STRATEGIC ENTREPRENEURSHIP

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STRATEGIC ENTREPRENEURSHIP
A Decicion-Making Approach to New Venture
Creation and Management

• Philip A. Wickham

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The nature of entrepreneurship

• An understanding of the main approaches to
  understanding the nature of entrepreneurship. In
  particular, the dinstinction between the
  entrepreneur as a performer of managerial tasks,
  as an agent of economic change and as a
  personality.

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Landau's classification ofentrepreneurial types
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The nature of entrepreneurship

• There is no universally agreed definition of
  entrepreneurship. The wide variety of definitions
  in the literature emphasise three aspects
• the entrepreneur as an economic agent generating
  particular economic effects
• the entrepreneur as an individual of a particular
  personality and
• the entrepreneur as a manager undertaking
  particular tasks.
• An entrepreneur is best regarded as a manager who
  pursues opportunity and drives change to create
  new value.
• The entrepreneurial venture is distinguished from
  the small business by virtue of being based on a
  significant innovation, having the potential for
  growth, and having clear strategic objectives.

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• Entrepreneurship is about bringing about change
  and making the difference. In a narrower sense,
  entrepreneurship is about exploiting innovation
  in order to create value which cannot always be
  measured in purely financial terms.

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• The entrepreneur is concerned with identifying
  the potential for change. He or she exists in a
  state of tension between the actual and the
  possible, that is, between what is and what might
  be. This tension is manifest in three dimensions
  the financial, the personal and the social.

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Beyond profit entrepreneurship in the social and
public domains

• An appreciation that an understanding of
  entrepreneurship can help make non-profit making
  activities more successful.
• Entrepreneurship is a style of management
• Entrepreneurs are managers who are very effective
  and pursuing opportunity and creating change
• Entrepreneurship is a social as well as an
  economic activity
• The motivation of the entrepreneur are varied and
  go beyond a desire to make money they also
  involve a desire to create a new and better
  world.

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Who becomes an entrepreneur?

• The inventor
• The unfulfilled manager
• The displaced manager
• The young professional
• The excluded

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Factors influencing entrepreneurial performance
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Innovation and the exploitation of opportunity

• New products
• New services
• New production techniques
• New operating practices
• New ways of delivering the product or service
• to the customer
• New means of informing the customer about the
  product
• New ways of managing relationships within the
  organisation
• New ways of managing relationships between
  organisations
• Multiple innovation

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Resources available to the entrepreneur

• Financial resources
• Resources which can take the form of cash
• Human resources
• People, skills, knowledge, etc.
• Operating resources
• Facilities such as buildings, vehicles, office
  equipment, machinery and raw materials, etc.

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The meaning of success

• Success can be best understood in terms of four
  interacting aspects
• The performance of the venture
• The people who have expectations from the venture
• The nature of those expectations
• Actual outcomes relative to expectations

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Measuring success and setting objectives

• Absolute fincancial performance
• Financial performance ratios
• Financial liquidity ratios
• Absolute stock market performance
• Stock market ratios
• Market presence
• Growth
• Innovation
• Customer assessment

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Understanding failure

• The business continues to exist as a legal entity
  under the control of the entrepreneur
• The business continues to exist as an independent
  entity but the entrepreneur loses control
• The business does not continue to exist as an
  independent entity.

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Business strategy is...

• Strategy content
• The product range
• Market scope
• Competetive approach

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The strategy for the venture

• A strategy is the means by which the venture will
  achieve its aims.
• Strategy content defines the products the venture
  will offer, the customer groups to be targeted
  and the way in which the venture will compete
  within its markets.
• Strategy process defines the way in which the
  venture will make decisions about strategy
  content to adopt.
• A well-defined strategy aids the venture by
  defining the means by which it will achieve its
  goals in the marketplace.
• A strategy acts as a guide for the decision
  making and provides a common language for the
  venture's stakeholders.
• Entrepreneurs often express their venture's
  strategy in the form of heuristics.

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The business planan entrepreneurial tool

• A recognition of the influence of formal
• planning on the performance of the
• entrepreneurial venture.

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The role of the business plan

• The activity of creating a formal business plan
• consumes both time and resources.
• There are four mechanisms by which
• business plan might aid the
• performance of the venture.

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The role of the business plan The four
mechanisms

• By working as a tool for analysis
• By working as a tool for synthesis
• By working as a tool for communication
• By working as a call to action

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What a business plan should include

• Mission
• Overwiew of key objectives
• The market environment
• Strategy
• Financial forecast
• Activity
• People

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The strategic window

• The strategic window is a visual metaphor which
  allows entrepreneurs to make sense of the
  opportunities they pursue.
• The five stages of the strategic window are
  spotting, locating, measuring, opening and
  closing.
• A business environment is full of opportunities
  because existing businesses always leave gaps.
  There is always the potential to create new value
  ? the strategic window.

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Seeing the window scanning for opportunity

• Types of opportunities available
• The new product
• The new service
• New means of production
• New distribution route
• Improved service
• Relationship building

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Locating the window

• Locating the window means developing a position
  for the new venture and its offerings to the
  marketplace.
• Strategic positioning relates to the way the
  venture fits in the marketplace in relation to
  its stage in the value addition chain the
  customer groups it serves the customer needs it
  addresses and the technology it adopts to serve
  its customers.
• Market positioning relates to the way the
  venture's offerings fit in the markeplace in
  relation to the offerings of competitors.

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Measuring the window

• Measuring means developing an understanding as to
  the size of the opportunity and what it might be
  worth.
• A business opportunity is analysed by qualitative
  methods which answer 'what' and 'why' questions
  and quantitative methods which asnwer 'how much'
  and 'how many' questions.
• Information can be expensive. Effective
  entrepreneurs weight the value of information
  against the cost of obtaining it. Information is
  regarded as an investment in the business.

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Opening the window

• Opening the window means gaining the commitment
  of stakeholders and actually starting the
  venture.
• The key commitments are financial support from
  the investors productive support from emplyees
  and network contacts agreements to provide
  inputs by suppliers and agreement to purchase
  outputs by customers.

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Closing the window

• Closing means creating a competitive advantage so
  that the venture can go on exploiting the
  opportunity in the face of competitive pressures.
• A competitive advantage is something the business
  can do that is valuable for the customer which
  competitors find difficult to match.
• A competitive advantage has a source within the
  business. The key sources are lower costs
  knowledge of the product and market stronger
  relationships within the network and a more
  flexible and responsive organisational structure.
• A competitive advantage must be actively
  maintained if it is to be sustainable.

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Gaining financial support

• Financial support is a critical factor in the
  success of a new ventue.
• Suppliers of investment capital are differntiated
  by the amount of capital they will supply, the
  risks they will undertake and the way in which
  they will expect to see their investment mature.
• Investors select investment opportunities by
  filtering them fof suitability. This filtering
  process has formal analysis and informal
  "intuitive" aspects.
• The vast majority of investment proposals are
  rejected.

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The dimensions of business growth

• The process of growth

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The process of growth

• Financial
• growth in income, expenditure and profits
• Strategic
• growth in market presence and competetive
  advantages
• Structural
• growth in organisational form, process and
  sturcture
• Organisational
• growth in organisations culture and attitudes

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Strategies for expansion

• Expanding the business means increasing the
  amount of
• trade it undertakes. Expansion from any base can
  be
• achieved in one of four ways, by increasing core
• markets, by lauching new products, by entering
  new
• markets and by acquiring established business.

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Organisational growth and development

• Organisational growth, like organisation itself,
  is best understood through metaphors of change.
• Growth is an important objectives for the
  venture. The growth objective must be considered
  in the light of the ventures market potential,
  its strategic capabilities, its resources and
  risks it wishes to undertake.
• Growth must be both planned for, and controlled
  by, the entrepreneur, both in terms of rate and
  direction.

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Leadership, power and motivation in the
entrepreneurial venture
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Leadership, power and motivation in the
entrepreneurial venture

• Leadership, power and motivation are interrelated
  and interdependent tools which the entrepreneur
  can use to control the venture and given it
  direction.
• Leadership is the power to focus and direct the
  organisation.
• Power is the ability to influence the cource of
  actions whitin the organisation.
• Motivation is the ability to encourage an
  individual to take a particular cource of action

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Consolidating the venture

• Consolidation involves changes to the financial,
  strategic, structural and organisational dynamic
  of the venture.
• Consolidation offers the venture a chance to
  create a defendable copetetive position in the
  marketplace. This offers the promise of rewarding
  the commitment stakeholders have shown towards
  the venture.
• Intrapreneurism is a form of management which,
  potentially, offers the venture a way of
  combining the flexibility and responsiveness of
  the entrepreneurial with the market power and
  reduced risk of the established organisation.

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The changing role of the entrepreneur in the
consolidated organisation

• The roles of the entrepreneur and the chief
  executive are subtly different, althought they
  overlap in many ways. The entrepreneur is more
  interested in creating change, and may be more
  willing to take risks than the role of chief
  executive properly calls for. This can expose the
  mature venture to unnecessary risk.
• Consolidation gives entrepreneurs an opportunity
  to specialise their roles within their
  organisations.
• Effective entrepreneurs manage the process of
  succession (the handing over of power within the
  venture) when it is time for them to move on.

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The roles of the entrepreneur in the mature
organisation