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STRATEGY IMPLEMENTATION CHAPTER 13 STRATEGIC ENTREPRENEURSHIP THE STRATEGIC MANAGEMENT PROCESS KNOWLEDGE OBJECTIVES KNOWLEDGE OBJECTIVES OPEN INNOVATION COMBINING EXTERNAL TECHNOLOGIES ID: 675187 Download Presentation

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Slide1

PART 3: STRATEGIC ACTIONS:

STRATEGY IMPLEMENTATION

CHAPTER 13

STRATEGIC ENTREPRENEURSHIPSlide2

THE STRATEGIC MANAGEMENT PROCESS

Slide3

KNOWLEDGE OBJECTIVESSlide4

KNOWLEDGE OBJECTIVESSlide5

OPEN INNOVATION: COMBINING EXTERNAL TECHNOLOGIES AND IDEAS WITH INTERNAL R&D CAPABILITIES

The world’s 10 most innovative firms in 2011: Apple Google

Twitter Dawning Information Industry

Facebook

NetFlix

Nissan

Zynga

,

Groupon

Epocrates

Source:

Fast Company■ Continuous innovation, the common denominator, is a potent competitive weapon, especially during tough economic times

OPENING CASE Slide6

OPEN INNOVATION: COMBINING EXTERNAL TECHNOLOGIES AND IDEAS WITH INTERNAL R&D CAPABILITIES

■ O

pen innovation occurs when a firm finds that a good idea is not commercially viable, given a firm’s present strategy; rather than shelving the idea, commercialization can take place through licenses, spin-offs, and joint ventures

P&G launched the concept of open innovation in 2001, with its

Connect & Develop

program

OPENING CASE Slide7

OPEN INNOVATION: COMBINING EXTERNAL TECHNOLOGIES AND IDEAS WITH INTERNAL R&D CAPABILITIES

■ Open innovation examples:

P&G -

Tide Total Care was developed through Sweden’s Lund University and two small chemical companies as partners

● P&G -

Glad brand plastic bag joint venture with Clorox, a historical rival

● P&G - F

ood product joint ventures with ConAgra and General Mills

OPENING CASE Slide8

OPEN INNOVATION: COMBINING EXTERNAL TECHNOLOGIES AND IDEAS WITH INTERNAL R&D CAPABILITIES

■ Open innovation examples:

Nike and Apple developed a sensor that transmits data from inside a shoe to the runner’s iPod or

iPhone

GlaxoSmithKline and

Oratech

partnered to develop

Aquafresh

White Trays, a tooth-whitening strip

OPENING CASE Slide9

OPEN INNOVATION: COMBINING EXTERNAL TECHNOLOGIES AND IDEAS WITH INTERNAL R&D CAPABILITIES

■ Open innovation examples:

Kimberly-Clark and

SunHealth

Solutions developed Little Swimmers Sun Care, an adhesive sticker that changes color to alert parents to the risk of sunburn

Kraft and Hershey developed

S’mores

,

a mixture of hot marshmallows that melt the chocolate between two graham crackers

OPENING CASE Slide10

OPEN INNOVATION: COMBINING EXTERNAL TECHNOLOGIES AND IDEAS WITH INTERNAL R&D CAPABILITIES

Three paths for open innovation solutions:

● Customer-driven: tapping unmet customer needs

Technology-driven: substantial R&D investments

Competitor-driven:

Fast follower

of competitors’ successful strategies

Senior-level championing is critical for success

OPENING CASE Slide11

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

s

ocial

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 effortsSlide12

IMPORTANT DEFINITIONS

Strategic entrepreneurship actions can be taken by:

Individuals

Corporations

Corporate entrepreneurship:

the u

se or application of entrepreneurship within an established firmSlide13

ENTREPRENEURSHIP AND ENTREPRENEURIAL OPPORTUNITIES

Entrepreneurship is concerned with:

The discovery of profitable opportunities

The exploitation of profitable opportunities

Entrepreneurship:

the process

by which individuals or groups identify and pursue entrepreneurial opportunities without the immediate constraint of the resources they currently controlSlide14

ENTREPRENEURSHIP AND ENTREPRENEURIAL OPPORTUNITIES

Purpose of entrepreneurship:

To create wealth

Firms that foster entrepreneurship

are:

Risk takers

Committed to innovation

Proactive in creating opportunities rather than waiting to respond to opportunities created by othersSlide15

ENTREPRENEURSHIP AND ENTREPRENEURIAL OPPORTUNITIES

Entrepreneurial opportunities:

Are opportunities others do not see or for which they do not recognize the commercial potential

Are

c

onditions

in which new products or services can satisfy a need in the market

Exist due to competitive market imperfections and unevenly distributed information

Are

s

tudied

at the level of the individual firm

May be the economic engine driving many nations’ economies in the global competitive landscapeSlide16

ENTREPRENEURSHIP AND ENTREPRENEURIAL OPPORTUNITIES

Creative Destruction

(

Schumpeter)

Entrepreneurship, as a process, results in the ‘

creative destruction

’ of existing products (good or services) or methods of producing them, and replaces them with new products/production methods

Entrepreneurial firms value individual innovations and the ability to continuously innovate across timeSlide17

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)

AcquisitionsSlide18

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

s

ource

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 advantageSlide19

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 inventionSlide20

INNOVATION

Invention

Innovation

Process of creating a commercial product from an invention

Brings something new into use

Commercial criteria determine

the

success of an innovationSlide21

INNOVATION

Invention

Innovation

Imitation

A

doption

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 Slide22

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 activitiesSlide23

ENTREPRENEURS

Entrepreneurs

Individuals, acting independently or as part of an organization, who see an entrepreneurial opportunity and then take risks to develop an innovation to exploit it

Entrepreneurial Mind-set

Values uncertainty in the marketplace and seeks to continuously identify opportunities with the potential to lead to important innovationsSlide24

ENTREPRENEURS

Entrepreneurial characteristics:

Highly motivated

Willing

to take responsibility for their projects

Passionate

Optimistic

Emo

tional

about the value and importance of their innovation-based ideas

Entrepreneurial mind-set

Able to deal with uncertainty

More alert to opportunities than others

Good social skills and plan exceptionally well Slide25

INTERNATIONAL ENTREPRENEURSHIP

Firms creatively discover and exploit opportunities outside their domestic markets in order to develop a competitive advantage

Entrepreneurship has become a global phenomenon

as internationalization typically leads

to improved firm performance

EXAMPLE

- Large multinational companies (MNCs) generate roughly 54% of their sales outside their domestic market, and more than 50% of their employees work outside of the home countrySlide26

INTERNATIONAL ENTREPRENEURSHIP

Risks include:

Unstable foreign currencies

Inefficient markets

Insufficient infrastructures to support businesses

Limitations on market size and growthSlide27

INTERNATIONAL ENTREPRENEURSHIP

Rates of entrepreneurship differ across countries due to:

Impact of national culture

Entrepreneurship declines as collectivism increases

Exceptionally high levels of individualism can be dysfunctional for entrepreneurship

Balance between individual initiative and cooperative spirit versus group ownership of innovation is required

Level of investment outside of the home country made by new ventures

Top executives with international experience

Internationally

diversified firms are generally more innovative

Slide28

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.Slide29

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 behaviorSlide30

INTERNAL INNOVATION: INCREMENTAL AND RADICAL INNOVATION Slide31

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 creativitySlide32

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 valueSlide33

MODEL OF INTERNAL CORPORATE VENTURING

FIGURE 13

.1

Model of Internal Corporate VenturingSlide34

INTERNAL INNOVATION

Internal Corporate Venturing refers to the set of activities firms use to develop internal inventions and innovations: autonomous and inducedSlide35

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 firmSlide36

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 structureSlide37

IMPLEMENTING INTERNAL INNOVATIONS

Entrepreneurial

m

ind

-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 innovationSlide38

CREATING VALUE THROUGH INTERNAL INNOVATION PROCESSES

FIGURE 13

.2

Creating Value Through Internal Innovation ProcessesSlide39

IMPLEMENTING INTERNAL INNOVATIONSCross-Functional Product Development Teams

Efforts to integrate and coordinate activities and apply knowledge from different functional activities associated with different functional areas to maximize innovation:

Design

Manufacturing

Marketing

New product development processes can be completed more quickly

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

Cross-Functional

Product Development

TeamSlide40

IMPLEMENTING INTERNAL INNOVATIONS Cross-Functional Product Development Teams

Cross-Functional

Product Development

Team

Horizontal structures support use of cross-functional teams

Two primary barriers to success:

Independent frames of reference of members with distinct specializations

Organizational politics that create competition for resources and inter-unit conflictSlide41

IMPLEMENTING INTERNAL INNOVATIONS Facilitating Integration and Innovation

Shared Values

Are framed around the firm’s 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

All are important to successfully innovate and facilitate cross-functional integration

.Slide42

IMPLEMENTING INTERNAL INNOVATIONSCreating Value from Internal Innovation

Entrepreneurial mind-set is necessary

Manager support

Cross-functional teams

Effective leadership and shared valuesSlide43

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 occurSlide44

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

Slide45

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)Slide46

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.

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