Corporate Entrepreneurship

and Innovation

Chapter 3
Innovation

1
CEI
Schumpeter’s types of innovation

1. Introduction of new or improved

product/service
2. Introduction of new process
3. Opening up of new market
4. Identification of new sources of
supply of raw materials
5. Creation of new types of industrial
organization
 Types of innovation (3D)

Radical

Radical
Product or
service ess
innovation r oc tion
P va
 
n o
in
Incremental  
Inc
re
 
me
Ma nta
  rk l
et i
ng Ra
dic
inn a
ov l
ati
on
 Types of innovation (2D)

Radical
product/service New-to-the-
Disruptive world
innovation innovation industries

Incremental
Incremental
product/service
innovation
innovation

Existing Market Market

Copy-cat
product/service development paradigm
shift

Existing Incrementally Radically

market new market new market

Disruptive innovation
 Radical or disruptive innovation
 New inventions & technologies
 New business models
 New production processes
 New markets
 Sea changes in market sentiment or
behaviour (e.g. global warming & CSR)
 Changes in laws or regulations (e.g. food
regulations or Health & Safety)
 Unthinkable events that are difficult or
impossible to plan for

Anthony Inspiration
 Incremental innovation

 Developments in technology
 Improvements in design or functionality
– doing things better
 Improvements in efficiency – doing
things cheaper
 New combinations of marketing mix –
e.g. ways of getting things to markets
 CASE
insight
Roll-Royce and Finferries

1. Who were the partners in this innovation & what were

their roles?
2. What are the implications of having autonomous ferries
in the near future? Is this a disruptive innovation?
SVAN
 Types of innovation (2D)

Radical
product/service New-to-the-
Disruptive world
innovation innovation industries

Incremental
Incremental
product/service
innovation
innovation

Existing Market Market

Copy-cat
product/service development paradigm
shift

Existing Incrementally Radically

market new market new market
 CASE
insight
Bill Gates & Microsoft

1. How difficult is it to break away

from the dominant logic within
an organization?
2. How difficult is it to ‘predict’ the
future in business?

1999 interview
 1

CASE
insight
Roll-Royce and TotalCare®

1. How dependent on other

forms of innovation was
the development of the
TotalCare programme?
2. What problems does a
company face when it
moves from selling a
product to a service?
Does this mean it has to
change its business
model?

TotalCare
 1

Types of innovation (2D)

Radical
product/service New-to-the-
Disruptive world
innovation innovation industries

Incremental
Incremental
product/service
innovation
innovation

Existing Market Market

Copy-cat
product/service development paradigm
shift

Existing Incrementally Radically

market new market new market
 1

Market paradigm shift

 Changes in established market conventions
associated with the creation of radically new
markets (e.g. low-cost airlines)
 Applies to stable markets geared up to
delivering established customer needs
 Opportunities arises from changes in
technologies, customer needs, supply
chains or just innovative thinking
 Usually causes market disruption
 1

Challenges to market paradigms

 Blue ocean strategy

– Finding unmet market needs, creating
uncontested market space & new demand
 Service dominant logic
– Implications of the idea that customers
buy the services that the product delivers

Ocean Lusch
 1

CASE
insight
Swatch

1. How difficult is it to change

the way you think about a
product or market?
2. What role might design
play in this

Manufacture
 1

Innovation intensity (2D)

In
High/

cr
ea in
Radical 

si ten
ng s
in ity
no
va
Degree/scale

tio
n
of innovation
 

Low/
Incremental

Occasional Frequent

Frequency of innovation
 
 1

Innovation intensity (3D)

Radical

Fast
Degree/ scale
of innovation o f
  e ed ion
Sp ovat
inn
Incremental  
Inf
req  
ue
nt
Fre
qu Fr
 
inn en eq
ue
o v cy nt
ati o
on f
 1

Innovation and risk (2D)

High/

In
Radical 

cr
ea
si
ng
ris
In co
Degree/scale

k
cr re
ea
of innovation

si com
ng
 

di ete
st
an nci
p

ce es
fr
om
Low/
Incremental

Low High

Newness of market
 
 1

Problems linking innovation to growth

 How do you measure innovation?

 Do you link it to growth of employment
or profits?
 What is the effect of ‘cycling’?
 Is innovation the cause of the growth?
 1

Innovation, size & industry structure

 SMEs significant in radical innovation

 Large firms have more resources
 SMEs thrive where economies of scale are
less important, particularly market niches
 SMEs less important in stable, mature, high-
concentration industries, particularly those
where efficiency is important
 2

CASE
insight
Astex Therapeutics

1. How important was the link

with the University of
Cambridge for Astex when it
started?
2. In the age of the internet,
how important is geographic
proximity to sources of
knowledge in encouraging
innovation? Explain.

Astex Products
 2

Activities

1. Draw up a research proposal to measure innovations

undertaken in an organization in the last year. Make sure
you cover details of the measurement scale you propose to
use (e.g. a copy of the questionnaire) & the methodology
you would use to collect the data
2. Find an organization that has introduced innovations over
the last year and undertake this study, plotting your results
on a diagram such as Figure 3.2(a) or (b)
3. Write a report explaining the commercial disruption caused
by the internet & mobile technologies over the last decade