chap012.ppt_Strategic Management_The Competitive Advantage

Strategic management

1. Chapter
Twelve
Effective Strategic
Management:
Fostering Corporate
Entrepreneurship and
New Venture Creation

2. CHAPTER 12
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin
After studying this chapter, you should have
a good understanding of:
•The importance of opportunity recognition in the venture development
process
•How strategic concepts contribute to the competitive advantages of
new ventures and small businesses
•The role of product champions and autonomous strategic behaviors in
internal corporate venturing
•How corporations develop an internal environment that promotes
entrepreneurial development
•How an entrepreneurial orientation can enhance a firm’s efforts to
develop promising new venture initiatives
•The pitfalls associated with new venture strategies and corporate
entrepreneurship
Learning
Objectives
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3. CHAPTER 12
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin
Company Creative Technique
Dupont Teaches creativity at its in-housing training center. Classes include how to brainstorm and
avoid creativity inhibitors. To create fresh perspectives, a mix of employees – high tech
and low tech, management and staff– meet together to create new product proposals.
Airco Industrial Gases Teaches the nominal group procedure (NGP) through its total quality management
program. The technique allows participants to prepare secret lists of problems and
potential solutions. Because the NGP provides anonymity, sensitive issues are brought
into the open without fear of personal reprisals.
DoubleClick Actively encourages fun at work. Its New York City office includes a miniature version of
Central Park, complete with picnic tables and trees, and a rooftop basketball court where
employees and their bosses compete. Its prize for the employee who brings in the most
referrals each year? A motorcycle.
Ford Motor Co. Developed its own method for examining processes and identifying improvement ideas:
RAPID, which stands for Rapid Actions for Process Improvement Deployment. RAPID
workshops are used to generate ideas, recommend creative solutions, and develop action
plans for implementing improvements.
Sources: Gundry, L.K., Kickul, J.R., & Prather, C.W. 1994. Building the creative organization. Organization Dynamics: 22-37; Mackie, K. 1998. Ford RAPIDS helping UT departments streamline work
processes. On Campus, April 14. Yaqub, R.M. 2000. The play’s the thing. Worth, November: 116-123.
Exhibit 12.1Techniques to Stimulate Creativity
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4. CHAPTER 12
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin
All Small Companies*, By Industry
Services (40%)
2,215,000
Agricultural Services (2%) 115,000
Retail Trade (20%)
1,094,000
Construction
(12%)
662,000
Mining (0.4%)
20,000
Manufacturing (6.%)
329,000
Finance, Insurance, and Real Estate (8%)
457,000
Transportation,
Communications, and
Public Utilities (4%)
217,000
Wholesale Trade (7.4%)
410,000
Source: SBA’s
Office of
Advocacy, based
on Data Provided
by the U.S.
Census Bureau,
statistics of U.S.
Businesses.
(Percentages
don’t add to
100% because of
rounding.)
* Businesses with 500 or fewer employees
in 1997 (rounded)
Exhibit 12.2
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5. CHAPTER 12
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin
Alternatives to Traditional Financing
Source: Fraser, J. A.
1998. A hitchhiker’s
guide to capital
resources. Inc.
Magazine, February: 74-
82; Owens, T. 1990.
Getting financing in
1990. Small Business
Reports, June:
Exhibit 12.3
A traditional non-cash means of exchanging products or services. Bartering
has enjoyed a resurgence in popularity because exchange services that are now
available on the Internet are facilitating more barter transactions.
Barter
Allows a start-up to hold on to its cash and minimize commitments to
equipment or real estate that might need updating as the company
grows (or shrinks). Leasing costs are deductible as a business expense.
Leasing
DESCRIPTIONMETHOD
Suppliers that let you pay for goods or services in 60 or 90 days
rather than after only 10 to 30 days are, in effect, financing your
purchase. Some suppliers will agree to this because they need
your business as badly as you need their credit.
Supplier Financing
One of the fastest-growing techniques for financing start-ups; number one
among women entrepreneurs. It’s like a bank loan without the lengthy
approval process. But the high interest rates that some cards charge could
make it risky.
Credit Cards
Factoring Factoring is a method of raising cash by selling accounts
receivables to a third party or financing against the value of
receivables. It’s generally only used for short term cash
needs and often comes with a hefty interest charge.
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6. CHAPTER 12
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin
3M’s Rules for Successful InnovationExhibit 12.4
Sources: Collins, J.
C., & Porras, J. I.
1997. Built to Last.
NewYork:
HarperBusiness;
Graham, A. B. 1996.
The Learning
Organization:
Managing Knowledge
for Business Success;
Mitchell, R. 1989.
Masters of innovation.
Business Week, April
10: 58-63; Osborn, T.
1988. The new product
champions: How 3M
manages for
innovation. Marketing
communications,
13(11): 17-22.
IMPLICATIONSRULE
If at first you don’t succeed, 3M believes that you should be able to try
and try again. Thus, it encourages experimentation and risk taking on
projects, even when the outcome is unclear. This strategy has helped
3M achieve one of its key objectives: obtain 25-30 percent of sales
from products introduced in the past 5 years.
Tolerate failure
Managers exhibit patience in nurturing projects. Ideas can be kept
alive by individual staffers who believe in a project, even if it can’t
find a home in one of 3M’s divisions.
Don’t kill a project
Product champions are challenged to be innovative. When successful,
they are rewarded with salaries and promotions. If a product takes off, a
champion forms an action team and may get to run his or her own product
group.
Motivate the champions
Divisions are split up if they get too big, say, over $250 million in
sales. 3M believes its divisions should be granted autonomy and that
division managers should know staffers by their first names.
Keep divisions small
Divisions and product groups do not have an exclusive claim on the
technologies they develop. An atmosphere of open communication
helps everyone benefit from the technological insights and
breakthroughs that others at 3M discover.
Share the wealth
Product development is not conducted in isolation. Customers are
often invited to join 3M researchers and marketers to brainstorm about
uses for a technology and new product concepts.
Stay close to customers
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7. CHAPTER 12
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin
Dimensions of Entrepreneurial Orientation
Source: Covin, J. G., &
Slevin, D. P. 1991. A
conceptual model of
entrepreneurship as firm
behavior. Entrepreneurship
Theory & Practice, Fall: 7-25;
Lumpkin, G. G., & Dess, G.
G. 1996. Clarifying the
entrepreneurial orientation
construct and linking it to
performance. Academy of
Management Review, 21(1):
135-172; Miller, D. 1983.
The correlates of
entrepreneurship in three
types of firms. Management
Science, 29: 770-791.
Exhibit 12.5
A forward-looking perspective characteristic of a marketplace
leader that has the foresight to seize opportunities in
anticipation of future demand.
Proactiveness
A willingness to introduce novelty through experimentation and
creative processes aimed at developing new products and
services as well as new processes.
Innovativeness
Independent action by an individual or team aimed at bringing
forth a business concept or vision and carrying it through to
completion.
Autonomy
DEFINITIONDIMENSION
Making decisions and taking action without certain knowledge
of probable outcomes; some undertakings may also involve
making substantial resource commitments in the process of
venturing forward.
Risk taking
An intense effort to outperform industry rivals. It is
characterized by a combative posture or an aggressive response
aimed at improving position or overcoming a threat in a
competitive marketplace.
Competitive
Aggressiveness
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8. CHAPTER 12
McGraw-Hill/Irwin Copyright © 2003 by The McGraw-Hill Companies, Inc. All rights reserved.
STRATEGIC MANAGEMENT  Gregory G. Dess and G. T. Lumpkin
Continuum of Radical and Incremental
Innovations
RADICAL
INNOVATION
INCREMENTAL
INNOVATION
Laparoscopic
“Keyhole”
Surgery
Bubble
Wrap
Fiber- optic
Cable
Speech
Recognition
Software
Frozen
Yogurt
Enterprise
Resource
Planning
(ERP)
Online
Auction
Exchanges
Polyester
Internet
Browser
Exhibit 12.6
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