Strategic Eneterpreneurship

Strategic entrepreneurship - Innovation as source of competitive advantage

Global organizations face the challenge of adapting frequently to meet the needs of their customers, suppliers, and share-holders. Creating value for stakeholders is becoming increasingly difficult even for leading players like General Motors (GM) and Ford. A stream of continuous value-creating innovations by global competitors (e.g., Toyota and Honda) have challenged GM & Ford to reinvent themselves continuously.

The challenge of continuous and dynamic change is affecting firms across multiple industries. This includes even the players in IT Services industry such as Accenture / IBM / Infosys & TCS and their Business & Service models are changing due to the nature of competition. The winners and losers resulting from changes in this particular industry remain unknown. Being able to create a more attractive value proposition for customers is making it quite difficult for some of the more traditional players like IBM or Accenture since that means cannibalization of their existing revenue stream, changing the Business model of service & delivery and altering the Relationship matrix with customers in complete linear model.

The Challenges of competing in a global environment creates several tension-filled questions for firms:

- In what markets should we compete? Should we offer standardized products across all markets or should we modify our products for local preferences?

- How much risk are we willing to accept to compete in markets with which we are not deeply familiar? What kinds of skills should we develop in order to become more innovative?

Though all of these tensions (and certainly few more ) are important, of particular interest is one that change creates for firms; specifically, the need for a firm to learn how to simultaneously exploit today that which it does well relative to rivals, while also exploring to determine what it needs to do to be successful in the future. In essence, this tension is between doing what is necessary to exploit today's competitive advantages and exploring today for innovations that can be the foundation for the firm's future competitive advantages.

The ability to effectively manage this tension is rapidly becoming a key differentiator between maintaining organizational success and facing dwindling performance over time. The Fortune 100 annual survey rankings indicate that only 26% of the 100 companies listed remained on the list after 20 years and managed to do this successfully.

Firms ability to manage this tension is the core of strategic entrepreneurship. First, we need to understand Strategic entrepreneurship as a concept with the potential to influence the degree of success organizations can achieve while engaging their rivals in competitive exchanges. Second - Strategic entrepreneurship has two components: exploration and exploitation, differences in operational activities, organizational structure, and organizational culture that contribute to effective strategic entrepreneurship.

What is Strategic entrepreneurship - Balance between Exploration & Exploitation

Strategic entrepreneurship (SE) is a term used to capture firms' efforts to simultaneously exploit today's competitive advantages while exploring for the innovations that will be the foundation for tomorrow's competitive advantages. Effective SE practices result in a firm being able to form a balance between opportunity-seeking (i.e., exploration) and advantage-seeking (i.e., exploitation) behaviors. Effective SE helps a firm position itself such that it is capable of properly responding to the types of significant environmental changes that face many of today's organizations and helps the firm develop relatively sustainable competitive advantages.

Sustainable advantages are not only rare & valuable, but also difficult for competitors to fully understand, and difficult to imitate. Continuous innovation is at the core of what firms can achieve as a result of balancing exploitation and exploration.

2.1. The challenge of strategic entrepreneurship: In spite of its benefits, firms find it difficult to balance exploration and exploitation due to several reasons:

* The outcomes of investments made in the firm's exploratory capabilities are uncertain. Stakeholders. For e.g. Suppliers often are uncertainty avoiders, exploratory actions may lack appeal, due to their experimental nature and the lack of certainty that positive outcomes will accrue from them. Employees initially find exploratory actions to be difficult and perhaps undesirable. In general, those working in companies prefer the known to the unknown. Exploitation, which takes place by exercising familiar organizational routines, is preferred at the expense of exploration.

* The Second challenge is the fragility of the process to transition from exploration to exploitation - operational, structural, and cultural changes must take place to transition from exploiting current competitive advantages to exploring for new opportunities. Thus, when transitioning, the firm moves from a concentration on diversity to create newness (i.e., seeking new opportunities, new market space ..etc ) to concentration on successfully using current skills and routines as the source of today's advantages.

Although SE has great promise, the complexity of the individual sets of actions, and the actions taken to transition from exploration to exploitation and from exploitation to exploration as well), poses significant challenges.

2.2. An expanded view of strategic entrepreneurship

Strategy is concerned with the firm's long-term development - no of elements such as decisions regarding scope, how resources are to be acquired and managed and intended sources of competitive advantage, among others. Entrepreneurship is concerned with actions taken to create newness - results from actions framed around efforts to create new organizational units, to establish new organizations, or to renew existing organizations

Strategy and entrepreneurship (SE) results from combining attributes of strategy and entrepreneurship. The firm combines exploration-oriented attributes with exploitation-oriented attributes to develop consistent streams of innovation and to remain technologically ahead of competitors. Thus, SE is concerned with actions the firm intends to take to exploit the innovations that result from its efforts to continuously explore for innovation-based opportunities (i.e., new organizational forms, new