Managing
Innovation and
Fostering
Corporate
Entrepreneurship
chapter 12
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education
.
Managing Innovation
12-2
 Innovation
allows for
 Transformation
of organizational processes
 Creation of new & commercially viable
products & services
 Innovation
 The
requires new knowledge from
latest technology
 The results of experiments
 Creative insights
 Competitive information
Managing Innovation
12-3
 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
Managing Innovation
12-4
 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
Managing Innovation
12-5
 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
 Can
innovation
enhance existing practices
 Make small improvements in products & processes
 Can create evolutionary applications of earlier
innovations; provide new capabilities
Managing Innovation:
Improving the Process
12-6
 Cultivating
 Discovery
innovation skills
skills allow leaders to see the
potential in innovations
 Creative intelligence allows 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
Managing Innovation:
Improving the Process
12-7
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?
Managing Innovation:
Improving the Process
12-8
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
Managing Innovation:
Improving the Process
12-9
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
Corporate Entrepreneurship
12-10

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

Corporate Entrepreneurship
12-11

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

Corporate Entrepreneurship:
Measuring Success
12-12
 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
Corporate Entrepreneurship:
Measuring Success
12-13
 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
Entrepreneurial Orientation
12-14
 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
Entrepreneurial Orientation
12-15
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.