Markus Rabenberger Manfred Steger May 2003 ...

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Entrepreneurial Strategies

Markus RabenbergerManfred Steger

13th May 2003, „Projektmanagement“

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• Peter F. Drucker: The Essential Drucker, Chapter 12

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Definition

Entrepreneurial Strategies:

Practises and policies outside the enterprise, in the market place.

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1. „Being fustest with the mostest“2. Hitting them where they ain´t

3. Finding and occupying a specialized „ecological niche“

4. Changing economic characteristics of a product, a market, or an industry

Aim at marketdomination

innovation

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• Strategies have:– prerequisites– fit certain kinds of innovation– require specific behaviour– own limitations– own risks

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Being fustest with the mostest

• Aims from the start at leadership position

• Very risky, greatest gamble, but highly rewarding if it succeeds

Examples:– Hoffmann-LaRoche– Du Pont

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Examples: Being fustestwith the mostest

Hoffmann-LaRoche:• Mid-1920s, newly discovered vitamins• Acquired vitamin patents – nobody else

wanted them• Hired discoverers• Invested all money it had

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Examples - Being fustest ...

• Du Pont:– After 15 years of research– invention of „nylon“, first truly synthetic fiber

– Massive efforts, huge plants, mass advertisement...

– Created the „plastic“ industry.

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Being fustest ...

• Real Innovation (create something truly new, different)

• One clear-cut goal, all efforts focus on it

• Difficult to adjust or correct strategy• Requires thought and careful analysis

(Du Pont, 15 years of research ...)

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Being fustest with the mostest

• Hit right or miss altogether

• Research budget higher after innovation• continuing effort to retain leadership pos. • systematically cut prices of own product

– (e.g Intel)

• Only for major innovations

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Hit them where they ain´t

• Creative Imitation

• Entrepreneurial judo

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Creative Imitation

• Exploit success of others• Wait until new market has been established• Original product lacks something

perfect and position existing productCustomer viewpoint• Satisfy demand that is not met by original

product

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Creative Imitation

• Aims at leadership position, or dominance • Risks:

– splinter efforts– Misread trend (e.g. IBM) – risk of being too

clever• Best in high-tech areas:

– too technology and product focused

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Creative Imitation

• Examples:– IBM– Hattori Company, Japan (Seiko watches)

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Entrepreneurial Judo

• Aims at leadership and dominance• Least risky, most likely to succeed

• Product designed specific to market segment that is not properly defended by leader

• Some degree of innovation

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• Typical: bad habits that, even if they lead to loss of market share, or leadership...

• are not admitted, instead false excuses

• Make use of the „Five bad habits“ that enable newcomers to use entrepreneurial judo

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Five Bad Habits

1. „NIH“ (Not Invented Here): e.g. „transistor“, pride and arrogance

2. To „cream“ a market:e.g. Xerox: copying machines

3. Belief in „quality“: != supplier puts in, but customer gets out

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Five Bad Habits (cont.)

4. Illusion of „premium“ price:Higher profit, but opens door to competitors

5. Maximize rather than optimize:e.g. XeroxOne product for every user (SOHO, enterprise

user,...)

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• Judo Examples:– Ad5th Bad Habit. Xerox vs. Japanese:

• Machines to specific groups of users• Each product designed to serve optimally a specific

market segment :

– Ad1: America vs. Sonytransistor

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• Judo:– 1st: find a beachhead, that is

not defended properly

– 2nd: establish beachhead(„Hit them where they ain´t“)

– 3rd: move to rest of „beach“,finally take whole „island“

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3. Finding and occupying a specialized „ecological niche“

4. Changing economic characteristics of a product, a market, or an industry

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• The Toll-Gate Strategy• The Specialty Skill Strategy• The Specialty Market Strategy• Creating Customer Utility• Pricing• Creating Customer‘s Reality• Delivering Value to the Customer

introduceaninnovation

strategyis theinnovation

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Finding and occupying a specialized „ecological niche“

• The Toll-Gate Strategy• The Specialty Skill Strategy• The Specialty Market Strategy

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The Toll-Gate Strategy

• Limited size of customers who want to buy the product

• Limited market size• Product has to be essential to a process

• e.g.:• Alcon Company: enzyme for senile

cataracts

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The Specialty Skill Strategy

• build around a product or market

• e.g.:• Baedeker: traveling guidebooks

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The Specialty Market Strategy

• build around specialized knowledge of a market

• e.g.:• England, Denmark: baking ovens for

cookies and crackers

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Changing economic characteristics of a product, a market, or an industry

• Creating Customer Utility• Pricing• Creating Customer‘s Reality• Delivering Value to the Customer

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Creating Customer Utility

• what is the true „utility“ to the customer?

• e.g.:• Lenox China Company: bridal register

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Pricing

• the customer wants to pay for what he buys

• e.g.:• Gillette: razor blades• Xerox: copy machine

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Creating Customer‘s Reality

• the customer’s social and economic reality

• e.g.:• Cyrus McCormick: harvesting machine

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Delivering Value to the Customer

• refers also to the „customer‘s reality“ • examples are trouble-free operations,

security, …

• e.g.:• America: special lubricant

Markus Rabenberger Manfred Steger May 2003 ...

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