PUJA
h6000
cap_13_hitt.pptx
PART 3: STRATEGIC ACTIONS:
STRATEGY IMPLEMENTATION
CHAPTER 13 STRATEGIC ENTREPRENEURSHIP
Authored by:
Marta Szabo White, PhD.
Georgia State University
THE STRATEGIC MANAGEMENT PROCESS
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KNOWLEDGE OBJECTIVES
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
● Define strategic entrepreneurship and corporate entrepreneurship.
● Define entrepreneurship and entrepreneurial opportunities and explain their importance.
● Define invention, innovation, and imitation, and describe the relationship among them.
● Describe entrepreneurs and the entrepreneurial mind-set.
● Explain international entrepreneurship and its importance.
KNOWLEDGE OBJECTIVES
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● Describe how firms internally develop innovations.
● Explain how firms use cooperative strategies to innovate.
● Describe how firms use acquisitions as a means of innovation.
● Explain how strategic entrepreneurship helps firms create value.
IMPORTANT DEFINITIONS
Organizational culture: the complex set of ideologies, symbols, and core values shared throughout the firm and that influence how the firm conducts business
The social energy that drives—or fails to drive—the organization
Strategic entrepreneurship: entrepreneurial actions (exploiting found opportunities in the external environment) through a strategic perspective (innovation efforts)
Entrepreneurship dimension: identifying opportunities to exploit through innovations
Strategic dimension: determining the best way to manage the firm’s innovation efforts
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
IMPORTANT DEFINITIONS
Strategic entrepreneurship actions can be taken by:
Individuals
Corporations
Corporate entrepreneurship: the use or application of entrepreneurship within an established firm
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
KEY CHAPTER POINTS
THREE ‘I’s
Three types of innovation activities according to Schumpeter
● Invention
● Innovation
● Imitation
THREE WAYS TO INNOVATE
● Internal - autonomous vs. induced
● Cooperative strategies (e.g., strategic alliances)
● Acquisitions
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INNOVATION
Innovation is the “specific function of entrepreneurship” (Drucker)
It is “the means by which the entrepreneur either creates new wealth-producing resources or endows existing resources with enhanced potential for creating wealth” (Drucker)
It is a source of competitive success, especially in turbulent and highly competitive environments
For global markets, innovation is key for competitive parity at a minimum, much less for competitive advantage
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
INNOVATION
Invention
The act of creating or developing a new product or process
Brings something new into being
Technical criteria determine the success of an invention
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INNOVATION
Invention
Innovation
Process of creating a commercial product from an invention
Brings something new into use
Commercial criteria determine the success of an innovation
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
INNOVATION
Invention
Innovation
Imitation
Adoption of an innovation by similar firms
Usually leads to product or process standardization
Products based on imitation often are offered at lower prices and without as many features
Results of imitation
Product or process standardization
Products made with fewer features
Products offered at lower prices
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
THE IMPORTANCE OF INNOVATION
Entrepreneurship is the linchpin between invention and innovation
Inventions are easier than commercializing those inventions: roughly 80% of R&D occurs in large firms, but these same firms produce fewer than 50% of the patents
Note: Google Labs was created to facilitate the transition from invention to innovation
Especially in the U.S., innovation is the most critical of the three types of innovative activities
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INTERNATIONAL ENTREPRENEURSHIP
Risks include:
Unstable foreign currencies
Inefficient markets
Insufficient infrastructures to support businesses
Limitations on market size and growth
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INTERNATIONAL ENTREPRENEURSHIP
Entrepreneurship can:
Fuel economic growth
Create employment
Generate prosperity for citizens
There is a strong positive relationship between the rate of entrepreneurial activity and economic development in a nation.
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
INTERNAL INNOVATION
Firms take deliberate efforts to develop inventions and innovations within the organization, selecting from several types of innovation and the specific processes through which each type is produced.
Most innovation is due to research and development (R&D):
Investments are uncertain
Often not achieved in the short term
Firms innovate internally in two ways
1. Autonomous strategic behavior
2. Induced strategic behavior
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
INTERNAL INNOVATION: INCREMENTAL AND RADICAL INNOVATION
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AUTONOMOUS STRATEGIC BEHAVIOR
Facilitates incremental and radical innovation
Facilitates incremental and radical innovation
INDUCED STRATEGIC BEHAVIOR
Primarily - Incremental Innovation
Primarily - Radical Innovation
INTERNAL INNOVATION: INCREMENTAL AND RADICAL INNOVATION
Incremental Innovation
Is evolutionary and linear
Most innovations are incremental
Builds on existing knowledge bases and provides small improvements in current product lines/processes
Radical Innovation
Is revolutionary and nonlinear
Is rare because of difficulty and risk
Generates significant technological breakthroughs and creates new knowledge/processes
Requires creativity
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INTERNAL INNOVATION: INCREMENTAL AND RADICAL INNOVATION
Incremental Innovation
Results from deliberate efforts
Primarily - induced strategic behavior
Can create value
Radical Innovation
Results from deliberate efforts
Strong potential to lead to significant growth in revenues and profits
Primarily - autonomous strategic behavior
Can create value
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
MODEL OF INTERNAL CORPORATE VENTURING
FIGURE 13.1
Model of Internal Corporate Venturing
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INTERNAL INNOVATION
Internal Corporate Venturing refers to the set of activities firms use to develop internal inventions and innovations: autonomous and induced
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AUTONOMOUS STRATEGIC BEHAVIOR
Bottom-up process
Top-down process
INDUCED STRATEGIC BEHAVIOR
INTERNAL INNOVATION
■ Bottom-up process in which product champions pursue new ideas, often through a political process, to develop and coordinate the commercialization of a new good or service
■ Product champion: individual with an entrepreneurial vision of a new good or service who seeks to create support in the organization for its commercialization
■ Autonomous strategic behavior is focused on firm’s knowledge and resources
■ Knowledge must be continuously diffused throughout the firm
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AUTONOMOUS STRATEGIC BEHAVIOR
Bottom-up process
INTERNAL INNOVATION
Induced strategic behavior
Top-down process whereby the firm’s current strategy and structure foster product innovations that are closely associated with that strategy and structure
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
Top-down process
INDUCED STRATEGIC BEHAVIOR
IMPLEMENTING INTERNAL INNOVATIONS
Entrepreneurial mind-set: required for internal corporate ventures
Viewpoint that values uncertainty in the marketplace and seeks to continuously identify opportunities with the potential to lead to important innovations
Value creation through internal innovation processes:
1. Cross-functional product development teams
2. Facilitating integration and innovation
3. Creating value from internal innovation
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INNOVATION THROUGH COOPERATIVE STRATEGIES
To successfully commercialize inventions, firms may need to cooperate and integrate knowledge and resources
Entrepreneurial new venture firms may need investment capital and distribution capabilities
More established companies may need new technological knowledge possessed by newer entrepreneurial firms
To innovate via cooperative relationships, firms must share their knowledge and skills – strategic alliances and joint ventures allow this to occur
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INNOVATION THROUGH ACQUISITIONS
Rapidly extend the product line
Increase the firm’s revenues
KEY RISK: a firm may substitute its ability to buy innovations for its ability to produce innovations internally
A firm may:
Lose its intensity in R&D efforts
Lose its ability to produce patents
Research demonstrates that subsequent to acquisitions, firms introduce fewer new products into the market
This is because firms focus on the financial controls at the expense of strategic control
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
CREATING VALUE THROUGH STRATEGIC ENTREPRENEURSHIP
Entrepreneurial ventures:
Produce more radical innovations
Possess strategic flexibility and willingness to take risks
Do more opportunity seeking
Must learn how to gain a competitive advantage (advantage-seeking behaviors)
Larger, well-established firms:
Produce more incremental innovations
Possess more resources and capabilities to exploit identified opportunities
Must relearn how to identify entrepreneurial opportunities (opportunity-seeking skills)
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
CREATING VALUE THROUGH STRATEGIC ENTREPRENEURSHIP
Objective is to help firms develop successful incremental and radical innovations
Be flexible and willing to take risks.
Identify and exploit opportunities with sufficient resources and capabilities to launch strategic actions.
Sustain a competitive advantage while identifying and exploiting opportunities.
Foster an entrepreneurial mind-set among managers and employees.
Emphasize resource management, particularly human capital and social capital.
Seek to enter and compete in international markets.
©2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.
