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100

Name three out as four axioms as well as why the fourth is not specified

  • For a given idea, there is more than one alternative path by which value can potentially be created and captured
  • Resource and strategic constraints prevent the pursuit of more than one alternative at once
  • Learning about a strategic alternative prior to a commitment provides information about the value of subsequent explorations and also allows one to refine evaluation of previously considered alternatives

Uncertainty is in everything

100

What are the two steps for choosing your competition?

And elaborate upon execution vs control + collaborate vs compete

Two steps:

1. Choose which industry to enter and compete in?

  • Define the relevant industry
  • Identify the key players/competitors in each of the five forces and group them in different categories
  • Identify the underlying drivers of each force
  • Assess the overall industry structure

    2. Choose with whom to compete – strategic positioning
    • Build defences against the threat of strong competitive forces
    • Exploit the opportunities among the weak forces

  • Whom to compete with -Cooperation or Competition
    • Is the ideal route to profitability through competing or through collaboration?
    • Especially when complementary assets are required, it may be fruitful to consider a cooperation strategy – lower the cost of entering, enhance the speed and scope of diffusion of the idea, and lessen the threat of competition
    • Go it alone and choosing a competition strategy represent freedom to operate and secure the sole rights for capturing the value

  • How to compete - Execution vs Control
    • Do we execute and launch rapidly or do we first make sure we have full control of the key assets
    • Execution means you can move quickly and engage a larger set of key stakeholders at an early stage - opens for external inputs for how to operate
    • Betting on control allows for the establishment of bargaining power once the firm has been established but may also hamper and increase cost of establishing
100
Explain the relationship between speed and entrepreneurship
  • Speed in decision making among management has proven exceedingly important – not least for the performance and even the viability of firms
  • Being quick also allows for proper timing which can be a major competitive advantage
  • For entrepreneurs even more important:
  • The windows of opportunity close quickly – the speed in evaluating entrepreneurial opportunity is core for capturing them
  • Even minor threats can have detrimental effects if not acted upon quickly

Those spending less time on solving problems spend more time on exploration activities

100

We need to position ourselves in 4 dimension

- Founders

- External position

- Internal capailities

- Ecosystem


Explain them

Identity and Founder:

  • Founder and firm identity can sometimes be linked
  • As the identity can be inherent in the entrepreneur
  • This person may act as a catalyst for promoting the firm and its identity

Why can this be dangerous?

If something happens to that specific person, the firm might loose competitive advantage as this persona is part of the company

If we sell the company, we sell the person as well

Internal capabilities

  • 1. Essential that internal people are aware of the identity ans act accordingly
  • 2. Can be done through the founder (at least in the initial stage). Founder may be in place to guide this from the beginning but eventually others such as employees need to be involved in shaping the identity
  • 3. MAtch internal capabilities to the identity since the capabilities often shape and strenghten the identity
  • 4. Early on it may be difficylt to attract the right capabilities

    • As the identity is weak established
    • Hiring the first internal stakeholders can be very difficult, but ifyou set up as specific identity this can help us hiring people and hiring the right people

      • As we manage to create the rigt perception
  • 5. As the firm developes its identity will be more visible and you will attract the right employees
  • 6. It may help to create a coherency in internal decision making through an identity established culture

External Positioning:

  • 1. What is it you want to be well known for in the competitive landscape?
  • 2. How makes you distinct beyond the product that you sell?
  • 3. Is the identity captured by the product, by the supply line, the distribution channels, by lower prices, or is your identity based on something completely different?
  • 4. Early on it may be difficult to get the signal across
  • 5. Consider the identity in terms to the traditional strategy framework: customers, suppliers, current rivals, future rivals and close substitutes

    • Porters five forces.
  • 6. The identity can be instrumental in sending signals to others in the market or in the markets value chain

The Ecosystem:

  • 1. Location of the business may say a few things about the entrepreneurial venture
  • 2. Your technology development and your association with the technology stakeholders

    • (twitter and IPA) intellectual propoerty right agreement. Twitter was not doing well, as they needed key capabilitites and individuals that would generate more value and finetune the software of twitter. Thus, twitter signed the IPA giving the power to the employees and attracted specific programmers
  • 3. Your position in the value chain and how you treat these specific stakeholders ( Roots Food)

    • Superfood firm, who provide moringa. understood the position of the farmers in the phillipines - used their supply chain to build up their identity
  • 4. Being part of or opposing a standard of the industry

    • Uber is positioned as aggressive whereas halo is less aggressive positioned and collaborate instead
  • 5. How you position yourself in the consumer environment and perhaps take an active part
  • 6. Engagement in political questions or activities
100

What is Absorptive capacity?


And what is the participative and directive leadership style?

the ability to learn and understand new things + connect them to existing bodies of knowledge you have

Diversity is a virtue, but to much diversity is not good à study that shows a curial linear between diversity and performance

Participative: Resembles democratic leadership à makes room for the group to influence the project à room for reflective à preferred for high heterogeneity.

Directive: Resembles authoritarian à preferred for low heterogeneity à will create more reflection

In role involvement: does not function well between participative leadership and high heterogeneity. Therefore, directiveness is the preferred leadership style in this case.

200

Explain Choices, constraints and scarcity

and why choices = commitment

Entrepreneurship is about making choices among an abundance of possible paths

These choices are unconstrained by prior activities - but alternatives are characterized by uncertainty

Resource scarcity limits the number of paths that can be followed

Abundance, unconstraint and scarcity creates a setting in which choices become paramount

Commitment because

Search through experimentation allows for identification of alternative routes through knowledge generation

Experimentation on one of them not requires commitment into a path

Commitment closes other potential options for strategic action

200

In L2 we had an exercise - what were the take-aways

  • Competition must be viewed more broadly to include not only direct rivals but also a set of other forces in an industry: buyers, suppliers, the potential new entry of other firms, and substitutes.
  • The five-force framework is often used to analyze a given industry structure faced by an existing firm, but…
  • For entrepreneurs, the five-force framework can be used as a tool to analyze and compare the competitive environments of different industries.
  • This analysis informs entrepreneurs about the choice of competition: which industry to enter, which forces in this industry to compete with, and how given their resources and capabilities.
  • A start-up can gain and sustain competitive advantage through strategic positioning in the industry structure.
    - Build defense against strong competitive forces, or
    - Establish a position in an industry where the forces are weakest
200

Why does tech choice matter?

IN THE CONTEXT OF ENTREPRENEURSHIP, TECHNOLOGY IS DEFINED AS THE APPLICATION OF HUMANITY’S KNOWLEDGE, TOOLS AND CRAFTS TO A PRACTICAL PURPOSE:

  • Tool (e.g. computer)
  • Technique (e.g. Machine learning algorithm, programming language

Why technology choice matters

• All technologies can hold the potential to create significant value. But there are tradeoffs between the level of a technology and its rate of improvement.

  • E.g., Airport biometric identification
  • Optical fingerprint recognition
  • Iris scans
  • Facial recognition
  • Electric cardiac signals

A defined technology choice provides structure of allocating scarce resources

  • Capital
  • Human talent/Skill sets
200

Explain the principle of coherence in choices

  • Reinforce-mechanisms across choices
  • Can act as a distinct competitive advantage which in itself may help fight off imitations
  • May assist the organisation in making more fast and efficient decisions - economise on time


200

Explain the relationship between the diverse team and exploration vs exploitation

  • Prior common work place often means shared culture, values, language, narratives, beliefs etc.
  • Common frame of reference and the ability to come to terms more quickly and establish common routines
  • Commonalities precipitates low levels of diversification and hence creativity - acts in unity as one leader
  • Different prior affiliation also means a more rich social network and social capital which represents an extended arm resources
  • The increased diversity/heterogeneity offers new perspectives and ways of thinking which is the route to innovation
  • There is access to a more diverse sets of inputs for the further development of the firm and hence the greater possibility of combining knowledge bundles previously not
300

Explain the four choices with value capture and value creation

  • Value creation


    Customers: Often opportunities may be finetuned to serve a multitude of different customer segments but cannot at the onset due to resource scarcity


    Technology: Technologies can come in all sorts of shapes and often multiple technologies are choice candidates


    Value Capture


    Competition: Standard strategy insinuates a formal analysis of the state of things – but entrepreneurs are in a position to formally shape it or choose not to compete


    Identity: identity is a means through which entrepreneurs position themselves to potential partners and stakeholders in an efficient and direct manner

300

When do we want to target the market and how do we cross the chasm? 

S-curve development

- not so many innovators and laggards. We want to target the market once the early adopters move in to the market - this is where the growth starts to take off.

- The tipping point - the s-curve shifts from a growth stage

How to Cross the Chasm?

  • Identify and secure a beachhead market in the mainstream market, capture the early majority. Capturing the consumers that will be the ambassadors of our product
  • Nurture it with the whole product (products + services)
  • Ensure that
    • the first set of customers completely satisfy their buying objective. The product should fit their needs 100% and that they are receiving something beyond what they expect -- Excedengliy high consumer surplus
    • this first set of consumers later will serve as a pragmatist customer base that is referenceabl
  • Establish a strong word‐of‐mouth reputation among these customers

WOM (Word of Mouth) - diffusion model, which explains how product enfuse into society by consumers becoming ambassadors

Do not think about the profits at the very beginning of a startup.

300

Explain the window of opportunity in relation to technology

While established firms are able to manage along the S‐Curve, many established players have trouble “switching” S‐Curves

From the perspective of an entrepreneur, the new S-curves allows the choice of a technology and the ability to reshape an industry

The growth stage à when entrepreneurs can matter on evolving on an excisting product which can be innovated further

In making a choice of technology, entrepreneurs should:

• Consider the context of all technologies available to them

• Evaluate the trade‐off between level and rate of a technology

Consider how their choice of technology to adopt will cohere with the choices of competition, customer and identity:

  • With whom and how they plan to compete
  • The interplay between customer and technology
  • The implications on the identity of the start‐up
300

Give a short account of the guest lecture

Differentiator for lunar way

- Digital DNA

Mindset and culture

- differentiate themselves from other companies

- focus on an innovative mindset - "how can we do it differently than executed know?"


Business structure

- Flat structure


Focus on 

- being fast - execution

- superiority

- recuiting only the best developers


Strategy Compass:

  • Started with value chain strategy, Collaborate and Execute

    • offering certain sets of banking offers
    • Collaborate with nykredit gaining legitimcay, compliance

By starting with VC, they can secure themselves, however, moving forward, they will move towards disruption releasing themselves from Nykredit.

nykredit benefits:

Probably aiming at funneling Lunar Way into their organisation, thus becoming superior within tech, as they integrate Lunar Way's systems.


Main focus, Lunar Way

- Moving fast, thus executing

- Starting with collab, thus Value Chain Strategy

- Moving towards competing, thus Disruption

300

Explain the relationship between shared experience and performance, but also why it can be difficult to attract old employees

  • New firm survival is associated with a tightly connected employee structure via shared prior work experience (Sarada and Tocoian, 2015).
  • The failure rate of spin-out firms decreases with the size of the employee team who made the transition together from parent firms (Agarwal, Campbell, Franco and Ganco, 2015)
  • There are substantial advantages of recruiting early employees from prior work ties (Wasserman, 2012)

Problem:

  • Yet, it may be difficult to attract individuals for working in startups
  • Many individuals may not be attracted to startups as a work place
  • Entrepreneurs can hardly pick and choose but may be forced to take what they can get
  • We need to understand the underlying conditions for hiring the right people
400

Explain the four choices and why the choices may be constraint

Customers

  • The right choice may create direct value but may also create indirect value by offering insights as to how to serve other segments
  • The wrong segments may limit your future flexibility in terms of targeting other customers - sequence of serving different segments matter
  • The market promise of a product is not independent of the first-choice customers - it is an endogenous mechanism
  • Choose a segment that may prove instrumental in order to target other segments later on – this segment may not be the optimal segment from the beginning as a stand-alone segment

Competition

  • Because entrepreneurs often move into the unknown based on previously unseen combinations, it may often be very difficult to do a standardized analysis of the competitive landscape
  • Two-dimensional choice for entrepreneurs:
    With whom will you compete?
    How will you compete?
  • It is often a matter of choosing whether to collaborate with incumbent firms or to establish a completely new value chain and compete directly with the incumbent
  • Larger sunk cost makes entry more costly – perhaps more rational to pursue a collaboration strategy (e.g. biotech)

Tech

  • Technologies evolve over time and the focus on different types of technologies within an industry changes as the industry evolves
  • Foster’s S-curves: Early on returns are low per investment for incremental changes.
  • As time passes, returns increase as the investments into technology suffer under diminishing returns
  • Newly started firms are free to choose different technological trajectories while incumbents are more constraints - lock-in
  • Entrepreneurs has to make the technology choice endogenous and carefully consider the choices rather than successful choice happens by chance
  • Entrepreneur actually choose between different degrees of exploration and exploitation
  • Choosing a path more towards exploitation requires more focus on why the technology used is advantageous compared to incumbents

Identity

  • Characteristics that separates the firm from other firms “… they have no core competencies, firm culture, or reference firms in analogous industries to anchor (or constrain) their vision for the future of the firm “
  • There is a great degree of inertia in such an identity making it immensely difficult to alter once it is installed
  • This choice needs to be aligned with founder purpose, internal capabilities, the external environment and the ecosystem

Constraints

  • Some industries and environments may make it difficult to make free choices
  • There may be some conditions that limits the number of choices you can make “competitive interaction between start-up innovators and established firms depends on the presence or absence of a “market for ideas” Gans and Stern, 2003
  • Biotech and Pharmaceuticals has a well-developed market for ideas/technologies - if it had not the situation may have looked very different
400

What is the Schumpeterian Hypothesis?

  • Schumpeterian hypothesis – market concentration (and large firms) supports innovation
  • Monopoly firms have a greater demand for innovation as their market power will enhance their ability to gain economic profits from their innovations
  • The monopoly firm will create a large supply of innovations because ’there are advantages which, though not strictly unattainable on the competitive level of enterprise, are as a matter of fact secured only on the monopoly level’.
400

Compete vs collaborate?

Consider if you Compete or Collaborate

• Compete with established firms

  • Will they be able to establish a competitive advantage with the choice of technology before incumbents erode it?

• Collaborate with established firms

  • Can they integrate into existing systems using this technology without creating prohibitive frictions for incumbents?

• Remember that the entrepreneur do not necessarily have to pursue a new technology, entrepreneurs could also apply a mature technology to a new vertically located business


Consider the entrepreneurs as endogenous to the technology

• Entrepreneurs are not constrained to being only adopters of technology,, but can choose to innovate upon a technology and shape its future trajectory.

• But whether to explore or exploit is a choice of the innovator / manager

400

What is the premise of E leadership

Requires cognitive ambidexterity

Presumes two separates sets of approaches to thought and action:

Prediction Logic & Creation Logic

Ambidextrous: skilled in both and ability to switch between

400

Explain the issue of hiring old employees in relation to sectors and why it is easier to attract from smaller firms

The issue:

On the one hand:

  • It is implicitly assumed that entrepreneurs have equal access to employee candidates among former coworkers (Agarwal et al. 2015, Beckman 2006).

On the other hand:

  • the characteristics of coworkers are not independent of work context (özcan and Reichstein 2009, Sørensen 2007, Elfenbein et al. 2010).
  • Willingness to work for start-ups
  • Skills suitable for start-ups


Public sectors are difficult content to find initial employees.

  • Like routines, security etc. 


Jack of all traits:

The ability to take on multiple tasks.

When small start-up, you often have to take on multiple roles, which is not often the case in large established firms

  • e.g. e-mail specialized, e-commerce etc. 


Lazear’s Decision Model of Entrepreneurship

If you are very specialized in a certain thing, you are not necessarily attractive in an entrepreneurial settings.

If you are on the 45 degree line, you are more attractive in E setting. 


Small firms and hires 

Costly to transfer skills from large firm to a startup, thus you are discounted 

If from small firm, might benefit from moving into a startup, thus the hurdle for attracting these Is much lower. 

So look for small firm employees - more likely to wanting to be hired.


The small size advantage
• Hiring employees with higher capability

• Increasing job match

• Building work teams motivated by future gains


Implications

• An alternative explanation on "the small firm effect": Small firm effect à a lot of start-up founders come from small firms à because you can also find employees here

• Relating the initial differences in firm demographics to heterogeneity across entrepreneurs' prior employers

• Employee retaining strategy for small firms



To overcome the hurdle of hiring/retaining

• Salary

• No-pecuniary rewards

• Being part of the identity

• Being part of developing something exciting

• Challenge the existing order (rebels)

• Exploring new ways

• Small tight team with close linkages

• etc.

• Stock options/warrants

500

Why should there always be two alternatives?

Finding only one clear path to pursue is unlikely

Large differences in promise across two alternative paths demands more search

Two alternatives with similar promos - stop search for alternatives

No bad news on one path may suggest little bad news on alternatives as well

Finding two equally viable alternatives provides confidence in the oppertunity

march is costly and resource demanding but may offer crucial insight

500

Why are small firms good and what is the difference between large and small firms?

Small is Beautiful

  • Distribution of Economics Power
  • High market concentration leads to economic inefficiencies
  • Consumer surplus in maximum
  • Better able to care for individual tastes of consumers
  • Responsible for employment growth
  • Challenge existing order by creating competitive environment
  • Radical innovations are primarily achieved by small firms

Small vs large

  • We tend to think of large firms to be elephants
  • We tend to think of small firms as flexible organizations with virtues larger firms find difficult to establish
  • We tend to think of small firms as different from larger ones when it comes to innovation performance
  • Small firms are often thought as the source of creative destruction
  • It does not have to rearrange an existing business platform with established routines and practices to the same extent
  • Small firms do not risk cannibalization when launching a new product - launch those discovered
  • They need not battle the internal belief in the technologies that led to success in the past
  • Large firms engage in more complex and large scale projects
  • Societies expects larger firms to take on other responsibilities in a grander scale which small firms cannot wherefore smaller firms are more free to operate
500

What is identity

  • It is not the firm vision since it is foremost embedded in the perception of the stakeholders

    • Vision is normally written down. Identity reaches far beyond. Identity is embedded in society, instated perception we get just by being imposed to the firm.
    • A way of communication, that is not written down
  • The identity can be affected by: product, advertisement, logo, firm name, office location, your stationary for communication, how you/ employees present yourself/themselves over simple communication channels, how your employees act in public, etc. - as long as it is visible to your stakeholders and makes them aware
  • Three steps: Determine the identity, design your identity and communicate it

Identity suggests that:

  • Something distinct that characterises the firm
  • Firms can be separated from each other through these specific characteristics
  • Firms are goverened by simple rules and procedual norms of business that needs to be coherently installed in order to characterise the firm

    • More than just transaction costs, so firms can to some degree be defined by the above
  • Firms can establish a competitive advantage by non tangible means in the form of perceptions in the public
500

What are the principles of a Prediction Approach to Thought and Action (the way established firms operate) and a Creation Approach to Thought and Action

Principles of a Prediction Approach to Thought and Action (the way established firms operate)

1. Goals are predetermined and achievable given known information.

2. Enough information is known for rigorous analysis and testing.

3. Tools and frameworks are available to guide decision-making.

4. Optimal solutions are identifiable within a given set of constraints.

5. Through analysis, risk can be minimized or mitigated to achieve optimal returns.

6. Outside organizations are seen as competitors and barriers to future growth.

--> A predicted way of giving tasks and operating

Principles of a Creation Approach to Thought and Action

1. If perceived resource needs are beyond your control, start to create

something with what you have.

2. When the future is unpredictable, create the future by shaping

opportunities.

3. When operating with limited information, take action in the real

world to acquire information but expect and leverage surprises or

failures.

4. Optimal decision-making is never possible in highly uncertain

environments. By starting something with current available means,

you are “satisfi cing” to take swift action.

5. Determine what you are willing to lose (money, time, and social

capital) to engage in the activity. Once you know what you are

willing to lose, risk is no longer an inhibitor of entrepreneurial

action.

6. Outside organizations, customers, and self-selected stakeholders are co-creators and not competitors.

Lack of information and unable to predict anything, but we have a certain number of items from where we have to find the best possible outcome

Overlap between the two frameworks and gans and sterns --> We need to focus on switching between creation and prediction

500

What are the three leadership styles we have covered in class and what are the (dis)advantages of each one?

Authoritarian leadership

  • All responsibility is held by the leader and the leaders is the sole decision-maker with little efforts to consult others
  • Decisions made are communicated to subordinates and prompt implementation are expected
  • The values and will is imposed on the subordinates
  • These work conditions are often characterised by little or no flexibility
  • Guidelines, procedures and policies are all natural additions of an autocratic leader dictating his/her values
  • There are very few situations that can actually support autocratic leadership.
  • Creative and grouporiented employees have no preferences for this style

Is not bad leadership in itself, but can be useful e.g. in the army – they can produce very sufficient outcomes at a rapid spead – hence no one will question directictions etc., but not very creative groups.


Democratic

  • Subordinates involved in decision-making - focus on and valuing subordinates’ contributions
  • Democratic leader holds final responsibility, but may delegate authority to other people who is deemed better suited to have final say on a specific project
  • Communication is active upwards/downwards
  • One of the most popular styles
  • Boosts employees moral since it makes them believe their opinions matter
  • Promotes fairness, competence, creativity, courage, intelligence and honesty.
  • Can be instrumental for major changes since the employees will take ownership of these changes
  • May be falling short when decisions need to be made quickly

An issue: too much time spent on finding the best/most creative idea à tasks must be delegated

A leadership style good for creativity, but not the preferred leadership style for time efficiency.


Laissez-Faire

  • Gives full authority to employees - no supervision and little feedback if any at all
  • Freedom to work and progress as is preferred by the individual/team/department
  • Little to no interference from direct leader
  • Is consistently the least satisfying and least effective management style
  • Some types may enjoy working in these conditions but the majority of individuals do not
  • Requires highly trained employees
  • May lead to aimless uncoordinated efforts which may lead to poor production, lack of control and eventually increasing cost
  • Can lead to either appointment of new leader or division of labour

So little information it builds frustration.

Two possible outcomes from this type of leadership:

  • Group assigns new leader
  • Great level of division of labor
    - Most often means leader loses role as leader
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