STUDY NOTES FOR EXPLORING INNOVATION

FACTORS AFFECTING NEW VENTURE FORMATION BY TECHNOPRENEUR

1. ANTECEDENT FACTORS (personal life) personality, home context (supportive, kids), background (academic, parents, income level) 2. PARENTAL EXPERIENCE (prior work/ host organisation) work environment, institutional support 3. ENVIRONMENTAL FACTORS technology (discoveries, new tech, patents), markets (new uses, applications and consumers)

TYPES OF TECHNICAL ENTREPRENEURS

1. APPLICATION INNOVATOR- 2. MARKET INNOVATOR- 3. TECHNOLOGY INNOVATOR 4. PARADIGM INNOVATOR

3 KEY ELEMENTS OF VALUE CAPTURE

1. APPROPRIABILITY- ability of the innovator to gain ROI (return on innovation). linked to innovator's uniqueness which can be protected. Strong appropriateness- can exercise high degree of control over creation, prevent copies. Apropriability mechanisms- nature of knowledge (codified), institutional protection (IP protection, contracts), HR management (emp contracts, staff rotation, commitment), practical/ technical means (trade secrets, access, passwords, security) and leadtimes (upgrades, 1st mover strat) 2. COMPLEMENTARY ASSETS- assets owned (brands, distribution channel, customer relationships) and capability assets (core technological know how, manufacturing, sales and service expertise). Often lacking in smaller firms hence JV 3. REVENUE GENERATING MECHANISMS- outright sale, renting/ leasing (access/usage granted for period), advertising (selling advert space for fee ie media), subscription (monthly or annual fee for use of facility), usage fee (use of services ie phone company), brokerage fee (3rd party intermediate), licensing (permission to use IP at a fee), razor and razor blades (type of outright sale, consumable item needs to be replaced frequenly or durable item needs to be maintained), freemium (services are free but pay for advanced features/ services)

DESCRIBE 3 PRACTICES/ SCHEMES TO ENABLE EMP CONTRIBUTION TO INNOVATION DISCUSS 3 WAYS ORGANISATIONS CAN MOTIVATE EMPLOYEES TO BE CREATIVE

1. BOOTLEGGING- Undercover activity of motivated individuals to develop new products either radical or incremental based on their own ideas. Organisations provide employees time to explore the things they are passionate about 2. IDEAS PROGRAMS- employee based schemes to encourage employees to come forth with ideas and suggestions. these are evaluated by the company and if the idea is adopted, the employee is rewarded. Usually result in process innovation. 3. RESEARCH CLUBS- method of facilitating innovation through collaboration rather than individuals. aim to bring companies with common interests together.

WHAT IS THE HIERARCHY OF STRATEGIES

1. BUSINESS STRAT- How do we compete? Eg Generic strat. 2. FUNCTIONAL STRAT- Which technologies? Eg Technology strat 3. PRODUCT STRAT- How do we innovate? Eg 1st mover strat

3 MODELS ON HOW INVENTION CAN BE UNDERTAKEN

1. CLASSIC MODEL- Individual, rare, limited resources 2. CLOSED MODEL- R&D lab 3. OPEN MODEL- Flexible. Licensing instead of exploitation.

3 FACTORS THAT DETERMINE LICENSING OVER IN HOUSE DEVELOPMENT

1. COMPLEMENTARY ASSETS in production and marketing- assets required to support production and sales and might include manufacturing expertise, marketing expertise, product support or training. If absent then licensing is more appropriate. 2. TRANSACTIONS COSTS associated with acquiring the complementary assets- if transaction costs of licensing are lower than purchasing complementary assets then licensing is better. 3. COMPETITION in the final product market- licensing appropriate depending on extent of competition. preventing others from coming up with an alternative.

HOW COULD DOMINANT DESIGNS ARISE

1. Consumer preference- particular package of factors is present in 1 design that's favoured by meeting their requirements. 2. Consumer appeal- rarely technically superior to rival designs but appeals to the consumer more due to simplicity, usability and familiarity 3. Market power of a dominant producer 4. Government or industry regulation body may be instrumental in a dominant design appearing

WHAT ARE THE CONTRIBUTIONS OF DOMINANT DESIGN THEORY TO INNOVATION

1. Contributes to understanding of innovation 2. Highlights the importance of the user, who may be less interested in technical features than in usability 3. Highlights the importance of standards especially where compatibility is an issue for the user 4. Shows the importance of a business strategy within innovation

DISCUSS 5 DRIVERS OF TECHNICAL ENTREPRENEURSHIP

1. DIFFUSION OF KNOWLEDGE- increase in supply of knowledge and accessible widespread learning through eg internet, university accessibility, publications. 2. STAFF CHURN- mobility and transferability of staff meaning that individuals are more likely to go off on their own 3. ABILITY OF AND ACCESS TO VENTURE CAPITAL- specialist financers who invest for growth and capital gain. provides entrepreneurs with finance to fund growth and expansion. business angels- high wealth individuals to provide loan finance and management expertise 4. THE NATURE OF NEW TECHNOLOGIES- now, newer technologies are more mobile and flexible than before. shift towards knowledge based economies. easier and faster for start ups to gain knowledge rather than expensive facilities. 5. ROLE MODELS- higher public profiles and are more commonly found indicating a demonstrative effect. 5.

EXPLAIN 3 CRITICAL FACTORS OF THEORY OF ABSORPTIVE CAPACITY/ ORGANISATION'S CAPACITY TO LEARN

1. EXPOSURE TO RELEVANT KNOWLEDGE i.e. use of appropriate networks to keep abreast of developments in the field 2. PRESENCE OF PRIOR RELATED KNOWLEDGE Linked to assimilation process. Needed in order recognise new external knowledge learned and assimilate it into the business 3. DIVERSITY OF EXPERIENCE greater scope for recognising external ideas and stimuli The value of outsiders - they add to diversity

6 USES/ BENEFITS/ FUNCTIONS OF PROTOTYPES

1. Evaluation and Empirical TESTING- gradual change of 1 thing at a time to test for improvement 2. INTEGRATION of components & sub-systems- especially for complex products 3. Facilitate LEARNING- testing enables learning through acquiring formal accumulative technical knowledge 4. Assists with understanding USERS and user benhaviour- through user-test prototypes 5. RISK reduction- tests can help ID potential technological risks 6. Turn IDEAS into tangible things

IMPORTANCE/ BENEFITS OF A PATENT

1. Exclusively prevents others from making/ selling the patented product or process by offering legal protection 2. Stimulate and encourage innovation as an incentive

BENEFITS AND FEATURES OF AN OPEN INNOVATION STRATEGY OPEN INNOVATION HAS 2 FORMS: EXTERNAL SOURCES AND EXTERNAL ROUTES

1. Explicitly recognises that no one firm can hire all the best brains, hence the importance of accessing external knowledge /expertise 2. Networking in various forms can provide the means of linking to external knowledge/expertise 3. Recognises that there are innovation strategies other than a first mover strategy 4.Spreads risk and cost 5. Businesses that have taken the open innovation route become more fluid and flexible with ideas, discoveries and inventions flowing into and out of the organisation with greater commercial potential. 6. -faster development because firms buy licenses/technology without waiting to invent it

NORMS OF A CULTURE SUPPORTIVE OF INNOVATION DESCRIBE CHARACTERISTICS PROMOTED BY A CULTURE ORGANISATION WITH A STRONG INNOVATION RECORD

1. Focus on IDEA GENERATION- open to new ideas and ways of working. experiment 2. Support for CONTINUOUS LEARNING- encouraging curiosity and widen horizons through new experiences. 3. Encourage RISK TAKING- creativity by nature involves taking risks. avoid too many controls inhibiting experimentation process. 4. TOLERATE FAILURE and mistakes- innovations don't always succeed. tolerate in order to encourage innovation. a desire to learn from mistakes 5. Support CHANGE- tolerating uncertainty within the organisation. 6. Accommodate and managing CONFLICT- it's inevitable where new ideas are concerned.

FEATURES OF TECHNOPRENEURS

1. Founders have been affiliated with the source of technology before establishing the company 2. business idea based on exploiting advanced technological knowledge developed or acquired in a source of technology 3. independent company 4. entrepreneurial company, controlled and managed by entrepreneur individual or group. 5. Make us of extensive networks: universities, large companies and research institutes as a source of knowledge inputs and market opportunities.

SOURCES OF INNOVATION

1. INDIVIDUALS Growth of small firm sector, strategic alliances, fin support, role models, angels, fewer restrictions, most common, spin-off companies formed, flexibility of small businesses to adapt 2. CORPORATIONS Corporate labs, R&D, mass production, declining, switching to open model, resources, cash flow, competitive edge 3. USERS innovations in construction, medical and science industries come from users themselves. Find solns within their jobs quickly and efficiently. Innovations handed over to larger/specialised orgs to distr as commercially viable P/P/S. 4. THE STATE Correcting market failure Uncertain potential returns. social return higher than private funding research and projects 5. Employees encouraged and rewarded for ideas/improvements in innovation for competitor advantage. Some allowed to use work time to develop ideas (bootlegging). 6. Outsiders Offer fresh perspective, broad range of contacts, likely to challenge ideas. assist in new product development 7. Spillovers idea bins, legal protection with loop holes and timing 8. Process needs Bottleneck- intense pressure to cure this. incentive for innovation and cost reduction. efficiency and productivity.

NAME 3 BUSINESS MODELS (Chesbrough) USED TO CONVERT INVENTIONS INTO ECONOMIC VALUE

1. Incorporate the technology into the CURRENT BUSINESS. 2. LICENSE the technology to a 3rd party. 3. launch a NEW VENTURE to exploit the technology in new business areas.

CHARACTERISTICS OF USERS INFLUENCING RATE OF DIFFUSION

1. Innovators- visionary minority with time and resources to lavish on new gadgets, eager to pursue the new 2. Early adaptors- fashion conscious, trendsettters/ leaders, well connected, powerful influence 3. Early majority- pragmatic, need solid evidence of benefits. Lead to sales peaking. 4. Late majority and laggards- after saturation is reached. Reluctant converts

BENEFITS OF LICENSING TECHNOLOGY check this

1. Inventor doesn't have to complete the final stages of the innovation process ie manufacturing and distribution 2. option for small businesses or start-ups who don't have the expertise or resources to commercialize their innovation. 3. Offers IPR, innovation is legally protected 4. Able to provide income and prevent other companies from developing an alternative process 5. Larger firms also can use it to exploit more peripheral technology assets while focusing their internal resources on core activities.

4 REASONS A COMPANY WOULD CHOOSE TO EXPLOIT ITS INNOVATION (INTERNAL ROUTE)

1. It has the RESOURCES to do so: finances and access to finance to enable exploitation, facilities, stafff 2. It has the KNOWLEDGE: sufficient knowledge on manufacturing, marketing or distribution channels with commercial background 3. It FITS with the company's strat- market is big enough to exploit. 4. Company has GLOBAL REACH- for technologies that span markets across the globe

4 REASONS/ FACTORS A FIRM CHOOSES EXTERNAL ROUTE TO INNOVATION

1. LACKS RESOURCES 2. LACKS KNOWLEDGE- eg Scientists and technologists develop new technology but lack commercial background to exploit 3. POOR FIT with the company's strat- market is too small, remote and specialised 4. LACK OF REACH- No global reach for potentially global technology. Can choose to sell the technology but confine it to very specific market as per terms.

EXAMPLES OF EXTERNAL SOURCES OF INNOVATION

1. LARGE COMPANIES- have significant R&D fapcilities that may have IP falling outside of their portfolio. 2. START-UP COMPANIES- small highly specialised enterprises with research capabilities and not enough resources to bring products to the market 3. UNIVERSITIES- have IP derived from research activities 4. TECHNOLOGY BROKERS- link owners of IP with users of IP

EXAMPLES OF EXTERNAL ROUTE OF INNOVATION

1. LICENSING AGREEMENT- of sorts 2. NEW VENTURE CREATION- through joint venture or spin-off

BENEFITS OF THE LICENSOR OF TECHNOLOGY check this

1. Licensees possess knowledge that the licensor might not have ie. market knowledge (from substantial market presence), production knowledge (from experience in the trade), tacit knowledge (rather than formal) 2. Licensees have access to long term capital finance ie cash, loan capital, equity capital. ROI might take a long time and invention might be risky. 3. Licensees have the motivation to exploit the technology and the ability to make commercial decisions.

DESCRIBE POTENTIAL BENEFITS OF 1ST MOVER/ PIONEER STRAT TO THE 1ST MOVER (barriers to entry)

1. Opportunity to establish a TECHNOLOGICAL LEAD- becoming more familiar, practised and competen with the technology. Headstart to GET FURTHER ALONG LEARNING CURVE depending on capacity to learn. 2. Linked to TECHNOLOGICAL LEADERSHIP- technology advance is a function of in house R&D. IP protection and trade secrets can deter rivals- barrier of entry 3.Ability to ACQUIRE SCARCE RESOURCES- pre empting later arrivals. Eg locations, suppliers, distribution facilities especially for retailers. Compettitve advantage. 4. Opportunity to build CUSTOMER BASE ahead of competitors. Building market share to lock in customers 5. Scope for building BRAND RECOGNITION 6. SHAPING CONSUMER PREFERENCES and expectactions by POSITIONING a product in the minds of consumers 7. Aquisition of patents and other IPR to deter competitors

BENEFITS OF A SIDE ENTRANCE STRAT

1. PROTECTION from full scale competition- sidestepping mainstream competition from large established competitors 2. Provision of OPPORTUNITIES FOR LEARNING- allows time for cumulative knowledge and understanding 3. Provision of space to BUILD SUPPORTING NETWORKS- suppliers, customers, research and testing providers, technical experts 4. Stimulating development ITO volume PRODUCTION and COST EFFECTIVENESS- improving and enhancing technology for reliability and effectiveness. 5. PROTECTED SPACE for promising innovation that can offer REAL VALUE 6. SATISFY UNMET NEEDS and mature and improve in order to EXTEND to MAIN MARKET

EXPLAIN 4 CASHFLOW PROBLEMS IN DEVELOPING TECHNO INNOVATION

1. Phases of innovation process generate negative cashflow 2. Uncertainty about extent of negative cashflow 3. Uncertainty about when the project will breakeven 4. Unwillingness of financial institutions to lend

DISCUSS THE NATURE AND IMPORTANCE OF DIFFUSION WITH REGARDS TO PROCESS AND SUCCESS OF INNOVATION

1. Plays NB role in the innovation success due to LEVEL OF ADOPTION over time: successful, discontinued and unsuccessful innovation 2. Highlights the needs and characteristics of different TYPES OF POTENTIAL ADOPTERS (represent all consumers) 3. Highlights the CHARACTERISTICS OF INNOVATION 4. Determines PROCESS INNOVATION adopted by organisations to maximize efficiency and profit especially when the rate of diffusion is rapid.

GIVE 6 CONTRIBUTIONS/IMPLICATIONS OF THE LONG WAVE THEORY

1. Provides a broad long term view of innovation 2. Provides a context for different types of innovations 3. Highlights how individual innovations don't occur in isolation- form part of bigger trends/ patterns 4. Shows how technology and advances influence type and rate of innovation 5. Analysis shows that the rate of technological change is cyclical and can be predicted 6. Gives insights into powerful driving forces such as techno changes and shifts and the impact Help us to make sense of innovation ID patterns of innovation Make comparisons btwn innovations Predict possible outcomes for process of innovation

4 STEPS/ STAGES OF DEMAND PULL MODEL

1. R&D- driven by market needs 2. PRODUCTION 3. MARKETING- driven by market needs 4. MARKET NEED

4 TYPES/ CATEGORIES OF INNOVATION based on component and systems knowledge with varying degree of novelty

1. RADICAL INNOVATION scientific advances, High novelty. New: techno, component, system, dominant, core design and new architecture. Rare and dramatic leading to disruptive technologies 2. INCREMENTAL INNOVATION Use firm expertise for gradual, minor improvements. component refinement to enhance performance= improved technology. Low novelty. Essential process for linear change. Increasing market penetration favours existing players. 3. MODULAR INNOVATION New: components, technology and design concepts Existing: architecture, configuration and system Less dramatic than radical. Opens up new markets for affluent countries. 4. ARCHITECTURAL INNOVATION Existing: Components and design concepts New: configurations as linkages are instituted. Reconfiguration of an established system to link with existing components in a new way. Some minor changes to components.

4 PHASES OF LONG WAVE CYCLE

1. RECOVERY- radical. opportunity for new technologies. uncertainty, high novelty, premium prices, no production efficiency 2. PROSPERITY- diffusion of innovations for a broader market. immitations. new industries emerge. speculative boom. investors cash in 3. RECESSION- price competition. surplus capacity and high costs. innovation shift to process applications 4. DEPRESSION- market saturation, reduced profitability, shift to efficiency, consolidation, new industries mature, intense competition, no techno advancements. shake out phase for new discoveries and waves

CATEGORIES OF TECHNICAL ENTREPRENEURS

1. RESEARCHER- research background ie engineers and scientists with some commercial experience. 2. PRODUCER- industrial background. involved in development of product or engineering with management skills 3. USER- marketing/ sales/ product support background. consumer stimulus for innovation. 4. OPPORTUNIST- ID opportunities in technology but little experience or knowledge. especially NB for generic technologies and incremental innovation.

3 FACTORS THAT MAKE INNOVATION EXPENSIVE

1. RESOURCES- Scale of resources ITO people and technology. requires attention of staff from a range of functional specialisms. 2. TIMING- length of time taken to achieve a marketable product or service. financial support (funds) has to be sustained till the end of the innovation process before profits can be realised. problem is the gap between outflow and inflow of funds. 3. UNCERTAINTY- difficult to predict outcome or course of events. innovation path isn't smooth with setbacks, false starts, blind alleys and recycling. funding may be difficult to predict. innovation may fail in the market so no inflow of funds will occur (risk)

CHARACTERISTICS OF DIFFUSION/ INNOVATION

1. Relative advantage perceived over other existing products 2. Compatibility with existing experiences and practices. 3. Complexity- ease of understanding by potential users 4. Trialability- reduces uncertainty 5. Observability- extent to which users can see benefits

DESCRIBE 2 ROUTES USED BY TECHNICAL ENTREPRENEURS TO CREATE A NEW VENTURE

1. START-UP ROUTE New company established to commercialise entrepreneur's idea. ides owned by entrepreneur entrepreneur acts independently without assistance from a parent organisation 2. SPIN-OFF ROUTE Arise from parent organisation eg university, government R&D lab or established firm Goal of comercialising a technology developed by the parent organisation. Created by an emp (scientist/ technologist) leaving the parent organisation which grants him access to technology. Emp has enough tacit know how technical knowledge and experience accumulated if new venture can license an aspect of the technology or research parent role in facilitating new venture creating process and take an equity stake to preserve the connection or harvest the stake at a later date. Parent doesn't want to commercialise the techno

5 BOOTSTRAPPING METHODS

1. Social capital network to obtain funding 2. Using domestic facilities ie garage 3. Borrowed facilities from parent organisation 4. Use 2nd hand equipment to lower costs 5. Get people to work for you in their spare time paying little or nothing

ROTHWELL'S 5 MODELS OF THE INNOVATION PROCESS- 4 closed, 1 open model

1. TECHNOLOGY PUSH- innov driven by R&D. sequential steps but naïve process.assumes that more techno brought abt by additional expenditure on R&D lead to more innov 2. DEMAND PULL- role of the market is central, appropriate for mature technology industries where consumer requirements are more sophisticated which drives R&D. 3. COUPLING MODEL- 1+2 are flawed in some industries. Acknowledge technos and mkt are sources of new ideas. Stages- distinct functions but interact and interdependent. 4. INTEGRATED MODEL- advances in IT. Functional teams brought into development cycle at beginning. Integrated from start, problems dealt with early on 5. NETWORK MODEL (Open Innovation)-

EXPLAIN THE IMPACT OF EXISTING TECHNOLOGY PARADIGM ON ESTABLISHED COMPANIES

1. Technology paradigms have longer cyclical patterns than business cycles-50 years, therefore NB for the LONGEVITY of the existing business. 2. All PHASES in the existing paradigm will affect the actions of an existing business. Each cyclical pattern wave has a recovery, prosperity , recession and a depression phase. 3. Long wave cycles reinforce the notion of different TYPES OF INNOVATION and the extent of impact of these innovations depending on the phase from which it came. Eg. radical innovations (more impact) in earlier phases and incremental in later phases 4. Existing organisations will be able to make better FORECASTS and business DECISIONS based on the phase they are in. Able to anticipate the market's reaction. 5. bringing about INSTITUTIONAL CHANGES in the organisation: education and training, industrial relations, corporate structures, systems of management, capital markets and legal framework. 6. Organisations must ADAPT at each phase of the existing paradigm in order TO PARTICIPATE in the market and avoid failure

WHY DO VENTURE CAPITALISTS SHOW INTEREST?

1. They look for new promising opportunities in multiple sources such as Journals 2. They come on board when initial revenues are obtained as proof of success 3. They come on board when the concept is proven with success over short period of time 4. They look for evidence of commitment ie. quit job to pursue the successful venture

ATTRIBUTES OF INNOVATION (WHAT IT INVOLVES)

1. UNCERTAINTY AND RISK- technical risk and uncertainty is reduced but cannot be removed. Risk with consumer acceptance 2. TRIAL AND ERROR- involves experimentation for effective solutions. Lengthy process, not smooth 3. FAILURE- valuable for learning 4. FITS AND STARTS- new techno lies dormant until there is an application for it and the technology is adapted. Or an existing concept used for a different use. 5. PERSEVERANCE- not to be put off by setbacks, delays, humiliation and lack of interest 6. COLLABORATION- team effort or partnerships with different strengths

DESCRIBE CONTEXTUAL FEATURES/FACTORS OF INNOVATION PROCESS THAT MAKE EFFECTIVE MANAGEMENT OF THIS PROCESS ESSENTIAL

1. UNCERTAINTY- nature of innovation. 2. COMPLEXITY- new innovation draws on different types of expertise. staff involvement from a range of disciplines including external expertise leads to complexity. 3. MESSINESS/ UNTIDINESS- new innovation not smooth and straightforward. 4. DISRUPTIVENESS- newness and novelty of radical innovation. new ways of doing things. even if incremental- can be disruptive leading to significant changes to the organisation. 5. CREATIVITY- requires degree of creativity help provide conditions in which creativity can flourish.

DISCUSS 2 FUNCTIONS WHICH A BUSINESS MODEL PERFORMS TO ENABLE EXPLOITATION OF INNOVATION

1. VALUE CREATION- activities that enable the user to recognize benefit and value that he can gain from the invention. NB for new technologies that are from scientific breakthroughs rather than to meet user's need or solve user's problem. ID users and articulate clear value proposition with purpose and benefit in order to encourage the purchase. 2. VALUE CAPTURE- appropriating/ obtaining value from the activities undertaken by the innovator. Value gained through revenue is generated by methods: renting, selling, advertising, after sales support. revenue generating mechanism chosen will determine consumer's enthusiasm to purchase. Protection of IP to avoid copying.

EXTERNAL RESOURCES ARE USED IN THE FOLLOWING WAYS

1. by taking internally generated ideas and using ext route to mkt via 3rd party org (like licensing agreement) so that latter develops ideas into mktable p/s and mkts it Int exploration + External exploitation = Innovation 2. Use of external resources by sourcing ideas themselves from external organisations. Internal development using the firms own resources/ facilities to exploit. Ext exploration + Internal exploitation = Innovation

LIST 6 BENEFITS OF THE PREDICTION OF INNOVATION THEORY

1. explain why innov succeeded /not and actions to be followed/avoided 2. Past behaviour predict future and learnings 3. Course of innov's events can be anticpated 4. Problems/ difficulties predicted in advance 5. There is scope for planning so that resources can be used more efficiently 6. Greater likelihood of successful outcome to innov.

FACTORS FACOURING OPEN INNOVATION

1. growing mobility of highly experienced and skilled people (i.e. can't keep knowledge inside) 2. Increased time people spend in university training (i.e. knowledge spillover to lots of firms) 3. Increased availability of private venture capital (i.e. easier for researchers to launch own start-up firms)

DISCUSS CONTRIBUTION OF BUSINESS ANGELS

1. main source of private sector finance, after the founder's initial resources have dried up, as they concentrate on smaller deals than venture capitalists. They see the potential in the individual and the business idea to a greater degree than other funding operations. 2. Business angels provide capital after the immediate setup phase and before the company has reached a size where it is likely to be of interest to venture capitalists. 3. Business angels may contribute to the due diligence required by venture capitalists providing them with all necessary information and assurance that the business is sound. 4. They perform an invaluable networking function by bringing together innovator, capital and managerial expertise. They provide mentorship and have knowledge and contacts to offer, which is an added value for the innovator.

DEFINITION AND PURPOSE OF A PATENT

20 year monopoly right granted by the state to the inventor. It's a reward for the invention. To buy breathing space for the inventor with exclusive right to benefit from it for a limited period of time. It's a "social bargain" designed to promote innovation Innovator is obligated to provide full details of how invention works to the IP Office and show that the invention is new by meeting 3 criteria: novelty, inventive step, industrial application

DEFINE SIDE ENTRANCE STRAT

A market entry strat for new products geared for a niche market due to lack of competitiveness in the main market itself.

CATEGORIES OF BUSINESS ANGLES

ACTIVE BUSINESS ANGELS entrepreneurs(self made), wealth-maximising (involved in company management with minority stakes. interested in financial gain), income seeking (acquired wealth through inheritence, make smaller investments with high rates of return), corporate (coporate venturing) PASSIVE BUSINESS ANGELS latent (invested in the past but no current investments), virgin (want to invest)

EXPLAIN HOW TECHNO STRAT AND DECISIONS ARE AFFECTED BY SUNK COSTS

AFFECT STRAT: 1. Could prevent an organisation from making necessary changes as quickly as its competitor 2. Give rise to marginal follow-on investment to protect the capital already invested. 3. The potential of the innovation is not seen as a high return on investment but is seen as a liability. This perception trickles down to management and other facets of the business thereby rendering the innovation a write off AFFECT MANAGER'S DECISIONS: 1. Sunk costs can affect the bias of managers' decisions. Humans are prone to loss aversions and have the need to recover costs. Managers often consider the costs already spent, which affects their decisions going forward. 2. Sunk costs tend to feed into the budget and leave little room for further development.

THE MOST NB THING IN CASH FLOW MANAGEMENT ITO IMPACT ON INNOVATION PROCESS AND SUCCESS OF THE INNOVATION

BRIDGING THE CASH FLOW GAP Having the necessary funds for the innovation process as well as the exploitation part of the process. Phases of innovation process (construction of a working model, prototype etc) generate negative cashflow. It can take months or years before sales are generated and there is an inflow of sales and the actual cashflow turns positive. Different sources of capital as well as bootstrapping must be used in order to help bridge the gap. If the venture is big enough the equity market is an option through an IPO (initial public offering) or AIM (alternative investment market.

EXTERNAL ROUTE TO INNOVATION

Based on factors a firm decides not to exploit the innovation and has to use some form of open innovation to exploit. Open innovation- Aim to transfer the technology to a 3rd party to complete innovation process. 3 MOST COMMON STRATEGIES FOR OPEN INNOV: 1. LICENSING 2. SPIN-OFFS- Firm creates another small independent company specialising in the application of new technology to exploit the innovation. Not closely related to core technology of the firm. Function as separate company with emps. Venture capitalists might buy the company and harvest it through IPO, parent company has equity stake in it still. Advantages: New management focus on application and development without distractions. Good reinvestment option. 3. DIVERSTMENT/ DEMERGER- similar to spin-off but differ in scale (bigger) and timing (spinoff at start of innov process, divestment is later once prospect of success is shown). Occurs when firm's major part of business is no longer part of its core fuction. Response to new opportunities.

INTERNAL ROUTE TO INNOVATION

CONSIDER WHEN- TIMING: 1. FIRST MOVER- being 1st to market with new innovation. Obvious and appealing due to dominance. Limitations- rapid technology change draws new competitors and increases the market, techno breakthroughs puncture equilibrium, 2. FOLLOWER/ LATECOMER- imitator strat. hold back during discontinuities and advances to see how the maket reacts. High cnsumer acceptance then entry into the market. Risk of being left behind counterbalance the mistakes others have made. Advantages: Free rider effect (utilise investments competitors have made for consumer approval), information spill over effect (access to R%D knowledge becomes mainstream), learning effects (reduced uncertainty), better understanding of customer requirements. CONSIDER WHERE- MAJOR DECISIONS WITH LONG TERM IMPLICATIONS: 3. NICHE/ SIDE ENTRANCE STRAT- New unique technologies appeal to narrowly defined market segments. 4. DERIVATIVE STRAT- applying new technology to an existing reputable product aiming to capitalise on existing marketing position. hybrid strat. improvements extend to complete redeisgn to better performance.

DEFINE SUNK COSTS ITO INNOVATION

Costs that have already been paid for and cannot be recovered

DISCUSS HOW TECHNOLOGICAL PARADIGM IMPACTS INDUSTRIES AND COMPETITORS

Creative destruction occurs as a result of paradigm shift in new technology Leads to reconfiguration of the economy- old industries fall, new emerge due to new, disruptive technologies Established, incumbent firms are unable to adapt and break existing habits, leading to their demise (loss in profits, market share and jobs) Inertia: traditions, sunk costs, internal political constraints, commitment to outmoded technology New technology requires new knowledge, skills and expertise creating opportunities for new firms, new jobs and industries that are flexible and able to adapt.

DOMINANT DESIGN

Design/product config that wins allegiance of the market place and competitors and innovators must adhere to in order to have significant market share. Widely accepted and copied design. 1. Pre paradigm phase- many ideas circulating in period of ferment where designs are fluid. No single accepted theory accepted. 2. Paradigmatic phase- single widely accepted theory thats dominant. Signifies scientific maturity. Remains accepted unless sometimes replaced by another paradigm

NB OF FOUNDER, FAMILY AND FRIENDS

FOUNDER- use savings, redundancy package or mortgage loan, continued employment FAMILY- past savings to invest especially for start-up stages FRIENDS- Social capital, network, funding, emotional support

NATURE AND TYPES OF PROTOTYPES

Have little to do with form, all about function. Form the basis of experimentation and testing. A version of the final product made of more flexible material. Types: 1. Functional prototypes engineering prototypes, feasibility models, simulations, virtual prototypes 2. User test prototypes working prototypes 3. Organisation/ System prototypes 1st production units, pilot runs, production models, 1st article

ABSORPTIVE CAPACITY

Intergrates external dimension of innovn (techno evolution) and internal dimension (learning and knowledge transfer process in the organisation) The ability of a firm to recognize the value of new, external info, assimilate it and apply it to commercial ends Knowledge diffusion to entire org and all levels within thru internal COMMS systems that transfer knowledge. Shared knowledge and expertise NB for good COMMS Ideas absorbed must be applied. More sophisticated than other theories of innovn and powerful tool. Highlights the NB of external knowledge as a critical component in innovn. Helps explain how some orgs are poor innovators despite tons of knowledge, cant absorb or use knowledge. Also how networks and networking is so NB.

FUNCTIONS OF MANAGEMENT

PLANNING- decision making activity looking into the future. setting goals, outcomes, achievement of goals 5 steps: i. determine the goal ii. ID tasks and activities to take iii. estimate time duration iv. determine sequence to complete and link to a model of an overall project v. develop a project planwith overall schedule for the project ORGANISING- people centred activity, specifying and structuring working relationships, mix of skills, human input LEADING- providing vision of where the organisation is going, motivating employees CONTROLLING- monitoring and evaluating the progress of activities according to plan

FORMS OF INNOVATION

PRODUCT SERVICE PROCESS

FORMS OF IP RIGHTS

Registered IP rights 1. PATENTS 2. REGISTERED DESIGNS- protect look/ appearance of a product. design must be new and materially different. duration of 5- 25 years. 3. TRADEMARKS- protection of commercial reputation. a distinct graphic sign distinguishing goods or service from others. ie logos, pictures, slogans, shapes, domain names. Inherent IP rights 4. DESIGN RIGHT- protect appearance of product once design drawing/ CAD complete and documented with date and authorship. lasts 10 years. no formal registration. designer has 5 years to prevent copying. there are limitations. must be original 5. COPYRIGHT- wide range of creative works that doesn't have to be original. copyright owner can sue for infringement if copies are made and sold without permission. usually last for the lifetime of the author. 6. PASSING OFF- trader mustn't sell goods under pretense. confuse/ deceive the consumer. . 7. LICENSING- owner permits registered patents to be used at a fee (royalties) via licensing agreement.

TECHNOLOGY S-CURVE (TECHNOLOGY LIFE CYCLE)

S curve is a technology learning curve has descriptive value (real time) and predictive value to predict the course of developmental path of innov next generation- successor technology

INNOVATION STRAT

STRAT CHALLENGES FOR THE INNOVATOR (market entry): 1. Whether to enter the market 2. When to enter the market 3. Where to enter VIA 2 ROUTES: 1. EXTERNAL ROUTE (open innovation) 2. INTERNAL ROUTE (closed innovation)

PUNCTUATED EQUILIBRIUM

Technological discontinuities/breakthroughs in technology occur from time-to-time i(new technology, radical) trigger periods of ferment (lots of new designs and configs) Eventually one design configuration becomes dominant & leads to stability and incremental change stability period/equilibrium: Only incremental innovations where new entrants are at a disadvantage In time another discontinuity/breakthrough occurs and cycle is repeated via fits and starts. Disruptive Techno breakthrus that form discontinuities are rare with mostly incremental innovn. Key features: need new skills, abilities and knowledge in development and manufacture of product.

DISCUSS THE NETWORK MODEL (insourcing and outsourcing "collaborative" innovation)

bring together best resources of all fields (int/ext). Expertise brought from outside thru JV teams, alliances, agreements and contracts. Either for development of major sub-systems and components or to undertake specific phases of the innovation process. Outside experts- new ideas/technologies fast Consumer high expectations for efficiency, variety and speed. Allow co's to build on existing expertise to accommodate expectations. Popular in pharmaceutical, computing and aerospace industries