Strategic Entrepreneurship

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Strategic Entrepreneurship
BA 495.009
Chapter Thirteen
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Todays Agenda

• Strategic Entrepreneurship
• Definitions
• Funding Sources
• International Entrepreneurship
• Innovation Process
• Model of Internal Corporate Venturing
• Implementing Internal Innovations
• Other Innovation Strategies
• Wrap-up

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Strategic Entrepreneurship
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Strategic Entrepreneurship

• Strategic Entrepreneurship
• Taking entrepreneurial actions using a strategic
  perspective.
• Discovery of profitable opportunities in external
  environment
• Implementation of strategy that exploits these
  opportunities
• Engaging in simultaneous opportunity seeking and
  competitive advantage seeking behaviors.
• Designing and implementing entrepreneurial
  strategies to create value and wealth.
• Entrepreneurship can be applied
• To individual business owners
• To corporations

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Strategic Entrepreneurship and Innovation

• Entrepreneurship is concerned with
• Developing new products and services
• Introducing existing products and services to new
  markets
• Developing innovative processes and systems
  within the firm
• Firms that encourage entrepreneurship are
• Risk takers.
• Committed to innovation.
• Proactive in creating opportunities rather than
  waiting to respond to opportunities created by
  others.

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Entrepreneurial Opportunities

• Entrepreneurial Opportunities
• Conditions in which new products or services can
  satisfy a need in the market.
• Entrepreneurs or entrepreneurial managers must be
  able to
• Identify opportunities not perceived by others.
• Take actions to exploit the opportunities.
• Establish a competitive advantage.
• Creative Destruction of existing products and
  services

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Entrepreneurs

• Entrepreneurs
• Individuals acting independently or as part of an
  organization who create a new venture or develop
  an innovation, and take risks entering
  innovations into the marketplace.
• Can be at any level in an organization - from
  owner to manager to front-line employee.
• Entrepreneurial capabilities include
• Entrepreneurial mind-set
• Intellectual capital effective human capital
• Transfer of entrepreneurial competence to others

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Capital for Entrepreneurial Ventures

• Venture Capital Firms
• Seek high returns on their investment.
• Value the 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 the degree of instability in the market
  addressed.

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Capital for Entrepreneurial Ventures

• Initial Public Offerings (IPOs)
• Are new stock priced to reflect the firms high
  potential.
• Often yield much larger equity investments than
  can be obtained from venture capitalists.
• Investment bankers frequently play major roles in
  the development and offering of IPOs.
• Firms that have previously received venture
  capital backing usually receive greater returns
  from IPOs.

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Capital for Entrepreneurial Ventures

• Angel Investors
• Wealthy individuals who invest similarly to
  Venture Capital Firms.
• Often used early in the companys growth.
• Expect high returns in exchange for assuming
  great risk.
• Friends Family
• The FIRST set of investors.
• Most other funding sources will look to this
  group as a signal.

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International Entrepreneurship

• Focus is outside domestic market
• International 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.

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International Entrepreneurship

• There must be a balance (in the culture)
  between
• Individual initiative and
• The spirit of cooperation andgroup ownership of
  innovation.
• Successful entrepreneurial firms
• Provide appropriate autonomy.
• Offer incentives for individual initiative.
• Promote cooperation and group ownership of an
  innovation.

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Innovation
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Innovation Process

• The act of creating or developing a new product
  or process
• Brings something new into being.
• Technical criteria are used to determine the
  success of an invention.

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Innovation Process

• The process of creating a commercial product from
  an invention.
• Brings something new into use.
• Commercial criteria are used to determine the
  success of an innovation.

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Innovation Process

• The adoption of an innovation by similar firms
• Usually leads to product or process
  standardization.
• Products based on imitation often are offered at
  lower prices but with fewer features.

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Incremental and Radical Innovation

• Incremental Innovation
• Is the usual case for innovation in
  organizations.
• Provides small increments in current product
  lines.
• Improves existing knowledge and processes.
• Tighter variance on value and risk.

• Radical Innovation
• Is rare because of difficulty and risk.
• Provides significant technological breakthroughs.
• Creates new knowledge and processes.
• Wider variance on value and risk.

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Model of Internal Corporate Venturing
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Model of Internal Corporate Venturing
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.
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Internal Corporate Venturing

• Autonomous Strategic Behavior
• A bottom-up process (involving manager-level
  employees)
• Product Champions develop and coordinate the
  commercialization of a new good or service until
  it achieves success in the marketplace.
• Product Champion
• An organizational member with an entrepreneurial
  vision of a new good or service who seeks to
  create support for the visions commercialization.

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Internal Corporate Venturing

• Induced Strategic Behavior
• A top-down process whereby the firms current
  strategy and structure foster product
  innovations.
• The strategy in place is filtered through a
  matching structural hierarchy.
• Resulting innovations are highly related to the
  firms current strategy.

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Implementing Internal Innovations
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Implementing New Product Development and Internal
Ventures

• To be innovative and 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.

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CrossFunctional Product Development Teams

• Facilitate integration of activities associated
  with different organizational functions.
• Design, manufacturing, marketing, etc.
• New product development processes can be
  completed more quickly.
• Products can be more easily commercialized when
  cross-functional teams work effectively.

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Barriers to Cross-Functional Teams Effectiveness

• Different orientations and perceptions
• Individuals from separate functions have
  different orientations on issues.
• Create differing approaches to product
  development activities.
• Organizational Politics
• Cause aggressive competition for resources among
  different organizational functions.
• Organizations must achieve cross-functional
  integration with minimal political conflict.

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Facilitating Integration and Innovation

• Shared Values
• Are framed around the firms strategic intent and
  mission.
• Become the glue that promotes integration between
  functional units.
• Effective Leadership Team that sets goals and
  allocates resources in a transparent and
  consistent way
• Effective Communication

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Other Innovation Strategies
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Cooperative Strategies for Entrepreneurship and
Innovation

• Cooperation and integration of knowledge and
  resources is required to successfully
  commercialize inventions.
• Entrepreneurial firms need investment capital and
  distribution capabilities.
• Established companies need the technological
  knowledge possessed by entrepreneurial firms.
• Firms innovate through the sharing their
  knowledge and skills in a cooperative
  relationship.

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Acquisitions to Buy Innovation

• Acquisitions
• Can rapidly extend the product line.
• Can quickly increase the firms revenues.
• Key risks of acquisitions
• The firm may substitute the ability to buy
  innovations for an ability to produce innovations
  internally.
• The firm may lose intensity in RD efforts.
• The firm may lose its ability to produce patents.

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Wrap-up
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Creating Value through Strategic Entrepreneurship

• Be effective in identifying opportunities.
• Be flexible and willing to take risks.
• Have sufficient resources and capabilities to
  exploit identified opportunities.
• Sustain a competitive advantage while identifying
  and exploiting opportunities.
• Develop an entrepreneurial mind-set among
  managers and employees.
• Seek to enter and compete in international
  markets.

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Wrap-up

• Strategic Entrepreneurship
• Definitions
• Funding Sources
• International Entrepreneurship
• Innovation Process
• Model of Internal Corporate Venturing
• Implementing Internal Innovations
• Other Innovation Strategies
• Questions