Innovation Strategies For Firms And Entrepreneurs (GEO32221)
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Lecture 1: introduction
As a firm you want to adapt your behavior to the respective stage where you are in. In a divergent
stage, different behavior is needed than in a convergent stage. Divergent behavior includes new
ideas, strategies. Convergent behavior is about exploitation, learning by testing, unitary leadership
and using existing networks.
Navigating ´the river’ safely, means that you also should out-compete other innovative companies.
You might not like what this means. But not every innovation can become a success. Even big
companies can fail because they bet on the wrong horse.
An innovation should be actively managed. ‘Innovation is the specific tool of entrepreneurs, the
means by which 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’.
Choice of strategy (& luck) are more important than industry:
-Choice of industry: 8,35%
-Choice of strategy: 46,4%
-Parent company: 0,8%
-Unexplained (e.g. luck): 44,5%
The price (for winning over another company) in classical business terms, is that you gain a sustained
competitive advantage, and that you make a lot of money. But for some this is not enough, since
they want to make the world a better place. However, most companies just want to make more
money. This can be done legally, using new innovation, but also illegally (or boarder line). For
instance uber booked fake rides at competitors. They also just started driving in cities without
permission hoping that the people would support them with legal cases against them.
In this course we will focus on legal strategies that can help companies to gain sustainable
competitive advantage.
Lecture 2: Incubation and startups
The resources startups want is not always what they need. With little effort they might find what
they need as well. This can also go through a supporting organization.
,Startups are young innovative enterprises. They often contribute to economic growth and help solve
societal challenges. They are also known as new technology-based firms, and they are an important
inspiration for this course. They are relatively small when they start and they do something new.
The difference between an entrepreneur and a startup is that an entrepreneur is the person (or
persons) behind a startup.
Business incubators are programs and organizations that primarily support new technology-based
startups. Others distinguish between incubators, accelerators, venture builders and some form of
supporting co-working spaces, incubator is a bit old-fashioned. They mostly do the same, the
difference is mostly marketing. They help the startups by supplying resources.
Resources are all assets, capabilities, organizational processes, firm attributes, information,
knowledge, etc. controlled by a firm that enable the firm to conceive of and implement strategies
that improve its efficiency and effectiveness. In the language of traditional strategic analysis, firm
resources are strengths that firms can use to conceive of and implement their strategies.
Resources help startups to survive, grow and compete. This is a list of resources an incubator can
provide.
It is not always clear how and if incubators help startups. The resources offered by the incubators are
sometimes of poor quality, or do not fit the needs. Startup entrepreneurs might not know what they
exactly need, so this could also be a reason why an incubator might not work.
The article of van Weele looks at which resources, provided by the incubator, do entrepreneurs and
incubator staff perceive as important, and why these perceptions differ. So it is really important for
the incubator to identify the needs of the startup, as well as explaining what is needed to them.
Often, it is initially thought that tangible resources (financial and physical capital) are the most
important, but later startups realize that intangible resources (social capital, knowledge) are way
more important. This aligns with the view of the incubator staff. This shows that experience can also
be very beneficial for startups, since they know better what resources and strategies are needed.
Resources and their quality did not always meet the needs of the startups. Startups are often focused
on technology. They are often “Unconsciously incompetent” (they don’t know how to do business,
and they don’t know they are bad at it), short term oriented and focused on day-to-day business
(they were focusing on developing the product, but don’t think about the next steps) and are
unwilling to leave their comfort zone.
The rich-versus-king dilemma: if you really want to be rich with a big company you have to work with
investors and give up a part of your power. So do you want to be king over a small kingdom, or rich
, over a big company, but give up control. (If you are an experienced entrepreneur with enough
money, you can be rich over a big company without giving up control to investors or other parties.
Inexperienced “incompetent” entrepreneurs have a strong intervention approach, with aggressive
coaching, mandatory participation, fixed mile stones and recruitment of additional entrepreneurs.
Experienced “competent” entrepreneurs use the Laissez-faire approach (free-market capitalism),
with demand driven support.
If a startup is aware of what they need, incubators/investors can have a loose approach. If they are
not aware of the resources they need, a stricter approach is needed.
Lecture 3: different types of innovation
The shortest way to separate product and process innovation is that product innovation focuses on
what is produced, and process innovation on how it is produced. A product innovation can be a new
or better product or product variety (can be both tangible and intangible). A process innovation
often refers to machines, but it can be both technological (so the machine) but also organizational.
A innovation can cause continuous small incremental changes: the incremental mode implies a more
step-by-step approach of gradually improving existing products or processes.
It can cause discontinuous radical innovations: change the entire order of things, making obsolete
the old ways and perhaps sending entire businesses into the ditch of history.
And it can cause massive shifts in some pervasive general purpose technology (GPT): this is
sometimes called ‘techno-economic paradigms’. With this a whole paradigm is shifted. It is an
innovation that helps other innovations and changes the fabric of society in fundamentally new ways.
An example of this is the internet or electricity.
You can distinguish product and process innovations based on the scope of the change. There are
changes at the level of the innovative product or process (technological characteristics, functions,
quality). Then there are changes induced by the innovation at the level of the innovating agent
(competencies, organizational structures, market position) and lastly changes induced by the
innovation throughout the value chain – for example, for users’ competencies, or supplier
involvement.
Besides radical and incremental, there are two other
types of innovations.
An architectural innovation is an innovation where
the ways in which components relate are
rearranged. The core components don’t change on
the other hand. (e.g. a motorcycle with 3 wheels, no
new components, but they work together in a new
way). A modular innovation is an innovation where
the core components in a design are overturned, but
the architecture is not. (e.g. electric engines in cars. This engine is a whole new component.
However, the car itself works the same way it would with a fuel engine).
According to Francis and Bessant, there are 4 dimensions of ‘innovation space’:
- Product – changes in the things (product/service) which an organization offers.
- Process – changes in the ways in which they are created and delivered.
- Position – changes in the context in which the products/services are introduced. (positional
innovations influence the meaning of the product in the eyes of the potential customer. E.g. you
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