Deck 12: Managing Innovation and Fostering Corporate Entrepreneurship

Question 1

The term innovation refers primarily to an invention that uses the latest technologies.

Answer 1

False
Explanation: Innovation involves using new knowledge to transform organizational processes or create commercially viable products and services. The sources of new knowledge may include the latest technology, the results of experiments, creative insights, or competitive information.

Question 2

The term strategic envelope refers to the scope of innovation efforts of a firm.

Answer 2

True
Explanation: Firms must have a means to focus their innovation efforts. By defining the strategic envelope, the scope of innovation efforts of a firm, firms ensure that their innovation efforts are not wasted on projects that are outside the domain of interest of the firm. Strategic enveloping defines the range of acceptable projects.

Question 3

Corporate entrepreneurship is sometimes called intrapreneurship.

Answer 3

True
Explanation: Corporate new venture creation was labeled intrapreneuring by Gifford Pinchot, because it refers to building entrepreneurial businesses within existing corporations.

Question 4

Disruptive innovations are those that overturn markets by providing an altogether new approach to meeting customer needs.

Question 5

Sustaining innovations are those that overturn markets by providing an altogether new approach to meeting customer needs.

Question 6

As an industry matures, there are greater opportunities for change and so innovations tend to be more radical.

Question 7

Research indicates that leaders of innovative firms spend 50 percent more time on discovery activities than the leaders of less innovative firms.

Question 8

Graphene can be magnetized and used in building computer systems that use spintronics, a technology that involves processing a signal using magnetic spin rather than electric change. It has the potential to replace silicon as the primary component of semiconductor chips. This is an example of disruptive innovation.

Question 9

Proctor & Gamble is centralizing 20 to 30 percent of its research efforts in a new corporate-level business creation and innovation unit. They believe that this will assist them only with developing incremental innovations that will help the overall bottom line.

Question 10

Strategic renewal and the pursuit of new venture opportunities are the two primary aims of corporate entrepreneurship.

Question 11

Innovation efforts of the firm rarely benefit from partnering with non-business entities such as universities and government agencies.

Question 12

Radical innovations are evolutionary applications of novel ideas within existing paradigms.

Question 13

Radical innovation often involves open-ended experimentation which can be very time consuming.

Question 14

The Dutch Boy twist and pour paint container is an example of a high tech source of innovation.

Question 15

A disruptive innovation appeals to less demanding customers who are seeking more convenient, less expensive solutions.

Question 16

Process innovations are often associated with a low cost leadership strategy.

Question 17

There are two major avenues through which companies can expand or improve their business. One is innovation and the other is strategic renewal.

Question 18

For innovation team members to work enthusiastically on innovation projects, it is important to separate the performance of individual team members from the performance of the innovation itself.

Question 19

For innovation projects, people from inside the company may have greater social capital and know the organizational culture, but this may inhibit them from thinking creatively.

Question 20

Product innovations are commonly associated with a differentiation strategy.

Question 21

When evaluating the effectiveness of the venturing initiatives of a corporation, an assessment needs to be made of the external competencies of the firm in order to determine if goals such as leveraging existing assets, building new knowledge, and enhancing company capabilities are likely to be met.

Question 22

Exit champions deal in uncertainty and ambiguity. Product champions reduce ambiguity by gathering hard data and developing a strong case for why a project should be killed.

Question 23

New venture groups are formed within corporations by individuals or a division and usually have the same mandate as a typical research and development department.

Question 24

Corporate venturing that is focused permeates all parts of the organization and involves every member of the organization.

Question 25

Corporate business incubators often provide physical space and business services to internal ventures, but not funding.

Question 26

The strategic goals of corporate entrepreneurship are often just as important as the financial goals.

Question 27

The Taco Bell Waffle Taco was the result of a team development effort. This is an example of a new venture group (NVG) identifying, evaluating, and cultivating a venture opportunity.

Question 28

The failure of the Motorola Iridium global satellite telecom project was a result of its exit champion.

Question 29

According to the text, new venture ideas must pass through two critical stages to be implemented by corporations: project definition and project impetus.

Question 30

Only about 50 percent of corporate venturing efforts reach profitability within six years of their launch.

Question 31

Exit champions are often reluctant to gather hard data about a venture because it might kill the project.

Question 32

Product champions are critical during the period after a new venture project has been defined but before it has gained momentum and achieved project impetus.

Question 33

Firms using a focused approach to corporate entrepreneurship typically separate corporate venturing activities from ongoing operations of the firm.

Question 34

Exit champions, different from product champions, must be willing to energetically stand up for what they believe.

Question 35

Most CE programs have strategic goals. The reasons for undertaking a corporate venture include maintaining the corporation base of resources and experience.

Question 36

One of the important questions the corporation must address in assessing the effectiveness of its venturing initiatives is that of the sustainability of its basis of competitive advantage.

Question 37

Business incubators are designed to support fledgling entrepreneurial ventures until they can operate as stand-alone businesses.

Question 38

Product champions are the employees who identify new product ideas or services.

Question 39

In evaluating the effectiveness of the venturing initiatives of a corporation, marketplace acceptance of the new products or services needs to be assessed.

Question 40

Dispersed approaches to corporate entrepreneurship are often found in organizations with a strong spirit of entrepreneurship.

Question 41

Corporate ventures that use real options logic in decision making tend to keep total investment low in order to minimize the downside risk of a project.

Question 42

Fostering creativity and experimentation is the only innovativeness technique that company managers should consider when identifying and launching corporate ventures.

Question 43

First movers in an industry often capture above-average profits, but usually find it difficult to maintain early market share gains.

Question 44

Financial risk taking involves the risk an executive assumes in taking a stand in favor of a strategic course of action.

Question 45

Escalation of commitment is the tendency for managers to irrationally stick with an investment, even one that is broken down into a sequential series of decisions, when investment criteria are not being met.

Question 46

According to Peter Drucker, successful entrepreneurs typically are risk takers.

Question 47

The term skunkworks is used to refer to a type of in-house facility that corporations use to develop entrepreneurial ideas.

Question 48

Managerial conceit occurs when decision makers who have made successful choices in the past come to believe that they possess superior expertise for managing uncertainty.

Question 49

Real options logic is useful when corporations consider stock options as a way to finance entrepreneurial ventures.

Question 50

Intel uses option contracts for the right to purchase key pieces of equipment at a specific future date. They simulate the likelihood that they will need to purchase a specific piece of equipment and then create the options contracts to reduce risk and potentially save money.

Question 51

Options exist when the owner of the option has the obligation to engage in certain types of transactions. The most common are stock options.

Question 52

Risk taking can lead to competitive advantage, but it needs to be managed carefully.

Question 53

One of the potential pitfalls of real options analysis is that managers may have the incentive and know-how to game the system.

Question 54

Firms can act proactively by introducing new products or technological capabilities after the competition has entered the market. Amazon and its online bookselling market is a good example of this.

Question 55

Stock options offer the prospect of high gains with relatively small up-front investments that represent limited losses.

Question 56

Real options analysis helps managers make investment decisions involving large irreversible commitments of financial resources.

Question 57

A real estate option grants the holder the obligation to buy or sell a piece of property at an established price sometime in the future.

Question 58

Competitive aggressiveness is a response to threats whereas proactiveness is a response to opportunities.

Question 59

Business risk taking refers to the risk associated with entering untested markets or committing to unproven technologies.

Question 60

The more specific the human capital of the manager becomes, the easier it is to transfer it to other organizations.

Question 61

The innovation dilemma known as seeds versus weeds refers to

A)choosing to pursue radical rather than incremental innovations.
B)choosing to pursue product rather than process innovations.
C)promoting organizational stars onto innovation teams rather than involving all employees in innovation efforts.
D)choosing to pursue investment in one innovative idea over another.

Question 62

Creative intelligence involves the ability to see patterns in data, integrating data, and making insights. Which of the following are the four patterns of action managers should take in order to develop more creative and higher potential innovations?

A)observing, experimenting, cataloging, and networking
B)questioning, observing, integrating, and networking
C)questioning, observing, experimenting, and networking
D)observing, experimenting, cataloging, and integrating

Question 63

Innovation involves introducing or changing to something

A)less costly.
B)with broader marketplace appeal.
C)new.
D)different.

Question 64

Which of the following is not an advantage of collaborating with strategic partners in order to innovate?

A)obtaining skills and new knowledge from outside sources
B)making firms identify their own strengths and weaknesses
C)managers clarifying what an innovation project requires to be successful and who will accomplish it
D)decreasing economies of scale

Question 65

Individuals with highly innovative DNA traits have the ability to connect seemingly unrelated questions, problems, and ideas from different fields that allows them the opportunity to creatively see opportunities others miss. This is referred to as

A)associating.
B)integrating.
C)visioning.
D)allocating.

Question 66

In the 1990s, DuPont used its knowledge of plastics to develop biodegradable plastic products. This is an example of

A)focusing on process rather than product innovation.
B)defining its innovation efforts within the context of its strategic envelope.
C)radical innovation.
D)public relations, since plastics are not biodegradable.

Question 67

According to Exhibit 12.1, the continuum of radical and incremental innovations, frozen yogurt represents mostly _______________ innovation, because ______________.

A)incremental; it extends sales in an existing market by enabling higher margins
B)radical; it is a small improvement on existing products
C)radical; it is a fundamental change that evokes a major departure from existing practices
D)incremental; it is a small improvement on existing products

Question 68

Innovations that extend sales in an existing market, usually by enabling new products or services to be sold at higher margins are known as _____________ innovations.

A)radical
B)disruptive
C)technology
D)sustaining

Question 69

Which of the following is not characteristic of a disruptive innovation?

A)It is usually more sophisticated technologically.
B)It appeals to less demanding customers.
C)It is typically a less expensive solution for meeting a need.
D)It usually takes root in a new market or the low-end of an existing market.

Question 70

______________ refers to efforts to create designs and applications of technology to develop new products, while ______________ refers to efforts to improve the efficiency of organizational systems such as manufacturing and operations.

A)Radical innovation; incremental innovation
B)Breakthrough innovation; instrumental innovation
C)Product innovation; process innovation
D)Product innovation; service innovation

Question 71

Companies such as Zimbra, Inc. and Best Practices LLC enhanced their entrepreneurial positions by using competitive aggressiveness techniques such as entering the marketplace with drastically lower prices and by copying successful business models.

Question 72

Incremental innovations

A)are usually highly disruptive.
B)usually represent technological breakthroughs.
C)are usually small improvements in products and processes.
D)nearly always can be patented.

Question 73

Radical innovations

A)often result in quick profits.
B)often represent technological breakthroughs.
C)usually apply simultaneously to products and processes.
D)usually cannot be patented.

Question 74

McGrath and Keil researched the types of human resource management practices that effective firms use to capture value from their innovation efforts. Which of the following is not one of their findings?

A)Create innovation teams with experienced players.
B)Require that employees serve in the new venture group as part of their career climb.
C)Transfer people to mainstream management positions after they have experience in the new venture group.
D)Integrate the performance of individuals with the performance of the innovation.

Question 75

New technology is an important source of new ideas because it

A)is seen by the customer as being important.
B)provides the manpower that firms need to make new products and services.
C)automatically reduces organizational waste.
D)provides the raw material that firms use to make innovative products and services.

Question 76

______________ produce fundamental changes that can transform a company or even revolutionize an industry, while ______________ enhance existing practices and often represent evolutionary applications of fundamental breakthroughs.

A)Technological breakthroughs; product-market breakthroughs
B)New technologies; new paradigms
C)Incremental innovations; radical innovations
D)Radical innovations; incremental innovations

Question 77

The innovation dilemma known as building capabilities versus collaborating refers to

A)developing innovation skills internally versus partnering with qualified outsiders.
B)building innovative products in-house versus outsourcing.
C)building credibility by launching products ahead of potential collaboration partners.
D)incrementally launching a product.

Question 78

Whereas ______________ are often associated with a low cost leader strategy, ______________ are frequently an important aspect of a differentiation strategy.

A)process innovations; product innovations
B)product innovations; service innovations
C)radical innovations; instrumental innovations
D)marketing innovations; management innovations

Question 79

In a typical corporation, which of the following factors does not determine how entrepreneurial projects will be pursued?

A)structural features that guide and constrain action
B)corporate culture
C)organizational systems that foster learning and manage rewards
D)number of innovation projects in the pipeline

Question 80

Which of the following is not a dilemma faced by corporations trying to manage the innovation process?

A)launching incremental rather than preemptive innovations
B)emphasizing marketing over management innovations
C)preferring experience over initiative
D)choosing internal rather than external staffing