The document summarizes the history and growth of Rovio Entertainment, the company behind the popular Angry Birds mobile game franchise. It describes how Rovio started as a small game development studio, struggled for years before creating Angry Birds, which became a massive commercial success. However, as Rovio grew rapidly it lost its entrepreneurial culture and had difficulties transitioning Angry Birds to the freemium model. This led to financial difficulties, layoffs, and former employees leaving to start their own companies.

1. INNOVATION AND
ENTREPRENEURSHIP
Chapter 9
Corporate Strategic
Management
Group: F
Presented by:
21802: Bhaumik Patel
21817: Kaushikkumar
Gothwal
21823: Monika Agrawal

2. CONTENT
 Introduction, Entrepreneurship and innovation: four major themes,
 Opportunity recognition, entrepreneurial process
 Social entrepreneurship
 Innovation dilemmas
 Diffusion of Innovation
 Case Study
 What is the case?
 Its Solution
 Outcome
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3. INTRODUCTION
Strategic entrepreneurship combines strategy and entrepreneurship
and includes both advantage-seeking strategy activities and
opportunity-seeking entrepreneurial activities to create value.
Four major themes:
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4. ENTREPRENEURSHIP
Entrepreneurship is a process by which individuals, teams or organisations
identify and exploit opportunities for new products or services that satisfy a
need in a market.
Opportunity recognition means recognising an
opportunity, circumstances under which
products and services can satisfy a need in the
market or environment.
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5. EXAMPLES
• HP
• Apple
• Facebook
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6. STEPS IN THE ENTREPRENEURIAL
PROCESS
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7. STAGES OF ENTREPRENEURIAL
GROWTH
Entrepreneurial life cycle progresses through start-up, growth,
maturity and exit.
Steps are as follows:
1. Startup
2. Growth
3. Maturity
4. Exit
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8. SOCIAL ENTREPRENEURSHIP
Social entrepreneurs are individuals and groups who create
independent organisations to mobilise ideas and resources to
address social problems, typically earning revenues but on a not-for-
profit basis.
Three key choices for social entrepreneurship:
 Social mission
 Organisational form
 Business model
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9. INNOVATION DILEMMAS
One important outcome of entrepreneurship is innovation. It is of
importance not only for start-ups, but for all firms, including large
companies that continuously need to develop new and innovative
products and services to successfully compete.
Innovation involves the conversion of new knowledge into a new
product, process or service and the putting of this new product,
process or service into actual commercial use.
The strategic dilemmas stem from this more extended innovation
process. Strategists have to make choices with regard to three
fundamental issues: how far to follow technological opportunity as
against market demand; how much to invest in product innovation
rather than process innovation; and how far to open themselves up to
innovative ideas from outside.10-12-2020 9

10. TECHNOLOGY PUSH OR MARKET
PULL
Technology push means it is the new knowledge created by technologists or
scientists that pushes the innovation process. Research and development
laboratories produce new products, processes or services and then hand
them over to the rest of the organisation to manufacture, market and
distribute.
Market pull reflects a view of innovation that goes beyond invention and
sees the importance of actual use.
There are two prominent but contrasting approaches to market pull:
1. Lead users
2. Frugal innovation
The lead user and frugal innovation approaches are opposite ends of a
spectrum, one elitist, the other basic. Many organisations will choose
somewhere in between. But fundamentally both approaches share a key
insight: innovations do not just come from scientific research, but can be
pulled by users in the external market.
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11. PRODUCT OR PROCESS
INNOVATION
Product innovation relates to the final product (or service) to be sold,
especially with regard to its features.
Process innovation relates to the way in which this product is
produced and distributed, especially with regard to improvements in
cost or reliability.
Product and process innovation over time:
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12. PRODUCT AND PROCESS
INNOVATION OVER TIME
The model has several strategic implications:
1. New developing industries
2. Maturing industries
3. Small new entrants
4. Large incumbent firms
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13. OPEN OR CLOSED INNOVATION
A closed innovation is based on the view that innovations are
developed by companies themselves. From the generation of ideas to
development and marketing, the innovation process takes place
exclusively within the company
Open innovation involves the deliberate import and export of
knowledge by an organisation in order to accelerate and enhance its
innovation.
Platform leadership refers to how large firms consciously nurture
independent companies through successive waves of innovation
around their basic technological ‘platform’.
Platform high-technology companies often foster ecosystems of
smaller companies around their platform. Ecosystems are
communities of connected suppliers, agents, distributors,
franchisees, technology entrepreneurs and makers of complementary
products around a platform or company.
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14. OPEN OR CLOSED INNOVATION
The balance between open and closed innovation depends on three
key factors:
o Competitive rivalry
o One-shot innovation
o Tight-linked innovation
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15. INNOVATION DIFFUSION
Diffusion is the process by
which innovations spread
among users.
The diffusion S-curve:
The shape of the S-curve reflects
a process of initial slow adoption
of innovation, followed by a
rapid acceleration in diffusion,
leading to a plateau representing
the limit to demand. The height
of the S-curve shows the extent
of diffusion; the shape of the S-
curve shows the speed.
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16. THE DIFFUSION S-CURVE
Diffusion rarely follows exactly this pattern, but nonetheless the S-
curve can help managers and entrepreneurs anticipate forthcoming
issues.
In particular, the S-curve points to four likely decision points:
 Timing of the ‘tipping point’
 Timing of the plateau
 Extent of diffusion
 Timing of the ‘tripping point’
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17. INNOVATORS AND IMITATORS
First-mover advantages and disadvantages
 A first-mover advantage exists where an organisation is better off than its
competitors as a result of being first to market with a new product, process or
service.
There are five potentially more robust first-mover advantages:
 Experience curve benefits
 Scale benefits
 Pre-emption of scarce resources
 Reputation
 Buyer switching costs
Late-movers have two principal potential advantages:
 Free-riding
 Learning
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18. THE INCUMBENT’S RESPONSE
o Definitions of entrepreneurship often emphasise pursuing
opportunities and developing innovations without immediately
being constrained by the resources under present control.
o This refers to the fact that incumbent organisations and companies
mostly are constrained by their existing resources, capabilities,
activities and vested interests.
o This suggests that for established companies in a market,
innovation can be challenging and innovations from others can be
a threat.
o Eg. Kodak’s dominance of the photographic film market was made
nearly worthless by the sudden rise of digital photography.
o The challenge for incumbents, however, is disruptive innovation.10-12-2020 18

19. DISRUPTIVE INNOVATION
o A disruptive innovation creates substantial growth by offering a
new performance trajectory that, even if initially inferior to the
performance of existing technologies, has the potential to become
markedly superior.
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o This superior
performance can
produce spectacular
growth, either by
creating new sets of
customers or by
undercutting the cost
base of rival existing
business models.

20. PORTFOLIO OF INNOVATION
OPTIONS
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21. ROVIO ENTERTAINMENT – GOING
BACK TO THE ENTREPRENEURIAL
ROOTS•Introduction
1. Rovio was founded in 2003 by Niklas Hed and two classmates at Helsinki
University of Technology after they won a game-development competition
sponsored by Nokia andHewlett Packard.
2. The company is based in Finland, and its key employees comprise Mikael
Hed, former CEO and now chairman of Rovio Animation Studios.
3. Rovio Entertainment Ltd is most famous for its Angry Birds smartphone
game.
4. Niklas Hed, head of Research and Development, and Peter Vesterbacka,
the Chief Marketing Officer.
5. Niklas’ cousin Mikael Hed, with an MbA from Tulane University in the USA,
soon joined.
6. The company initially did well in workfor-hire jobs, developing games for
Electronic Arts, Nokia and Real Networks.
7. Angry Birds became a top-selling app on Apple’s App Store in 2010, the
start of a stream of business ventures including broadcast media,
merchandising, publishing, retail stores and playgrounds.10-12-2020 21

22. ROVIO ENTERTAINMENT – GOING
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ROOTS
8. However, after some years of significant growth Rovio faced
several challenges.
9. His father, Kaj Hed, had been a successful software entrepreneur,
selling an earlier business for $150m (£100m, €110m). Kaj Hed
invested €1m and became company chairman: Kaj still owns 70 per
cent of the equity.
10. Peter Vesterbacka only joined full-time in 2010, as Angry Birds
began to take off. However, Vesterbacka, a business developer from
Hewlett Packard active in the Finnish start-up scene for many years,
had been encouraging Rovio and helping from the sidelines since
2003.
11. Although Rovio had been successful at creating games and selling
them to established third party companies, the company’s ambition
was to create a major game success of its own. Niklas Hed thought it
would take about 15 tries to create a world-beater, but Angry Birds
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23. ROVIO ENTERTAINMENT – GOING
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ROOTS
PATH OF ROVIO ENTERTAINMENT
Meanwhile, there were clashes over strategy. In 2005, Mikael Hed left the
company after a row with his father, Kaj, whom he accused of being over-
controlling.
 By 2008, Rovio had cut employment from 50 to just 12. but in 2009, Mikael
came back, making peace with his father and sensing an opportunity with
the new Apple iPhone and its App Store. The combination of the striking
Angry Bird characters with the success of the Apple iPhone finally created a
winning formula.
 Rovio used Chillingo, a well-connected british games publisher, to
negotiate a deal with Apple and push Angry Birds into world markets.
 In February 2010, Chillingo persuaded Apple to feature Angry Birds as the
game of the week on the Apple App Store’s front page: Angry Birds shot to
No. 1 in the UK; five months later, it was top of the US charts as well.
Chillingo was bought by Electronic Arts during 2010, and Rovio declared that10-12-2020 23

24. ROVIO ENTERTAINMENT – GOING
BACK TO THE ENTREPRENEURIAL
ROOTS
 In October 2010, Rovio launched the free Android Angry Birds, winning two million
downloads in three days.
 By 2011, Angry Birds and its various branded spin-offs had earned €50m, on the back of
a game which originally cost only €100,000 to develop.
 In March 2011, Mikael Hed was cautiously excited, telling Wired Magazine : ‘I know how
fragile the gaming industry is; I’m super-paranoid. but I feel at the moment that we are
walking. We should be running.
Like Disney with Mickey Mouse, Rovio saw the potential of transferring its powerful brand
to other products.
Partnering with the American toy manufacturer Commonwealth Toy & Novelty, Rovio was
able to place Angry Birds soft toys and T-shirts in US shops. Rovio soon had more than
400 partners, including Coca-Cola, Intel and Kraft.
The number of Angry Birds products reached 20,000, including board games, fridge
magnets and key chains. Rovio receives royalties on sales of its licensed products ranging
from 5 to 20 per cent.
Rovio launched its first Angry Birds playground in Finland, with a strategy to mimic
Disney’s theme parks on a smaller scale. Rovio wanted to create a more ‘distributed’
means of physical interaction with families and children than the occasional visit to
Disneyland: the Angry Birds playgrounds are local and can be visited every day.
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25. ROVIO ENTERTAINMENT – GOING
BACK TO THE ENTREPRENEURIAL
ROOTS
Rovio partnered with Samsung to include a motion controlled Angry
Birds game on its smart televisions.
In November 2012, the company launched the Rovio Channel; letting
users of the Samsung TV sets download games as well as the new
Angry Birds Toons show and a comic-book series.
The Rovio channel builds on the success of the Angry Birds YouTube
channel, which attracted well over two billion views by the end of
2015. Rovio also established a successful books operation in 2011;
they have released and licensed hundreds of books, which are sold in
over 50 countries.
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26. ROVIO ENTERTAINMENT – GOING
BACK TO THE ENTREPRENEURIAL
ROOTS
GROWTH
The number of employees grew from 40 to over 800 between 2010 and
2012.
With amusements parks, toys, books, comics and even a movie
announcement, as a result, the parallel with Disney became clearer.
In 2011, Rovio was offered a reported $2.25bn from Zynga, the US games
company famous for Farmville, but the Finnish company decided not to
make a deal with the Farmville creator.
However, the business peaked in 2013 – after three years of significant
growth, from a mere €6.5m in revenue in 2010 to €152m in 2012. Rovio
then reported operating profits of €36.5m in 2013, which fell 73 per cent in
the next year, to €10m.4 Rovio was forced to lay off 110 employees in 2014
and another dramatic cut in 2015 – 260 people were laid off, one third of all
employees.
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27. ROVIO ENTERTAINMENT – GOING
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ROOTS
Up until 2013, Angry Birds had generated revenue through download fees.
Kart-racing title Angry Birds Go! was released in December 2013, and it was
their first game designed from scratch for a freemium model.
Nearly all top performing titles today are so-called free-to-play or freemium
games, meaning the downloading is free and revenue is generated through
in-game purchases.
Angry Birds 2 was released in the summer of 2015 and it was downloaded
nearly 50 million times in just a month, but it failed to boost revenues and
disappeared from the top grossing app store charts in a relatively short time.
Angry Birds games were, however, not originally designed for he freemium
model; fans complained about limited game time and intrusive in-app
purchase offers which changed the flow of the gameplay. Excessive
monetisation and a more complicated game environment are driving away
the casual gamers and younger players. The core of the original game was
lost in the new freemium games because it was created for a different
model.10-12-2020 27

28. ROVIO ENTERTAINMENT – GOING
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ROOTS
In October 2015, Rovio jumped on the bandwagon of celebrity
endorsed games and launched the new game Love Rocks, featuring
the pop star Shakira, but it did not bring in massive revenues.
According to the mobile-app analytics firm App Annie, the game
peaked at number 21in the top grossing charts in the first month of
release and fell to a ranking of 304 during the next month.
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29. ROVIO ENTERTAINMENT – GOING
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ROOTS
Restructuring
When the company grew, new support functions had been established, such
as a personnel department and licensing department.
With this, they lost the flat hierarchy and fast decision-making model of a
start-up and as a consequence the original organisational culture vanished.
As a result, many ex-Rovio employees ventured out to start their own
gaming companies. The brain-drain then continued when growth stalled and
many of those who helped to build the original success of Rovio left.
Some of the former managers opened up anonymously to a Finnish business
and finance magazine (Talouselämä), to point out the lack of a shared
strategic vision from the family owned business, where each member seems
to have a different idea in terms of what kind of company they are building.
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30. ROVIO ENTERTAINMENT – GOING
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ROOTS
Co-founder Mikael Hed stepped down from the CEO position in 2014, but
stayed on the board and became chairman of Rovio Animation Studios.
The newly appointed CEO Pekka Rantala left the position after only 16
months, after a difficult year of mass job losses and a disappointing
response to Angry Birds 2.
A former head of legal operations, Kati Levoranta, is the newest CEO. She
says Rovio is ready to make the most out of the Angry Birds movie release in
2016.
The chairman Kaj Hed explained that after extensive layoffs, Rovio aimed to
become ‘leaner and more agile’ with restructuring of its business operations
and going back to their entrepreneurial roots.
As a part of their restructuring plans, Rovio announced at the beginning of
2016 the spinoff of their education business which includes a preschool
concept and digital learning tools and licensing out the Angry Birds
playgrounds.
The books business was spun off as well.10-12-2020 30

31. ROVIO ENTERTAINMENT – GOING
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ROOTS
Future plans
An Angry Birds 3D movie is planned for release in 2016, after three years in the
making.
Rovio is financing the entire production of the movie, making it the most
expensive Finnish film ever made. They have hired Sony Pictures Imageworks to
produce the animation.
Hollywood celebrities Jason Sudeikis, Josh Gad and Peter Dinklage, among many
others, are acting as voiceovers for the characters.
Of the total budget of €175m, €75m is production costs and €100m
marketing.7 Rovio has high hopes that the movie will create the next boost for
the company’s licencing business.
Lego and Spin Master are already on board as toy partners for movie-inspired
lines, other new licencing partners include the tech company Painting Lulu and
www.SwimOutlet.com with an exclusive Angry Birds swim line.
By retaining creative control and utilising the global marketing and distribution
skills of Sony Pictures Entertainment, Rovio believes they are on track to deliver a
hit feature.
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32. ROVIO ENTERTAINMENT – GOING
BACK TO THE ENTREPRENEURIAL
ROOTS
Rovio acknowledged they lost focus and tried to do too many things.
As the company moves ahead with the movie, they still have the
ambition to be a leading entertainment company, with mobile games
at its heart, said the CEO Kati Levoranta in 2015.
The main focus after the restructuring will be games, media and
consumer products. Majority owner Kaj Hed has announced that
Rovio has its eye on a possible merger or acquisition, although a
public share offering is not up for discussion at the moment.
In 2014, Rovio made an operating profit of €10m on sales of €158m,
down from profits of €36.5m on sales of 173.5m in 2013. For 2015,
Hed restructuring costs.
Rovio, however, is confident they will see sales growth in 2016 on the
back of the new movie, new licensing deals and new games:10-12-2020 32

33. ROVIO ENTERTAINMENT – GOING
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ROOTS
‘We had an exceptional situation a few years ago. I am satisfied with
the current situation, because now we don’t have false visions.
Hed says as the new Hollywood 3D movie is about to be released in
May 2016.
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34. ROVIO ENTERTAINMENT – GOING
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Questions
1 What are the advantages and disadvantages of Rovio’s current
business model?
2 Do you agree with the company chairman Kaj Hed when he says he
is satisfied with Rovio’s current situation?
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