Strategic Entrepreneurship

STRATEGIC ENTREPRENEURSHIP
Source: Hamel, Gary, Leading the
Revolution, 2000. Lehtonen,Pekka,
Strategic Entrepreneurship, 1999

CUSTOMER BENEFITS CONFIGURATION COMPANY BOUNDARIES

CUSTOMER STRATEGIC VALUE NETWORK
CORE STRATEGY
INTERFACE RESOURCES

Business Mission
Fulfilment & Core Suppliers
support Competencies
Product / Market Partners
Scope
Information & Strategic Assets
Coalitions
Insight
Basis for Core Processes
Differentiation
Relationship
Dynamics

Pricing Structure

EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS
STRATEGIC PEKKA LEHTONEN Ph.D.
ENTREPRENEURSHIP Copyright

UNPACKING THE BUSINESS
CONCEPT (Hamel)

• Business concept innovation starts
with unpacking the business concept

• A business concept comprises four
major components:


1. CORE STRATEGY

the essence of how the firm chooses to compete
•
elements:
1.1 The Business Mission: what the business concept
is designed to accomplish or deliver.
1.2 Product / Market Scope: where the firm competes
(which customers, which geographies, what product
segments) and where, by implication it does no
compete.
1.3 Basis for Differentiation: how the firm competes
differently from its competitors.


2. STRATECIG RESOURCES

• The unique firm-specific resources:
2.1 Core Competencies: the skills and
unique capabilities of the firm that are
valuable to customers and transferable
to new opportunities.
2.2 Strategic Assets: the rare and valuable
things that the firm owns, including e.g
brands and customer data.
2.3 Core Processes: methodologies and
routines used in the firm.


3. CUSTOMER INTERFACE

3.1 Fulfilment & Support: how the firm actually “goes to
market”, how it actually “reaches” its customers – which
channels it uses, what kind of customer support it offers
and what level of service it provides.

3.2 Information & Insight: the information content of
the customer interface (all the knowledge that is collected
from and utilized on behalf of customers) and the ability of a
company to extract insights from this information.

3.3 Relationship Dynamics: the nature of the interaction
between the producer and the customer, including both
emotional and transactional elements.

3.4 Pricing Structure: what the company charges for.


4. VALUE NETWORK

• Complements and amplifies the firm´s own
resources
• Elements:
4.1 Suppliers: typically reside ”up the value chain” from
the producer. Companies can off-load noncore
activities to suppliers.
4.2 Partners: typically supply critical ”complements” to
a final product or solution. The company can “borrow”
the assets and competencies of its partners and link
them with its own.
4.3 Coalitions: like-minded competitors joined together.


The four core components are linked
together by three ”bridge”
components
1. CONFIGURATION
• intermediates between a company´s core strategy and strategic
resources
• is the unique way in which competencies, assets and processes
are combined and interrelated in support of particular strategy
2. CUSTOMER BENEFITS
• intermediates between the core strategy and the customer
interface
• the bundle of benefits that is actually being offered to the
customer
3. COMPANY BOUNDARIES
• intermediates between a company´s strategic resources and its
value network
• the decisions that have been made about what the firm does and
what it contracts out to the value network

There are four factors to consider in determining
the wealth potential (how the business concept will
generate new wealth) of any business concept:

1. The extent to which the business concept is an
EFFICIENT way of delivering customer benefits

2. The extent to which the business concept is UNIQUE

3. The degree of FIT among the elements of the business
concept (all the elements must work together for the same
end goal)

4. The extent to which the business concept exploits
PROFIT BOOSTERS that have the potential to generate
above-average returns:


4.1 Increasing returns: denotes a fly-wheel effect that
tends to perpetuate early success, leaving those who
are behind, falling farther behind. To benefit from
increasing returns a business concept must harness one
of three underlying forces: network effects (the value of
a network increases as the number of e.g. members in
the network grows), positive feedback effects (using
market feedback), learning effects (learning faster than
the rivals do).

4.2 Competitor lock-out: through pre-emption (being
first), choke point (e.g. a patent or a prime location)
control or customer lock-in (e.g. trough long-term supply
contracts).


4.3 Strategic economies: come from building scale
advantages (getting bigger), having a business
concept with a sharp focus or using economies of
scope (sharing things – brands, facilities, best
practice and so on – across business units and
countries).

4.4 Strategic flexibility: comes from portfolio
breadth (having a broad offering of products,
businesses etc.), operating agility (the company’s
ability to refocus its operations) and lower breakeven
(a business concept with a low breakeven point is
more flexible, both financially and strategically, than
the one with a higher breakeven point).


time
past present future

closed (not open open closed (not open yet)
anymore)

Creativity Market imitation Process effectiveness Omega- entrepreneurship

CONFIGURATION
CUSTOMER BENEFITS COMPANY BOUNDARIES

CUSTOMER INTERFACE CORE STRATEGY STRATEGIC RESOURCES VALUE NETWORK

Fulfilment & support Business Mission Core Competencies Suppliers

Information & Insight Product/market Scope Strategic Assets Partners

Relationship Dynamics Basis for Differentiation Core Processes Coalitions

Pricing Structure
EFFICIENT / UNIQUE / FIT / PROFIT BOOSTERS

WINDOW OF OPPORTUNITY IN A START-
UP -CONTEXT

The window of opportunity can be:
•

1. CLOSED: the window is not open ANYMORE

2. OPEN

3. CLOSED: the window is not open YET


When the window of opportunity is OPEN, the start-up has
following opportunities:

1. CREATIVITY:
– Entrepreneurship equals INNOVATION. According to Hamel,
innovation should be BUSINESS CONCEPT INNOVATION, starting
from seeing the business concept in its entirety, then unpacking the
business concept and finally seeing opportunities for innovation in
all the parts of the business concept
2. MARKET IMITATION
– Utilizing the innovator’s accomplishments through market
information and copying or otherwise utilizing the innovative
solution (e.g. core technology)
– Requires market and technology knowledge based on experience
3. PROCESS EFFECTIVENESS
– Using the existing resources as effectively as possible
4. OMEGA-ENTREPRENEURSHIP
– As a result of bankruptcies, etc., the opportunity costs go down,
creating a cost-effective business opportunity for another
entrepreneur

THE TEN COMMANDMENTS OF THE
GREATEST COMPANIES
1. The product has to be competitive: it has to meet
customer needs and expectations.
2. When creating this competitive product, competence,
product development and market knowledge are
needed.
3. The greatest companies focus on their own special
competence area.
4. In order to achieve this, the product range has to be
narrow.
5. When specializing, the company has to go global - local
markets are not enough (especially in a small national
economy).


6. For a small national economy, it is not so common to
create an active marketing network. Creating the network
requires own local presence: not only local agencies but
often acquisitions as well.
7. When going international, the purchasing has to be
effective and internationally orientated. The purchasing
and the manufacturing process has to be integrated.
8. The leaders have to be both inspired and inspiring (in
order to motivate the whole organization) as well as hard-
facts-analyzing (in order to keep the resources in balance).
9. The whole system and the whole organization has to be
able to meet customer needs in all the situations in all its
market areas.
A growing company needs to take care of its financing:
10.
financing from operations has to be used to develop the
company.


Strategic Entrepreneurship

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