Innovation and entrepreneurship

Why this matters

Anyone can buy a drone, so a business’s advantage does not come from owning one. It comes from solving a customer’s problem better than the existing way, at a price the customer will pay. Most new ventures fail because they build something nobody wants, not because the technology does not work. This module gives you a systematic way to test a business idea before committing large sums.

Two kinds of innovation

In The Innovator’s Dilemma (1997), Clayton Christensen distinguishes two kinds of innovation:

• Sustaining innovation makes existing products better for existing customers, such as a higher-resolution survey camera
• Disruptive innovation starts out inferior in the eyes of existing customers but cheaper, simpler or opening a new market, then improves until it replaces the incumbent. Low-cost drones that map well enough are an example challenging large aircraft survey work over small areas

NASA’s Technology Readiness Levels (TRL) run from TRL 1, where basic research is just starting to be turned toward applications, to TRL 9, where the system is proven in real use. A business selling a service should use high-TRL technology; low-TRL technology suits research or innovation grants, not service contracts with delivery deadlines.

Lean Startup and the MVP

In The Lean Startup (2011), Eric Ries proposes running a business as continuous experiments in a Build–Measure–Learn loop. Start with a minimum viable product (MVP), measure how customers respond, and then decide whether to persevere or pivot. Steve Blank and Bob Dorf propose customer development: going out to real customers to confirm the problem before building the full product.

from scipy import stats

contacted, paid = 40, 9
rate = paid / contacted
ci = stats.binomtest(paid, contacted).proportion_ci(confidence_level=0.95)
print(f"paid pilot rate {rate:.1%}   95% CI [{ci.low:.1%}, {ci.high:.1%}]   criterion 20%")

paid pilot rate 22.5%   95% CI [10.8%, 38.5%]   criterion 20%

The Business Model Canvas

The Business Model Canvas of Osterwalder and Pigneur (2010) summarises a business model on one page in nine blocks: customer segments, value propositions, channels, customer relationships, revenue streams, key resources, key activities, key partnerships and cost structure. Value Proposition Design (2014) helps match the value proposition to the jobs, pains and gains of customers.

The right side of the canvas is about customers and revenue, the left side about delivery and cost, with the value proposition in the middle linking them. For a solar-panel inspection service, the value proposition might be “know which panels are faulty within 48 hours, without stopping generation”, far more specific than “high-quality drone services”.

import math

price, variable_cost, fixed_cost = 3_500, 1_400, 60_000
margin = price - variable_cost
print(f"contribution margin {margin:,} baht per job ({margin / price:.0%} of price)")
print(f"jobs per month to cover fixed cost: {fixed_cost / margin:.2f} -> {math.ceil(fixed_cost / margin)}")

contribution margin 2,100 baht per job (60% of price)
jobs per month to cover fixed cost: 28.57 -> 29

Intellectual property in Thailand

Intellectual property (IP) protects the products of ideas. In Thailand it is administered by the Department of Intellectual Property, Ministry of Commerce. Terms of protection in summary:

These terms follow the Department of Intellectual Property’s information, and an amendment to the patent law is under consideration. Check the current rules with the Department before filing. A common mistake by new entrepreneurs is disclosing an invention publicly before filing a patent application, which can destroy its novelty. Agree ownership of work with co-developers and clients in writing from the start.

Class activity

Common mistakes

Summary

• Sustaining innovation improves existing products; disruptive innovation starts from overlooked markets. TRL shows technology readiness
• Lean Startup uses an MVP and the Build–Measure–Learn loop, with criteria set before seeing results
• The Business Model Canvas summarises a business in nine blocks, and the contribution margin shows how many jobs cover fixed costs
• Each kind of IP protects different things; beware disclosure before filing a patent

Check your understanding

1. A higher-resolution survey camera for existing customers is which kind of innovation?
2. At which TRL is a system proven in real use?
3. A service costs 5,000 baht, variable cost is 2,000 baht and fixed cost 90,000 baht per month. How many jobs a month are needed?
4. Which block sits in the centre of the Business Model Canvas?
5. What is the longest protection a Thai petty patent can have once fully renewed?