Lecture notes, lecture Complete - Entrepreneuship and innovation PDF

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Entrepreneuship and Innovation...

Description

Entrepreneuship

Innovation(

Know(how( to(

Strategy(

Intrapreneurship(

VALUE(

Innovation - Effective ways of creating business value Know how to - Applied knowledge to extend human capacity Intrapreneurship - How opportunities to create value are identified, evaluated & exploited Strategy - Intended & emergent initiatives to use resources to enhance performance

Create and Manage

Innovation(

Creation(

Management(

needs(combination(of(creativity(&(management(

needs((technical(competence(

needs((technical(affinity(

Innovation and Entrapreneurship

needs(innovation(+(execution(

needs(collaboration(and(discipline( Entrapreneurship( best(performed(by(multi(skilled( team(

The Entrepreneurial Process

Responding(to( opportunities(in( context(

Managing( business/( company(

Finding( out(about( market(

Raising( financial(/( social(capital(

Effective( planning( (

Risk( management (

What entrepreneurs do -

they do not predict they control forms partnerships limits risk, limits loss take surprises positively

Characteristics of Intra and entrepreneurial leadership -

Embrace change Innovative Strategy Drive Allow failure Opportunity seeking Relationship building Build people Team player Take measured risk Question the status quo Not controlling Have vision Resilient & persistent Clarifier of ambiguity Rapid transferers of knowledge Confidence builder

Leaders -

realistic, credible, attractive inspiring, motivational, aspirational

Finding( required( resources((

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Strategic thinkers Strategic reflectors Strategic actors Strategic learners Generators of respect & trust self – awareness self – management social awareness social skills

Effectual Thinking = Entrepreneurial Thinking -

Effectuation = A thinking framework = A set of heuristics = Doing the do-able = How to get sellable products and services established ≠ A system to tell you what to do ≠ An algorithm ≠ “Not planning” ≠ A way to launch an entire business

Principles of Effectuation 1) The Bird in hand principle : Start with what you have Who I am– my traits, tastes and abilities What I know – my education, training, expertise, and experience Who I know – my social and professional networks 2) The affordable loss principle: Risk little, fail cheap – but LEARN focus on the downside risk limit risk by understanding what they can afford to lose at each step, instead of seeking large all-or- nothing opportunities choose goals and actions where there is upside even if the downside ends up happening entrepreneurs tend to find ways to achieve the objective with minimum expenditure of resources such as time, effort, and money In the extreme case, the affordable loss principle translates into the zero resources to market principle entrepreneurs do not tie themselves to any theorized or pre-conceived “market” or strategic universe for their idea. they open themselves to surprises as to which market or markets they will eventually end up building their business in or even which new markets they will end up creating.

3) Crazy quilt principle: Form partnerships Focus on building partnerships before doing a systematic competitive analysis Ideal beginning for a successful startup would be the induction of customers into strategic partnerships 4) The lemonade principle: Leverage surprises forms partnerships ability to turn the unexpected into the profitable invite the surprise factor instead of making “what-if” scenarios to deal with worst-case scenarios, experts interpret “bad” news and surprises as potential clues to create new markets 5) The pilot in the plane: Apply non-predictive control control v predict know their actions will result in the desired outcomes, by focusing on activities within their control in the belief that the future is neither found nor predicted, but rather mad Casual and Effective Reasoning

Causal reasoning(

Effectual reasoning(

To the extent that we can predict the future, we can control it.(

To the extent that we can control the future, we do not need to predict it.(

Creating the future -

The future is not discovered but created Being in a market that can be predicted is not always such a good idea, since there will always be someone smarter and with deeper pockets who will predict it better Being in an unpredictable market means that the market can be shaped through the decisions and actions of entrepreneurs working in conjunction with pre-committed stakeholders and customer-partners.

Principles of effectual knowledge 1. Opportunities can be made 2. Market creation could be the result of Murphy’s law Characteristics of Successful Entrepreneur -

Have a sound knowledge of their marketplace Have a sound knowledge of their competition Plan and execute their plans

Failures • Inadequate Pricing • Insufficient start-up capital • Failure to look at industry norms • Lack of focus • Inadequate market research • Failure to segment market Theories Main theoretical approaches to entrepreneurship : 1. Economics perspectives (leading from one theoretical strand to contemporary finance views) - Most developed scholarly approach with the longest history 2. Cognitive views seek to understand personalities & behaviour of entrepreneurs & actions - Psychology-based 3. OB view based on developing human resources - Organizations-based perspective borrowed from OB literature, specifically the resource-based view and dynamic capabilities Entrepreneurs evolution Entrepreneurs are innovators who bring together people & knowledge to change people’s lives in some way by: -

Developing & articulating ideas through a written business plan that communicates with external stakeholders, & by Changing the “rules of the game” in their industry by introducing new products/services/materials/organizing methods

Entrepreneurship = innovation in the way that existing ideas are applied in new ways (“incremental” innovation), and not just about scientific inventions = applying idea(s) in a way that improves people’s lives

Cognitive Theories of Entrepreneurship - Cognition = process of thinking based on an individual’s own social experiences, reading/learning -

“Entrepreneurial cognition” is a process of how entrepreneurs behave and act based on their own life experiences

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Many “cognitive” theories are based on understanding: o Traits approach = Why people choose to become entrepreneurs o Cognitive approach = How entrepreneurs think

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Traits approach = how far entrepreneurs have unique, natural personal-psychological characteristics

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As cognitive processes may be learnt, cognitive research has practical social implications- for a class of students

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Four main perspectives of cognitive research: o Heuristics and biases o Self-perception o Risk perception o Information cost models

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Intrinsic motivation - doing something for its own sake Extrinsic motivation - reward-driven behaviour- drives new venture creation Information Cost models = as information is key to entrepreneurship, focus on developing business intelligence to generate entrepreneurial opportunities Real Options approach suggests how entrepreneurs respond to new information by making investments that create real options

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Organizational Theories of Entrepreneurship Organization theories involve developing innovative organization culture that enables knowledge management through routines and capabilities. Organizational routines : • • • •

Regular & predictable Collective, social & tacit Guide cognition, behaviour & performance Promise to bridge economic & cognition theories with management practices: “The way we do things here”

Dynamic Capabilities Three key sources of dynamic capabilities:

• • •

Firm’s Position- technologies, processes & products compared with competitors Paths open to the firm, given its competencies & emerging opportunities Processes to integrate & exploit competencies within/between firms

Entrepreneur and Innovation Process 5 phases: • Searching & scanning internal & external environments (In) • Filtering & selecting opportunities (IE) • Technical, financial & market resourcing (E) • Commercializing- market diffusion, service contracts (E) • Reviewing & learning new knowledge (In) Entrepreneur and Innovation Strategy Four factors influence firm’s ability to create value through innovation : 1. National system of innovation in which a firm is embedded 2. Power and market position within the international value chain 3. Firm’s capability and processes, comprising research, design, development, production, marketing, and distribution. 4. Ability to identify & exploit internal + external sources of innovation Key demands : • To cope with environmental complexity & uncertainty • To develop firm-specific knowledge & capacity to exploit it, & • To create organizational structures & processes to manage trade-offs between specialized & broad knowledge. Types of entrepreneurial firms Small and large firms/organizations at all stages of conception/development : incubating ventures, proprietary organizations, public & private organizations, State-owned statutory boards, not-for-profit (usually known as “charitable”) organizations, “ethnic minority” businesses, females-for-females businesses.

Business Model Business Model Components -

Business concept = defines strategy Capabilities = defines resources needed to execute strategy

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A high-performing organization returns value to all stakeholders Revenue Model = based on sales, fees of many kinds Cost Model based on = cost to acquire people, advertising, material & supplies, R&D, infrastructure Asset Model based on = financial assets, property, plant & equipment, securities, real estate, relationships, brand, knowledge & expertise, agility and responsiveness, intellectual property, goodwill

What is Business Model?

Customer segments(

Value proposition(

Distribution channels(

Customer relationships(

- groups of customers with distinct characteristics - List the customer groups we are serving. regroup them in terms of different needs and ways of reaching them or as to profitability

- products and services that satisfy our customer segments’ needs - Identify the value you create for each distinct customer segment by describing the bundle of products and services you offer them

- channels we communicate with our customers and through which we offer our value propositions - Identify the channels through which we offer our value propositions to each customer segment - types of relationships we entertain with each customer segment -(Identify(which(types(of(relationships(you(have( built(and(which(

Revenue streams(

- streams through which we earn our revenues from our customers for value creating and customer facing activities -(Identify(which(types(of(revenue(streams(we(earn( from(each(of(our(customer(segments(and(value(

Key resources(

- key resources on which our business model is built -(Identify(the(key(tangible(and(intangible(resources( which(are(the(

Key activities(

Partner network(

cost structure(

- most important activities performed to implement our business model -(Identify(which(key(activities(we(cover(in(our( business(model( - partners and suppliers we work with -(Outline(with(which(partners(and(suppliers(we( work(to(implement(our(business(model(

- costs we incur to run our business model - Identify our most important cost positions resulting from our business model

Describing Business Model -

Set-up a team from different departments with diverse views Apply an joint definition of the business model Get the team to draw a clear picture of how your current business model looks

Assessing Business Model -

Drill down on every described building block and analyze them. Flag strengths and opportunities Flag weaknesses and threats Give overall conclusion on the evaluation of your business model

Improving Business Model -

Build on the conclusion Brainstorm freely on improvement Implement ideas into feasible projects and form an improved business model...