Chapter 14

14-1 © 2006 by Nelson, a division of Thomson Canada Limited.

Strategic Entrepreneurship

Chapter 14


The Strategic .

Management .

Process

The Strategic Management Process

Chapter 5Bus. - Level

Strategy

Chapter 6Competitive

Dynamics

Chapter 9International

Strategy

Chapter 10CooperativeStrategies

Chapter 8Acquisitions &Restructuring

Str

ateg

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Str

ateg

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ctio

ns

Str

ateg

ic O

utc

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esChapter 4Internal

Environment

Chapter 3External

Environment Strat. Intent

Strat. Mission

Strategy Formulation

Strategic Competitiveness

Chapter 1

Above Average Returns

Chapter 2Strategic

Competitiveness

Chapter 1

Chapter 7Corp. - Level

Strategy

Chapter 5Bus. - Level

Strategy

Chapter 13Strategic

Leadership

Chapter 14Entrepreneurship & Innovation

Strategy Implementation

Feedback

Chapter 11Corporate

Governance

Chapter 12Structure& Control

Chapter 12Structure& Control

Chapter 14Entrepreneurship & Innovation



Knowledge objectives

1. Define & explain strategy.

2. Describe the importance of entrepreneurship.

3. Discuss the importance of international entrepreneurship & describe why its practice is increasing.

4. Describe the two forms of internal corporate venturing: autonomous and induced strategic behaviour.



Knowledge objectives (continued)

5. Discuss how cooperative strategies, such as strategic alliances are used to develop innovation.

6. Explain how firms use acquisitions to increase their innovations and enrich their innovative capabilities.

7. Describe the importance of venture capital & initial public offerings to entrepreneurial activity.

8. Explain how the practice of strategic entrepreneurship creates values for customers & shareholders of all types of firms, large and small, new & established.



The use of entrepreneurial actions based on a strategic perspective.


An individual or a group in an organization creates a new venture or develops an innovation.

Corporate Entrepreneurship

Creating or developing a new product or process.

Invention

Creating a commercial product from an invention.

Innovation

Defining Entrepreneurship

Adoption of innovation by a population of similar firms.

Imitation


The key to success with entrepreneurship and

innovation is moving from the invention of ideas to effective

commercialization and acceptance in the

marketplace.

Successful Entrepreneurship


Innovation

• Innovation is the process of creating a Innovation is the process of creating a commercial product from an invention.commercial product from an invention.

• invention brings something new into beinginvention brings something new into being• innovation brings something new into useinnovation brings something new into use

• Innovation is a key outcome firms seek through Innovation is a key outcome firms seek through entrepreneurship and is often the source of entrepreneurship and is often the source of competitive success.competitive success.

• Innovations produced in large established firms Innovations produced in large established firms are often referred to as corporate are often referred to as corporate entrepreneurship.entrepreneurship.


Entrepreneurs

• Entrepreneurs Entrepreneurs – are individuals acting independently or as part of an are individuals acting independently or as part of an

organizationorganization– create a new venture or develop an innovation and create a new venture or develop an innovation and

take risks entering them into the marketplacetake risks entering them into the marketplace

• Entrepreneurs Entrepreneurs – can be independent individuals can be independent individuals – can surface in an organization at any levelcan surface in an organization at any level


International Entrepreneurship

• Entrepreneurship canEntrepreneurship can– fuel economic growthfuel economic growth– create employmentcreate employment– generate prosperity for citizensgenerate prosperity for citizens

• There is a strong positive relationship between the rate There is a strong positive relationship between the rate of entrepreneurial activity and economic development in of entrepreneurial activity and economic development in a nation.a nation.


International Entrepreneurship

• There must be a balance (in the culture) There must be a balance (in the culture) betweenbetween– individual initiative andindividual initiative and– the spirit of cooperation and group ownership of the spirit of cooperation and group ownership of

innovationinnovation

• Successful entrepreneurial firmsSuccessful entrepreneurial firms– provide appropriate autonomyprovide appropriate autonomy– incentives for individual initiative incentives for individual initiative – promote cooperation and group ownership of an promote cooperation and group ownership of an

innovationinnovation


Innovation Types:

• most innovations are incrementalmost innovations are incremental

• builds on existing knowledge basesbuilds on existing knowledge bases

• provides small improvements in the provides small improvements in the current product linescurrent product lines

IncrementalIncrementalinnovationinnovation

Incremental InnovationIncremental Innovation


RadicalRadicalinnovationinnovation

Innovation Types

• provides significant technological provides significant technological breakthroughsbreakthroughs

• creates new knowledgecreates new knowledge

• is rare because of difficulty and riskis rare because of difficulty and risk

• requires substantial creativityrequires substantial creativity

• radical innovations are often best radical innovations are often best developed in separate units that start developed in separate units that start internal venturesinternal ventures

IncrementalIncrementalinnovationinnovation

Radical InnovationRadical Innovation


Internal Corporate Venturing

Autonomous strategic behaviour is a bottom-up process through which Product Champions pursue new product ideas to commercialization.

Product Champions are individuals who have an entrepreneurial vision for a new product & seek support for its commercialization.

Corporate Entrepreneurship can occur as either a bottom-up process or as a top-down process.


Structural Context

InducedStrategic Behaviour

AutonomousStrategic Behaviour

Strategic Context

Model of Internal Corporate Venturing

Concept of Corporate Strategy


Internal Corporate Venturing:

• Autonomous strategic behaviour is a bottom-Autonomous strategic behaviour is a bottom-up process in which product champions:up process in which product champions:

– pursue new ideas, often through a political pursue new ideas, often through a political processprocess

– develop and coordinate the commercialization of a develop and coordinate the commercialization of a new good or service until it achieves success in new good or service until it achieves success in the marketplacethe marketplace

Autonomous Strategic behaviourAutonomous Strategic behaviour


• A product champion is an organizational A product champion is an organizational member with an entrepreneurial vision of a member with an entrepreneurial vision of a new good or service who seeks to create new good or service who seeks to create support for its commercialization.support for its commercialization.

• Autonomous strategic behaviour is Autonomous strategic behaviour is – based on a firm’s wellsprings of knowledge and based on a firm’s wellsprings of knowledge and

resources that are the sources of the firm’s resources that are the sources of the firm’s innovationinnovation

– a firm’s technological capabilities and a firm’s technological capabilities and competencies are the basis for new products and competencies are the basis for new products and processesprocesses


Autonomous Strategic Autonomous Strategic behaviourbehaviour


• Induced strategic behaviour is a top-down Induced strategic behaviour is a top-down process wherebyprocess whereby

– the firm’s current strategy and structure foster product the firm’s current strategy and structure foster product innovationsinnovations

– innovations are associated closely with that strategy innovations are associated closely with that strategy and structureand structure


Induced Strategic BehaviourInduced Strategic Behaviour


• To be innovative and develop internal ventures To be innovative and develop internal ventures requiresrequires– an entrepreneurial mindsetan entrepreneurial mindset

– risk propensityrisk propensity

– an emphasis on executionan emphasis on execution

• Individuals with an entrepreneurial mindset Individuals with an entrepreneurial mindset – engage the energies of everyone in their domainengage the energies of everyone in their domain

– both inside and outside the organizationboth inside and outside the organization


Induced Strategic BehaviourInduced Strategic Behaviour


Cross-Functional Product Development Teams

• Facilitate efforts to integrate activities Facilitate efforts to integrate activities associated with different associated with different organizational functions.organizational functions.

• Design, manufacturing, marketing, Design, manufacturing, marketing, etc.etc.

• New product development processes New product development processes can be completed more quickly.can be completed more quickly.

• Products can be more easily Products can be more easily commercialized when cross-commercialized when cross-functional teams work effectively.functional teams work effectively.

Cross-functionalCross-functionalproductproductdevelopment teamdevelopment team


Cross-Functional Product Development Teams

• Product development stages are Product development stages are grouped into parallel or overlapping grouped into parallel or overlapping processes.processes.

• This approach allows the firm to This approach allows the firm to tailor its product development efforts.tailor its product development efforts.– unique core competenciesunique core competencies– needs of the marketneeds of the market

Cross functionalCross functionalproductproductdevelopment teamdevelopment team


Different functional time orientation

Different functional language and interpersonal orientation

Different goal orientation

Formality of structure

Barriers to Integration

Long time line: R&D

Different functional time orientation

Short time line: Production

Qualitative: HRM

Different functional language and interpersonal orientation

Quantitative: Accounting

Customer satisfaction:

Sales

Different goal orientation

Cost reduction:

Production

Informal: R&D

Formality of structure

Formal: Manufacturing


Cross-Functional Integration/

Design Teams

Cross-functional design teams can help to break down barriers to entrepreneurship within firms


Different Time

Interpersonal

Different Goal

Formality of

Orientation

Orientation

Orientation

Structure

Appropriating Value From Innovation

Facilitators of Integration

Facilitators of Integration tend to increase the effectiveness of

Cross-functional integration or design teams

Value Appropriation

from Innovation

Shared Values

Leaders’ Vision

Effective

Budget Allocation

Communication


Creating Value through Internal Innovation Process


Appropriating Value from Innovation

Product Quality

Customer Value

Customer Value

Time to Market

Value Appropriation

from Innovation


Different Time

Interpersonal

Different Goal

Formality of

Orientation

Orientation

Orientation

Structure

Facilitators of Integration

Shared Values

Leaders’ Vision

Effective

Budget Allocation

Communication

Cross-Functional Integration/

Design Teams

Facilitators & Teams help the firm improve


Cooperative Strategies for Entrepreneurship and Innovation

• Firms may need to cooperate and integrate Firms may need to cooperate and integrate knowledge and resources to successfully knowledge and resources to successfully commercialize inventions.commercialize inventions.– entrepreneurial new venture firms may need entrepreneurial new venture firms may need

investment capital and distribution capabilitiesinvestment capital and distribution capabilities– more established companies may need new more established companies may need new

technological knowledge possessed by newer technological knowledge possessed by newer entrepreneurial firmsentrepreneurial firms

• To innovate through a cooperative relationship, To innovate through a cooperative relationship, firms must share their knowledge and skills.firms must share their knowledge and skills.


Acquisitions to Buy Innovation

• AcquisitionsAcquisitions– rapidly extend the product linerapidly extend the product line– increase the firm’s revenuesincrease the firm’s revenues

• A key risk of acquisitions is that a firm may A key risk of acquisitions is that a firm may substitute the ability to buy innovations for an substitute the ability to buy innovations for an ability to produce innovations internally.ability to produce innovations internally.– firm may lose intensity in R&D effortsfirm may lose intensity in R&D efforts– firm may lose ability to produce patentsfirm may lose ability to produce patents


Capital for Entrepreneurial Ventures

• Venture capital firmsVenture capital firms– seek high returns on their investmentseek high returns on their investment

– value competence of the entrepreneur or the human value competence of the entrepreneur or the human capital in the firmcapital in the firm

– place weight on the expected scope of competitive place weight on the expected scope of competitive rivalry the firm is likely to experiencerivalry the firm is likely to experience

– evaluate degree of instability in the market addressedevaluate degree of instability in the market addressed


Capital for Entrepreneurial Ventures

• Initial public offerings (IPOs)– new stock new stock

– firm needs high potential in order to sell new stock firm needs high potential in order to sell new stock

– often quite larger than the amounts obtained from often quite larger than the amounts obtained from venture capitalistsventure capitalists

– investment bankers frequently play major roles in the investment bankers frequently play major roles in the development and offering of IPOsdevelopment and offering of IPOs

– firms that have also received venture capital backing firms that have also received venture capital backing usually receive greater returns from IPOsusually receive greater returns from IPOs


Creating Value through Strategic Entrepreneurship

• Newer entrepreneurial firms are often more effective than larger firms in identifying opportunities.

• Firms must develop an entrepreneurial mindset among their managers & employees.

• Managers must emphasize the development of their resources, particularly human capital & social capital.

• Firms should seek to enter & compete in International markets.

• Firm that seek to establish their technology as a standard are engaging in strategic entrepreneurship as creating a standard produces a sustainable competitive advantage for the firm.

Chapter 14

Business

Transcript of Chapter 14