Ch.11 Entrepreneurship and Innovation Flashcards
What is opportunity recognition and what are its elements?
Opportunity Recognition: recognising circumstances where products/services can satisfy a market need. (combining
resources and capabilities into the creation of new products and services.
Elements:
1. Entrepreneur/Team:
Drives the process, spots trends in the environment, linking these to existing resources and capabilities/acquiring appropriate ones and recombining them, and combines resources. (alert to opportunities and able to deal with uncertainty…)
- Environmental Trends and marketplace Gaps:
Macro trends and marketplace gaps (e.g., Run keeper app).
Building on macro trends and possible marketplace gaps - likely to be central in identifying an opportunity. Includes observing PEST and linking them to specific customer needs currently not satisfied. - Resources/Capabilities:
Essential for recognising opportunities (e.g., IKEA, Google).
Helpful ways of mapping and evaluating them discussed in Ch 5 (VRIO, value chain, activity systems etc)
What are the Entrepreneurial Process steps?
- Opportunity recognition.
- Feasibility analysis: Assessing (product/service) viability of the idea, market opportunity, financing.
- Industry and competitor evaluation: Using five forces, strategic groups, and VRIO analysis.
- Business model and strategy: Creating value, managing finances, and choosing a competitive strategy.
- Financial examination.
Nature: Iterative, not strictly sequential process, often involves experimentation (“pivoting”) like Starbucks’ transition. pivoting - making major changes in some dimension of the venture based on market and external feedback.
What are the stages of Entrepreneurial Growth?
- Start-up: Focus on capital sources.
- Growth: Challenge of transitioning from “doing” to “managing”. 20+ employees
- Maturity: Retaining enthusiasm, generating growth, and possibly diversifying into new business areas. Period where entrepreneurship van change into intrapreneurship (generation of new ventures from inside the org). Tencent
- Exit: Departure from the venture, releasing capital, options like IPOs.
- Outcome: Successful entrepreneurs often become serial entrepreneurs.
What is Social Entrepreneurship?
Social Entrepreneurship addresses social problems, often on a not-for-profit basis.
Key Choices:
1. Social Mission: Primary focus, like Grameen bank’s poverty reduction. 2 elements: end objectives and
operational processed.
- Organisational Form: Non-profits, hybrids, or profit-oriented social companies (e.g., Cafédirect).
- Business Model: Rely on marketplace revenues, innovate in the value chain.
- Collaborations: Often partner with large commercial companies for mutual benefits.
What is innovation and why is it important?
innovation involves converting new knowledge into a product/service and then commercially using it or other use.
Innovation is vital for business-level strategy, With implications for cost, price, differentiation and sustained
competitive advantage. and is a dynamic capability that can renew organisational resources and capabilities.
What is Technology Push and Market Pull?
Technology Push: Innovation is driven by technology, with R&D labs producing new products/services. e.g., drug development costs.
Market Pull: Innovation is driven by users.
Both approaches acknowledge the importance of external market insights for innovations.
Balance: Organizations must strike a balance between technology push and market pull.
Shared key insight: innovation do not just come from scientific research, but can be pulled by users in the external market.
What are two approaches to market pull?
Lead Users: Principal source of innovation. Top professionals or experts pull the innovation, e.g., top
surgeons. Pull of market experts that pull the innovation.
Frugal Innovation: Addresses needs of the general public, especially in emerging markets, e.g., frugal
innovations from India. Frugal innovation emphasises low cost, simplicity, robustness and easy maintenance. Juugad innovation
What is Product and Process Innovation?
Product Innovation: Focuses on the end product/service features. e.g., Apple’s product line.
Process Innovation: Focuses on production and distribution, improving cost or reliability. e.g., Zara’s supply chain.
Who favours Product innovation and who favours Process innovation?
New developing industries favor product innovation, as competition is still around defining the basic features of the product or service.
Maturing industries favour process innovation, as competition shifts towrds efficient production of dominant design of product or service.
What is Business model innovation?
Business model innovation: is still another form of innovation and thus involves reorganising value creation, configuration and capture into an entirely new business model.
What is Open innovation and Closed innovation?
Open Innovation:
Exchanges knowledge with external entities to accelerate innovation. e.g., IBM’s ‘collaboratories’, Spotify’s ‘music hack days’, and crowdsourcing platforms like InnoCentive.
Typically requires careful support of collaborators.
Closed Innovation: Relies on an organization’s internal resources and keeps innovation secretive.
What is Innovation Ecosystems?
Ecosystems: Communities formed around innovation platforms, involving multiple stakeholders. e.g.,
Apple’s app ecosystem, Alphabet, and Microsoft platforms. that need to interact to innovate and create value for all.
Innovation ecosystem partnership includes a platform innovator, innovation complementors - together create value. But, while share interest to grow the whole amrket around the innovation and platform → they compete
over how the value is distributed among ecosystem participants.
What are the 3 factors for balancing Open and Closed innovation?
- Competitive rivalry (steal innovations → better to have closed)
- One-shot innovation: the nature of innovation (one-shot vs continuous)
- Tight-linked innovation, the complexity of technologies - tightly interlinked.
Innovation Diffusion - what is diffusion?
Diffusion is the process by which innovations spread among users. The speed and extent of this spread can critically impact the commercial viability of the innovation.
Can be influenced from the supply and demand sides, which they can also model using the S-curve.
What are the factors affecting pace of Diffusion
- Supply-Side Factors: pace is determined by product features like:
- Degree of improvement (Performance): in performance above current products. The more an innovation surpasses existing products in performance, the faster it may be adopted.
- Compatibility (with other factors): Innovations that integrate or work well with other products/services have an advantage. (make sure appropriate complementory products and services are in place).
- Complexity: Simplicity in both product and pricing promotes faster adoption.
- Experimentation: Allowing users to test a product before full commitment can encourage wider adoption, diffusion. reviews, trial period
- Relationship Management: Efficient support and easy access to information can influence the adoption rate. (Need appropriate relationship management process to assist users)
- Demand-Side Factors: (affordability ofc key)
- Market Awareness: Adequate promotion is crucial; otherwise, even valuable innovations might fail.
- Network Effects: As more users adopt a product, its value can increase, prompting even more users to adopt.
- Customer Propensity: Innovations initially target early adopters, eventually aiming for wider markets.
What is the S-curve and describe its patter:
S-curve: Reflects a process of initial slow adoption of innovation, followed by a rapid acceleration in diffusion, leading
to a plateau representing the limit to demand.
Pattern:
* Starts with slow adoption.
* Experiences a tipping point leading to rapid growth.
* Eventually, growth slows, leading to a plateau.
Useful concept to avoid simply extrapolating next year’s sales from last year’s sales. But, tripping point also underlines that innovations don’t follow inevitable process. Netflix dvd rentals → streaming
What is a first-mover advantage?
A first-mover advantage exists where an organisation is better off than its competitors as a result of being first to market with a new product, process or service. (initially monopolist)
What are the advantages of being a first-mover?
- Network Effects:
Early adopters can establish a strong user base, making it harder for latecomers. - Experience Curve:
First movers gain expertise quickly. - Scale Benefits:
Early entrants often reach the necessary production scale earlier. - Resource Pre-emption:
First movers can secure key resources. - Reputation:
Being first can establish a brand’s dominance. - Buyer Switching Costs:
Early entrants can lock in customers.
What are the disadvantages of being a first-mover?
- Not all first-movers succeed, as seen with Spotify’s success and Rdio’s failure.
- Late movers can learn from the mistakes and successes of pioneers.
- Given the potential advantages of late movers, face a hard choice between striving to be first or coming in later. Fast second strategy → can build early mover advantage.
What needs to be considered when choosing between innovating and imitating?
Fast Second Strategy:
It’s not always about being the first but being among the first to effectively adapt and market an innovation.
Considerations: Three factors need to be considered in choosing between innovating and imitating:
- Capacity for Profit Capture: The ability to secure the benefits of the innovation. Challenging if innovation easy to replicate and intellectual property rights are weak.
- Complementary Assets: The need for assets/capabilities that support the innovation and to gain an
advantage. - Fast-moving Arenas: Dynamic Markets: In fast-changing markets, being first doesn’t guarantee a lasting advantage.
What are the difficulties for incumbents regarding innovation?
Incumbent firms, or current market leaders, often find innovation challenging, and external innovations can be threatening.
2 problems for incumbents:
1. Managers can become too attached to existing asses and skills.
- Relationships between incumbent organisations and customers can become too close. Customers unable to imagine completely new technologies.
What is disruptive innovation?
Innovations that drastically change the market and render old technologies or methods
obsolete.
Name 3 strategies for incumbents?
- Develop a Portfolio of Real Options:
Real options are investments that keep future opportunities open.
* Companies that are most challenged by disruptive innovations tend to be those built upon a single
business model and with one main product/service.
- Companies should build portfolios of real options in order to maintain organisational dynamism. (est R&D
team/acquiring a small start up in a nascent market)
- Corporate Venturing:
Autonomous (new venture) units within a company that focus on new, innovative ventures. BMW - Intrapreneurship:
Encouraging employees to act as entrepreneurs within the company (as a part of their regular job).
However, can also be autonomous from, and conflict with, corporate management → thus not always
encouraged.
Whether by developing real options, internal venture units or equivalent, it’s clear that established incumbents need to be able to support a spirit of intrapreneurship.
