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Chapter 12: Managing Innovation and Fostering Corporate Entrepreneurship

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Collaborating with Innovation Partners . Innovation often requires collaborating with others who possess complementary knowledge and skills. Partners can come from ... – PowerPoint PPT presentation

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Title: Chapter 12: Managing Innovation and Fostering Corporate Entrepreneurship


1
Chapter 12 Managing Innovationand Fostering
CorporateEntrepreneurship
  • Importance of Innovation
  • Challenges of Innovation
  • Unique role of corporate entrepreneurship
  • Focused verses Dispersed
  • Entrepreneurial orientation benefits

2
Managing Innovation
  • Innovation
  • using new knowledge to transform organizational
    processes or create commercially viable products
    and services
  • Latest technology, results of experiments,
    creative insights, competitive information

12-2
3
Example Getting to Aha
  • There are five disciplines for creating what
    customers want
  • Identify important customer needs
  • Create solutions that fill those needs
  • Build innovation teams
  • Empower "innovation champions" who keep the
    effort on track
  • Align the entire enterprise around creating value
    for customers

Source Getting to Aha!, Business Week.
September 4, 2006.
12-3
4
Types of Innovation
  • Product v. Process
  • Radical v. Incremental
  • Exploration v. Exploitation

5
Types of Innovation
  • Product innovation
  • Efforts to create product designs
  • Applications of technology to develop new
    products for end users
  • More radical and common during early stages of an
    industrys life cycle
  • Associated with differentiation strategies

12-5
6
Types of Innovation
  • Process innovations
  • Improving efficiency of an organizational process
  • Manufacturing systems and operations
  • More likely to occur in later stages of an
    industrys life cycle
  • Associated with cost leader strategies

12-6
7
Types of Innovation
  • Radical innovation
  • Fundamental changes and breakthroughs
  • Evoke major departures from existing practices
  • Can be highly disruptive
  • Can transform or revolutionize a whole industry

12-7
8
Types of Innovation
  • Incremental innovation
  • Enhance existing practices
  • Small improvements in products and processes
  • Evolutionary applications within existing
    paradigms

12-8
9
Continuum of Radical and Incremental Innovations
12-9
10
Types of Innovation
  • Sustaining innovations
  • extend sales in an existing market, usually by
    enabling new products or services to be sold at
    higher margins.
  • Disruptive innovations
  • overturn markets by providing an altogether new
    approach to meeting customer needs.

12-10
11
Challenges of Innovation
12-11
12
Seeds versus Weeds
  • Deciding the merits of innovative ideas
  • Seeds likely to bear fruit
  • Weeds should be cast aside
  • Dilemma
  • Some innovation projects require considerable
    level of investment before merit can be determined

12-12
13
Experience versus Initiative
  • Deciding who will lead an innovation project
  • Senior managers have experience and credibility
    and tend to be more risk averse
  • Midlevel employees may be the innovators
    themselves and have more enthusiasm

12-13
14
Internal versus External Staffing
  • People drawn from inside the firm
  • May have greater social capital
  • Know the organizations culture and routines
  • May not be able to think outside the box
  • People drawn from outside the firm
  • Are costly to recruit, hire, train
  • May have difficulty building relationships

12-14
15
Building Capabilities versus Collaborating
  • Firms can seek help
  • Other departments
  • Partner with other companies that bring resources
    and experience
  • Partnerships
  • Create dependencies and inhibit internal skills
    development
  • Sharing benefits of innovation may create conflict

12-15
16
Incremental versus Preemptive Launch
  • Incremental launch
  • Less risky
  • Requires few resources
  • Can undermine the projects credibility if too
    tentative
  • Large-scale launch
  • Requires more resources
  • Can effectively preempt a competitive response

12-16
17
Innovators DNA (Exhibit 12.2, p. 439)
  • Associating
  • connecting the unrelated
  • Questioning
  • challenge common wisdom
  • Observing
  • regular behavior of people
  • Experimenting
  • trying and testing ideas
  • Networking
  • social capital
  • find and test radical ideas

18
Defining the Scope of Innovation
  • Firms must define the strategic envelope (scope
    of the innovation efforts)
  • Firms ensure that their innovation efforts are
    not wasted on projects that are outside the
    firms domain of interest.

12-18
19
Defining the Scope of Innovation
  • In defining the strategic envelope, a firm should
    answer several questions
  • How much will the innovation cost?
  • How likely is it to actually become commercially
    viable?
  • How much value will it add that is, what will it
    be worth if it works?
  • What will be learned if it does not pan out?

12-19
20
Managing the Pace of Innovation
  • Incremental innovation
  • May be six months to two years
  • May use a milestone approach driven by goals and
    deadlines
  • Radical innovation
  • Typically long term, 10 years or more
  • Often involves
  • open-ended experimentation and time-consuming
    mistakes

12-20
21
Staffing to Capture Value from Innovation
  • Create innovation teams with experienced players
  • Require that employees seeking to advance their
    career serve in the new venture group
  • Once people have experience with the new venture
    group, transfer them to mainstream management
    positions
  • Separate the performance of individuals from the
    performance of the innovation.

12-21
22
Collaborating with Innovation Partners
  • Innovation often requires collaborating with
    others who possess complementary knowledge and
    skills
  • Partners can come from several sources
  • Other personnel within the department
  • Personnel within the firm but from another
    department
  • Partners outside the firm
  • Non-business sources, including research
    universities and the federal government

12-22
23
Collaborating with Innovation Partners
  • To choose partners, firms need to ask
  • what competencies are we looking for?
  • what will the innovation partner contribute?
  • Knowledge of markets
  • Technology expertise
  • Contacts with key players in an industry

24
II. Corporate Entrepreneurship
  • New value for a corporation
  • Intrapreneurship

25
II. Corporate Entrepreneurship
  • Corporate entrepreneurship
  • the creation of new value for a corporation,
    through investments that create either new
    sources of competitive advantage or renewal of
    the value proposition.

12-25
26
Factors affecting Entrepreneurial Ventures
  • Culture
  • Leadership
  • Structural features that guide/constrain action
  • Organizational systems that foster learning and
    manage rewards
  • The use of teams in strategic decision making
  • Whether the company
  • is product or service oriented
  • innovation efforts are aimed at product or
    process improvements
  • it is high-tech or low-tech

12-26
27
Entrepreneurial Culture
  • Culture of entrepreneurship
  • Search for venture opportunities permeates every
    part of the organization
  • Strategic leaders and the culture generate a
    strong impetus to innovate, take risks and seek
    out new venture opportunities

12-27
28
Rules for Fostering Innovation(p. 444)
12-28
29
Focused versus Dispersed
  • Focused
  • New Venture Groups
  • Business Incubators
  • Funding
  • Physical space
  • Business services
  • Mentoring
  • Networking
  • Dispersed
  • Entrepreneurial culture
  • Product Champions

30
Measuring the Success of Corporate
Entrepreneurship Activities
  • Comparing strategic and financial CE goals
  • Are the products or services offered by the
    venture accepted in the marketplace?
  • Are the contributions of the venture to the
    corporations internal competencies and
    experience valuable?
  • Is the venture able to sustain its basis of
    competitive advantage?

12-30
31
Measuring the Success of Corporate
Entrepreneurship Activities
  • Exit champions
  • individual working within a corporation who is
    willing to question the viability of a venture
    project by demanding hard evidence of venture
    success and challenging the belief system that
    carries a venture forward.

12-31
32
Real Options Analysis
  • Looks at investment or activity as a series of
    sequential steps
  • Investing additional funds
  • Delaying
  • Shrinking the scale
  • Abandoning the activity
  • Potential Pitfalls
  • Agency theory and the back-solver dilemma
  • Managerial Conceit
  • Overconfidence and illusion of control
  • Irrational escalation of commitment

33
III. Entrepreneurial Orientation
  • Spirit
  • Culture
  • Muchness

34
III. Entrepreneurial Orientation
  • For successful corporate entrepreneurship ? firms
    need to have an entrepreneurial orientation (EO)
  • EO the strategy-making practices that
    businesses use in identifying and launching new
    ventures, consisting of

35
Dimensions of Entrepreneurial Orientation
Keeps innovation, entrepreneurship, creativity,
Going within the organization
12-35
36
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37
Strategic Management
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