Strategic Management Ch14

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

Strategic Entrepreneurship

Chapter Fourteen

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


The Strategic Management Process

Chapter 8:Acquisition & Restructuring

Chapter 9:International

Strategy

Chapter 10:Cooperative

Strategy

Strategy Formulation

Chapter 11:Corporate

Governance

Ch. 12: Org. Structure & Controls

Chapter 13:Strategic

Leadership

Chapter 14:Org. Renewal & Innovation

Strategy Implementation

StrategicActions

Chapter 3:The External Environment

Strategic Competitiveness

Strategic Mission & Strategic Intent

Strategic Objectives & Inputs

Chapter 1: Strategic

ManagementStrategic

Competitiveness Ch. 2: Strat. Mgmt . &

Performance



Chapter 4:The Internal Environment

Chapter 5: Bus.-Level Strategy

Chapter 6:Competitive Dynamics

Chapter 7:Corp.-Level

Strategy




Knowledge objectives1. Describe the importance of entrepreneurship in strategy2. Discuss the importance of international entrepreneurship

& describe why its practice is increasing3. Describe the two forms of internal corporate venturing:

autonomous and induced strategic behaviour 4. Discuss how cooperative strategies, such as strategic

alliances are used to develop innovation 5. Explain how firms use acquisitions to increase their

innovations and enrich their innovative capabilities 6. Describe the importance of venture capital & initial public

offerings to entrepreneurial activity 7. Explain how the practice of strategic entrepreneurship

creates values for customers & shareholders of all firms


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 processInvention

Creating a commercial product from an inventionInnovation

Defining Entrepreneurship

Adoption of innovation by a population of similar firmsImitation

Entrepreneurial actions based on a strategic perspective



The key to success with entrepreneurship and innovation is moving from:

Successful Entrepreneurship

the invention of ideas

to effective commercialization

& acceptance in the marketplace


Innovation

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

• Invention brings something new into being• Innovation brings something new into use

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

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


Entrepreneurs

• Entrepreneurs – Are individuals acting independently or as part

of an organization– Create a new venture or develop an innovation

& take risks entering them into the marketplace

– Can be independent individuals – Can surface in an organization at any level


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


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– Incentives for individual initiative – Promote cooperation and group ownership of

an innovation


Innovation Types:

• Most innovations are incremental• Builds on existing knowledge bases• Provides small improvements in the

current product lines

Incrementalinnovation

• Provides significant technological breakthroughs

• Creates new knowledge• Is rare because of difficulty and risk

Radicalinnovation

• Requires substantial creativity• Radical innovations are often best

developed in separate units that start internal ventures


Structural Context

InducedStrategic Behaviour

AutonomousStrategic Behaviour

Strategic Context

Model of Internal Corporate Venturing

Corporate Headquarters

Corp. Entrepreneurship can occur as either a

or as a top-down processa bottom-up process


Internal Corporate Venturing

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

– Pursue new ideas, often through a political process

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

Autonomous Strategic behaviour


• A product champion – Is an organizational member with an entrepreneurial

vision of a new good or service who seeks to create support for its commercialization

• Autonomous strategic behaviour is – Based on a firm’s wellsprings of knowledge &

resources that are the sources of the firm’s innovation– A firm’s technological capabilities and competencies

are the basis for new products and processes


Autonomous Strategic behaviour


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

– The firm’s current strategy and structure foster product innovations

– Innovations are associated closely with that strategy and structure


Induced Strategic Behaviour


• To be innovative & develop internal ventures requires– An entrepreneurial mindset

– Risk propensity

– An emphasis on execution

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

– Both inside and outside the organization


Induced Strategic Behaviour


Cross-Functional Product Development Teams

• Facilitate efforts to integrate activities related to different organizational functions

• Design, manufacturing, marketing, etc

• New product development processes can be completed more quickly

• Products are more easily commercialized with effective cross-functional teams

Cross-functionalproduct

development team


Cross-Functional Product Development Teams

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

• This approach allows the firm to tailor its product development efforts.

– unique core competencies

– needs of the marketCross-functional

productdevelopment 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

Entrepreneurial mind set

Cross-functional product development

teams

Creating value through

innovation

Facilitating integration and innovation • Shared values • Entrepreneurial leadership


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 knowledge and resources to successfully commercialize inventions– 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 through a cooperative relationship, firms must share their knowledge and skills


Acquisitions to Buy Innovation

• Acquisitions– Rapidly extend the product line– Increase the firm’s revenues

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


Capital for Entrepreneurial Ventures

• Venture capital firms– Seek high returns on their investment

– Value competence of the entrepreneur or the human capital in the firm

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

– Evaluate degree of instability in the market addressed


Capital for Entrepreneurial Ventures

• Initial public offerings (IPOs)– New stock

– Firm needs high potential in order to sell new stock

– Often quite larger than the amounts obtained from venture capitalists

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

– Firms that have also received venture capital backing usually 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

• Firms seeking to establish their technology as a stand-ard engage in strategic entrepreneurship as creating a standard produces a sustainable competitive advantage


The Strategic Management Process

Chapter 8:Acquisition & Restructuring

Chapter 9:International

Strategy

Chapter 10:Cooperative

Strategy

Strategy Formulation

Chapter 11:Corporate

Governance

Ch. 12: Org. Structure & Controls

Chapter 13:Strategic

Leadership


Strategy Implementation

StrategicActions


Strategic Competitiveness

Strategic Mission & Strategic Intent

Strategic Objectives & Inputs

Chapter 1: Strategic

ManagementStrategic

Competitiveness Ch. 2: Strat. Mgmt . &

Performance



Chapter 4:The Internal Environment

Chapter 5: Bus.-Level Strategy

Chapter 6:Competitive Dynamics

Chapter 7:Corp.-Level

Strategy



That’s the Whole Enchilada

Hitt, Ireland, Hoskisson, Rowe, and Sheppard

Strategic Management: Competitiveness & Globalization

Strategic Management Ch14

Education

Transcript of Strategic Management Ch14