1. Organization Renewal & Innovation©
Chapter Fourteen:
Organization Renewal & Innovation
Chapter Three:
The External Environment
Chapter Three:
The External Environment
Hitt, Ireland, Hoskission, Rowe & Sheppard
Strategic
Management
N o t e s
Competitiveness & Globalization

2. The Strategic Management Process
Ch. 1: Strat. Mgmt. & Com-petitiveness
Ch. 2: Strat. Mgmt . & Performance
Chapter 3:
The External Environment
Chapter 4:
The Internal Environment
Strategic Competitiveness
Strategic Mission & Strategic Intent
Strategic Objectives & Inputs
Chapter 11:
Corporate Governance
Ch. 12: Org. Structure & Controls
Chapter 13:
Strategic Leadership
Chapter 14:
Org. Renewal & Innovation
Strategy Implementation
Chapter 14:
Org. Renewal & Innovation
Strategic
Actions
Chapter 5:
Bus.-Level Strategy
Chapter 6:
Competitive Dynamics
Chapter 7:
Corp.-Level Strategy
Chapter 8:
Acquisition & Restructuring
Chapter 9:
International Strategy
Chapter 10:
Cooperative Strategy
Strategy Formulation

3. Organizational Renewal & Innovation
Knowledge objectives
Note the importance of entrepreneurship in strategy & international entrepreneurship is increasing.
Describe the 2 forms of internal corp. venturing: autonomous and induced strategic behaviour.
Discuss how cooperative strategies, such as strategic alliances are used to develop innovation.
Explain how firms use acquisitions to increase their innovations and enrich their innovative capabilities.
Describe the importance of venture capital & initial public offerings to entrepreneurial activity.
See how the practice of strategic entrepreneurship creates value for customers & shareholders.

4. Entrepreneurship Definitions
Entrepreneurial actions based on a strategic perspective.
Strategic Entrepreneurship
An individual or a group in an organization creates a new venture or develops an innovation.
Corporate Entrepreneurship
Exploiting a new market segment unexplored by other potential competitors.
Blue Ocean Strategy
Entrepreneurs & Entrepreneurship
Definitions 6

5. Innovation Definitions
Creating or developing a new product or process.
Invention
Creating a commercial product from an invention.
Innovation
Adoption of innovation by a population of similar firms.
Imitation
BONUS
Firms doing basic & applied (commercializable) research.
Ambidextrous Organizations
Geographic clustering of firms in associated industries.
Incubators
Inventions radically changing industry competitive balance.
Disruptive Technologies (creative destruction)
Definitions 6

6. Entrepreneurs & Entrepreneurship
Are individuals acting independently or as part of an organization.
Create a new venture or develop an innovation & take risks entering them into the marketplace.
Can be independent individuals.
Can surface in an organization at any level.
Successful entrepreneurship and innovation involves moving from:
the invention of ideas,
to effective commercialization,
& acceptance in the marketplace.
Entrepreneurs & Entrepreneurship
Entrepreneurs & Entrepreneurship
Innovation 7

7. International Entrepreneurship
Entrepreneurship can:
Fuel economic growth,
Create employment,
Generate prosperity for citizens.
There’s a + link between rates of entrepreneurial activity & economic development in a nation.
There must be a balance (in the culture) between:
The individual initiative and,
The spirit of cooperation & group ownership of innovation.
Successful entrepreneurial firms
Provide appropriate autonomy,
Incentives for individual initiative,
Promote cooperation & group ownership of an innovation.
Entrepreneurs & Entrepreneurship

8. Innovation
Innovation is the process of creating a commercial product from an invention:
Invention brings something new into being,
Innovation brings something new into use.
Innovation is a key outcome firms seek through entrepreneurship and is often the source of competitive success
Innovations produced in large established firms are often referred to as corporate entrepreneurship
Innovation

9. Innovation Types: Incremental innovation Radical innovation
Most innovations are Incremental.
Builds on existing knowledge bases.
Provides small improvements in the current product lines.
Incremental
innovation
Radical
innovation
Provides significant technological breakthroughs.
Creates new knowledge.
Is rare because of difficulty and risk.
Requires substantial creativity.
Radical innovations are often best developed in separate units that start internal ventures.
Innovation

10. Internal Corp. Venturing Model
Corp. Entrepreneurship can occur as either a
Corporate Headquarters
Structural Context
Induced
Strategic Behaviour
Autonomous
Strategic Behaviour
Strategic Context
a bottom-up process
or as a top-down process
Internal Corp. Venture Model 19

11. Internal Corp. Venturing Model
Autonomous
Strategic Behaviour
Strategic Context
Autonomous Strategic behaviour:
A bottom-up process in which product champions:
Pursue new ideas, often through a political process.
Develop & coordinate commercialization of a new good or service until it achieves success in the marketplace.
Based on a firm’s wellsprings of knowledge & resources that are the sources of the firm’s innovation.
A firm’s technological capabilities & competencies are the basis for new products and processes.
A product champion is:
An organizational member with entrepreneurial vision who seeks support for commercialization of a new good / service.
Internal Corp. Venture Model

12. Internal Corp. Venturing Model
Structural Context
Induced
Strategic Behaviour
Corporate Headquarters
Induced Strategic Behaviour
A top-down process whereby:
The firm’s current strategy & structure foster product innovations,
Innovations are associated closely with that strategy and structure.
To be innovative & develop internal ventures entails:
An entrepreneurial mindset,
A 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.
Internal Corp. Venture Model

13. Appropriating Value from Innovation
Barriers to Integration
Different Time Orientation
Interpersonal Orientation
Different Goal Orientation
Formality of Structure
Facilitators of Integration
Shared Values
Vision & Leadership
Budget Allocation
Effective Communication
Cross-Functional Integration /
Design Teams
Cross-functional design teams may break down barriers to entrepreneurship.
Helps
Product Quality
Customer Value
Time to Market
Value Appropriation from Innovation
Facilitators of Integration increase effectiveness of Cross-functional integration or design teams.
Appropriating / Creating Value 27

14. Appropriating Value from Innovation
Barriers to Integration
Long time line: R&D
Short time line: Production
Different functional
time orientation
Qualitative: HRM
Quantitative: Accounting
Different functional language and interpersonal orientation
Customer satisfaction: Sales
Cost reduction: Production
Different goal
orientation
Informal:
R&D
Formal: Manufacturing
Formality of structure
Appropriating / Creating Value 27

15. Appropriating Value from Innovation
Cross-Functional Product Development Teams
Facilitate efforts to integrate activities related to different firm functions.
Design, mfg., marketing, etc.
Development can be completed more quickly.
Allow for easier commercialization.
Development stages are grouped into parallel or overlapping processes.
Allows a firm to tailor its product development efforts:
Unique core competencies,
Needs of the market.
The Firm
Cross-functional
product
development team
Appropriating / Creating Value

16. Innovation from the Outside
Cooperative strategies for entrepreneurship & innovation
Firms may need to cooperate & integrate knowledge & resources to successfully commercialize inventions:
Entrepreneurial new venture firms may need investment capital and distribution capabilities.
More established firms may need new technological knowledge possessed by newer entrepreneurial firms.
To innovate through a cooperative relationship, firms must share their knowledge and skills.
Innovation from the Outside

17. Innovation from the Outside
Acquisitions to Buy Innovation
Acquisitions
Rapidly extend the product line,
Increase the firm’s revenues.
A key risk of acquisitions is that a firm may substitute the ability to buy innovations for an ability to produce innovations internally:
Firm may lose intensity in R&D efforts,
Firm may lose ability to produce patents.
Innovation from the Outside

18. Capital for Entrepreneurial Ventures
Venture capital firms:
Seek high returns on their investment.
Value 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 degree of instability in the market addressed.
Initial public offerings (IPOs):
New stock; Firm needs high potential sell new stock.
Larger than amounts obtained from venture capitalists.
Investment bankers frequently play major role.
Firms that have also received venture capital backing usually receive greater returns from IPOs.
Capital Sources

19. Entrepreneurial Value Creation
Creating Value via Strategic Entrepreneurship:
New entrepreneurial firms are often more effective than large firms in identifying opportunities.
Firms must develop an entrepreneurial mindset among their managers & employees.
Managers must emphasize the development of their resources, particularly human & social capital.
Firms should seek to enter & compete in International markets.
Firms seeking to establish their technology as a standard engage in strategic entrepreneurship.
Being standard = a sustainable competitive advantage.
Entrepreneurial Value Creation

20. The Strategic Management Process
Ch. 1: Strat. Mgmt. & Com-petitiveness
Ch. 2: Strat. Mgmt . & Performance
Chapter 3:
The External Environment
Chapter 4:
The Internal Environment
Strategic Competitiveness
Strategic Mission & Strategic Intent
Strategic Objectives & Inputs
Chapter 11:
Corporate Governance
Ch. 12: Org. Structure & Controls
Chapter 13:
Strategic Leadership
Chapter 14:
Org. Renewal & Innovation
Strategy Implementation
Chapter 14:
Org. Renewal & Innovation
Strategic
Actions
Chapter 5:
Bus.-Level Strategy
Chapter 6:
Competitive Dynamics
Chapter 7:
Corp.-Level Strategy
Chapter 8:
Acquisition & Restructuring
Chapter 9:
International Strategy
Chapter 10:
Cooperative Strategy
Strategy Formulation

21. That’s the Whole Enchilada
Hitt, Ireland, Hoskisson, Rowe & Sheppard
Strategic Management: Competitiveness & Globalization