Strategic Strategic EntrepreneurshEntrepreneursh

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Strategic Strategic EntrepreneurshEntrepreneursh

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Chapter ThirteenChapter Thirteen

BA 495.009BA 495.009

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Today’s AgendaToday’s Agenda

• Strategic EntrepreneurshipStrategic Entrepreneurship DefinitionsDefinitions Funding SourcesFunding Sources International EntrepreneurshipInternational Entrepreneurship

• Innovation ProcessInnovation Process• Model of Internal Corporate VenturingModel of Internal Corporate Venturing• Implementing Internal InnovationsImplementing Internal Innovations• Other Innovation StrategiesOther Innovation Strategies• Wrap-upWrap-up

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Strategic Entrepreneurship

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Strategic EntrepreneurshipStrategic Entrepreneurship• Strategic EntrepreneurshipStrategic Entrepreneurship

Taking entrepreneurial actions using a strategic Taking entrepreneurial actions using a strategic perspective.perspective.

• Discovery of profitable opportunities in external environmentDiscovery of profitable opportunities in external environment• Implementation of strategy that exploits these opportunitiesImplementation of strategy that exploits these opportunities

Engaging in simultaneous opportunity seeking and Engaging in simultaneous opportunity seeking and competitive advantage seeking behaviors.competitive advantage seeking behaviors.

Designing and implementing entrepreneurial Designing and implementing entrepreneurial strategies to create value and wealth.strategies to create value and wealth.

• Entrepreneurship can be appliedEntrepreneurship can be applied To individual business ownersTo individual business owners To corporationsTo corporations

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Strategic Entrepreneurship and Strategic Entrepreneurship and InnovationInnovation• Entrepreneurship is concerned with:Entrepreneurship is concerned with:

Developing new products and servicesDeveloping new products and services Introducing existing products and services to new Introducing existing products and services to new

marketsmarkets Developing innovative processes and systems within Developing innovative processes and systems within

the firmthe firm

• Firms that encourage entrepreneurship are:Firms that encourage entrepreneurship are: Risk takers.Risk takers. Committed to innovation.Committed to innovation. Proactive in creating opportunities rather than waiting Proactive in creating opportunities rather than waiting

to respond to opportunities created by others.to respond to opportunities created by others.

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Entrepreneurial OpportunitiesEntrepreneurial Opportunities• Entrepreneurial OpportunitiesEntrepreneurial Opportunities

Conditions in which new products or services can Conditions in which new products or services can satisfy a need in the market.satisfy a need in the market.

• Entrepreneurs or entrepreneurial managers must Entrepreneurs or entrepreneurial managers must be able to:be able to: Identify opportunities not perceived by others.Identify opportunities not perceived by others.

Take actions to exploit the opportunities.Take actions to exploit the opportunities.

Establish a competitive advantage.Establish a competitive advantage.

• ““Creative Destruction” of existing products and Creative Destruction” of existing products and servicesservices

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EntrepreneursEntrepreneurs

• EntrepreneursEntrepreneurs Individuals acting independently or as part of an Individuals acting independently or as part of an

organization who create a new venture or develop an organization who create a new venture or develop an innovation, and take risks entering innovations into innovation, and take risks entering innovations into the marketplace.the marketplace.

Can be at any level in an organization - from owner to Can be at any level in an organization - from owner to manager to front-line employee.manager to front-line employee.

• Entrepreneurial capabilities include:Entrepreneurial capabilities include: Entrepreneurial mind-setEntrepreneurial mind-set Intellectual capital & effective human capitalIntellectual capital & effective human capital Transfer of entrepreneurial competence to othersTransfer of entrepreneurial competence to others

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Capital for Entrepreneurial VenturesCapital for Entrepreneurial Ventures

• Venture Capital FirmsVenture Capital Firms

Seek high returns on their investment.Seek high returns on their investment.

Value the competence of the entrepreneur or the Value the competence of the entrepreneur or the human capital in the firm.human capital in the firm.

Place weight on the expected scope of competitive Place weight on the expected scope of competitive rivalry the firm is likely to experience.rivalry the firm is likely to experience.

Evaluate the degree of instability in the market Evaluate the degree of instability in the market addressed.addressed.

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Capital for Entrepreneurial VenturesCapital for Entrepreneurial Ventures

• Initial Public Offerings (IPOs)Initial Public Offerings (IPOs)

Are new stock priced to reflect the firm’s high Are new stock priced to reflect the firm’s high potential.potential.

Often yield much larger equity investments than can Often yield much larger equity investments than can be obtained from venture capitalists.be obtained from venture capitalists.

Investment bankers frequently play major roles in the Investment bankers frequently play major roles in the development and offering of IPOs.development and offering of IPOs.

Firms that have previously received venture capital Firms that have previously received venture capital backing usually receive greater returns from IPOs.backing usually receive greater returns from IPOs.

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Capital for Entrepreneurial VenturesCapital for Entrepreneurial Ventures• Angel InvestorsAngel Investors

Wealthy individuals who invest similarly to Venture Wealthy individuals who invest similarly to Venture Capital Firms.Capital Firms.

Often used early in the company’s growth.Often used early in the company’s growth.

Expect high returns in exchange for assuming great Expect high returns in exchange for assuming great risk.risk.

• Friends & FamilyFriends & Family The FIRST set of investors.The FIRST set of investors.

Most other funding sources will look to this group as a Most other funding sources will look to this group as a signal.signal.

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International EntrepreneurshipInternational Entrepreneurship

• Focus is outside domestic marketFocus is outside domestic market• International entrepreneurship can:International entrepreneurship can:

Fuel economic growthFuel economic growth Create employmentCreate employment Generate prosperity for citizensGenerate prosperity for citizens

• There is a strong positive relationship between There is a strong positive relationship between the rate of entrepreneurial activity and economic the rate of entrepreneurial activity and economic development in a nation.development in a nation.

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International EntrepreneurshipInternational Entrepreneurship

• There must be a balance There must be a balance (in the culture) between (in the culture) between Individual initiative andIndividual initiative and The spirit of cooperation andThe spirit of cooperation and

group ownership of innovation.group ownership of innovation.

• Successful entrepreneurial firms: Successful entrepreneurial firms: Provide appropriate autonomy.Provide appropriate autonomy. Offer incentives for individual initiative.Offer incentives for individual initiative. Promote cooperation and group ownership of Promote cooperation and group ownership of

an innovation.an innovation.

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Innovation

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Innovation ProcessInnovation Process

• The act of creating or developing a The act of creating or developing a new product or processnew product or process

• Brings something new into being.Brings something new into being.• Technical criteria are used to Technical criteria are used to

determine the success of an determine the success of an invention.invention.

InventionInvention

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Innovation ProcessInnovation Process

• The process of creating a The process of creating a commercial product from an commercial product from an invention.invention.

• Brings something new into use.Brings something new into use.• Commercial criteria are used to Commercial criteria are used to

determine the success of an determine the success of an innovation.innovation.

InventionInvention

InnovationInnovation

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Innovation ProcessInnovation Process

• The adoption of an innovation by The adoption of an innovation by similar firmssimilar firms

• Usually leads to product or Usually leads to product or process standardization.process standardization.

• Products based on imitation often Products based on imitation often are offered at lower prices but with are offered at lower prices but with fewer features.fewer features.

InventionInvention

InnovationInnovation

ImitationImitation

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Incremental and Radical InnovationIncremental and Radical Innovation• Incremental InnovationIncremental Innovation

Is the usual case for Is the usual case for innovation in innovation in organizations.organizations.

Provides small Provides small increments in current increments in current product lines.product lines.

Improves existing Improves existing knowledge and knowledge and processes.processes.

Tighter variance on Tighter variance on value and risk.value and risk.

• Radical InnovationRadical Innovation Is rare because of Is rare because of

difficulty and risk.difficulty and risk. Provides significant Provides significant

technological technological breakthroughs.breakthroughs.

Creates new Creates new knowledge and knowledge and processes.processes.

Wider variance on Wider variance on value and risk.value and risk.

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Model of Internal Corporate Venturing

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Source: Adapted from R. A. Burgelman, 1983, A model of the interactions of strategic behavior, corporate context, and the concept of strategy, Academy of Management Review, 8: 65.

Model of Internal Corporate VenturingModel of Internal Corporate Venturing

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Internal Corporate VenturingInternal Corporate Venturing

• Autonomous Strategic BehaviorAutonomous Strategic Behavior A bottom-up process (involving manager-level A bottom-up process (involving manager-level

employees)employees)

Product Champions develop and coordinate the Product Champions develop and coordinate the commercialization of a new good or service until it commercialization of a new good or service until it achieves success in the marketplace.achieves success in the marketplace.

• Product ChampionProduct Champion An organizational member with an entrepreneurial An organizational member with an entrepreneurial

vision of a new good or service who seeks to create vision of a new good or service who seeks to create support for the vision’s commercialization.support for the vision’s commercialization.

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Internal Corporate VenturingInternal Corporate Venturing

Induced Strategic BehaviorInduced Strategic Behavior A top-down process whereby the firm’s current A top-down process whereby the firm’s current

strategy and structure foster product innovations.strategy and structure foster product innovations.

The strategy in place is filtered through a matching The strategy in place is filtered through a matching structural hierarchy.structural hierarchy.

• Resulting innovations are highly related to the Resulting innovations are highly related to the firm’s current strategy.firm’s current strategy.

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Implementing Internal Innovations

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Implementing New Product Implementing New Product Development and Internal VenturesDevelopment and Internal Ventures• To be innovative and develop internal ventures To be innovative and develop internal ventures

requires:requires: An entrepreneurial mindsetAn entrepreneurial mindset Risk propensityRisk propensity An emphasis on executionAn emphasis on execution

• Individuals with an entrepreneurial mindset Individuals with an entrepreneurial mindset engage the energies of everyone in their domain engage the energies of everyone in their domain both inside and outside the organization.both inside and outside the organization.

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Cross–Functional Product Development Cross–Functional Product Development TeamsTeams

• Facilitate integration of activities Facilitate integration of activities associated with different associated with different organizational functions.organizational functions. Design, manufacturing, marketing, Design, manufacturing, marketing,

etc.etc.

• New product development New product development processes can be completed processes can be completed more quickly.more quickly. Products can be more easily Products can be more easily

commercialized when cross-commercialized when cross-functional teams work effectively.functional teams work effectively.

Cross-functionalCross-functionalProduct DevelopmentProduct Development

Team Team

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Barriers to Cross-Functional Teams Barriers to Cross-Functional Teams EffectivenessEffectiveness• Different orientations and perceptionsDifferent orientations and perceptions

Individuals from separate functions have different Individuals from separate functions have different orientations on issues.orientations on issues.

• Create differing approaches to product development Create differing approaches to product development activities.activities.

• Organizational PoliticsOrganizational Politics Cause aggressive competition for resources among Cause aggressive competition for resources among

different organizational functions.different organizational functions.• Organizations must achieve cross-functional integration with Organizations must achieve cross-functional integration with

minimal political conflict.minimal political conflict.

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Facilitating Integration and InnovationFacilitating Integration and Innovation

• Shared Values Shared Values Are framed around the firm’s strategic intent and Are framed around the firm’s strategic intent and

mission.mission. Become the glue that promotes integration between Become the glue that promotes integration between

functional units.functional units.

• Effective Leadership Team that sets goals and Effective Leadership Team that sets goals and allocates resources in a transparent and allocates resources in a transparent and consistent wayconsistent way

• Effective CommunicationEffective Communication

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Other Innovation Strategies

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Cooperative Strategies for Cooperative Strategies for Entrepreneurship and InnovationEntrepreneurship and Innovation• Cooperation and integration of knowledge and Cooperation and integration of knowledge and

resources is required to successfully resources is required to successfully commercialize inventions.commercialize inventions. Entrepreneurial firms need investment capital and Entrepreneurial firms need investment capital and

distribution capabilities.distribution capabilities.

Established companies need the technological Established companies need the technological knowledge possessed by entrepreneurial firms.knowledge possessed by entrepreneurial firms.

• Firms innovate through the sharing their Firms innovate through the sharing their knowledge and skills in a cooperative knowledge and skills in a cooperative relationship.relationship.

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Acquisitions to Buy InnovationAcquisitions to Buy Innovation

• AcquisitionsAcquisitions Can rapidly extend the product line.Can rapidly extend the product line.

Can quickly increase the firm’s revenues.Can quickly increase the firm’s revenues.

• Key risks of acquisitionsKey risks of acquisitions The firm may substitute the ability to buy innovations The firm may substitute the ability to buy innovations

for an ability to produce innovations internally.for an ability to produce innovations internally.

The firm may lose intensity in R&D efforts.The firm may lose intensity in R&D efforts.

The firm may lose its ability to produce patents.The firm may lose its ability to produce patents.

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Wrap-up

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Creating Value through Strategic Creating Value through Strategic EntrepreneurshipEntrepreneurship

• Be effective in identifying opportunities.Be effective in identifying opportunities.

• Be flexible and willing to take risks.Be flexible and willing to take risks.

• Have sufficient resources and capabilities to exploit Have sufficient resources and capabilities to exploit identified opportunities.identified opportunities.

• Sustain a competitive advantage while identifying and Sustain a competitive advantage while identifying and exploiting opportunities.exploiting opportunities.

• Develop an entrepreneurial mind-set among managers Develop an entrepreneurial mind-set among managers and employees.and employees.

• Seek to enter and compete in international markets.Seek to enter and compete in international markets.

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Wrap-upWrap-up

• Strategic EntrepreneurshipStrategic Entrepreneurship DefinitionsDefinitions Funding SourcesFunding Sources International EntrepreneurshipInternational Entrepreneurship

• Innovation ProcessInnovation Process• Model of Internal Corporate VenturingModel of Internal Corporate Venturing• Implementing Internal InnovationsImplementing Internal Innovations• Other Innovation StrategiesOther Innovation Strategies• QuestionsQuestions