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Teaching Note: Case 6 – Backers Beware: Kickstarter Is Not A Store
Case Objectives
1. To understand the importance of strategic leadership and managing innovation, especially
when pursing an entrepreneurial growth strategy.
See the table below to determine where to use this case:
NOTE: There are both PRIMARY and Secondary chapters that can be used for this case. The
Chapter Use Key Concepts Additional Readings
PRIMARY
CONCEPTS
8: Entrepreneurial
Strategies
Opportunity recognition
12: Managing
Innovation
Innovation; scope of
innovation;
NOTE additional articles, web links.
See possible additional assigned
11. Strategic
Leadership
Setting a direction NOTE additional reading, web links.
SECONDARY
Concept
Strategic management;
NOTE additional reading, web links.
2: External
Industry competition
NOTE additional reading, web links,
Case Synopsis
By 2015 Kickstarter had become a popular middleman between the entrepreneur and the capital
needed to turn an idea into a reality. The platform was one of the first to introduce the concept of
crowd funding; raising capital from the general public in small denominations to fund creative
However, Kickstarter was having trouble pleasing both project creators and backers alike:
procedures had to be refined, rules and policies established, and all parties needed better
communication in order to clear up misunderstandings. Kickstarter’s founders appeared to focus
Kickstarter’s founders continued to try to explain to backers that they had no control over the
donated funds once those funds were in the hands of the project creator/developer, and therefore
couldn’t issue refunds. Kickstarter continued to emphasize that the value was in participating in
Teaching Plan
Kickstarter is a good example of how entrepreneurial firms need a good understanding of
industry and external environmental factors when crafting strategy. This case can be used toward
the end of the semester to review strategy formulation and implementation, especially how
strategic leadership is necessary in order to manage innovation when the industry is still under
development.
ICEBREAKER
This case can start with an icebreaker. Starting from the perspective of a customer may make it
easier for students to transition to a strategic analysis. It might be interesting to have students
visit the Kickstarter website at http://www.kickstarter.com/ and ask the following:
Would you invest in a Kickstarter project? Why or why not? What might entice you into making
this type of investment or donation to a creative project?
Some students may have already known about certain Kickstarter projects. Expand upon the
Summary of Discussion Questions
Here is a list of the suggested discussion questions. You can decide which questions to assign,
and also which additional readings or exercises to include to augment each discussion. Refer
back to the Case Objectives Table to identify any additional readings and/or exercises so they can
be assigned in advance.
1. PRIMARY QUESTIONS: What makes Kickstarter entrepreneurial, and how is this
strategy working for them?
2. What approach does Kickstarter’s leadership appear to have regarding innovation, and
how should this be managed?
3. SECONDARY QUESTIONS: What is it about the initial strategic analysis process that
helps a firm identify a business opportunity? How might the external environment affect
Kickstarter’s entrepreneurial strategy?
Discussion Questions and Responses
1. What makes Kickstarter entrepreneurial, and how is this strategy working for them?
Referencing Chapter 8: Entrepreneurial Strategy & Competitive Dynamics
New ventures often face unique strategic challenges if they’re going to survive and grow.
Whether the firm is an entrepreneurial startup, a small business, or an existing business entering
a market or industry for the first time, it must rely on sound strategic principles to be successful.
Entrepreneurial activity influences a firm’s strategic priorities and intensifies the rivalry among
Entrepreneurship involves the creation of new value by an existing organization or new venture
For an entrepreneurial venture to create new value, three factors must be present—an
entrepreneurial opportunity, the resources to pursue the opportunity, and an entrepreneur or
entrepreneurial team willing and able to undertake the opportunity. Entrepreneurs must go
Launching a competitive venture requires a special kind of leadership involving courage, belief
in one’s convictions, and having the energy to work hard. Three characteristics of entrepreneurial
leaders are:
●Vision
To achieve excellence, venture founders must understand the customer, provide quality products
Resources are an essential component of a successful entrepreneurial launch. The most Important
resource is usually money, but human resources, strong and skilled management, is also an
Entrepreneurs also need to understand the concept of opportunity recognition: the process of
discovering and evaluating changes in the business environment, such as a new technology,
socio-cultural trends, or shifts in consumer demand, that can be exploited. Changes in the
Certainly, Kickstarter’s founders had vision, dedication and drive, and they appeared to
understand their customer (at least the project creator/developer). They had provided a quality
Regarding resources, Kickstarter had gotten a good start with $10 million financing from the
founders of Twitter, Vimeo, Meetup and Flickr, among others. Obviously, these entrepreneurs
Kickstarter’s founders appeared to have clearly identified the opportunity, the changes in the
business environment that allowed their idea to emerge. Certainly the “customer demand” had
been there (entrepreneurs have existed for decades), but a mechanism for providing small
Part of the value in an “investment” was being able to see a significant return. Kickstarter’s
founders had been clear that they were not interested in providing a conduit for investors to
become equity holders in the projects they funded. Now that more competition was entering the
2. What approach does Kickstarter’s leadership appear to have regarding innovation, and
how should this be managed?
Referencing Chapter 12: Managing Innovation and Fostering Corporate Entrepreneurship
Kickstarter’s major challenge was to create a sustainable competitive advantage in the
marketplace that is not only unique and valuable but also difficult for competitors to copy or
Innovation involves using new knowledge to transform organizational processes or create
commercially viable products and services using the latest technology, experimentation, creative
insights, and information from competitors. However it comes about, innovation occurs when
Before proceeding, firms must first define the scope of the innovation efforts, and must ensure
A strategic envelope defines the range of acceptable projects. Strategic envelope means a firm-
specific view of innovation that defines how a firm can create new knowledge and learn from an
innovation initiative even if the project fails. The strategic envelope also gives direction to a
firm’s innovation efforts, which helps separate seeds from weeds and builds internal capabilities.
One way to determine which projects to work on is to focus on a common technology. Then,
In defining the innovation scope, a firm should answer several questions:
●How much will the innovation cost?
●How likely is it to actually become commercially viable?
●How much value will it add; that is, what will it be worth if it works?
●What will be learned if it does not pan out?
Some of challenges of innovation involve choosing when and how to continue to innovate, the
scope of future innovation and the pace, as well as whether or not to collaborate with innovation
Kickstarter’s founders certainly had vision, dedication, and drive. They appeared to have created
an organization with significant resources: they had attracted legitimate entrepreneurs in several
Their vision appeared to have attracted both human and social capital, from the apparently
dedicated employees to the support of institutions such as the Sundance Film Festival. If artistic
In addition, Kickstarter founders appeared to be willing to engage in self-assessment – what were
The major problem appeared to be the scope of future innovation. Now that Kickstarter had
implemented new rules, especially ones limiting the “gadget makers” in what they could present
Was that a wise choice? Would investments in true “art” projects be lucrative enough to keep a
For advanced students: the instructor might want to assign the 1996 article by Lumplin & Dess,
which gives more information about the entrepreneurial orientation: in implementing an
entrepreneurial strategy, it helps if leadership can embrace the entrepreneurial orientation –
Referencing Chapter 11: Strategic Leadership
The concept of leadership involves the process of transforming organizations from what they are
to what the leader would have them become. See Chapter 11, Exhibit 11.1. This involves:
●Setting a direction
Leaders need to set the direction for the organization by continually scanning the environment to
develop knowledge of all stakeholders, and knowledge of salient environmental trends and
Leaders are responsible for designing the organization: a strategic leadership activity of building
structures, teams, systems, and organizational processes that facilitate the implementation of the
Difficulties in implementing the leader’s vision and strategies include a lack of understanding of
responsibility and accountability among managers, reward systems that do not motivate
Leaders play a key role in changing, developing, and sustaining an organization’s culture. An
excellent and ethical organizational culture is an organizational culture focused on core
competencies and high ethical standards. Organizational culture can be an effective means of
organizational control. In nurturing a culture dedicated to excellence and ethical behavior,
Everything the Kickstarter founders had done to the date of the end of the case pointed to a clear
direction, and a culture dedicated to excellence and ethical behavior. The major question still
unanswered was whether the organization was designed in such a way as to facilitate the
