Shaping Entrepreneurial Mindsets

Innovation and Entrepreneurship in Leadership Development

Jordi Canals

• Publisher: Palgrave Macmillan
• Year: 2016
• ISBN:
  9781137516671
• Topic: Business
• Subtopic: Small Business
• Index: Business

Corporate innovation and entrepreneurship are more important than ever to create and sustain growth opportunities. This book deals with the challenge of how to speed up innovation and entrepreneurial initiatives to sustain corporate growth, by focusing on developing the necessary leadership competencies.

Part I

Nurturing Entrepreneurial and Innovation Capabilities

1

Leadership Competencies for Innovation and Entrepreneurship: A Top Management Perspective

Jordi Canals

Introduction

The infusion of a more dynamic, innovative and entrepreneurial spirit has become an urgent need for companies, in particular in mature economies. Some social and economic trends—like decreasing population, slowing demand and stronger global rivalry—are putting additional competitive pressure on companies. The threat of disruptive innovation—mostly associated with the digital revolution—is making companies more aware of the need to build the capacity to innovate and change. Today disruption not only comes from Silicon Valley companies. Some emerging countries’ companies are not only formidable cost competitors but they are also developing and applying reverse innovation—innovative products developed in emerging markets and brought to mature markets.

Unfortunately, the increasing relevance and need for innovation and entrepreneurship in established companies are some steps ahead of the formal process of developing managerial capabilities that are needed to tackle this challenge. Innovation involves creativity and willingness to experiment, but it also needs some key competencies, like discovering, framing and assessing new opportunities, or the discipline to accelerate and launch a new project to make innovation successful and sustainable. Leadership development has made great progress over the past decade, including capabilities development to work in a more global business world (Canals, 2012). Unfortunately, the development of the innovation and entrepreneurial competencies (IEC) is still a challenge for many companies. A sustainable approach to IEC development needs to integrate those competencies into the firm’s innovation strategy, and the latter should be a central part of the overall firm’s strategy.

This chapter focuses on how the firm’s top management should approach the process of developing leadership competencies for innovation and entrepreneurship within an established company. I do not refer here to entrepreneurial or innovation competencies in general or for start-ups, but those that can be nurtured and deployed in already existing firms. In this chapter, I focus on IEC and do not deal with innovation strategy or innovation management. The IEC development aims at turning innovators into good general managers who can lead innovative projects inside firms or improving the IEC that a general manager needs to have.

This chapter presents two frameworks. The first describes leadership competencies for innovation and entrepreneurship. It provides the building blocks for a systematic development of those leadership competencies for innovation. The second framework presents some guidelines on how top managers can help develop those competencies. In section “Leadership competencies development for innovation and entrepreneurship”, I outline a framework of leadership competencies for innovation and entrepreneurship. In section “How top managers add value to innovation and entrepreneurship”, the role and functions of a CEO are presented in a model that includes innovation and entrepreneurship. I introduce the CIPS framework—CIPS: Context, Ideas, People, Structure—that can help top managers—CEOs, business unit heads or global HR managers—think about the development of leadership competencies for innovation and entrepreneurship. This framework is developed in the following sections and pays special attention to the assessment of new ideas. The final section provides a summary of how a CEO can help develop leadership competencies that take innovation and entrepreneurship to a higher and more sustainable level. CEOs should work on them with the conviction that, through this process, people can become better professionals and human beings. These leadership competencies not only make an organization better and with more solid competencies but they also make individuals better by developing innovation and entrepreneurial capabilities.

Leadership competencies development for innovation and entrepreneurship

Some leadership development models include a few qualities and dimensions that are related with innovation and entrepreneurship. This is the case in frameworks explaining global leadership development (Javidan et al., 2006). Nevertheless, this integration is still work in progress.

An integrative framework requires the connection of IEC with innovation strategy. We will use some basic hypotheses on innovation and innovation strategy that are needed to clarify some concepts and provide a better frame for capability development. The first is that innovation could be good or bad, depending on how it is conceived and executed, and how it is perceived by customers. Innovation should be connected with customers’ experience. Effectiveness in managing innovation is important, but focusing innovation on delivering value for customers is a question of survival.

The second is that the right type of innovation depends on each company. Any company needs some degree of innovation if it wants to avoid the risk of obsolescence. How much innovation a company needs depends on the economic cycle, the industry, consumer behavior and the firm’s positioning. Some companies may need gradual innovation; others, disruptive innovation.

The third hypothesis stems from the previous one. IEC need to be aligned with the firm’s innovation strategy, which should also be integrated in the wider firm’s strategy. This principle highlights the fact that innovation competencies should not be defined or considered in an isolated way. They are part of a wider system of competencies that good companies should try to develop.

There is a rich literature on the capabilities of innovators (among others, McGrath and MacMillan, 2000; Dávila, Epstein and Shelton, 2006; Teece, 2007; O’Connor, Corbett and Pirantozzi, 2009; Desouza, 2011). Most of the studies on this issue focus on the specific attributes to be expected of a good innovator or entrepreneur, like discovering opportunities and pursuing them in an effective way. In this chapter, I try to offer a wider framework, based upon the knowledge, capabilities, inter-personal skills and attitudes framework (Canals, 2012).

Leadership competencies for innovation and entrepreneurship can be grouped around three categories: observe and understand customers’ behavior, develop the business idea and accelerate the new project. Each category involves a set of knowledge, capabilities, inter-personal skills and attitudes—see Table 1.1.

Observe—and learn from—customers’ behavior. The first category is the drive to observe customers’ behavior and discover new opportunities, where other people only see threats or uninteresting pathways. This group of attributes includes the knowledge about customers, products and markets. It also includes the capabilities to understand customers and how they use products and services; to discover new ways of serving those needs, think about needs that are not currently served, and frame a new value proposition; the skills to listen and observe; and attitudes like the entrepreneurial mindset to try new things and the passion to serve customers better or fill a gap in the product offer.

Table 1.1 Leadership competencies for innovation and entrepreneurship

Development of the business idea. The second category of competencies relates to developing and nurturing the business idea that stems from observed opportunities. In this stage, innovators need to learn and develop more general management competencies to make the project sustainable. These competencies are made up of a portfolio of knowledge, capabilities, skills and attitudes, some of them valid for any general manager, and some of them specific to innovators and entrepreneurs. Knowledge includes the notions and models of the different business functions—finance, strategy, marketing and so on—and the concepts to analyze the business idea, to develop a credible business plan, to have a specific understanding and experience on the industry, and to assess the risk the organization or investors are assuming.

There is also a set of relevant capabilities in this area: analyze and synthesize, communicate and build consensus among the different stakeholders, set up alliances and coalitions to make the project viable, convince senior managers to get the right people on board and commit resources to the project, engage potential investors, prepare specific action plans, and carefully define worst-possible scenarios with an exit plan. Inter-personal skills include the following: engage and convince team members to come up with a solid action plan, listen to critics of the project and learn from them, keep the energy around the project intense, and be grounded to stop the project if most market signals are against it. The fourth group refers to personal attitudes: the strong determination to make the project happen must be combined and balanced with a deep sense of humility that makes everybody feel the ownership of the project and keep an open mind to consider all the dimensions of the challenge, beyond the passion to see it happen.

Acceleration of the new project. The third category of competencies is related with the stage of acceleration and commercialization of the project, once its viability has been considered and tests around its feasibility have been passed. In this third stage, a new combination of competencies is needed. Knowledge on how to organize for scale and commercialization, build up a team of professionals, lead them toward market entry and market success, understanding customer relationship and managing the P&L of the project are important attributes. On the capabilities side, organizational abilities, people leadership and customer relationships are key functions that need to be developed properly. On inter-personal skills, the ability to develop relationships with customers, distributors and suppliers, and to get ready for future growth are key ingredients in this step of acceleration. It is also very important to keep listening to market reactions to understand what attributes in the offer need to be changed or adapted because customers expect it, far beyond the personal preferences of innovators. On attitudes, speed, resilience and perseverance are of utmost necessity, since indicators of success take time before they become reliable.

The different IEC presented above highlights that innovation requires some special competencies, but sustainable innovation requires champions that are able not only to launch an innovation but also make it a strong pillar within a company. This step requires innovators with strong general management competencies. This portfolio of competencies needs to be framed into a wider context. In this respect, the model of global leadership capabilities presented elsewhere (Canals, 2012) that discusses the role of knowledge, capabilities, inter-personal skills and attitudes can be applied here. IEC introduce new dimensions that make this framework richer. More important, this framework not only looks at how innovators may come up with new ideas or discover new opportunities but also at how innovators can grow into general managers, with the capabilities to move from an idea to a business plan that is implemented and, later on, into a company ready for growth. The experience with entrepreneurship and new business ventures is that many promising ideas never see the light; after they are tested, turned into prototypes and go to market, very few of them survive the passing of time. The failure rate is very high in internal corporate venturing (ICV; Burgelman and Välikangas, 2005) and in stand-alone entrepreneurial projects. Business failure has many roots. Nevertheless, the lack of competencies to turn an idea into a project, later on into a business plan and move to a full-scale launch is a very important factor.

It is true that discovering and growing individuals with those competencies is a difficult task. Nevertheless, senior managers must make sure that there are a few of them that understand the whole process and are good enough to lead a diverse team with the wisdom and strength to make a project successful. And CEOs need to provide the firm’s commitment to those champions of new projects that can rejuvenate a company and add new growth potential. These are some of the key dimensions of senior managers’ contributions to making companies more innovative and entrepreneurial.

How top managers add value to innovation and entrepreneurship

A recent framework organizes the CEO’s job around some major functions or tasks (Canals, 2010). A CEO should develop the firm’s mission and nurture its values, have a point of view about the firm’s future and how to compete (strategy), grow people and develop future leaders, make decisions on resource allocation according to the strategic priorities, and design the organization to execute effectively.

In this context, the typologies of CEOs regarding innovation fit in a natural way. Some authors propose different types of roles for CEOs who foster innovation, depending on the company, the CEOs’ personal attributes or the culture of the firm. Dávila and Epstain (2014) distinguish four different roles that CEOs can adopt regarding innovation: the innovation strategist, the innovation sponsor, the innovation architect and the innovation evangelist. In terms of our framework, the strategist is the CEO thinking about strategy. The evangelist is the CEO who includes innovation in the firm’s mission and values. The architect is the CEO who organizes for innovation. The sponsor is the CEO who not only supports innovation with ideas but also commits resources to it. Innovation is considered as a special set of activities that are a central part of the CEO’s job.

Moreover, leadership capabilities development—including innovation—should be consistent with the firm’s mission and values, should be embedded in the strategy process, and should be supported by the indispensable resources and have the backing of the CEO’s commitment. Innovation strategy should be coordinated and included into the firm’s strategy. More specifically, IEC need to fit well within the specific innovation strategy followed by the firm.

How can a CEO support IEC development? The CIPS framework presented here is consistent with the CEOs’ functions. CEOs should help develop leadership competencies for innovation and entrepreneurship in four ways or key areas—see Table 1.2. The first is the development of the right context, with a corporate culture and values that appreciate innovation and entrepreneurial mindset—Context. The second is to stimulate new ideas and concepts—Ideas—that will help serve customers better and asses them. The third is to grow general managers who can become innovators or develop inno...

Table of contents

• Cover
• Title
• Copyright
• Contents
• List of Figures, Tables and Exhibits
• Preface and Acknowledgments
• List of Contributors
• Part I Nurturing Entrepreneurial and Innovation Capabilities
• Part II Entrepreneurship, Intrapreneurship and Innovation
• Part III Innovative Methodologies and Learning Processes to Foster Innovation
• Part IV Innovation at Business Schools: Creating an Entrepreneurial Learning Context for Leadership
• Index