Innovation and entrepreneurship
Many MBA programmes put a lot of emphasis on innovation and entrepreneurship. Innovation is about exploiting new ideas – coming up with business ideas, then developing them further so they become commercially viable. Entrepreneurship is a related concept, and it is defined as the pursuit of opportunities without regard to the resources you control – it typically applies to independent (startup) businesses, but it can also be applied in the corporate setting. In this section we talk about five of the most important models for helping innovators or entrepreneurs in their efforts.
Coming up with new business ideas is the first step in the process. A classic way of doing this is brainstorming, which is a group-based process for generating a lot of ideas around a common theme. More recently, it has become popular to apply design thinking to the innovation challenge. This is an approach that blends intuitive and rational views of the world, and it puts a lot of emphasis on experimentation and prototyping.
There are also many sophisticated models for structuring the innovation process in large companies. Most firms use some sort of innovation funnel or stage/gate process for sorting through and selecting the most promising business ideas for investing in. Scenario planning is a way of looking out to the future to identify new opportunity areas, and then using these insights to decide what new technologies, products or services the company should invest in.
For independent entrepreneurs, the lean startup model has emerged over the last five years as the dominant way of thinking about defining and developing business opportunities. In contrast to the traditional notion of a carefully thought-through business plan, lean startup thinking puts an emphasis on trial-and-error, hypothesis testing, and rapid pivoting to new opportunities when the original idea proves unworkable.
Finally, we describe two very important conceptual models that apply equally to both established and startup companies. Disruptive innovation is a way of understanding why some new technologies make it possible for startups to overthrow established leaders, as happens a lot in the world of digital media, while other new technologies help the existing leaders to stay ahead. Open innovation is a way of understanding the increasingly networked approach to innovation we see today. Established companies, for example, no longer do all their research and development work themselves – they will often partner with startups, and they will often use ‘crowdsourcing’ techniques to tap into new ideas beyond their traditional boundaries.