykänen (49%, CEO), Inga MathiesenBuinevits
(49%, CMO) and Niko Venäläinen (2%, Design). Nykänen has background of technology
(telecommunications) and patenting and is currently finalizing its Master’s thesis at the Helsinki
University of Technology. MathiesenBuinevits has background from business administration,
financing and marketing and is finalizing her Master’s thesis in industrial management at the
Helsinki University of Technology. She has a diploma in business administration from the Tallinn
Technical University since 1997 and is currently employed by Nokia. Venäläinen has background of
interior design and arts and is studying in Master’s Prograam of the Helsinki University of Design
and Arts. In addition, Terra Rio is considering employing Satu Simpanen, gardening and plant
specialist from Viikki, for setting and finetuning biological requirements in the prototype testing and
product development. Terra Rio Oy’s is currently focusing on product development and is in the
process of building its first prototype in Arabus New Business Center. The company applies for
TEKES financial support and guidance in order to execute the awarded business plan.
Business Plan Implementation and Product Development before the Project
Since founding the company in summer 2005, Terra Rio has focused on building its 0prototype.
As of October 2005 the company has purchased 85% of all needed terrarium components and intends
to assemble the very first prototype within October. Cocurrently the company is mapping optimal
components suppliers to decrease component cost and components physical size while targeting at
acceptable component quality and product safety.
The company intends to test the very first prototype during the rest of 2005 and until the second
version of the first prototype is built and ready for testing.
Project Description
Terra Rio Ltd. Business Establishment project is divided into four stages as listed below.
Timeframes for the phases are given in brackets.
1. First terrarium prototype design and building (based on existing technologies) (Q2Q4/06)
2. First terrarium prototype testing (Q4/06Q1/07)
3. First product launch (piloting) to get knowledge of the customer and market requirements
(Q2/07)
4. Research project for developing and studying LED lighting for plants (in terrarium
environment). The research includes developing lighting control and power supply devices
usable in the development project of plant terrarium starting after this establishment project.
The research project forms basis for the advanced product development and is planned to
take place in parallel with project phases 13 participation to (Q2/06Q2/07)
5. Second (advanced) prototype design and building based on LED lighting research project
(Q1Q2/07)
Targets
This product development project lasts from the second quarter of 2006 to third quarter of 2007.
User centric design and piloting with the Orchid Union is utilized for setting the product
development objectives for the advanced, LEDbased terrarium. LEDbased plant terrarium is
expected to have a potential for international rollout at a later stages of the business expansion. The
terrarium LEDlighting development project is intended to launch in cooperation with Helsinki
University of technology Lighting and Communication laboratories and also with Arabus and
Technopolis Business Incubation centers.
Team members roles in the Product Development Project
In the small of three, each team member fully participates to the project. However, each team
member takes a lead role in a different stages of the project, according the area of expertise. In the 1st
phase Mikko Nykänen is going to coordinate the technology used for the first product prototype.
Niko Venäläinen is responsible for the design of the prototype. Inga MathiesenBuinevits will take a
lead in first product launch and piloting project thereafter. Satu Simpanen will coordinate optimum
conditions finetuning and building a database of the conditions for different plants to be used in the
terrarium.
In the 2nd phase Each team member participates in prototype testing with plants as well as testing
the terrarium usability, again under Satu Simpanen coordination. Terra Rio has oral commitment also
from a member of board of the Orchid Union, Eva Kairaluoma, to test and pilot the terrarium.
In the 3rd phase Inga MathiesenBuinevits is coordinating the product launch while Niko
Venäläinen is responsible for the marketing material looks. All the team members are participating in
sales activities to gain market experience.
The 4th phase, the research project has to identify the impact of LED lighting on plants as well as
the optimal usage of LEDs for plants in terrarium environment for building advanced product. It is
probable that a new lighting element – LED matrix – needs to be built to be used in the terrarium.
Terra Rio Oy has limited resources to be able to conduct an independent research. The company has
cooperation with the Communications and Lighting Laboratories of the Helsinki University of
Technology. Professor Timo Korhonen from HUT Communications laboratory has already been
acting as advisory for the business idea development of Terra Rio Oy.
Terra Rio Ltd. Business Set Up project budget is 75 000 €. 60 000 € of which is applied equity
loan from TEKES and 15 000 € is from Terra Rio Oy own resources. 28 000 € is going to be used for
1000 € / month salary per each four team members from December 2006 to June 2006. 7000 € is
used to related social security costs. 3000 € is used for travelling (finding suppliers, customers
visits). 19 000 € is used to materials and accessories. 5 000 € of the 18 000 € is needed for inventory
and 4000 € for marketing materials. 10 000 € is for building the materials for the simple product
prototype. Some components such as power supply need to be tailored and that causes high material
cost compared to planned price for the product. 4 000 € is for computers purchase. 2000 € is going to
be used for rents (mainly office rent, but also small compensation for using private laptops until the
equipment purchase). 13 000 € is used for external services related to R&D, immaterial property
rights, education, consulting, but mostly marketing.
Innovativeness of the project
The first terrarium prototype is built on conventional technologies, however, it combines the
existing technical pieces into an innovative new product with the functionality, currently not
available for consumers. Currently it is not possible to grow exotic plants easily at home or office.
Spending on interior design shows a strong growth trend. Only recently LED technology has
achieved the performance needed for lighting solutions. Geographical longitude cannot restrict the
use of exotic flora with the plant terrarium simulating different growing conditions.
The second, advanced product will utilize the compact nature and yet powerful lighting qualities
of LED lights. LED lighting developed to support plant growth is an innovation currently tested with
a handful of projects around the world.
Overview of the business to be started by the project
Target Customers, Competition and Competitive position
Plant enthusiasts like people who grow orchids or herbs are interested in plant terrarium.
Interior designers are also interested. Later also ordinary consumers are possible.
Kodin Ykkönen and Ikea sell products that have no infrastructure, but are in nature based on
similar product idea. Also, there is a Japanese plant incubator meant for an industrial use, but meant
for a totally different target group. There is also Swedish Levande Filter, but again, the product is
meant for a specific use for air purification. It is, however, of large size and expensive compared to
our Plant Terrarium which makes it unattractive for our target customers.
Competitive advantage
We intend to be first in the market in combining design with greenhouse functionality.
Currently there is no such product available. We intend to protect our idea by legal protection of
design and by selling first to niche markets like orchid union in Finland that has roots and networks
also abroad.
Income and market penetration
23% of Finnish homes have aquariums. By selling terrarium first as highend design product, we
make a business case with less than half a percent of market penetration. We breakeven in 3 years.
But this is only with Finland. However, the terrarium has global markets.
Subcontracting
Product Development is done mostly by our own team, but for some difficult tasks outside help
is needed. For complicated control devices, LED light control functions, gardening experiments for
example. Finally production of the Terrarium is going to be entirely outsourced. Finland and Estonia
have been considered as production countries in the first phase. The most suitable production partner
is chosen based on costs and the requirements by the final product. Initially to the early market in
2007, however, we are going to do the assembly by ourselves.
Marketing and Sales is our own effort and that consists of sales and marketing activities to our
distributors. We are utilizing as much channel marketing as possible. Design aspect has an important
role in our marketing. We present our idea in home, plants, gardening and interior magazines In this
project we are piloting with orchid union. After that, we sell through specialists like B2B florists and
interior designers. During this project we are also building after sales service relationships and
operations.
This application ended with pictures “Competition and our market position” and “Plant
Terrarium Attractive Interior Design Element” from the pages 76 and 78 in the thesis.