Entrepreneurial Value Creation Capital Sources Appropriating / Creating Value Definition s Entrepreneurs & Entrepreneurship Innovation Internal Corp

Entrepreneurial Value Creation

Capital Sources

Appropriating / Creating Value

Definitions

Entrepreneurs & Entrepreneurship

Innovation Internal Corp. Venture Model

Innovation from the Outside

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Chapter Three:

The External Environment

Chapter Three:

The External Environment

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Hitt, Ireland, Hoskission, Rowe & Sheppard

Strategic Management

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t e sChapter

Fourteen:

Organization Renewal & Innovation

Competitiveness & Globalization


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The Strategic Management Process

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

Chapter 11:Corporate

Governance

Ch. 12: Org. Structure & Controls

Chapter 13:Strategic

Leadership

Chapter 14:Org. Renewal & Innovation

Strategy Implementation

StrategicActions

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



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Organizational Renewal & Innovation

Knowledge objectives1. Note the importance of entrepreneurship in

strategy & international entrepreneurship is increasing.2. Describe the 2 forms of internal corp. venturing:

autonomous and induced strategic behaviour. 3. Discuss how cooperative strategies, such as

strategic alliances are used to develop innovation. 4. Explain how firms use acquisitions to increase their

innovations and enrich their innovative capabilities. 5. Describe the importance of venture capital & initial

public offerings to entrepreneurial activity. 6. See how the practice of strategic entrepreneurship

creates value for customers & shareholders.


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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

Entrepreneurship Definitions

Entrepreneurial actions based on a strategic perspective.

Strategic Entrepreneurship


Definitions


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Innovation Definitions

Definitions

Creating or developing a new product or process.Invention

Creating a commercial product from an invention.Innovation

Firms doing basic & applied (commercializable) research.Ambidextrous Organizations

Adoption of innovation by a population of similar firms.Imitation

Geographic clustering of firms in associated industries.Incubators

Inventions radically changing industry competitive balance. Disruptive Technologies (creative destruction)

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Successful entrepreneurship and innovation involves moving from:


the invention of ideas,

to effective commercialization,

& acceptance in the marketplace.

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.

InnovationEntrepreneurs & EntrepreneurshipEntrepreneurs & Entrepreneurship


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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.



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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


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Innovation Types:

• Most innovations are Incremental.• Builds on existing knowledge bases.• Provides small improvements in the

current product lines.

Incrementalinnovation

• Provides significant technological breakthroughs.

• Creates new knowledge.• Is rare because of difficulty and risk.

Radicalinnovation

• Requires substantial creativity.• Radical innovations are often best developed

in separate units that start internal ventures.

Innovation


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Structural Context

InducedStrategic Behaviour

AutonomousStrategic

Behaviour

Strategic Context

Corporate Headquarters

or as a top-down processa bottom-up process

Internal Corp. Venturing Model

Corp. Entrepreneurship can occur as either a

Internal Corp. Venture Model


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Internal Corp. Venturing Model

• 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.

Autonomous Strategic behaviour:

• A product champion is:– An organizational member with entrepreneurial vision who

seeks support for commercialization of a new good /

service.

AutonomousStrategic Behaviour

Strategic Context



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• 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. Venturing ModelInduced Strategic Behaviour

Structural Context

InducedStrategic

Behaviour

Corporate Headquarters



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Appropriating Value from Innovation

Helps

HelpsProduct Quality

Customer Value

Time to Market

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.

Facilitators of Integration increase effectiveness of Cross-functional integration or design teams.

Value Appropriation

from Innovation



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Long time line: R&D

Short time line: Production

Qualitative: HRM

Quantitative: Accounting

Customer satisfaction:

Sales

Cost reduction:

Production

Informal: R&D

Formal: Manufacturing

Formality of structure

Different goal orientation

Different functional language and interpersonal orientation

Different functional time orientation

Barriers to Integration



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• 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.

Cross-functionalproduct

development team

Cross-Functional Product Development Teams



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• 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.

Cooperative strategies for entrepreneurship &

innovation



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• Acquisitions– Rapidly extend the product line,– Increase the firm’s revenues.

Acquisitions to Buy Innovation

• 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.



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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


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• 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.

Creating Value via Strategic Entrepreneurship:



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The Strategic Management Process

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

Chapter 11:Corporate

Governance

Ch. 12: Org. Structure & Controls

Chapter 13:Strategic

Leadership


Strategy Implementation

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


StrategicActions


Capital Sources


Definitions




2120

That’s the Whole Enchilada

Hitt, Ireland, Hoskisson, Rowe & Sheppard

Strategic Management: Competitiveness & Globalization

Documents

Entrepreneurial Value Creation Capital Sources Appropriating / Creating Value Definition s Entrepreneurs & Entrepreneurship Innovation Internal Corp