Managing Innovation and Fostering Corporate Entrepreneurship Chapter Twelve McGraw-Hill/Irwin Copyright © 2012 by The McGraw-Hill Companies, Inc. All rights reserved.

Learning Objectives After reading this chapter, you should have a good understanding of: LO12.1 The importance of implementing strategies and practices that foster innovation. LO12.2 The challenges and pitfalls of managing corporate innovation processes. LO12.3 How corporations use new venture teams, business incubators, and product champions to create an internal environment and culture that promote entrepreneurial development. 12-2

Learning Objectives (cont.) LO12.4 How corporate entrepreneurship achieves both financial goals and strategic goals. LO12.5 The benefits and potential drawbacks of real options analysis in making resource deployment decisions in corporate entrepreneurship contexts. LO12.6 How an entrepreneurial orientation can enhance a firm’s efforts to develop promising corporate venture initiatives. 12-3

Managing Innovation  Innovation  using new knowledge to transform organizational processes or create commercially viable products and services  Latest technology, results of experiments, creative insights, competitive information 12-4

Types of Innovation  Sustaining innovations  extend sales in an existing market, usually by enabling new products or services to be sold at higher margins.  Disruptive innovations  overturn markets by providing an altogether new approach to meeting customer needs. 12-5

Challenges of Innovation Seeds versus Weeds Experience versus Initiative Internal versus External staffing Building capabilities versus Collaborating Incremental versus Preemptive launch 12-6

Managing the Pace of Innovation  Incremental innovation  May be six months to two years  May use a milestone approach driven by goals and deadlines  Radical innovation  Typically long term – 10 years or more  Often involves open-ended experimentation and time- consuming mistakes 12-7

Rules for Fostering Innovation 12-8 Exhibit 12.3

Focused Approaches to Corporate Entrepreneurship  New venture group  a group of individuals, or a division within a corporation, that identifies, evaluates, and cultivates venture opportunities. 12-9

Focused Approaches to Corporate Entrepreneurship  Business incubator  supports and nurtures fledgling entrepreneurial ventures until they can thrive on their own as stand-alone businesses

Entrepreneurial Culture  Culture of entrepreneurship  Search for venture opportunities permeates every part of the organization  Strategic leaders and the culture generate a strong impetus to innovate, take risks and seek out new venture opportunities 12-11

Product Champions  Product (or project) champions  Bring entrepreneurial ideas forward  Identify what kind of market exists for the product or service  Find resources to support the venture  Promote the venture concept to upper management 12-12

Measuring the Success of Corporate Entrepreneurship Activities  Exit champions  individual working within a corporation who is willing to question the viability of a venture project by demanding hard evidence of venture success and challenging the belief system that carries a venture forward

Real Options Analysis  Real options analysis  for each investment step the investor has the option of (a) investing additional funds to grow or accelerate, (b) delaying, (c) shrinking the scale of, or (d) abandoning the activity

Dimensions of Entrepreneurial Orientation Exhibit 12.4