HU FICHE SELALE CAMPUS

Course Title: Innovation management and entrepreneurship

Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)
Chapter One - The Innovation Imperative

1. Innovation Matters

Why it’s critical:

 Survival & Growth: Drives competitive advantage, market relevance, and long-term
sustainability (Bessant & Tidd, 2015).
 Economic Impact: Fuels job creation, productivity, and national economic dynamism (Drucker,
2014).
 Value Creation: Solves pressing societal challenges (e.g., climate change, healthcare) while
unlocking new revenue streams (Ottosson, 2019).

In today’s hyper-competitive landscape, innovation transcends mere technological advancement

—it’s a strategic lifeline. Organizations that fail to innovate risk obsolescence as market
dynamics shift rapidly, customer expectations evolve, and disruptive entrants rewrite industry
rules. Beyond survival, innovation catalyzes growth by opening untapped markets and creating
ecosystems around novel solutions, as seen in Apple’s integration of hardware, software, and
services.

The societal imperative is equally critical. Drucker (2014) emphasizes that innovation addresses
systemic challenges like aging populations and resource scarcity, transforming social pain points
into economic opportunities. For instance, renewable energy innovations combat climate change
while generating trillion-dollar markets. Thus, innovation isn’t just an organizational choice but a
cornerstone of modern economic resilience and human progress.

2. Innovation and Entrepreneurship

Synergistic Relationship:
 Entrepreneurship is the vehicle for commercializing innovation (Drucker, 2014).
 Innovation provides the "content" (new products/services/business
models); entrepreneurship is the "action" (risk-taking execution) (Bessant & Tidd, 2015).

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 HU FICHE SELALE CAMPUS
Course Title: Innovation management and entrepreneurship
Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)

 Key Insight: Not all entrepreneurs innovate (e.g., replicative businesses), but breakthrough
ventures fuse both (Hisrich & Kearney, 2013).

Innovation without entrepreneurship remains an unrealized idea—a prototype gathering dust.

Entrepreneurship injects discipline into creativity, translating visions into viable business models
through calculated risk-taking. Consider Airbnb: its platform innovation (paradigm shift in
lodging) required entrepreneurial grit to navigate regulatory hurdles and scale globally. This
synergy thrives in environments where experimentation is rewarded, and failure is viewed as
learning.
Critically, replicative entrepreneurship (e.g., opening a franchise) sustains economies but rarely
transforms them. Hisrich & Kearney (2013) contrast this with innovative entrepreneurship—
exemplified by Elon Musk’s ventures—where high-risk bets on electric vehicles (Tesla) and
private space travel (SpaceX) redefine industries. True value emerges when novelty meets
execution.

3. Innovation Isn’t Easy!

Major Barriers:
 Resource Constraints: Funding, talent, and time gaps (Goffin & Mitchell, 2016).
 Organizational Inertia: Resistance to change, rigid hierarchies, and "this is how we’ve always
done it" mindsets (Ottosson, 2019).
 Market Uncertainty: Unpredictable customer adoption, technological shifts, and regulatory
hurdles (Hisrich & Kearney, 2013).
 Failure Culture: Fear of mistakes stifles experimentation (Bessant & Tidd, 2015).
The "innovator’s paradox" looms large: success breeds complacency, making established firms
vulnerable to disruptors. Kodak’s downfall—despite inventing the digital camera—illustrates
how organizational inertia prioritizes legacy revenue streams over emerging opportunities.
Similarly, startups face the "valley of death," where 90% fail due to premature scaling or
misreading market signals (Hisrich & Kearney, 2013).

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 HU FICHE SELALE CAMPUS
Course Title: Innovation management and entrepreneurship
Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)
Psychological barriers compound these challenges. In risk-averse cultures, employees avoid
novel ideas to protect careers, leading to incrementalism. Ottosson (2019) notes that complexity
in global supply chains and regulations (e.g., GDPR compliance) further amplifies uncertainty.
Overcoming this demands psychological safety—where teams, like Google’s X Lab, celebrate
"intelligent failures" as data sources.

4. Managing Innovation and Entrepreneurship

Core Strategies:
 Structured Flexibility: Balance agile experimentation with stage-gate processes (Goffin &
Mitchell, 2016).
 Culture & Leadership: Foster psychological safety, cross-functional teams, and top-down
commitment (Hisrich & Kearney, 2013).
 Ecosystem Engagement: Leverage partnerships (universities, startups, suppliers) for open
innovation (Ottosson, 2019).
 Metrics: Track both inputs (R&D spend) and outputs (new patents, revenue from
innovations) (Bessant & Tidd, 2015).
Effective management bridges creativity and commercial discipline. Stage-gate systems (e.g.,
P&G’s innovation funnel) provide rigor in screening ideas, while agile sprints allow rapid pivots
—as seen in Spotify’s squad model. Leaders must champion this duality, allocating "slack
resources" for experimentation (e.g., Google’s 20% time) while maintaining strategic focus.

Equally vital is opening organizational boundaries. Ottosson (2019) highlights how Siemens co-
innovates with universities on AI, while Tesla’s open patents foster industry-wide EV adoption.
Metrics should reflect this holistic view: input metrics (e.g., diversity of idea sources) predict
future pipelines, while output metrics (e.g., % revenue from new products) gauge current health.

5. Dimensions of Innovation

Four Key Types (Bessant & Tidd, 2015; Goffin & Mitchell, 2016):

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 HU FICHE SELALE CAMPUS
Course Title: Innovation management and entrepreneurship
Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)

Dimension Description Example

Product New goods/services iPhone (Apple)

Process Efficiency-driven operational changes Toyota Production System

Position Re-positioning in market/context Dyson entering hand dryers

Paradigm Shifting business models/mental frameworks Netflix (streaming vs. DVDs)

Product innovation satisfies unmet needs—like Pfizer’s mRNA vaccine—but requires

complementary process innovation for scalability. Toyota’s lean manufacturing exemplifies how
operational excellence sustains product leadership. Meanwhile, position innovation exploits
existing capabilities in new contexts: Dyson leveraged vacuum-engine tech to dominate hand
dryers, circumventing saturated markets.

The most transformative is paradigm innovation, which rewrites industry logic. Netflix’s shift
from DVDs to streaming demolished Blockbuster, while IKEA’s flat-pack model disrupted
furniture retail. Bessant & Tidd (2015) stress that winning innovators combine dimensions:
Apple’s ecosystem (paradigm) integrates hardware (product) with seamless retail experiences
(process).

6. Process Model for Innovation & Entrepreneurship

5-Stage Framework (Hisrich & Kearney, 2013; Ottosson, 2019):

1. Idea Generation:

o Sources: Customer feedback, R&D, trend analysis.

2. Opportunity Screening:

o Feasibility analysis (technical, market, financial).

3. Development:

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 HU FICHE SELALE CAMPUS
Course Title: Innovation management and entrepreneurship
Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)
o Prototyping, MVP testing, iterative refinement.
4. Commercialization:
o Scaling, marketing, distribution.
5. Diffusion & Learning:
o Post-launch feedback, adaptation, and knowledge capture.

Idea Generation thrives in diverse environments—from hackathons to cross-industry

benchmarking. LEGO’s Ideas platform crowd sources concepts from fans, while 3M’s "15%
culture" empowers employee experimentation. At this stage, quantity matters; broad nets capture
outlier opportunities, like Post-it Notes’ accidental discovery.

Screening filters ideas through viability lenses. Financial tools (e.g., NPV) quantify risks, while
market analysis identifies "job-to-be-done"—as Uber recognized urban mobility
gaps. Development embraces iteration: Dropbox’s MVP video validated demand before
coding. Commercialization demands precision in timing and channel strategy—Dyson’s air
blade launch targeted high-traffic venues for visibility. Finally, Diffusion & Learning closes the
loop: Amazon’s relentless A/B testing turns user data into feature refinements, embedding
innovation into culture.

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 HU FICHE SELALE CAMPUS
Course Title: Innovation management and entrepreneurship
Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)
Chapter Two: Social Innovation
1. What is "Social Innovation"?
Social innovation creates novel solutions to systemic social, environmental, or economic
challenges, prioritizing community well-being over profit. It addresses root causes of issues like
poverty, inequality, and climate resilience through sustainable models. Examples include
microfinance systems empowering low-income communities, fair-trade supply chains ensuring
ethical production, and telehealth expanding healthcare access. This approach blends purpose
with scalability, transforming social needs into self-sustaining initiatives that drive long-term
impact.
Deeper Insight: Unlike temporary aid, social innovation redesigns systems by shifting power
dynamics—such as community-led renewable energy co-ops that democratize energy access
while reducing fossil fuel dependence. Its success is measured not just by outputs (e.g., people
served) but by sustainable behavioral and institutional change.
2. Different Players
The social innovation ecosystem thrives on collaboration among diverse actors. Social
entrepreneurs pioneer mission-driven ventures, while NGOs implement grassroots solutions.
Governments enable progress through supportive policies and funding frameworks. Corporations
contribute via shared-value business models, and academia fuels innovation through research and
incubation. Success hinges on cross-sector synergy—such as partnerships between nonprofits,
businesses, and communities—to scale solutions effectively.
Critical Dynamics: Each player brings unique leverage: governments provide regulatory
scaffolding (e.g., tax incentives for impact investing), corporations offer scalability, and
grassroots groups ensure solutions reflect local realities. Breakdowns occur when one actor
dominates; equitable governance models (e.g., community advisory boards) prevent power
imbalances.

3. Motivation: Why Do It?

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 HU FICHE SELALE CAMPUS
Course Title: Innovation management and entrepreneurship
Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)
Drivers include ethical imperatives to address injustice or environmental crises, and filling gaps
where markets or governments fail. Stakeholder pressure—from consumers, employees, and
investors demanding ethical practices—also propels action. Crucially, social innovation offers a
strong business case: it builds brand loyalty, attracts talent, and unlocks new markets. For
instance, "buy-one-give-one" models demonstrate how purpose-driven strategies can achieve
commercial success while creating social value.
Strategic Imperative: Beyond ethics, it mitigates systemic risks—companies ignoring social
needs face regulatory penalties (e.g., carbon taxes) and talent drain. The rise of ESG investing
shows capital now flows to ventures aligning profit with measurable impact.
4. Enabling Social Innovation
Key enablers include supportive policy frameworks, impact-focused funding (like crowd funding
and blended finance), and practical tools such as design thinking. Digital platforms and global
networks connect innovators to resources and expertise. Flexible regulations and tech
partnerships enable scalable solutions, as seen in mobile banking systems that expand financial
inclusion. These elements democratize resources, allowing grassroots ideas to achieve systemic
impact.
Acceleration Tactics: "Sandbox" regulatory environments (e.g., Kenya’s mobile money policies)
allow real-world testing. Digital tools like block chain now verify fair-trade supply chains
transparently, while open-source platforms (e.g., Ushahidi) crowd source crisis data.
5. Challenges of Social Entrepreneurship
Major barriers include balancing financial sustainability with social impact ("double bottom
line"), and avoiding mission drift during scaling. Measuring social outcomes—like community
well-being—is more complex than tracking profits. Fragmented ecosystems also hinder
coordinated action. Solutions involve collective-impact models where governments, businesses,
and communities align goals to tackle challenges like climate change or inequality holistically.
Navigating Complexity: Mission drift often stems from investor pressure—e.g., microfinance
institutions charging exploitative interest rates. Solutions include "golden share" governance

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 HU FICHE SELALE CAMPUS
Course Title: Innovation management and entrepreneurship
Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)
(community veto rights) and standardized impact metrics (e.g., IRIS+) to maintain integrity
during growth.
Key Takeaways
 Solves systemic issues through self-sustaining models that redistribute agency to communities.
 Collaboration is non-negotiable—cross-sector coalitions overcome resource limits.
 Purpose-viability tension requires hybrid financing (e.g., impact bonds) and community-led
metrics.
 Policy and technology must be context-adaptive to avoid "solutionism."

Chapter Three: Sources of Innovation

1. Knowledge Push
Definition: Innovation driven by scientific discoveries, R&D breakthroughs, or new
technological capabilities.
Explanation: Advances in fundamental knowledge "push" novel solutions into existence, often
before market demand exists. Examples include penicillin (accidental discovery) and mRNA
technology (decades of research preceding COVID vaccines).
Key Insight: Requires long-term investment and tolerance for uncertainty (Bessant & Tidd,
2015).
Additional Note: This type of innovation often results in groundbreaking technologies that can
reshape industries. The investment in basic research can lead to unforeseen applications, creating
new markets and opportunities that were previously unimaginable.

2. Need Pull
Definition: Market demands or unmet user needs triggering innovation.
Explanation: Problems or gaps in existing solutions "pull" innovators to develop responses.
Example: Airbnb emerged from a need for affordable lodging during conferences.
Critical Factor: Deep user empathy ensures solutions align with real pain points (Drucker,
2014).
Additional Note: Understanding customer needs through direct engagement or feedback loops

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 HU FICHE SELALE CAMPUS
Course Title: Innovation management and entrepreneurship
Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)
can lead to more effective solutions. Companies that adopt a user-centric approach can anticipate
market trends and respond swiftly, fostering loyalty and enhancing user experience.
3. Making Process Better
Definition: Innovations improving efficiency, cost, or quality in production/delivery.
Explanation: Focuses on optimizing workflows. Example: Toyota’s lean manufacturing reduced
waste and boosted quality.
Impact: Lowers costs and enhances scalability (Goffin & Mitchell, 2016).
Additional Note: Continuous improvement methodologies, such as Six Sigma and Kaizen,
emphasize incremental innovations that contribute to long-term competitive advantages. By
fostering a culture of efficiency, organizations can adapt to changing market conditions more
readily.
4. Whose Needs? Working at the Edge
Definition: Targeting underserved or extreme users (e.g., astronauts, disabled communities) to
drive radical innovation.
Explanation: Constraints of edge users reveal universal needs. Example: Voice assistants (like
Siri) originated from assistive tech for visually impaired users.
Strategy: Solutions developed for extremes often benefit mainstream markets (Hisrich &
Kearney, 2013).
Additional Note: By addressing the specific challenges faced by marginalized groups,
companies can uncover innovative solutions that not only serve niche markets but can also be
scaled for broader applications. This approach fosters inclusivity while driving innovation.

5. Emerging Markets at ‘the Base of the Pyramid’

Definition: Innovating for low-income populations in developing economies.

Explanation: High-volume, low-cost models address affordability gaps. Examples include Tata
Nano (low-cost car for Indian families) and solar lanterns replacing kerosene in Africa.
Opportunity: $5 trillion market potential via inclusive design (Ottosson, 2019).
Additional Note: Businesses focusing on the base of the pyramid can cultivate sustainable

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 HU FICHE SELALE CAMPUS
Course Title: Innovation management and entrepreneurship
Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)
growth by creating products tailored to local needs. This not only improves living standards but
also opens new revenue streams, fostering economic development in emerging markets.

6. Crisis-Driven Innovation

Definition: Urgent challenges (e.g., pandemics, disasters) accelerating novel solutions.

Explanation: Constraints force rapid experimentation. Examples include mRNA vaccines
developed in 2020 and remote work tools (Zoom) scaling during COVID.
Lesson: Crisis dismantles bureaucratic barriers (Drucker, 2014).
Additional Note: The urgency brought about by crises often leads to unprecedented
collaboration among stakeholders. This spirit of cooperation can result in innovative solutions
that might not have emerged in more stable environments, highlighting the potential of adaptive
thinking.

7. Towards Mass Customization

Definition: Blending standardized production with personalized user experiences.

Explanation: Technology enables cost-effective tailoring. Examples include Nike By You
(customizable sneakers) and Spotify’s algorithm-driven playlists.
Enabler: AI and modular design democratize bespoke solutions (Goffin & Mitchell, 2016).
Additional Note: As consumer preferences shift towards personalization, companies that
embrace mass customization can enhance customer satisfaction and loyalty. By leveraging data
analytics, businesses can predict trends and tailor offerings to meet evolving demands.
8. Users as Innovators
Definition: End-users modifying or creating solutions to fit their needs.
Explanation: "Lead users" often pioneer improvements later commercialized. Examples include
surgeons prototyping medical devices and open-source software (Linux).
Advantage: User-led innovations have built-in market validation (Bessant & Tidd, 2015).
Additional Note: Engaging users in the innovation process not only enhances the relevance of

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 HU FICHE SELALE CAMPUS
Course Title: Innovation management and entrepreneurship
Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)
solutions but also fosters a sense of community and ownership. This co-creation model can lead
to faster adoption and greater success in the marketplace.
9. Watching Others – Learning from Them
Definition: Adopting/adapting ideas from competitors, industries, or cultures.
Explanation: Cross-pollination sparks innovation. Examples include Japan’s bullet trains
inspired by bird beaks (biomimicry) and Uber’s model adapted by food-delivery apps.
Tactic: Benchmarking and reverse engineering accelerate progress (Hisrich & Kearney, 2013).
Additional Note: Observing and learning from others can also help organizations avoid common
pitfalls. By analyzing successful and unsuccessful innovations across various sectors, companies
can refine their strategies and enhance their chances of success.
10. Recombination, Regulations, and Futures

Definition: Combining existing ideas; navigating policy; forecasting trends.

Explanation: Recombination involves merging ideas to create new solutions, while regulations
can drive innovation in compliance and privacy. Futures thinking, like scenario planning (e.g.,
Shell’s energy transitions), prepares organizations for potential disruptions.
Forecasting Tool: Delphi method and AI predict disruptions (Ottosson, 2019).
Additional Note: By actively engaging in trend analysis and regulatory forecasting,
organizations can position themselves ahead of the curve. This proactive approach not only
mitigates risks but also identifies new opportunities for growth and innovation.

Key Takeaways

 Innovation springs from diverse sources: knowledge, needs, crises, or

recombination.
 User-centricity and inclusive design unlock untapped markets.
 Agility in leveraging constraints (crises/regulations) drives breakthroughs.

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 HU FICHE SELALE CAMPUS
Course Title: Innovation management and entrepreneurship
Course Code: MGMT4012
Credit Hour: 3: ECTS: 5
By: Ayele A (MBA)
Chapter Four: Exploiting Networks

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