Corporate Entrepreneurship

Professor Alexander Settles

The Entrepreneurial Mindset in Organizations

Factors in the emergence of the entrepreneurial economy:
The rapid evolution of knowledge and technology promoted high-tech entrepreneurial start-ups.

Demographic trends adding fuel to the proliferation of newly developing ventures.

The venture capital market became an effective funding mechanism. American industry began to learn how to manage entrepreneurship.

Reengineering Corporate Thinking

Steps that will help innovative people to develop an entrepreneurial mindset:
1. Set explicit goals. 2. Create a system of feedback and positive reinforcement. 3. Emphasize individual responsibility.

4. Give rewards based on results.

5. Do not punish failures.

Assessing Support for Innovation

Does the firm encourage entrepreneurial thinking?

Does the firm provide ways for innovators to stay with their ideas?
Are people permitted to do the job in their own way, or are they constantly stopping to explain their actions and ask for permission? Has the firm evolved quick and informal ways to access the resources to try new ideas?

Has the firm developed ways to manage many small and experimental innovations?

Assessing Support for Innovation (contd)

Is the system set up to encourage risk taking and to tolerate mistakes? Are people in your company more concerned with new ideas or with defending their turf?

How easy is it to form functionally complete, autonomous teams in the firms corporate environment?

Rules for an Innovative Environment

1. 2. 3. 4. 5. 6. 7. 8. Encourage action. Use informal meetings whenever possible. Tolerate failure and use it as a learning experience. Persist in getting an idea to market. Reward innovation for innovations sake. Plan the physical layout of the enterprise to encourage informal communication. Expect clever bootlegging of ideassecretly working on new ideas on company time as well as personal time. Put people on small teams for future-oriented projects.

9.

Encourage personnel to circumvent rigid procedures and bureaucratic red tape.

10. Reward and promote innovative personnel.

Source: Corporate Venturing Obstacles: Sources and Solutions, by Hollister B. Sykes and Zenas Block, Journal of Business Venturing (winter 1989): 161. Copyright 1989 by Elsevier Science Publishing Co., Inc.

Encouraging an Intrapreneurial Environment

Steps to help restructure corporate thinking and encourage an intrapreneurial environment:
1. Early identification of potential intrapreneurs 2. Top management sponsorship of intrapreneurial projects 3. Creation of both diversity and order in strategic activities 4. Promotion of intrapreneurship through experimentation 5. Development of collaboration between intrapreneurial participants and the organization at large

Benefits of an Entrepreneurial Philosophy

Leads to the development of new products and services and helps the organization expand and grow. Creates a work force that can help the enterprise maintain its competitive posture. Promotes a climate conducive to high achievers and helps the enterprise motivate and keep its best people.

The Corporate Entrepreneurship Process

Strategic Renewal Innovation Corporate Venturing

Corporate Entrepreneurship

The Nature of Corporate Entrepreneurship

Defining The Concept
Corporate Entrepreneurship
Activities that receive organizational sanction and resource commitments for the purpose of innovative results.
A process whereby an individual or a group of individuals, in association with an existing organization, creates a new organization or instigates renewal or innovation within the organization.

A process that can facilitate firms efforts to innovate constantly and cope effectively with the competitive realities that companies encounter when competing in international markets.

Defining Corporate Entrepreneurship

Source: Michael H. Morris, Donald F. Kuratko, and Jeffrey G. Covin, Corporate Entrepreneurship & Innovation (Mason, OH, Thomson), 2008, p. 81.

The Need for Corporate Entrepreneuring

Rapid growth in the number of new and sophisticated competitors Sense of distrust in the traditional methods of corporate management An exodus of some of the best and brightest people from corporations to become small business entrepreneurs International competition Downsizing of major corporations An overall desire to improve efficiency and productivity

Table

3.2

Sources of and Solutions to Obstacles in Corporate Venturing

Adverse Effects
Innovative solutions blocked, funds misspent Competitive lead lost, low market penetration Facts ignored that should replace assumptions Nonviable goals locked in, high failure costs Entrepreneur failure and/or venture failure Missed opportunities Venturing dumped when base business is threatened Wrong decisions about competition and markets

Traditional Management Practices

Enforce standard procedures to avoid mistakes Manage resources for efficiency and ROI Control against plan Plan for the long term Manage functionally Avoid moves that risk the base business Protect the base business at all costs Judge new steps from prior experience

Recommended Actions
Make ground rules specific to each situation Focus effort on critical issues (e.g., market share) Change plan to reflect new learning Envision a goal, then set interim milestones, reassess after each Support entrepreneur with managerial and multidiscipline skills Take small steps, build out from strengths Make venturing mainstream, take affordable risks Use learning strategies, test assumptions

Compensate uniformly
Promote compatible individuals

Low motivation and inefficient operations

Loss of innovators

Balance risk and reward, employ special compensation

Accommodate boat rockers and doers

Source: Corporate Venturing Obstacles: Sources and Solutions, by Hollister B. Sykes and Zenas Block, Journal of Business Venturing (winter 1989): 161

Successful Innovative Companies

Factors in large corporations that are successful innovators:
Atmosphere and vision Orientation to the market Small, flat organizations Multiple approaches Interactive learning Skunkworks

Conceptualizing Corporate Entrepreneurship Strategy

Corporate Entrepreneurship Strategy
A vision-directed, organization-wide reliance on entrepreneurial behavior that purposefully and continuously rejuvenates the organization and shapes the scope of its operations through the recognition and exploitation of entrepreneurial opportunity. It requires the creation of congruence between the entrepreneurial vision of the organizations leaders and the entrepreneurial actions of those throughout the organization.

Model of the Corporate Entrepreneurship Strategy Process

Corporate entrepreneurship strategy is manifested through the presence of three elements:
An entrepreneurial strategic vision A proentrepreneurship organizational architecture Entrepreneurial processes and behavior as exhibited across the organizational hierarchy.

Model of the Corporate Entrepreneurship Strategy Process (contd)

Linkages in the model:
1. Individual entrepreneurial cognitions of the organizations members 2. External environmental conditions that invite entrepreneurial activity 3. Top managements entrepreneurial strategic vision for the firm

4. Organizational architectures that encourage entrepreneurial processes and behavior

5. The entrepreneurial processes that are reflected in entrepreneurial behavior

6. Organizational outcomes resulting from entrepreneurial actions.

317

An Integrative Model of Corporate Entrepreneurship Strategy

Source: Duane Ireland, Jeffery G. Covin, and Donald F. Kuratko, Conceptualizing Corporate Entrepreneurship Strategy, Entrepreneurship Theory and Practice 33, no. 1

Conceptualizing a Corporate Entrepreneurial Strategy (contd)

Critical steps of a corporate entrepreneurial strategy:
Developing the vision Encouraging innovation

Structuring for an intrapreneurial climate

Developing individual managers for corporate entrepreneurship Developing venture teams.

Shared Vision

Source: Jon Arild Johannessen, A Systematic Approach to the Problem of Rooting a Vision in the Basic Components of an Organization, Entrepreneurship, Innovation, and Change (March 1994): 47.

Types of Innovation
Radical Innovation
The launching of inaugural breakthroughs.
These innovations take experimentation and determined vision, which are not necessarily managed but must be recognized and nurtured.

Incremental Innovation
The systematic evolution of a product or service into newer or larger markets. Many times the incremental innovation will take over after a radical innovation introduces a breakthrough.

Objectives and Programs for Venture Development

Objectives
Make sure that current systems, structures, and practices do not present insurmountable roadblocks to the flexibility and fast action needed for innovation. Provide the incentives and tools for intrapreneurial projects.

Programs
Reduce unnecessary bureaucracy, and encourage communication across departments and functions.

Use internal venture capital and special project budgets. (This money has been termed intracapital to signify a special fund for intrapreneurial projects.) Allow discretionary time for projects (sometimes referred to as bootlegging time). Encourage joint projects and ventures among divisions, departments, and companies. Allow and encourage employees to discuss and brainstorm new ideas.

Seek synergies across business areas so new opportunities are discovered in new combinations.

Source: Supporting Innovation and Venture Development in Established Companies, by Rosabeth Moss Kanter, Journal of Business Venturing (winter 1985): 5659

Developing and Supporting Radical and Incremental Innovation

Radical
Stimulate through challenges and puzzles. Remove budgetary and deadline constraints when possible. Encourage technical education and exposure to customers. Allow technical sharing and brainstorming sessions. Give personal attentiondevelop relationships of trust. Encourage praise from outside parties. Have flexible funds for opportunities that arise. Reward with freedom and capital for new projects and interests.

Incremental
Set systematic goals and deadlines. Stimulate through competitive pressures. Encourage technical education and exposure to customers. Hold weekly meetings that include key management and marketing staff. Delegate more responsibility. Set clear financial rewards for meeting goals and deadlines.

Source: Harry S. Dent, Jr., Growth through New Product Development, Small Business Reports (November 1990): 36.

3Ms Innovation Rules

Dont kill a project

Tolerate failure
Keep divisions small

Motivate the champions

Stay close to the customer Share the wealth

Structuring for a Corporate Entrepreneurial Environment

Reestablishing the drive to innovate:
Invest heavily in entrepreneurial activities that allow new ideas to flourish in an innovative environment. Provide nurturing and information-sharing activities. Employee perception of an innovative environment is critical.

Corporate Venturing
Institutionalizing the process of embracing the goal of growth through development of innovative products, processes, and technologies with an emphasis on long-term prosperity.

Intrapreneurial Development: Joint Function of Individual and Organizational Factors

Source: Deborah V. Brazeal, Organizing for Internally Developed Corporate Ventures, Journal of Business Venturing (January 1993): 80.

Preparing for Failure

Learning from Failure
Recognizing the importance of managing the grief process that occurs from project failure.
Understanding how organizational routines and rituals are likely to influence the grief recovery. Ensuring that the organizations social support system can encourage greater learning, foster motivational outcomes, and increase coping self-efficacy in affected individuals.

Developing Individual Managers for Corporate Entrepreneurship

Corporate Entrepreneurship Training Program (Corporate Breakthrough Training)
1. The Breakthrough Experience

2. Breakthrough Thinking
3. Idea Acceleration Process 4. Barriers and Facilitators to Innovative Thinking 5. Sustaining Breakthrough Teams 6. The Breakthrough Plan

Corporate Entrepreneurship Assessment Instrument (CEAI)

Key Internal Climate Factors in an Organizations Readiness for Entrepreneurial Activity
Management support
Autonomy/work discretion Rewards/reinforcement

Time availability
Internal organizational boundaries

Facilitating Corporate Entrepreneurial Behavior

Organizations foster entrepreneurial behavior by:
Encouragingnot mandatinginnovative activity Human resource policies for selected rotation Committing to projects long enough for momentum to occur. Bet on people, not on analysis.

Rewarding Entrepreneuring:
Allow inventor to take charge of the new venture Grant discretionary time to work on future projects Make intracapital available for future research ideas

Corporate Innovators Commandments

1. 2. Come to work each day willing to give up your job for the innovation. Circumvent any bureaucratic orders aimed at stopping your innovation.

3.
4. 5.

Ignore your job description, do any job needed to make your innovation work.
Build a spirited innovation team that has the fire to make it happen. Keep your innovation underground until it is prepared for demonstration to the corporate management.

6.
7. 8. 9.

Find a key upper level manager who believes in you and your ideas and will serve as a sponsor to your innovation.
Permission is rarely granted in organizations, thus always seek forgiveness for the ignorance of the rules that you will display. Always be realistic about the ways to achieve the innovation goals. Share the glory of the accomplishments with everyone on the team.

10. Convey the innovations vision through a strong venture plan.

Sustaining Corporate Entrepreneurship

Sustained Corporate Entrepreneurship Model
Based on theoretical foundations from previous strategy and entrepreneurship research.
Considers the comparisons made at the individual and organizational level on organizational outcomes, both perceived and real, that influence the continuation of the entrepreneurial activity. Transformational trigger
Something external or internal to the company that initiates the need for strategic adaptation or change.

Developing Innovative (I) Teams

Innovative (I) Team
A semi-autonomous self-directing, self-managing, high-performing group of two or more people who formally create and share the ownership of a new organization. The leader is called a product champion or an corporate entrepreneur.

Collective Entrepreneurship
Individual skills are integrated into a group; this collective capacity to innovate becomes something greater than the sum of its parts.

A Model of Sustained Corporate Entrepreneurship

Source: Donald F. Kuratko, Jeffrey S. Hornsby, and Michael G. Goldsby, Sustaining Corporate Entrepreneurship: Modeling Perceived Implementation and Outcome Comparisons at Organizational and Individual Levels, International Journal of Entrepreneurship and Innovation 5(2) (May 2004): 79.

Corporate Entrepreneurship at IBM

Emerging Business Opportunity (EBO) Programs Key Rules:
Think big . . . really big. Bring in the A-team. Start small. Establish unique measurement techniques.