Creative destruction: How innovative business models revitalize firms in dynamic markets

Our fourth VU MBA Talk brought two experts on entrepreneurship and innovation with diverse backgrounds together: Enno Masurel, a Professor in Sustainable Entrepreneurship, and Dr. Marcus Schmalbach, the CEO of RYSKEX GmbH, a young insurtech firm that disrupts the traditional insurance industry with novel technologies like artificial intelligence (AI) and blockchain.

01-12-2020 | 10:31

Together, they shared and discussed their views on how innovative business models can revitalize firms in dynamic markets. We also learned about different ways to protect innovative business models and why patents are sometimes not ideal for achieving this. On top, we heard about the Amsterdam entrepreneurship ecosystem, which is unique in Europe and super-helpful for start-up firms.

Some entrepreneurs like Marcus can grow on their own at first and bring externals on board at a later stage. But other entrepreneurs profit from external support through, for example, incubators, business angels, or venture capitals, already earlier in their lifecycle. Some key takeaways from the webinar:

  • Innovation can be thought of as ‘creative destruction’: dismantling something old or outdated (‘destruction’) by something new, aka an innovation (‘creative’).
  • We distinguish between radical (disruptive) innovations and incremental innovations.
  • Innovating is not easy. Innovators often face difficulties such as uncertainty, reluctance, or even antagonism.
  • Innovations are rewarding to the innovator but also risky. Innovators may lose their invested capital, their time, their reputation, or other people’s goodwill.
  • Protection of innovations:
    • Registered formal legal rights: patents; registered designs; trademarks; copyrights
    • Non-registered formal legal rights: confidentiality clauses; restrictive covenants in contracts; non-disclosure agreements
    • Informal protection actions: high trust relations; lead-time advantages; keep quiet; branding
  • On an aggregated level, registered formal legal rights are hardly related to firm growth due to the non-linear nature of firm growth and the speed of innovation. Registered formal legal rights are time-consuming and costly. Further, some patents reveal secrets to competitors.
  • Outsiders such as coaches, mentors, external board members, or venture capitalists can stimulate innovation. They may offer start-up assistance, know-how, planning consultation, access to networks, financial capital.
  • Outsiders inspire innovative behavior and prevent a too extensive focus on the daily business. Pivotal: a fresh pair of eyes and access to networks.
  • Being an innovator can be very rewarding. However, after time, innovators face the challenge that they become ‘managers.’ It is essential to maintain a purpose. One way can be to sell the business and start a new one.

Recommended readings

Mol, M. C., & Masurel, E. (2012). Differences and similarities between patents, registered designs and copyrights: Empirical evidence from the Netherlands. International Journal of Innovation Management.

Rosenbusch, N., Brinckmann, J., & Bausch, A. (2011). Is innovation always beneficial? A meta-analysis of the relationship between innovation and performance in SMEs. Journal of Business Venturing, 26(4), 441-457.

This MBA Talk is part of Vrije Universiteit Amsterdam's School of Business and Economics webinar series. More information and registration

Florian_ZapkauAuthor
Dr. Florian Zapkau is an associate professor at the Department of Management & Organization at Vrije Universiteit Amsterdam. He is also the programme director of the new MBA in International Business at the School of Business and Economics.