Article summary with Strategic Entrepreneurship: Creating Competitive Advantage Through Streams of Innovation by Ireland and Webb - 2007

Most of today’s companies are faced with the challenge of changing frequently in order to meet the needs of those they serve, which is becoming increasingly difficult.

Tension: The need for a firm to constantly and rapidly change. A firm should exploit what it already is successful in, and explore what it is not successful in yet. Effectively managing this tension is becoming a key differentiator between maintaining organizational success and facing dwindling performance over time. It is namely shown that firms have difficulties sustaining their performance over a considerable period of time.

Introduction

Most of today’s companies are faced with the challenge of changing frequently in order to meet the needs of those they serve, which is becoming increasingly difficult.

Tension: The need for a firm to constantly and rapidly change. A firm should exploit what it already is successful in, and explore what it is not successful in yet. Effectively managing this tension is becoming a key differentiator between maintaining organizational success and facing dwindling performance over time. It is namely shown that firms have difficulties sustaining their performance over a considerable period of time.

Introducing strategic entrepreneurship

Strategic entrepreneurship (SE) = 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. >> A firm should opt for a balance between opportunity seeking (exploration) and advantage seeking (exploitation).

Effective SE helps the firm to develop relatively sustainable competitive advantages, which are difficult to understand for competitors and difficult to imitate.

The actions taken to transition from exploration to exploitation, and from exploitation to exploration poses challenges.

Refer to Figure 1 for some individual attributes of strategy, entrepreneurship and SE.

Exploration; benefiting from diverse investments

Identifying ways to position a firm in one or more market spaces to deal with environmental change is a key outcome of exploration activities. Exploration’s success depends on the firm’s ability to acquire new and diverse knowledge, and integrate that with existing knowledge.

Increases in the rate and complexity of environmental changes makes firms looking for more efficient means of explorations >> Strategic alliances and corporate venture capital programs are the outcome here, namely firms are able to share the risks and uncertainty of exploration activities.

There are structural and cultural mechanisms required to support exploration : the degree of centralization of authority, the standardization of procedures, and the formalization of processes. Organizational structures characterized by decentralized authority, semi-standardized procedures, and semi-formalized processes support exploration activities.

Exploitation; benefiting from focus

Exploitation rests on knowledge of a proven innovation, making it possible for firms to be aware of present needs and demands. Firms that are able to meet these needs and demands enjoy a competitive advantage.

Firms may also seek external partnerships when engaged in exploitation. Firms want to acquire and bundle complementary knowledge and resources to extend their ability to leverage existing capabilities and competitive advantages.

Exploitation is characterized by structural and cultural mechanisms that allow the firm to focus on a core set of knowledge and capabilities. Continuouslt acquiring diverse knowledge is not critical here, the need for speed requires that the firm focuses on already established knowledge. Because of this, extensive cross-divisional communication is not needed. A centralized structure is needed, and highly specialized, standardized and formalized routines also benefit a firm’s exploitation efforts. Experimental behaviors of employees are not needed here >> Slows down the process and introduce inefficiencies. Focus on what is known instead of what could be should be supported.