Strategic management Ch 13

8/3/2019 Strategic management Ch 13

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PowerPoint slides by:

R. Dennis MiddlemistColorado State University

Copyright 2004 South-Western

All rights reserved.

Chapter 13

StrategicEntrepreneurship


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Copyright 2004 South-Western. All rights reserved. 122

Knowledge Objectives

Studying this chapter should provide you with thestrategic management knowledge needed to:

Define and explain strategic entrepreneurship.

Describe the importance of entrepreneurial opportunities,

innovation, and entrepreneurial capabilities.

Discuss the importance of international entrepreneurship.

Describe autonomous and induced strategic behaviorthetwo forms of internal corporate venturing.

Discuss how cooperative strategies such as strategicalliances are used to develop innovation.


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Studying this chapter should provide you with thestrategic management knowledge needed to:

Knowledge Objectives (contd)

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

Describe the importance of venture capital and initialpublic offerings to entrepreneurial activity.

Explain how strategic entrepreneurship creates value in alltypes of firms.


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Figure 1.1

Copyright 2004 South-Western. All rights reserved.

The StrategicManagement

Process


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Strategic Entrepreneurship

Strategic EntrepreneurshipTaking entrepreneurial actions using a strategic

perspective

Engaging in simultaneous opportunity seeking

and competitive advantage seeking behaviorsDesigning and implementing entrepreneurial

strategies to create wealth

Strategic entrepreneurship actions can be

taken by: IndividualsCorporations


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Strategic Entrepreneurship and Innovation

Entrepreneurship is concerned with:The discovery of profitable opportunities

The exploitation of profitable opportunities

Firms that encourage entrepreneurship are:Risk takers

Committed to innovation

Proactive in creating opportunities rather than

waiting to respond to opportunities created byothers


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Entrepreneurial Opportunities

Entrepreneurial OpportunitiesConditions in which new products or services

can satisfy a need in the market

Entrepreneurs or entrepreneurial managersmust be able to:

Identify opportunities not perceived by others

Take actions to exploit the opportunities

Establish a competitive advantage


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Innovation Process

The act of creating ordeveloping a new product orprocess

Brings something new into

being Technical criteria are used to

determine the success of aninvention

Invention


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Innovation Process

The process of creating acommercial product from aninvention

Brings something new into use.

Commercial criteria are used todetermine the success of aninnovation

Invention

Innovation


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Innovation Process

The adoption of an innovation

by similar firms Usually leads to product or

process standardization

Products based on imitation

often are offered at lowerprices but with fewer features

Invention

Innovation

Imitation


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The Importance of Innovation

Innovation Is a key outcome firms seek through

entrepreneurship

Is often the source of competitive success

Corporate Entrepreneurship

Innovations produced in large established firms


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Entrepreneurs

Entrepreneurs Individuals acting independently or as part of an

organization who create a new venture ordevelop an innovation, take risks entering

innovations into the marketplaceCan be any manager or employee in an

organization


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Entrepreneurial Capabilities

Entrepreneurial capabilities include: Intellectual capital

Entrepreneurial mind-set

Transfer of entrepreneurial competence to othersin the organization

Effective human capital


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International Entrepreneurship

Entrepreneurship can:Fuel economic growth

Create employment

Generate prosperity for

citizens

There is a strong positiverelationship between the rate

of entrepreneurial activityand economic developmentin a nation


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International Entrepreneurship

There must be a balance(in the culture) between

individual initiative and

the spirit of cooperation and

group ownership of innovation

Successful entrepreneurial firms

Provide appropriate autonomy

Offer incentives for individual initiative

Promote cooperation and groupownership of an innovation


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Incremental and Radical Innovation

Incremental InnovationMost innovations are

incremental

Provides small

increments in currentproduct lines

Improves existingknowledge and

processesCan create value

Radical InnovationAre rare because of

difficulty and risk

Provides significant

technologicalbreakthroughs

Creates newknowledge and

processesCan create value


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Internal Corporate Venturing: A Model

SOURCE: Adapted from R. A. Burgelman, 1983, A model of theinteractions of strategic behavior, corporate context, and the concept ofstrategy, Academy of Management Review, 8: 65.


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Internal Corporate Venturing

The set of activities used to createinventions and innovations through internalmeans

R&D spending is linked to success in internal

corporate venturing

Product champion

Organizational member with an entrepreneurialvision of a new good or service who seeks tocreate support for the visions commercialization


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Internal Corporate Venturing

A bottom-up process in which productchampions:

Pursue new ideas, often through a politicalprocess

Develop and coordinate the commercialization ofa new good or service until it achieves successin the marketplace

Forms of internal corporate venturing

Autonomous strategic behavior

Induced strategic behavior


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Venturing: Strategic Behaviors

Autonomous Strategic BehaviorBased on a firms knowledge and resources that

are the sources of the firms innovation

A firms technological capabilities and

competencies are its basis for new products andprocesses


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Venturing: Strategic Behaviors

Induced Strategic BehaviorA top-down process whereby the firms current

strategy and structure foster product innovations

The strategy in place is filtered through a

matching structural hierarchy Innovations are associated closely with that

strategy and structure


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Implementing New Product Developmentand Internal Ventures

To be innovative and develop internalventures requires:

An entrepreneurial mindset

Risk propensity

An emphasis on execution

Individuals with an entrepreneurial mindset

Engage the energies of everyone in their domainboth inside and outside the organization


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CrossFunctional Product Development Teams

Facilitate integration ofactivities associated withdifferent organizationalfunctions

Design, manufacturing,

marketing, etc.

New product developmentprocesses can becompleted more quickly

Products can be more easilycommercialized when cross-functional teams workeffectively

Cross-functional

Product DevelopmentTeam


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CrossFunctional Product Development Teams

Product developmentstages are grouped intoparallel or overlapping

processes, allowing thefirm to tailor its productdevelopment efforts

Unique core

competencies

Needs of the market

Cross-functional

Product DevelopmentTeam


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Barriers to Cross-Functional TeamsEffectiveness

Different orientations and perceptions

Individuals from separate functions havedifferent orientations on issues

Perceive product development activities indifferent ways

Organizational politics

Aggressive competition for resources among

different organizational functions

Must achieve cross-functional integration withminimal political conflict


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Facilitating Integration and Innovation

Shared valuesFramed around the firms strategic intent and

mission

Become the glue that promotes integration

between functional units

Effective leadership

Sets goals and allocates resources

Goals include integrated development andcommercialization of new goods and services

Effective communication


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Creating Value from Innovation


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Cooperative Strategies for Entrepreneurshipand Innovation

Cooperation and integration of knowledgeand resources is required to successfullycommercialize inventions

Entrepreneurial firms need investment capitaland distribution capabilities

Established companies need the technologicalknowledge possessed by entrepreneurial firms

Firms innovate through the sharing theirknowledge and skills in a cooperativerelationship


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Acquisitions to Buy Innovation

AcquisitionsRapidly extend the product line

Increase the firms revenues

Key risks of acquisitions

The firm may substitute the ability to buyinnovations for an ability to produce innovationsinternally

The firm may lose intensity in R&D efforts

The firm may lose its ability to produce patents


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Capital for Entrepreneurial Ventures

Venture capital firmsSeek high returns on their investment

Value the competence of the entrepreneur or the

human capital in the firmPlace weight on the expected scope of

competitive rivalry the firm is likely to experience

Evaluate the degree of instability in the market

addressed


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Capital for Entrepreneurial Ventures

Initial public offerings (IPOs)Are new stock priced to reflect the firms high

potential

Often yield much larger equity investments thancan be obtained from venture capitalists

Investment bankers frequently play major rolesin the development and offering of IPOs

Firms that have previously received venturecapital backing usually receive greater returnsfrom IPOs


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Creating Value through StrategicEntrepreneurship

Be effective in identifying opportunities

Be flexible and willing to take risks

Have sufficient resources and capabilities to exploit

identified opportunities

Sustain a competitive advantage while identifyingand exploiting opportunities

Develop an entrepreneurial mind-set amongmanagers and employees

Seek to enter and compete in international markets

Strategic management Ch 13

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