Strategic management competitiveness globalization concepts and case 10e chapter 13

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THE STRATEGIC MANAGEMENT PROCESS

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● 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.

KNOWLEDGE OBJECTIVES

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● Describe how firms internally develop innovations.

● Explain how firms use cooperative strategies to

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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

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 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

OPENING CASE

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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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• 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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ENTREPRENEURSHIP AND

ENTREPRENEURIAL 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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• Proactive in creating opportunities

rather than waiting to respond to opportunities created by others

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• 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 products/production methods

• Entrepreneurial firms value individual

innovations and the ability to continuously innovate across time

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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

Invention • The act of creating or

developing a new product or process

• Brings something new into being

• Technical criteria determine the success of an invention

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• Brings something new into use

• Commercial criteria determine the success of an innovation

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• 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

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• 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

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• Emotional about the value and

importance of their innovation-based

ideas

• Entrepreneurial mind-set

• Able to deal with uncertainty

• More alert to opportunities than others

• Good social skills and plan exceptionally

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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

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Risks include:

• Unstable foreign currencies

• Inefficient markets

• Insufficient infrastructures to support businesses

• Limitations on market size and growth

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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.

• 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

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• Facilitates incremental and radical innovation

• Primarily - Radical Innovation

AUTONOMOU

S STRATEGIC

BEHAVIOR

• Facilitates incremental and radical innovation

• Primarily - Incremental

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• Is rare because of difficulty and risk

• Generates significant technological breakthroughs and creates new

knowledge/processe

s

• Requires creativity

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• Strong potential to lead to significant growth in

revenues and profits

• Primarily - autonomous strategic behavior

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MODEL OF INTERNAL CORPORATE VENTURING

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• Bottom-up process

Internal Corporate Venturing refers to

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

autonomous and induced

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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

• 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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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:

1 Cross-functional product development teams

2 Facilitating integration and innovation

3 Creating value from internal innovation

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IMPLEMENTING INTERNAL

INNOVATIONS

Cross-Functional Product

activities and apply knowledge from different functional activities

associated with different functional areas to maximize innovation:

• Products can be more easily commercialized when cross- functional teams work effectively

Cross-Functional

Product Development

Team

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IMPLEMENTING INTERNAL INNOVATIONS

• Two primary barriers to success:

• Independent frames of reference of members with distinct

specializations

• Organizational politics that create competition for resources and inter-unit

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IMPLEMENTING INTERNAL INNOVATIONS

Facilitating Integration and

• Sets goals and allocates resources

• Goals include integrated development and commercialization of new goods and services

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