Iinovation

2/15/24, 5:23 AM Innovation management & Enterpreneurship.pptx - Chapter 1 The Innovation Imperative Outline 1. Innovation Matters 2.
ters 2. Innovation and Entrepreneurship 3. Innovation Isn't - Colleg…
Home / Management
Innovation management & Enterpreneurship.pptx

School
Hawassa University*
*We are not endorsed by this school
Course
MGMT 3191
Pages
143
Upload Date
Jan 31, 2024
Uploaded by AmbassadorElectron9381 on coursehero.com
Helpful Unhelpful
Page 1 of 143
https://www.collegesidekick.com/study-docs/2682997 1/138
2/15/24, 5:23 AM Innovation management & Enterpreneurship.pptx - Chapter 1 The Innovation Imperative Outline 1. Innovation Matters 2. Innovation and Entrepreneurship 3. Innovation Isn't - Colleg…
The
Chapter
Innovation
1
Imperative
Outline
1. Innovation Matters
3. Innovation and
2. Isn'tEntrepreneurship
Easy!
4. Managing Innovation and Entrepreneurship
5. Dimensions of Innovation: What Can We Change?
6. A Process Model for Innovation and Entrepreneurship
7. What, Why, and When: The Challenge of Innovation Strategy
Introduction
 Innovation is an essential part of every organization activities as it is
necessary for growth of organization, and it has an important role in
distinguishing the organization from others.
 The word 'innovation' comes from the Latin, innovare, and is all about
2/15/24, 5:23 AM
, ,
Innovation management & Enterpreneurship.pptx - Chapter 1 The Innovation Imperative Outline 1. Innovation Matters 2. Innovation and Entrepreneurship 3. Innovation Isn't - Colleg…
 value
Perhaps
from
a more
ideas'.
helpful definition of innovation is 'the process of creating
change.
 Innovation is about creating value and increasing efficiency, and therefore
growing your business. "Without innovation, new products, new services,
and new ways of doing business would never emerge, and most
organizations would be forever stuck doing the same old things in the same
old way."
Innovation matters
 Innovation does make a huge difference to organization of all
shapes and size. The logic is simple: if we don't change what we
offer the world (product and services) and how we create and deliver
them, we risk being overtaken by others who do".
 One person's problem is another's opportunity and the nature of
innovation
skill
the
 Onheart
tothe
spotis
ofplus
thethat it isinnovation
opportunities
innovation
side fundamentally
and
process.
create about
is also
new ways entrepreneurship.
strongly
to exploit
associated The
them with
is at
growth. New business is created by new ideas, by the process of
creating competitive advantage in what a firm can offer.
Innovation and entrepreneurship

 Definition of Innovation
• Innovation is the specific tool of entrepreneurs, how they exploit
change as an opportunity for a different business or service. It is
capable of being presented as a discipline, capable of being learned,
capable of being practiced. (Definition by Peter Drucker)
• Definition
business
The most
capacityofand
ventureEntrepreneurship
obviousalong
example
willingness
with of
anyentrepreneurship
to
of develop,
it's risks inorganize
order
is thetostarting
and
makemanage
a of
profit.
newa
businesses. (Definition in business dictionary.com)
Innovation and entrepreneurship

We use this lens to look at managing innovation and
entrepreneurship. We'll use three core concepts:
 Innovation
As a process which can be organized and managed, whether in
a star-up venture or in renewing a 100-years-old business.
 Entrepreneurship
As the motive power to drive this process through the efforts
of passionate individuals, engaged teams and focuses
terms,
As
of the employment
purpose
social
networks. for innovation,
welfare. or growth, sustainability
whether expressed
or improvement
in financial
 Creating Value
Innovation & Entrepreneurship

Stage in
life cycle
Start-up Growth Sustain/scale Renew
Returning to the
Growing the
Building a portfolio radical frame
business
Individual through adding of incremental and breaking kind of
entrepreneur radical innovation innovation which
Creating new
exploiting new to sustain the began the business
wealth products/service
technology or business and/or and enables it to
s or
market opportunity spread its influence move forward as
moving into new
into new markets something very
markets
different
Developing the Spreading the idea

Social
ideas and widely, diffusing it
entrepreneur, engaging others to other communities Changing the
passionately
Creating in a network for of social system - and then
https://www.collegesidekick.com/study-docs/2682997
d 7/138
Creating in a network for of social system and then
concerned to
social change - entrepreneurs, acting as agent for
improve or change
value perhaps in a engaging links with next wave of
something in their
region or mainstream players change
immediate
environment around a key like public sector
issue. agencies
Innovation isn't easy

 Coming up with good ideas is what human being are
good at we have this facility already fitted as
standard equipment in our brains! But taking those
ideas forward is not quite so simple, and most new
ideas fail.
 Many SMEs fail because they don't see or recognize
the need for change. They are inward looking, too
busy fighting fires and dealing with today's crises to
worry about storm clouds on the horizon.
 One problem for successful companies occurs when
the very things which helped them achieve success
-" their 'core competencies' become the things which
make it hard to see or accept the need for change.
Barriers to innovation
 Barriers to innovation include:
• Seeing innovation as ideas, not managing the
whole journey;
• Not recognizing the need for change;
• Mindset and complacency- core competence
becomes core rigidity;
• Closed information network, insulated from
new ideas.
Managing innovation and

Entrepreneurship
 There have been many attempts to answer the question
of whether we can manage innovation.
 Researchers have looked at case examples, at sectors, at
entrepreneurs, at big firm and small firms, at success and
failure.
 Practicing entrepreneurs and innovation managers in
large business have tried to reflect on the 'how' of what
they do.
 The key message come from the world of experience.
 The key message from this knowledge base are that
successful innovators.
 Explore and understand different dimension of
innovation
 Manage innovation as a process create condition to
enable them to repeat the innovation trick (building
capability)
 Focus this capability to move their organization
forward (innovation strategy)
forward (innovation strategy)
Dimensions of innovation: what can

we change?
 One approach to finding an answer to the question of
where we could innovate is to use a kind of 'innovation
compass' exploring different possible directions.
 Innovation can take many forms but we can map the
option
TABLE along four
1.3 Dimensions fordimension,
innovations as show in table 1.3
Dimensi Type of change
on
Product Changes in the things (products/services) an
organization offers.
Process
Changes in the ways these offerings are created
Position and delivered.
Paradig Changes in the context into which the

m products/services are introduced.
Changes in the underlying mental models which

frame what the organization does.
Cont'd
• Some TABLE 1.4 Examples of paradigm innovation
examples of
paradigm
Business model How it changes the rules of the game
innovation
innovation
''Servitization'' Traditionally, manufacturing was about producing and then selling a product. But,
increasingly, manufacturers are bundling various support services around their products,
particularly for major capital goods. Rolls-Royce, the aircraft engine maker, still produces
high-quality engines but it has an increasingly large business around services to ensure
those engines keep delivering power over the 30-plus-year life of many aircraft.
Caterpillar, the specialist machinery company, now earns as much from service contracts,
which help keep its machines running productively, as it does from the original sale
Ownership to Spotify is one of the most successful music-streaming companies with around eight
million subscribers. It shifted the model from people's desire to own the music they
rental listened to towards one in which they rented access to a huge library of music. In similar
fashion, Zipcar and other car rental businesses have transformed the need for car
ownership in many large cities.
Offline to online Many businesses have grown up around the Internet and enabled substitution of
physical encounters, for example in retailing, with virtual ones.
Mass customization New technologies and a growing desire for customization have enabled the emergence
not only of personalized products but platforms on which users can engage and co-
and co-creation create everything from toys (e.g. Lego), clothing (e.g. Adidas) to complex equipment like
cars (Local Motors).
Experience Moving from commodity through offering a service towards creating an experience
around a core product, for example Starbucks making a coffee shop into a place where
innovation people can meet and chat, use Wi-Fi, read books and do a host of activities as well as
buy and drink coffee.
Process
Innovation
Model for
 Innovation is interpreted as a process of a series of
extended activities. There are four major steps of the
entrepreneurial process model.
 Recognizing the opportunity
 Finding the resources
 Developing the idea
 Capturing value
Process Model for Innovation & Entrepreneurship
Recognizing
• we the
are going to Opportunity:
pick up these trigger
The message
signals then
herewe
is clear:
need toif
develop some pretty extensive antennae for searching and
scanning around us and that includes some capability for
looking into the future.
• Finding the Resources: So this stage is very much about
strategic choices.
o Does the idea fit a business strategy,
o Does it build on something we know about
o Do we have the skills and resources to take it forward?
o If we don't have those resources, how will we find and
mobilize them?
Process Model for Innovation &

Entrepreneurship
• Developing the Idea: Having picked up relevant trigger signals, made a
into some decision

strategic
resources we
kindneed,
of reality.
to
thepursue
next key
some
phaseofisthem
actually
andturning
found those
and potential
mobilizedideas
the
- In some ways this implementation phase is a bit like making a kind of
'knowledge tapestry', by gradually weaving the different threads of
knowledge (about technologies, markets, competitor behaviours, etc.) into
a successful innovation.
• Capturing value: Despite all our efforts in recognizing opportunities, finding
resources and developing the venture, there is no guarantee we will be able to
capture the value from all our hard work.
- We also need to think about, and manage, the process to maximize our
chances through protecting our intellectual property and the financial
returns if we are engaged in commercial innovation.
What, why and when: the challenge of

innovation strategy
• Building a capability to organize and manage
innovation is a great achievement, but unless
that
the
no where
organization
capability
to go!is risks
pointed
being
in aall
suitable
dresseddirection
up with
• For entrepreneurs starting a new venture the
challenge is even greater: Without a clear
sense of direction, a vision you can share with
others to excite and focus them, the whole
thing may never take off.
Cont'd
TABLE 1.6 Strategic advantages through innovation
Mechanism Strategic advantage Examples
Novelty in Offering something no Introducing the first (Walkman,

product or one else can. fountain pen, camera, dishwasher,
service telephone bank, online retailer,
ff i
https://www.collegesidekick.com/study-docs/2682997 t ) t th ld 16/138
offering in
process
Novelty customized,
Offering
cannot
cheaper,
match
it
more
inetc.
ways
- faster,
others etc.) to the
banking,
Pilkington's
Bessemer's world
online
steel
float
bookselling,
process,
glass process,
Internet
etc.
Complexity Offering something Rolls-Royce and aircraft engines
others find difficult to (only a handful of competitors can
master. master the complex machining and
metallurgy involved).
Legal Offering something Blockbuster drugs like Zantac,
protection of others cannot do unless Prozac, Viagra, etc.
intellectual they pay a license or
property other fee
Add/extend Move basis of Japanese car manufacturing, which
range of competition (e.g. systematically moved the
competitive from price of product to competitive agenda from price to
factors price and quality, or quality, to flexibility and choice, to
price, quality, choice) shorter times between launch of
Cont'd
Timing First-mover advantage Amazon.com, Yahoo - others can follow,
(being first can be but the advantage sticks to the early
worth significant movers.
market share in new Personal digital assistants (iPads) and
product fields). Fast- smart phones have captured a huge and
follower advantage growing share of the market. In fact,
(sometimes being first the concept and design were articulated
means you encounter in Apple's ill-fated
many unexpected Newton product some five years before
teething problems, Palm launched its successful Pilot range
and it makes better - but problems with software and
and it makes better but problems with software and
the
move
follow-up
senseearly
fastmistakes
product
into a
to watch and features
success
came
market because
and
with
especiallyintocould
iPod
its
it dominant
was
learn
as an
handwriting quite
and
MP3design.
late
include
player
into key
recognition the
Robust/ Offering
someonesomething
else make Sony's it
meant original
flopped. Walkman architecture
By contrast, Apple's
platform which provides the which has spawned several generations
design platform on which of personal audio
other variations and equipment (minidisk, CD, DVD, MP3,
generations can be iPod), Boeing 737 (over 30 years old,
built. the design is still being adapted and
configured to suit different users)
remains one of the most successful
aircraft in the world in terms of sales.
Intel and AMD with different variants of
their microprocessor families
Cont'd
Reconfiguri Rethinking the way Zara and Benetton
ng the in which bits of the in clothing, Dell in
parts of the system work computers, Toyota
process together (e.g. in its supply chain
building more management
effective networks,
outsourcing and
coordination of a
coordination of a
gdifferent
across elements for
established from application
wheels transferred
application virtual company)
different markets market like rolling
contexts
Transferrin Recombining luggage into
Polycarbonate
children's toys -
lightweight micro
scooters
Creating an Innovation Strategy

 Putting an innovation strategy together involves three
key steps, pulling together ideas around core themes
and inviting discussion and argument to sharpen and
shape them. These are:
• Strategic analysis: what could we do?
• Strategic selection: what are we going to do, and
why?
why?
it happen?
• Strategic implementation: how are we going to make
End of
ter
ha
c opn
Chapter 2
Social
Innovation
Outline
 What is Social Innovation?
 Different Players
 Motivation: Why do it?
 Enabling Social Innovation
 The Challenges of Social Entrepreneurship
Introduction
 Social innovation is an increasingly important component of 'big business', as
large organizations realize that they can only secure a licence to operate if they
can demonstrate some concern for the wider communities in which they are
located.
 Not all innovation is about making money many examples exist of social
entrepreneurship in which the primary aim is to create some form of social value
to make a difference to the world.
• Examples include Nobel prizewinner Muhammad Yunus who revolutionized
economics by founding the Grameen Bank, or 'village bank,' in Bangladesh
in 1976 to offer 'micro loans' to help impoverished people attain economic
self-sufficiency through self-employment.
 In the field of social entrepreneurship a growing number of businesses are
recognizing the possibilities of pursuing parallel and complementary trajectories,
targeting both conventional profits and also social value creation
2/15/24, 5:23 AM
targeting both conventional profits and also social value creation.
What is Social Innovation?

• There are many definitions of social innovation and
entrepreneurship, but most include two critical elements:
- The aim is to create social change and value, rather than
commercial innovation and financial value.
• Conventional commercial entrepreneurship often results in
new products and services and growth in the economy and
employment, but social benefits are not the explicit goal.
- It involves business-, public- and third-sector organizations to
achieve this aim.
• Conventional commercial entrepreneurship tends to focus on
the individual entrepreneur and new venture, which occupy
the business sector, although organizations in the public or
third sectors may be stakeholders or customers.
What is Social Innovation?

 Social innovation is the process of developing and deploying
effective solutions to challenging and often systemic social and
environmental issues in support of social progress.
 Social innovation is not the prerogative or privilege of any
organizational form or legal structure.
 But, solutions often require the active collaboration of constituents
across government, business, and the non-profit world.
 Examples of applications of social innovation and entrepreneurship
include the following: Poverty relief, community development,
health and welfare, environment and sustainability, arts and culture
and education and employment
WHAT IS NOT SOCIAL INNOVATION

o Social innovation is confused with many different terms four of
which include social enterprise, corporate social innovation, social
entrepreneurship, and corporate social responsibility
o Social innovation is not the same as a social enterprise.
o Social innovation is an idea, a product, a service, or an
approach that introduces change, outperforms existing
solutions, and benefits society.
o A social enterprise, on the other hand, refers to the business
model, which means that it optimizes both social and financial
returns.
WHAT IS NOT SOCIAL INNOVATION

o Corporate social innovation is business and social innovation in one.
o Companies that incorporate social innovation into their commercial activities

are referred to as corporate social innovation (CSI).
o This may be viewed as a continual strategy that strives to remedy societal
concerns and build on existing approaches.
o Social innovation is different from social entrepreneurship. Instead of
focusing on the solution, social entrepreneurship focuses on the problem. To
guarantee longevity and result, social entrepreneurs think the workarounds
should be co-designed with the community.
o They don't depend just on innovation because they understand that effect is
the social sector's bottom line. They demonstrate implications and desire scale,
making them innovative as well as rigorous in their outlook.
What is not social innovation

• Social innovation is NOT corporate social responsibility.
• Corporate social responsibility warrants an institution's activities
to be socially ethical and useful.
• This approach is often divided into four categories: economic
responsibility. the environment, philanthropy, and human rights.
Key
Motives andcharacteristics
aims of social
Timeframe entrepreneurs
Resources
 entrepreneurs,
Social entrepreneurs
but are different
share inmost
someof
important
the characteristic
respects: of
Key characteristics of social entrepreneurs

 Motives and aims:
o Less concerned with independence and wealth, and more on social
o equal
means opportunities,
Social and
entrepreneurs
ends. etc.
tackle
withmajor
the underlying
social issues;
desire,
poverty,
passion
healthcare,
even, to
make a change.
 Timeframe:
o Less emphasis on short term growth and longer term harvesting of the
venture, and more concern on long-term change and enduring heritage.
 Resources:
• Less reliance on the firm and management team to execute the venture
and greater reliance on a network of stakeholders and resources to
develop and deliver change.
Key characteristics of social entrepreneurs

 Key characteristics which appear to distinguish social
entrepreneurs from their commercial counterparts include a high
level of empathy and need for social justice
level of empathy and need for social justice.
 recognize
The conceptandofemotionally
empathy isshare
complex,
the feelings
but includes
and needs
the of
ability
others,
to
and is associated with a desire to help.
 However, whilst empathy and a need for social justice may be
necessary attributes of a social entrepreneur, they are not
sufficient. These may make a social venture desirable, but not
necessarily feasible.
Players of social innovation

• Social innovation involves the same core entrepreneurial process of
finding opportunities, choosing amongst them, implementing and
capturing value, but it plays out in a number or different ways, which
we explore briefly.
Developers are the inner core of social innovation initiatives
- Developers
initiating
• These and are
actors theseen
operating
are inner
the core able
of social
assolution.
being innovation initiatives,
unsatisfactory circumstances into antoinnovative
translate knowledge about
idea in order to
improve the situation.
• Furthermore, these actors have the ability to not only invent but
also to develop and implement the idea in order to make it a
social innovation.
Players of social innovation

- Promoters of social innovations are involved in social innovation
processes as partners that provide infrastructural equipment, funding,
and connect initiatives to superior policy programs.
- Supporters refer to actors facilitating the spread and diffusion of
social innovations through, for example, dissemination or lobbying
activities
- activities.
 Social
Knowledge
knowledge
innovation
relevant
providers
is toan
spur
: devoted
important
and enrich
to role
the
actors
development
in that
improving
provide
process.
people's
special
lives, and attracted the attention of various institutions
aimed at supporting and stimulating it.
MOTIVATION: WHY DO IT?

 Psychological studies of entrepreneurs suggest they often have a
high need for achievement (n-Ach), which is a measure of how far
they want to make their on the world.
 High n-Ach requires some evidence that a mark has been

made but this doesn't have to be in terms of profit or loss
on balance sheet
on balance sheet.
 record
Many value
social people
of creation,
building
find andentrepreneurial
successful
even those
businesses
satisfaction
with a may longthrough
track
find
themselves drawn into this territory.
Motivation of social innovation

Social innovation is good by itself. But when incorporated with
business goals, it provides financial benefits.
In essence, refining and broadening such initiatives bring long-term
business advantages.
1. Opportunities for business development
Handling emerging issues in the environment and society is beneficial
for companies considering how innovation brings business development.
purchasing power.
Organizations often address challenges by modifying their products in
service while taking into account the region's facilities and limited

2. Enhanced brand image
• Social innovation holds businesses liable for their activities while
also making them more susceptible to the sentiments and
perception of the public.
• Nowadays, clients want more from companies other than their
products and services.
• They want to support brands with a culture that aligns with their
principles, convictions, and beliefs.
• Organizations can either choose to act on this and gain more

supporters or fall far from the competition by failing to meet
contemporary societal requirements.

3. Competitive employees
• Studies show that employees want to feel a sense of purpose in
their careers. They want to work with meaning and commitment.
• As these factors make them more dedicated to their jobs, they
become more focused, resourceful, and innovative.
• This is what makes corporate social innovation a tremendous tool
for acquiring and engaging talented and competitive individuals.
Enabling social innovation

 Innovation doesn't just happen because there're processes that
can be managed. This process begins by searching for
opportunities and cultivating them into a concept that deserves to
be a goal. The next step turns the idea into reality and finally
launches a new product.
 Whether they choose to adopt and use it, and spread the word to
other so the innovation diffuses, depends a lot on how we manage
using other knowledge and resource streams to understand, shape
and develop the market.
Potential barriers to social entrepreneurship
• Barriers to social entrepreneurship include the following:

- Access to and support of local networks of social and
community-based organizations, for example, relationships and
trust in informal networks.
- Access to and support of government and political
infrastructure, for example, nationality or ethnic restrictions.
The challenges of social entrepreneurship

 While changing the world with social innovation is possible, it
isn't easy! Just because there is no direct profit motive doesn't
take the commercial challenges out of the equation.
 Social innovation is driven by social entrepreneurs working in

both start-ups and in established organizations.
 But social entrepreneurs carries with it a number of additional

challenges to those posed by commercial innovation; these are
summarized in table 2.2.
TABLE 2.2 Challenges of social innovation

What has to be Challenges in social entrepreneurship
managed....
Search - • Many potential social entrepreneurs (SEs) have the

recognizing passion to change something in the world and there
opportunities are plenty of targets to choose from, like poverty,
access to education, healthcare and so on.
• But passion isn't enough they also need the classic
entrepreneur's skill of spotting an opportunity, a
connection, a possibility which could develop.
• It's about searching for new ideas which might bring
a different solution to an existing problem for
example, the micro-finance alternative to
conventional banking or street-level moneylending.
TABLE
to be has 2.2
What Challenges
Challenges in of
social
social
entrepreneurship
innovation
managed.
.
Selection • Spotting an opportunity is one thing but getting others to believe in it and,
and more importantly, back it is something else.
resource • Whether it's an inventor approaching a venture capitalist or an internal
mobilizat
team pitching a new product idea to the strategic management in a large
ion
organization, the story of successful entrepreneurship is about convincing
other people.
• In the case of SE the problem is compounded by the fact that the targets
for such a pitch may not be immediately apparent.
• There are some foundations and non-profit organizations but in many
cases one of the important skill sets of a SE is networking, the ability to
chase down potential funders and backers and engage them in their
project. It's also important to build coalitions of support - securing
support for social innovation is very often a distributed process, but power
and resource are often not concentrated in hands of single decision-maker.
be has to Challenges in social entrepreneurship

What
managed..
Developing • Social innovation requires extensive creativity in getting
the venture hold of the diverse resources to make things happen
especially since the funding base may be limited.
Networking skills become critical here engaging
different players and aligning them with the core vision.
Innovation • Here the overall vision is critical, the passionate

strategy commitment to a clear vision can engage others but
social entrepreneurs can also be accused of idealism and
head in the clouds. Consequently there is a need for a
clear plan to translate the vision step by step into reality.

What has to be Challenges in social entrepreneurship
managed..
organization/
Innovative • Social innovation
structures depends
where the on looseare
main linkages andthrough
organica
rich networking
sense of shared purpose. At the same time there is
a need to ensure some degree of structure to allow
for effective implementation.
• The history of many successful social innovations
is essentially one of networking, mobilizing
support and accessing diverse resources through
rich networks. This places a premium on
networking and broking skills.
Chapter
End of
2
Chapter
Sources 3
of innovation
3.1
Sources of
Innovation
 Innovation comes from many other directions, involving
many elements such as, Knowledge Push, Need Pull,
Shocks to the system, Accidents, Watching others,
Recombinant innovation, Regulation, Advertising,
Inspiration, Design drive innovation , Users as innovators,
Exploring alternative future etc.
K l d
https://www.collegesidekick.com/study-docs/2682997 h 46/138
 Knowledge
• In
Oneshort,
which push
obvious
emerge
it is
source
as constant
a result
of innovation
ofteamwork
scientific
is research.
research
the possibilities
whose
principal goal is to find answers and ideas to cover
people's needs.
• Nowadays, there are many companies who actually
invest a lot of millions of dollars in R&D department in
Cont'd
 Need pull
• As the expert says "need pull" innovation is captured
in the saying 'necessity is the mother of invention'.
• But, this concept means any innovative idea is often
the response to a real or perceived need for change.
• Need-pull innovation is particularly important at
mature stages in industry or product life cycles when
to suit and
competing
needs different
attributes,
depends
adopter
onand/or
differentiating
types.segmenting
on the basis
offering
of
there is more than one offering to choose from -
• For instance, Energy saving cars, Procter & Gamble
began their real business meeting the needs at home
 Whose needs? Working at the edge:

• When considering need pull as a source of
innovation we should remember that one
size doesn't fit all.
• Differences amongst potential users can
also provide rich triggers for innovation in
new directions.
• Disruptive
innovation: innovation which 48/138
• Disruptive
and innovation:-
market the 'rules
change ofwhich innovation
the of potential whichto
the game'hasin terms
price,
occurs at the performance
periphery of a mainstream and other
 Advertising and mass customization

• Another important source of innovation results from
our desire for 'customization'.
• Markets are not made up of people wanting the same
thing - we all want variety and some degree of
personalization.
• Mass customization:- ability to offer highly
configured bundles of non-price factors to suit
different market segments/Providing a high degree of
personalization to products or services without
2/15/24, 5:23 AM
personalization to products or services without
incurring the traditional costs of tailoring to specific

needs.
• Of course, there are different levels of customizing -
from simply putting a label 'specially made for
Table 3.1 Options in customization

Type of Characteristics Examples
customiza
tion
Distributi Customers may customize Sending a book to a friend from
on product/service packaging, Amazon.com. They will receive an
customiza delivery schedule and delivery individually wrapped gift with a
tion location but the actual personalized message from you - but
product/service is it's actually all been done online and in
standardized. distribution warehouses.
Assembly Customers are offered a Buying a computer from Dell or another
customiza number of pre-defined online retailer. Customers choose and
tion options. Products/services are configure to suit their exact
made to order using requirements from a rich menu of
standardized components. options
Fabricatio Customers are offered a Buying a luxury car like a BMW, where
n number of pre-defined the customer is involved in choosing ('
customiza designs. Products/services are designing') the configuration which best
tion manufactured to order. meets their needs and wishes (for
engine size, trim levels, colour, fixtures
and extras, etc.
Design Customer input stretches to Co-creation, where end users may not
customiza the start of the production even be sure what it is they want but
p y
tion process. Products do not exist where, sitting down with a designer,
until initiated by a customer they co-create the concept and
order elaborate it. It's a little like having
some clothes made but rather than
choosing from a pattern book they
actually have a designer with them and
 Making processes better

• Of course, needs aren't just about products
and services - they also apply as drivers for
process innovation.
• 'Squeaking wheels' and other sources of
frustration with the way current processes
operate can provide rich signals for change,
both in terms of incremental improvement
and in finding radically new ways of working.
• For example, this approach provided the
basic philosophy behind the 'total quality
2/15/24, 5:23 AM p p y q y
management' movement in the 1980s, the
 Crisis-driven Innovation
• Sometimes the urgency of a need can have
a forcing effect on innovation.
• For example, the demand for iron and iron

products increased hugely in the Industrial
Revolution and exposed the limitations of
the old methods of smelting with charcoal -
it created the pull which led to
developments like the Bessemer converter.
• In similar fashion the energy crisis has

 Users as Innovators
• It is easy to fall into the trap of thinking about
need pull innovation as involving a process in
which user needs are identified and then
something is created to meet those needs.
• This assumes that users are passive recipients,

but this is often not the case.
• In many cases users are ahead of the game.

Their ideas plus their frustrations with existing
solutions lead them to experiment and create
something new.
• Importantly, active and interested users (lead

users) are often well ahead of the market in
terms of innovation needs.
• Lead users- group of very early adopters of new

ideas who are enthusiastic for changes and who
 Extreme Users
• An important variant which picks up on both
the lead user and the fringe needs concepts
lies in the idea of extreme environments as
a source of innovation.
• Looking for extreme environments or users

can be a powerful source of stretch in terms
of innovation, meeting challenges which can
then provide new opportunity space.
• As Roy Rothwell puts it in the title of a

f 't h t d
 Watching Others - and Learning from Them

• Another important source of innovation
comes from watching others: imitation is not
only the sincerest form of flattery but also a
viable and successful strategy for sourcing
innovation.
• For example, reverse engineering of

products and processes and development of
imitations - even around impregnable
patents - is a well-known route to find ideas .
Eg: China's imitation of

Mercedes: Geely
 Much of the rapid progress of Asian economies in

the post-war years was based on a strategy of 'copy
and develop', taking Western ideas and improving
on them.
 A powerful variation on this theme is the concept of
benchmarking.
 Benchmarking - systematic comparison of products,
processes or services to identify areas for
 Recombinant innovation
• An
innovation
assumption
is that
which
it always
we often
hasmake
to involve
about
something new to the world.
• The reality is that there is plenty of scope
for crossover; ideas and applications which
are commonplace in one world may be
perceived as new and exciting in another.
• This is an important principle in sourcing
innovation where transferring or combining
old ideas in new contexts - a process called
'recombinant innovation'
 Using the Crowd

• Not everyone is an active user but the idea of
the crowd as a source of different
people with very

perspectives is andifferent
importantideas,
one.perspectives
Sometimes
or expertise can contribute new directions to
our sources of ideas, essentially amplifying.
• Using the wider population has always been
an idea but until recently it was difficult to
organize their contribution simply because of
the logistics of information processing and
communication.
• Crowdsourcing:- acquiring ideas from a wide
 Regulation
• provide a reminder of another important source of
innovation: the stimulus given by changes in the rules
and regulations which define the various 'games' for
b i d
https://www.collegesidekick.com/study-docs/2682997 i t 58/138
• business and in
Regulation society.
this way provides a double-edged
sword. It closes off avenues along which innovation
had been taking place but also opens up new ones
along which change needs to happen.
• Eg: New tax rules on cigarettes- restricts sales of

cigarettes, opens up new market of 'fake cigarettes'
and aids to quit smoking.
Chapte
End
r 3of
Chapter 4
Exploiting Networks
No Man is an Island...
Introduction
 Innovation is not a solo act but a multiplayer
game. Whether it is the entrepreneur who
spots an opportunity or an established
organization trying to renew its offerings or
sharpen up its processes, making innovation
happen depends on working with many
different players.
 productive
organization.
bringing the anddifferent
This raises questions creative
about teampeople
ways together
working, inside an
in
 But increasingly it's also about links between
organizations, developing and making use of
increasingly wide networks.
Cont'd
 Smart firms and solo entrepreneurs have always
recognized the importance of linkages and
connections - getting close to customers to
understand their needs, working with suppliers to
deliver innovative solutions, linking up with
collaborators, research centers, even competitors to
build and operate innovation systems.
build and operate innovation systems.
 with
But inhighly
technological
an eramobile
infrastructures
of global
skills,
operations
building
populated
andand
by
high-speed
managing
people
networks and connections becomes the key
Cont'd
 It's not about knowledge creation so much as

knowledge flows . Even major research and
development players like Siemens or GlaxoSmithKline
are realizing that they can't cover all the knowledge
bases they need and instead are looking to build
extensive links and relationships with players around
the globe.
 Networking is important right across the innovation

process - from finding opportunities, through pulling
together the resources to develop the venture, to
making it happen
and diffusing the idea - and 63/138
making it happen and diffusing the idea - and
capturing value at the end of the process.
 The idea of a solo entrepreneur able to carry all of this

out on his/her own is a myth; putting new ventures
together depends on securing all kinds of input from
diff t l d i thi t
Cont'd
 This chapter explores some of the emerging themes
around the question of innovation as a network-based
multiplayer game.
 And of course, in the 21st century this game is being

played out on a vast global stage but with an
underlying networking technology - the Internet -
which collapses distances, places geographically far-
flung locations right alongside each other in time and
enables increasingly exciting collaboration
possibilities.
 However, just because we have the technology to

make and live in a global village doesn't necessarily
mean we'll be able to do so: much of the challenge as
mean we ll be able to do so: much of the challenge, as
we'll see, lies in organizing and managing networks so

that they perform.
 Rather than simply being the coming together of
Spaghetti Model of Innovation
 Innovation is a core process with a defined structure

and a number of influences.
 That's helpful in terms of simplifying the picture
into some clear stages and recognizing the key
levers we may have to work with if we are going to
manage the process successfully.
 But like any simplification, the model isn't quite as
complex as the reality.
 While our model works as an aerial view of what
goes on and has to be managed, the close-up
2/15/24, 5:23 AM
goes on and has to be managed, the close up
picture can look a lot more like the picture on the

i h
Cont'd
 The ways knowledge actually flows around an innovation
project are complex and interactive, woven together in a
kind of social spaghetti where different people talk to
each other in different ways, more or less frequently, and
about different things.
 This complex interaction is all about knowledge and the

ways it flows and is combined and deployed to make
innovation happen.
 Whether it's our entrepreneur building a network to help

him get his mousetrap to market or a company like Apple
bringing out the latest generation iPhone, the process
2/15/24, 5:23 AM g g g , p
will involve building and running knowledge networks
Cont'd
 By the time we get to big complex projects - like building
a new airplane or hospital facility - the number of players
and the management challenges the networks pose get
pretty large.
 There is also the complication that increasingly the

networks we have to learn to deal with are becoming
more virtual, a rich and global set of human resources
distributed and connected by the enabling technologies
of the Internet, broadband and mobile communications
and shared computer networks.
 Innovation and entrepreneurship are evolving from a

world of centuries ago which saw the sole
inventor/entrepreneur as the key player through one in
the last century in which major corporations came to
dominate the landscape to today's picture, which is
becoming massively networked globally distributed and
Cont'd
 Networking of this kind is something which Roy Rothwell,
for many years a key
researcher at Sussex University's Science Policy
Research Unit, foresaw in his pioneering work on models
of innovation which predicted a gradual move away from
thinking about (and organizing) a linear
science/technology push or demand pull process to one
which saw increasing interactivity.
 At first, this exists across the company with cross-

functional teams and other boundary-spanning activities.
 Increasingly, it then moves outside it with links to

external actors Rothwell's vision of the 'fifth generation'
Cont'd
TAble 4.1 Rothwell's five generations of innovation models
Generation Key features
First/second Simple linear models (need pull, technology

push)
Third Coupling model, recognizing interaction

between different elements and feedback
loops between them .
Fourth Parallel model, integration within the

company, upstream with key suppliers and
downstream with demanding and active
customers, emphasis on linkages and
alliances.
useful toTypes
begin of Innovation
 If
innovation
networking becoming the Networks
andis entrepreneurship dominant
then it mode
will for
be
with a clear understanding of our
terms.
 A network can be defined as a complex,
interconnected group or system and networking
involves using that arrangement to accomplish
particular tasks.
 As we've suggested, innovation has always been a

multiplayer game and we can see a growing number
of ways in which such networking takes place.
 At its simplest networking happens in an informal

way when people get together and share ideas as a
by-product of their social and work interactions.
 But we'll concentrate our attention on more formal

They can also

Innovation
assembling andhave
deploying
networks
emergent
knowledge
properties.
are in amore
complexthan
world. just
 Being in an effective innovation network can deliver a Cont'd ways of
wide range of benefits beyond the collective knowledge

efficiency mentioned above.
 These include getting access to different and

complementary knowledge sets, reducing risks by
sharing them, accessing new markets and technologies
and otherwise pooling complementary skills and assets.
 Without such networks, it would be nearly impossible for

the lone inventor to bring his or her idea successfully to
market. And it's one of the main reasons why established
businesses are increasingly turning to cooperation and
alliances: to extend their access to these key innovation
resources.
Table 4.1 of innovation networks
Network Characteristics
type
Entrepreneur Bringing different complementary resources together to

based energy
help
formal
take
andanenthusiasm
informal,
opportunity
depends
in getting
forward.
a lot
people
Often
on the
interested
a combination
entrepreneur's
to joinof
and stay in the network. Networks of this kind provide
leverage for obtaining key resources but they can also
provide support and mentoring, for example in
entrepreneur clubs.
Internal Formal - and informal - networks of knowledge and key

project teams skills within organizations which can be brought together
to help enable some opportunity to be taken forward.
Essentially like entrepreneur networks but on the inside of
established organizations. May run into difficulties
because of having to cross internal organizational
boundaries.
Communities These are networks which can involve players inside and
of practice across different organizations - what binds them together
is a shared concern with a particular aspect or area of
knowledge. They have always been important but with the
rise of the Internet there has been an explosion of online
communities sharing ideas and accelerating innovation
(e.g.
also3D
shops'
of Linux, Mozilla
important
as places
printing (e.g.
and andemergence
where
the
the Apache).
networking
'maker 'Offline'
ofaround communities
'fab-labs'
movement' isthebeginning
and
new'tech-
ideasare
to
happen).
Spatial Networks which form because of the players being close to

clusters each other (e.g. in the same geographical region). Silicon
Valley is a good example of a cluster which thrives on
proximity - knowledge flows amongst and across the
members of the network but is hugely helped by the
geographical closeness and the ability of key players to
meet and talk.
Network Characteristics
type
New product or Sharing knowledge and perspectives to create and market
process a new product or process concept (e.g. the Symbian
development consortium (Sony, Nokia, Ericsson, Motorola and others)
consortium worked towards developing a new operating system for
mobile phones and PDAs).
development
consortium
New technology organized
(e.g.
in thetheUS
Sharing pioneering
bylearning
and and
IBMJapan,
but
semiconductor
involving
or newly
around the BLADE
major
research
players
emerging server
programmes
in consortium
devising
technologies
new server architectures)
Emerging Exploring and establishing standards around innovative

standards technologies (e.g. the Motion Picture Experts Group
(MPEG) working on audio and video compression
standards)
Supply chain Developing and sharing innovative good practice and

learning possibly shared product development across a value chain
Managed Building on the core idea that 'not all the smart people
open work for us', organizations are increasingly looking to
innovation build external networks in a planned and systematic
networks fashion. Underlying purpose is to amplify their access to
ideas and resources. It may involve joining established
networks or it may require constructing new ones. In this
space there is a growing role for 'brokerage' mechanisms
(individuals, software, etc.) which can help make the
connections and support the network building process
approach,
simply as passive
opening
markets. Often
up mobilizes
to largea broadcast
open networks via
User networks Extending the above
crowdsourcing. idea isthese
Problem networksfront-end
converting aim to connect
interest
to users
into as a long-term
meaningful source ofco-creation
innovationactivity
input rather than
Innovation An extreme version of the open and user networks

markets approach is to broadcast the innovation needs and
connect to potential solutions in a marketplace. The
Entrepreneurs' Networks
 The idea of the lone inventor pioneering his or
her way through to market success is
something of a myth, not least because of the
huge efforts and different resources needed to
make innovation happen.
 While individual ideas, energy and passion are

key requirements, most successful
entrepreneurs recognize the need to network
entrepreneurs recognize the need to network
 They
need via complex
networking,are webs
essentially
of relationships.
highly skilled at
extensively both in
and to building and resources
collect the in maintaining
they
those networks to help create a sustainable
business model.
Cont'd
 Take the wind-up radio story (Lifeline Energy)
featured on the Portal a great idea and an
interesting invention required an extensive
network of finance, logistics, distribution,
marketing and manufacturing to enable it to
come to scale and sustainability.
what
technological
is now aworld,
management key
idea,global
which
but player
it provided
in the
began the
withinformation
a basis for
process
 Mike Lynch's Autonomy - another brilliant
Cont'd
 These days one of the most powerful companies in the
electronics world is ARM, whose chips are in almost all
mobile phones and a host of other devices. Now a
global player, ARM began as a spin-off from Cambridge
University in the 1980s. But its evolution was not a
one-man show but the building and development of a
complex network with links across countries, sectors
and technologies.
 Networking is not just a way of providing leverage for

entrepreneurs seeking to access resources. It also
provides valuable support in other ways, from acting
as a sounding board through to providing valuable
Internal Cross-boundary and
Communities of Practice
 'If only x knew what x knows...' You can fill the x in
with the name of almost any large contemporary
organization (Siemens, Philips, GSK, Citibank).
 They all wrestle with the paradox that they have

hundreds or thousands of people spread across their
organizations with all sorts of knowledge.
 The trouble is that, apart from some formal project

activities which bring them together many of these
activities which bring them together, many of these
knowledge elements remain unconnected, like a
giant jigsaw puzzle in which only a small number of
Cont'd
 This kind of thinking was behind the fashion for
'knowledge management' in the late 1990s and one
response, popular then, was to make extensive use of
information technology to try to improve the
connectivity.
 Trouble is that, while the computers and database

systems were excellent at storage and transmission,
they didn't necessarily help make the connections that
turned data and information into useful and used
knowledge
2/15/24, 5:23 AM
knowledge.
 I i l fi i i h hil
Cont'd
 The concept of communities of practice is becoming a
powerful focal point in designing effective knowledge-
sharing systems.
 It's back to the spaghetti model of innovation: how to

ensure that people get to talk to others and share and
build on each other's ideas.
 This may not be too hard in a three- or four-person

business, but it gets much harder across a typical
sprawling multinational company.
 Al h h hi i l di bl h h
Clusters and 'Collective Efficiency'

in Innovation
 Innovation is about taking risks and deploying what
are often scarce resources on projects which may not
succeed. So, another way in which networking can
help is by helping to spread the risk and, in the
process, extending the range of things which may be
tried.
 This is particularly useful in the context of smaller

businesses where resources are scarce and it is one
of the key features behind the success of many
industrial clusters.
Cont'd
 We think of places like Silicon Valley, Cambridge in the
UK or the island of Singapore as powerhouses of
innovation but they are just the latest in a long-
running list of geographical regions which have grown
and sustained themselves through a continuous
stream of innovation.
 Supply Chain and Improvement

• Networks Supply chain learning involves building a
knowledge-sharing network; good examples can be
found in the automotive, aerospace and food
industries, and often involve formal arrangements
 For example, Toyota has worked over many years to Cont'd

build and manage a learning system based on
transferring and improving its core Toyota Production
System across local and international suppliers.
 The model (which has been replicated in Toyota supplier
networks outside Japan) is based on:
• a set of institutionalized routines for exchange of
tacit and explicit knowledge.
• clear rules around intellectual property, e.g. new
production process knowledge is the property of the
network.
• a strong sense of network identity which is actively
promoted by Toyota, and evidence of clear benefits
 Similarly, Volvo's and IKEA's experiences in China show

how the firms can share their knowledge with their
Cont'd
principal suppliers, who then disseminate it further. Key
suppliers (in both first and second tiers) learnt parts of
Volvo's management systems, especially quality
management and supply chain management, and this led
to dissemination and positive influence on the next tier
of Chinese suppliers.
 Another example is the Boeing 787 aircraft. It is

manufactured in Japan, Australia, Sweden, India, Italy
and France and finally assembled in the USA. In spite of
the cultural differences, suppliers must be able to
Breakthrough Technology
 One area where it makes sense to collaborate is in
advantages the
exploring
Collaborations
of doing
frontiers
this in
of network
new technology.
fashion include
reduced risk and increased resource focused on a
The
learning and experimental process.
 This is often found in pre-competitive R&D consortia

which are convened for a temporary period during which
there is considerable experimentation and sharing of
both tacit and explicit knowledge.
 Examples range from the Japanese 5th Generation

computer project and the ESPRIT collaborations in the
Learning Networks
 Another way in which networking can help innovation is
in providing
networks. support for shared learning: learning
 A lot of process innovation is about configuring and
adapting what has been developed elsewhere and
applying it to your processes, for example in the many
efforts which organizations have been making to adopt
world class manufacturing (and increasingly service)
practice.
 While it is possible to go it alone in this process, an
Cont'd
 A problem in innovation arises because, although
individuals and organizations operate in a world full
of external knowledge which they could access,
capacity':
they are, their
in practice,
ability tolimited
make sense
by their
of it, 'absorptive
acquire it
and put it to effective use.
 They need to learn, building a capability for

innovating to take advantage of the open
innovation environment.
 Once again, networking can help enable even very
Cont'd
 Experience and research suggest that shared learning
can help deal with some of the barriers to learning
which individual firms may face. For example:
• in shared learning there is the potential for challenge and
structured critical reflection from different perspectives.
• different perspectives can bring in new concepts (or old
• different perspectives can bring in new concepts (or old
• provide
sharedorsupport
costs experimentation
risks inand
trying
open new
new
can lines
things
reduce
ofshared
inquiry
perceived
experiences
or exploration.
and actual
can
conceptslearning
• shared which arehelps
new toexplicate
the learner).
the systems principles,
seeing the patterns (separating the wood from the trees)
• shared learning provides an environment for surfacing
assumptions and exploring mental models outside of the
normal experience of individual organizations (helps prevent
'not invented here' and other effects).
• shared learning can reduce costs (e.g. in drawing on
consultancy services and learning about external markets)
which can be particularly useful for small/medium-sized
Recombinant Innovation
Networks
 Participating in innovation networks can help
companies bump into new ideas and creative
combinations even for mature businesses.
 The process of creativity involves making
associations; sometimes, the unexpected
conjunction of different perspectives can lead to
 conjunction
surprising
The same is
of networks of different
results.
true at the
indicate perspectives
organizational
that getting can
level.
together lead a to
in Studies
such
fashion can help open up new and productive
territory.
 An increasing number of organizations are offering
Managed Open Innovation

Networks
 The logic of open innovation is that organizations
need to open up their innovation processes,
searching widely outside their boundaries and
working towards managing a rich set of network
connections and relationships right across the
board.
trading
knowledge in flows
knowledge
in and out
as ofmuch
the organization,
as goods and
 services.
Their challenge becomes one of improving the
Cont'd
 Similarly this open environment offers rich

opportunities for start-up entrepreneurs. They no
longer need to have all the knowledge resources in
one place; rather, the challenge is knowing where
they are and how to get at them. But once again
this means learning a whole new set of skills
around making and managing connections.
startups orbetween
example between the
established
public andorganizations
private sectors.
and
Instead, it is a pattern of new relationships across
 Traditional boundaries are becoming blurred, for
 The process of opening up the game is not without its problems, first of all in finding
new ways to enable connections. There has been a huge rise in the role played by social
and technological networking as mechanisms which enable closer linkages, and with it
have sprung up new roles and groupings within organizations (gatekeepers, information
managers, knowledge hubs, etc.) and new service businesses on the outside specializing
in brokering and connecting. But improving knowledge flows also opens a can of worms
as far as managing intellectual property is concerned. In a world of open source, who
owns what and how should you protect your hard-won knowledge assets?
 For the lone entrepreneur this raises a tantalizing mixture of threat and opportunity. On
the one hand, he or she can make effective connections to resources and mobilize them
and act on a global basis. We've seen examples of this in the field of Internet businesses
which operate often with very small groups of people and amplify their efforts and
presence through networking to a global community sometimes running into billions of
people. Developments around networking mean that the old problem for small
businesses - their isolation - is removed. But on the other hand the sheer scale and
number of potential connections requires learning new skills in finding, forming and
getting networks to perform.
getting networks to perform.
Choosing the most appropriate form of open innovation network is very much dependent
on where an organization sits in terms of its size, sector and stage in its lifecycle. For
example, inputs from customers are central when market dynamics are high, suppliers are
important in technologically challenging environments, and the inclusion from companies
of other industries is effective irrespective of the setting.
 Strategy is not limited to the decision whether to open

up a project to a wide range of different types of external
partners (the breadth dimension), but it is equally
important to consider the depth of the relations with
different types of external partners (the depth
dimension) and the balance between the development of
new and long-standing relations with these external
partners (the ambidexterity dimension).
 For example, higher levels of project novelty are

associated with a higher intensity of interaction between
actors and the use of more rich mechanisms for
knowledge sharing. This suggests that open innovation is
not a universal prescription, but may be more relevant to
more novel or complex development projects under
conditions of uncertainty.
 Table 4.3 summarizes some of the key contingency
factors in shaping open innovation strategy based on
factors in shaping open innovation strategy, based on
considerations of:
• conditions and context, e.g. environmental
uncertainty and project complexity
TABLE 4.3 Potential benefits and challenges of applying open innovation

Six principles of Potential benefits Challenges to apply
open innovation
Tap into • Increase the pool of • How to search for and identify
external knowledge relevant knowledge sources
knowledge • Reduce reliance on limited • How to share or transfer such
internal knowledge knowledge, especially tacit and
systemic
External R&D • Can reduce the cost and • Less likely to lead to distinctive
has uncertainty associated with capabilities and more difficult to
significant value internal R&D, and increase differentiate.
depth and breadth of R&D • External R&D also available to
competitors .
Do not have to • Reduce costs of internal • Need sufficient R&D capability in
originate R&D, more resources on order to identify, evaluate and
research in external search strategies adapt external R&D
order to profit and relationships
from it
Building a • Greater emphasis on • First-mover advantages depend on
better business capturing rather than technology and market context
model is creating value • Developing a business model
superior to demands time-consuming
being first to negotiation with other actors
market
Best use of • Better balance of resources • Generating ideas is only a small
internal and to search and identify part of the innovation process
internal and to search and identify part of the innovation process
external ideas, ideas, rather than generate • Most ideas unproven or no value,
not generation so cost of evaluation and
of ideas development high
Mobilizing User
Networks
 Innovation is not simply about technological knowledge;
the other piece of the puzzle is knowledge of user
needs.
 We saw in the previous chapter how users have always

been an important source of innovation and this role
has accelerated in recent years as the technology and
social networks allow for more participating in what is
effectively a process of co-creation.
 However, although the potential of involving users is

huge, the experience has often been that actively
engaging with and working with communities beyond a
front-end process of crowdsourcing ideas requires
careful management.
 Once again, there are many different ways in which

organizations are seeking to build more open networks
with users; Figure 10.2 gives an overview of key
FIGURE 4.2 Strategic options in engaging

users in innovation
 Lead Users
• Lead users demand new requirements ahead of the general
market of other users, but are also positioned in the market
to significantly benefit from the meeting of those
requirements. Where potential users have high levels of
sophistication, for example in business-to-business markets
such as scientific instruments, capital equipment and IT
systems, lead users can help to co-develop innovations, and
are therefore often early adopters of such innovations.
• Research by Eric von Hippel suggests lead users adopt an
average of seven years before typical users, but the precise
lead time will depend on a number of factors, including the
technology lifecycle.
• One empirical study identified a number of characteristics of
lead users:
• Recognize requirements early - are ahead of the market in
identifying and planning for new requirements.
• Expect high level of benefits - owing to their market
position and complementary assets.
• Develop their own innovations and applications - have
products
This has two
contribute and
to important
services should
implications.
identify
the co-development First,
and potential
those
early lead
seeking
adoption users
oftothe
with
develop
suchinnovative
characteristics
innovation. complex
Second, to
lead
users, as early adopters, can provide insights to forecasting the diffusion of innovations. For
example, a study of 55 development projects in telecommunications computer
infrastructure found that the importance of customer inputs increased with technological
newness and, moreover, the relationship shifted from customer surveys and focus groups
to co-development because 'conventional marketing techniques proved to be of limited
utility, were often ignored, and in hindsight were sometimes strikingly inaccurate.
 Extreme Users
We mentioned extreme users as a source of innovation in Chapter 3 and it is clear this
can give us valuable clues about what could be mainstream innovations in the future.
For example, the whole concept of 'mobile money' is of interest around the world but
in the extreme conditions of emerging countries in Africa, Asia and Latin America it is
being brought to life because of the needs of extreme users.
In the field of mobile communications this is only one of hundreds of new applications
being developed in extreme conditions and by underserved users, and represents a
powerful laboratory for new concepts which companies like Nokia and Vodafone are
working closely to explore. The potential exists to use this kind of extreme
environment as a laboratory to test and develop concepts for wider application, for
example Citicorp has been experimenting with a design of ATM based on biometrics
for use with the illiterate population in rural India.
Extreme users are important but the question again is around how we can engage with
up of 'living
them. How canlabs';
weplaces
build effective
where experimentation
networks of extreme
and experience
users? Onesharing
approach
can isgothe
onsetting-
in the
context of extreme users and from whom valuable insights can be developed.
Another way of building such networks is via online communities, for example a significant
innovation community has been pulled together around the experience of living with or
caring for those with rare diseases. User experiences of this kind can not only diffuse across
the community to everyone's benefit but also surface new directions for innovation.
 Co-Development
The potential for users, either as individuals or as groups, to become involved in the
design and production of products has clearly been recognized for some time.
efforts. Many
However,
relationship
experience these
orin now
ideas
which
conceptions
argue
ofsuppliers
users
that and
we
ofareuser-supplier
are
apply
able,
seeing
them
in some
a to
dramatic
innovation
their
way own
or
shift
another,
all
product
towards
tendtodevelopment
tomore
harness
depict
open,
the
a
democratized forms of innovation that are driven by networks of individual users, not
firms.
Users are now visibly active within all stages of the innovation process, from concept
generation to development and diffusion. They may now be actively engaged with
firms in the co-development of products and services and the innovation agenda may
no longer be entirely controlled by firms.
Some forms of user activity represent the emergence of a parallel system of

innovation that does not share the same goals, drivers and boundaries of mainstream
commercial activity. Users are seen as having an active role in seeking to shape or
reshape their relationship with innovation, beyond the prescribed application or use,
or developing an agenda that may conflict with the producer.
In this way the boundary between producers and users becomes less distinct, with some
users able to develop and extend technologies or use them in entirely novel and
unexpected ways. Innovation can become far more open and democratized. Such lack of
compliance by users with producers and promoters of innovations need not be viewed as a
deviant activity but can become more central to the processes of innovation and diffusion.
This has potentially significant implications for market relationships, business models and
intellectual property.
intellectual property.
 Crowdsourcing
We saw in Chapter 6 the emergence of the crowd as a source of innovation.
Crowdsourcing can be implemented in many ways, but it is typically enabled by
information and communication technology which can extend the reach without losing
some of the richness of user engagement.
One approach is to organize a competition where a problem or challenge is set and
potential solutions or ideas are invited. Rewards range from peer or public recognition
and community status, but more commonly feature some extrinsic motivation such as
free products or cash prizes. For example, Dell's crowdsourcing platform Idea Storm
received more than 15 000 ideas, of which over 400 were implemented. Contributions
and rewards tend to be more individual and competitive than in peer or user
communities.
Another approach is to make extensive use of users as co-developers. For example, Adidas
has taken the model and developed its 'mi Adidas' concept where users are encouraged to
co-create their own shoes using a combination of website (where designs can be explored
and uploaded) and in-store mini-factories (where user-created and customized ideas can
then be produced).
Chapter 5
Growing the enterprise
Introduction
 Estimates vary, but most studies confirm that
around half of start-ups survive no more than
four years, and less than 4% of the remaining
new ventures grow.
 contribute
In this chapter
to the
wesuccess
identifyand
thegrowth
factorsofwhich
new
ventures, and we try to differentiate the
factors which entrepreneurs can influence from
those which are more contextual.
Factors Influencing Success
 A study of 11 259 new technology ventures in the USA

over a period of five years found that 36% survived
after four years and 22% after five years. To try to
explain the success and failure of these ventures, the
researchers reviewed 31 other key studies of
technology ventures, and found only eight factors that
i t tl f
https://www.collegesidekick.com/study-docs/2682997 d t i fl 103/138
were consistently
• Value chainfound
 Cooperation to influence
management
with success:
suppliers, :
distribution, agents
and customers.
• Market scope:
 Variety of customers and market segments, and
Factors Influencing
Success
• Firm age: Number of years in existence.
• Size of founding team : Likely to bring additional and
more diverse expertise to the ventures and better decision
making.
• Financial resources: Venture assets and access to
funding.
• Founders' marketing experience : But not technical
sectors.
• Existence
experience,of or
patent
priorrights In product
: startups
experience of (see or process
below).
technology, but R&D investment was not found to be
• Founders' industry experience: In related markets or
Factors Influencing
Success
 The first three factors were by far the most significant
predictors of success.
 However, clearly there is also some interaction between

these effects, for example the founders' marketing and
industry experience is likely to influence the attention to
market scope and the value chain, and patent rights
make raising finance easier, and vice versa.
 In addition, they found that some commonly cited factors

had no effect incl ding fo nders' e perience of R&D or
had no effect, including founders' experience of R&D or
prior start-ups.
 The importance of other factors depended on the precise

context of the venture, for example for independent

 Despite these relatively high rates of survival, very few
firms grow significantly or consistently, the so-called
gazelles.
• Gazelles are extremely fast-growing firms, typically

double-digit, in terms of sales and employment over a
prolonged period. Rare, most estimate less than 5%
of all firms.
 Internal and external factors contribute to the success

and growth of a new venture.
• Internal factors include the most significant
controllable factors such as size of target market,
industrial experience of founders, strength of social

networks, business management skills, product
attractiveness to target market, ownership structure
Factors Influencing
Success
• External factors include access to complementary
resources, social and business networks, and the
regional and national context.
 However, innovation promotes the development and

growth of a new venture, and this demands access to
complementary resources and capabilities within the new
venture and throughout its external networks.
• Complementary capabilities :- the mixture of diverse
experience, expertise and resources that ventures
need to grow, partly achieved through multiple
founders and partly through external networks.

 This is one reason why firms created by pairs or small

 The contrasting capabilities and perspectives of multiple
founders provide a stronger basis to identify, develop
and deliver innovative offerings.
Table 5.2 Complementary capabilities of new ventures created by
multiple founders
Case Multiple founders Complementary capabilities

company
Apple Jobs, Wozniak and Graphic design and showmanship

Ive Computer science, Industrial design
Facebook Zuckerberg and Computer science and psychology

Saverin
Microsoft Gates and Allen Computer science, and intellectual

property, Computer science
Intel Noyce Moore and Physics maths and organization

Intel Noyce, Moore and Physics, maths and organization,
Grove Electrical engineering Process
Types of New Venture

 Entrepreneurs create new business for various reasons. It's
important to understand different entrepreneurial motives and
mechanisms.
• Lifestyle entrepreneurs:
- Those who seek independence, and wish to earn a living
based around their personal circumstances and values.
- e.g. individual professional consulting practices or home-
based craft businesses.
• Growth entrepreneurs:
- Those who aim to become wealthy and powerful through the
creation and aggressive growth of new businesses.
- Successful growth entrepreneurs tend to create very large
corporations through acquisitions, which may dominate
Types of New Venture

• Innovative entrepreneurs:
- Individuals who are driven by the desire to create or
change something, whether in the private, public or
third sectors.
- Independence, reputation and wealth are not the
primary goals in such cases. Rather, the main
motivation is to actually change or create something
new.
- Innovative entrepreneurs include technological
entrepreneurs and social entrepreneurs.
Context for Entrepreneurship

 Innovation SMEs (Small Medium Enterprise) exhibit
broadly similar characteristics across sectors. They:
a. Are more likely to involve product innovation than
process innovation.
b. Are focused on product for niche markets, rather than
mass markets.
c. Will be more common amongst producers of final
products, rather than producers of components.
d. Will frequently involve some form of external linkage.
e. Tend to be associated with growth in output and
employment, but not necessarily profit.
Process and Stages

Newfor
Venture
Creating a
Assessing Growing
the Developin Acquiring the and
opportunity g the resources and harvesting
for a new business funding the
venture - plan and necessary for venture -
generating, deciding implementation how to
evaluating the - including create and
and refining structure expert support extract
the of the and potential value from
business venture partnership the
concept business
Process and Stages for Creating a

New Venture
 A new venture will face different challenges at different
next stage,
stages in order
what the
to make
researchers
a successful
call 'critical
transition
junctures'.
to the
• Opportunity recognition:
 How entrepreneurs identify potential
opportunities to support new business.
• Entrepreneurial commitment:
 Acts and sustained persistence that bind the
venture champion to the emerging business
venture.
• Venture credibility:
 This is critical for the entrepreneurs to gain the
resources necessary to acquire the finance and
other resources for the business to function.
Process and Stages for Creating

a New Venture
 Research confirms that the ability to recognize and
assess opportunities is a critical determinant of new
ventures
venture success.
include:or
• Extensions Common sources
adaptations of ideasproduct
of existing for newor
service.
• Application of existing products or service in different
or newly created market segments, or at different
price point.
• Adding value to an existing product or service.
• Developing a completely new product or service.

New Venture
 The more fundamental drivers of opportunities
for new ventures are:
• Economic factors, e.g. changes in disposable income.
•increase)
Technological
Demographic
barriers
trends,
developments
to entry.
e.g. the -ageing
which population,
may reduce more
(or
leisure time.
• Regulatory changes, e.g. environmental requirements,
health and safety.

New Venture
 Developing the Business Plan
• The primary reason for developing a formal business
plan for a new venture is to attract external funding.
• No standard business plan exists, but in many case
venture capitalists will provide a pro forma for the
• Typically,
say no morea business
10 to 20plan
pages,
should
begins
be with
relatively
an executive
concise,
business plan.
summary and include:
• details of the product or service, assessment of the
market opportunity, identification of target
customers, barriers to entry and competitor analysis,
experience, expertise and commitment of the
management team, strategy for pricing, distribution
New Venture Structure

 When deciding what type of company to form, you
need to ask yourself the following questions:
- How much capital is needed to start the business?
- How much control and ownership do I want?

- How much risk am I willing to take on, in the case of failure?
- What
different
are structures?
How large the registration,
proposed
could harvest
reporting
the business strategies
andand
become, tax
or how
implications
exit routes?
fast? of
- Who could become the beneficiary of the business?

The basic options are:
- Sole proprietorship:
• The advantages are relatively light regulation and reporting, autonomy of
decision-making and total control, direct personal incentive to succeed and
ease of exit.
• However, this exposes the owner to unlimited personal liability, provides only
limited access to external capital and development and relies on the skills and
talent of only one person.
- Partnership:
• However,
partnerships
potential
out partners as
whothewish
business
for personality
develops.
to leave andjoint
and decision-making conflicts,
unlimited liability buying
of partners
• The advantages are easy to establish, larger pool of expertise and
are some of the downsides.
capital, partners share all profits and having flexibility to extend

• Company:
- Easy and cheap to establish, better access to capital
for growth, and exposes owners to only a limited
liability.
- The disadvantages are the reporting requirements,
rules of operations, different shareholder interests
and restrictions on the sale and transfer of assets.
Acquiring the Resources and Funding
• The potential sources of initial funding for

creating a new venture:
- self-funding
- family and friends
- business angels
- bank loans
- government schemes
- crowd funding
Acquiring the Resources and

Funding
• The initial funding to establish a new venture is rarely a
major problem. Almost all
are funded from personal savings or loans from family or
friends.
• At this stage few professional sources of capital will be

interested, with the possible exception of government
support schemes.
• However, a new venture is likely to require financial

restructuring every three years, if it is to develop and
grow.
2/15/24, 5:23 AM g Innovation management & Enterpreneurship.pptx - Chapter 1 The Innovation Imperative Outline 1. Innovation Matters 2. Innovation and Entrepreneurship 3. Innovation Isn't - Colleg…
• Studies identify stages of development, each having

different financial requirements:
Initial financing for launch
Acquiring the Resources and Funding

• Business angels:
- are successful entrepreneurs who wish to re-invest in
new ventures, usually in return for some management
role.
- They are usually able to introduce a venture to an
established network of professional advisers and
business contacts.
• Crowd funding :
- is the practice of funding a project or venture by
raising money from a large number of people of
people, typically via the internet.
- Typically, this is mediated by Web Portal on which

project can be posted attract investor, often multiple
Reading Assignment
 Growth and performance of new venture
Chapter 6
Business Models and

Capturing Value
Outline
1. What's a Business Model?
2. Why Use Business Models?
3. What's in a Business Model?
4. Business Model Innovation
5. Generic and Specific Business Models
6. Building a Business Model
What's aModel?
Business
 Business model is an explanation of how value is
created for customers, and making it explicit can
help us focus on how we can capture this in
innovation. For example:
• A theatre uses scripts, actors, scenery,
lighting and music to create a theatrical
experience which the audience values
 Every organization, public or private sector, offers
some kind of value proposition - a product or
service or some combination which end users value.
 In commercial markets this is something they are
prepared to pay for, but in other contexts, such as
 Peter Drucker states that a reliable business Cont'd

model should be able to answer this
questions:
1. Who are the company's customers?
2. How important is the customer to the
company?
3. How management is able to generate
profits for the company? Or
4. What underlies management decides when
and how to add value to customers?
Why Use Business Models?

 The purpose of a business model is to provide a
created
clear representation
and can be captured.
of whereThat's
and howuseful
value
forisa
number of reasons:
• It provides a roadmap for how an innovation can

create value. It won't just happen; it needs a
framework.
• It provides a way of sharing the idea with others,
making the business vision explicit. That can be
useful for entrepreneurs trying to pitch their
ideas to venture capitalists or to innovation
teams trying to win resources and support for an
What's in a Business Model?

 Value creation doesn't just happen. It is the result
of a structured process which involves:
• A value
what proposition -
is valued?
• A target market - by
whom?
• A supplier - who?
• A set of activities - how?
• A representation of the
value - how much?
Table 6.1 Examples of business

models
Exam Value For whom? By whom (key Core activities
ple proposition? players on to deliver that
supply side)? value
Razor Shaving with Men (and later Manufacturers Design and

blade a fresh
women) like Gillette development 128/138
blade
s ainstead
freshblade
sharp
every time
of women) like Gillette development
andblades,
Manufacture
of distribution
having to advertising and
sharpen a marketing, etc.
razor
Onlin 24/7 bank Customers IT platforms, Customer

e opening and unable or call center staff service and
banki ability to unwilling to use other customer relationship
ng operate 'normal' banking interfaces management
independent hours but who Back-office
of physical appreciate the systems and
Business Model Innovation
 Business model innovation is about creating

new models or changing existing ones to
maximize the value created and return it to
the organization which created it
capturing 129/138
the organization which created it - capturing
value.
• Example, a pharmaceutical company
spends around 20% of its sales on R&D,
funding extensive laboratories and
facilities to create new drugs.
Cont'd
Table 6.2 Examples of the Internet as a route to business
model innovation
Old model Internet-enabled alternative
Airline and travel Disintermediation - DIY or else via

booking online aggregator
Printing and
driven Online coordination, self-
options
Encyclopaedia- expert
publishing - physical Wikipedia
publishing,and
longopen-source
tail, print on
networks and demand
specialist
Retailing - physical Amazon and online, long tail
Generic and Specific Business Models
 Once established, there is competition about

finding new and modified ways of deploying these -
playing with the '4Ps' in terms of streamlining or
changing processes, modifying the product/service
offering or changing the positioning in new
markets or in the story we tell about our offer.
Table 6.3 Some examples of generic business models
Model Value proposition
Product or service Offers an end-product or service

provider
Ownership of key Rental for temporary period of something valuable like

assets and renting space, e.g. car parks, luggage and goods storage
them out businesses
Finance provider Offers access to money and services around that
Systems integrator Pulls together components on behalf of an end customer,

e.g. building contractors, software service providers,
computer builders like Dell
Pl tf id
Off l tf hi h th dd l 132/138
Platform provider
Network provider Offers
Offers aphone
mobile platform
access across
variouswhich
ortobroadband kindsothers
company can add service,
of network value, e.g.
e.g.
smartphones and the various apps which run across them,
Skills provider Sells or rents access to human resources and knowledge,
and Intel whose chipsets enable others to offer computing
functions
Building a Business
Model
 Building a business model is not easy as we determine
the product or service to sell. Building a business model
means mapping how we can deliver valuable goods or
services to consumers.
Building a Business The reason why customers choose the
Model
Value value of certain benefits offered by the
proposition company when compared with the
Target market Whobenefits
shall we serve?offered by a competitor
company.
How to make products or services and
Creating and how the system of delivery of products
or services to consumers
delivering Information from customers helps to design
Value products or services in accordance with the
Capt re
Capture wishes of customers.
Related to the cost incurred in designing
Cost
products or services to meet customer desires
Structure
.
Sustaina Business models not easily imitated competitors
bility - develop new ideas by adding value to products
/ services
Thank You!!!
Uploaded by AmbassadorElectron9381 on coursehero.com
RESOURCES
Study Guides
Study Documents
About Learneo
LEGAL
Copyright Policy
Honor Code
Terms
Academic Integrity
Privacy Policy
Cookie Policy
Community Guidelines
Digital Services Act
Do not Sell or Share My Personal Info
SUBJECTS
Accounting
Aerospace Engineering
Anatomy
Anthropology
Arts & Humanities
Astronomy
Biology
Business
Chemistry
Civil Engineering
Computer Science
Communications
Economics
Electrical Engineering
English
Finance
Geography
Geology
Health Science
History
Industrial Engineering
Information Systems
Law
Linguistics
Management
Marketing
Material Science
Mathematics
Mechanical Engineering
Medicine
Nursing
Philosophy
Physics
Political Science
Psychology
Religion
Sociology
Statistics
SOCIAL
© Learneo, Inc. 2024
*College Sidekick is not sponsored or endorsed by any college or university.

Iinovation

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Iinovation

Uploaded by

Copyright:

Available Formats

2/15/24, 5:23 AM Innovation management & Enterpreneurship.pptx - Chapter 1 The Innovation Imperative Outline 1. Innovation Matters 2.

ters 2. Innovation and Entrepreneurship 3. Innovation Isn't - Colleg…

Innovation management & Enterpreneurship.pptx

5. Dimensions of Innovation: What Can We Change?

6. A Process Model for Innovation and Entrepreneurship

7. What, Why, and When: The Challenge of Innovation Strategy

Innovation and entrepreneurship

Innovation and entrepreneurship

Innovation & Entrepreneurship

Developing the Spreading the idea

Innovation isn't easy

Managing innovation and

Dimensions of innovation: what can

Paradig Changes in the context into which the

Changes in the underlying mental models which

Process Model for Innovation & Entrepreneurship

Process Model for Innovation &

into some decision

What, why and when: the challenge of

Novelty in Offering something no Introducing the first (Walkman,

Creating an Innovation Strategy

What is Social Innovation?

What is Social Innovation?

WHAT IS NOT SOCIAL INNOVATION

WHAT IS NOT SOCIAL INNOVATION

o Companies that incorporate social innovation into their commercial activities

What is not social innovation

Key characteristics of social entrepreneurs

Key characteristics of social entrepreneurs

Players of social innovation

Players of social innovation

MOTIVATION: WHY DO IT?

 High n-Ach requires some evidence that a mark has been

Motivation of social innovation

Motivation of social innovation

• Organizations can either choose to act on this and gain more

Motivation of social innovation

Enabling social innovation

Potential barriers to social entrepreneurship

• Barriers to social entrepreneurship include the following:

The challenges of social entrepreneurship

 Social innovation is driven by social entrepreneurs working in

 But social entrepreneurs carries with it a number of additional

TABLE 2.2 Challenges of social innovation

Search - • Many potential social entrepreneurs (SEs) have the

TABLE 2.2 Challenges of social innovation

be has to Challenges in social entrepreneurship

Innovation • Here the overall vision is critical, the passionate

TABLE 2.2 Challenges of social innovation

 Whose needs? Working at the edge:

 Advertising and mass customization

incurring the traditional costs of tailoring to specific

Table 3.1 Options in customization

 Making processes better

management' movement in the 1980s, the

• For example, the demand for iron and iron

• In similar fashion the energy crisis has

• This assumes that users are passive recipients,

• In many cases users are ahead of the game.

• Importantly, active and interested users (lead

• Lead users- group of very early adopters of new

• Looking for extreme environments or users

• As Roy Rothwell puts it in the title of a