Week 6 Entrepreneurship and Innovation

Week 6:
Entrepreneurship &
Innovation
Alessandro Ferrazza
Learning outcomes
Identify and
Understand Anticipate Evaluate Understand Anticipate Decide
respond
Understand Anticipate key Evaluate Understand Identify and Anticipate and Decide when
Entrepreneurshi issues facing opportunities closed and respond to key to some extent being a first-
p and entrepreneurs and choices open innovation influence the mover or an
Innovation in opportunity facing social innovation dilemmas diffusion (or imitator and
recognition, in entrepreneurs spread) of follower is most
making choices as they create innovations. appropriate in
during the new ventures innovation, and
entrepreneurial to address how an
process and in social incumbent
various stages problems. organisation
of growth, from should respond
start-up to exit. to innovative
challengers.
Entrepreneurship and innovation:
four major themes
Entrepreneurship
• Entrepreneurship is a process by which
individuals, teams or organisations identify and
exploit opportunities for new products or
services that satisfy a need in a market.
• Opportunity recognition: recognising an
opportunity (i.e. circumstances under which
products and services can satisfy a need in the
market or environment) is central for any form of
entrepreneurship.
Entrepreneurial opportunity recognition
Steps in an
entrepreneurial
process
Source: Adapted from B.R. Barringer and R.D. Ireland,

Entrepreneurship – Successfully launching new ventures,
4th edn, 2012, Pearson.
The entrepreneurial life cycle
progresses through four stages each
with key challenges:
• Start-up – sources of capital;
• Growth – transition to management;
• Maturity – retaining
commitment and
Entrepreneurial generating new growth;
life cycle • Exit – alternative ways of

releasing capital.
Social entrepreneurs are
individuals and groups who
create independent
Social organisations to mobilise ideas
entrepreneurship and resources to address social
problems, typically earning
revenues but on a not-for-profit
basis.
Innovation
•Innovation involves the
conversion of new knowledge
into a new product, process or
service and the putting of this
new product, process or service
into actual commercial use.
•Innovation is more complex
than invention (creating
something new) – putting the
invention into use can be the
most challenging part of the
process.
Technology push
or market pull
Innovation
dilemmas Product or process
(1 of 3) innovation
Open or closed
innovation
Technology push or market pull
• Technology push is the view that it is
the new knowledge created by
technologists or scientists that pushes
Innovation the innovation process (i.e. the
outcomes from R&D labs).
dilemmas • Market pull is the view that it is the
pull of users in the market that is
(2 of 3) responsible for innovation.
• ‘Lead users’ are of particular
importance. In
• contrast, ‘frugal innovation’ is also
important – sensitivity to the real
needs of poorer consumers (e.g. Tata’s
Nano car).
Product or
Innovation
process
dilemmas innovation
(3 of 3) Product innovation
relates to the final
Process innovation
relates to the way
product (or in which a product
service) to be sold, is produced and
especially with distributed,
regard to its especially with
features. regard to
improvements in
cost or reliability.
• New developing
industries favour product
innovations.
Implications • Maturing industries
of favour process
product/proces innovations.
• Small new entrants have
s innovation greatest opportunities in the
model early stages of an industry.
• Large incumbent firms have
advantages in later stages.
•Source: Adapted from J. Abernathy and W. Utterback, ‘A dynamic model of process and product
innovation’, Omega, vol. 3, no. 6 (1975), pp. 639–56, with permission from Elsevier.
Product
and
process
innovation
‘Closed’ innovation – the traditional
approach to
innovation, relying on the

organisation’s own internal resources –
its own laboratories and marketing
departments. Innovation is secretive,
organisations are anxious to protect
Innovatio intellectual property and avoid
competitors free-riding on their ideas.
n Open or
closed
dilemmas innovation
‘Open’ innovation involves the
deliberate import and export of
knowledge by an organisation in order
to accelerate and enhance its
innovation. Exchanging ideas openly is
seen as likely to produce better
products more quickly.
Open innovation
Open innovation is now being widely
adopted. For example:
• ‘Collaboratories’ – IBM has

established 10 worldwide joint
development ventures with other
companies and universities.
• Crowdsourcing – an organisation
broadcasts a specific problem to a
crowd of individuals or teams
often in tournaments with prizes
awarded to the best solution.
Open or closed
innovation
The balance between open and closed

innovation depends on:
• Competitive rivalry – if it is intense
closed innovation is better.
• ‘One-shot’ or continuous innovation
– open innovation is best where
innovation is continuous
(encouraging reciprocal behaviour).
• Complex and tight-linked
innovation – closed innovation is
best in order to avoid inconsistent
elements in development.
Diffusion is the process by which
Innovation innovations spread amongst users.
diffusion This can vary with respect to both
speed and extent.
Slide 10.28
Innovators
and First-mover advantage exists where an
organisation is better off than its
imitators competitors as a result of being first to
market with a new product, process or
service.
In theory, this creates an initial monopoly
position but there are also some
disadvantages.
Examples of first mover advantage
include Coca-Cola (in soft drinks) and
Hoover (in vacuum cleaners).
First-
mover
advantages
Late-mover
advantages
A fast second?
Costas Markides and Paul Geroski argue
that the most appropriate response to
innovation, especially radical innovation,
is often not to be a first-mover, but to be
a ‘fast second’– being one of the first to
imitate the original innovator.
Fast second companies may not literally

be the second company into the market,
but they dominate the second
generation of competitors (e.g. Amazon
Kindle).
What is a disruptive
innovation?
Disruptive innovation creates
substantial growth by offering a new
performance trajectory that, even if
initially inferior to the performance of
existing technologies, has the
potential to become markedly
superior.
•Hatten, Timothy S. (2015) Small business management:
Entrepreneurship and beyond. Cengage Learning, 2015.
Resources
•Mullins, John W. (2013) The new business road test: what
entrepreneurs and executives should do before launching a
lean start-up. 4th ed. Pearson.
Questions

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Week 6:

Source: Adapted from B.R. Barringer and R.D. Ireland,

life cycle • Exit – alternative ways of

innovation, relying on the

• ‘Collaboratories’ – IBM has

The balance between open and closed

Fast second companies may not literally

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