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Unformatted text preview: Chapter 3 Levels of Entrepreneurship in Organizations: Entrepreneurial I ntensity
Copyright (c) 2007 by Donald F. Kuratko All rights reserved. Exploring the Dimensions of Entrepreneurship
Three dimensions characterize an entrepreneurial organization E I nnovativeness Risk-Taking Proactiveness Exploring the Dimensions of Entrepreneurship E Three Frontiers of I nnovation Services new or improved services Products unique or improved Processes new or better ways to accomplish a task or function E Exploring the Dimensions of Entrepreneurship I nnovativeness to what extent is the company doing things that are novel, unique, or different Does the concept address a need that has not previously been addressed Does it change the way one goes about addressing a need I s it a dramatic improvement over conventional solutions Does it represent a minor modification or improvement to an existing product I s it just the geographic transfer of a proven product E the Dimensions of Entrepreneurship Exploring
A Range of Options: I nnovativeness as it Applies to Products and Services
New to the World Products/Services New to the M arket Products/Services New Product/Service Lines in a Company Additions to Product/Service Lines Product I mprovements/Revisions New Applications for Existing Products/Services Re-positioning of Existing Products/Services Cost Reductions for Existing Products/Services Exploring the Dimensions of Entrepreneurship
I nnovativeness as it Applies to Processes
Degree of I nnovation
M ajor New Process M inor New Process Significant Revision of Existing Process M odest I mprovement to Existing Process Supply Chain M anagement Techniques Distribution M ethods Pricing Approaches I nformation M anagement Systems Customer Support Programs Logistical Approaches Hiring M ethods E Type of Process_______
Administrative Systems Service Delivery Systems Production M ethods Financing M ethods M arketing or Sales Approaches Procurement Techniques Compensation M ethods Employee Training Programs Exploring the Dimensions of Entrepreneurship
Sixteen Dilemmas of I nnovation Not all entrepreneurs are innovators, and not all innovators are entrepreneurs, but successful E entrepreneurship tends to involve continued innovation (in products, services and processes/ methods). Innovation is about the unknown. Management is about control. How do you control the unknown? Innovation is often about breaking the rules. People who break rules don' t last long in organizations. Successful innovation tends to occur when there are constraints, routines and deadlines. There is a need for both freedom and discipline, and the issue is one of balance. Failure is likely if the firm does not innovate. But the more the firm innovates, the more it fails. An innovation succeeds because it addresses customer needs. Yet, when you ask customers about their needs, many do not know or cannot describe them to you except in very general terms. Innovating can be risky. Not innovating can be more risky. Innovation can be revolutionary or evolutionary. The costs, risks, and returns of both types differ, and both require different structures and management styles. A company that innovates is frequently making its own products obsolete when there was E Exploring the Dimensions of Entrepreneurship Sixteen Dilemmas of I nnovation (continued) Innovation requires supporting infrastructure to be successful, and the existing infrastructure is often inadequate. However, these infrastructure needs may not become apparent until after the innovation is developed. While innovation is more technically complex and costly today, many breakthrough innovations do not come from large companies or corporate R& D labs with sizeable budgets, but from individual inventors and entrepreneurs. People who design innovations typically seek to perfect their new product or service, making it the best possible. But the marketplace often wants it to be " good enough," not perfect. The additional time and money necessary to make the innovation " best possible" drive up prices beyond what the customer will pay, and result in missed opportunity. Technology-driven innovation often leads to dramatic new products that prove to be " better mousetraps" nobody wants. Customer-driven innovation often leads to minor modifications to existing products or " me-too" products meeting a competitive brick wall. While typically associated with genius or brilliance, innovation is more often a function of persistence. While innovation is sometimes associated with breaking the rules of the game (e.g, 3M), it frequently entails playing an entirely different game (e.g., Starbucks, Dell). Being first to market is not consistently associated with success, while being second or third is not consistently associated with failure. E Exploring the Dimensions of Entrepreneurship Synectics, a leading international firm specializing in innovation and consulting characterized the " best practices" of companies that seem to be especially good at innovation yielded three categories of firms: Stars high performing companies that had successfully integrated innovation and creativity into their daily business practices Seekers display a number of appropriate innovation practices, but came up short in terms of innovation performance and company-wide commitment to innovation Spectators acknowledge the importance of innovation but E Exploring the Dimensions of Entrepreneurship Stars have a number of characteristics that distinguish them from Seekers and Spectators:
Having CEO' s that were heavily involved in fostering innovation; Defining innovation as critical to long-term company success; Attaching great importance to the concept of managing change; Having the words innovation and creativity in their mission statements; Demonstrating an openness to outside ideas; Having formal programs for idea generation and problem-solving; Placing strong emphasis on cross-function communications; Implementing programs to encourage employees to talk to customers; Increasing levels of investment in R& D and a strong focus on product development; Creating budgets allocated exclusively to innovation; Providing rewards for individual creativity and innovation; Spending time in meetings that were highly productive. E
Exploring the Dimensions of Entrepreneurship Risk-taking I ndividual level & Organization level Financial Technical M arket Personal Social E Exploring the Dimensions of Entrepreneurship High Little to no
Innovative Activity Home-run Strategy Risk
Lots of trials and experiments/ balanced portfolio of projects Low Low Innovativeness High E
Exploring the Dimensions of Entrepreneurship Four Types of I nnovation: Discontinuous innovation Dynamically continuous innovation Continuous innovation I mitation E Exploring the Dimensions of Entrepreneurship Relating Types of Innovation to Risk
High RISK Low Imitation Continuous Dynamically Continuous Discontinuous TYPE OF INNOVATION E
Exploring the Dimensions of Entrepreneurship Proactiveness "Entrepreneurial firms acting on, rather than reacting to their environments" 3 items to measure proactiveness Following versus leading competitors in innovation Favoring the tried and true versus emphasizing growth, innovation, and development Trying to cooperate with competitors versus trying to undo them E Exploring the Dimensions of Entrepreneurship "Missing-the-Boat" and "Sinking-the-Boat" Risk
Total Risk TR=f (SBR, MBR) Missing the boat risk curve Planning Time Source: Dickson and Giglierano (1986). Reprinted with permission E
Exploring the Dimensions of Entrepreneurship Seeking new opportunities that may or may not be related to the present line of operations; 2. I ntroducing new products and brands ahead of the competition; & 3. Strategically eliminating operations that are in the mature or declining stages of the life cycle.
1. E Exploring the Dimensions of Entrepreneurship
Stuck in the M ud Wild-Eyed Gambler Dreamer Entrepreneur E Exploring the Dimensions of Entrepreneurship
High Dreamer Entrepreneur Innovativeness Stuck in the Mud Low Wild-eyed Gambler Low High Risk-taking E Entrepreneurial Intensity:
Combining Degree and Frequency of Entrepreneurship Combining Degree and Frequency...... The Entrepreneurial Grid Entrepreneurial Intensity: Combining Degree and Frequency of Entrepreneurship High Frequency of Entrepreneurship Continuous/ Incremental Dynamic Revolutionary E Low Periodic/ Incremental Low Degree of Entrepreneurship Periodic/ Discontinuous High (innovativeness, risk-taking, proactiveness) E Applying the Entrepreneurial Grid to Organizations The entrepreneurial grid is a useful too for managers attempting to define the role of entrepreneurship within their organizations. A company's entrepreneurial strategy is effectively defined according to where it falls on the grid. Applying the Entrepreneurial Grid to Organizations
Procter & Gamble Level 3 Communications E Frequency of Entrepreneurship 3M Wendy's Nucor Steel Low Low Degree of Entrepreneurship High E
Applying the Grid at the Level of the Individual Manager The entrepreneurial grid can serve as a useful means for diagnosing entrepreneurial management profiles Applying the Grid at the Level of the Individual Manager High
Richard Branson (Virgin) E Rich DeVos (Amyway Household Products) Ted Turner (CNN) Akio Morito (Sony) Frequency of Entrepreneurship Ray Kroc (McDonald's) Sachiro Honda (Honda Motors) Bill Gates (Microsoft) Herb Kellehner (Southwest Airways) Howard Head (Head Skis, Prince Tennis Racquets) Low Low Steven Jobs (Apple, NeXT and Pixar) Degree of Entrepreneurship High Things We Know and Don't Know about Entrepreneurial Intensity
Research is embryonic I deal point is industry and market E specific E We Know and Don't Know about Things
Entrepreneurial Intensity There is also much we do not know. For example, to what extent does the relative importance of degree vs. frequency vary depending on such strategic factors as the pace of technological change in an industry, the levels of competitive intensity, or the heterogeneity of market demand? Under what conditions is degree vs. frequency the strongest contributor to company performance? E We Know and Don't Know about Things
Entrepreneurial Intensity I t is also necessary to determine if frequency and degree contribute equally to short-term as opposed to long-term performance. Another critical question concerns the types and amounts of costs associated with Entrepreneurial I ntensity (EI ). Finally, it is not clear that high levels of entrepreneurial intensity are sustainable. ...
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This note was uploaded on 08/25/2009 for the course ENTR 3312 taught by Professor Staff during the Spring '08 term at University of Houston.
- Spring '08