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

Strategic Entrepreneurship Knowledge objectives Describe the importance of entrepreneurship in strategy Discuss the importance of international entrepreneurship & describe why its practice is increasing Describe the two forms of internal corporate 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 Explain how the practice of strategic entrepreneurship creates values for customers & shareholders of all firms

Defining Entrepreneurship An individual or a group in an organization creates a new venture or develops an innovation Corporate Entrepreneurship 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 Entrepreneurial actions based on a strategic perspective Strategic Entrepreneurship

Successful Entrepreneurship The key to success with entrepreneurship and innovation is moving from: the invention of ideas to effective commercialization & acceptance in the marketplace

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 corp.te entrepreneurship

Entrepreneurs Entrepreneurs 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

International Entrepreneurship Entrepreneurship can: Fuel economic growth Create employment Generate prosperity for citizens There is a strong positive relationship between the rate of entrepreneurial activity and economic development in a nation

International Entrepreneurship There must be a balance (in the culture) between Individual initiative and The spirit of cooperation and group ownership of innovation Successful entrepreneurial firms Provide appropriate autonomy Incentives for individual initiative Promote cooperation and group ownership of an innovation

Innovation Types: Most innovations are incremental Builds on existing knowledge bases Provides small improvements in the current product lines 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 Incremental innovation Radical innovation

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

Internal Corporate Venturing Autonomous strategic behaviour is a bottom-up process in which product champions: Pursue new ideas, often through a political process Develop and coordinate the commercialization of a new good or service until it achieves success in the marketplace Autonomous Strategic behaviour

A product champion Is an organizational member with an entrepreneurial vision of a new good or service who seeks to create support for its commercialization Autonomous strategic behaviour is Based on a firm’s wellsprings of knowledge & resources that are the sources of the firm’s innovation A firm’s technological capabilities and competencies are the basis for new products and processes Internal Corporate Venturing Autonomous Strategic behaviour

Induced strategic behaviour is a top-down process whereby: The firm’s current strategy and structure foster product innovations Innovations are associated closely with that strategy and structure Internal Corporate Venturing Induced Strategic Behaviour

To be innovative & develop internal ventures requires An entrepreneurial mindset 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 Corporate Venturing Induced Strategic Behaviour

Cross-Functional Product Development Teams Facilitate efforts to integrate activities related to different organizational functions Design, manufacturing, marketing, etc New product development processes can be completed more quickly Products are more easily commercialized with effective cross-functional teams The Firm Cross-functional product development team

Cross-Functional Product Development Teams Product development stages are grouped into parallel or overlapping processes. This approach allows the firm to tailor its product development efforts. unique core competencies needs of the market The Firm Cross-functional product development team

Barriers to Integration Different functional time orientation Different functional language and interpersonal orientation Different goal orientation Formality of structure Long time line : R&D Different functional time orientation Short time line : Production Qualitative: HRM Different functional language and interpersonal orientation Quantitative: Accounting Customer satisfaction: Sales Different goal orientation Cost reduction: Production Informal: R&D Formality of structure Formal: Manufacturing

Appropriating Value From Innovation Cross-Functional Integration/ Design Teams Cross-functional design teams can help to break down barriers to entrepreneurship within firms Barriers to Integration Different Time Interpersonal Different Goal Formality of Orientation Orientation Orientation Structure Facilitators of Integration Facilitators of Integration tend to increase the effectiveness of Cross-functional integration or design teams Value Appropriation from Innovation Shared Values Leaders’ Vision Effective Budget Allocation Communication

Creating Value through Internal Innovation Process Entrepreneurial mind set Cross-functional product development teams Creating value through innovation Facilitating integration and innovation • Shared values • Entrepreneurial leadership

Appropriating Value from Innovation Facilitators & Teams help the firm improve Product Quality Customer Value Time to Market Value Appropriation from Innovation Barriers to Integration Different Time Interpersonal Different Goal Formality of Orientation Orientation Orientation Structure Facilitators of Integration Shared Values Leaders’ Vision Effective Budget Allocation Communication Cross-Functional Integration/ Design Teams

Cooperative Strategies for Entrepreneurship and Innovation Firms may need to cooperate and integrate knowledge and resources to successfully commercialize inventions 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 through a cooperative relationship, firms must share their knowledge and skills

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

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

Capital for Entrepreneurial Ventures Initial public offerings (IPOs) New stock Firm needs high potential in order to sell new stock Often quite larger than the amounts obtained from venture capitalists Investment bankers frequently play major roles in the development and offering of IPOs Firms that have also received venture capital backing usually receive greater returns from IPOs

Creating Value through Strategic Entrepreneurship Newer entrepreneurial firms are often more effective than larger firms in identifying opportunities Firms must develop an entrepreneurial mindset among their managers & employees Managers must emphasize the development of their resources, particularly human capital & social capital Firms should seek to enter & compete in International markets Firms seeking to establish their technology as a stand-ard engage in strategic entrepreneurship as creating a standard produces a sustainable competitive advantage

T hat’s the Whole Enchilada Hitt, Ireland, Hoskisson, Rowe, and Sheppard Strategic Management: Competitiveness & Globalization

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