Corporate Entrepreneurship I

MBAX 6100MBAX 6100

Entrepreneurship & Entrepreneurship &

Small Business ManagementSmall Business Management

MBAX 6100MBAX 6100

Entrepreneurship & Entrepreneurship &

Small Business ManagementSmall Business Management

Frank MoyesFrank MoyesLeeds College of Business Leeds College of Business University of ColoradoUniversity of ColoradoBoulder, ColoradoBoulder, Colorado

Corporate Entrepreneurship I

Corporate Entrepreneurship Corporate Entrepreneurship Revised ScheduleRevised Schedule

Week 5 Obstacles to corporate entrepreneurshipWeek 5 Obstacles to corporate entrepreneurship Week 6 Week 6 You as an IntrapreneurYou as an Intrapreneur Week 7 Week 7 Innovation in corporations Innovation in corporations

Switch Week 6 & Week 7 Topics & Assignments

Corporate Entrepreneurship I

Today’s AgendaToday’s Agenda

Corporate EntrepreneurshipCorporate Entrepreneurship Is this a good market?Is this a good market? Entrepreneurial market research –Gene HayworthEntrepreneurial market research –Gene Hayworth

Corporate Entrepreneurship I

Next Week’s ScheduleNext Week’s Schedule

Corporate Entrepreneurship – Creativity & InnovationCorporate Entrepreneurship – Creativity & Innovation Case: Emerging Business Opportunities at IBMCase: Emerging Business Opportunities at IBM ReadRead

Bringing Silicon Valley InsideBringing Silicon Valley Inside Feasibility: M-4 Is This a Good Industry?Feasibility: M-4 Is This a Good Industry?

Read a magazine you would never, ever read & identify a Read a magazine you would never, ever read & identify a business opportunitybusiness opportunity

Entrepreneurship InterviewEntrepreneurship Interview Hand in paperHand in paper Be ready to discuss in classBe ready to discuss in class

Corporate Entrepreneurship I

What is Corporate Entrepreneurship?What is Corporate Entrepreneurship?

““Formal or informal activities aimed at creating new Formal or informal activities aimed at creating new businesses in established companies through product businesses in established companies through product and process innovations and market developments.” and process innovations and market developments.” ZahraZahra

“…“…centers on reenergizing and enhancing the firm’s centers on reenergizing and enhancing the firm’s ability to acquire innovative skills and capabilities.” ability to acquire innovative skills and capabilities.” Morris & KuratkoMorris & Kuratko

““Cost-effective innovation or intrapreneurship” PinchotCost-effective innovation or intrapreneurship” Pinchot

Corporate Entrepreneurship I

How Do Corporations Deal With Uncertainty?How Do Corporations Deal With Uncertainty?

Thorough analysis Thorough analysis Approval levelsApproval levels Must follow the plan once approvedMust follow the plan once approved Short term time horizonShort term time horizon Establish controls – HR, accounting, legal, marketingEstablish controls – HR, accounting, legal, marketing RulesRules

Corporate Entrepreneurship I

Why Do Companies Need Rules?Why Do Companies Need Rules?

Consistent actionsConsistent actions Guide behaviorGuide behavior Help make decisionsHelp make decisions Treat employees fairlyTreat employees fairly Provide consistent quality & serviceProvide consistent quality & service

Corporate Entrepreneurship I

Obstacles to Corporate EntrepreneurshipObstacles to Corporate Entrepreneurship

SystemsSystems Organization structuresOrganization structures Policies & ProceduresPolicies & Procedures Strategic directionsStrategic directions PeoplePeople CultureCulture

Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I

Systems Obstacles?Systems Obstacles?

Reward & evaluation systemsReward & evaluation systems Rigid planning & budgeting systemsRigid planning & budgeting systems

Don’t like changes or surprisesDon’t like changes or surprises Inflexible budgeting systemsInflexible budgeting systems Arbitrary cost allocation systemsArbitrary cost allocation systems

Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I

Organizational Obstacles?Organizational Obstacles?

Too many hierarchical levelsToo many hierarchical levels Responsibility w/o authorityResponsibility w/o authority Top down managementTop down management Restricted communication channelsRestricted communication channels Lack of accountabilityLack of accountability Lack of commitmentLack of commitment

Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I

Policies & Procedures Obstacles?Policies & Procedures Obstacles?

Long, complex approval cyclesLong, complex approval cycles Extensive documentation requirementsExtensive documentation requirements Corporate requirementsCorporate requirements

AccountingAccounting HRHR Brand useBrand use SOX SOX

Traditional evaluation techniques don’t work (ROI, market Traditional evaluation techniques don’t work (ROI, market share, quick payback)? share, quick payback)?

Management reporting requirementsManagement reporting requirements

Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I

Strategic Direction Obstacles?Strategic Direction Obstacles?

Lack of commitment from senior execsLack of commitment from senior execs No innovation goalsNo innovation goals No strategy for ENo strategy for E No visionNo vision No E role models at topNo E role models at top Instincts are to protect existing businessesInstincts are to protect existing businesses

Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I

People Obstacles?People Obstacles?

Definition of success: promotion every 3 years, corner Definition of success: promotion every 3 years, corner office, corporate kiteoffice, corporate kite

Fear of failure/risk takingFear of failure/risk taking Human nature: resistance to change, turf protection, Human nature: resistance to change, turf protection,

complacencycomplacency SkillsSkills

Inappropriate skills/talentsInappropriate skills/talents Entrepreneurial ventures attract mavericks & risk takersEntrepreneurial ventures attract mavericks & risk takers

Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I

Culture Obstacles?Culture Obstacles?

Ill-defined valuesIll-defined values No consensus on prioritiesNo consensus on priorities Experimentation not encouragedExperimentation not encouraged Values that conflict with E requirementsValues that conflict with E requirements

Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I

Personal Obstacles?Personal Obstacles?

Too busy with current jobToo busy with current job Fear of failureFear of failure Managerial skills neededManagerial skills needed

Selling skills Selling skills Financial dynamicsFinancial dynamics

Style of managementStyle of management Old dog who can’t learn new tricksOld dog who can’t learn new tricks Political savvyPolitical savvy Sense of urgencySense of urgency Morris & Kuratko, Corporate Entrepreneurship

Corporate Entrepreneurship I

What is the Problem?What is the Problem?

Corporate Entrepreneurship I

Definitions of an EntrepreneurDefinitions of an Entrepreneur

““Entrepreneurs are societies rejects, instead of becoming Entrepreneurs are societies rejects, instead of becoming hobos, criminals or professors, the start their own hobos, criminals or professors, the start their own business.” Thereaubusiness.” Thereau

““Traits of entrepreneurs are closest to juvenile delinquents.”Traits of entrepreneurs are closest to juvenile delinquents.” ““Progress depends upon unreasonable men.” GB ShawProgress depends upon unreasonable men.” GB Shaw ““If I’m in control, I’m probably going to slow.” Mario AndrettiIf I’m in control, I’m probably going to slow.” Mario Andretti ““Road less traveled”, Robert Frost: Road less traveled”, Robert Frost: ““If you ain’t makin’ waves, you ain’t kickin’ hard enough.”If you ain’t makin’ waves, you ain’t kickin’ hard enough.”

Corporate Entrepreneurship I

Entrepreneurs AreEntrepreneurs Are

Opportunity driven, which meansOpportunity driven, which means Understands competitionUnderstands competition Understands market: size, trends, accessibilityUnderstands market: size, trends, accessibility Understand customers through direct contactUnderstand customers through direct contact

Tolerance for ambiguityTolerance for ambiguity Locus on controlLocus on control Take risksTake risks CreativeCreative ImpatientImpatient Not tied to conventional approachNot tied to conventional approach

Corporate Entrepreneurship I

Entrepreneurial Ventures Good AtEntrepreneurial Ventures Good At

Focus all resources & time on creating a successful Focus all resources & time on creating a successful ventureventure

Trial & error (ready, fire, aim)Trial & error (ready, fire, aim) Quick decisionsQuick decisions Using OPR’sUsing OPR’s Instant communicationsInstant communications Recruiting & motivating world-class employeesRecruiting & motivating world-class employees

How Start-up Actually HappensHow Start-up Actually Happens

Inspiration Goals

Plan FoolingAround

Doing

Plans

Mistakes

Failure Goals

Some OtherAction

Plan

ActionGoals

Inspiration

Inspiration SuccessPinchot & Pellman, Intrapreneurship in Action

Corporate Entrepreneurship I

Differences Between Start-up & Differences Between Start-up & Corporate EntrepreneursCorporate Entrepreneurs

Entrepreneur takes the riskEntrepreneur takes the risk Entrepreneur owns conceptEntrepreneur owns concept Unlimited rewardsUnlimited rewards One error may mean failureOne error may mean failure Independence of Independence of

entrepreneurentrepreneur Experimentation & flexibilityExperimentation & flexibility Quick decision makingQuick decision making Resource limitationsResource limitations

Corporation assumes riskCorporation assumes risk Corporation owns; no equity Corporation owns; no equity Clear limitsClear limits More room for errorsMore room for errors Interdependence of entrepreneurInterdependence of entrepreneur Rules, procedures, bureaucracyRules, procedures, bureaucracy Long approval cyclesLong approval cycles Access to finances, R&D, sales Access to finances, R&D, sales

force, distribution channelsforce, distribution channels

Start-up Corporate

Corporate Entrepreneurship I

Similarities Between Start-up & Similarities Between Start-up & Corporate EntrepreneursCorporate Entrepreneurs

Opportunity recognition with a defined windowOpportunity recognition with a defined window Driven by passionate individual who uses a team to Driven by passionate individual who uses a team to

commercialize a conceptcommercialize a concept Encounter resistance & obstacles requiring Encounter resistance & obstacles requiring

persuasivenesspersuasiveness Must convince people to “invest”Must convince people to “invest” Leverage resourcesLeverage resources AmbiguityAmbiguity

Corporate Entrepreneurship I

How Can Corporations Be How Can Corporations Be Intrapreneurial?Intrapreneurial?

Corporate Entrepreneurship I

Conclusion – Challenges to IntrapreneurshipConclusion – Challenges to Intrapreneurship

How encourage experimentationHow encourage experimentation How treat failureHow treat failure Types of people who work well in large organizationsTypes of people who work well in large organizations How establish effective reward systemsHow establish effective reward systems Definition of success - corner office & corporate kiteDefinition of success - corner office & corporate kite Traditional evaluation techniques don’t work (ROI, market Traditional evaluation techniques don’t work (ROI, market

share, quick payback)? share, quick payback)? Instincts are to protect existing businessesInstincts are to protect existing businesses Is patient capital possible? Phil Knight “Took 18 years to be Is patient capital possible? Phil Knight “Took 18 years to be

an overnight success.”an overnight success.”

Corporate Entrepreneurship I

Building Breakthrough Businesses Building Breakthrough Businesses Within Established OrganizationsWithin Established Organizations

Emphasis is on executionEmphasis is on execution Strategic experiments are highest risk and returnStrategic experiments are highest risk and return Require unique approach – Forgetting, Borrowing & Require unique approach – Forgetting, Borrowing &

LearningLearning

Govindarajan & Trimble, HBR, “Building Breakthrough Businesses Within Established Organizations”

Corporate Entrepreneurship I

ForgettingForgetting

Forget core business modelForget core business model Changing behavior – institutional memoryChanging behavior – institutional memory Hiring, compensation, status, manufacturing, sales, marketing, Hiring, compensation, status, manufacturing, sales, marketing,

R&D, new product development milestone driven, purchasing R&D, new product development milestone driven, purchasing (supply chain)(supply chain)

PlanningPlanning Falling short was perceived failureFalling short was perceived failure Informed estimatesInformed estimates

Govindarajan & Trimble, HBR, “Building Breakthrough Businesses Within Established Organizations”

Corporate Entrepreneurship I

Borrowing IBorrowing I

Complete separation not practical, nor desirable.Complete separation not practical, nor desirable. Resources are too valuableResources are too valuable NYTD needed branded content & access to exist NYTD needed branded content & access to exist

Times advertisersTimes advertisersObjective - Gain competitive advantageObjective - Gain competitive advantage

Not to get cost reductionNot to get cost reduction Avoid IT & HR linksAvoid IT & HR links

Corporate Entrepreneurship I

Borrowing IIBorrowing II

Requires proactive senior managementRequires proactive senior management Manage the interactions – we vs. them Manage the interactions – we vs. them Performance review stressed collaboration, Performance review stressed collaboration,

willingness to cooperatewillingness to cooperateMake it painless to core. Make it painless to core.

Replenish resourcesReplenish resources Set transfer price high enough to make it a prioritySet transfer price high enough to make it a priority

Corporate Entrepreneurship I

Learning ILearning I

Strategic experimentsStrategic experiments Must have a structured learning process to reduce Must have a structured learning process to reduce

uncertaintyuncertainty Make mistakes earlyMake mistakes early Evaluate leader on ability to learn & make good Evaluate leader on ability to learn & make good

decisionsdecisions

Corporate Entrepreneurship I

Learning IILearning II

Lean to predict outcomesLean to predict outcomes By analyzing the disparities between forecast and outcomeBy analyzing the disparities between forecast and outcome Frequent, candid, open, fastFrequent, candid, open, fast

Predictions can’t become too rigidPredictions can’t become too rigid Aggressive investment, followed by abandonmentAggressive investment, followed by abandonment Guardrail to guardrail decision makingGuardrail to guardrail decision making Plans should be easy to revisePlans should be easy to revise Avoid lots of detailAvoid lots of detail

Corporate Entrepreneurship I

Conclusions: Building Breakthrough Conclusions: Building Breakthrough BusinessesBusinesses

Strategic experiments are highest risk and returnStrategic experiments are highest risk and return Emphasis is on executionEmphasis is on execution Require unique approach – Forgetting, Borrowing & Require unique approach – Forgetting, Borrowing &

LearningLearning Commitment & active involvement of top managementCommitment & active involvement of top management

Govindarajan & Trimble, HBR, “Building Breakthrough Businesses Within Established Organizations”