corporate ventures

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Chapter 4 The Forms of The Forms of Corporate Corporate Entrepreneurship Entrepreneurship Copyright (c) 2007 by Donald F. Kuratko All rights reserved.

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Page 1: Corporate Ventures

Chapter 4

The Forms of The Forms of Corporate Corporate EntrepreneurshipEntrepreneurship

Copyright (c) 2007 by Donald F. Kuratko All rights reserved.

Page 2: Corporate Ventures

EIntroduction

Entrepreneurship manifests in Entrepreneurship manifests in companies in two ways:companies in two ways:

Corporate VenturingCorporate Venturing – addition of – addition of new businesses to the corporationnew businesses to the corporation

Strategic EntrepreneurshipStrategic Entrepreneurship – – highly consequential innovations highly consequential innovations that are adopted in the firm’s that are adopted in the firm’s pursuit of competitive advantagepursuit of competitive advantage

Page 3: Corporate Ventures

EIntroduction

Delineating Different Forms that Corporate Entrepreneurship Can Take

Corporate Entrepreneurship

Corporate Venturing

• Internal corporate venturing

• Cooperative corporate venturing

• External corporate venturing

Strategic Entrepreneurship• Strategic renewal• Sustained regeneration• Domain redefinition• Organizational rejuvenation• Business model

reconstruction

Page 4: Corporate Ventures

EModes of Corporate VenturingModes of Corporate Venturing

Internal corporate venturingInternal corporate venturing – new – new businesses created and owned by the businesses created and owned by the corporationcorporation

Cooperative corporate venturingCooperative corporate venturing – new – new businesses are created and owned by businesses are created and owned by the corporation together with one or the corporation together with one or more external development partnersmore external development partners

External corporate venturingExternal corporate venturing – new – new businesses are created by parties businesses are created by parties outside the corporation and outside the corporation and subsequently invested in or acquired by subsequently invested in or acquired by the corporationthe corporation

Page 5: Corporate Ventures

ECorporate Venturing

What is a new business?What is a new business?

Market Developm

ent Strategy

Diversification

Strategy

MarketPenetratio

nStrategy

Product Developm

entStrategy

Corporate Growth Strategy MatrixCorporate Growth Strategy Matrix

New Markets

Current Markets

Product Focus

Market Focus

“When a company finds itself dealing with new categories of customers and selling them products or services that are new to the firm”

Page 6: Corporate Ventures

ECorporate Venturing

The Domain of a New BusinessThe Domain of a New Business

New Busine

ss

Existing

Business

Market Creation

*New Market

Market Extension

Existing Market

Existing Product in

Current Industry

New Industry Entry and/or

Creation

*New Product in

Current Industry

Product Extension in

Current Industry

Market Focus of the

Entrepreneurial Initiative

Product Focus of the Entrepreneurial Initiative

* The point of reference for new is new to the firm

Page 7: Corporate Ventures

ECorporate Venturing

Motives for Corporate VenturingMotives for Corporate Venturing

LeveragingLeveraging – to exploit existing – to exploit existing competencies in new product or competencies in new product or market arenasmarket arenas

LearningLearning – to acquire new – to acquire new knowledge and skills that may be knowledge and skills that may be useful in existing product or market useful in existing product or market arenasarenas

Page 8: Corporate Ventures

ECorporate Venturing

LeveragingLeveraging To exploit under-utilized To exploit under-utilized

resourceresource To extract further value from To extract further value from

existing resources existing resources To introduce competitive To introduce competitive

pressure onto internal suppliers pressure onto internal suppliers To spread the risk and cost of To spread the risk and cost of

product development product development To divest non-core activitiesTo divest non-core activities

Page 9: Corporate Ventures

ECorporate Venturing

LearningLearning

To learn about the process To learn about the process of venturing of venturing

To develop new To develop new competencies competencies

To develop managersTo develop managers

Page 10: Corporate Ventures

ECorporate Venturing

Corporate venturingCorporate venturing – directly investing – directly investing corporate funds into external business start-corporate funds into external business start-upsups

Chesbrough’s framework for linking corporate Chesbrough’s framework for linking corporate venture capital investments with a venture capital investments with a company’s larger strategic agenda can be company’s larger strategic agenda can be sorted into categories according to:sorted into categories according to:

1.) their objectives (strategic or financial)1.) their objectives (strategic or financial)2.) the degree to which the new business 2.) the degree to which the new business being invested in (typically as a start-up) being invested in (typically as a start-up) has operational capabilitieshas operational capabilities

Page 11: Corporate Ventures

ECorporate Venturing

Four pure types of corporate Four pure types of corporate venture capital investment:venture capital investment:

1.) Driving investments1.) Driving investments

2.) Enabling investments2.) Enabling investments

3.) Emergent investments3.) Emergent investments

4.) Passive investments4.) Passive investments

Page 12: Corporate Ventures

EStrategic Entrepreneurship: Innovating in Pursuit of Competitive Advantage

Form of Strategic Entrepreneur

Focus of the Entrepreneurial Initiative*

The Entrepreneurial Event

Typical Frequency of the Entrepreneurial Event

StrategicStrategicRenewalRenewal

Strategy of the firm Adoption of a new strategy Low

SustainedSustainedRegenerationRegeneration

Products offered by the firm or markets served by the firm

Introduction of a new product into a pre-existing product category or introduction of an existing product into a new (to the firm) but pre-existing market

High

DomainDomainRedefinitionRedefinition

New competitive space Creation of new or reconfiguration of existing product categories or market space

Low

OrganizationalOrganizationalRejuvenationRejuvenation

Organization structure, processes, and/or capabilities of the firm

Enactment of a major, internally-focused innovation aimed at improving strategy implementation

Low-to-moderate

Business ModelBusiness ModelReconstructionReconstruction

Business model of the firm Design of a new or redesign of an existing business model

Low*The focus of the entrepreneurial event can be the entire firm or, in the case of multi-business firms, one or more of its businesses

Page 13: Corporate Ventures

EThe Business Model as a Vehicle for Corporate Entrepreneurship

A Firm’s Business Model:A Firm’s Business Model:

““a concise representation of how an a concise representation of how an interrelated set of decision interrelated set of decision variables in the areas of venture variables in the areas of venture strategy, architecture, and strategy, architecture, and economics will be addressed to economics will be addressed to createcreate sustainable competitive sustainable competitive advantage in defined markets”advantage in defined markets”

Page 14: Corporate Ventures

EThe Business Model as a Vehicle for Corporate EntrepreneurshipA business model should address six basic A business model should address six basic

questions:questions:

1.) How does the firm create value1.) How does the firm create value2.) For whom does the firm create value2.) For whom does the firm create value3.) What is our source of internal advantage or 3.) What is our source of internal advantage or

core competencycore competency4.) How does the firm externally differentiate 4.) How does the firm externally differentiate

itself in the marketplaceitself in the marketplace5.) What is the firm’s model for making money5.) What is the firm’s model for making money6.) What is the management’s growth 6.) What is the management’s growth

ambition and over what time periodambition and over what time period

Page 15: Corporate Ventures

EThe Business Model as a Vehicle for Corporate Entrepreneurship

Decisions in these six areas can Decisions in these six areas can be made at three levels:be made at three levels:

1.) Foundation level1.) Foundation level

2.) Proprietary level2.) Proprietary level

3.) Rules level3.) Rules level

Page 16: Corporate Ventures

EThe Open Innovation Revolution

Open innovationOpen innovation – “a firm is not – “a firm is not solely reliant upon its own solely reliant upon its own innovative resources for new innovative resources for new technology, product, or business technology, product, or business development purposes. Rather, development purposes. Rather, the firm acquires critical inputs to the firm acquires critical inputs to innovation from outside sources.”innovation from outside sources.”

Page 17: Corporate Ventures

EThe Open Innovation Revolution

Four reasons companies are increasingly Four reasons companies are increasingly choosing to pursue open innovation choosing to pursue open innovation models:models:

1.) Importing new ideas is a good way to 1.) Importing new ideas is a good way to multiply the building blocks of innovationmultiply the building blocks of innovation

2.) Exporting ideas is a good way to raise 2.) Exporting ideas is a good way to raise cash and keep talentcash and keep talent

3.) Exporting ideas gives companies a way to 3.) Exporting ideas gives companies a way to measure an innovation’s real value and to measure an innovation’s real value and to ascertain whether further investment is ascertain whether further investment is warrantedwarranted

4.) Exporting and importing ideas helps 4.) Exporting and importing ideas helps companies clarify what they do bestcompanies clarify what they do best