Managing Innovation and Fostering Corporate Entrepreneurship

1. Managing Innovation and Fostering Corporate Entrepreneurship chapter 12

2. Managing Innovation • Innovation allows for • Transformation of organizational processes • Creation of new & commercially viable products & services • Innovation requires new knowledge from • The latest technology • The results of experiments • Creative insights • Competitive information

3. Managing Innovation • Types of innovation include • Product innovation • Creates new product designs • Applies technology to develop new products for end-users • Common during early stages of an industry’s life cycle • Associated with a differentiation strategy

4. Managing Innovation • Types of innovation also include • Process innovation • Improves the efficiency of an organizational process • Improves materials utilization, shortens cycle time, increases quality • Common during later stages of an industry’s lifecycle • Associated with overall cost leadership strategies

5. Managing Innovation • Other types of innovation include • Radical innovation • A major departure from existing practices • Usually as a result of technological change • Can be highly disruptive • Can transform or revolutionize a whole industry • Incremental innovation • Can enhance existing practices • Make small improvements in products & processes • Can create evolutionary applications of earlier innovations; provide new capabilities

6. Managing Innovation: Improving the Process • Cultivating innovation skills • Discovery skillsallow leaders to see the potential in innovations • Creative intelligenceallows individuals to develop more creative, higher potential innovations by means of • Associating patterns, information & insights • Questioning common wisdom • Observing behavior • Experimenting with new possibilities • Networking with a diverse set of individuals

7. Managing Innovation: Improving the Process • Defining the scope of innovation • Defining the strategic envelope • Focus on a common technology? • Focus on a market theme? • Evaluating results • How much will the innovation initiative cost? • How likely is it to actually become commercially viable? • How much value will it add; what will it be worth if it works? • What will be learned if it does not pan out?

8. Managing Innovation: Improving the Process • Managing the pace of innovation • Incremental innovations • May take six months or two years; • May use a milestone approach, goals & deadlines • Radical innovations • May take 10 years or more; • May involve open ended experimentation & time-consuming mistakes • “Time pacing” allows for control of the innovation process

9. Managing Innovation: Improving the Process • Staffing to capture value from innovation • Effective human resource management practices for innovation projects include • Use experienced players from diverse areas • Require employees serve in the new venture group as part of career development • Once people have new venture experience, transfer them to mainstream management positions to revitalize core businesses • Separate individual performance from innovation performance so failure is not a stigma

10. Corporate Entrepreneurship • Focused approaches to corporate entrepreneurship • Autonomous corporate venturing workgroup separated from the rest of the firm • Frees entrepreneurial team members from constraints imposed by existing norms & routines; facilitates open-minded creativity • Does isolate the group from the corporate mainstream via • New venture groups • Business incubators

11. Corporate Entrepreneurship • Dispersed approaches to corporate entrepreneurship • Entrepreneurship is spread throughout the firm • Ability to change is a core capability • Stakeholders can bring new ideas or venture opportunities to anyone in the organization • Has three related aspects • An entrepreneurial culture • Resource allotments to support entrepreneurial activities • Product champions

12. Corporate Entrepreneurship: Measuring Success • Exit champions help avoid costly defeats by • Questioning the viability of a venture project • Reducing ambiguity by gathering hard data • Developing a strong case for why a project should be killed • Reasserting decision-making criteria to guide venture decisions • Risking loss of status while opposing popular projects • Saving a corporation’s finances & reputation

13. Corporate Entrepreneurship: Measuring Success • Real options analysis is an investment tool • Helps manage the uncertainty associated with launching new ventures • ROA helps the firm decide whether to • Invest additional funds to accelerate the activity • Delay further investment in order to learn more • Shrink the scale of the activity • Abandon the activity • Requires a series of go or no-go decisions

14. Entrepreneurial Orientation • An entrepreneurial orientation involves • Strategy making practices used to identify & launch new ventures • A unique frame of mind • A perspective toward entrepreneurship • Reflected in a firm’s ongoing processes • Reflected in the corporate culture • That permeates decision-making styles & practices of the firm’s members

15. Entrepreneurial Orientation Exhibit 12.3 Dimensions of Entrepreneurial Orientation Sources: Dess, G.G. & Lumkin, G.T. 2005. The Role of Entrepreneurial Orientation in Stimulating Effective Corporate Entrepreneurship. Academy of Management Executive, 19(1): 147-156; Covin, J.G. & Slevin, D.P. 1991. A Conceptual Model of Entrepreneurship as Firm Behavior. Entrepreneurship Theory & Practice, Fall: 7-25; Lumpkin, G.T. & Dess, G.G. 1996. Clarifying the Entrepreneurial Orientation Construct and Linking It to Performance. Academy of Management Review, 21: 135-172; Miller, D. 1983. The Correlates of Entrepreneurship in Three Types of Firms. Management Science, 29: 770-791.