mgt 405 - chapter 12

What is innovation?

The transformation of processes and the creation of new products/services using new knowledge.

What is product innovation?

New product designs using new tech; common early in industry life; supports differentiation.

What is process innovation?

Efficiency improvements in processes; common in mature industries; supports cost leadership

What is radical innovation?

A major departure from existing practices; disruptive; can reshape industries.

What is incremental innovation?

Small, evolutionary improvements to existing products or processes.

What are sustaining innovations?

Innovations that extend sales in existing markets; can be incremental or radical

What are disruptive innovations?

Simpler, cheaper innovations appealing to low-end users; eventually transform markets.

What is the seeds vs. weeds dilemma?

Deciding which innovation ideas deserve investment.

What is the experience vs. initiative dilemma?

Choosing between experienced but cautious managers vs. enthusiastic innovators.

What is the internal vs. external staffing dilemma?

Choosing between insiders (culturally aligned) vs. outsiders (fresh ideas).

What is the build vs. collaborate dilemma?

Developing skills internally vs. partnering with external organizations.

What is the incremental vs. large-scale launch dilemma?

Small, safe test launch vs. large, risky launch that preempts competitors

What are discovery skills in innovation?

Associating, questioning, observing, experimenting, and networking.

What is a strategic envelope?

Defines the scope or boundaries for innovation efforts.

What should firms evaluate in innovation projects?

• Cost

• probability of success

• expected value

• learning potential from failure

How long do incremental vs. radical innovations take?

Incremental: 6–24 months; Radical: 10+ years.

Why is failure valuable in innovation?

Provides learning and builds capabilities for future projects.

What is corporate entrepreneurship (CE)?

Pursuing new opportunities or strategic renewal inside an established firm.

What are focused approaches to CE?

New venture groups and business incubators isolated from the main organization.

What is a new venture group (NVG)?

A semi-autonomous unit that experiments, finds resources, and launches ventures.

What is a business incubator?

Provides funding, workspace, services, coaching, and networking for new ventures.

What are dispersed approaches to CE?

Entrepreneurship is spread throughout the organization, not confined to a single unit.

What are the three elements of dispersed CE?

Entrepreneurial culture, resource allotments, and product champions.

What is an entrepreneurial culture?

A culture that encourages innovation, risk-taking, and opportunity-seeking at all levels.

What are resource allotments for CE?

Time and funding allocated to pursue innovative ideas.

What is a product champion?

A person who advocates for a venture, finds resources, and overcomes resistance.

What is an exit champion?

Someone who gathers evidence to shut down failing projects and prevent escalation.

What is real options analysis (ROA)?

A tool for making staged investment decisions under uncertainty (continue, delay, shrink, or abandon).

What is a limitation of ROA?

Managers may game criteria (back-solver issue), become overconfident, or escalate commitment.

What is entrepreneurial orientation (EO)?

A firm’s strategy-making mindset focused on entrepreneurship across five dimensions: autonomy, innovativeness, proactiveness, competitive aggressiveness, and risk taking.