Part IV

Growth Strategies for

Entrepreneurial Ventures

Chapter 13
Strategic
Entrepreneurial
Growth

PowerPoint Presentation by Charlie Cook

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 Chapter Objectives
1. To introduce the importance of strategic planning
with emerging firms
2. To delve into the nature of strategic planning
3. To examine the challenges of managing
entrepreneurial growth
4. To discuss the five stages of a typical venture life
cycle: development, start-up, growth, stabilization,
and innovation or decline
5. To examine the transition that occurs in the
movement from an entrepreneurial style to a
managerial approach
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 Chapter Objectives (contd)
6. To identify the key factors that play a major role
during the growth stage
7. To discuss the complex management of paradox
and contradiction
8. To introduce the steps useful for breaking through
the growth wall
9. To explore the elements of building an
entrepreneurial company
10. To identify the unique managerial concerns with
growth businesses

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 Strategic Planning and Emerging Firms
Most entrepreneurs planning for their ventures
is informal and unsystematic.
The need for formal, systematic planning arises
when:
The firm is expanding with constantly increasing
personnel size and market operations
A high degree of uncertainty exists
There is strong competition
There is a lack of adequate experience, either
technological or business

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 The Nature of Strategic Planning
Strategic Planning
The formulation of long-range plans for the effective
management of environmental opportunities and
threats in light of a ventures strengths and
weaknesses.
Includes:
Defining the ventures mission
Specifying achievable objectives
Developing strategies
Setting policy guidelines

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 The Nature of Strategic Planning (contd)
Basic Steps in Strategic Planning:
1. Examine the internal and external environments of
the venture (SWOT: strengths, weaknesses,
opportunities, threats).
2. Formulate the ventures long-range and short-range
strategies (mission, objectives, strategies, policies).
3. Implement the strategic plan (programs, budgets,
procedures).
4. Evaluate the performance of the strategy.
5. Take follow-up action through continuous feedback.

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Figure
13.1 The Strategic Management Process

Source: Michael A. Hitt, R. Duane Ireland, and Robert E. Hoskisson, Strategic Management: Competitiveness & Globalization,
10th ed. (Mason, OH: Cengage Learning, 2013), 5. Reprinted with permission of Cengage/South-Western , Publishing.
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 Key Dimensions Influencing
a Firms Strategic Planning Activities
Demand on strategic managers time
Decision-making speed
Problems of internal politics
Environmental uncertainty
The entrepreneurs vision
Step 1: Commitment to an open planning process.
Step 2: Accountability to a corporate conscience.
Step 3: Establishment of a pattern of subordinate
participation in the development of the
strategic plan.

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 The Lack of Strategic Planning
Reasons for the Lack of Strategic Planning
1. Time scarcity
2. Lack of knowledge
3. Lack of expertise/skills
4. Lack of trust and openness
5. Perception of high cost

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 The Value of Strategic Planning
Findings of Strategic Planning Studies
Strategic planning is of value to a venture and that
planning influences a ventures survival.
Benefits of Long-Range Planning
Cost savings
More efficient resource allocation
Improved competitive position
More timely information
More accurate forecasts
Reduced feelings of uncertainty
Faster decision making
Fewer cash-flow problems
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 Strategic Planning Levels (contd)
Strategic Planning Categories
Category I: No written plan
Category II: Moderately sophisticated planning
Category III: Sophisticated planning
Results: More than 88% of firms with Category II or III
planning performed at or above the industry average
compared with only 40% of firms with Category I planning.
All research indicates:
Firms that engage in strategic planning are more
effective than those that do not.
The planning process, rather than merely the plans,
is a key to successful performance.
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 Fatal Visions in Strategic Planning
Fatal mistakes that entrepreneurs fall prey
to in their attempt to implement a strategy:
Fatal Vision #1: Misunderstanding industry
attractiveness
Fatal Vision #2: No real competitive advantage
Fatal Vision #3: Pursuing an unattainable competitive
position
Fatal Vision #4: Compromising strategy for growth
Fatal Vision #5: Failure to explicitly communicate the
ventures strategy to employees

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Figure
13.2 The Integration of Entrepreneurial and Strategic Actions

Source: R. Duane Ireland, Michael A. Hitt, S. Michael Camp, and Donald L. Sexton, Integrating Entrepreneurship and
Strategic Management Actions to Create Firm Wealth, Academy of Management Executive 15(1) (February 2001): 51.
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 Strategic Positioning:
The Entrepreneurial Edge
Strategic Positions
Are often not obvious, and finding them requires
creativity and insight.
Are unique positions that have been available but
simply overlooked by established competitors.
Can help entrepreneurial ventures prosper by
occupying a position that a competitor once held but
has ceded through years of imitation and straddling.

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Table
13.1 Strategic Approaches: Position, Leverage, Opportunities

Position Leverage Opportunities

Strategic logic Establish position Leverage resources Pursue opportunities

Strategic steps Identify an attractive market Establish a vision Build Jump into the confusion
Locate a defensible resources Leverage across Keep moving Seize
position Fortify and defend markets opportunities Finish strong

Strategic question Where should we be? What should we be? How should we proceed?

Source of advantage Unique, valuable position Unique, valuable, inimitable Key processes and unique
with tightly integrated resources simple rules
activity system

Works best in Slowly changing, well- Moderately changing, well- Rapidly changing,
structured markets structured markets ambiguous markets

Duration of advantage Sustained Sustained Unpredictable

Risk It will be too difficult to alter Company will be too slow Managers will be too
position as conditions to build new resources as tentative in executing on
change conditions change promising opportunities

Performance goal Profitability Long-term dominance Growth

Source: Reprinted by permission of Harvard Business Review from Strategy as Simple Rules, by Kathleen M. Eisenhardt and
Donald N. Sull (January 2001): 109. Copyright 2001 by the Harvard Business School Publishing Corporation; all rights reserved.
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Figure
13.3 The Entrepreneurial Strategy Matrix: Independent Variables

Source: Matthew C. Sonfield and Robert N. Lussier, The Entrepreneurial Strategic Matrix: A Model for New and Ongoing Ventures.
Reprinted with permission from Business Horizons, May/June 1997, by the trustees at Indiana University, Kelley School of Business.
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Figure
13.4 The Entrepreneurial Strategy Matrix: Appropriate Strategies

Source: Matthew C. Sonfield and Robert N. Lussier, The Entrepreneurial Strategic Matrix: A Model for New and Ongoing Ventures.
Reprinted with permission from Business Horizons, May/June 1997, by the trustees at Indiana University, Kelley School of Business.
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 Venture Development Stages
Life-Cycle Stages of an Enterprise (Chandler)
1. Initial expansion and accumulation of resources
2. Rationalization of the use of resources
3. Expansion into new markets to assure the continued
use of resources
4. Development of new structures to ensure continuing
mobilization of resources

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Figure
13.5 A Ventures Typical Life Cycle

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 Major Stages in a Ventures Life Cycle
New-venture Activities associated with the initial formulation of the new ventures
development general philosophy, mission, scope, and direction.

Start-up Creating a formal business plan, searching for capital, carrying out
activities marketing activities, and developing the entrepreneurial team.

Growth Leadership transitions from an entrepreneurial one-person focus to a

managerial team-orientation to cope the growth of the venture.

Business A swing stage that precedes the period when the firm either
stabilization swings toward greater profitability or toward decline and failure.

Innovation or The firm either continues its success by acquiring other innovative
decline firms and develops new products/services or it goes into decline.

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 Transitioning from Entrepreneurial
to Managerial
Impediments to Transition:
A highly centralized decision-making system
An overdependence on one or two key individuals
An inadequate repertoire of managerial skills and
training
A paternalistic atmosphere

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 Table
13.2 The Entrepreneurial Culture versus the Administrative Culture

Entrepreneurial Focus Administrative Focus

Characteristics Pressures Characteristics Pressures
Strategic Driven by perception Diminishing opportunities Planning systems Social contracts
Orientation of opportunity Rapidly changing technology, consumer and cycles Performance measurement
economics, social values, and political rules criteria
Commitment Revolutionary, with Action orientation Evolutionary, with Acknowledgement of multiple
to Seize short duration Narrow decision windows long duration constituencies
Opportunities Acceptance of reasonable risks Negotiation about strategic
Few decision constituencies course
Risk reduction
Coordination with existing
resource base
Commitment Many stages, with Lack of predictable resource needs A single stage, with Need to reduce risk
of Resources minimal exposure at Lack of control over the environment complete Incentive compensation
each stage Social demands for appropriate use of commitment out of Turnover in managers
resources decision Capital budgeting systems
Foreign competition Formal planning systems
Demands for more efficient use
Control of Episodic use or rent Increased resource specialization Ownership or Power, status, and financial
Resources of required resources Long resource life compared with need employment of rewards
Risk of obsolescence required resources Coordination of activity
Risk inherent in the identified opportunity Efficiency measures
Inflexibility of permanent commitment to Inertia and cost of change
resources Industry structures
Management Flat, with multiple Coordination of key noncontrolled resources Hierarchy Need for clearly defined
Structure informal networks Challenge to hierarchy authority and responsibility
Employees desire for independence Organizational culture
Reward systems
Management theory
Source: Reprinted by permission of the Harvard Business Review. An exhibit from The Heart of Entrepreneurship, by Howard H. Stevenson
and David E. Gumpert, March/April 1985, 89. Copyright 1985 by the President and Fellows of Harvard College; all rights reserved.
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 Balancing the Focus:
Entrepreneurial versus Managerial
The Entrepreneurs The Administrative
Point of View Point of View
Where is the opportunity? What resources do I
control?
How do I capitalize on it?
What structure determines
What resources do I need?
our organizations
How do I gain control over relationship to its market?
them?
How can I minimize the
What structure is best? impact of others on my
ability to perform?
What opportunity is
appropriate?

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 Understanding the Growth Stage
Key Factors During the Growth Stage
Control
Does the control system imply trust?
Does the resource allocation system imply trust?
Is it easier to ask permission than to ask forgiveness?
Responsibility
Creating a sense of responsibility that establishes flexibility,
innovation, and a supportive environment.
Tolerance of failure
Moral failure
Personal failure
Uncontrollable failure
Change
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 Managing Paradox and Contradiction
Bureaucratization versus decentralization
Environment versus strategy
Strategic emphases:
Quality versus cost versus innovation

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 Confronting the Growth Wall
Successful growth-oriented firms have exhibited
consistent themes:
The entrepreneur is able to envision and anticipate the firm
as a larger entity.
The team needed for tomorrow is hired and developed today.
The original core vision of the firm is constantly and zealously
reinforced.
New big-company processes are introduced gradually as
supplements to, rather than replacements for, existing
approaches.
Hierarchy is minimized.
Employees hold a financial stake in the firm.

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 Handling Environmental Changes and Trends
Internal Constraints on Managing Growth
Lack of growth capital
Limited spans of control
Loss of entrepreneurial vitality
Key Steps in Managing Growth and Change:
Creating a growth task force
Planning for growth with strategies
Maintaining a growth culture
Developing an outside board of advisors

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 Building an Entrepreneurial Company
in the Twenty-First Century
Building Dynamic Capabilities:
Internallythrough the utilization of the creativity
and knowledge from employees
Externallythrough the search for external
competencies to complement the firms existing
capabilities
What Entrepreneurs Do:
Perceive a unique opportunity
Pursue the opportunity
Believe that success of the venture is possible

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Figure
13.6 The Entrepreneurial Mind-Set

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Table
13.3 The Managerial versus the Entrepreneurial Mind-Set

Managerial Mind-Set Entrepreneurial Mind-Set

Decision-making The past is the best predictor of the future. A new idea or an insight from a
assumptions Most business decisions can be quantified. unique experience is likely to provide
the best estimate of emerging trends.

Values The best decisions are those based on New insights and real-world
quantitative analyses. experiences are more highly valued
Rigorous analyses are highly valued for than results based on historical data.
making critical decisions.

Beliefs Law of large numbers: Chaos and Law of small numbers: A single
uncertainty can be resolved by incident or several isolated incidents
systematically analyzing the right data. quickly become pivotal for making
decisions regarding future trends.

Approach to Problems represent an unfortunate turn of Problems represent an opportunity to

problems events that threaten financial projections. detect emerging changes and
Problems must be resolved with possibly new business opportunities.
substantiated analyses.

Source: Mike Wright, Robert E. Hoskisson, and Lowell W. Busenitz, Firm Rebirth: Buyouts as Facilitators
of Strategic Growth and Entrepreneurship, Academy of Management Executive 15, no.1(2001): 114.
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 Key Elements for an Entrepreneurial Firm
An Entrepreneurial Firm
Increases opportunity for its employees, initiates
change, and instills a desire to be innovative.
How to remain adaptive and innovative:
Share the entrepreneurs vision
Increase the perception of opportunity
Institutionalize change as the ventures goal
Instill the desire to be innovative:
A reward system
An environment that allows for failure
Flexible operations
The development of venture teams
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 Unique Managerial Concerns of Growing Ventures

Distinctiveness One-Person-Band
of Small Size Syndrome

Continuous Growing Time

Learning Management
Venture

Community
Pressures

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 Critical Steps in Effective Time Management

Creation of
Assessment Prioritization Delegation
procedures

Analyzing daily Dividing and Handling repetitive Creating procedures

activities and ranking categorizing activities daily activities is made for various tasks
them in order of based on the easier if instructions allows for others to
importance managers ability to are provided carry out those tasks
devote the necessary
time to the task

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 Achieving Entrepreneurial Leadership
in the New Millennium
Entrepreneurial Leadership
Arises when an entrepreneur attempts to manage
the fast-paced, growth oriented company.
Components of Entrepreneurial Leadership
Determining the firms purpose or vision.
Exploiting and maintaining the core competencies.
Developing human capital.
Sustaining an effective organizational culture.
Emphasizing ethical practices.
Establishing balanced organizational controls.

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Table
13.4 Strategic, Visionary, and Managerial Leadership

Strategic Leaders
synergistic combination of managerial and visionary leadership

emphasis on ethical behavior and value-based decisions

oversee operating (day-to-day) and strategic (long-term) responsibilities

formulate and implement strategies for immediate impact and preservation of long-term
goals to enhance organizational survival, growth, and long-term viability

have strong, positive expectations of the performance they expect from their superiors,
peers, subordinates, and themselves

use strategic controls and financial controls, with emphasis on strategic controls

use, and interchange, tacit and explicit knowledge on individual and organizational levels

use linear and nonlinear thinking patterns

believe in strategic choice, that is, their choices make a difference in their organizations
and environment
Source: W. Glenn Rowe, Creating Wealth in Organizations: The Role of Strategic Leadership, Academy of Management Executive 15, no. 1 (2001): 82.
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Table
13.4 Strategic, Visionary, and Managerial Leadership (contd)

Visionary Leaders Managerial Leaders

are proactive, shape ideas, change the way people think about
what is desirable, possible, and necessary
work to develop choices, fresh approaches to long standing
problems; work from high-risk positions
are concerned with ideas; relate to people in intuitive and
empathetic ways
feel separate from their environment; work in, but do not belong to,
organizations; sense of who they are does not depend on work
influence attitudes and opinions of others within the organization
are reactive; adopt passive attitudes toward goals; goals arise out
of necessities, not desires and dreams; goals based on past
view work as an enabling process involving some combination of
ideas and people interacting to establish strategies
relate to people according to their roles in the decision-making
process
see themselves as conservators and regulators of existing order;
sense of who they are depends on their role in organization
influence actions and decisions of those with whom they work

concerned with insuring future of organization, especially through involved in situations and contexts characteristic of day-to-day
development and management of people activities
more embedded in complexity, ambiguity, and information concerned with, and more comfortable in, functional areas of
overload; engage in multifunctional, integrative tasks responsibilities
know less than their functional area experts expert in their functional area

more likely to make decisions based on values less likely to make value-based decisions

more willing to invest in innovation, human capital, and creating engage in, and support, short-term, least-cost behavior to enhance
and maintaining an effective culture to ensure long-term viability financial performance figures
focus on tacit knowledge and develop strategies as communal focus on managing the exchange and combination of explicit
forms of tacit knowledge that promote enactment of a vision knowledge and ensuring compliance to standard operating
procedures
utilize nonlinear thinking utilize linear thinking

believe in strategic choice, that is, their choices make a difference believe in determinism, that is, the choices they make are
in their organizations and environment determined by their internal and external environments

Source: W. Glenn Rowe, Creating Wealth in Organizations: The Role of Strategic Leadership, Academy of Management Executive 15, no. 1 (2001): 82.
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 The International Environment:
Global Opportunities
Global Entrepreneurs
Rely on global networks for resources, design, and
distribution.
Are adept at recognizing opportunities that require
agility, certainty, and ingenuity with a global
perspective.
Must be global thinkers in order to design and adopt
strategies for different countries.

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 Key Terms and Concepts
entrepreneurial firm new-venture development
entrepreneurial leadership one-person-band syndrome
entrepreneurial strategy matrix perception of high cost
global entrepreneur personal failure
growth stage stabilization stage
growth wall start-up activities
innovation strategic planning
lack of expertise/skills strategic positioning
lack of knowledge SWOT analysis
lack of trust and openness time scarcity
life-cycle stages uncontrollable failure
moral failure

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