CH 3- Innovation Flashcards
What is entrepreneurial architecture?
Entrepreneurial architecture refers to the systems, culture, and structure within an organization designed to foster entrepreneurial behavior, such as innovation, risk-taking, and opportunity spotting.
What is the purpose of entrepreneurial outputs?
The aim of entrepreneurial outputs is to drive innovation. Innovation helps a business enter new markets, grow, and survive in a competitive landscape. It is essential for economic growth and plays a key role in shaping industries over time.
How is innovation linked to economic growth?
Theories of industrial evolution suggest that entrepreneurship drives economic growth by introducing innovation. As entrepreneurs create new products, services, and business models, they stimulate market entry and evolution, which leads to economic expansion and the transformation of industries.
Why is innovation considered the key to entrepreneurship?
Innovation allows entrepreneurs to:
* Create change and new opportunities.
* Drive profits and sustain competitive advantage.
* Sometimes even create entirely new industries. In short, innovation is the core of entrepreneurship and a major driver of growth for both businesses and nations.
Does innovation only benefit the economy?
No, innovation can also contribute to social and environmental well-being. For instance, companies can adopt regenerative design, a practice that focuses on recycling, reusing, and refurbishing products to reduce environmental impact while boosting profits. An example is Caterpillar, which improved profits by 50% while reducing energy and water use by 90% through remanufacturing components.
What is regenerative design?
Regenerative design is a business model where products are part of a circular economy. This means products are reused, repaired, refurbished, or recycled to recapture value and reduce waste, contributing to both environmental sustainability and economic growth.
Can innovation come from the public sector?
Yes, large-scale innovation often originates from government investments. Governments invest in early-stage (and often riskier) innovation, especially in fields like mass production, nuclear power, space exploration, and the internet. This public-sector innovation often provides the foundation for private-sector commercialization.
How do public and private sectors collaborate in innovation?
The private sector often engages in the later stages of innovation, focusing on commercializing research that was initially funded by the public sector. For example, Apple’s iPhone incorporates technologies such as GPS and touchscreens, which were developed through government research and funding.
Why is innovation in the private sector sometimes limited?
Large private companies sometimes prioritize maintaining their monopoly power over continuous innovation. As a result, smaller startups or government labs often take on the more radical, risky innovations that big corporations are hesitant to pursue.
What is the “Three-Player Game” in innovation?
According to Janeway (2018), the “Three-Player Game” refers to the dynamic between:
* State investment in fundamental research.
* Financial speculation, which funds high-risk, transformative technologies.
* Private-sector commercialization, which capitalizes on these innovations to drive economic growth and raise living standards.
Each player plays a crucial role in driving large-scale innovation and economic progress.
What is innovation?
Innovation is simply defined as “new ways of doing something.” It can involve new products, processes, services, or marketing strategies that make a business more competitive and efficient.
How does Kanter define innovation?
Kanter (1983) defines innovation as the generation, acceptance, and implementation of new ideas, processes, products, or services. It includes both creative invention and practical use.
What are Schumpeter’s five types of innovation?
Schumpeter (1996)
Schumpeter (1996) emphasizes newness in his five types of innovation:
1. Introduction of a new or improved product or service.
2. Introduction of a new process.
3. Opening up a new market.
4. Identifying new sources of supply.
5. Creating new types of industrial organization (e.g., changes in organizational architecture).
Figure 3.1
What are the three dimensions of innovation?
- Product/Service Innovation: Creating a completely new product or improving existing ones (e.g., the internet was radical, while anti-lock brakes were incremental).
- Process Innovation: Changes in how something is produced to improve efficiency or reduce costs (e.g., robot assembly lines are radical; merging two steps in a process is incremental).
- Marketing Innovation: Changes in how products or services are marketed, distributed, or supported (e.g., selling via the internet was radical; using social media for marketing is incremental).
What is business model innovation?
This involves creating a new way for a business to operate, including how it uses resources, interacts with customers, and generates profits. An example is iTunes, which revolutionized the music industry by linking the iPod to a new model of selling music digitally.
Why is organizational architecture innovation important?
Innovation in organizational architecture (the way a company is structured) makes it more entrepreneurial, competitive, and better-performing. Unlike product or process innovations, architectural innovations are harder for competitors to copy, giving the organization a long-term advantage.
Why is measuring innovation difficult?
There is no clear, quantifiable scale for measuring innovation. What constitutes radical or incremental innovation is often subjective and depends on how people perceive it. For instance, while some new cars may not be truly innovative, the Mini changed how people perceived vehicle design, demonstrating that innovation can be about perception as much as reality.
Examples of historical radical innovations:
- 18th Century: Water power, textiles, iron.
- 19th Century: Steam engines, steel, and railroads.
- 20th Century: Electricity, chemicals, and internal combustion engines.
- Modern Examples: Computers, mobile technologies, and the internet.
What are some current radical innovations?
- Google’s driverless car, which threatens the traditional car industry.
- Amazon Fresh, which could reshape the fresh-food market.
- Artificial intelligence (AI) and nanotechnology are expected to fuel future radical innovations.
How do the internet and cloud-based services support radical innovation?
The internet and cloud technologies lower the barriers to entry by:
* Making automation easier.
* Offering economies of scale.
* Reducing capital costs for startups and innovators. These factors enable faster innovation and disruption of traditional industries.
What is the role of governments in radical innovation?
Governments often fund the basic research that lays the foundation for radical innovation. For example, the U.S. Defense Department funded the early research that led to the internet, which later revolutionized global communication.
What is the relationship between invention and radical innovation?
Invention is the most extreme form of radical innovation, typically involving the creation of new technologies or processes. However, while inventors come up with new ideas, they often struggle to commercialize them successfully.
Can you provide examples of inventors who didn’t benefit from their innovations?
- Charles Babbage: Invented the concept of a mechanical computer but never fully realized it commercially.
- Tim Berners-Lee: Created the World Wide Web but didn’t directly profit from it.
- Thomas Edison: Although successful, his business ventures often needed external management to succeed.
Why is market demand hard to predict for radical innovations?
Potential customers have no prior experience with a radically new product or service, so traditional market research struggles to gauge demand accurately. This is why many groundbreaking innovations come from entrepreneurial insight rather than customer surveys.
What is organizational ambidexterity?
Ambidexterity in organizations refers to the ability to explore new innovations while also exploiting existing technologies or markets. It requires balancing the pursuit of new opportunities with the need to optimize current operations.
What is the difference between scientific and entrepreneurial approaches to innovation?
Scientists focus on analysis—breaking down problems to understand them deeply. Entrepreneurs, on the other hand, excel at synthesis—connecting existing ideas or technologies to create something new and commercially viable.
What is business model innovation?
Business model innovation involves creating new ways for a business to compete, use resources, structure relationships, communicate with customers, create value, and generate profit. It’s not just about improving a product—it’s about fundamentally changing how a business operates to gain a competitive edge.
What does business model innovation involve?
It can involve changes in:
* Products and processes: Innovating how goods and services are delivered or produced.
* Competition: Developing new ways to stand out in the market.
* Customer communication: Changing how the business interacts with and delivers value to customers.
What is a market paradigm shift?
A paradigm shift occurs when a radical innovation changes how people think about a product or service, often creating new markets where none existed before. It redefines the rules of the game, leading to a shift in consumer behavior or expectations.
What is an example of a market paradigm shift?
The low-cost airline industry is a perfect example. Before low-cost carriers like Southwest, easyJet, and Ryanair, air travel was expensive and targeted at business travelers or the wealthy. These new airlines changed the airline business model by cutting costs (e.g., no seat allocation, fewer amenities) and introduced a new market for affordable air travel for everyday people.
How do low-cost airlines demonstrate business model innovation?
- Minimized costs: Stripped down services to the essentials and charged extra for perks (e.g., seat allocation, food).
- Operational efficiency: Re-engineered operations (e.g., fewer cabin crew, fast turnarounds) to maximize profits.
- Marketing tactics: Used aggressive promotions and virtual ticketing to attract a high volume of passengers.
What drives market paradigm shifts?
- Technological advances: New technologies like the internet can completely change how industries operate.
- Environmental conditions: Changes in regulations or economic conditions can force industries to evolve.
- Untapped markets: Innovators can find new opportunities in markets with different expectations and needs.
How do paradigm shifts affect value for customers?
- Add value without adding costs: Offering more convenience or a better experience without raising prices.
- Reduce costs but maintain high prices: Allow companies to save on production costs while still charging a premium.
- Generate additional revenue streams: For example, internet companies offering free services to users while generating revenue by selling user data to advertisers.
