978-1259278211 Case 6 Solution Manual Part 1

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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