Developing Strategy and Data Analysis: Innovation and Strategic Options Study Notes

Entrepreneurship and Intrapreneurship

• Conceptual Definitions and Foundations

  • Entrepreneurship: Defined by Harry Nystrom (1993) as the "visualisation and realisation of new ideas by insightful individuals, who are able to use information and mobilise resources to implement their visions."

  • Entrepreneur: An individual who perceives an opportunity, establishes viability, gathers resources, and creates an organization to pursue it. Vital traits include innate intelligence, creativity, flair for innovation, high energy levels, and a lack of risk aversion. Driven by both vision (spotting gaps) and necessity (e.g., caregiving requirements).

  • Intrapreneurship: Entrepreneurship within an existing organization. Coined by Gifford Pinchot III in 1978 as a "dreamer who figures how to turn an idea into a profitable reality." Steve Jobs (1985) described it as a team going "back to the garage, but in a large company."

• Social Entrepreneurship

  • Focused on using commercial activity to generate profit used entirely or partially to address social/environmental problems. Organizations may have dual or triple bottom lines (financial, social, and/or environmental benefits).

  • Ashoka Network: Founded by Bill Drayton in 1980; identified as one of the largest networks for supporting change agents.

  • Types of Social Entrepreneurship:

    • Co-operatives: Exist to benefit members (e.g., credit unions).

    • Social Firms: Provide employment for disadvantaged groups (e.g., those with disabilities).

    • Socially Responsible Companies: Operations aligned with a social mission (e.g., Patagonia).

    • For-Profit with Social Impact: Support causes through donations (e.g., Warby Parker).

  • Case Studies:

    • TOMS: One-for-one model; over $95\,m$ shoes donated.

    • FIGS: Online medical apparel retailer; donated nearly $300,000$ scrubs in 2023.

    • Lush: Vegetarian/vegan recipes; "Charity Pot" campaign donates $100\%$ of profits to welfare/rights/conservation.

    • Dion’s Chicago Dream: Delivered over $1\,m$ lbs of fresh produce via the "Food is Medicine" program.

• Comparison: Entrepreneurship vs. Intrapreneurship

  • Entrepreneurship: Independent of employer; Higher ROI; Rewards go to individual; More freedom; Risk taken by individual.

  • Intrapreneurship: Activity by employees/managers; Job security; Easier access to financial/human resources; Rewards go to company; Risk taken by company.

  • Barriers to Intrapreneurship: Complacency, bureaucracy, managerial fear (juniors outshining seniors), improper reward systems, and short-termism.

  • Organizational Examples:

    • Kodak (Failure): Steven Sasson invented the digital camera in 2012; Kodak suppressed it to protect film, leading to bankruptcy.

    • Google (Success): "Innovation Time Off" ($20\%$ projects) led to Gmail.

    • Sony (Success): Ken Kutaragi developed the PlayStation while working for Sony.

The Entrepreneurial Process and Growth Stages

• Main Steps in the Entrepreneurial Process

  1. Ideation: Sourcing ideas from demographic changes, regulatory shifts, market gaps, or fixing problems. Tools include PESTLE analysis.

  2. Evaluation: Distinguishing an idea from a "Business Opportunity" (defined by Baringer & Ireland as attractive, durable, timely). Statistics show $20\%$ of businesses fail in year 1 and $60\%$ within $3\,years$.

  3. Planning: Building a roadmap (Proof of idea to launch). Components: Executive Summary, Industry Analysis, Marketing/Financial Plans, Exit Strategy.

  4. Getting Set Up: Choosing a legal form, securing domain names ($.com$, etc.), determining the Unique Selling Proposition (USP), and finding "love money" (family) or Venture Capital (VC).

  5. Launch: Implementing the marketing plan and gaining visibility.

• Evaluation Criteria: Bankers vs. Venture Capitalists (VCs)

  • Bankers: Look for credit history, cashflow projections, realism, and collateral.

  • VCs: Look for proven management teams, defensible competitive advantage, reasonable valuation, and a clear exit strategy.

• Stages of Entrepreneurial Growth

  1. Existence: Building a customer base; focus on covering startup costs.

  2. Survival: Demonstrating viability; major goal is cash forecasting to cover asset replacement.

  3. Success: Attained market penetration and economic success; decision to expand or stay stable.

  4. Growth: Pivotal stage; requires delegation and managing high debt-equity ratios.

  5. Maturity: Market leadership; professional management; risk of Strategic Drift.

  6. Exit: Harvesting value through an Initial Public Offering (IPO) or acquisition.

Innovation Frameworks

• Definition & Characteristics

  • Developing new products/services to differentiate, stay relevant, and future-proof. Essential in the public sector to define and fix problems (Christian Bason, MindLab).

• Types of Innovation

  • Incremental (Evolutionary): Simple improvements to existing products (e.g., annual car model updates).

  • Disruptive: Conflicts with and replaces traditional approaches (e.g., Uber, Netflix, AirBnB).

  • Architectural: Using existing technology to create new markets (e.g., Smartwatches using cellphone tech).

  • Radical: New technology opening new markets (e.g., MRI machines replacing X-rays).

• Technology Push vs. Market Pull

  • Technology Push: Driven by R&D/breakthroughs (e.g., Touchscreens, Digital Twins). Volvo/Ford use Digital Twins for testing; Walmart uses them for store layout optimization.

  • Market Pull: Agile response to customer demand/problems (e.g., the evolution of cameras integrated into smartphones).

• Product vs. Process Innovation

  • Product Innovation: New characteristics/uses (e.g., Revolut multi-currency accounts, Kindle devices).

  • Process Innovation: Improved ways of doing things to decrease unit costs or increase quality. Classic example: Henry Ford’s assembly line (reduced production time from $12\,hours$ to $90\,minutes$).

  • Digital Impact on Process: Results in Simple, Intelligent, Shared, Automated, and Real-time processes. Case: GitHub allows $65\,m$ developers to share code.

• Open vs. Closed Innovation (Henry Chesbrough)

  • Closed: Internal R&D exclusivity. High demand on hiring qualified staff; protects intellectuals property (e.g., Apple's integrated ecosystem).

  • Open: Interactions with external ideas/suppliers/competitors. Example: SAP CollaborationJam; Tesla making drive technology patents public.

Diffusion of Innovation (DOI) Theory

• Adopter Categories (E.M. Rogers, 1962)

  • Innovators ($2.5\%$): Risk-takers, price-insensitive (e.g., overnight queues for iPhones).

  • Early Adopters ($13.5\%$): Opinion leaders, role models.

  • Early Majority ($34\%$): Slower to adopt; need evidence/trust.

  • Late Majority ($34\%$): Sceptical, conservative, cost-sensitive.

  • Laggards ($16\%$): Bound by tradition; adopt only when forced.

• Factors Influencing Adoption Speed

  • Relative Advantage, Compatibility, Complexity, Tryability, Observability, Social factors, and Demographics.

Strategic Use of Technology and Digital Business Models

• First Mover Advantage

  • Establishing a dominant position. Examples: Apple (iPad), KFC (China), Netflix (Streaming).

  • Risks: Costs of educating customers; imitation by followers (e.g., Samsung/Sony copying AirPods).

• Digital Business Models

  1. Free Offerings: Ad-revenue based (Facebook, Instagram).

  2. Freemium Model: Upselling basic users to paid plans (Spotify, LinkedIn, Canva).

  3. Subscription Model: Recurring revenue (Amazon Prime, Netflix).

  4. Marketplace Model: Connecting buyers/sellers for brokerage fees (Etsy, Alibaba).

  5. Sharing Economy: Unlocking underused adjacent assets (Airbnb, ParkonMyDrive.com).

  6. User Experience Premium: Charging for status/brand (Apple, Tesla).

  7. Ecosystem: Lock-in via hardware/software compatibility (Apple).

  8. On-demand: Immediate access to time/services (Uber, Upwork).

• Disruptive Business Models

  • Involves turning industry beliefs on their head. Example: Target (Designer goods in discount stores); Adobe (Moving from licensing to monthly subscription).

Emerging Technologies and Strategy

• Cloud Computing

  • Deployment: Public, Private, and Hybrid (optimizes security/flexibility).

  • Models:

    • IaaS (Infrastructure): Renting servers/storage (e.g., Microsoft Azure). Eliminates capital expense.

    • PaaS (Platform): Environment for developers; includes middleware.

    • SaaS (Software): Browser-based apps (e.g., Office 365, CRM).

  • Public Sector: UK Cloud First Policy (2013). Home Office portfolio reduced spend by $40\%$ via optimization.

• Big Data and Data Analytics

  • The Five Vs: Volume, Velocity, Variety, Value, Veracity. (Summary adds Variability).

  • Analytics Techniques: Descriptive (past events), Diagnostic (why it happened), Predictive (forecasting via AI), Prescriptive (providing answers).

  • Sector Impacts: DWP uses data for targeted job advice; Moorfields Eye Hospital uses DeepMind AI to analyze $3,000$ scans per week.

• Process Automation

  • BPA (Business Process): Automating end-to-end workflows.

  • RPA (Robotic Process): Using "bots" for repetitive tasks. A bank replaced capacity of $200$ full-time employees at $30\%$ of recruitment cost using $85$ bots. NHS Trust saved $82,000\,hours$; reduced GP referral time from $25\,minutes$ to $5\,minutes$.

• Artificial Intelligence (AI) and Generative AI

  • Generative AI: Creates content (text, image, code). Focuses on augmenting employees.

  • AI Adoption Approaches: Relieve (mundane tasks), Split up (steps), Replace (total job), Augment (enhancing skill).

  • DVSA: Uses AI to create risk scores for $23,000$ garages and $66,000$ testers, reducing enforcement prep time by $50\%$.

• Internet of Things (IoT)

  • Applications: IoMT (Medical), Smart Cities (Glasgow intelligent street lighting), Industrial IoT (Industry 4.0).

  • Case: Historic Environment Scotland manages $251$ unstaffed sites using low-power sensors.

  • Legislation: Product Security and Telecommunications Infrastructure Bill (UK) bans default passwords like 'admin'.

Agile Organisations

• Five Trademarks (McKinsey)

  1. Strategy: "North Star" shared vision; Intense customer focus.

  2. Structure: Flat, scalable network of teams. Models include Cross-functional teams, Self-managing teams, and Flow-to-the-work pools.

  3. Process: Rapid iteration; "sprints" ($1\text{- to }2\text{-week}$ cycles). Decisions made at $70\%$ probability rather than $100\%$ certainty later.

  4. People: People-centric culture; "Shared and servant leadership." Role mobility.

  5. Technology: Integrated core technology; Next-generation delivery practices.

Generating Strategic Options (Porter, Bowman, Ansoff)

• Porter’s Generic Strategies

  • Cost Leadership: Lowest cost base in sector (Ikea, Ryanair). Risks: Imitation.

  • Differentiation: Uniqueness valued by customers (Apple, Rolls-Royce).

  • Cost Focus vs. Differentiation Focus: Targeting specific niches.

• The Strategy Clock (Bowman & Faulkner)

  • Option 1: Low price, low added value (No frills).

  • Option 2: Low price.

  • Option 3: Hybrid (Good quality at lower prices; e.g., IKEA).

  • Option 4: Differentiation.

  • Option 5: Focused differentiation (Premium price/luxury).

  • Options 6, 7, 8: Destination for Failure strategies (High price, low value).

• Miles and Snow Strategy Stances

  • Prospector: Growth/Innovation (Google).

  • Defender: Protects current market (Marks & Spencer).

  • Analyser: Blend of both (Procter & Gamble).

  • Reactor: Playing catch-up; no clear strategy (Nokia history).

• Ansoff’s Growth Matrix

  • Market Penetration: Existing product, existing market.

  • Product Development: New product, existing market.

  • Market Development: Existing product, new market.

  • Diversification: New product, new market. Includes Related (Vertical/Horizontal) and Unrelated (Spreading risk).

Corporate Strategy and Development Options

• Insourcing vs. Outsourcing

  • Insourcing: Bringing activities back (repatriation). Driven by accountability, innovation control, and Cloud enablers.

  • Outsourcing: Contracting to external suppliers. Benefits: Economies of scale, access to specialized resources.

• Divestment

  • Methods: Spin-offs (shares to existing holders), Direct Sale (cash), Equity Carve-out ($\%$ sold to public).

• Corporate Parenting Styles

  • Financial Control: Extreme decentralization; centre acts as a banker.

  • Strategic Planning: Strong central coordination; SBUs focus on implementation.

  • Strategic Control: Centre co-ordinates strategy but SBUs develop it.

• GE-McKinsey Nine-Box Matrix

  • Plots Industry Attractiveness vs. Business Strength. Options: Invest/Grow, Selective Investment, Harvest/Divest.

• Strategic Development Methods

  • Internal Development: Fitting culture but takes time.

  • Strategic Alliances: Mutual benefit, risk sharing, co-specialization.

  • Mergers & Acquisitions: Speed to market, consolidation (e.g., Police Scotland merger of $8$ forces).

Evaluation, Metrics, and Marketing

• SAF Strategy Model

  • Suitability: Fits strategic position (SWOT/PESTLE check).

  • Acceptability: Stakeholder reaction, Risk, and Financial Return (ROI, Payback, NPV/DCF).

  • Feasibility: Can we actually do it? (Finance, People/Competences, Resource Integration).

• McKinsey 7S Framework

  • Hard Elements: Strategy, Structure, Systems.

  • Soft Elements: Shared Values (Central), Style (Leadership types), Staff, Skills.

• Objectives and Performance

  • SMART: Specific, Measurable, Achievable, Relevant, Time-bound.

  • The Four Es: Economy (spending less), Efficiency (spending well), Effectiveness (spending wisely), Equity (spending fairly).

• The Marketing Mix

  • 4 Ps: Product, Price (Penetrative vs. Skimming vs. Dynamic), Place (Bricks & mortar vs. Online), Promotion.

  • 7 Ps (Services): + People, Process, Physical evidence.

  • Digital Marketing (6 Is): Interactivity, Intelligence, Individualisation, Integration, Independence of Location, Industry Restructuring.

• Marketing Strategy (STP)

  • Segmentation: Demographics, Psychographics, Customer Behaviour, Geography.

  • Targeting: Undifferentiated, Concentrated (Niche), Multi-segment.

  • Positioning: Creating brand image/USP in consumer minds.

• Ethics and Branding

  • Branding Crisis Management: 1. Acknowledge issue; 2. Withdraw product; 3. Communicate via top leadership.

  • Unethical Practices: Overstating fuel economy, airbrushing photos, "ambush marketing" (e.g., Ansett vs. Qantas during Olympics).