Keeping up with the Speed of Change – Strategic Entrepreneurship

If everything seems under control you’re not going fast enough.” – Mario Andretti

Traditional approaches to strategy assume a relatively steady and routine business world; in our modern society such a world no longer exists. With the rapid pace of industry changes, such as the introduction of crowd funding, co-creation, renewable business practices, unpredictable political environments and “UBER like” business models, how can an organisation expect three year or even one year strategies to stay relevant? The Question every organisation should ask is: How can I apply sound strategic management principles in an environment that is changing faster than my organisation?

I am urging you to think about the balance of exploration for new advantages and the exploitation of identified advantages and ideas. These two activities require two very different business environments and orientations:

  • Exploration/Innovation requires decentralized controls, semi-standardized processes, freedom to experiment and an entrepreneurial culture where failure is tolerated and calculated risk is encouraged.
  • Exploitation requires a controlled environment, focus on execution of strategy, centralized decision making, standardized processes and advanced risk mitigation controls.

The aim of Strategic Entrepreneurship is not to simply create an organisational culture where both exploration and exploitation activities can thrive simultaneously at even strength, but to create an environment where one can adapt from one focus to the other without skipping a beat, in essence: Developing the ability to adapt.

Strategic Entrepreneurship (SE) is a construct originating from multiple academic fields; Including Entrepreneurship, Strategic Management, Organisational Theory and Economics. Of these, the most critical influences are the fields of Strategic Management and Entrepreneurship. A very short description of these concepts would be in their motives for application:

Strategic

Management engages in the management of actions set on the exploitation of advantages, out-performance of competitors and the achievement of organisational success.

Entrepreneurship embarks on the exploration for novelty, innovation and value creating activities.

By balancing exploration and exploitation efforts through Strategic Entrepreneurship you can create an internal ability that allows the organisation to adapt to changes in the external environment. This creates change ready organisations that can capitalize on opportunities faster than their traditional counterparts.

The tools for effective Strategic Entrepreneurship include the creation of an innovation pipeline, fostering an entrepreneurial orientation within the organisation, employing/nurturing entrepreneurial leaders within the organisation, continuous organisational learning and strategic resource management, each of which I will unpack further in a series of follow-up articles. The alignment of these actions will ultimately provide the organisation the means to create value, wealth and competitive advantage.

  • Innovation can be achieved by managers who can create business units with the ability to generate new ideas. This requires a culture encouraging of new ideas, cross functional teams and collaboration. These teams possess the ability to convert those ideas into innovations through the application of semi-standardized processes, the encouragement of employees to embrace risk and generate increased buy in throughout the development of the innovations. The diffusion of those ideas throughout the organisation increases their ability to roll out new products and services quickly and get ahead of their competitors.
  • Entrepreneurial Orientation is created through the application of risk-taking: achieved by managers who act on transient opportunities and venture into the unknown, Innovativeness: the application of creativity and experimentation to bring new products to the market and Pro –activeness: achievable to the organisation who encourages opportunity seeking behavior with a forward looking orientation. Entrepreneurial Orientation requires an acceptance of failure to be part of the organisation’s mental model.
  • Entrepreneurial Leadership can be developed by leaders who apply Scenario Enactment and Cast Enactment. Scenario Enactment is the actions of framing challenges by setting high standards for employees and leading through example to achieve it, leaders who develop the ability to absorb uncertainty and build confidence through their actions. The final trait of Scenario enactment involves the actions of path clearing: involving the ability of leaders to remove obstacles, negotiate & transact strongly and providing courage and confidence. Cast Enactment lies within building commitment of followers to achieve the scenarios set in Scenario Enactment, to inspire and motivate others, build enthusiasm, induce teamwork and seek continuous improvement.
  • The resulting Value that is created can be measured with Financial Performance metrics such as Gross profit (GP), return on Assets (ROA) and Return on Investment (ROI) and Non-Financial performance metrics such as sales growth, employment footprint and comparative growth in industry market share.

Ketchen, Ireland and Snow (2007) argued that in a rapidly changing and hyper-competitive environment, the concentration on either strategy or entrepreneurship without the other has the ability to lead to a downturn in organisational performance and possibly failure. Understanding the current stance of Strategic Entrepreneurship and the relationships of sub-constructs within Strategic Entrepreneurship would provide valuable information to managers on the focus areas that would collectively yield the most value for the organisation. The active application of Strategic Entrepreneurship rewards curiosity, risk-taking, learning and innovation.

There has been no greater need for organisations to innovate than there is at the present” – Rita Mc Grath (Harvard Business Review, 2013)

Modern organisations are no longer competing in single industries or markets, but rather multi-discipline arenas where clientele can be stolen away by organisations in industries previously “unrelated” to yours, as described by Rita McGrath (2013). Companies are increasingly realizing that advantages are created through capabilities centered in a “readiness for change”, they are in need of leaders continuously asking the right questions. Organisations able to adapt faster than their external environment changes have the unique ability to enter new markets first, disrupt industries or even to create new ones.

Strategic Entrepreneurship is the tool of choice for externally focused organisations purposed with creating value through Innovation, improving their chances to compete successfully against innovative business models and unlocking underutilized innovation, growth, value and wealth.
Unfortunately Many of the actions forming part of Strategic Entrepreneurship are applied in isolation, resulting in a loss in both synergies and value.

Are you losing out on the exponential value gains to be generated through the collective application of Strategic Entrepreneurial actions?

Please share your thoughts and comments on adapting to change and the topic of Strategic Entrepreneurship.

References:

McGrath, R. (2013). Transient Advantage. Harvard Business Review, 91(6), 62-70
Ketchen, D. J., Ireland, R. D., & Snow, C. C. (2007). Strategic Entrepreneurship, collaborative innovation and wealth creation. Strategic Entrepreneurship Journal, 10(1002), 14.