Session 13: Social activist + Business pioneer = social Entrepreneur.

What is SE? Moving the idea that SE can be described as “any innovative initiative to help people” a step further, SE is the use of start-up companies and other entrepreneurs to develop, fund, and implement solutions to social,
cultural, or environmental issues. // These are for-profit in nature. Motto –Making money by doing good.// Look at the poor as consumers and not beneficiaries. For example, see SELCO. // Solar Light Pvt. Ltd. is a for-profit social
enterprise based in Bangalore, India. SELCO has played an instrumental role in improving living standards of poor households in rural India (especially in the state of KA) through solar energy-based interventions and low smoke
cook stoves. // A Social Business is a company that either creates income for the poor or provides them with essential products and services like healthcare, clean water, or clean energy. They operate exactly like normal
companies, except for a few small differences. Unlike a charity, a Social Business generates profit and aims to be financially self-sustaining (one potential oversight for some SEs focused on social problems; Ramus & Vaccaro,
Removing the need for fundraising allows social businesses to reinvest profits back into generating impact, Different Types of Social Businesses: Cooperative: A cooperative(also known as co-operative, co-op, or coop) is “an
autonomous association of persons united voluntarily to meet their common economic, social, and cultural needs and aspirations through a jointly-owned and democratically-controlled enterprise”
Producer Organization: A Producer Organisation(PO) is a legal entity formed by primary producers(e.g., farmers, milk producers, fishermen, weavers, rural artisans, craftsmen). A PO can be a producer company, a cooperative
society, or any other legal form which allows to share profits/benefits among the members
Section 8 Company: Not-for-profit company that promotes research, social welfare, religion, charity, commerce, art, science, sports, education, and the protection of the environment (IIMB NSRCEL is one such entity)
The Importance of SE and Social Enterprises: We can make a strong case for businesses that strive to bridge gaps and inequities. These may be top 25 companies, but also non-profits or small corporations.
In sum, “social enterprises” create new models for the provision of products and services that caterto basic human needs that remain unsatisfied by current economic or social institutions.
When did that Start? (Past) Born of a weariness with charity and the not-for-profit model.// Born of a belief that new innovative solutions were needed to solve entrenched social issues.//This is also aligned with a broader
movement gaining momentum in contemporary market economies, demanding a more ethical and socially inclusive capitalism.// Born of a belief that challenges cannot be addressed unless the business produced significant
returns. Great, But… Players with Problematic Solutions* (Present and Future) Government Inefficiencies, slow, bureaucratic, prone to corruption… Nonprofit Orgs Dependent on donations (uncertain, demand far exceeds supply)
“Compassion fatigue” Raising money takes time and energy.// Multilateral Institutions (World Bank…)Conservative, slow, under-funded, unreliable. Success is measured by: GDP (might not help the poor) Volume of loans
negotiated (not measuring impact) Work exclusively with the government. Corporate Social Responsibility (CSR)“As long as it can be done without sacrificing PROFITS”.
Emerging Models for Equitable Growth: Why is it Important? Blurred Organizational Internal origin process
What are the New Approaches to Boundaries? Corporate Entrepreneurship Strategies
Social Issues?

Session 14: Corporate Entrepreneurship: This is an entrepreneurial activity within a mature firm (Chakravorti, 2010). It attempts to create products, enter markets, or
3 horizon framework
introduce process innovations that are new to the firm. Why should large corporations be entrepreneurial? To counter the gale of creative destruction. To find new
growth opportunities. Any challenges: Strategic Challenges: Focus on near-term margins + size of business. Cyclicality/seasonality. New businesses with old
lenses/glasses. Possible Resolution: Three horizon (S-, M-, L-T) framework. Outside hires, non-organic/external growth.
Incentives and Organizational Challenges Risk and failure avoidance. Organizational design dilemma. Emphasis on organizational harmony “Cost-center” purgatory.
Potential Resolution Leeway for ‘well-intentioned failure’ Balancing act between coordination and competition Bottom-up entrepreneurship/Disciplined empowermen t
Insulation of entrepreneurial efforts.
Decision-Making Challenges Rigid application of financial metrics and performance measures. Reliance on traditional market research. Linear stage-gate processes.
Potential Resolution Metrics should be ‘aligned’ with the horizon of the project, type of innovation, and market maturity (remember timing/’choregraphed’ moves in
R&R?)‘Make little, sell little’ Bootstrap it! Limited, staged investments. Summary: Entrepreneurship is critical for mature companies, but poses many challenges. A fine
balancing act is needed to manage core businesses (exploitation) while exploring new growth drivers/markets (exploration) Conscious planning and design of
organizational structures and processes can overcome the strategic, organizational, and decision-making challenges of CE.
A social enterprise is a business with primarily social objectives whose surpluses are principally reinvested for that purpose in the business or in the community rather than being driven by the need to maximize profit for shareholders and owners
Bootstrapping: Resource Generation: Nobody will invest money before the venture starts. Hence, it is important to start to demonstrate the viability of the idea. Asset parsimony and acquisition of resources at the lowest cost are
important Transfer fixed costs to variable costs. On VC or external funding:Only a tiny fraction of firms get VC or external funding (reminder). VC may play a role in influencing the original thinking of entrepreneurs. Myth busting:
More than 80% of Fortune 500 high-growth companies were bootstrapped by the founders’ own resources. Median capital: $10,000 (INR 1.9 Lakhs PPP) The typical story: We had no luck in raising capital or we didn’t even try, or
we got unsolicited VC offers once we were successful. Context (3): Hidden Costs of Outside Money: VC can be a poor fit for many ventures. It’s also easier to raise 10 million than 1 million. As we already know, money from outside
investors comes with strings attached. There can be a false sense of security leading to complacency and lack of control. Adopting the ‘try it-fix it’ approach required in new ventures can also lead to diminished flexibility. Conflicts
between investors and promoter-managers can also debilitate. Most importantly, most entrepreneurs do not have the credentials to convince VCs PLUS the ’try-it/fix-it’ ability (THE most important entrepreneurial quality) is rarely
visible. Hence -bootstrap! What is Bootstrapping? Bootstrapping is a collection of methods used to minimize the amount of outside debt and equity financing needed from banks and investors. This includes a combination of
methods to: Reduce overall capital requirements. Improve cash flows. Take advantage of personal finance. Important Note: Small and young firms have the maximum problem of raising money due to liability of newness and
liability of smallness. Benefits of Bootstrapping: It can create a win-win situation for stakeholders. It can help to find the right stakeholders (experienced, diversified etc.). It can help to turn the fixed costs into variable costs. It can
help to build and maintain social networks. Resources can be used without having to own them. It clears away the “clutter” and simplifies the issue –“nothing happens until someone sells something”. It can be used as an acid test
for whether you’ve got a real business or a just a possible/plausible business plan. REMINDER: Entrepreneurship is the pursuit of opportunity beyond the resources controlled ENT is about bootstrapping and bootstrapping is a core
component of ENT! Resources can be used without having to own them Do not buy new what you can buy used. Do not buy used what you can lease. Do not lease what you can borrow. Do not borrow when you can barter. Do not
barter what you can beg. Do not beg what you can scavenge. Do not scavenge what you can get for free. Do not take for free what someone will pay you for. Do not take payment for something that people will bid for (create an
auction). Bootstrapping ‘in Practice’ You can get operational quickly. You can look for quick break-even and cash-generating projects . You can offer high value products or services that can sustain personal selling. Also, being a
second-mover can help in getting operational quickly. You can forget about the crack team and focus more on growth and keep growth in check. You can focus on cash(not on profits, market share, or anything else). You can keep
good books and build and maintain relationships with bankers. Other Considerations: Customer Focus is Essential! Stay focused on what your customer is receiving (value). Keep in mind that customers do not really care about how
your office looks, your business plan, etc. They care about one thing –the value they receive for the money they pay you (when compared to what they could get elsewhere. Keep in mind that you have to treat customers as
customers, not as sales targets. Keep in mind that you have to spend much of your day to meet as many customers as possible(hence, the weight given to interviews in your projects ). So, get out of your computer (and out of the
building) and go to see your customers. Keep in mind that profitable opportunities are discovered by identifying solutions to customer’s problems, which is best done through “DIRECT CONTACT”! Keep in mind that people buy with
emotions and justify with facts!. Remember to include emotion and enthusiasm into your sales pitch and tell the customer a compelling and nice story!. Focus your pitch on what the customer will receive in value. The benefits not
the features of the product should be the emphasis. You also have to provide the service your customer wants and expects. That comes first. Don’t forget to create “total customer responsiveness” with superior quality, superior
service, and fast reaction. Other Details: Manage for Cash not Profitability (1): The bootstrapping business model has the following characteristics Low upfront capital requirement. Short sales cycles. Short payment terms. Recurring
revenue. Word-of-mouth advertising. Managing for cash flow requires a longer time to collect. So, one needs to target markets… …that do not require educating the customer about the pain point…that are “auto-persuasive” –
people recognize their pain and how to solve it and persuade themselves to buy the product…where one can piggyback on a product that already has a large installed base. That strategy should be implemented after one is sure that
there are sufficient cash reserves. Other Details: Broad Types of Bootstrapping: 1) Customer-Related Methods are used to improve cash flow from customers: How? By creating incentives for advanced payments. By charging
interest on overdue invoices. By ceasing relations with late-paying customers. 2) Delaying Payments Examples Paying late. Negotiating longer credit periods. Leasing more than purchasing
Any other considerations? Yes, Keep in mind that…smaller and newer firms offer more credit than larger firms. smaller firms find it more difficult to negotiate longer credits. 3) Owner-Related Finances and Joint Utilization of
Resources: Examples of owner finances. Savings. Loans by owners or from family (love money). Examples of joint utilization of resources “Sharing” employees (CFO). Assets. Business space. Coordinating purchases with other firms
to take advantage of economies of scale. Yes, But… Limits to Bootstrapping: Ventures outside the promoter’s knowledge domain are difficult to bootstrap. Ventures that require some critical assets to be deployed (even before
testing out the business concept) CANNOT be bootstrapped. There is also a need to change as the business approaches the growth phase. Intrapreneurship and Intrapreneur : Intrapreneurship “is the use of entrepreneurial
management techniques within established companies to create new environments that foster innovation” (Mills & Dang, 2020: 1)Business manager is responsible for developing the new business. Leads and guides the team.
Answerable/accountable to the top management. Focal point of the entire venture. Challenges to Intrapreneurs: Lack of credibility You do NOT have a strong track record. Lack of legitimacy Resource consumption rather than
resource generation in the initial stages .(In the initial stages) Somebody else in the organization is paying for your existence! Resource starvation Competition for resources from mainstream activities. Pressure on efficient use of
resources Pressure to establish economic viability. Resistance and inertia Lack of information and significance.
Intrapreneur Traits/Tactics: Intrapreneurs
may take less risks, but this is not all.
Building an Ecosystem

Moving along the Risk-

Resource Envelope:
 1) If ideas are not core and not intended to be integrated (lower left quadrant of Figure 1), it is time to stop and reassess to see if these avenues are worth pursuing at all. 2) In other cases,
organizations seek to bring new innovation skill sets into the company culture, such as tech sprints and IDEO human-centered design processes. These ideas do not represent changes to
the core business strategy but can be useful if they are integrated into the appropriate business lines (upper left quadrant). 3) The upper right quadrant of the matrix represents some of
the most critical organizational decisions: how to separate out and when and whether to reintegrate innovation ideas that present threats and opportunities to the core business. For
these core innovations, it is helpful to envision a three-step innovation journey, as depicted in Figure 2 below.
First, to allow core business innovations the space to flourish, organizations should separate out the innovation activity from the main business to insulate it from pressures from the
traditional unit. The second step requires top management to provide the project with its own resources and clearly communicate support. The third step is the most difficult and often
the source of failure: integrating, when appropriate, the new product and processes back into the organization. These steps are further detailed below. Step 1) that in order to
successfully maintain sustaining innovations, while exploring disruptive ones, companies must “separate their new, exploratory units from their traditional, exploitative ones, allowing for
different processes, structures, and cultures,” while deliberately retaining the tension and oversight responsibilities at the top level of the organization’s leadership.8 They call this kind of
forward-looking company an “ambidextrous organization,” one that seeks out disruptive innovations, while simultaneously pursuing incremental gains in the core business. Step2) When
cultivating innovation within its own separate sphere, the parent organization should ensure that the unit does not have to compete with other business lines for resources. The
traditional business is responsible for maintaining the ongoing profit and revenue of the company and could starve the new unit of resources or attempt to block its activity for fear that
the innovation efforts will cannibalize the core business. The innovative group should therefore receive its own funding and attention to ensure that their “distinctive processes,
structures, and cultures are not overwhelmed by the forces of ‘business as usual.’ At the same time, the established units are shielded from the distractions of launching new businesses
Step 3) As innovation programs develop, stabilize, and eventually succeed, CEOs of established firms have to decide whether to keep the new line of business isolated or to integrate it
into the main organization. When the new innovations are essential to the success of the core business, and customers love the new product or service, it may be crucial to integrate the
unit back into the main business and incur the risks associated with that integration. A successful reintegration requires buy-in from both the core business and the innovative unit. The
executive team must definitively communicate to the whole organization what the problem is and how the innovation can solve the problem, “bringing together all employees in a
common cause.”
In today’s rapidly changing environment, many companies want to keep an eye on technologies that may be or may become relevant to their business (see the lower right quadrant of the
matrix in Figure 1). As a result, corporate venture capital (CVC) firms, accelerators, and incubators have gained steam. CVCs and accelerators possess certain drawbacks, however,
particularly in the flow of innovative ideas back to the larger organization. Corporate venture partners (often young MBAs) have difficulty communicating valuable lessons to senior
leadership or are unable to see how to effectively integrate the new innovations. What should management do when the venture program “discovers” a promising new activity? The
difficulties of reaping the benefits of CVC-backed innovations reflect two frictions described above: the lack of a clear roadmap or set of objectives for the innovation initiative, and the
resistance of the mature organization to integrating changes and new ideas.
Intrapreneurship is a difficult process for established firms, especially because innovative ideas can seem antithetical to the processes that have developed over time and led to the success of the core
business. There is no one size fits all prescription for innovating within established organizations, but certain principles have emerged. Separating out innovative efforts can provide space for new initiatives
to flourish in a more vibrant way, insulated from the pressures of quarterly profits. Entrepreneurs and managers who find themselves in leadership roles overseeing innovation decisions need to constantly
focus on what outcomes they are trying to achieve and maintain a broad consensus on innovation goals. This will help in the most challenging part of innovation efforts: integrating the new ideas,
products, and processes in a productive way back into the existing organization
Why Gods Are Attracted to Small Things: The Rationale for Corporate Entrepreneurship: There are many benefits of maintaining such interests. They create options for new growth,
opportunities to monetize the firm’s substantial physical and intangible assets and value from the synergies between the core and new businesses. Proactively pursuing entrepreneurial
ventures has anticipation benefits: it is a hedge against competitive and disruptive threats and helps in anticipating emerging trends and cutting-edge technologies. Moreover, new ventures
are a powerful mechanism for generating excitement among all stakeholders and they also help develop and retain talent.
The benefits of the association go both ways. The established firm can help create competitive advantage for a new venture at every stage of the entrepreneurial life-cycle. At the front-end, it can yield asymmetric market insight through the estThe
benefits of the association go both ways. The established firm can help create competitive advantage for a new venture at every stage of the entrepreneurial life-cycle. At the front-end, it can yield asymmetric market insight through the established firm’s
wide reach and access, uncover problems and provide critical resources for a solution, e.g. R&D, manufacturing, proprietary technologies or processes. The resources of a large firm can help with formulating a viable business model since the firm’s core
businesses can provide a subsidy for the venture’s offerings. During the start-up and scale-up stages, the established firm can provide capital and business functions as well as access to supply chain and distribution networks and other critical assets. The
firm can be a source of talent of all kinds and its brand can lend the venture some credibility. The firm can give the venture negotiating leverage with market participants with whom the venture needs to do business. The established firm can help in
managing the risks of a venture by making the venture part of a bigger portfolio and by facilitating trials and experiments with its customer base. The proximity to the large firm also expands the venture’s exit options: The established firm has many
alternatives to choose from including re-cycling the venture into a different product/business, spinning-off, licensing, integrating it into an existing business unit or carving it out as a new business unit. In summary, both the established firm and an
entrepreneurial venture can mutually benefit from their association. For these reasons, it is no surprise that most established firms nurture entrepreneurial ventures in some form or the other. Established firm’s wide reach and access, uncover problems
and provide critical resources for a solution, e.g. R&D, manufacturing, proprietary technologies or processes. The resources of a large firm can help with formulating a viable business model since the firm’s core businesses can provide a subsidy for the
venture’s offerings. During the start-up and scale-up stages, the established firm can provide capital and business functions as well as access to supply chain and distribution networks and other critical assets. The firm can be a source of talent of all
kinds and its brand can lend the venture some credibility. The firm can give theventure negotiating leverage with market participants with whom the venture needs to do business. The established firm can help in managing the risks of a venture by
making the venture part of a bigger portfolio and by facilitating trials and experiments with its customer base. The proximity to the large firm also expands the venture’s exit options: The established firm has many alternatives to choose from including
re-cycling the venture into a different product/business, spinning-off, licensing, integrating it into an existing business unit or carving it out as a new business unit. In summary, both the established firm and an entrepreneurial venture can mutually benefit
from their association. For these reasons, it is no surprise that most established firms nurture entrepreneurial ventures in some form or the other. Primary challenges: there are three broad set of challenges that pose obstacles for corporate entrepreneurs:
Strategy Challenges: Lack of integrated decision making: At the highest level, choices optimized for the core business are not integrated with choices that affect entrepreneurial ventures. Managers generally allocate scarce resources based on near-term
margins and size of the business. New businesses that need up-front investments and have few customers get low priority. To make matters worse, the new businesses might be perceived to have the potential to cannibalize the core; balancing priorities for
competing businesses is hard to do in a single organization. Cyclicality: Budgets for entrepreneurial activities are among the first to experience cuts during economic downturns, such as the one experienced during 2008-09. During such periods, there is
pressure on management to scale back or outsource non-core activities New Businesses, Old lenses: Established firms have a tendency to view new business opportunities through the lens of their current businesses, brand associations and product
categories – often as line extensions or near adjacencies. This can be self-limiting and makes the firm vulnerable to being blindsided by shifts in consumer preferences and unanticipated new technologies or to game- changing new entrants.
Incentives and organizational challenges: Risk and failure avoidance: Entrepreneurial ventures are risky and the chances of failure are high. One of the biggest obstacles for established firms is that the incentives and decision-making structure encourages the avoidance of risk. Senior
management is held accountable for near-term performance; this keeps the focus on surer bets. Failure is often perceived as a career-ending event, which deters many from attempting to take on risk. Not invented here mentality : It is often hard for established firms to step outside their
organizational boundaries for input. In addition to prevalent self-referential mindsets, such inhibitions could stem from several concerns: e.g. about sharing of intellectual property or other proprietary assets with outsiders, being perceived as a signal of weakness, sharing economic gains
with others or anticipating the challenges of integrating with other cultures. Organizational design dilemmas: Many established firms struggle with the choice of where to house the venture – within a business unit, in a separate unit that reports to the corporate center or outside the
organization altogether? Locating within a business unit leads to the venture being forced to harmonize with management practices suited for mature businesses; locating in a separate unit leads to isolation and the commercial assets of business units being out of reach; locating outside the
organization may lead to misalignment of objectives. Emphasis on organizational harmony: Established organizations develop efficiencies through standardization of management practices. This results in a push for organizational harmony, which in turn means that performance metrics,
financial hurdles, decision rules and compensation systems in an entrepreneurial business within the company cannot stray too far from those applied to core businesses. Compensation systems generally do not offer the high upside rewards that a free- standing entrepreneur might earn for
a successful outcome. Decision making challenges: Rigid application of financial metrics: The use of discounted cash flow and NPV analyses causes decision makers to underestimate the value of a new business. The treatment of fixed costs and sunk costs, which favors the leveraging of
potentially obsolete assets and the emphasis given to earnings per share causes managers to make decisions based on horizons that are too short for successful incubation and development of new businesses. reliance on traditional market research: Validation for new businesses or the
generation of ideas is often done by traditional market research, such as focus groups or surveys, which fail to uncover truly breakthrough or disruptive ideas. Linear stage gates and cumbersome decision making: The process for getting approvals for new businesses and products often
involve linear stage-gate processes, which do not leave room for adaptation and experimentation. Decision-making also frequently involves layers of bureaucracies and committees. performance measures and compensation: Compensation and performance evaluation for new business
builders is often managed by establishing targets and metrics, which leads to a predominance of incremental innovations and business ideas. Breakthroughs cannot easily fit into a framework with defined measures and targets.
Potential resolutions: Despite the many challenges to sustaining corporate entrepreneurship, it is clear that there are strong reasons for established firms to persist in finding solutions to make the association work. Adapting management practices: Adaptation of management practices to
blend core business management techniques with those used by VCs. Management practices used for corporate entrepreneurs typically involve a combination of approaches and variations on the core management style. These include doing limited, staged investments, measuring
performance against set targets and adopting new approaches to strategic planning, such as discovery driven planning. Several of these adaptations represent a blending of practices used by the venture capitalists and those drawn from their core businesses. From the venture capital
industry, the companies have adapted models of making milestone-based, limited bets on multiple experiments and trials that can be scaled up or down. This creates a funneling of new business opportunities from ideation through to launch. Established companies typically manage core
businesses by setting targets and measuring performance against them and compensating managers on the basis of performance. Many companies have extended such practices to their management of new ventures. For example, 3M had declared the objective of getting 35% of their
revenues from products introduced in the past 4 years; Pfizer and Nokia set specific time-to-market goals, which drove manager compensation. Once a target is set, the established firm typically makes resource allocation decisions based on a planning process. However, the planning must
be done differently from the process used to manage the core. Planning for the core business draws upon the data and models that build on the prevailing market and past experience. Some firms have used a “discovery-driven” planning approach. Once a target is set, the planner asks: what
measurable outcomes are needed to accomplish the target and what actions need to be taken. This leads to questions about what assumptions are being made about revenue and cost drivers. When the assumptions are challenged, they are tested, which define checkpoints for whether the
venture should continue to get funding. selectively insulating venture: Techniques for separating the entrepreneurial venture from the core while preserving essential linkages. As observed earlier, one of the most significant challenges to corporate entrepreneurship has to do with
incentives and organization design: organizations optimized for operating a mature core business are at odds with an entrepreneurial environment. Clearly, some form of insulation from the core business is necessary for a venture to achieve its full potential. Studies suggest that an
“ambidextrous” organization may be ideal: Exploitative ventures (i.e. involving small improvements in existing products and markets) are pursued by the core units, while exploratory innovation (i.e. involving fundamental changes that lead to breakthroughs) is led by a separate part of the
organization with independent processes, structures and cultures. A separate unit run by different rules often create resentment. Fears of cannibalization of the core products may lead to rejection by the sales force. Separation can send a signal that entrepreneurship and execution are
responsibilities of different groups and can discourage core unit employees from acting on their own entrepreneurial ideas. The separate unit may perennially remain a backwater. Its lack of revenues may erode resources and respect within the organization. There is too much corporate
bureaucracy and compensation structures do not offer sufficient upside reward; the ventures, therefore, do not attract the best entrepreneurial talent. Managers of these units are not privy to the same high quality deal flow as the top VCs. These factors in combination could conspire to
make the entrepreneurial initiatives prone to “adverse selection” – where all the promising ideas go elsewhere. Thus, insulating the corporate entrepreneur is not a panacea. Alternative designs have attempted to address these concerns in three directions: by engaging the core business
units in developing entrepreneurial businesses, by making entrepreneurship everybody’s business or by stepping away from the organization altogether and reaching outside the firm’s boundaries for entrepreneurial ventures. Alternative support models: Modes of support adopted by the
established firm to back the entrepreneurial venture. A third important dimension of choice for the established firm is the kind of resources it offers to support the entrepreneurial venture. The decision depends heavily on its objectives with the venture and nature of corporate assets it can
bring to bear. Of the formal support models available to the established firm, there are three primary alternatives: Corporate incubation: The typical purpose of such initiatives is to monetize ideas, usually developed within the established firm, and to take advantage of its assets. The
company provides infrastructure, seed capital, managerial talent and other staff and additional inputs needed to graduate the early-stage venture to a point where it attracts funding from a business unit or external investors. Corporate venture funds: This approach focuses on financing as
the primary linkage between the established firm and the entrepreneur. The firm makes investments in ventures that have obtained some seed and first round funding from elsewhere. There are several possible objectives, both strategic and financial, for such funds. The strategic objectives
include: to tap into emerging technologies, products and trends and gain insight into forthcoming changes in the market; to test future demand and pre-empt disruptions; to invest in a venture with the potential to become a full- fledged business or part of a business unit within the
established firm. There are also strong financial objectives motivated by the potential to generate superior returns from advantages provided to the venture by proprietary assets of the established firm. Co-creation: Several drivers -- such as productivity, cost and risk management, speed-
to-market, access to specialized capabilities, along with the growth of Web 2.0-enabled collaboration tools -- have contributed to many established firms establishing a strategy for co-creating value with external entrepreneurs. Usually the established firm provides a mechanism for
collaboration with entrepreneurs through its technologies or products. There are several variants of this approach: Standards and Platforms: Some established firms invent and license standards that allow multiple new businesses to develop new products that can inter-operate. Qualcomm
as the creator of the widely used CDMA wireless cellular telecommunications standards and of 3G technology is an ideal example. In addition, other established firms provide a “platform”, which is, in essence, a technology or a product reaches a wide audience and enables the development
of several additional technologies or products aimed at alternative applications or at alternative market segments. Open Innovation: Many established firms have engaged with outside parties, including customers, partners, third-parties, as well as their own employees, to develop new
products and services. Proctor and Gamble, for example, has a program called “Connect + Develop” whose purpose is to tap into global talent by enabling inventors, scientists, partners and others to submit product ideas for P&G and create opportunities to earn money for their
contributions. Prizes and Contests: Several potential entrepreneurial opportunities are missed because of market failure and there is insufficient incentive for exerting focused effort. Some firms have instituted prizes as a way to fill the gap. Unbundled Assets: Many established firms have
discovered that several of their assets can be offered to external parties to build entrepreneurial ventures without compromising the host’s own productivity. The Gap That Remains The purpose of highlighting the various alternatives that have been considered to address the challenges
with the association between the established firm and the entrepreneur is to underscore the lengths that firms have gone to succeed as corporate entrepreneurs. However, despite the vast solution space that they have explored, and all the examples that I have offered in the earlier
sections, the overall track record is rather sobering. This gap can be viewed as the starting point for a strategic approach to deriving competitive advantage through corporate entrepreneurship. Clearly, a god of small things stands to unlock a godly amount of value.
What is competitive advantage? ‘Abnormal’ profitability = above industry average profitability. What do we mean by profitability: Return on invested capital (ROIC) exceeds cost of capital (r)ROIC > r. Very difficult to achieve…even more difficult to sustain Normal (i.e., not abnormal)
economic profits when ROIC = r. Efficient markets can be bad for companies. Some necessary conditions are necessary for efficient-markets: 1)Easy to enter. 2)Easy to imitate (imitation potential has an important role in Resource Based View). Perspectives on Above-Average Returns: 1)
Industrial Organization Model: Above-average returns are determined primarily by factors that are EXTERNAL to the firm What matters in the I/O model: Industry structure, Entry barriers, Attractiveness of the external environment. 2) Resource-Based Model: Above-average returns are
determined primarily by factors that are INTERNAL to the firm: What matters in the resource-based model: Developing/obtaining valuable resources. Resources should also be difficult to imitate/non-imitable and rare Barriers to resource/capabilities acquisition. A firm is said to have a
sustained competitive advantage when it is implementing a value creating strategy not simultaneously being implemented by any current or potential competitors and when these other firms are unable to duplicate the benefits of this strategy” Why are some firms more successful than
others? Industry organization perspective :Because they choose a good industry. Resource based view: Because they are better firms( i.e with valuable, rare, imitable and organized resources). A firm’s ability to outperform competitors is related to its ability to: Stop others from entering
or make it too costly for them to enter Develop a set of hyper-specific (idiosyncratic) capabilities that others cannot replicate, or it’s too costly for them to do so, or it takes some time to do so. Communication Tools Is my business plan good if I use an attractive document?, Is my business
plan good if I use a proven software? Business model canvas: Business model canvas cannot be a substitute for an integrated understanding –beware of ‘bullet-point thinking’ Business model canvas can be used for all businesses(i.e., including those that do (not) have sustained
competitive advantage) Multiple canvases can be created for a single business –for each industry or customer segment, for different periods of time etc. Business models tell us what makes the business tick Business model canvas is a tool that helps in documenting and communicating a
business model A good understanding of business models also alerts us about imitability Business models tend to change over time, as companies evolve AND adapt to the new environment (e.g., digital versions). What is a business model then? This is “a purposefully designed and value-
centered activitysystem, where an activity is the engagement of human, physical, and/or capital resources of any party to the business model (the focal [and herein ‘mature’] firm, end customers, vendors, etc.) to serve a specific purpose toward the fulfilment of the overall objective,
which is typically an unmet or suboptimally met customer need” Corporate ventures typically start with an idea or a market opportunity It then takes time to understand the business model that makes the opportunity commercially viable. Once understood, the company has to make a
decision about whether to spinoff the business or internalize and scale within the org (cf. next slide). This requires strong and decisive leadership attitudes and skills. Other potential challenges/issues include resistance to change and organizational inertia (‘let’s continue what we did in
the past’)
Session 1:Creative Destruction: Process of industrial mutation that incessantly revolutionizes the economic structure from within, incessantly destroying the old one and
creating a new one.
In your opinion, who is an entrepreneur? Need for achievement & Risk-taking propensity.
What is entrepreneurship? Entrepreneurship is about pursuing opportunities without all resources in hand. Entrepreneurship is a process by which individuals – either on
their own or inside organizations - pursue opportunities without regard to the resources they currently control” or, Entrepreneurship is the creation, discovery, and
exploitation of profitable opportunities within all (newly created or already existing) ventures. The goal is to create value, not only through daily (business, non-business,
innovative, non-innovative) activities and practices, but also for the society at large within which ventures are embedded and from which they receive some context-
related operating conditions they must manage.
Session 2: Expected Return: Calculate upside potential and pursue the (risk adjusted) best opportunity. Affordable Loss: Calculate and focus on the downside potential
and you do not risk more than you can afford to lose. Attitude toward others: Competition: Setup transactional relationship with suppliers and customers.
Form partnerships: Build your future together with customers and suppliers you are interacting with and even some prospective competitors.
Session 3: Idea and opportunity: What is an opportunity? “[W]e define entrepreneurial
opportunities as situations in which new goods, services, raw materials, markets and
organizing methods can be introduced through the formation of new means, ends, or
means-ends relationships”. Sources of opportunity: technological change, political and
regulatory change, Social and demographic change. Sources of ideas: Brainstorming,
Painstorming, leveraging skills and hobbies, crazy and whack ideas.
Opportunity Characteristic:
Does it represent a good fit with the capabilities the founder and/or the team
(Thiel, 2014) have (e.g., their experiences, knowledge, and skills)? Is it durable?
Does the opportunity space remain stable for a reasonable length of
time/window of opportunity? Or is it based on a fad or need that will
disappear quickly (remember the pins)?
Does it create significant value for customers by solving a significant problem
(Thiel, 2014) or an unmet need or an urgent demand (remember Mises?) for
which they are willing to pay a premium?
Session 4: Planning a venture: lean startup method. Does it offer significant profit potential to the entrepreneur/investor (at least
enough to meet their risk/reward expectations)
Does that opportunity excite the entrepreneur/investor? Is s/he or
are they motivated by it? Assessing opportunity doability

Session 8: Matching skills ideas and resource and simulation: Skills:

Tradeoffs with gathering resources: Talent differences can have huge implications/impact
Diversity versus homogeneity when assembling a team. Giving in/on many positions at startups (Burton & Beckman,
up control versus attracting talent, investors, etc. Getting the 2006)
right combination of skills for the task at hand. Getting (needed) The best programmers may be 20x better than the worst
funding (not too much, not too little) without giving up too much Early choices about hiring have long-term effects
stake/control. Top hires help attract other top hires
Diversity/Homogenity: Funding partners:
Startups can pursue exploratory or exploitative strategies Funding partners get control and equity in return for
Exploratory: Radical innovation and really new ideas (e.g., investments
Ford T, the locomotive etc.) Important to balance immediate needs for funds with
Milestone or Time-Based Vesting:
Exploitative: Smaller improvements (incremental innovationt)he desire to get the best terms possible (without giving Founders also get equity at certain time intervals or milestones so that, if one founde
and fast execution up too much control)
never leaves their day job or never accomplishes anything or even decides to leave,
Match strategy to employee diversity Funding partners can provide more than money. The
the shares that are not vested go back to the remaining founders.
Diversity includes backgrounds, skills, and job history right partners can provide reputation, access to resources
Focusing on equity:
Exploratory startups best served by diversity through networks etc.
An ownership interest in a venture in the form of stock.
Each unique affiliation on TMT increased the chances of getting Negotiation determines value and the nature of the deal Control/decision rights:
VC by 7-12% (Eisenhardt & Schoonhoven, 1990) At an early stage, valuation is more an art than a
Investors will contract on veto rights on how the assets of the firm will be
More diverse teams are better at solving hard problems science, and partners look at the team, market, product,
distributed in case of liquidation, when and where the venture can raise
Exploitative startups ‘slowed down’ by diversity the pitch, and other factors
Session 9: Equity subsequent rounds of funding, conditions under which they can fire CEO or other
Less diverse teams tend to act and agree more quickly members, seats on the board, rights to call board meetings etc.
They bring products to the market faster (Beckman, 2006) Most high-growth ventures grow through equity Founders can decide on one person who will get veto rights
Rich vs king: partnerships. That means equity deals get structured and
Ownership does NOT automatically give control/decision rights
A rich is a “founder [who] generally loses the throne but sees hisrestructured in a variety of ways as the venture evolves into a
stable corporation (whether public or private) Clauses like drag-along rights mean that the investors can force others to co-sell
or her venture pursue its business opportunity to the fullest”*
At the same time, most new ventures fail NOT because of bad even if they don’t want to (this is usually when the investor has a supermajority).
Rich: Maximize return by hiring high-end employees, But the founders can ask for a right-of-first-refusal and, if the investor finds a
management, slow market uptake, or lack of cash, but
delegating authority, and taking on investment (Wasserman, third-party willing to buy and drag-along rights, the right means that the founder
2013) because of conflictual relationships between partners and
can buy at the same price as the third-party. Other liquidation clauses can
A king is a “founder [who] retains the throne but does not rule other equity partners that then become impossible to repair. convey that, if the company gets sold, then investors will get paid first a certain
as big and rich a kingdom as might […] have been possible”* Hence, the paradox of equity. You need to share
equity to build an enduring high-growth venture. But, 1X or 2X of their investment (+dividends) and then the remaining is split among
King: Maintain control and give up little equity, making it shareholders and investors again get paid. Redemption rights are when investors
harder to get talent and raise money (Wasserman, 2013) sharing equity without understanding how to increases
the probability of the venture breaking up and failing. force the company to repurchase shares at a particular price (1X or 2X +
When to split Equity? dividend) after a certain period.
73% of startups split equity right in the beginning, Profit sharing: You can split equity unequally (say 70- 30) but divide profits
before there is some revenue, before there is any equally or in a varying manner depending on performance or milestones.
customer validation, and before they even know Compensation: depends on idea, time a person has spent, amount of money put
each other really well. in capital, opportunity cost, personal network, prior entrepreneurial experience,
Quick equal splits (where founders spent less than a day on time a person will spend in future.
deciding the split) receive lower valuations in the first round,
when compared to slow equal splits and unequal splits.
Session 6: venture development
Problem-solution fit does NOT NECESSARILY imply product market fit. There is an ITERATIVE process through which the problem gets redefined until product-market fit is achieved “The product offering can
be adapted to make it better fit what the market needs”.
Product-market fit does NOT NECESSARILY imply profitability. The path to revenue and profitability requires a viable business model, which in turn may involve refining the problem and product further.
It is important to focus on metrics that matter. While focusing on vanity metrics can help getting attention and some funding early on, subsequent growth and funding will need a sharp focus on value
metrics such as retention and repeated usage (reminder: retention is the ultimate form of customer validation)
Session 5: Customer discovery and development:
As you build your venture you will need to reach out to different range of stakeholders with different asks: Money, other resources, advice, collaboration.
How to make an effective ask? Create a canvas of potential stakeholders. Start with an inventory. Make a list of all people you want to reach, who could be stakeholders of you project Starting with who you
know already has a great advantage: You have a starting point already and you don´t have to build a relationship from scratch. Link the canvas: Use social networking sites (Cespedes, 2012) to increase the
range of potential stakeholders Sites like LinkedIn allow you to review peoples’ work and educational experience – both are a possible starting point for an Ask. Develop a good introduction and idea on why
you should connect. Send them a LinkedIn message. See how it works and where the conversation goes and adapt. Widen the net: Give people the opportunity to “opt-in” I.e., find ways to let people know
about what you are doing, so that they can come to you with their own Ask to get involved somehow. Facebook could be a good option. Blogging and micro-blogging (e.g., Twitter) are great vehicles to
achieve the same thing. Change roles: Don’t constrain people to their current relationship with you Give the people you already work with opportunities to increase their participation with you.
Prepare to launch your ask:
Tailor your narrative: Make the connection between your interest and the person you plan to talk with Create a story clear enough to draw someone in and broad enough to let them determine how they
might collaborate with you. DO a practice run: Find some good friends willing to role play yourAsk with you, so you can try your story and see possible paths. Make it an affordable loss: You think you need
money. But you really need money for something. Would it be easier for someone to give you the something directly? Ask without the Quid Pro Quo: Many people are afraid to ask for something unless they
have something to offer in return. Don’t forget to ask.
Open the dialog which is your ask: 1) Start with something specific. 2) Start Broad. 3) Build empathy 4) Build ownership
Pivot your ask to artfully match interests means and constraints: 1) permission to pester 2) Ask and dance 3) transform
Commit your ask into action: Skin in the game 2) Contingent commitment 3) Talk cricket. 4) Exit
Iterate: Play a fair game.
Session 7: Hypothesis driven entrepreneurship and RTR.
What is Key to Successfully execute The BML Loop?1) Identify the right hypotheses for your business and have the courage to test them (e.g., through interviews) 2) Identify the key indicators (that make
sense for your business and let you know how (well) you are doing — it can vary) 3) Put some mechanisms in place to measure the key indicators
(customer insights plus the link to product development) 4) Discuss the conversion funnel that helps to turn prospects into loyal customers (it often gives you the info that you need to validate your
hypotheses) See that planning and action loops go in opposite direction
Types of hypothesis: Value Hypotheses and Growth hypthoses.
Minimum viable product: The smallest set of activities needed to rigorously disprove a hypothesis.
Why is MVP important? Because, by developing that product, you go through an iterative process allowing you not only to improve its design (in response to prior test results) but also to reduce the
probability to have false negative results later.
Joker: The “Joker” in the pack (Sarasvathy, 2011). You can use it in a variety of ways depending on who you are playing with, what stage of the game you are in, and what your game goal is Equity can be used
as compensation in hiring key talents Can be used to allocate profits among talents and for things not specifically written down in a term sheet or employment contract Can be used to make a decision in
cases of non-agreement It is a trump card, so think about how you want to use it and see if there are other lesser cards that you might prefer to use instead of that one Equity is an instrument that deals with
the uncertainties of ownership.
Session 10: venture financing
What are the reasons underlying the Indian market potential? Draw the diagram.
Problem driven entrepreneurship.
Private equity: Private Equity is an asset class composed of funds purchasing stakes in companies that are not publicly traded. VC is a very specific case of PE. Investment in early stage of company’s life.

Valuation is the process of determining how much to pay to invest in a company.

Valuation Art and science: methods of valuation: comparables and Net present value.
The comparables method assigns a value to a company based on the value known to have beenplaced on ‘like’ companies Identifying comparable companies 2) Are these in the same industry? (are there
enough companies?) Are they similar in revenue? 4) Are their cost structures similar? 5) Are their growth rates/dynamics similar? 6)Are their distribution strategies similar? Etc.
What are VC firms looking for?
Passionate, driven entrepreneurs and teams Great storytellers (with coherent & comprehensive BPs; Camp, 2002),
able to “disrupt/change the narrative”, and with whom they have personal chemistry (Camp, 2002)
Companies serving an unmet need in a large, growing market #1 reason startups die: Building a product that nobody (or very fewpeople) wants to buy! (Reminder) Companies with a differentiated solution
Do one important thing 10X faster, 10X better, 10X cheaper than what exists today (remember Steve Blank on Steve Jobs) Companies with early measurable ‘traction’ (i.e., customer validation).