Chapter 13 – Strategic Entrepreneurship

Agenda Introduction to Corporate Entrepreneurship Innovation Organizing for Corporate Entrepreneurship

Corporate Entrepreneurship SOURCE: “How failure breeds success”, Business Week, July 10, 2006: 44-45.

Entrepreneurship Entrepreneurial Opportunities Conditions in which new products or services can satisfy a need in the market Entrepreneurship is concerned with the discovery of profitable opportunities not perceived by others, the exploitation of profitable opportunities, and establish a competitive advantage based on opportunities

Corporate Entrepreneurship Individuals acting independently or as part of an organization who create a new venture or develop an innovation and take risks entering innovations into the marketplace Can be any manager or employee in an organization Corporate entrepreneurship Process whereby an individual or a group in an existing organization creates a new venture or develops an innovation

Entrepreneurial Capabilities Firms that encourage entrepreneurship are: Risk takers Committed to innovation Proactive in creating opportunities rather than waiting to respond to opportunities created by others Entrepreneurial capabilities include: Intellectual & human capital Entrepreneurial mind-set Transfer of entrepreneurial competence to others in the organization

Agenda Introduction to Corporate Entrepreneurship Innovation Organizing for Corporate Entrepreneurship

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

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

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

Incremental & Radical Innovation Incremental Innovation Most innovations are incremental Provides small increments in current product lines Improves existing knowledge and processes Can create value Radical Innovation Are rare because of difficulty and risk Provides significant technological breakthroughs Creates new knowledge and processes Can create value

Incremental & Radical Innovation Fiber-optic cable Internet browser Online auction exchanges Bubble wrap Radical Innovation Incremental Innovation Laparoscopic “keyhole” surgery Speech recognition software Polyester Enterprise resource planning (ERP) Frozen yogurt

Source: Kanter, E. R., cited in: Business Week, March, 2007: 3. Innovation Pyramid Source: Kanter, E. R., cited in: Business Week, March, 2007: 3.

Agenda Introduction to Corporate Entrepreneurship Innovation Organizing for Corporate Entrepreneurship

Internal Corporate Venturing Set of activities used to create inventions and innovations through internal means Spending on R&D is linked to success of internal corporate venturing Successful entrepreneurial firms Provide appropriate autonomy Offer incentives for individual initiative Promote cooperation and group ownership of an innovation

Strategic Venturing Behaviors Induced Strategic Behavior A top-down process whereby the firm’s 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 Autonomous Strategic Behavior Bottom-up process based on a firm’s wellsprings of knowledge and resources A firm’s technological capabilities and competencies are its basis for new products and processes

Product Champion Organizational member with an entrepreneurial vision of a new product or service and who seeks to create support for its commercialization Play critical role in moving innovations forward “Sell” new business ideas to the organization Particularly important for autonomous strategic behavior

Cross–Functional Product Development Teams Facilitate integration of activities associated with different organizational functions (design, manufacturing, marketing, etc.) New product development processes can be completed more quickly Products can be more easily commercialized when cross-functional teams work effectively The Firm Cross-functional Product Development Team

Barriers to Cross-Functional Teams Effectiveness Different orientations and perceptions Individuals from separate functions have different orientations on issues Perceive product development activities in different ways Organizational politics Aggressive competition for resources among different organizational functions Must achieve cross-functional integration with minimal political conflict

Cooperative Strategies & M&A Unlikely that firms possess all the knowledge and resources required for it to be entrepreneurial and innovative in a dynamic, competitive market To gain access to other organization’s knowledge and resources and to commercialize innovations, firms Enter into strategic alliances and/or networks of alliances Engage in acquisitions of other organizations