Chapter 11: Entrepreneurship & innovation

Question 1

What is the definition of entrepreneurship?

Answer 1

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

Question 2

What are the steps of the entrepreneurial process? (6)

Answer 2

1. opp recognition
2. feasability analysis
3. business plan
4. industry conditions and competitor analysis
5. business model and strategy
6. financing and funding

Question 3

What are the stages of entrepreneurial growth?

Answer 3

Start up
Growth management
Maturity
Exit?

Question 4

What is jugaad innovation?

Answer 4

quick, makeshift solutions with few resources

Question 5

What is frugal innovation?

Answer 5

A strategic, deliberate effort to create cost-effective, accessible products

Question 6

What is innovation?

Answer 6

Innovation is a dynamic capability that can renew organisational resources and capabilities.

Question 7

What is technological push?

Answer 7

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.

Question 8

What is the downside of market pull perspective?

Answer 8

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.

Question 9

What is product innovation?

Answer 9

the final product or service to be sold, especially with regard to its feautres (Apple is well known for this)

Question 10

What is process innovation?

Answer 10

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)

Question 11

What is the relationship between product and process innovation?

Answer 11

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.

Question 12

What is open and closed innovation?

Answer 12

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.

Question 13

What is crowdsourcing?

Answer 13

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.

Question 14

What are the five types of innovation? (pp, Schumpeter 1934)

Answer 14

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

Question 15

What is market pull innovations?

Answer 15

“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.

Question 16

What are the dichotomies of innovation?

Answer 16

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)

Question 17

What is a value network according to Clayton Christensen, 1997?

Answer 17

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.

2. 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.
3. 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

Question 18

What is sustaining innovation?

Answer 18

An innovation that does not affect existing markets

Question 19

What is disruptive innovation?

Answer 19

An innovation that creates a new market by applying a different set of values which then unexpectedly overtakes an existing market.

Question 20

What is a technological shakeout?

Answer 20

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

Question 21

Where does innovation come from?

Answer 21

Demand (market) pull or technological push

Question 22

What are the effects of innovations on industrial dynamics?

Question 23

What is the productivity paradox? (Solow, 1957)

Answer 23

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.”

Question 24

What did Schumpeter mean about creative destruction?

Answer 24

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).

Question 25

What are the two ways to view entrepreneurship?

Answer 25

Opportunity recognition: detecting problems and finding solutions (bodyshop)

Opportunity creation: creating solutions, finding problems (post-itlappen)

Question 26

What are some problems with the market-pull (demand-pull) view on sources of innovations?

Answer 26

How to explain radical and discontinuous innovations?
How explain that innovation processes tend to occur at
different rates (speed)?
* Is the firm passive in this process?
* What happens after the firm has realised demand?
How easy can it meet the demand? What capabilities
do the firm possess to meet demand? What access to
relevant knowledge?
(Dosi, 1982)

Question 27

What are some problems with the technological push assumption as a source of innovation?

Answer 27

• There is an apparent risk of technological determinism
• Seems to suggest a way too simplified linear model:
  Science=> Applied R&D=> New products and services

Question 28

What is competence destroying innovation?

Answer 28

1. Competence destroying innovations:
   The hallmark of a competence-destroying discontinuities is that
   mastery of the new technology fundamentally alters the set of
   relevant competencies within a product class” (T&A, 1986, p. 442)
   – Either creates a new product class or substitutes for an existing product

Question 29

What is disruptive innovation?

Answer 29

Origin: Introduced by Clayton Christensen in the 1990s.
Definition: Disruptive innovation refers to innovations that start by serving a niche market with a product that’s often considered inferior by mainstream standards. However, over time, the product improves and eventually displaces established products or market leaders.
Focus: The key aspect is that the innovation initially caters to underserved or overlooked segments of the market before improving and becoming dominant.
Example: Netflix started by offering DVD rentals by mail, which initially served a niche market. Over time, as streaming technology improved, Netflix disrupted the traditional video rental industry, pushing companies like Blockbuster out of the market.

Question 30

What is competence-enhancing innovations?

Answer 30

Competence-enhancing discontinuities are order-of-magnitude
improvements in price/performance that build on existing know-how within a product-class” (T&A, 1986, p. 442)

Question 31

What is Attackers Advantage?

Answer 31

Foster (1986) observed that in times of
discontinuous technological change, incumbent firms
are disadvantaged relative to new entrants (“attackers”)
who are the ones bringing in new technolog

Question 32

What is reverse innovation?

Answer 32

Reverse innovation refers to the case where an innovation is adopted first in an emerging economy before ‘tickling up’ to rich countries (Govindarajan and Ramamurti, 2011)

Question 33

What is Innovators Dilemma?

Answer 33

Innovating too much to meet your customers needs
may be harmful

Question 34

What is the garbage can model?

Answer 34

The Garbage Can Model is a concept in organizational theory developed by Cohen, March, and Olsen in 1972 to describe decision-making in complex, chaotic organizations. Unlike traditional models that assume decisions are made logically and systematically, the Garbage Can Model suggests that in unpredictable environments, decisions can seem haphazard, as if they come from a “garbage can” where various ideas, problems, and solutions are mixed together.

Question 35

What is a radical innovation?

Answer 35

A radical innovation refers to a groundbreaking, transformative innovation that changes the landscape of an industry or creates an entirely new market. It introduces products, services, or processes that are significantly different from existing solutions, offering a new value proposition that can make existing products or technologies obsolete.

Question 36

What is the difference between invention and innovation?

Answer 36

Invention is something new. Innovation is something new that is also used.

Question 37

Who is the mother of invention?

Answer 37

Necessity! (Dosi 1982)

Question 38

What are the problems with demand-pull?

Answer 38

Do we always know what we need?
You can’t ask someone about a need they don’t know exist.

How can we then explain radical and discontinuous innovations?

Question 39

What are the problems with technology push?

Answer 39

Risk of technological determinism

Seems to suggest a way too simplified linear model: Science -> R&D -> Product & Service

Question 40

How can we understand innovation from the supply side and the demand side?

Answer 40

Supply side: enhancing or destroying innovation

Demand side: what happens when we innovate in relation to our customers? are we breaking or supporting with our existing customers?

Question 41

What argument can make it reasonable to move towards an unattractive industry?

Answer 41

Disruptive innovation.