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Entrepreneurship and Innovation

Advanced Strategy M2/MSc 2012-2013

Learning outcomes
Identify and respond to key innovation dilemmas, such as the relative emphases on the different natures, sources, and activities of innovation and the broad business model design. Anticipate and to some extent influence the diffusion of innovations. Decide when being a first-mover or follower is most appropriate in innovation, and how an incumbent organization should respond to innovative challengers.

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Learning outcomes
Introduce the entrepreneurial toolkit developed by SKEMA to guide individual and corporate entrepreneurship
ISMA 360 for effectual marketing of innovation The Business Model canvas The 13 slides Business Plan The art of pitching

0. What is innovation ?

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What is Innovation ?
Def_Innovation
The conversion of new knowledge into a new product, process or service and the putting of this new product, process or service into actual use (P. Trott, 2005) The implementation of a new or significantly improved product (good or service), or process, a new marketing method, or a new organizational method (Oslo Manual, OECD, 2005) The most efficient means for firms to support their strategic choices and achieve their strategic goals when facing new and changing competitive realities (Zahra, 1996) Internal change to get an intrinsic competitive advantage that also overturns the competitive advantage of other firms (Grant, 1991)

1. Innovation dilemmas

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1.1. Innovation dilemmas the sources

Technology push or market pull innovation ? Technology push is the view that it is the new knowledge created by technologists or scientists that pushes the innovation process. Market pull is the view that it is the pull of users in the market that is responsible for innovation. Lead users are of particular importance. Lead users early adopters mainstream clients

1.1. Innovation dilemmas the sources

Issues of technology push innovation
What are the core functions of the technology? Who will be interested by those functions? What is the strength of the value proposition? Who are the clients, the facilitators and competitors? What are the possible substitute technologies? Is the technology valuable and protectable? Is the technology a VRIN capability? i.e. can it generate a competitive advantage?

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1.1. Innovation dilemmas the sources

Technology push innovation
Spin-off from IMRA EUROPE SAS (Toyota research center) From car air-conditioning to food industry nebulization

1.1. Innovation dilemmas the sources

Technology push innovation

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1.1. Innovation dilemmas the sources

Technology push innovation

1.1. Innovation dilemmas the sources

Issues of market pull innovation
A problem is a potential source of a business opportunity. => Lets Right a Wrong !
Ex: Tele-radiology to handle the lack of radiologists in backcountry valleys

One can identify a business opportunity by looking at unsatisfied needs, nascent needs. => Beware client myopia that may not lead to innovation Trends in the society are favorable to identify business opportunities. Ex: the boom of (electric) bikes, the boom of home-services,

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1.1. Innovation dilemmas the sources

Issues of market pull innovation
The role of lead users and market scanning ! Some ex-ante early adopters help identifying opportunities. The point is: Who are they?

1.1. Innovation dilemmas the sources

Market pull innovation and societal trends
Recycling in sustainable and trendy !

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1.2. Innovation dilemmas the natures

Sustaining or disruptive innovation *
Sustaining innovation aims at continuously improving existing offering features for existing customers and markets. Sustaining innovation can be either incremental or radical. Disruptive innovation aims at proposing an offering with radically different characteristics to new markets or new users. Disruptive innovation potentially 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.
Christensen, 1997, the innovators dilemma

1.2. Innovation dilemmas the natures

Sustaining or disruptive innovation
Example of new users

Figure 9.4

Disruptive innovation

Source: Reprinted by permission of Harvard Business School Press. From The Innovators Solution by C. Christensen and M.E. Raynor. Boston, MA 2003. Copyright 2003 by the Harvard Business School Publishing Corporation. All rights reserved

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1.2. Innovation dilemmas the natures

Solving the dilemma of disruptive innovation
Incumbents follow two policies to be responsive to potentially disruptive innovations: Develop a portfolio of real options (limited investments with open opportunities for the future small R&D team, start-up acquisition). The principle: fail fast, fail cheap, try again Develop new venture units small, innovative businesses with relative autonomy : independent BU, Spin-Offs

1.3. Innovation dilemmas the natures

Closed or open innovation
Closed innovation the traditional approach to innovation relying on the organisations own internal resources its own laboratories and marketing departments. Innovation is secretive, anxious to protect intellectual property and avoid competitors free-riding on ideas. 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.

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1.4. Innovation dilemmas the activities

Technological innovation
Product innovation
The introduction of a good or service that is new or significantly improved with respect to its characteristics or intended uses aiming at : sustaining the loyalty of existing customers in existing markets thanks to novelty and differentiation taking advantage of market opportunities providing access to new clients

Process innovation
A new or significantly improved production or delivery method aiming at decreasing unit costs of production or delivery increasing quality of existing products

1.4. Innovation dilemmas the activities

Industry cycle: product / process innovation
Shake-out Dominant design phase no entering firms Less entering firms Many exits Decline phase

Many entering firms

Few entering firms Few entering firms Start of a new industry cycle: creative destruction

Figure 9.2

Product and process innovation

Source: Adapted from J. Abernathy and W. Utterback, A dynamic model of process and product innovation, Omega, vol. 3, no. 6 (1975), pp. 14260

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1.4. Innovation dilemmas the activities

Technological innovation and industry life cycle : product / process
New developing industries favour product innovation. Maturing industries favour process innovation (power of clients => scale economies). Small new entrants have greatest opportunities in early stages of an industry : no dominant design yet. Large incumbent firms have advantage in later stages (sunk costs of process innovation !)

1.4. Innovation dilemmas the activities

Marketing innovation
New marketing method involving significant changes in product design or packaging, product placement, product promotion or pricing (4Ps) aiming at : better addressing customer needs opening-up new markets newly positioning a firms product on the market

Organizational innovation
New organizational method in the firms business practices, workplace organization or external relations aiming at : reducing administrative or transaction costs, improving workplace satisfaction (and thus labour productivity), gaining access to non-tradable assets (external knowledge) reducing costs of supplies

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2. The diffusion of Innovation

2.1. Diffusion of innovation determinants

Determinants of innovation diffusion supply side
Degree of improvement provided (overall performance) Degree of novelty ( for lead users, early adopters, mainstream clients ?) Degree of compatibility (market needs, value network, ) Degree of complexity (product features, marketing, ) Experimentation (possibility to test the innovation, ) Management of relationships with the value network of the market

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2.1. Diffusion of innovation determinants

Determinants of innovation diffusion demand side Market awareness (promotional efforts, opinion leaders, ) Network effects (reaching a critical mass of users) Customer innovativeness (from lead users, early adopters, to mainstream clients ?)

2.2. Diffusion of innovation the S-curve

Figure 9.3

The diffusion S-curve

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3. Innovators and Followers

3. Innovators and followers First-mover advantages

Experience curve benefits Scale benefits Pre-emption of scarce resources Buyer switching costs

Reputation

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3. Innovators and followers Late-mover (but fast-followers) advantages

Free-riding imitating pioneers strategies but more cheaply

Learning from the mistakes made by pioneers

Identification and improvement of best practices (see strategic groups theory) => Analyzer profiles (see Miles & Snow typology)

4. SKEMA Entrepreneurial toolkit

go to CROSSKNOWLEDGE !

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