CBS Innovation & Entrepreneurship 2 — Questions and Answers
Question 1: Which innovation framework categorizes innovations as sustaining or disruptive based on their impact on existing markets?
- Blue Ocean Strategy
- Clayton Christensen's Disruptive Innovation Theory (Correct answer)
- Porter's Five Forces
- Ansoff Matrix
Correct answer: Clayton Christensen's Disruptive Innovation Theory
Clayton Christensen's Disruptive Innovation Theory distinguishes between sustaining innovations (improving existing products for mainstream customers) and disruptive innovations (creating new markets or reshaping existing ones).
Question 2: A startup uses a 'freemium' model where basic features are free but advanced features require payment. This is an example of which business model innovation?
- Subscription bundling
- Value-based pricing
- Freemium monetization strategy (Correct answer)
- Cost-plus pricing
Correct answer: Freemium monetization strategy
Freemium monetization offers a free tier to acquire users and a paid tier to generate revenue, converting free users into paying customers.
Question 3: What is the primary purpose of a 'minimum viable product' (MVP) in entrepreneurship?
- To launch a fully polished product ahead of competitors
- To test core assumptions with minimal resources before full development (Correct answer)
- To satisfy regulatory requirements for product safety
- To maximize initial revenue from early adopters
Correct answer: To test core assumptions with minimal resources before full development
An MVP allows entrepreneurs to validate key hypotheses about customer needs and product-market fit with the least possible investment.
Question 4: Which stage of the venture capital funding cycle typically involves the largest investment and prepares a company for a public offering?
- Seed round
- Series A
- Series C or late-stage round (Correct answer)
- Angel round
Correct answer: Series C or late-stage round
Late-stage rounds (Series C and beyond) involve the largest investments, funding scaling operations and positioning the company for an IPO or acquisition.
Question 5: An entrepreneur pivots from selling software directly to licensing it to enterprise clients. This change is best described as a:
- Product pivot
- Technology pivot
- Revenue model pivot (Correct answer)
- Customer segment pivot
Correct answer: Revenue model pivot
A revenue model pivot changes how a company generates income without necessarily changing the product itself.
Question 6: Open innovation, as defined by Henry Chesbrough, refers to:
- Sharing all company IP freely with the public
- Using external ideas and paths alongside internal R&D to advance technology (Correct answer)
- Crowdsourcing product designs from consumers
- Eliminating internal R&D in favor of acquisitions
Correct answer: Using external ideas and paths alongside internal R&D to advance technology
Open innovation leverages both internal and external sources of ideas and commercialization paths, contrasting with the traditional closed R&D model.
Question 7: Which metric best measures how effectively a startup is converting marketing spend into sustainable customer relationships?
- Gross margin
- Customer Lifetime Value to Customer Acquisition Cost ratio (LTV:CAC) (Correct answer)
- Monthly burn rate
- Churn rate alone
Correct answer: Customer Lifetime Value to Customer Acquisition Cost ratio (LTV:CAC)
The LTV:CAC ratio shows whether the value derived from a customer justifies the cost of acquiring them, indicating sustainable unit economics.
CBS Innovation & Entrepreneurship 2
Which innovation framework categorizes innovations as sustaining or disruptive based on their impact on existing markets?