ENTI 359 Exam

Question

Answer

What central question does Chapter 7 address?

How companies embed individual discovery skills into organizational innovation.

Define the innovation premium.

The share of a company's market value not explained by cash flows from existing businesses, representing expectations of profitable future innovations.

How did the authors' innovation ranking differ from BusinessWeek's?

BusinessWeek surveyed executives about innovative companies; the authors ranked companies according to investors' expectations of profitable future innovation.

Why can a highly inventive company have a low innovation premium?

Developing novel products does not guarantee profitability. Investors may doubt the company's ability to earn returns from future innovations.

What did the Sony–Nintendo comparison illustrate?

Sony had a −28% innovation premium versus Nintendo's +26%. Investors expected stronger future innovation profits from Nintendo despite Sony's reputation for invention.

Who led the authors' innovation-premium ranking, and at what value?

Salesforce.com, with a historical five-year innovation premium of 73% (p. 162).

What are the three components of organizational innovation DNA?

People, Processes, and Philosophies — the 3P framework (Figure 7-1, p. 170).

What does People mean within the 3P framework?

Discovery-skilled leaders and employees, with complementary discovery and delivery capabilities throughout the organization.

What does Processes mean within the 3P framework?

Organizational routines that encourage discovery skills and recruit, develop, reward, and promote innovative employees.

What does Philosophies mean within the 3P framework?

Shared beliefs supporting employee innovation, disruptive projects, small teams, and smart risk-taking.

What is founder imprinting?

The process through which a founder's behaviours and preferred methods of solving problems become embedded in organizational practices and culture.

How does Edgar Schein explain the formation of organizational culture?

Successful ways of solving recurring problems are repeated until they become taken-for-granted organizational practices (p. 167).

What did Jeff Bezos ask Amazon job candidates, and why?

He asked them to describe something they had invented. This helped identify people who demonstrated initiative and inventive behaviour (pp. 165–166).

How did Amazon's Web Lab demonstrate organizational innovation?

Amazon institutionalized experimentation by having employees systematically test website interfaces to improve customer experience (p. 166).

What did Bezos mean by the institutional yes?

A culture willing to explore unconventional opportunities and find ways to make ideas work rather than automatically rejecting them.

How did A. G. Lafley influence P&G's innovation culture?

He personally observed customers and established processes encouraging employees to do the same, making customer observation an organizational practice.

How did Marc Benioff embed his discovery skills into Salesforce?

He encouraged idea networking through tools such as Chatter, allowing employees to connect and exchange ideas across the organization.

What are the four innovation philosophies introduced in Chapter 7?

Innovation is everyone's job; disruption belongs in the innovation portfolio; deploy small, properly organized teams; take smart risks (p. 169).

Why can't an innovative founder alone sustain an innovative company?

Innovation must become embedded in recruitment, organizational processes, and culture rather than depend entirely on the founder's personal discovery skills.

What does the Chapter 7 organizational innovation assessment measure?

Ten statements examining innovative leadership, hiring, organizational discovery processes, employee participation, and risk-taking support (pp. 171–172).

1. What is the central argument of Chapter 8?

Innovative organizations need discovery-driven leaders, complementary team members, and the right balance of discovery and delivery skills. Innovation depends on team composition, not just individual creativity.

2. How do leaders of highly innovative companies differ from traditional executives?

Innovative leaders personally engage in discovery rather than simply delegating innovation. The study found they averaged the 88th percentile in discovery and 56th in delivery, versus 68th and 80th for executives at less innovative companies (pp. 176–177).

3. How does an innovative leader influence the rest of an organization?

Leaders model discovery behaviours, allocate resources to new ideas, and select people with similar capabilities. Employees learn that discovery skills are valued and rewarded (pp. 175–180).

4. What did Steve Jobs's absence and return demonstrate about Apple's innovation?

Apple's innovation premium averaged −30% without Jobs (1985–1998), then rose to 52% during 2005–2009. The authors connect this change to discovery-driven leadership and management composition (pp. 176–179).

5. How did A. G. Lafley demonstrate innovative leadership at P&G?

Lafley personally visited marketplaces and observed customers. His behaviour encouraged other employees to engage in discovery. P&G's innovation premium increased from 23% before his leadership to 35% during his tenure (pp. 179–180).

6. What are complementary discovery skills, and why do they matter?

Team members excel at different discovery skills, such as observing, questioning, or experimenting. Combining these strengths increases the team's ability to generate ideas beyond what individuals could accomplish alone (pp. 181–182).

7. How did Microsoft's Defect Prevention Team demonstrate complementary discovery skills?

Its six members had different discovery strengths and developed games that encouraged employees to identify software language errors. The games improved quality and saved millions of dollars (pp. 181–182).

8. Why was mutual trust important to Microsoft's Defect Prevention Team?

Trust allowed team members to share unusual ideas, challenge assumptions, and take risks. Ross Smith encouraged independent thinking and recognized others' contributions (p. 182).

9. What is the difference between discovery skills and delivery skills?

Discovery skills generate new ideas through associating, questioning, observing, networking, and experimenting. Delivery skills include analyzing, planning, detail-oriented implementing, and self-discipline (p. 184).

10. How did Michael Dell and Kevin Rollins demonstrate complementary discovery and delivery skills?

Dell frequently generated ideas, while Rollins evaluated their feasibility and managed execution. Their Curious George and bulldozer gifts symbolized the need for more questioning and more discipline (p. 183).

11. How did Pierre Omidyar and Jeff Skoll complement each other at eBay?

Omidyar focused on creative product development and discovering solutions. Skoll contributed analytical and practical execution skills that helped turn ideas into operational results (p. 183).

12. Why is a 50/50 balance of discovery and delivery skills not always optimal?

The ideal balance depends on the organization's stage and the team's responsibilities. Early innovation requires more discovery, while growth and mature operations generally require more delivery (pp. 184–185).

13. Which organizational functions generally need more discovery skills versus delivery skills?

Product development, marketing, and business development generally need more discovery. Finance and operations generally need more delivery, although both benefit from some discovery capabilities (pp. 184–185).

14. What are the four stages of BIG's innovation funnel?

1. Idea generation: find ideas. 2. Winnowing: evaluate and improve ideas. 3. Refinement: prototype and test. 4. Capture value: manufacture, market, distribute, and sell (pp. 185–187).

15. Why did BIG's Mike Collins favour discovery-driven people during the winnowing stage?

Discovery-driven people could recognize possibilities in undeveloped ideas and suggest improvements. A delivery-focused retail executive mainly identified reasons proposals would fail (p. 186).

16. Why are discovery skills still useful during the capture-value stage?

Even after product development, companies can discover better ways to manufacture, price, market, and distribute products. BIG used unconventional distribution channels rather than relying only on major retailers (p. 187).

17. What is T-shaped expertise, and why does IDEO value it?

T-shaped individuals have deep knowledge in one discipline and broader knowledge across others. This allows specialists from different fields to understand one another and combine ideas effectively (p. 188).

18. What three types of expertise does IDEO emphasize in innovation teams?

Human factors assess customer desirability; technical factors assess feasibility; business factors assess commercial viability and profitability. A successful product must address all three (pp. 188–191).

19. What did 3M's colour-shifting film/gift-bag example demonstrate?

Strong technology can fail commercially when existing business models, pricing assumptions, or distribution channels prevent its adoption. Business innovation may be needed to commercialize technical innovation (pp. 189–190).

20. Why did Steve Jobs recruit people with diverse educational backgrounds for the Macintosh team?

Jobs valued perspectives from disciplines such as music, art, zoology, and history. Diverse knowledge allowed the team to make unusual associations and approach product design differently (p. 191).

1. What is the central argument of Chapter 9?

Innovative organizations create repeatable processes that encourage employees to practice discovery skills. Innovation becomes an organizational capability rather than depending on a few creative individuals (pp. 193–194).

2. What is an organizational process, and how does it support innovation?

A process is an established way of completing recurring tasks or solving problems. Innovative firms use processes to make questioning, observing, networking, and experimenting regular employee activities (pp. 193–194).

3. What are the two main types of processes needed for successful innovation?

Discovery processes generate and develop new ideas, while delivery processes turn ideas into products and services that can be reliably produced, distributed, and sold (pp. 193–194).

4. How do innovative companies recruit employees with strong discovery skills?

They assess evidence of curiosity, questioning assumptions, experimentation, and previous inventions rather than relying exclusively on experience or academic credentials (pp. 194–197).

5. How did Google use Code Jam to identify innovative employees?

Google organized programming competitions that allowed candidates to demonstrate technical problem-solving skills, providing an alternative way to identify talented recruits (p. 196).

6. What did research on star stock analysts reveal about organizational processes?

Analysts who performed exceptionally at one firm often performed worse after moving elsewhere. Their success depended partly on organizational resources, colleagues, and established processes, not just individual talent (pp. 198–199).

7. What is the Five Whys technique?

A structured questioning process developed by Toyota's Taiichi Ohno. Repeatedly asking why a problem occurred helps identify underlying causes instead of treating symptoms (pp. 199–200).

8. How did Amazon apply the Five Whys after a workplace injury?

An employee injured his thumb on a conveyor belt. Repeated questioning revealed he had placed his bag there because no nearby table was available. Addressing the workspace problem helped prevent recurrence (p. 200).

9. What is disruptive questioning, and how did Apple apply it to the iPad?

Disruptive questioning challenges assumptions about products, markets, and customer needs. Apple considered what a device between a smartphone and laptop could accomplish rather than simply improving existing devices (p. 201).

10. Why is direct customer observation an important innovation process?

Observation reveals actual behaviours, unmet needs, and workarounds that customers may not recognize or explain in interviews. Companies can use these findings to develop better products (pp. 201–202).

11. How did Keyence use observation to generate innovations?

Keyence employees visited customers' factories to observe equipment use and identify problems. These observations informed the development of new industrial automation products (p. 202).

12. What did the Google–P&G employee exchange demonstrate?

Employees learned by observing practices in another organization. Google identified P&G's missed opportunity to engage influential parent bloggers, demonstrating how unfamiliar perspectives reveal new possibilities (p. 203).

13. What is idea networking, and how did Google encourage it internally?

Idea networking involves exchanging ideas with people who offer different knowledge and perspectives. Google used innovation competitions, short presentations, idea boards, and informal employee interactions (pp. 204–205).

14. What is open-market innovation, and how did P&G's Connect + Develop program use it?

Open-market innovation systematically searches outside the company for ideas and solutions. P&G connected with external inventors, researchers, and organizations instead of relying solely on internal R&D (pp. 205–206).

15. How did NineSigma, InnoCentive, and Reckitt Benckiser support external innovation?

NineSigma and InnoCentive connected companies with outside problem-solvers. Reckitt Benckiser used IdeaLink to identify solutions to specific technical challenges, including the development of Finish Quantum (p. 206).

16. What is organizational experimentation, and why is it important?

Organizations systematically test assumptions through prototypes, simulations, trials, and customer feedback. Experiments generate evidence, reduce uncertainty, and identify improvements before large-scale investment (pp. 207–209).

17. How did Monsanto use experimentation to improve agricultural innovation?

Monsanto combined molecular breeding data, robotics, and computer simulations to evaluate crop genetics more efficiently, accelerating the identification and testing of promising seed varieties (p. 207).

18. What did Beiersdorf discover by observing sunscreen customers?

Consumers often applied less sunscreen than recommended. Observing actual usage helped Beiersdorf identify problems that conventional product testing or customer claims might overlook (p. 208).

19. How did Google use beta releases as an experimentation process?

Google released early product versions to users, collected feedback, and improved the products through repeated testing rather than relying entirely on internal predictions before launch (p. 209).

20. How did IDEO combine the discovery skills when redesigning kitchen tools?

IDEO questioned users, observed product frustrations, gathered diverse perspectives, combined ideas through brainstorming, and tested prototypes. Its cheese-grater project showed how the discovery processes reinforce one another (pp. 209–213).

1. What is the central argument of Chapter 10, and what are its four innovation philosophies?

Innovative companies embed beliefs that support discovery throughout their culture. The four philosophies are: (1) Innovation is everyone's job, (2) Disruptive innovation is part of the portfolio, (3) Deploy small, properly organized project teams, and (4) Take smart risks (pp. 215–216).

2. What does the philosophy "Innovation is everyone's job" mean?

All employees, not just R&D or senior management, are responsible for developing new ideas and improving products, services, and processes. Leaders must reinforce this expectation through their actions, resources, and rewards (pp. 216–217).

3. How did Steve Jobs use Apple's "Think Different" campaign to encourage innovation?

The campaign communicated that Apple valued people who challenged conventional thinking. Jobs used it to establish an expectation that employees should innovate and create products that change existing markets (pp. 217–218).

4. How did A. G. Lafley demonstrate that innovation was everyone's responsibility at P&G?

Lafley wanted innovation to extend beyond P&G's approximately 8,000 scientists and engineers to its entire workforce of over 100,000 employees. He actively solicited ideas from outside R&D and supported employee-generated innovations (p. 218).

5. What is psychological safety, and why does it matter for innovation?

Psychological safety exists when employees can express opinions, challenge assumptions, experiment, and acknowledge mistakes without fear of punishment. It encourages employees to use their discovery skills rather than suppress unconventional ideas (p. 219).

6. How did Herb Kelleher create psychological safety at Southwest Airlines?

Kelleher encouraged employees to ask challenging questions and disagree with management. This made it safer for employees to question established practices and suggest improvements (p. 219).

7. What did the executive who discouraged her employees' creativity demonstrate?

Although she demanded innovation, she consistently undervalued employees' ideas and rewarded execution. Employees consequently stopped expressing innovative ideas around her. Leaders' actions and rewards matter more than their stated support for creativity (pp. 220–221).

8. How did Google and 3M provide employees with time to innovate?

Google encouraged engineers to spend up to 20% of their time on approved self-directed projects, producing ideas such as Gmail and Google News. 3M had a similar 15% innovation-time practice. Both provided resources for discovery beyond regular duties (pp. 221–222).

9. What two questions does the textbook recommend asking employees to assess whether innovation is everyone's job?

(1) Does your organization expect you to innovate in your job? (2) Is innovation explicitly part of your performance reviews? In highly innovative organizations, at least 70% of employees answer yes (p. 223).

10. What does the philosophy "Disruptive innovation is part of our innovation portfolio" mean?

Companies deliberately invest resources in platform and breakthrough projects, rather than concentrating almost entirely on incremental improvements to existing products. This helps create future markets and revenue opportunities (pp. 224–227).

11. Define derivative innovation and provide the textbook example.

Derivative innovation makes incremental improvements to an existing product using familiar technologies. Sony's PS3 improved on the PS2 with better graphics, Blu-ray capability, and internet connectivity without creating a fundamentally new market (p. 224).

12. Define platform innovation and provide the textbook example.

Platform innovation introduces a substantially different product or architecture but does not necessarily establish an entirely new market. Apple's MacBook Air was a new laptop category but primarily served existing computer customers (pp. 225–226).

13. Define breakthrough/disruptive innovation and provide textbook examples.

Breakthrough innovation uses substantially new technology or product architecture to create a new market or value proposition. Examples include Sony's Walkman, Apple's iPod/iTunes and iPhone App Store, and Amazon's Kindle and cloud computing (pp. 224–225).

14. What two dimensions distinguish derivative, platform, and breakthrough innovation in Figure 10-2?

(1) Degree of technological change in components and product architecture, and (2) Impact on the market, ranging from improving existing products to creating entirely new markets (p. 225).

15. What was Google's 70-20-10 innovation portfolio allocation?

Google historically allocated approximately 70% of engineering effort to derivative improvements to its core business, 20% to platform projects extending the core, and 10% to fundamentally new businesses. This differs from its 20% employee innovation-time rule (p. 226).

16. How much investment in platform and breakthrough innovation indicates a serious commitment to disruption?

The authors suggest allocating at least 25% of innovation projects or resources to platform and breakthrough opportunities. A portfolio with less than 5% of projects in these categories is unlikely to indicate strong innovation ambitions (pp. 223, 227).

17. What does the philosophy "Deploy small, properly organized innovation project teams" mean, and how did Amazon apply it?

Innovation projects benefit from small teams with clear responsibilities and appropriate autonomy. Amazon's Two Pizza Teams typically contained 6–10 people, allowing more independent projects and faster experimentation (p. 228).

18. How should team structure and autonomy change with the degree of innovation?

More radical innovations generally require greater autonomy and diverse expertise. Derivative projects may use existing functional teams, platform projects may need heavyweight cross-functional teams, and breakthrough projects may require autonomous business units (pp. 228–230).

19. Why did Amazon create an autonomous business unit for cloud computing?

Cloud computing required a business model fundamentally different from online retailing. A separate unit gave the team enough independence to develop the new business without being constrained by Amazon's existing retail processes (p. 230).

20. What does "Take smart risks" mean, and how do companies distinguish good from bad failures?

Smart risks involve experimenting while limiting potential losses and learning from mistakes. IDEO encouraged early failure to accelerate learning. Google identified good failures as those where the cause is understood and the failure occurs quickly and cheaply enough to avoid damaging the brand (pp. 230–232).

1. What was Indigo Agriculture's core innovation, and how did it differ from genetically modified crops?

Indigo developed seed coatings containing beneficial, naturally occurring microbes to improve crop yield and resistance to environmental stress. Unlike GMO technology, Indigo sought to improve plant performance without modifying the plant's genetic material (pp. 5–7).

2. How did Indigo's founders discover the opportunity in agricultural microbiomes, and which discovery skill does this demonstrate?

Geoff Von Maltzahn and Flagship Ventures drew connections between the human microbiome and plant health. They hypothesized that restoring beneficial microbes could improve crop resilience. This demonstrates associating ideas across different scientific fields (p. 6; DNA Ch. 2).

3. Why did Indigo initially focus on water-stressed cotton?

Cotton faced costly drought-related yield losses, and few commercial technologies directly addressed water stress. Indigo saw an opportunity to solve an unmet problem rather than compete solely on incremental improvements to existing seed technology (p. 7).

4. How did Indigo test whether its microbial seed treatments worked?

Indigo screened microbes in laboratories and greenhouses before conducting field trials. Its 2014 cotton trials tested 15 microbial strains, three watering conditions, three seed types, and three Texas locations to evaluate performance under different growing conditions (pp. 7–8).

5. What were Indigo's early experimental results, and what limitations remained?

Early cotton trials showed yield improvements exceeding 10% compared with untreated seeds, particularly in dry conditions. However, results varied with growing conditions, and limited trials did not establish consistent performance across locations, seasons, or commercial production volumes (p. 8).

6. Why do agricultural growing seasons create a major challenge for Indigo's product development?

Field trials depend on planting and harvesting windows, which cannot easily be accelerated. Cotton takes roughly four to six months to mature, meaning missed planting windows can delay results by an entire season. This limits how quickly experimentation and product validation can occur (pp. 7–8).

7. Why did David Perry accelerate Indigo's cotton launch, and what risks did this create?

Encouraged by early field results and grower interest, Perry moved the planned launch from 2017 to May 2016, targeting 100,000 acres. Acceleration forced organizational learning but increased regulatory, manufacturing, product-quality, and customer risks before extensive validation was complete (pp. 9–10).

8. What did Indigo achieve in its May 2016 cotton launch?

More than 70 growers planted Indigo-treated cotton on approximately 50,000–60,000 acres across five U.S. states. This demonstrated substantial commercial progress, although it fell below the original 100,000-acre target and long-term performance remained uncertain (pp. 1, 13).

9. What commercialization challenges did Indigo encounter beyond proving the technology worked?

Indigo needed economical microbial dosages, large-scale fermentation, consistent seed coating, shelf-life testing, regulatory approvals, manufacturing partners, distribution arrangements, and grower relationships. A scientifically promising treatment was not automatically a commercially deliverable product (pp. 10–13).

10. What is the stage-gate development process, and why was Indigo considering it?

Stage-gate divides product development into stages with specified deliverables and criteria for proceeding. Indigo was considering a more formal system to coordinate research, testing, regulation, manufacturing, and launches as its product portfolio expanded (pp. 9, 14).

11. Why were microbial dosage and manufacturing scale major bottlenecks?

The most effective dose was not necessarily the highest dose, and microbes were expensive to produce. Indigo had to move from roughly one-litre laboratory fermentation to 500–2,500-litre commercial batches while maintaining product effectiveness and acceptable costs (p. 11).

12. How did regulation affect Indigo's product development decisions?

Indigo worked with USDA requirements while excluding some microbial strains that triggered additional EPA regulatory obligations. EPA registration for products addressing pests or diseases could take approximately 18 months, making regulatory classification important to launch timing (pp. 11–12).

13. What was Indigo's value-sharing business model, and how did it work?

Rather than charge a conventional upfront seed-treatment fee, Indigo charged $10 per acre when treated cotton produced more than 30 additional pounds of yield compared with untreated cotton. Farmers paid when measurable additional value was generated (p. 12).

14. Why was Indigo's value-sharing model important for farmer adoption and future innovation?

It reduced farmers' financial risk, making them more willing to try an unfamiliar product without years of performance evidence. Direct grower relationships also produced field data that Indigo could use to improve its treatments and build its proprietary database (pp. 12–13).

15. How does Indigo demonstrate the importance of complementary People capabilities from Chapter 8?

Von Maltzahn and scientists supplied microbiology expertise, Perry supplied startup leadership and commercialization experience, and Raymond brought agricultural business experience. Manufacturing, regulatory, and grower-relations specialists added delivery capabilities needed to turn discovery into a commercial product (pp. 8–12; DNA Ch. 8).

16. How does Indigo illustrate the difference between discovery and delivery skills?

Discovery involved connecting microbiome science to crops, identifying promising strains, and testing their effects. Delivery involved producing reliable treatments at scale, securing approvals, coordinating partners, and launching products. Indigo needed both capabilities, especially as launch targets increased (pp. 7–13; DNA Ch. 8).

17. Which Chapter 9 organizational discovery processes did Indigo use?

Indigo institutionalized experimentation through lab screening, greenhouse assays, multi-location field trials, and feedback into its data platform. It also used external networking through university research collaborations. These routines helped transform individual scientific ideas into repeatable organizational learning (pp. 7–8; DNA Ch. 9).

18. How did Indigo's rapid commercialization reflect Chapter 10's philosophy of taking smart risks, and where was the tension?

The accelerated launch generated real-world evidence and forced teams to develop commercial capabilities earlier. However, advancing from small field trials to tens of thousands of acres increased exposure before extensive validation. The management challenge was ensuring learning justified the risks imposed on growers and the company (pp. 9–13; DNA Ch. 10).