Dr. Lorraine Warren gave a presentation on value creation and digital disruption. She discussed how digital technologies like broadband, smartphones, social media, and open data have lowered barriers to innovation. This digital disruption has led to new forms of technological innovation through crowd-driven activities like hackathons and new models of crowd-funding. Crowd-funding originally supported arts projects but is now used for business ventures. Dr. Warren provided examples of crowd-funding platforms and discussed regulatory developments around crowd-funding. She expressed interest in collaborating on research related to European and Pakistani contexts of these new digital phenomena.

1. Value creation and digital disruption
Dr Lorraine Warren
Entrepreneurship Research Network
Islamabad, 2014

2. About me…
• Interested in all forms of entrepreneurship and innovation (usually
qualitative approaches, drawing on critical realism, constructionist
methodologies)
• Particularly science & technology (creativity, concept
development, incubation, new paradigms in regard to low-cost, high
impact methods)
• Currently, Director of Research Centre for Strategic Innovation at
University of Southampton, Management School, www.soton.ac.uk/csi
• From July 2014, Professor of Entrepreneurship & Innovation at Massey
University in New Zealand
• Longstanding interests in KPK through British Council INSPIRE project
www.soton.ac.uk/inspire, www.blog.soton.ac.uk/inspire
• One PhD completion (Muhammad Nouman, IMSciences) and two
underway (Adnan Javed, Javed Iqbal), plus curriculum development
• More about me on
www.doclorraine.com, https://www.southampton.ac.uk/management/ab
out/staff/lw4.page

3. Crossnan and Apaydin, 2010, Journal of Management Studies
• Innovation is widely regarded as a critical source of
competitive advantage in an increasingly changing
environment (Dess and Picken, 2000; Tushman and O’Reilly,
1996).
• According to management scholars, innovation capability is
the most important determinant of firm performance
(Mone et al., 1998).
• An unrestricted search of academic publications using the
keyword innovation produces tens of thousands of articles,
yet reviews and meta-analyses are rare and narrowly
focused, either around the level of analysis (individual,
group, firm, industry, consumer group, region, and nation)
or the type of innovation (product, process, and business
model).

4. Emerging technologies: value creation?

5. Relevant to Innovation and
Entrepreneurship:
• Technology transfer/ Commercialisation
• New product development
• New business model development
• Incubation
• Open innovation/lead user/ crowdfunding
• Plethora of reports: Gov, EU, NESTA -> how do we do
this better? (Sainsbury, 2005; Hauser, 2010; Dyson,
2010; Wilson, 2012)
• International perspectives: MIT/Silicon Valley;
Fraunhofer; ITRI
• What do we mean by value?

6. Crossing the valley…*
• Rarely straightforward: Markham et al, 2010; Barr et al,
2009; Boocock & Warren, 2009
• and highly context dependent (Casper, 2007)
• Spin out rates remain low, and many patents are not
developed further
• high uncertainty within those so-important innovation
networks which contain multiple factors and
stakeholders, including social, political, technological,
legislative and cultural transitions as well as material
and financial resource limitations
* there isn’t a valley? It’s a metaphor

7. Approaches….
• Stage gate (Cooper)
• Role theory (Markham et al, 2010)
• voice of the customer (Griffin and
Hauser, 1993)
• lead user techniques (von Hippel,1986)
• open innovation (Chesbrough, 2003)
• technology roadmapping (Phaal et al 2004)

8. Theories….(not forgetting actor-network, structure-
agency, complexity, entrepreneurship)

9. Digital disruption?
• Widespread access to broadband technologies
• Smartphones and tablets
• Social media
• Increasing availability of government datasets to the public (open data)
• Awareness of potential of ‘big data’
• Falling prices for some technology areas digitisation has lowered entry
barriers to new forms of technological innovation
• traditional incubation pathways have been supplemented by free-form
crowd-driven patterns of activity (unconference, barcamp, hackathon)
• Many applications – education, health, transport, energy (many forms of
value)
• Not all ‘high tech’ -> simple process innovations/applications, home-based

10.  Crowd Funding is an internet-inspired, and usually internet-based means of raising
money from the mass market, for a project or business.
 It is a relatively recent concept that originally had its origins in community and arts-
based ventures, which members of the public were inclined to support for mainly
benevolent reasons.
 Initially, businesses/ new ventures/ individuals approached the public at large for cash/
loans/ donations/ investment into their film/ music/ arts projects and in return the
individuals would typically receive a gift such as tickets to a film premier/ opening night
or a mention in the credits etc.
 Crowd Funding was initially seen by many as a concept unsuitable for use in the
business world.
 More recently, drawing on the popularity of crowdsourcing and social media, it has
become a bigger phenomenon (von Hippel).
 Despite this scepticism, the tightening of banks’ lending criteria and unavailability of
commercial finance has meant that Crowd Funding is gaining attraction on both sides of
the Atlantic.
An example: Crowd Funding

11. 1997: British rock group Marillion’s USA tour was underwritten by donations
from fans. $60,000 raised.
2009: “The Age of Stupid” was the first full length feature film to be
financed entirely by Crowd Funding. £1.5 m raised.
2009: Nine Inch Nails https://www.kickstarter.com/blog/josh-freeses-crazy-
crowdfunding-adventure
Crow Funding : Arts examples

12. • Flying Car
Technology example:

13.  Debt: Investors are repaid for their investment over a
period of time at a specified rate of interest.
 Equity: Investors receive a stake/ shares in the company.
 Donations: Contributions go towards a benevolent cause
with the ‘investor’ receiving nothing in return.
 Rewards: Investors receive a tangible item or service in
return for their funds. (Invest in film, and get
tickets to the premier.)
Models for crowdfunding

14. USA: c. $900 million (2012)
The World: c. $2 billion (2012)
Forecast: $6.8 billion forecast for 2013 CFP= Crowd
Funding Platform
(Difficult to validate)
Crowd Funding : The size of the market
© Lupton Fawcett Lee & Priestley 2013

15. Increase in market size
Equity based Crowd Funding
has seen the greatest compound
aggregate growth rate (CAGR)
since 2007, however Rewards
Based Crowd Funding still holds
the lion’s share of the Crowd
Funding market.
Crowd Funding : Increase in market
size
© Lupton Fawcett Lee & Priestley 2013

16. • Regulation is looming
• https://theconversation.com/crunch-time-for-
crowdfunders-as-regulation-looms-19630
BUT….

17. • In the USA, will be regulated by the Securities Exchange
Commission
• In the UK, the Financial Services and Markets Act and the Financial
Services Authority were both designed prior to the Crowd Funding
concept.
• Current UK legislation is not fit for purpose and Crowd Funding
businesses face a number of obstacles.
• Typically in the UK, lending is governed by the Consumer Credit Act
and/ or the issue of a banking licence.
• The raising of share/ equity capital requires the issue of a
prospectus or an investment memorandum. The targeting by private
limited companies of potential investors is generally limited to high
net worth individuals/ sophisticated investors.
• FSA approval can take 6 to 18 months.
• Currently under consultation by the Financial Conduct Authority
Crowd Funding : recent legislative
developments

18. FSA “Websites which allow businesses to raise finance from
consumers should not be promoted to amateur
investors.”
FSA “Crowd Funding website(s) … should be targeted at sophisticated
investors who know how to value a start up business.”
BIS “The government is working with industry to support a range
of new ways of lending and other innovative financial models.”
Thoughts, quotes

19. Another example:
• MOOCs

20. • Many possibilities here for European perspective
studies (new phenomena, new perspectives)
• Significance of Pakistani context
• Example from yesterday
• Personal note
• am open to collaboration on research, teaching, outreach,
knowledge transfer
• New position from July 1 (Chair in entrepreneurship and
Innovation at Massey University)
• Going home tomorrow morning (domestic commitment)
• lw4@soton.ac.uk
For discussion