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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 12-2

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 12-3

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 12-4

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 12-5

Managing Innovation: Improving the Process  Cultivating innovation skills Discovery 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 12-6

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? 12-7

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 12-8

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 12-9

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 12-10

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 12-11

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 12-12

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 12-13

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 12-14

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