MM 5012 BUSINESS STRATEGY Summary Week 10

Oleh Joseph Enrico (29111349)

MASTER OF BUSINESS ADMINISTRATION SCHOOL OF BUSINESS AND MANAGEMENT INSTITUT TEKNOLOGI BANDUNG 2013

School of Business & Management Institut Teknologi Bandung

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Chapter 13 Strategic Entrepreneurship

Strategic entrepreneurship is taking entrepreneurial actions using a strategic perspective. In addition to innovating within the firm, firms can develop innovations by using cooperative strategies, such as strategic alliances, and by acquiring other companies to gain access to their innovations and innovative capabilities. Innovation and entrepreneurship are vital for young and old and for large and small firms, for service companies as well as manufacturing firms, and for high-technology ventures. A major portion of the material in this chapter is on innovation and entrepreneur- ship within established organizations. This phenomenon is called corporate entrepreneurship, which is the use or application of entrepreneurship within an established firm. Entrepreneurship and Entrepreneurial Opportunities Entrepreneurship is the process by which individuals, teams, or organizations identify and pursue entrepreneurial opportunities without being immediately constrained by the resources they currently control. Entrepreneurial opportunities are conditions in which new goods or services can satisfy a need in the market. Innovation Innovation is the means by which the entrepreneur either creates new wealth -producing resources or endows existing resources with enhanced potential for creating wealth. Companies must regularly develop innovative products desired by customers. This means that innovation should be an intrinsic part of virtually all of a firms activities. Innovation is a key outcome firms seek through entrepreneurship and is often the source of competitive success, especially in turbulent, highly competitive environments. Invention is the act of creating or developing a new product or process. Innovation is the process of creating a commercial product from an invention. Entrepreneurs Entrepreneurs are individuals, acting independently or as part of an organization, who perceive an entrepreneurial opportunity and then take risks to develop an innovation to pursue it. Evidence suggests that successful entrepreneurs have an entrepreneurial mind-set. The person with an entrepreneurial mind-set values uncertainty in the marketplace and seeks to continuously identify opportunities with the potential to lead to important innovations. International Entrepreneurship International entrepreneurship is a process in which firms creatively discover and exploit opportunities that are outside their domestic markets in order to develop a competitive advantage. A key reason that entrepreneurship has become a global phenomenon is that in general, internationalization leads to improved firm performance. Culture is one of the reasons for the differences in rates of entrepreneurship among different countries. Internal Innovation In established organizations, most innovation comes from efforts in research and development (R&D). Effective R&D often leads to firms filing for patents to protect thei r innovative work. Increasingly, successful R&D results from integrating the skills avail- able in the global workforce. Firms produce two types of internal innovationsincremental and radical innovations when using their R&D activities. Most innovations are incrementalthat is, they build on existing knowledge bases and provide small improvements in the current product lines.

In contrast to incremental innovations, radical innovations usually provide significant technological breakthroughs and create new knowledge. radical innovations have strong potential to lead to significant growth in revenue and profits. Radical innovations are rare because of the difficulty and risk involved in developing them. Internally developed incremental and radical innovations result from deliberate efforts. Autonomous strategic behavior is 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. The second of the two forms of internal corporate venturing, induced strategic behavior, is a top-down process whereby the firms current strategy and structure foster innovations that are closely associated with that strategy and structure. Implementing Internal Innovations An entrepreneurial mind-set is required to be innovative and to develop successful internal corporate ventures. Because of environmental and market uncertainty, individuals and firms must be willing to take risks to commercialize innovations. Having processes and structures in place through which a firm can successfully implement the outcomes of internal corporate ventures and commercialize the innovations is critical. Effective integration of the various functions involved in innovation processes from engineering to manufacturing and, ultimately, market distributionis required to implement the incremental and radical innovations resulting from internal corporate ventures. Cross-functional teams facilitate efforts to integrate activities associated with different organizational functions, such as design, manufacturing, and marketing. Innovation through Cooperative Strategies Virtually all firms lack the breadth and depth of resources (e.g., human capital and social capital) in their R&D activities needed to internally develop a sufficient number of innovations to meet the needs of the market and remain competitive. Both entrepreneurial firms and established firms use cooperative strategies (e.g., strategic alliances and joint ventures) to innovate. Because of the importance of strategic alliances, particularly in the development of new technology and in commercializing innovations, firms are beginning to build networks of alliances that represent a form of social capital to them. Innovation through Acquisitions Firms sometimes acquire companies to gain access to their innovations and to their innovative capabilities. One reason companies make these acquisitions is that the capital market values growth; acquisitions provide a means to rapidly extend one or more product lines and increase the firms revenues. Creating Value through Strategic Entrepreneurship Newer entrepreneurial firms often are more effective than larger established firms in the identification of entrepreneurial opportunities. Alternatively, larger and well-established firms often have more resources and capabilities to exploit identified opportunities. To be entrepreneurial, firms must develop an entrepreneurial mind-set among their managers and employees. Firms practicing strategic entrepreneurship contribute to a countrys economic development.

RM 13 Overcoming Barriers to Open Innovation at Apple, Nintendo and Nokia

Three levels of barriers: cognitive, behavioral, and institutional, and describe the companies balanced between internal and external resources to launch products that were instrumental in companies reinventing themselves in markets. Commercializing innovation is not only about managing R&D projects, but related to more fundamental issues in how managers organize and run their business. So basically everything a company does is a service the customer companies merely provide people with tools to produce the added value themselves in co-creation with the firm. Though innovations can be incremental or radical, most successful companies find a new ways to do things a new twist or take on things. More and more companies are acknowledging that they cannot do things alone. Companies need to integrate outside ideas, research projects, and concepts into their own offering, thus acting on an open innovation fashion. Managerial and organizational cognition refer to both the individual and organizational level processes in a firm regarding shared beliefs in what makes a business success. The dominant managerial logic in a firm defines how turned it to recognizing the potential of an innovation. There are five main themes that underpin how innovations become successful. Firstly, any competitive advantage a firm may have is lost if companies don't innovate. Secondly, innovation doesn't relate only to technology. Thirdly, innovations always deal with change. Fourthly, new knowledge has to be but together in new and novel ways. It is crucial to understand what capabilities are needed in the R&D, and commercialization, processes. These capabilities can be divided into three categories. Firstly, these skills can be at the core of the firms know-how, distinctive to the advantages the company has over other players in the market. Secondly, they can be critical, vital to the successful completion of a R&D and commercialization project. Finally, they can be contextual, where certain capabilities are needed in the process, but this is an abundance of those specific skills available in the company or the markets. Innovation is seen as something that must be kept in-house and the intellectual property generated through R&D is a trade secret. There are five main roles that people play in the process for recognizing the potential and commercializing innovations: ide generators, gatekeepers and boundary spanners, champions, sponsors, and project managers. On cognitive level we can analyze why managers dont even notice the need for innovation. Managers may not even realize the benefit of new products or approaches. On a behavioral level our interest is in the actions of managers. Managers may realize the potential and needed for innovation, but dont act on it. The challenge may lie i n institutional factors. Open innovation requires managers to identify what their core capabilities are and focus on that. Apples case the focus is on the cognitive level, Nokia focuses on the behavioral level, Nintendos development and launch of the Wii gaming console can be defined as a socio-cultural invention.