Chapter 11: Entrepreneurship and innovation

Diffusion

The process by which innovations spread among users

Pace of diffusion: supply-side

• Degree of improvement

• Compatibility

• Complexity

• Experimentation

• Relationship management

Pace of diffusion: demand-side

• Market awareness

• Network effects

• Customer propensity to adopt

Disruptive innovation

Creates substantial growth by offering a new performance trajectory that, even if initially inferior to the performance of existing technologies, has the potential to become markedly superior

To encourage innovation and be responsive to potentially disruptive innovations, there are three different approaches:

1. Develop a portfolio of real options

2. Corporate venturing

3. Intrapreneurship

Innovation ecosystems

Communities formed around innovation platforms

• Consist of a group of mutually dependent and collaborative partners that need to interact to innovate and create value for all

Balance between open and closed innovation depends upon

1. Competitive rivalry

2. One-shot innovation

3. Tight-linked innovation

Entreprenuership life cycle

progresses through start-up, growth, maturity, and exit

Challenges:

• Start-up: sources of capital

• Growth: management

• Maturity: staying enthused & committed

  • intrapreneurship: new ventures from inside the org

  • diversification

• Exit: trade sale or initial public offering (IPO)

Figure 11.4 (pg. 333)

Entreprenuership

a process by which individuals, start-ups, or organizations identify and exploit opportunities for new products and services that satisfy a need in a market

First-mover advantage

Exists where an organization is better off than its competitors as a result of being first to market with a new product, process or service

• Network effects

• Experience curve benefits

• Scale benefits

• Pre-emption of scarce resources

• Reputation

• Buyer switching costs

‘Fast second’

Being first to imitate the origins, innovator and thus building an early mover advantage’

To innovate or to imitate?

• Capacity for profit capture

• Complementary assets

• Fast-moving arenas

Innovation

the conversion of new knowledge into a new product, process, or service

+

the putting of this new product, process, or service into actual commercial or other use

Open innovation

involves the deliberate import and export of knowledge by an org in order to accelerate and enhance its innovation

Opportunity innovation

Opportunity recognition

i.e. circumstances under which products and services can satisfy a need in the market or environment

• 3 important & interdependent elements:

  • Entrepreneur or entrepreneurial team

  • Environmental trends and marketplace gaps

  • Resources and capabilities

Figure 11.2 (pg. 330)

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

Social entrepreneurs

individuals or groups who create independent organizations to mobilize ideas and resources to address social problems, typically earning revenues but on a not-for-profit basis

key choices:

• social mission

• org form

• business model

Entrepreneurial process steps

• Opportunity recognition

• Feasibility analysis

• Business plan

• Industry conditions and competitors

• Business model and strategy

• Financing and funding

Figure 11.3 (pg 331)

Dilemmas posed by innovation for the strategist

• How far to follow technological opportunity against market demand?

  • Tech push (listen to R&D)

  • market pull

    • lead users

    • frugal innovation

• How much to invest in product innovation rather than process innovation?

• How far to open themselves up to innovative ideas from outside?