Session 24
Control, Innovation, and
Entrepreneurship
McGraw-Hill/Irwin
Strategic Management, 10/e
Copyright © 2007 The McGraw-Hill Companies, Inc. All rights reserved.
13-2
Learning Objectives
Describe and illustrate four types of strategic control.
Summarize the balanced scorecard approach and how it
integrates strategic and operational control.
Summarize the difference between incremental and
breakthrough innovation.
Explain what is meant by continuous improvement and
how it contributes to incremental innovation
Evaluate the risks associated with an incremental versus a
breakthrough approach to innovation.
Describe the three key elements of the entrepreneurship
process.
Explain intrapreneurship and how to enable it to thrive.
13-3
Establishing Strategic Controls
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Strategic control is concerned with tracking a
strategy as it is being implemented, detecting
problems or changes in its underlying premises,
and making necessary adjustments
Characterized as a form of “steering control”
13-4
Premise Control
•
Premise control is designed to check
systematically and continuously whether the
premises on which the strategy is based are still
valid
•
Environmental factors
•
Industry factors
13-5
Strategic Surveillance
•
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Strategic surveillance is designed to monitor a
broad range of events inside and outside the firm
that are likely to affect the course of its strategy
Strategic surveillance must be kept as unfocused as
possible
Despite its looseness, strategic surveillance
provides an ongoing, broad-based vigilance in all
daily operations
13-6
Special Alert Control
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A special alert control is the thorough, and often rapid,
reconsideration of the firm’s strategy because of a sudden,
unexpected event
A drastic event should trigger an immediate and intense
reassessment of the firm’s strategy and its current strategic
situation
Crisis teams
Contingency plans
13-7
Implementation Control
•
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Strategy implementation takes place as series of
steps, programs, investments, and moves that
occur over an extended time
Implementation control is designed to assess
whether the overall strategy should be changed in
light of the results associated with the incremental
actions that implement the overall strategy
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Monitoring strategic thrusts
Milestone reviews
13-8
Balanced Scorecard Methodology
•
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An alternative approach linking operational and
strategic control, developed by Harvard Business
School professors Robert Kaplan and David
Norton, is a system they names the balanced
scorecard
system (not only a measurement system) that
enables companies to clarify their strategies,
translate them into action, and provide meaningful
feedback
13-9
Integrating Shareholder Value and Organizational
Activities across Organizational Levels
13-10
Balanced Scorecard
Four perspectives:
1. The learning and growth perspective: How well are we
continuously improving and creating value?
2. The business process perspective: What are our core
competencies and areas of operational excellence?
3. The customer perspective: How satisfied are our
customers?
4. The financial perspective:
How are we doing for our
shareholders?
13-11
Innovation
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Invention is the creation of new products or
processes through the development of new
knowledge or from new combinations of existing
knowledge
Innovation is the initial commercialization of
invention by producing and selling a new product,
service, or process
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Product innovation
Service innovation
Process innovation
13-12
Incremental Innovation
• Incremental innovation refers to simple
changes or adjustments in existing products,
services, or processes
• Continuous improvement, what in Japanese
is called kaizen, is the process of relentlessly
trying to find ways to improve and enhance a
company’s products and processes from
design through assembly, sales, and service
13-13
Incremental Innovation
• Toyota’s CCC21: construction of cost
competitiveness for the 21st century
• Six Sigma is a rigorous and analytical
approach to quality and continuous
improvement with an objective to improve
profits through defect reduction, yield
improvement, improved consumer
satisfaction, and best-in-class performance
10 Essential Elements that
Lead to Incremental Innovation
1. Define quality and
customer value
2. Develop a customer
orientation
3. Focus on the company’s
business processes
4. Develop customer and
supplier partnerships
5. Take a preventive
approach
13-14
6. Adopt an error-free
attitude
7. Get the facts first
8. Encourage every manager
and employee to
participate
9. Create an atmosphere of
total involvement
10. Strive for continuous
improvement
13-15
Breakthrough Innovation
•
A breakthrough innovation is an innovation in a
product, process, technology, or the cost associated
with it that represents a quantum leap forward in
one or more of those ways
•
Breakthrough approaches to innovation are
inherently more risky than incremental innovation
approaches
13-16
Risks Associated with Innovation
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Innovation involves creating something that
doesn’t now exist
Long odds for success
Market risk
Technology risk
13-17
Idea Factors
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Need spotting
Solution spotting
Mental inventions
Random events
Market research
Trend following
Treacy’s Useful Points about
Managing Risks
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13-18
The point of innovation is growth
Get the most from the minimum innovation
Incremental product innovations can lock in
existing customers
Incremental business process innovations can
generate more revenue gain or cost savings with
less risk than radical ones
Radical innovations are often too radical
The time to launch breakthrough innovations is
when they are essential to the marketplace
13-19
Ways to Lower Risk
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Product teams
Cross-functional groups
Joint ventures
Cooperation with lead users
“Do it yourself” innovation
Acquiring innovation
Outsourcing innovation
13-20
Entrepreneurship
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Entrepreneurship is the process of bringing
together creative and innovative ideas and actions
with the management and organizational skills
necessary to mobilize the appropriate people,
money, and operating resources to meet an
identifiable need and create wealth in the process
Inventors
Promoters
Administrators
Entrepreneurs
13-21
Who Is the Entrepreneur?
Three Elements Central to
Entrepreneurial Process
1. Opportunity
2. Entrepreneurial Teams
3. Resources
13-22
13-23
Resources
1. Debt financing is generally obtained from a
commercial bank to pay for property, equipment,
and maybe provide working capital
2. Equity financing is usually obtained from one or
more of three sources: friendly sources, informal
venture investors, or professional venture
capitalists
13-24
Intrapreneurship
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Intrapreneurship, or entrepreneurship in large
companies, is the process of attempting to identify,
encourage, enable, and assist entrepreneurship
within a large, established company so as to create
new products, processes, or services that become
major new revenue streams and sources of cost
savings for the company
13-25
Pinchot’s 10 Freedom Factors
1.
2.
3.
4.
5.
Self-selection
No hand-offs
The doer decides
Corporate “slack”
End the “home run”
philosophy
6. Tolerance of risk,
failure, and mistakes
7. Patient money
8. Freedom from turfness
9. Cross-functional teams
10.Multiple options