1. Managing Innovation and Fostering Corporate Entrepreneurship
Part 3: Strategic Implementation
Strategic Management: creating competitive advantages
Gregory G. Dess
G. T. Lumpkin
Marilyn L. Taylor
Chapter 12
Managing Innovation and Fostering Corporate Entrepreneurship

2. Learning Objectives
After reading this chapter, you should have a good understanding of:
The importance of implementing strategies and practices that foster innovation.
The challenges and pitfalls of managing corporate innovation processes.
The role of product champions and exit champions in internal corporate venturing.

3. Learning Objectives
After reading this chapter, you should have a good understanding of:
How independent venture teams and business incubators are used to develop corporate ventures.
How corporations create an internal environment and culture that promotes entrepreneurial development.

4. Learning Objectives
After reading this chapter, you should have a good understanding of:
How an entrepreneurial orientation can enhance a firm’s efforts to develop promising corporate venture initiatives.

5. 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

6. Types of Innovation Degree of innovativeness Radical innovation
Fundamental changes and breakthroughs
Evoke major departures from existing practices
Can be highly disruptive
Can transform or revolutionize a whole industry
Incremental innovation
Enhance existing practices
Small improvements in products and processes
Evolutionary applications within existing paradigms

7. Continuum of Radical and Incremental Innovations
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
Exhibit 12.1 Continuum of Radical and Incremental Innovations

8. Types of Innovation Product and process innovations Product innovation
Efforts to create product designs
Applications of technology to develop new products for end users
More radical and common during earlier stages of an industry’s life cycle
Associated with differentiation strategies

9. Types of Innovation Product and process innovations
Improving efficiency of an organizational process
Manufacturing systems and operations
Can improve materials utilization
Shorten cycle time
Increase quality
More likely to occur in later stages of an industry’s life cycle
Associated with cost leader strategies

10. Challenges of Innovation
Seeds versus weeds
Deciding the merits of innovative ideas
Seeds—likely to bear fruit
Weeds—should be cast aside
Dilemma
Some innovation projects require considerable level of investment before merit can can be determined

11. Challenges of Innovation
Experience versus initiative
Deciding who will lead an innovation project
Senior managers
have experience and credibility
tend to be more risk averse
Midlevel employees
may be the innovators themselves
May have more enthusiasm

12. Challenges of Innovation
Internal versus external staffing
Innovation projects need competent staffs to succeed
People drawn from inside the firm
May have greater social capital
Know the organization’s culture and routines
May not be able to think outside the box
People drawn from outside the firm
Are costly to recruit, hire, train
May have difficulty building relationships

13. Challenges of Innovation
Building capabilities versus collaborating
Innovation projects often require building new sets of skills
Firms can seek help
Other departments
Partner with other companies that bring resources and experience
Partnerships
Create dependencies and inhibit internal skills development
Sharing benefits of innovation may create conflict

14. Challenges of Innovation
Incremental versus preemptive launch
Companies must manage the timing and scale of new innovation projects
Incremental launch
Less risky
Requires few resources
Serves as a market test
Can undermine the project’s credibility if too tentative
Large-scale launch
Requires more resources
Can effectively preempt a competitive response

15. Defining the Scope of Innovation
Firms must define the “strategic envelope” (scope of the innovation efforts)
In defining the strategic envelope, a firm should answer several questions
How much will the innovation cost?
How likely is it to actually become commercially viable?
How much value will it add; that is, what will it be worth if it works?
What will be learned if it does not pan out?

16. Managing the Pace of Innovation
Firms need to regulate 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
Strict timelines unrealistic

17. Collaborating with Innovation Partners
Innovation often requires collaborating with others who possess complementary knowledge and skills
Partners can come from several sources
Other personnel within the department
Personnel within the firm but from another department
Partners outside the firm
Nonbusiness sources, including research universities and the federal government

18. Corporate Entrepreneurship
Determining
how
entrepreneurial projects will be pursued
Corporate culture
Leadership
Structural features that guide and constrain action
Organizational systems that foster learning and manage rewards
Use of teams in strategic decision making
Whether the company is product or service oriented
Whether the firm’s innovation efforts are aimed at product or process improvements
The extent to which it is high-tech or low-tech

19. Focused Approaches to Corporate Entrepreneurship
Autonomous corporate venturing work group
Autonomous corporate venturing (work) group
Frees entrepreneurial team members from constraints imposed by existing norms and routines
Facilitates open-minded creativity
But, does isolate the group from the corporate mainstream
New venture groups (NVGs)
Business incubators

20. New Venture Groups (NVGs)
Focused approach
New Venture
Group
Goal is to identify, evaluate, and cultivate venture opportunities
Typically function as semi-autonomous units with little formal structure
Involvement includes
Innovation and experimentation
Coordinating with other corporate divisions
Identifying potential venture partners
Gathering resources
Launching the venture

21. Business Incubators
Focused approach
Business Incubators
Business incubators are designed to “hatch” new businesses
Incubators provide some or all of the following functions
Funding
Physical space
Business services
Monitoring
Networking

22. Disbursed Approaches to Corporate Entrepreneurship
Dedication to principles and practices of entrepreneurship is spread throughout the firm
Ability to change is a core capability
Stakeholders can bring new ideas or venture opportunities to anyone in the organization
Two related aspects of dispersed entrepreneurship
Entrepreneurial culture
Product champions

23. Entrepreneurial Culture
Dispersed approach Entrepreneurial Culture
Culture of entrepreneurship
Search for venture opportunities permeates every part of the organization
Effect is strongest when it animates all parts of the organization
Strategic leaders and the culture generate a strong impetus
to innovate
Take risks
Seek out new venture opportunities

24. Dispersed approach Product
Product Champions
Dispersed approach 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
New project must pass two critical stages
Project definition
Project impetus

25. Measuring the Success of Corporate Entrepreneurship Activities
Techniques used to limit the expense of venturing or to cut losses when entrepreneurial initiatives (CE) appear doomed
Comparing strategic and financial CE goals
Are the products or services offered by the venture accepted in the marketplace?
Are the contributions of the venture to the corporation’s internal competencies and experience valuable?
Is the venture able to sustain its basis of competitive advantage?

26. Measuring the Success of Corporate Entrepreneurship Activities
Techniques used to limit the expense of venturing or to cut losses when entrepreneurial initiatives (CE) appear doomed
Exit champions
Willing to question the viability of a venture project
Demand hard evidence and challenge the belief system that is carrying an idea forward
Hold the line on ventures that appear shaky
Real options
Managing the uncertainty associated with launching new ventures

27. Entrepreneurial Orientation
Dimension Definition
Autonomy Independent action by an individual or team aimed at bringing forth a business concept or vision and carrying it through to completion.
Innovativeness A willingness to introduce novelty through experimentation and creative processes aimed at developing new products and services as well as new processes.
Proactiveness A forward-looking perspective characteristic of a marketplace leader that has the foresight to seize opportunities in anticipation of future demand.
Source: J. G. Covin and D. P. Sleving, “A conceptual Model of Entrepreneurship As Firm Behavior,” Entrepreneurship Theory & Practice, Fall 1991, pp. 7-25; G. T. Lumpkin and G. G. Dess, “Clarifying the Entrepreneurial Orientation Construct and Linking It to Performance,” Academy of Management Review 21, no. 1 (1996), pp ; D. Miller, “The Correlates of Entrepreneurship in Three Types of Firms,” Management Science 29 (1983), pp
Adapted from Exhibit 12.2 Dimensions of Entrepreneurial Orientation

28. Entrepreneurial Orientation
Dimension Definition
Competitive An intense effort to outperform industry rivals. It is characterized by a combative posture or an aggressive response aimed at improving position or overcoming a threat in a competitive marketplace.
aggressiveness
Risk taking making decisions and taking action without certain knowledge of probable outcomes; some undertakings may also involve making substantial resource commitments in the process of venturing forward.
Source: J. G. Covin and D. P. Sleving, “A conceptual Model of Entrepreneurship As Firm Behavior,” Entrepreneurship Theory & Practice, Fall 1991, pp. 7-25; G. T. Lumpkin and G. G. Dess, “Clarifying the Entrepreneurial Orientation Construct and Linking It to Performance,” Academy of Management Review 21, no. 1 (1996), pp ; D. Miller, “The Correlates of Entrepreneurship in Three Types of Firms,” Management Science 29 (1983), pp
Adapted from Exhibit 12.2 Dimensions of Entrepreneurial Orientation

29. Entrepreneurial Orientation
Autonomy
Two techniques often used to promote autonomy
Using skunkworks to foster entrepreneurial thinking
Designing organization structures that support independent action
Innovativeness
Two methods used to enhance competitive position through innovativeness
Fostering creativity and experimentation
Investing in new technology, R&D, and continuous improvement

30. Entrepreneurial Orientation
Proactiveness
Two methods to promote acting proactively
Introducing new products or technological capabilities ahead of the competition
Continuously seeking out new product or service offerings
Competitive aggressiveness
Two ways competitively aggressive firms enhance their entrepreneurial position
Entering markets with drastically lower prices
Copying the business practices or techniques of successful competitors

31. Entrepreneurial Orientation
Risk taking
Three types of risks faced by organizations and their executives
Business risk taking
Financial risk taking
Personal risk taking
Two methods to strengthen competitive position through risk taking
Researching and assessing risk factors to minimize uncertainty
Using techniques that have worked in other domains