PART 3: STRATEGIC ACTIONS: STRATEGY IMPLEMENTATION CHAPTER 13 STRATEGIC ENTREPRENEURSHIP Authored by: Marta Szabo White, PhD Georgia State University THE STRATEGIC MANAGEMENT PROCESS ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use KNOWLEDGE OBJECTIVES ● Define strategic entrepreneurship and corporate entrepreneurship ● Define entrepreneurship and entrepreneurial opportunities and explain their importance ● Define invention, innovation, and imitation, and describe the relationship among them ● Describe entrepreneurs and the entrepreneurial mind-set ● Explain international entrepreneurship and its importance ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use KNOWLEDGE OBJECTIVES ● Describe how firms internally develop innovations ● Explain how firms use cooperative strategies to innovate ● Describe how firms use acquisitions as a means of innovation ● Explain how strategic entrepreneurship helps firms create value ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use OPENING CASE 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 FacebookNetFlix Nissan Zynga, Groupon Epocrates Source: Fast Company ■ Continuous innovation, the common denominator, is a potent competitive weapon, especially during tough economic times ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use OPENING CASE OPEN INNOVATION: COMBINING EXTERNAL TECHNOLOGIES AND IDEAS WITH INTERNAL R&D CAPABILITIES ■ Open 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 ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use OPENING CASE 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 - Food product joint ventures with ConAgra and General Mills ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use OPENING CASE 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 toothwhitening strip ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use OPENING CASE 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 ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use OPENING CASE 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 ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use • 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 value ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use MODEL OF INTERNAL CORPORATE VENTURING FIGURE 13.1 Model of Internal Corporate Venturing ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use INTERNAL INNOVATION Internal Corporate Venturing refers to the set of activities firms use to develop internal inventions and innovations: autonomous and induced AUTONOMOUS STRATEGIC • Bottom-up process BEHAVIOR INDUCED STRATEGIC • Top-down process BEHAVIOR ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use INTERNAL INNOVATION AUTONOMOUS STRATEGIC • Bottom-up process BEHAVIOR ■ 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 firm ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use INTERNAL INNOVATION INDUCED STRATEGIC BEHAVIOR • Top-down process 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 structure ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use IMPLEMENTING INTERNAL INNOVATIONS Entrepreneurial mind-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: Cross-functional product development teams Facilitating integration and innovation Creating value from internal innovation ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use CREATING VALUE THROUGH INTERNAL INNOVATION PROCESSES FIGURE 13.2 Creating Value Through Internal Innovation Processes ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use IMPLEMENTING INTERNAL INNOVATIONS Cross-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 Cross-Functional quickly Product Development • Products can be more easily Team commercialized when cross©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use functional teams work effectively IMPLEMENTING INTERNAL INNOVATIONS Cross-Functional Product Development Teams • • • Cross-Functional Product Development Team • Horizontal structures support use of crossfunctional 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 conflict ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use All are important to successfully innovate and facilitate cross-functional integration IMPLEMENTING INTERNAL INNOVATIONS Facilitating Integration and Innovation • Shared Values • • • Effective Leadership • • • Are framed around the firm’s strategic intent and mission Become the glue that promotes integration between functional units Sets goals and allocates resources Goals include integrated development and commercialization of new goods and services Effective Communication ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use IMPLEMENTING INTERNAL INNOVATIONS Creating Value from Internal Innovation • • • • Entrepreneurial mind-set is necessary Manager support Cross-functional teams Effective leadership and shared values ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 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 occur ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use 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 ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use CREATING VALUE THROUGH STRATEGIC Entrepreneurial ventures: ENTREPRENEURSHIP • • • • 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) ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use CREATING VALUE THROUGH STRATEGIC Objective is to help firms develop successful ENTREPRENEURSHIP 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 ©2013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use [...]... INTERNAL INNOVATION: INCREMENTAL AND RADICAL INNOVATION Incremental Innovation • • • Is evolutionary and linear Most innovations are incremental Builds on existing knowledge bases and provides small Radical Innovation • • • Is revolutionary and nonlinear Is rare because of difficulty and risk Generates significant technological breakthroughs and creates new knowledge/processe s ©2 013 Cengage Learning All Rights... password-protected website for classroom use INTERNAL INNOVATION: INCREMENTAL AND RADICAL INNOVATION AUTONOMOU S STRATEGIC BEHAVIOR • Facilitates incremental and radical innovation • Primarily Radical Innovation INDUCED STRATEGIC BEHAVIOR • Facilitates incremental and radical innovation • Primarily Incremental Innovation ©2 013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated,... 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 behavior ©2 013 Cengage Learning All Rights Reserved May not be copied,... • 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 value ©2 013 Cengage Learning All Rights Reserved... classroom use INTERNAL INNOVATION Internal Corporate Venturing refers to the set of activities firms use to develop internal inventions and innovations: autonomous and induced AUTONOMOUS STRATEGIC • Bottom-up process BEHAVIOR INDUCED STRATEGIC • Top-down process BEHAVIOR ©2 013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted... 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 time ©2 013 Cengage Learning... Organizational culture: the complex set of ideologies, symbols, and core values shared throughout the firm and that influence how the firm conducts business • The social 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... password-protected website for classroom use INTERNAL INNOVATION INDUCED STRATEGIC BEHAVIOR • Top-down process 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 structure ©2 013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except... entrepreneurial activity and economic development in a nation ©2 013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use INTERNAL INNOVATION • Firms take deliberate efforts to develop inventions and innovations... identify and pursue entrepreneurial opportunities without the immediate constraint of the resources they currently control ©2 013 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use ENTREPRENEURSHIP AND ENTREPRENEURIAL