The objectives of this analytical report are:
• Industry analysis of entrepreneurship ecosystem of Philadelphia region and great Sydney region
• Utilize Porter’s 5 forces analytical tool to analysis the 5 forces of entrepreneurship ecosystem accelerator/incubator business in great Sydney region.
• Provide constructive recommendation to UTS management team of how to utilize university strengths and take initiative to lead innovation and support entrepreneurship ecosystem in great Sydney region as what Temple University did in Philadelphia.
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Ecosystem industoryanalysis
1. Charlie Chen |UTSEMBA Student| December 11, 2014
Industry Analysis of Entrepreneurship
Ecosystem Incubator Business
FOR GREAT SYDNEY REGION
2. PAGE 1
Table of Contents
Document Objective..................................................................................... 2
Industry Analysis.......................................................................................... 2
Philadelphia, USA........................................................................................... 2
Temple University........................................................................................ 2
University city Science Center ..................................................................... 3
Sydney, Australia............................................................................................ 3
Porter’s Five Forces Analysis...................................................................... 5
Rivalry within the market place .................................................................... 5
Threat of Substitutes.................................................................................... 6
Bargaining Power of Customers .................................................................. 7
Bargaining power of suppliers...................................................................... 7
Threat of New Entrants................................................................................ 7
Conclusion and Recommendation.............................................................. 8
Appendix: Personal Reflection of Trip...................................................... 10
References.................................................................................................. 11
3. PAGE 2
Document Objective
The objectives of this analytical report are:
Industry analysis of entrepreneurship ecosystem of Philadelphia region
and great Sydney region
Utilize Porter’s 5 forces analytical tool to analysis the 5 forces of
entrepreneurship ecosystem accelerator/incubator business in great
Sydney region.
Provide constructive recommendation to UTS management team of how to
utilize university strengths and take initiative to lead innovation and
support entrepreneurship ecosystem in great Sydney region as what
Temple University did in Philadelphia.
Industry Analysis
Philadelphia, USA
TEMPLE UNIVERSITY
One of the key component to a successful entrepreneur ecosystem is quality
human capital (Goodner, 2013). Temple University as well as University of
Pennsylvania and Drexel University have significant contribution of producing
such quality human capital during the period of Philadelphia’s technology
transfer.
The author has noticed that there is an unconventional division in the
administration infrastructure of Temple University-The Office of Technology
Development and Commercialization. As articulated by Judy Curlee, this
division orchestrates university-wide program for innovation and
commercialization. (Curlee, 2013)
“Through the advancement of the university research enterprise, we ensure
our place as a nexus of discovery, education, translational research, and
service, dedicated to improving quality of life,’ says Stephen G. Nappi,
Director of the Office for Technology Development and
Commercialization.”(Curlee, 2013). The author believes this is a strategic
approach which enable the university to play an important role in developing
and accelerating the regional entrepreneurship ecosystem.
In reflecting upon the engagement exercise we had in Philadelphia, it was
useful to observe that the university takes innovated approach to educate
student with a different set of skills and promoting critical thinking as well as
building character strengths of resilience and creative thought (Goodner,
2013).
4. PAGE 3
UNIVERSITY CITY SCIENCE CENTER
Daniel J. Isenberg famous diagram “domains of the entrepreneurship
ecosystem” has illustrated elements of six domains of a healthy
entrepreneurship ecosystem and there interactive relationships.
Based on my observation University City Science Centre, provides lab, office
space, IT infrastructure, and Finance service/support which organically
connects support domain, culture domain and Finance domain in the same
roof. More important, it created a center of attraction for Human Capital
domain, Market domain and policy distribution center. As stated by its CEO
and Chairman of the Board “the Science Center is by taking a metaphorical
journey along the startup path that connects entrepreneurs who have an idea
to the infrastructure and the ecosystem that can help them grow and
thrive.”(Tang and Carnaroll, 2014).
40,000 jobs are generated by graduate and resident companies of the
Science Center and the annual regional economic output was a whopping
$9.4 billion. (Curlee, 2013).
Sydney, Australia
University of Technology, Sydney is part of the golden triangle (consists
University New South Wales, Sydney University and University of
Technology, Sydney), of Australia’s most important intellectual quality human
capital breading ground. It has produced many successful and influential
entrepreneurs both in Australia and overseas.
5. PAGE 4
We are glad to know that UTS is one of the shareholders of Australia
Technology Park (ATP) Innovations (one of Australia’s leading startup
business incubator).
This organization helps startups to:
raise capital,
build the team
secure government grants
create new products and
grow revenue
(Source: http://atp-innovations.com.au/)
Over the last 5 years the organization has worked with more than 80
businesses.
Since 2006 this organization has:
Raised over $113 million from private investors.
Secured more than $28 million of competitive government grants.
Filed 250 patents and trademarks applications with 122 granted.
6. PAGE 5
ATP Innovations’ clients have successfully commercialized technologies
across a broad spectrum of technologies1
.
Porter’s Five Forces Analysis
Porter’s Five Forces Model of Competition
The entrepreneurship ecosystem business consists of many stakeholders and
processes in a complicated environment. We must fully understand these
dynamic forces and their relationship so we can develop a successful
business strategy. In order to achieve this objective, the author leverage
Michael Porter’s framework to analyze the environment of the industry and
possible impacts of those five forces to an entrepreneurship ecosystem in
great Sydney region.
RIVALRY WITHIN THE MARKET PLACE
In great Sydney region, we believe there are several players in the startup
incubating business. Most of them are in their early stages. Concentration
Ratio (CR) is the method to measure intensify of competition between rivalry
organizations. Following diagram provides an overview of CR of
entrepreneurship ecosystem in great Sydney region. The intensity of rivalry is
influenced by following industry characteristics:
1. Number of competitors: This figure is relatively low in great Sydney region
compare with Philadelphia region (total 96);
2. Market Growth: In great Sydney region we did not see the startups market
growth as we saw in Philadelphia region. Here are Sydney startup
demographics reference figures: Startups: 169; Investors: 1; Seed Funds:
0; Venture Capital: 1; Corporate Funds: 0; Angel Groups: 0;
1
http://atp-innovations.com.au/about/
7. PAGE 6
Accelerators:1; Incubators:0; Community Enablers: 0; Academic:0; Service
Providers:12
.
3. Higher fix costs for new rivals: The large portion of the investment of
startup incubator is real estate. While Sydney real estate market still in its
bubble status, it will be very hard for an investor to use sizeable real estate
for a business which has very low returns.
4. Complicated multiple strength resources demand: It is a great challenge
for a new rival organization to have all expertise that cover Information
technology, telecommunication, finance, legal and business admin
domains.
Map of Sydney Startups3
THREAT OF SUBSTITUTES
Threat of substitutes is the competition caused by a threat of substitute comes
from product outside of the industry. (QuickMBA Strategic Management,
2010).
The business of incubation for startups is a combination of real estate, office
admin, Information Technology, Telecommunication legal and finance
services. It is not an easy job for conventional investors to get sufficient
resources at the beginning of the business. The higher cost of real estate
2
https://startupgenome.co/sydney-newsouthwales-aus/
3
http://www.bluechilli.com/sydney-startrail-map/
8. PAGE 7
investment for this business in Sydney and its niche market nature with very
low ROI are great barriers of entry. It is hard to imagine this business will
attract many investors. The threat of substitutes to existing startup incubation
business should be relatively low.
Upon reflection, it was observed that the business model of University City
Science Centre has not been changed since it established 50 years ago.
Therefore it is hard for us to image there will be alternative business model
which will compete with current business model of startup incubation services.
BARGAINING POWER OF CUSTOMERS
Even Sydney is the largest startup ecosystem in Australia, the actual number
of startups are very low. One element which also seems important for startups
is sense of community belong. Startup usually very much attached with its
specific community. Once they involved in the specific community it is hard for
them to move to another community.
Due to above reasons, we believe the customers of this market do not have
strong bargain power.
BARGAINING POWER OF SUPPLIERS
The suppliers, in this particular business domain, are utilities service providers
(i.e. electricity, water, telecommunication, etc.). The deregulation of electricity
and telecommunication industry increased the competition between service
providers. Businesses have many choices of utility suppliers in the market
place.
University can leverage their large business purchasing power to further
weaken the bargaining power of suppliers.
THREAT OF NEW ENTRANTS
Due to the size of the market, higher initial investment requirement, low return
on investment and complexity of the business, we do not anticipate many
competition in this niche market.
Above conditions practically create barriers to entry. Due to the nature of the
entrepreneurship ecosystem incubator business, the profit level will not be
dramatically increased in its early stage.
However there are several external sources may change the barriers of the
entry:
1. Government creates barriers: in normal circumstance, the government role
are preserve competition through anti-trust actions, restricts competition
9. PAGE 8
through granting of monopolies and regulation4
. I believe competitors in
this niche market should able to have self-regulation roles with respect
each other rather than try to destroy each other.
2. Organizational Economies of Scale: in a normal business environment this
is related to product unit cost (fix cost + variable cost). In this special
business environment, I believe it consists 2 elements:
a. Source of funding in its early stage: since it requires initial
investment (acquire real estate, interior renovation, etc.) it is critical
for securing the funding in its early stage. It is a big challenge
because it is a low ROI business and hard to quantify its positive
social impact even the investor willing to consider this aspect.
b. Sustainability from financial perspective: the service charge have to
be low or even very low in order to achieve its goal to become a
real entrepreneurship ecosystem incubator/accelerator rather than
a commercial real estate service provider. However the business
should be able to self-sustain after passing its infant stage. The
administration of the business must eliminate any possible resource
wasting and find any possibly way to minimize the running cost.
Denial Isenberg has pointed out “Incubators can take 20 years or
longer to generate a measurable impact on entrepreneurship.”
(Isenberg, 2010).Realistically, we anticipate there will be several
players exist from entrepreneur startup accelerator/incubator
business rather than many new players to enter this business.
Conclusion and Recommendation
Sydney is Australia’s largest startup ecosystem, however, it has not reached a
position where it has significant impact to industry and broader societies in
Australia.
We believe one of the reasons is lacking of sizable entrepreneurship
ecosystem and its supporting environment.
Another reason is lacking of venture capital business society that we see in
US and even some of developing countries.
There are also other reasons which has been articulated in the article: Silicon
Beach Building momentum, A study of the Australian Startup Ecosystem.
In order to accelerate great Sydney region entrepreneurship ecosystem
development, UTS should leverage its available resources such as libraries,
unused spaces in campuses, Internet connectivity and other facilities for
supporting start-ups. The university should also leverage its intellectual
resources (educators and researchers, etc.) to mentor students and
graduates to become entrepreneurs. Furthermore, UTS should leverage its
4
http://www.quickmba.com/strategy/porter.shtml
10. PAGE 9
industry relationship to engage private sectors to finance and commercialize
new business ideas, innovations.
The author also suggest that UTS should take leadership in:
Further enhancement of ATP hub and eventually make it as a flagship of
entrepreneurship ecosystem incubator in great Sydney region.
Lobby government to make policy changes.
The commodities boom in Australia has become past. This nation need to
start an entrepreneurial revolution in order to have sustained economic
growth. “The entrepreneurship ecosystem consists of set of individual
elements-such as leadership, culture, capital markets and open mined
customers.” (Isenberg D. 2010). Universities arguably are natural incubators
of these elements.
11. PAGE 10
Appendix: Personal Reflection of Trip
The ultimate goal of this trip, as it been addressed in the subject outline, is for
us to study/assess the Philadelphia entrepreneurship ecosystem and
understand and explain the role Temple University has played in its
development.
Personally, I always fascinated by success startup stories since I was young. I
tried to start up a business in nineteen ninety eight which failed to take off. I
have been looking for answers since then. I believe that I finally found answer
via this well-structured study/business trip.
I believe horizontal and vertical collaboration is one of the key elements which
will lead to a success of innovations/startups. I have observed and learnt how
to use this powerful method during this trip.
We had extensive collaboration with established businesses/businessman,
start up business owners, venture capital investors and innovated project
leader/lecturers of Temple University community.
One of the benefits of this trip is it provides us a opportunity for deep diving in
to a real successful entrepreneurship ecosystems. I will never be able to
understand how it works without this trip.
There are few learning highlights of this trip:
The underground market research project was a groundbreaking
master piece. The project leader and lecturer revolutionary merged
market research and business process analysis in an Art School
lecture/project domain. The outcomes opened everyone’s mind.
The multi-dimensional support entrepreneurs able to obtain from the
business society and academic society in Philadelphia is one of the key
factor of success of entrepreneurial startup businesses.
12. PAGE 11
References
Bluechill Sydney Startrail Startup map update.
http://www.bluechilli.com/blog/sydney-startrail-map-update-3-released/
Culee, J. (2013, October 31). How Universities Are Fuelling the Local
Economy. Http://Phuladelphia.regionsbusiness.com/
University City Science Center 2014 Annual report
Part One, Startup Ecosystem Report 2012
Startup Genome Report
Isenberg, D. (2010). How to start an entrepreneurial Revolution.
Harvard Business Review June 2010
Isenberg, D. (2011). Introducing the Entrepreneurship Ecosystem: for Defining
Characteristics. Http://www.fprbes.com
Morle, P., Kitschke, Z., Jones, A., & Tanchel, J. (2012). Silicon Beach,
Building momentum, A study of the Australian startup ecosystem.
Khatri, M. (2013, September 23). Porter’s Five forces A model for Industry
Analysis. http://www.slideshare.net/mayurkhatri5/porters-five-forces-
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