Chapter 13 strategic management competitiveness and globalization 10e

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CHAPTER 13

STRATEGIC

ENTREPRENEURSHI P

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THE STRATEGIC MANAGEMENT PROCESS

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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.

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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.

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OPEN INNOVATION: COMBINING EXTERNAL

TECHNOLOGIES AND IDEAS WITH INTERNAL R&D CAPABILITIES

■ The world’s 10 most innovative firms

Source: Fast Company

■ Continuous innovation, the common denominator, is a potent competitive weapon, especially during tough

economic times

OPENING CASE

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■ 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

OPENING CASE

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■ Open innovation examples:

● P&G - Tide Total Care was developed through Sweden’s Lund University and two small chemical companies as

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● 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 tooth-whitening strip

OPENING CASE

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● 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

OPENING CASE

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■ 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

OPENING CASE

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IMPORTANT DEFINITIONS

• 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 dimension: identifying

opportunities to exploit through innovations

• Strategic dimension: determining the best

way to manage the firm’s innovation efforts

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IMPORTANT DEFINITIONS

• Strategic entrepreneurship actions can be taken by:

• Individuals

• Corporations

Corporate entrepreneurship: the use or application of

entrepreneurship within an established firm

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ENTREPRENEURSHIP AND

ENTREPRENEURIAL OPPORTUNITIES

• Entrepreneurship is concerned with:

• The discovery of profitable

opportunities

• The exploitation of profitable

opportunities

Entrepreneurship: the process by

which individuals or groups identify and pursue entrepreneurial

opportunities without the immediate constraint of the resources they

currently control

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Entrepreneurial opportunities:

• Are opportunities others do not

see or for which they do not

recognize the commercial potential

• Are conditions in which new

products or services can satisfy a need in the market

• Exist due to competitive market

imperfections and unevenly

distributed information

• Are studied at the level of the

individual firm

• May be the economic engine

driving many nations’ economies in the global competitive landscape

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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

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THREE WAYS TO INNOVATE

● Internal - autonomous vs induced

● Cooperative strategies (e.g.,

strategic alliances)

● Acquisitions

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INNOVATION

• Innovation is the “specific function of

entrepreneurship” (Drucker)

It is “the means by which the

entrepreneur either creates new

wealth-producing resources or endows existing resources with enhanced

potential for creating wealth” (Drucker)

• It is a source of competitive success,

especially in turbulent and highly

competitive environments

• For global markets, innovation is key for competitive parity at a minimum, much less for competitive advantage

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INNOVATION

developing a new product

or process

• Brings something new into being

• Technical criteria determine the success of

an invention

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INNOVATION

Invention

Innovation

• Process of creating a commercial product from

an invention

• Brings something new into use

• Commercial criteria determine the success of

an innovation

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INNOVATION

Invention

Innovation

Imitation

• Adoption of an innovation by similar firms

• Usually leads to product or process standardization

• Products based on imitation often are offered at lower prices and

without as many features

• Results of imitation

• Product or process standardization

• Products made with fewer features

• Products offered at lower prices

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THE IMPORTANCE OF

INNOVATION

• Entrepreneurship is the linchpin

between invention and innovation

• Inventions are easier than

commercializing those inventions: roughly 80% of R&D occurs in large firms, but these same firms produce fewer than 50% of the patents

• Note: Google Labs was created to

facilitate the transition from

invention to innovation

• Especially in the U.S., innovation is the most critical of the three types

of innovative activities

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ENTREPRENEURS

• Entrepreneurs

• Individuals, acting independently

or as part of an organization, who see an entrepreneurial

opportunity and then take risks to develop an innovation to exploit it

• Entrepreneurial Mind-set

• Values uncertainty in the

marketplace and seeks to

continuously identify

opportunities with the potential to lead to important innovations

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• Entrepreneurial mind-set

• Able to deal with uncertainty

• More alert to opportunities than others

• Good social skills and plan

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INTERNATIONAL ENTREPRENEURSHIP

● Firms creatively discover and

exploit opportunities outside their domestic markets in order to

develop a competitive advantage

● Entrepreneurship has become a

global phenomenon as

internationalization typically leads

to improved firm performance

● EXAMPLE - Large multinational

companies (MNCs) generate

roughly 54% of their sales outside their domestic market, and more than 50% of their employees work outside of the home country

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Rates of entrepreneurship differ across countries due to:

● Impact of national culture

• Entrepreneurship declines as collectivism

increases

• Exceptionally high levels of individualism can be dysfunctional for entrepreneurship

• Balance between individual initiative and

cooperative spirit versus group ownership of

innovation is required

● Level of investment outside of the home

country made by new ventures

● Top executives with international experience

• Internationally diversified firms are generally

more innovative

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There is a strong positive

relationship between the rate

of entrepreneurial activity

and economic development in

a nation.

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INTERNAL INNOVATION

Firms take deliberate efforts to

develop inventions and innovations

within the organization, selecting from several types of innovation and the specific processes through which each type is produced.

development (R&D):

1 Autonomous strategic behavior

2 Induced strategic behavior

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• Primarily - Radical Innovation

AUTONOMO

US STRATEGIC

BEHAVIOR

• Facilitates incremental and radical innovation

• Primarily - Incremental

INDUCED

STRATEGIC

BEHAVIOR

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• Is rare because

of difficulty and risk

• Generates significant technological breakthroughs and creates new knowledge/proce sses

• Requires creativity

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efforts

• Strong potential to lead to

significant growth in revenues and profits

• Primarily - autonomous strategic

behavior

• Can create

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MODEL OF INTERNAL CORPORATE VENTURING

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process

AUTONOMO

US STRATEGIC

Internal Corporate Venturing refers

to the set of activities firms use to develop internal inventions and

innovations: autonomous and

induced

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process, to develop and coordinate the

commercialization of a new good or service

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

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INDUCED

STRATEGIC

BEHAVIOR

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

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