The Strategic Management Process

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Strategic Entrepreneurship

Entrepreneurship is concerned with: The discovery of profitable opportunities The exploitation of profitable opportunities

Entrepreneurship: the process by which individuals, teams, or organizations identify and pursue entrepreneurial opportunities without the immediate constraint of the resources they currently control

Purpose of entrepreneurship: To create wealth or value

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Strategic Entrepreneurship

Entrepreneurs Individuals, acting independently or as part of an

organization, who perceive an entrepreneurial opportunity and then take risks to develop an innovation to exploit it

Entrepreneurial Mind-set Person who values uncertainty in the marketplace and seeks

to continuously identify opportunities with the potential to lead to important innovations

Firms that foster entrepreneurship are: Willing to take risks Committed to innovation Proactive in creating opportunities rather than waiting to

respond to opportunities created by others

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Strategic Entrepreneurship

Strategic entrepreneurship: taking entrepreneurial actions through a strategic perspective Entrepreneurship dimension: identifying opportunities in the

external environment to exploit through innovations Strategic dimension: determining the best way to manage the

firm’s innovation efforts Corporate entrepreneurship: the use or application of

entrepreneurship within an established firm Critical to the survival and success of established organizations as

well as startup entrepreneurial ventures (or “startups”) Three ways organizations can innovate

Internally By cooperating (e.g., strategic alliances) Through acquisitions

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Strategic Entrepreneurship

Firms engage in three types of innovative activities 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

Innovation Process of creating a commercial product from an invention Brings something new into use Commercial criteria determine the success of an innovation

Imitation Adoption of an innovation by similar firms Results of imitation

Product or process standardization Products made with fewer features Products offered at lower prices

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Internal Innovation

With internal innovation firms take deliberate efforts to develop inventions and innovations within the organization

Often called internal corporate venturing or intrapreneurship

Firm internal innovation is reflected in efforts in research and development (R&D) and patents

Firms innovate internally in two ways Autonomous strategic behavior Induced strategic behavior

Firms produce two major types of internal innovations Incremental innovations Radical innovations

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Internal Innovation

Autonomous strategic behavior A bottom up process in which product champions pursue

new ideas, often through a political process, by means of which they develop and coordinate the commercialization of a new good or service until it achieves success in the marketplace

Can facilitate incremental and radical innovations Primarily - Radical Innovation

Induced strategic behavior A top down process whereby the firm’s current strategy and

structure foster innovations that are closely associated with the current strategy and structure

Can facilitate incremental and radical innovations Primarily - Incremental Innovation

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Internal Innovation

Incremental Innovation Is evolutionary and linear in nature Most innovations are incremental Build on existing knowledge bases and provide small

improvements in current product lines/processes Primarily - induced strategic behavior

Radical Innovation Is revolutionary and nonlinear in nature Is rare because of difficulty and risk involved Provide significant technological breakthroughs and creates new

knowledge Requires creativity Use new technologies to serve newly created markets Primarily - autonomous strategic behavior

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Innovation Through Cooperative Strategies

Most firms lack the breadth and depth of resources in their R&D activities to continually develop innovations and remain competitive

To successfully develop and commercialize inventions, firms may need to cooperate and integrate knowledge and resources Entrepreneurial new venture firms may need investment

capital and distribution capabilities More established companies may need new technological

knowledge possessed by newer entrepreneurial firms To innovate via cooperative relationships, firms must

share their knowledge and skills – strategic alliances and joint ventures allow this to occur

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Innovation Through Acquisitions

Firms can acquire companies to gain access to new innovations and innovative capabilities

This can rapidly extend the firm’s product line and increase the firm’s revenues

KEY RISK: a firm may substitute its ability to buy innovations for its ability to produce innovations internally and thus Lose its intensity in R&D efforts Lose its ability to produce patents

Research demonstrates that subsequent to acquisitions, firms introduce fewer new products into the market

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Process Management Tools

The use of process management tools can improve an organization’s strategy implementation efforts.

Each tool has to do with making improvements to how a firm performs a business process or series of activities.

Common process improvement tools include: Best Practices - a technique for performing an activity or

business process that has been shown to consistently deliver superior results compared to other methods

Benchmarking - a tool for improving a company’s own internal activities that is based on learning how other companies perform them and borrowing their best practices

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Process Management Tools

Common process improvement tools (cont.): Reengineering - involves radically redesigning and streamlining

how an activity is performed with the intent of achieving dramatic improvements in performance

Total Quality Management - a philosophy of managing a set of business practices that emphasizes continuously improving the performance of every task and value chain activity

Six Sigma Quality Programs - utilize advance statistical methods to improve quality by reducing defects and variability in the performance of business processes

Lean Manufacturing - a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful, and thus a target for elimination; centered on preserving value with less work