MGT 409 - Chapter 12 Review

What 3 questions should be used to assess the effectiveness of a corporation's venturing initiatives?

- Are the products offered by the venture accepted in the marketplace? - Are the contributions of the venture to the corporation's internal competencies valuable? - Is the venture able to sustain its basis of competitive advantage?

What are the 5 traits of the Innovator's DNA?

- Associating - Questioning - Observing - Experimenting - Networking

What are the pitfalls associated with Autonomous work units?

- Autonomous teams often lack coordination - Excessive decentralization has a strong potential to create inefficiencies

What are the 5 dimensions of Entrepreneurial Orientation?

- Autonomy - Innovativeness - Proactiveness - Competitive Aggressiveness - Risk Taking

What are the 5 insights provided by experts for companies competing in a dynamic market where it is uncertain which technology will emerge triumphant?

- Avoid overcommitting - Don't let shame or despair knock you out of the game - Pivot quickly - Transfer knowledge - Be aware that it can be dangerous to be right at the outset

What are the 3 main Pitfalls associated with ROA?

- Back-Solver Dilemma - Managerial Conceit - Escalation of Commitment

What are the 3 types of Risk Taking?

- Business Risk - Financial Risk Taking - Personal Risk Taking

In a typical corporation, what determines how entrepreneurial projects will be pursued?

- Corporate Culture - Leadership - Structural Features that guide and constrain action - Organizational Systems that foster learning and manage rewards

What 4 Human Resource Management practices are especially important for firms to capture value from their Innovation Efforts?

- Create innovation teams with experienced players that have dealt with uncertainty and can help new staff members learn venture management skills - Require that employees seeking to advance their career with the organization serve in the new venture group - Once people have experience with the new venture group, transfer them to mainstream management positions - Separate the performance of individuals from the performance of the innovation

When identifying new applications of its technology, firms should consider a broad scope of potential markets. What are the two methods of identifying potential markets?

- Desk Research - Field Research

What are the three related aspects of Dispersed Entrepreneurship?

- Entrepreneurial Culture - Resource Allotment - Product Champions

How are Exit Champions different from Product Champions?

- Exit Champions: Deal in Data, must reinstate procedures, may lose status - Product Champions: Deal in Ambiguity, may violate procedures, often emerge as heroes

Innovation is both a force in the External Environment and a factor affecting a firm's Internal Choices. Explain how

- External Environment: Technology, Competition - Internal Choices: Generic Strategy, Value-Adding Activities

Two distinct approaches to Corporate Venturing are found among firms that pursue entrepreneurial aims. What are they?

- Focused Approach - Dispersed Approach

What are the 5 functions provided by Business Incubators?

- Funding - Physical Space - Business Services - Mentoring - Networking

Companies must be clear about not only the kinds of Innovation they are looking for, but also the expected results. With regards to its Innovation Efforts, what 4 questions do companies typically ask themselves?

- How much will the innovation initiative cost? - How likely is it to actually become commercially viable? - How much value will it add? - What will be learned if it does not pan out?

What are the two major avenues through which companies can expand or improve their business?

- Innovation - Corporate Entrepreneurship

With regards to Innovation, what are the main sources of New Knowledge?

- Latest Technology - Creative Insights - Competitive Information

What are the two most common types of Focused Approaches?

- New Venture Groups (NVGs) - Business Incubators

What are the two stages that a New Venture Concept must pass through in order to be accepted by the organization (Internal Development)?

- Project Definition - Project Impetus

How are the timelines for Radical Innovations different than the timelines for Incremental Innovations?

- Radical Innovations often begin with a long period of exploration, making strict timelines unrealistic - Incremental Innovations may use a milestone approach that is driven by goals and deadlines

Research suggests that firms are more likely to effectively leverage its technologies in new markets if they follow what 4 steps?

- Redefine the technology or competency in general terms - Identify new applications of the technology - Select the most promising applications - Choose the best entry mode

When pursuing Innovation, what 5 dilemmas do companies face?

- Seeds versus Weeds - Experience versus Initiative - Internal versus External Staffing - Building Capabilities versus Collaborating - Incremental versus Preemptive Launch

What 2 aims do Innovation and Corporate Entrepreneurship have in common?

- Strategic Renewal - Pursuit of Venture Opportunities

What are the two primary aims of Corporate Entrepreneurship (CE)?

- Strategic Renewal - The Pursuit of New Venture Opportunities

What are the Strategic Reasons for undertaking a Corporate Venture?

- Strengthening Competitive Position - Entering into New Markets - Expanding Capabilities - Building the Corporation's Base of Resources and Experience

Failure can be a great catalyst for learning. What are three steps to ensure that firms can leverage the value of failures?

- Study individual projects that were unsuccessful and gather insights from them - Crystallize these insights and share them across the organization (reports and meetings) - Conduct corporate reviews to ensure that the overall approach to failure is yielding strong benefits (the business is learning/improving, is the same pattern being repeated, etc)

What are the main features of Disruptive Innovations?

- Technologically Simpler and Less Sophisticated than Currently Available Products or Services - Appeal to Less Demanding Customers who are seeking more convenient, less expensive solutions - Take time to take effect and only become disruptive once they have taken root in a New Market or low-end part of an Existing Market

What drives Creative Intelligence?

- The core skill of Associating - Four patterns of action: Questioning, Observing, Experimenting, and Networking

What are the 2 common techniques that firms can use to promote Autonomy?

- The firm can create Independent Work Groups (NVGs) - Create Organizational Structures to foster creativity and flexibility

When selecting the most promising applications of their technology, what are two key factors that help a firm select the right application?

- The firm must assess whether their technology provides advantages over current products - Firms need to assess the practicality of their technology and take steps to identify the challenges they'll face

According to the text, what are the two things that make Innovation so difficult?

- Uncertainty about Outcomes - The Innovation Process Involves Many Choices

What are two common sources of Innovation Partnerships?

- Universities - The Federal Government

What are Business Incubators?

A corporate NVG that supports and nurtures new ventures until they can thrive on their own as stand-alone businesses - Corporations use incubators as a way to grow businesses identified by the NVG

What is the Strategic Envelope?

A firm-specific view of innovation that defines how a firm can create new knowledge and learn from an innovation initiative even if the project fails - The Strategic Envelope also gives direction to a firm's innovation efforts, which helps separate Seeds from Weeds and builds Internal Capabilities

What is the Dispersed Approach to CE?

A form of CE in which a dedication to the principles and policies of entrepreneurship is spread throughout the organization

What is the Focused Approach to CE?

A form of CE in which the venturing entity is separated from the other ongoing operations of the firm

What is Proactiveness?

A forward-looking perspective characteristic of a marketplace leader that has the foresight to seize opportunities in anticipation of future demand - Proactive organizations monitor trends, identify. the future needs of existing customers, etc

What are New Venture Groups (NVGs)?

A group of individuals, or a division within a corporation, that identifies, evaluates, and cultivates Venture Opportunities - NVGs typically function as semiautonomous units with little formal structure

What is the Back-Solver Dilemma?

A problem with investment decisions in which managers scheme to have a project meet investment approval criteria, even though the investment may not enhance firm value

What is Innovativeness?

A willingness to introduce novelty through experimentation and creative processes aimed at developing new products and processes - It involves creativity and experimentation - How firms invest their resources is often a powerful driver for innovativeness

What is Intrapreneuring?

AKA Corporate New Venture Creation - It refers to building entrepreneurial businesses within existing corporations

What are Product Champions?

An individual working within a corporation who brings entrepreneurial ideas forward and: - Identifies what kind of market exists for the product - Finds resources to support the venture - Promotes the venture concept to upper management

What are Exit Champions?

An individual working within a corporation who is willing to question the viability of a venture project by demanding hard evidence of venture success and challenging the belief system that carries a venture forward

What are Incremental Innovations?

An innovation that enhances existing practices or makes small improvements in products and processes

What are Radical Innovations? How do they affect an Industry?

An innovation that fundamentally changes existing practices - Radical Innovations tend to be highly disruptive and can transform a company or even revolutionize a whole industry - These breakthrough innovations usually occur because of Technological Change

What is Competitive Agressiveness?

An intense effort to outperform industry rivals - Characterized by a combative posture or an aggressive response aimed at improving position or overcoming a threat in a competitive marketplace

What is Real Options Analysis (ROA)?

An investment tool that looks at an investment or activity as a series of sequential steps. For each step, an investor has the option to: - Invest additional funds to grow or accelerate the activity - Delaying the activity - Shrinking the scale of the activity - Abandoning the activity

Finish the Sentence: Another way to view the impact of an innovation is in terms of its degree of Innovativeness, which falls somewhere on a continuum that extends from ____________ to ____________

Another way to view the impact of an innovation is in terms of its degree of Innovativeness, which falls somewhere on a continuum that extends from Incremental to Radical

What is Questioning?

Asking questions that challenge common wisdom - This gets others around them to challenge the assumptions that limit the possible range of actions the firm can take

What is the Illusion of Control?

Because Real Options are designed to minimize potential losses while preserving potential gains, any problems that arise are likely to be smaller at first. This causes less concern for the manager - Managerial Conceit suggests that managers will assume that these problems are the easiest to solve and control. This is the Illusion of Control

What is the second main Advantage of the Dispersed Approach?

Because of the firm's entrepreneurial reputation, stakeholders such as vendors, customers, or alliance partners can bring new ideas or venture opportunities to anyone in the organization and expect them to be well received

What is the main Disadvantage of the Focused Approach to CE?

Because the venturing entity is isolated from the corporate mainstream, it may not receive the resources and support that it needs

What is Managerial Conceit?

Biases, blind spots, and other human frailties that lead to poor managerial decisions

What is the purpose of defining the Strategic Envelope?

By defining the scope of a firm's innovation efforts (The Strategic Envelope), firms ensure that their innovation efforts are not wasted on projects that are outside the firm's domain of interest

With regards to the Internal Development Process of a New Venture Concept, when are Product Champions especially important? Explain why

Champions are especially important during the time after a new project has been Defined, but before it gains momentum (Impetus) - Champions form the link between the Definition and Impetus Stages of Internal Development. This is done by procuring resources and stimulating interest for the product among potential customers

What is the "Experience versus Initiative" Dilemma? What do firms need to address this dilemma?

Companies must decide who will lead an innovation project - Senior managers may have experience and credibility, but they tend to be more risk-averse - Midlevel employees have more enthusiasm because they can see how an innovation would address specific problems - To address this dilemma, firms need to support and reward organizational members who bring ideas to light

What is the "Incremental versus Preemptive Launch" Dilemma?

Companies must manage the timing and scale of new innovation projects - Incremental launches are less risky because they require fewer resources and serve as a market test. However, tentative launches can undermine the project's credibility and opens the door for competitive response - A Large-scale preemptive launch requires more resources, but it can effectively preempt a competitive response - Firms need to make funding and management arrangements that allow for projects to hit the ground running, and they need to be responsive to market feedback

How do Proactive organizations place pressure on their competitors?

Competitors must respond to proactive organizations with successful initiatives

Describe the relationship between the Innovation Process and Corporate Entrepreneurship (CE)

Corporate Entrepreneurship uses the fruits of the Innovation Process to help build new sources of competitive advantage and renew their value propositions - CE helps firms identify opportunities and launch new ventures

What is Entrepreneurial Culture?

Corporate culture in which change and renewal are a constant focus of attention

What is the key attribute that firms need to develop in their managers in order to improve their innovative potential?

Creative Intelligence

What is Observing?

Discovery-driven executives produce innovative business ideas by observing regular behavior of individuals, especially customers and potential customers

What is the "Bottom-Up" Approach to Entrepreneurial Activity?

Employees from anywhere in the company are encouraged to generate and pitch innovative ideas - Many of the best ideas for new corporate ventures come from the Bottom-Up

True or False: A culture of Entrepreneurship is one in which the search for venture opportunities accumulates at the top of the organization's hierarchy

False - A culture of Entrepreneurship is one in which the search for venture opportunities permeates every part of the organization - The key to creating value successfully is viewing every value-chain activity as a source of competitive advantage

True or False: A manager's ability to Associate cannot be developed or improved

False - As managers practice Questioning, Observing, Experimenting, and Networking, they will develop the skill of Association - They will begin to see opportunities and be more creative as they Associate information from different parts of their life

True or False: Competitive Aggressiveness is a strategy that is best used frequently

False - Competitive Aggressiveness is a strategy that is best used in moderation

True or False: Companies should always try to hurry their research efforts, even if it means entering the market before they are completely ready

False - Doing this would damage the companies ability to innovate, and its reputation

True or False: For a Patent application to be successful, it does not necessarily have to be Novel

False - For a Patent application to have any chance of success, one of the most important attributes it must possess is Novelty - You cannot Patent an idea that has been copied

True or False: When it becomes difficult or uncertain, a firm should cease their Innovation Efforts

False - Only those companies that actively pursue innovation, even when it is difficult and uncertain, will get a payoff from their innovation efforts

True or False: Process Innovations are more likely to occur in earlier stages of an Industry's Life Cycle

False - Process Innovations are more likely to occur in the later stages of an industry's life cycle - EX: The Maturity Stage

True or False: Product Innovations tend to be more common during the later stages of an industry's life cycle

False - Product Innovations tend to be more common during the *earlier* stages of an industry's life cycle

In addition to time, how else can firms foster Corporate Entrepreneurship (CE)?

Firms can provide monetary investment to fund entrepreneurial ideas

What is the main Disadvantage of the Dispersed Approach?

Firms that are overzealous about CE sometimes feel they must change for the sake of change - This causes them to change vital competencies or spend heavily on R&D and innovation to the detriment of the bottom line

What does it mean to use the "Top-Down" Approach to stimulate Entrepreneurial Activity?

In a Top-Down Approach, the top leaders of the organization support programs and incentives that foster a climate of entrepreneurship

Explain how the following Staffing Practice can be counterproductive: Creating a climate where innovation team members are considered second-class citizens

In companies where achievements are rewarded, the brightest and most ambitious players may avoid innovation projects with uncertain outcomes

How can Incremental Innovations afford a firm a Competitive Advantage? Provide examples

Incremental Innovations can be a source of competitive advantage by providing new capabilities that minimize expenses or speed productivity - EX: Frozen Food, Sports Drinks, Electronic Bookkeeping, etc

What is Autonomy?

Independent action by an individual or team aimed at bringing forth a business concept or vision and carrying it through to completion

What is the "Internal versus External Staffing" Dilemma? What do firms need to address this dilemma?

Innovation projects need competent staffs to succeed - People drawn from inside the company may have greater Social Capital and know the organization's culture and routines. However, this may keep them from thinking outside the box - Staffing innovation projects with external personnel requires that project managers justify the hiring and spend time recruiting, training, and relationship building - To address this dilemma, Firms need to streamline and support the process of staffing innovation efforts

What is the "Building Capabilities versus Collaborating" Dilemma? What do firms need to address this dilemma?

Innovation projects often require new sets of skills - Firms can seek help from other departments and/or partner with other companies that bring resources and experience as well as share costs of development. However, these arrangements can create dependencies and conflicts - To address this dilemma, Firms need a mechanism for forging links with outside parties to the innovation process

What are Sustaining Innovations?

Innovations that extend sales in an existing market, usually by enabling new products or services to be sold at higher margins - Sustaining Innovations may be either Radical or Incremental

What are Disruptive Innovations?

Innovations that overturn markets by providing an altogether new approach to meeting customer needs

What is Networking?

Innovators use broad and diverse personal networks to find and test radical ideas

What is Business Risk Taking?

Involves venturing into the unknown without knowing the probability of success - This is the risk associated with entering untested markets or committing to unproven technology

What is the main Advantage of the Focused Approach to CE?

It frees entrepreneurial team members to think and act without the constraints imposed by existing organizational norms and routines

What is Risk Taking?

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

What causes Managerial Conceit to occur?

Managerial Conceit occurs when decision makers who have made successful choices in the past come to believe that they possess superior expertise for managing uncertainty - These managers are likely to shift away from analysis to trusting their own judgement

Elaborate on the following expert insight: Avoid Overcommitting. How can it be avoided?

Managers can become entrenched as confirmation bias leads them to focus only on data that suggest they've made the right choice - Firms should consider Joint Ventures and other alliances to avoid over-investments

Elaborate on the following expert insight: It can be dangerous to be right at the outset

Managers in firms that initially select the winning technology can fail to recognize the need to rethink some details of their product and the underlying technology - Their complacency can give firms that initially chose the wrong technology an opportunity to pull ahead

What is the "Seeds versus Weeds" Dilemma? What do firms need to address this dilemma?

Most companies have an abundance of innovative ideas - The ideas that are expected to bear fruit ("the seeds") must be separated from "the weeds" - This is complicated by the fact that some innovation projects require a considerable level of investment before a firm can fully evaluate whether it is worth pursuing - To address this dilemma, firms need a mechanism with which they can choose among various innovation projects

How are NVGs different from R&D Departments?

NVGs usually have a larger mandate than a typical R&D Department - In addition to innovation and experimentation, NVGs are involved with coordinating with other corporate divisions, identifying venture partners, gathering resources, and actually launching the venture

Elaborate on the following expert insight: Pivot quickly

Once they realized they made a mistake, firms that were ultimately successful changed course and moved quickly - Studies indicate that the ideal moment to enter a high-tech industry is just as the dominant design emerges

What is the first main Advantage of the Dispersed Approach?

Organizational members don't have to be reminded to think entrepreneurially or be willing to change - In the Dispersed Approach, the ability to change is considered to be a Core Capability

According to the text, when is ROA appropriate to use?

ROA is appropriate to use when investments can be staged - That is, a smaller investment is made up front and are followed by subsequent investments

How can ROA be applied to Entrepreneurship? What is the benefit of using Real Options logic?

ROA suggests a path that companies can use to manage the uncertainty associated with launching new ventures - By using Real Options logic to advance the development process, firms can reduce uncertainty and minimize innovation-related failures

How can Radical Innovations afford a firm a Competitive Advantage? Provide examples

Radical Innovations may lead to products or processes that can be Patented, giving a firm a strong competitive advantage - EX: Electricity, desktop computers, the telephone

What is Product Innovation? What Generic Strategy is it often associated with?

Refers to efforts to create product designs and applications of technology to develop new products for end users - Product Innovation is commonly associated with Differentiation

What is Process Innovation? What Generic Strategy is it often associated with?

Refers to efforts to improve the efficiency of organizational processes, especially manufacturing systems and operations - Process Innovation is typically associated with Overall Cost Leader Strategies

What is Desk Research?

Refers to searching patent databases and more general web searches

What is Personal Risk Taking?

Refers to the risks that an executive assumes in taking a stand in favor of a strategic course of action - Executives who take such risks stand to influence the course of their whole company, and their decisions also can have significant implications for their careers

What is Financial Risk Taking?

Requires that a company borrow heavily or commit a large portion of its resources in order to grow

Elaborate on the following expert insight: Don't let shame or despair knock you out of the game

Shame is a particularly destructive reaction to failure - Some companies that bet on the wrong technology decide, unnecessarily, to get out of the market entirely. Thus, the firm misses out on any future market opportunities

According to the text, leaders of innovative firms have achieved success by exhibiting "discovery skills". What are "discovery skills"?

Skills that allow managers to see the potential in innovations and to move the organization forward in leveraging the value of these innovations

Elaborate on the following expert insight: Transfer knowledge

Successful firms use the information they gathered in a losing bet to exploit other market opportunities

Explain how the following Staffing Practice can be counterproductive: Creating a staff that consists only of volunteers who want to work on projects they find interesting

Such players are often overzealous about new technologies or are overly attached to product concepts, which can lead to poor decisions about which projects to pursue or drop

What is Associating?

The ability to connect seemingly unrelated questions, problems, and ideas from different fields

What is Corporate Entrepreneurship (CE)?

The creation of new value for a corporation through investments that create either new sources of competitive advantage or renewal of the value proposition

When choosing the best entry mode for a new market, what 3 basic choices does the firm have? What is this selection decision based on?

The firm must assess the resources needed to win in the new market and determine if it has these resources or not. After doing this, the firm can: - Enter the Market Alone - Enter the Market with a Strategic Alliance / Partner - License the Technology to someone already in the Market

What is Entrepreneurial Orientation (EO)?

The practices that businesses use in identifying and launching corporate ventures - It represents a frame of mind and perspective toward entrepreneurship

What is Project Definition?

The proposed opportunity must be justified in terms of its attractiveness in the marketplace and how well it fits with the corporation's other strategic objectives

What is Escalation of Commitment?

The tendency for managers to irrationally stick with an investment even when investment criteria are not being met - Involves specific environments with Sequential Decisions

What is Innovation?

The use of new knowledge to transform organizational processes or create commercially viable products and services - It occurs when new combinations of ideas and information bring about positive change

What is Experimenting?

This can include new jobs, living in different countries, and new ideas for their businesses

Explain how the following Staffing Practice can be counterproductive: Create a staff that consists only of strong players whose primary experience is related to the company's core business

This provides too few people to deal with the uncertainty of innovation projects and may cause good ideas to be dismissed because they do not appear to fit with the core business

How can Time Pacing be a source of Competitive Advantage?

Time Pacing helps a company manage transitions and develop an internal rhythm - With Time Pacing, the firm works to develop an internal rhythm that matches the buying patterns of customers

How should firms choose Innovative Partners? What aspect of this Innovative Partnership should be specified?

To choose partners, firms need to ask what competencies they are looking for and what the innovation partner will contribute - Innovation Partnerships should specify how the rewards of the innovation will be shared and who will own the intellectual property that is developed

What is Project Impetus?

To gain Impetus, the project's strategic and economic impact must be supported by senior managers who have experience with similar projects - It then becomes an embryonic business with its own organization and budget

In the context of ROA in Strategic Decision Making, what are "Tollgates"?

Tollgates refer to key points at which Strategic Decision Makers can decide to continue, delay, or abandon the project - There are opportunities to make "go" or "no-go" decisions at each phase

True or False: A key to managing entrepreneurial risks is to evaluate New Venture Opportunities thoroughly enough to reduce the uncertainty surrounding them

True

True or False: CE is usually the domain of autonomous work groups that pursue entrepreneurial aims independent of the rest of the firm

True

True or False: Employees are more likely to generate innovative ideas when they have the time to do so

True

True or False: Innovation Efforts that involve multiple partners and the speed and ease with which partners can network and collaborate are changing the way innovation is conducted

True

True or False: Inventions and new ideas need to be nurtured even when their benefits are unclear

True

True or False: Some of the most common applications of Real Options are with property and insurance

True

True or False: In the Real Options perspective, managers may fail to respond appropriately to problems because they underestimate them

True - Because the problem initially appears to be small, the manager may think that it is easily resolved - Managers may approach each Real Option decision with less care and diligence than if they had made a full commitment to a larger investment

True or False: It is rare for any one organization to have all the information it needs to carry an innovation from concept to commercialization

True - Even a company that is highly competent with its current operations usually needs new capabilities to achieve new results

True or False: In terms of the financial risk-return tradeoff, it appears that CE often falls short of expectations

True - However, it is important to look beyond simple financial returns and consider a well-rounded set of criteria

True or False: When determining which projects to work on, a firm might focus on a common technology

True - In this case, innovation efforts across the firm can aim at developing skills and expertise in a given technical area - Another potential focus is on a market theme

True or False: The project timeline of an Incremental Innovation may be 6 months to 2 years

True - Radical Innovations may have a project timeline of 10 years or more

True or False: Employing the Real Options perspective can encourage decision makers toward a bias for action

True - This leads to carelessness

True or False: Although Innovations are not always high-tech, changes in technology can be an important source of change and growth

True - When an Innovation is based on a sweeping new technology, it often has a more far-reaching impact

True or False: Betting on a losing technology and then switching to the winner can position a company to come out ahead of competitors that were on the right track all along

True - Firms that initially invest in an unsuccessful innovative effort often end up dominating the market in the long run