Chapter 11: Entrepreneurship & innovation Flashcards
What is the definition of entrepreneurship?
the process by which individuals, start-ups or organisations identify and exploit opportunities for new products or services that satisfy a need in a market
What are the steps of the entrepreneurial process? (6)
- opp recognition
- feasability analysis
- business plan
- industry conditions and competitor analysis
- business model and strategy
- financing and funding
What are the stages of entrepreneurial growth?
Start up
Growth management
Maturity
Exit?
What is jugaad innovation?
quick, makeshift solutions with few resources
What is frugal innovation?
A strategic, deliberate effort to create cost-effective, accessible products
What is innovation?
Innovation is a dynamic capability that can renew organisational resources and capabilities.
What is technological push?
Technological push view, aka supply-induced innovation.
the new knowledge created by scientists or technologists pushes the innovation process. R&D labs produce new products, processes or services and then hand them over to the rest of the organisation. According to this view, managers should listen primarily to their scientists and technologists and support them with resources needed to fund research.
What is the downside of market pull perspective?
Relying heavily on existing users in the external market can make companies become too conservative and vulnerable to disruptive technologies that uncover needs unforeseen by existing markets.
What is product innovation?
the final product or service to be sold, especially with regard to its feautres (Apple is well known for this)
What is process innovation?
relates to the way in which this product is produced and distributed, especially with regards to improvements in cost or reliability (Zara is known for process innovation in its supply chain and manufacturing; allowing them to answer to fluctuating market trends quickly and get new clothes in stores fast)
What is the relationship between product and process innovation?
Typically, organisations start with product innovation based on new features and then it moves on to process innovation. Like for the early history of automobiles: there was first competition in how the product (car) should look like.. three wheels or four? Eventually industries come to a dominant design (the standard configuration of basic features) after Henry Fords Model T. Once such dominant design is set, innovation switches to process innovation as the competition now is who does this the fastest and provides the best price. And then the cycle continues again, like now when the Tesla is on the rise.
What is open and closed innovation?
Closed innovation = the traditional approach, relying on the organisations own internal resources - its laboratories and marketing departments. Innovation in this sense is secretive to protect intellectual property and avoid competitors free-riding on ideas.
Open innovation = involves the deliberate import and export of knowledge by an organization in order to accelerate and enhance its innovation. The idea is that exchanging ideas openly is more likely to produce better products more quickly than the internal, closed approach. Spotify arranged “music hack days” in various locations around the world where developers are invited for a day of discussing and developing new applications.
What is crowdsourcing?
crowdsourcing is a form of open innovation where a company broadcasts a specific problem to a crowd of individuals or teams, often in tournaments with prizes awarded to the best solution.
What are the five types of innovation? (pp, Schumpeter 1934)
Schumpeter 1934
1. New goods (product innovation)
2. New methods of production (process innovation)
3. New markets
4. New sources of input
5. New organization
What is market pull innovations?
“Necessity is the mother of invention”, Dosi 1982.
Market pull view aka demand-pull assumptions:
users are the ones behind innovations, not the producers. So when organizations design their innovation strategies, organisations should first listen to user rather than their own scientists. What does the market want and need? Lets produce that.
There is two ways to see this (two spectrum extremes)
-
Lead users (market experts)
The lead users are the ones being the source of innovation. For instance, in medical surgery, the lead users can be the surgeons that, during their work, find new types of operation. Or in extreme professional snowboarding, the users make the improvements necessary for greater performance: they know it best. In this view, managers need to identify who the lead users are and build strong relationships with them. -
Frugal innovation (ordinary consumers)
At the other end of the spectrum, its not the experts leading the way, its the ordinary consumers, particularly the poor in emerging markets. Frugality is the guiding principle: doing more with less and hence innovating (as with the Arbutus Medical illustration). Frugal innovation typically emphasizes low cost and simplicity.
What are the dichotomies of innovation?
Discontinous and continuous innovation
Architecturaland modular innovation
Disruptive (supports a new set of customers) and sustaining innovation (those that supporting the value that you deliver to existing customers)
What is a value network according to Clayton Christensen, 1997?
According to Clayton Christensen, a value network refers to the ecosystem of players that work together to create and deliver value, while also shaping how businesses compete and innovate.
Key Points from Christensen’s Perspective:
1. Interconnected Relationships: Companies in a value network depend on each other to create and deliver value to customers. These connections influence the strategies and innovation potential of each organization.
- Innovation and Disruption: Christensen emphasizes that the value network is crucial in understanding how innovations succeed or fail. Disruptive innovations often emerge when a new value network forms, catering to unmet needs or new customer segments in ways the old network didn’t address.
- Performance and Competition: In a value network, organizations aim to improve their products or services based on customer feedback and competitive pressures within that specific network.
As firms gain experience within a given network, they are likely to develop their capabilities, structures and cultures to ʻfitʼ that position better by meeting that networkʼs distinctive requirements
What is sustaining innovation?
An innovation that does not affect existing markets
What is disruptive innovation?
An innovation that creates a new market by applying a different set of values which then unexpectedly overtakes an existing market.
What is a technological shakeout?
happens when a new technology rapidly changes an industry, causing many companies to either fail or merge. As competition intensifies, only a few firms that can adapt and use the new technology survive, leading to market consolidation. Examples include the rise of the internet during the dot-com bubble and the early car industry
Where does innovation come from?
Demand (market) pull or technological push
What are the effects of innovations on industrial dynamics?
What is the productivity paradox? (Solow, 1957)
refers to the observation that despite the rapid advancement and widespread adoption of information technology (IT), there was no significant corresponding increase in productivity in the economy during the 1970s and 1980s. Solow famously stated in 1987: “You can see the computer age everywhere but in the productivity statistics.”
What did Schumpeter mean about creative destruction?
He describes capitalism as a system that is never stationary because it thrives on constant transformation. The key mechanism driving this transformation is what he famously termed “Creative Destruction. Its the process by which new innovations destroy old industries or methods, only to replace them with new, more efficient ones.
Schumpeter argues that this process is the fundamental force in capitalism. It’s not just about making incremental improvements; it’s about revolutionizing entire industries and ways of doing business.
The emphasis is on the destruction of the old to make room for the new. This can involve entire industries becoming obsolete (e.g., the transition from horse-drawn carriages to automobiles).
Example: The advent of digital photography destroying the traditional film photography industry (e.g., Kodak’s decline).
