C H A P T E R 9
INNOVATION AND ENTREPRENEURSHIP
Introduction
In this edition, our treatment of innovation has discussed more about open innovation,
something that is becoming more widespread with the harnessing of web communities and
associated with the influential writings of Henry Chesbrough. The second part of the chapter
also has more material on entrepreneurial strategic options.
Illustration 9.1
Frugal sanitary towels
1. Identify the various features of Murugananthams approach that make his sanitary towel
business a typical or not so typical frugal innovation.
Typical frugal innovation? On the one hand, there is a great deal that is typical about frugal
innovation in Murugananthams approach. He is clearly very low budget in terms of
2. Could a large company such as Procter & Gamble imitate this strategy?
Procter & Gamble imitation: At first glance, it should be easy for P&G to imitate this strategy,
as the manufacturing technology is not complex. However, Murugananthams business model
Illustration 9.2
The disruptive cloud
1. Why might some groups be apprehensive about the Cloud Computing Era?
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Apprehension about the cloud: the cloud promises to be highly disruptive in the Christensen
sense of moving from one trajectory to another, with considerable disruption and possible
redundancy for existing players (see Section 9.4.3). In particular, the cloud threatens to
2. What are the advantages of a visual roadmap of this kind? What are the limitations to this
visual approach?
Visual roadmaps: there is a considerable advantage in the visual nature of roadmaps; they
offer a clear and memorable summary of the past and future. Such roadmaps are easy to
Illustration 9.3
Blockbusters busted business model
This is a useful illustration to illustrate the role of business-model innovation in strategy. For
Blockbuster, most of these innovations were what could be classified as disruptive innovations
(Section 9.4.3), fundamentally challenging its future prospects.
1. Compare the pros and cons of the various business models for movie consumption.
The first question asks students to compare the pros and cons of the various business models
2. What potential competitive advantages did Blockbuster have as a company as the new
business models emerged in the last decade or so?
Blockbuster did have several potential competitive advantages and students might have
Illustration 9.4
Nearly billionaires
Hopefully readers will feel sympathetic with these two fellow-students who nearly struck very
rich. But their mistakes are salutary.
1. What do you learn from the experience of Goldberg and Ting which could be useful to
launching a new enterprise?
Learning from the Goldberg and Ting experience: the primary thing to learn is the danger of
getting fixated by the technology, a common problem for engineering or scientific
2. Are there any unmet needs in your community, at college or elsewhere, that could be turned
into a business opportunity?
Unmet needs in your community: almost all universities now have entrepreneurship
Illustration 9.5
Sociable rats in search of a model
1. What are the advantages and disadvantages of a social enterprise approach in this kind of
domain?
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2. What would be your advice to Bart Weetjens as he searches for a secure long-term business
model?
With regard to the first question, the advantages of the social enterprise approach include:
The disadvantages on the other hand are:
difficulty of sustaining momentum over time;
Key Debate
Are large firms better innovators than small firms?
This key debate is designed to bring some evidence to the question of innovation advantage,
which tends to attract romantic notions about the inherent innovativeness of small firms and
entrepreneurs. Large firms are shown to have at least three substantial advantages, around risk,
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Video assignment
Alyssa Smith
Alyssa Smith is a young British jewellery designer who launched her business in 2010. The
video is a frank account of the issues faced in launching the business, and the issues that have
arisen as the business has grown. The issues raised are relevant to Sections 9.5.1 and 9.5.3.
1. Much has been written on the characteristics of successful entrepreneurs and Alyssa Smiths
experience seems to confirm much of this. During the interview she talks about needing to
be innovative, business minded, being driven and having to be very thick skinned. In her
particular business being creative is important, but she also talks about the need for structure
(by this she is stressing the importance of being organised). The literature on small
2. Building entrepreneurial relationships is covered in Section 9.5.3 and it is something that
Alyssa Smith refers to. In her case she explains the importance of having a support network
of like minded people and friends. She is also active in the local college where she acts as a
Assignment 9.1
New product or service
This question refers to the four introductory dilemmas of Section 9.2 and will typically require
no more than some basic research (for those without easy access to proprietary information
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Assignment 9.2
Web traffic trends
This question addresses the issue of diffusion, as in Section 9.3.2. The research should be easy
for students on alexa.com.
You should ask students to look out for tipping points, plateau points and tripping points, and
Assignment 9.3
Incumbent response
Again, this should involve no more than basic research via the same kinds of sources as in
Assignment 9.4
Entrepreneurial life cycle
As often with textbook models, reality will not fit perfectly and there will be room for different
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Assignment 9.5
Social entrepreneurship
Students are increasingly interested in social enterprise. Useful websites with many inspiring
Integrative assignment 9.6
Strategic plan
Given student interest in entrepreneurship today, this should be a motivating assignment for
Case Example
Rovio entertainment
This case should be attractive as involving a product-type that almost all students will be
familiar with and offering an inspiring model to the entrepreneurially ambitious. There are also
very real issues about family relationships (the Hed father and son) and if and when to cash-
out (the Zynga offer).
1. What are the advantages and disadvantages of Rovios business model?
In some respects, Rovios business model is conventional for its sector. Section 9.2.4
introduces the business model concept, distinguishing both the product and the selling sides.
Rovios development of the Angry Birds games is quite similar to that of many other games
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The advantage of Rovios business model then is that it capitalises on the immediate
success of Angry Birds to create a raft of more stable revenue streams from outside the
mobile games industry itself. There is the prospect of creating an enduring and diversified
business here, just like Disney did, building from its original movies.
However, there are disadvantages. Rovio faces all the usual challenges of diversification
2. What strategy might Zynga have pursued with Rovio if it had succeeded in its acquisition?
This is of course a speculative question, but turns the focus back on to Rovios business
model and its motivation.
Zynga is already a large-scale company with many games in its portfolio, though