Wk8: Chapter 7: Managing uncertainty & failure

Question 1

What is the business process for established, non-entrepreneurial firms and when is it appropriate?

Answer 1

• Identify opportunity
• Build product
• Launch product

Only appropriate for large firms dealing with known problems and known solutions. (incremental innovation)
Typically includes lots of resources & time, and validation, stagegating and prototyping before going into mass production

Question 2

What are the 4 options on the matrix of uncertainty for innovation challenges?

Answer 2

• Known problem & known solution-Established market and product, tested strategy, incremental innovation
• Unknown problem & unknown solution- highly innovative and radical, a brand-new solution to a problem that might not even exist yet (e.g: Paypal; first computer OS)
• Unknown problem, Known solution- entering new market with an existing technology that has worked elsewhere, but you don’t know how new market will respond to it
• Known problem, unknown solution- a new way of doing something to try and fix an already existing problem

Question 3

Describe the entrepreneurial approach to business innovation.

Answer 3

• Typically seen in start-ups due to lack of resources (Lean-startup approach)
• Startup is an experiment: (Business vision=hypothesis; Validting hypothesis=tast; Goal=find sustainable business model; Once sustainable business model is validated, it can be scaled
• Emphasises quick results and feedback speed while using minimum resources
• The test is to better understand customers, to better predict buying behaviour.

Question 4

Within the enterpreneurial approach to innovation

How can we validate a hypothesis?

Answer 4

• Repeat cash sales, early on is the best indicator of something potentially scalable
• Beware of burdensome sales (Cost of convincing customer to buy is higher than return from the sale)
• Evangelical customers are a good sign (Customers who spread the word about how good your product is in their own circles; best form of free marketing)

Question 5

Rules of doing a lean start-up?

Answer 5

• Start-ups should not act like large corporations (R&D spending etc.)
• Build minimum viable product ASAP (rapid prototyping and test marketing)
• Test, learn & adapt product quickly before commiting scaling resources
• Do not do the following:
• Overconfidence in understanding customers
• Over-enthusiastic about future predictions
• Over-reliance on rigid plan

Question 6

What distinguishes lucky once-off entrepreneurs from those that are successful time and again?

Answer 6

• Serially successful entrepreneurs constantly engage in the right entrepreneurial processes (Test business model, validate and scale or scrap)
• They have particular skills such as the ability to solve problems, articulate propositions, minimise risk and maximise opportunities
• Lucky entrepreneurs are just in the right place at the right time

Question 7

How do you increase your return on failure?

Answer 7

• Extract maximum value from every failure
• Minimise liabilities (Control/reduce costs associated with new innovation)
• Maximise assets (Learn as much as possible) e.g: new market insights, better understand how your company works together, what are its weaknesses

Question 8

Wrt increasing organisation’s return on failure

What is step 1 in the process?

Answer 8

• Step 1: Learn from every failure
• Study every failure to gain insight into what went wrong
• Assets:
• What has been learnt about our customers’ needs/preferences/behaviour?
• What has been discovered about future market trends?
• What have we learned about our organisation’s processes, culture & how well we work together?
• How have our team’s skills developed?
• Liabilities:
• Direct costs (Materials, labour, resources, time etc.)
• External costs (Effect of failure on our reputation)
• Internl costs (Effect of failure on employee morale)

Question 9

Wrt increasing organisation’s return on failure

What is step 2?

Answer 9

• Step 2: Share lessons throughout organisation
• Failures should be openly talked about and reflected on by entire organisation to encourage organisational learning
• Senior management shouldn’t be afraid to talk about failures

Question 10

Wrt increasing organisation’s return on failure

What is step 3?

Answer 10

• Step 3: Review your pattern of failure
• Make sure value is extracted (lessons are learned) from every failure however small
• Make sure these lessons are spread throughout the organisation
• Periodically check to ensure these processes are in-fact helping organisation move in the right direction.