Week 10 - 2020

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Week 10

ENTREPRENEURSHIP
TECHNOLOGY & INNOVATION
Last week

 Corporate Governance
 Definition
 Agency problems
 Internal governance mechanisms
 Martha Stewart Case
Agenda

 Entrepreneurship
 Definition
 Strategic entrepreneurship vs corporate entrepreneurship
 Technology & Innovation
 Incremental innovation & radical innovation
 Ambidexterity
 How to increase innovations?
 Amazon
Entrepreneurship

 Definition – the process by which individuals, teams, or firms identify


and pursue entrepreneurial opportunities without being immediately
constrained by the resources they currently control.
 Definition of corporate entrepreneurship
 Difference between corporate venturing and strategic entrepreneurship
 Corporate venturing – addition of new business to the firm
 Strategic entrepreneurship – highly consequential innovations that are adopted in
the firm’s pursuit of competitive advantage
 Strategic renewal, business model reconstruction, domain redefinition, organizational
rejuvenation
Innovation

 Definition: 3 types of innovative activities (by Schumpeter)


 Invention: creating or developing a new product or process idea
 Innovation: creating a commercial product from invention
 Imitation: adoption of innovation by a group of similar firms
 Incremental Innovation and Radical Innovation
 Incremental innovations: they build on existing knowledge bases and
provide small improvements in the current product lines.
 Radical innovations: they provide significant technological breakthroughs
and create new knowledge.
 Relationship with autonomous strategic behavior (bottom-up process) and
induced strategic behavior (top-down process)
Ambidexterity

 Exploitation and Exploration


 Exploitation: learning gained via local search, experiential refinement,
and selection and reuse of existing routines (Baum, Li, and Usher, 2000) /
Improvements in existing components and build on the existing
technological trajectory (Benner & Tushman, 2002)
 Exploration: learning gained through processes of concerted variation,
planned experimentation, and play (Baum, Li, and Usher, 2000) / a shift
to a different technological trajectory (Benner & Tushman, 2002)
 Ambidexterity
 Any challenges to achieve ambidexterity?
 How can firms achieve ambidexterity?
Sequential Ambidexterity

exploration

exploitation

t t+1 t+2 t+3 t+4 time


How Do Firms Create
Innovation?
 Internal corporate venturing (internal innovation)
 Internal R&D, internal corporate venture (cf. external startup)
 Xerox Technology Ventures (XTV) (http://hbswk.hbs.edu/item/xtv-xeroxs-attempted-
recovery-from-fumbling-the-future)
 Innovation through cooperative strategies
 Any challenges?
 Innovation through acquisitions
 Any challenges?
 Intel’s acquisition of Mobileye(https://www.youtube.com/watch?v=80sj-5qDI88)
 Corporate venture capital
 Financial objective vs. strategic objective
 Any challenges?
 Google Ventures’ investment in Uber
 https://www.cbinsights.com/blog/corporate-venture-capital-active-2014/
 Any other ways?
Who Wins in Innovation, the Big or
the Small?

 Can a big company be innovative like a start-up?


 Advantages of big firms
 Problems of big firms
 Advantages of small entrepreneurial firms
 Problems of small entrepreneurial firms
 How do big firms innovate?
 https://www.forbes.com/innovative-companies/list/#tab:rank
 https://www.youtube.com/watch?v=ov6N5wnQ5IE
 (optional) https://www.youtube.com/watch?v=zS3VBCYDfJc
 (optional) https://www.youtube.com/watch?v=6pm1bbLMqZE
Amazon
Backgrounds

 How Amazon started to compete in the tablet


market from the perspective of its founder Jeff Bezos
 the strategic entrepreneurship process
 The Amazon Kindle was launched in 2007 and went
through many product development phases
 Bezos believed that the e-book ecosystems can
bring Amazon many potential revenue streams
Kindle Strategy

 Broad market & lowest cost possible


 to offer relative standardized products with features acceptable to most
customers at the lowest competitive price
 In order to remain a cost leader, Amazon has employed process
innovations that facilitate extremely efficient production and distribution
methods
 Kindle device cost a lot in R&D and many efforts in terms of bringing
in publishers to convert their books to e-books
 a Kindle device was sold at a profit margin of barely 5%.
 Amazon believes that once a customer has a Kindle device, the
device will become a tool for brining in the customer into Amazon’s
ecosystem of content
Five Forces to Support Amazon’s
Cost Leadership
 The threats of new entrants: The threat is high because Amazon usually is the leader
in innovation and also the first mover in many products. For example, soon after
Kindle was introduced, Barnes & Noble also came out with a similar product called
the Nook. Apple also released the iPad, which was proven to be very successful.
 The power of suppliers: Because Amazon is a very big online retailer, suppliers do
not have very much bargaining power. In fact, if a supplier cannot offer a
competitive price, it will eventually be driven out of the competition.
 The power of buyers: The customer base for Amazon demands lowest price, and
most of them know how to shop online for the best price. Thus, Amazon has to
remain a cost leader in order to keep its customers.
 Threat of substitutes: There are many substitutes for the products that Amazon
offers. For example, the Nook Tablets and the iPads are substitutes for the Kindle
devices.
 The intensity of rivalry : It is hard for other companies to compete with Amazon
because of Amazon’s size and efficient distribution methods. Rivals are usually
hesitant to compete on basis of price.
 In order for Amazon to remain a cost leader, it will need to constantly improve its
products and services, and come out with newest technology and solutions; at the
same time, Amazon has to offer all these at a very competitive price
Competitive Rivalry

 Kindle Fire’s direct competitors are the Nook Tablets by B&N, and the iPad 2 by
Apple.
 The iPad 2 is bigger than a Kindle Fire (in terms of screen size) but thinner than a Kindle
Fire (though also heavier). A Kindle Fire targets media junkies, children and mobile
gamers, and higher education
 The Kindle Fire against the iPad:
 The iPad: first mover in the tablet market/ royal customer base because of its differentiation
business-level strategy. /simple but yet sleek design, and perfection to details. /serving as a
multipurpose/ 3 to 4 times more expensive than a Kindle Fire.
 If Amazon can secure its content offerings, for example, making the Amazon TV selections
significantly larger than its competitors, the Kindle Fire may be able to take away Apple’s iPad
market because of its substantially lower price.
 The Kindle Fire against the Nook:
 Similar in terms of the hardware specifications with Kindle. / B&N’s heavy promotions  the profit
loss of B&N /offer different user experiences: Amazon’s focus was on its own content and
services, whereas B&N focused on providing its own text-based content and allowing third
parties to deliver the rest.
 If Amazon can continue to offer a full package, including a better browsing experiences and
cloud-based services, the Kindle Fire can remain ahead of the competition against the Nook.
Innovation

 Strategic entrepreneurship is composed of entrepreneurial actions (exploiting found


opportunities in the external environment) through a strategic perspective (innovation
efforts). The key is to identify opportunities to exploit through innovations and determine
the best way to manage the firm’s innovation efforts
 Risk-taking: Risk taker CEO in the world of e-commerce.
 First, the first online retailers to offer Amazon Prime express shipping subscription services. /Amazon
Prime can enjoy unlimited 2-day express shipping.
 Bezos founded Lab126 hardware development group, which developed the e-reader, the Kindle.
High R&D cost, a lot of time and money.
 Committed to innovation: Invention is in Amazon’s DNA.
 Under his leadership, Amazon has gone from a small online retailer to the world’s largest bookstore
by 1999, and by 2011, controlled 10 percent of the North American e-commerce market.
 The forefront of the e-commerce market by pushing out new products and services, such as cloud-
based services and the Kindle device. Amazon also promotes a “service-oriented architecture” the
“fundamental building abstraction” for all Amazon technologies. This focus on internal technology
development had led to a culture of innovation for Amazon.
 Proactive in creating opportunities:
 Amazon has a long history of investing in emerging opportunities years ahead of revenues or
profitability.
Future Direction

 Features:
 7-inch, color LCD touchscreen, a Wi-Fi radio, a dual-core processor, an 8 GB of internal storage, and free cloud storage
for content purchased from Amazon. It also featured Amazon Silk, a cloud-accelerated web browser that can handle
the computation necessary to render webpages in the cloud
 Tens of thousands of preapproved apps and games available for purchase and download through the Amazon app
market
 Movies, TV shows, songs, and magazines available for streaming or download
 (Prime subscribers received streaming access to more than 13,000 movies and TV shows for free)

 The Kindle Fire came with a free one-month subscription to Amazon Prime to encourage a customer’s integration into
the Amazon ecosystem of content, goods, and services

 Target customer: Media Junkies, Children and Mobile Gamers, Higher Education
 Challenging leading competitors: Amazon’s leading competitor, Apple, is known to bringing the best personal
computing, mobile communication, portable digital music, and video experience to customer segments through
innovative hardware, software, peripherals, services, and Internet offerings. In order for Amazon to gain market
share from Apple’s, it needs to strengthen its cost leadership position. Amazon needs to keep the Kindle Fire’s
price low and affordable, while offering the best customer user experience. In doing so, other competitors, such
as B&N, will not be able to compete with Amazon.
 Innovation: Amazon needs to invest heavily in R&D, with a broadly defined competitive scope. By constantly
improve the Kindle Fire, it will be very easy and convenient for users to learn and use the Kindle Fire.
 Personalization: Amazon can offer users the opportunity to turn the Internet into a unique and personal online
portal by displaying specific content, pages, and applications chosen by the user. This way, the Kindle Fire can
turn into a lifestyle product that a user can depend on and become used to it (instead of switching to the
competitors’ products).

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