CHAPTER 13

STRATEGIC ACTIONS: STRATEGY IMPLEMENTATION

Strategic Entrepreneurship

Strategic Management
PowerPoint Presentation by Charlie Cook The University of West Alabama 2007 Thomson/South-Western. Thomson/SouthAll rights reserved.

Competitiveness and Globalization: Seventh edition Concepts and Cases

Michael A. Hitt R. Duane Ireland Robert E. Hoskisson

KNOWLEDGE OBJECTIVES Studying this chapter should provide you with the strategic management knowledge needed to: 1. Define strategic entrepreneurship and corporate entrepreneurship. 2. Define entrepreneurship and entrepreneurial opportunities and explain their importance. 3. Define invention, innovation, and imitation and describe the relationship among them. 4. Describe entrepreneurs and the entrepreneurial mindmindset. 5. Explain international entrepreneurship and its importance.
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KNOWLEDGE OBJECTIVES (cont d) Studying this chapter should provide you with the strategic management knowledge needed to: 6. Describe how firms internally develop innovations. 7. Explain how firms use cooperative strategies to innovate. 8. Describe how firms use acquisitions as a means of innovation. 9. Explain how strategic entrepreneurship helps firms create value.

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Strategic Entrepreneurship
Strategic Entrepreneurship
 Taking entrepreneurial actions using a strategic perspective.  Engaging in simultaneous opportunity seeking and competitive advantage seeking behaviors.  Designing and implementing entrepreneurial strategies to create wealth.

Strategic entrepreneurship actions can be taken by:

 Individuals  Corporations
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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 by others.

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Entrepreneurial Opportunities
Entrepreneurial Opportunities
 Conditions in which new products or services can satisfy a need in the market.

Entrepreneurs or entrepreneurial managers must 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
Invention The act of creating or developing a new product or process Brings something new into being. Technical criteria are used to determine the success of an invention.

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Innovation Process (cont d)

Invention The process of creating a commercial product from an invention. Brings something new into use. Commercial criteria are used to determine the success of an innovation.

Innovation

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Innovation Process (cont d)

Invention The adoption of an innovation by similar firms Usually leads to product or process standardization. Products based on imitation often are offered at lower prices but with fewer features.

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 or develop an innovation, take risks entering innovations into the marketplace.  Can be any manager or employee in an organization.

Entrepreneurial capabilities include:

 Intellectual capital  Entrepreneurial mind-set mind Transfer of entrepreneurial competence to others  Effective human capital
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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.

2007 Thomson/South-Western. All rights reserved.

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International Entrepreneurship (cont d)

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 group ownership of an innovation.

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Incremental and Radical Innovation

Incremental Innovation  Is the usual case for innovation in organizations.  Provides small increments in current product lines.  Improves existing knowledge and processes.  Can create value. Radical Innovation  Is rare because of difficulty and risk.  Provides significant technological breakthroughs.  Creates new knowledge and processes.  Can create value.

2007 Thomson/South-Western. All rights reserved.

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FIGURE 13.1

Model of Internal Corporate Venturing

Source: Adapted from R. A. Burgelman, 1983, A model of the interactions of strategic behavior, corporate context, and the concept of strategy, Academy of Management Review, 8: 65. 2007 Thomson/South-Western. All rights reserved.

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Internal Corporate Venturing

The set of activities used to create inventions and innovations through internal means.
 R&D spending is linked to success in internal corporate venturing.

Product Champion
 An organizational member with an entrepreneurial vision of a new good or service who seeks to create support for the visions commercialization.

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Internal Corporate Venturing (cont d)

A bottom-up process in which product bottomchampions:
 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.

Forms of internal corporate venturing:

 Autonomous strategic behavior  Induced strategic behavior

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Venturing: Strategic Behaviors

Autonomous Strategic Behavior
 Based 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 and processes.

Induced Strategic Behavior

 A top-down process whereby the firms current topstrategy and structure foster product innovations.  The strategy in place is filtered through a matching structural hierarchy.
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Implementing New Product Development and Internal Ventures

To be innovative and 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.

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Cross Functional Product Development Teams

Facilitate integration of activities associated with different organizational functions.
 Design, manufacturing, marketing, etc.

CrossCross-functional Product Development Team

New product development processes can be completed more quickly.

 Products can be more easily commercialized when crosscrossfunctional teams work effectively.
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Cross Functional Product Development Teams

Product development stages are grouped into parallel or overlapping processes, allowing the firm to tailor its product development efforts  Unique core competencies  Needs of the market

CrossCross-functional Product Development Team

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Barriers to Cross-Functional Teams CrossEffectiveness

Different orientations and perceptions
 Individuals from separate functions have different orientations on issues.
Create differing approaches to product development activities.

Organizational Politics
 Cause aggressive competition for resources among different organizational functions.
Organizations must achieve cross-functional integration with crossminimal political conflict.

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Facilitating Integration and Innovation

Shared Values
 Are framed 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 and commercialization of new goods and services

Effective Communication

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FIGURE 13.2

Creating Value through Internal Innovation Processes

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Cooperative Strategies for Entrepreneurship and Innovation

Cooperation and integration of knowledge and resources is required to successfully commercialize inventions.
 Entrepreneurial firms need investment capital and distribution capabilities.  Established companies need the technological knowledge possessed by entrepreneurial firms.

Firms innovate through the sharing their knowledge and skills in a cooperative relationship.
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Acquisitions to Buy Innovation

Acquisitions
 Can rapidly extend the product line.  Can quickly increase the firms revenues.

Key risks of acquisitions

 The firm may substitute the ability to buy innovations for an ability to produce innovations internally.  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 Firms
 Seek high returns on their investment.  Value the 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 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 than can be obtained from venture capitalists.  Investment bankers frequently play major roles in the development and offering of IPOs.  Firms that have previously received venture capital backing usually receive greater returns from IPOs.

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Creating Value through Strategic Entrepreneurship

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 identifying and exploiting opportunities. Develop an entrepreneurial mind-set among managers mindand employees. Seek to enter and compete in international markets.
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