# Innovation and Entrepreneurship

Business I · Business Administration · https://tryals.app/learn/business-i/innovation-and-entrepreneurship

## Creative Destruction & The S-Curve

Schumpeter defined **creative destruction** as new combinations that build new industries by demolishing old ones. The entrepreneur is its agent; the manager's harness.

**A taxonomy of innovation**:
- **Product vs process**: a new thing to sell versus a new way to make it.
- **Incremental vs radical**: refining the engine versus replacing it with a motor.

**Technology S-curves** map a technique's life: slow early progress, explosive middle, maturity's plateau. The strategic moment is the **crossover**: the new curve passes the old plateau, and decades of advantage change sides. Sailing ships and film photography were improved brilliantly right up to irrelevance.

## Disruptive Innovation & Lean Craft

**Sustaining** innovations improve what existing customers value (incumbents win). **Disruptive** innovations start worse on mainstream metrics but cheaper, take root in niches, and swallow the mainstream.

| | Sustaining | Disruptive |
|---|---|---|
| Starts | Better | Worse on mainstream |
| Beachhead | Existing market | Ignored niche |
| Won by | Incumbents | Entrants |

**Entrepreneurship** is opportunity pursuit beyond controlled resources. The **lean startup** cycle builds a minimal version, measures, learns, and pivots.

**Corporate entrepreneurship** uses **ambidextrous structures** to separate exploring units from the exploiting core. **Common pitfall:** Disruption looks laughable at first, which is why incumbents walk into the blade.

## Practice questions

9 of this lesson's 14 practice questions, with answers. The full set is in the app.

### 1. Sustaining or disruptive? Sort each pattern.

**Answer:**

- Sustaining innovation: Improves the metrics existing customers already pay for, Incumbents usually win this game
- Disruptive innovation: Starts worse on mainstream metrics, but cheaper, Takes root in a niche the leaders ignore, Improves upmarket until it swallows the mainstream

**Why:** The asymmetry is the theory: incumbents dominate sustaining races because their best customers demand them, and lose disruptive ones because those same customers scoff at the toy.

Page: https://tryals.app/practice/business-i/innovation-and-entrepreneurship/sustaining-or-disruptive-sort-each-pattern

### 2. Match each concept to its author or origin.

**Answer:**

- Creative destruction → Schumpeter: the new demolishing the old
- Disruptive innovation → Christensen: worse today, everywhere tomorrow
- Lean startup → Build-measure-learn on minimal versions
- Intrapreneurship → Entrepreneurial ventures inside the big firm

**Why:** The innovation canon in four names, from the economist who diagnosed the storm to the methods for surfing it.

Page: https://tryals.app/practice/business-i/innovation-and-entrepreneurship/match-each-concept-to-its-author-or-origin

### 3. A market leader polls its most profitable customers, who unanimously want better performance in the existing product, none want the cheap, inferior newcomer’s gadget. The leader invests accordingly and, eight years later, is obsolete. Christensen calls this…

A. Proof that customer research is useless
B. Bad luck unrelated to strategy
C. The innovator's dilemma
D. A failure to poll enough customers

**Answer:** C. The innovator's dilemma

**Why:** Every step was locally rational, that is the dilemma. Best customers can only report today’s needs on today’s metrics; disruption changes the metrics. The escape is structural: a separate unit free to serve the niche the core is right to ignore.

Page: https://tryals.app/practice/business-i/innovation-and-entrepreneurship/a-market-leader-polls-its-most-profitable-customers-who-unanimously

### 4. A market leader listens carefully to its best customers and is destroyed by a cheaper, initially worse technology. Christensen called this the innovator's dilemma. Why is it a dilemma rather than a mistake?

A. Because the new technology was protected by patents the leader could not license
B. Because the leader's managers were complacent and dismissed the threat
C. Because the correct decisions are what blocked the disruption
D. Because the firm lacked the technical capability to build the new product

**Answer:** C. Because the correct decisions are what blocked the disruption

**Why:** Serving your most profitable customers and rejecting a low-margin, worse product is textbook good management, and it is exactly the trap, which is why the incumbent's competence is the mechanism rather than its complacency. Christensen's remedy is structural: a separate unit whose customers are the new market's.

Page: https://tryals.app/practice/business-i/innovation-and-entrepreneurship/a-market-leader-listens-carefully-to-its-best-customers-and-is

### 5. Which practices belong to the lean-startup method?

A. Perfecting the full product in secret for three years
B. Shipping a minimum viable product to real users early
C. Pivoting when evidence contradicts the hypothesis
D. Measuring actual behavior instead of stated intentions

**Answer:** B. Shipping a minimum viable product to real users early; C. Pivoting when evidence contradicts the hypothesis; D. Measuring actual behavior instead of stated intentions

**Why:** Build, measure, learn, the plan is a stack of hypotheses and the market is the lab. The three-year stealth perfection is the anti-pattern: maximum spend before the first fact arrives.

Page: https://tryals.app/practice/business-i/innovation-and-entrepreneurship/which-practices-belong-to-the-lean-startup-method

### 6. Digital photography destroyed chemical film, and Kodak had invented the digital sensor. Why do incumbents so often lose to a technology they developed?

A. Because the new market is too small to justify cannibalisation
B. Because incumbents lack the engineering skill to commercialise their inventions
C. Because incumbent managers fail to notice the new technology exists
D. Because patents on disruptive technologies are unusually hard to enforce

**Answer:** A. Because the new market is too small to justify cannibalisation

**Why:** Christensen’s point is that the incumbent’s decisions are locally correct. Serving your best customers and protecting your margins is exactly what leaves the low end to someone else.

Page: https://tryals.app/practice/business-i/innovation-and-entrepreneurship/digital-photography-destroyed-chemical-film-and-kodak-had-invented

### 7. Order the lean-startup cycle for a new delivery service.

**Answer:**

1. State the riskiest hypothesis: "restaurants will pay 20% commission"
2. Build a minimal test: ten restaurants, manual dispatch
3. Measure real behavior: sign-ups, orders, churn
4. Learn: commission tolerance is 12%, not 20%
5. Pivot the revenue model and rerun the loop

**Why:** Hypothesis, build, measure, learn, pivot, each loop costs weeks, not funding rounds; the method’s whole economy is making ignorance cheap to cure.

Page: https://tryals.app/practice/business-i/innovation-and-entrepreneurship/order-the-lean-startup-cycle-for-a-new-delivery-service

### 8. A new technology doubles its performance every 2 years, starting at 10 while the old plateau sits at 80. **Set the slider to the years until crossover.**

**Answer:** 6 (within ±0.5)

**Why:** Three doublings: $10 \rightarrow 20 \rightarrow 40 \rightarrow 80$ in **6 years**. An 8× performance gap sounds unassailable and is three doublings from gone, the arithmetic every incumbent should run before laughing at a toy.

Page: https://tryals.app/practice/business-i/innovation-and-entrepreneurship/a-new-technology-doubles-its-performance-every-2-years-starting-at

### 9. In ambidextrous organizations, the exploring unit is deliberately separated from the exploiting core because the core’s metrics and cadence tend to suffocate early-stage ventures.

**Answer:** True

**Why:** A venture measured on quarterly margin dies in review; the core measured on experimentation dissolves into chaos. Separation — different metrics, budgets, and tolerance for failure — lets one company run both clocks. Integration comes later, at scale.

Page: https://tryals.app/practice/business-i/innovation-and-entrepreneurship/in-ambidextrous-organizations-the-exploring-unit-is-deliberately