Turning Problems into Profit: A transportation entrepreneur shows how to launch and grow a B2B start-up.

By nature, B2B start-ups tend to follow one of the golden rules of entrepreneurship: solve a problem; do not chase an idea. This, of course, stems from the fact that B2B companies often deliver products and services that solve existing industry problems.

But if you have a solution to an industry problem, how do you know whether that will translate into a viable B2B business?

For Linda Darragh, executive director of the Levy Institute for Entrepreneurial Practice at the Kellogg School, the short answer is: it comes down to a comprehensive process of testing, researching, iterating, and refining an idea.

Pinpointing a Pain Point

In 2012, Kellogg School student and budding entrepreneur Mathew Elenjickal approached Darragh with perhaps the perfect case study for that process.
Elenjickal, who had previously spent seven years at supply chain leader i2 Technologies (now jda.), had identified a pain point that had plagued the logistics and transportation management industry for decades: shippers and freight brokers did not have an efficient, real-time method for tracking trucks that were transporting their loads.

In the age of GPS devices and smartphones, that might come as a surprise. But while trucking companies had access to location data, they did not have a good way to cull that information and communicate it to shippers and freight brokers. To know their trucks’ exact locations, shippers or brokers had to call, email, or fax the trucking companies directly—a tedious process. Alternatively, they could monitor the location of trucks through the Electronic Data Interchange, a notoriously slow system that was only capable of transmitting location information hours after the fact.

“If you come into B2B not knowing the industry, not having a network, it is going to be harder.”

The nature of the trucking and shipping industry only complicated things further. The market was enormous and fragmented, with half a million trucking companies in the United States—many of them small, family-owned shops—along with more than 10,000 freight brokerage companies. How could any single company create a tracking system that all players would simultaneously adopt?

It was a weighty problem. The only way that Elenjickal could begin to solve it, Darragh told him, was if he got out of the building and talked to potential customers in order to get feedback—a lot of it. In the B2B space, that feedback tends to come from one-on-one interviews with people in the industry, rather than through digital channels.

The difficulties of collecting this feedback are compounded if an entrepreneur is not intimately familiar with the industry. “In Matt’s case, he worked in the industry, so he knew the players already,” Darragh says. “Through networking, he was able to indicate that there was another group maybe you should talk to. But if you come into B2B not knowing the industry, not having a network, it is going to be harder.”

“This is the whole testing idea,” Darragh says, reflecting on that early conversation with Elenjickal. “You don’t spend time and money on engineers at this point. You say, ‘Here’s a possible solution,’ and you storyboard it. And then you start talking to shippers and the truckers and ask them, ‘What do you think about this?’ You listen to them and see whether they are interested. And you just keep iterating.”

The Evolution of an Idea

Elenjickal’s first idea was to work with a GPS manufacturer to create a small tracking device and install it in trucks nationwide. He also planned to develop software that would monitor the devices on behalf of shipping companies.

But while proposing this idea to investors, Elenjickal was faced with a series of questions that he could not answer. For example, how would he convince every trucking company in the nation to buy his GPS device, especially if they were already using another device? Even if he gave the device away for free, how would he ensure that the companies would use them? And how could he afford the start-up costs associated with buying devices for the three million trucks operating in the United States?

Elenjickal went back to the drawing board, and came up with a better idea: create a cloud-based platform that harvests tracking data from the nation’s largest GPS manufacturers—such as Omnitracs, Qualcomm, or PeopleNet—and delivers it to the shipping companies. He reasoned that most trucking companies were, or soon would be, working with these manufacturers, given pending legislation mandating that all trucks carry GPS devices by 2016. Moreover, Elenjickal envisioned that his platform would integrate with the shippers’ existing communications systems, eliminating the need to purchase or learn new software.

The opportunity, he estimated, was “in the billions.”

Iteration through Conversation

Elenjickal, with help from Darragh and others in his network, started sharing his business idea—which he branded under the name “FourKites”—with leaders in the transportation management industry.

One of those leaders was Ron Konezny, the founder of PeopleNet, who was so taken by Elenjickal’s concept that he gave FourKites access to his company’s portal in order to build and test its integration capabilities. That paved the way for piloting the platform with several other top companies, including Caterpillar Inc., Command Transportation, and National Freight Industries.

Another conversation fundamentally changed FourKites’ market strategy. Urged by one of his mentors in the Pritzker Group LaunchU program, Elenjickal met with Doug Waggoner, CEO of Echo Global Logistics, a leading freight brokerage company. Until that point, Elenjickal had avoided freight brokers, assuming they would be FourKites’ primary competition since they acted as middlemen between shippers and truckers. To Elenjickal’s surprise, during his meeting with Waggoner, the CEO expressed interest in becoming a FourKites customer.

“What I realized was, these guys have the same pain point as the shippers,” Elenjickal says. “They could be early adopters. That meeting essentially opened up a new customer segment.”

This is precisely why it is so important for entrepreneurs to continually seek feedback, adds Darragh. “By going through this process, and talking to these intermediaries, he realized that he had value for them,” she says. “Some of the stakeholders that he thought were barriers were really proponents in the end.”

Acquire Customers, Mitigate Risk

Today, Elenjickal is in the final stages of FourKites’ launch. He is wrapping up the platform’s pilot phase, securing funding from investors (he has currently secured over $1 million) and getting his sales strategy off the ground.

For that last to-do, Elenjickal has adopted a simple, yet effective, approach: he lets customers try FourKites free for a month, accessing its data through their own system or FourKites’ optional user interface and app. Then, if they like the platform, they only pay by the transaction—a certain amount per truckload.

The goal is to acquire more customers, faster. “If you look at the enterprise companies out there, the sales cycle is too long,” Elenjickal explains. “You get into customers’ doors and then you’re negotiating the license, the service, and everything. This is purely transactional. And so far, we haven’t had a customer that doesn’t like it.”

Because FourKites’ platform is inherently sticky, its customers are likely to generate recurring revenue in the long term. That is key to the success of any start-up and the beauty of the B2B model, says Darragh. “It’s not only about first-time use, but multiple uses,” she says. “How do you increase the conversion rates and how do you make sure you create long-term value for the customer.”

After undergoing an exhaustive process of talking to customers, investigating this problem, and refining his idea, Elenjickal feels confident in the prospects of his company. Darragh underscores that point, explaining that the more time you spend on testing a business concept, the more you mitigate the risk involved in launching a new venture.

“Everyone says, ‘I have to get it on the market fast,’” she says. “But if you want to take the risk out of it, take your time. Don’t worry about the first-mover advantage. If you really build something of true value, then you will beat out the rest of the competition.”

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Innovative behavior and venture performance of SMEs: the moderating effect of environmental dynamism

European Journal of Innovation Management, Volume 18, Issue 2, May 2015.
Purpose This study explores the relationship between innovative behavior and firm performance to determine empirically whether managers’ innovative behavior impacts directly or indirectly on firm performance through innovative output. A proposed conceptual model is tested with the moderating effects of environmental dynamism Design/methodology/approach An empirical study tests the conceptual model of a multi-industry sample of Tunisian SMEs. For this analysis we apply the Partial Least Squares (PLS) technique using the software package SmartPLS, version 2.0 Findings Empirical findings reveal that innovative behavior acts on innovation output thus having a positive and significant effect on business performance. Direct effect on business performance is found to be positive but weakly significant. These positive relationships tend to decrease when market conditions are highly dynamic. Practical implications Managers should be aware of the strategic potential of their innovative skills which can reinforce a firm’s innovativeness in order to improve business performance. Originality/value This article proposes a model showing how a manager’s innovative behavior affects innovation output thus enhancing firm performance. The proposed conceptual model gives a more specific vision with the introduction of environmental dynamism as a moderating factor.
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The differentiated impacts of organizational innovation practices on technological innovation persistence

European Journal of Innovation Management, Volume 18, Issue 1, Page 110-127, January 2015.

Purpose – The purpose of this paper is to test the major determinants of technological (product and process) innovation persistence and provides evidence of the significant role of organizational innovation. Design/methodology/approach – Data came from two waves of the Luxembourg Community Innovation Survey (CIS): CIS2006 for 2004-2006 and CIS2008 for 2006-2008. The longitudinal data set resulted in a final sample of 287 firms. A multinomial probit model estimates the likelihood that each firm belongs to one of three longitudinal innovation profiles: no, sporadic, or persistent innovators. Findings – The determinants have differentiated impacts on process and technological innovation persistence. Organizational innovation influences technological innovation persistence. In the analysis of detailed organizational practices, strong evidence emerged that knowledge management exerts a crucial effect on product innovation persistence; workplace organization instead is associated with process innovation persistence. Research limitations/implications – The relationships of innovation persistence, organizational innovation, and firms’ economic performance demand further exploration. The different persistence patterns of complex (process and product) and simple (process or product) innovators also are worth investigating. Practical implications – Organizational innovation matters for technological innovation persistence. However, the effects of non-technological innovation differ depending on whether the firm wants to innovate in processes or products. Managers must acknowledge these various effects and select appropriate strategies. Originality/value – Few works account for the impact of organizational innovation strategies on technological innovation. This study is the first, based on recent CIS data, to address the role of organizational innovation practices for technological innovation persistence, which appears necessary for the sustainable dynamics of firms, industries, and regions.
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User participation and stakeholder involvement in health care innovation – does it matter?

European Journal of Innovation Management, Volume 18, Issue 1, Page 2-18, January 2015.

Purpose – The purpose of this paper is to discuss how and to what extent users can become involved in the process of selecting and implementing telecare and telehealth technologies in local health care services. Design/methodology/approach – The discussion is based on data from a project in one local authority in Norway. About 100 persons have participated in focus group interviews where issues regarding new telecare and telehealth technologies for the elderly were discussed. The focus groups involved different groups of product users and stakeholder groups, i.e. “older senior users” (over 65 years), “younger senior users” (55-65 years), relatives, health care professionals and general practitioners (GPs). Findings – Different user groups have different stakes in the technology. It is difficult to involve “older senior users” in the selection process due to their lack of information about potential solutions, while “younger senior users” are more informed and positive towards the introduction of telecare and telehealth technologies. The results also indicate that professionals are ambiguous towards new technologies; on the one hand they expect services to be better, but on the other they are concerned about ethical and working life issues that have not been fully explored as yet. Originality/value – This paper provides an understanding of how different groups of product users and stakeholder groups relate to and can be involved in an expanded implementation process of telecare and telehealth technology which allow older people to remain in their homes for longer.
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The differentiated impacts of organizational innovation practices on technological innovation persistence

European Journal of Innovation Management, Volume 18, Issue 1, January 2015.

Purpose This article tests the major determinants of technological (product and process) innovation persistence and provides evidence of the significant role of organizational innovation. Design/methodology/approach Data came from two waves of the Luxembourg Community Innovation Survey (CIS): CIS2006 for 2004–2006 and CIS2008 for 2006–2008. The longitudinal data set resulted in a final sample of 287 firms. A multinomial probit model estimates the likelihood that each firm belongs to one of three longitudinal innovation profiles: no, sporadic, or persistent innovators. Findings The determinants have differentiated impacts on process and technological innovation persistence. Organizational innovation influences technological innovation persistence. In the analysis of detailed organizational practices, strong evidence emerged that knowledge management exerts a crucial effect on product innovation persistence; workplace organization instead is associated with process innovation persistence. Research limitations/implications The relationships of innovation persistence, organizational innovation, and firms’ economic performance demand further exploration. The different persistence patterns of complex (process and product) and simple (process or product) innovators also are worth investigating. Practical implications Organizational innovation matters for technological innovation persistence. However, the effects of non-technological innovation differ depending on whether the firm wants to innovate in processes or products. Managers must acknowledge these various effects and select appropriate strategies. Originality/value Few works account for the impact of organizational innovation strategies on technological innovation. This study is the first, based on recent CIS data, to address the role of organizational innovation practices for technological innovation persistence, which appears necessary for the sustainable dynamics of firms, industries, and regions.
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Balancing diversity in innovation networks: trading zones in university-industry R&D collaboration

European Journal of Innovation Management, Volume 18, Issue 1, January 2015.

Purpose Although the potential of innovation networks that involve both university and industry actors is great variances in cultures, goals and knowledge poses significant challenges. To better understand management of such innovation networks, we investigate different strategies for balancing diversity. Design/methodology/approach In this multiple case study, we draw on network and trading zone theory to examine the strategies of four research centers that govern university-industry innovation networks. Findings We (1) provide empirically grounded descriptions of strategies for balancing diversity in innovation processes, (2) extend previous theorizations by suggesting two types of trading zones (transformative and performative), and, (3) identify four strategy configuration dimensions (means of knowledge trade, tie configuration, knowledge mobility mechanisms and types of trust). Research limitations/implications Further research is needed on transferability of results when e.g. cultural collaboration and communication patterns change, and, performance implications of different configurations. Our research provides conceptual tools for future research on the impact of different diversity strategies. Practical implications Our findings point to the importance of identifying desired types of innovation outcomes and designing the appropriate level of diversity. To implement the selected strategy, managers need to configure communication channels and strength of relationships, establish associated capacity for knowledge transfer and build appropriate levels of trust. Originality/value While extant research has provided a solid understanding of benefits from diversity in boundary spanning innovation processes, this paper outlines strategies for managing associated challenges.
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Innovation education programs: toward a conceptual framework

Abstract

Purpose – Innovation education has been identified as a key contributor to enhancing the innovative behavior of individuals, organizations and economies; yet very little literature exists on the development and assessment of innovation education programs (IEPs). This is particularly so in the higher education and vocational education domains. The purpose of this paper is to bridge the gap in the literature, by proposing a conceptual framework of a multi-dimensional IEP. Design/methodology/approach – The paper employs a transparent and reproducible procedure and critical appraisal of the literature; coupled with emergent inquiry and case study implementation of a leading international IEP. Findings – The study provides a framework by which innovation education facilitators may develop and evaluate their IEPs. The proposed framework provides a thematic appreciation of the multi-dimensional relationships between components. Research limitations/implications – Limited within the context of this case study, geographical context and scant literature on IEPs and reproducible procedure. Originality/value – The study provides a conceptual innovation education framework, based upon a successful international innovation management program.
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