EXPLORING STRATEGY

Strategic Choices
Innovation and
Entrepreneurship

Learning Outcomes (1)

Identify and respond to key innovation
dilemmas, such as the relative emphases
to place on technologies or markets,
product or process innovations, and the
broad business model
Anticipate key issues facing entrepreneurs
as they go through the stages of growth
from start-up to exit

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Learning Outcomes (2)

Anticipate and to some extent influence
the diffusion or spread of innovations
Decide when being a first-mover or
follower is most appropriate in innovation,
and how respond to innovative challengers

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What is Innovation?
Innovation involves the conversion of
new knowledge into a new product,
process, or service and the putting of this
new product, process, or service into use,
either via the marketplace or by other
processes of delivery.

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1. Innovation dilemmas
1.1. Technology push or market pull
Technology push: technologists/
scientists carry out research to create
knowledge form the basis for new
product, service, process
Market pull: goes beyond invention and
sees the importance of actual use

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Sole Technology
For what reasons is it important to be
authentic in the skateboarding shoe
market?
If a big company like Nike or Adidas was
looking to grow in this market, what would
you advise it to do?

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1. Innovation dilemmas
1.2. Product or process innovation
Product innovation: relates to final
product to be sold especially with regard to
its features
Process innovation: relates to the way in
which product is produced and distributed
Relationship: the relative important
change overtime

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Implications of Product/
Process Innovation Model
New developing industries favour product
innovation
Maturing industries favour process
innovation
Small new entrants have greatest
opportunities in early stages of an industry
Large incumbent firms have advantage in
later stages

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1.3. Technological or Business

Model innovation
Technological innovation: new
knowledge in the form of scientific or
technological advance
Business model bringing
customers, producers and suppliers
together in new ways

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What is a Business Model?

A business model describes the
structure of product, service, and
information flows and the role of
participating parties.

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2. Innovation diffusion
Diffusion is the process by which
innovations spread amongst users,
varying in pace and extent.

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Supply Side Determinants

of Pace Diffusion
Degree of improvement
Compatibility
Complexity
Experimentation
Relationship management

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Demand Side Determinants

of Pace Diffusion
Market awareness
Observability
Customer innovativeness

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he Diffusion S-Curve

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Decision Points Indicated by SCurve

Timing of the
tipping point

Timing of the
plateau

Extent of
diffusion

Timing of the
tripping point

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The MySpace Snowball

How should potential advertisers have interpreted

the upwards blip in daily reach in late 2004 and
downwards blip in early 2006?
How would you forecast future demand for
MySpace?

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3. First-mover or follower
A first-mover advantage exists
where an organisation is better off
than its competitors as a result of
being first to market with a new
product, process, or service.

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First-Mover Advantages
Experience curve
benefits
Scale
benefits

Pre-emption
of scarce
resources

Reputation

Buyer
switching costs

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Late-Mover Advantages

Free-riding

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4. Entrepreneurship & relationship

Stages of Entrepreneurial Growth

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Chapter Summary (1)

Three fundamental decisions in innovation facing
strategists include the relative emphasis to put on
technology push or market pull, whether to focus
on product or process innovation, and how far to
concentrate on technological innovation or
business model innovation
Innovations often diffuse into the market following
an S-curve model
Managers have a choice to enter first or enter
later
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Chapter Summary (2)

Incumbents must be careful of being victim
to disruptive innovations
Entrepreneurs face characteristic
dilemmas as their businesses go through
the entrepreneurial life cycle of start-up,
growth, maturity, and exit

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Case Example: Skype (1)

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Case Example: Skype (2)

Skypes software allows people to use the
Internet to make free calls to other Skype
users
Skypes costs are very low. Customers use
their own computers and marketing is
accomplished via word of mouth
It earns revenues on ancillary services

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Case Example: Skype (3)

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Case Example: Skype (4)

eBay purchased Skype
There are similarities in the business
models
eBay plans to leave Skype to
manage its own business

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