Corporate Entrepreneurship. Juan A. Moriano

Transcription

1 Corporate Entrepreneurship Juan A. Moriano UNED

2 DEFINITION Independent entrepreneurship is the process where an individual or group of individuals act independently, create a new organization CE = Entrepreneurial behaviour inside established organizations. CE = Entrepreneurial efforts that require organizational resources for the purpose of carrying out innovative activities in the form of product, process, and organizational innovations. Source: Morris & Kuratko(2002); Sathe(2003)

3 Hierarchy of terminology in corporate entrepreneurship Entrepreneurship Independent Entrepreneurship Corporate Entrepreneurship Strategic Renewal Innovation Corporate Venturing External corporate venturing Potential outcomes: Joint ventures Spin off Internal corporate venturing Potential outcomes: new divisions Source: Sharma / Chrisman (1999)

4 TYPES OF CE 1. Strategic renewal: entrepreneurial efforts inside organization, whose results are substantial changes in a business model, strategy or structure of the organization.

5 NOKIA Nokia s history demonstrates corporate entrepreneurship, which has been defined as a set of behavior, processes or activities that rejuvenate, renew or reinvent an organization. 1885: Paper factory 1898: Nokia's rubber business 1912: Nokia's cable businesses. 1960: First electronics department 1979: TV and Radio 1991: Nokia equipment is used to make the world s first GSM call

6 TYPES OF CE 2. External corporate:the creation of a new business unit. The output is the existence of partially or fully autonomous units operating outside existing organization, e.g. joint ventures or spin- offs.

7 TYPES OF CE 3. Internal corporate:the creation of organizational entities operating inside existing organization, e.g. new departments, divisions or cross-functional teams. Xeroxestablished an innovation board in the 1980s to aid decision making. The administrative board gave way in 1989 to an internal venture-capital group called Xerox Technology Ventures XTV was terminated in the mid-1990s, and yet another structure, called Xerox New Enterprise, became its replacement. XNE took more aggressive ownership of the ventures yet sought to infuse them with entrepreneurship. XNE, in turn, was terminated in the late 1990s

8 Corporate and independent entrepreneurs Similarly, both find the entrepreneur encountering resistance and obstacles, necessitating perseverance, ability to formulate innovative solutions and develop creative strategies for leveraging recourses. Both involve significant risk and ambiguity and require risk-management strategies and the ability of the entrepreneur to balance vision with managerial skill, passion with pragmatism, and proactiveness with patience.

9 Corporate and independent entrepreneurs Independent Entrepreneurship Corporate Entrepreneurship Risks?? Concept or idea?? Rewards?? Failures?? External influences?? Freedom?? Decision making?? Social support?? Resources??

10 The intrapreneurial framework Figure characterizes different types of people in the organization based on the extent to which they focus on: 1. The conceptualization part of things 2. Making it happens Dreamer Artist Inventor Planner Intrapreneur Manager Technician Strength of Vision Depth of Action

11 Traditional manager vs. Intrapreneur Traditional Manager Intrapreneur Primarymotives (e.g. McClelland)?? Time orientation?? Focus of attention?? Tendency to action?? Attitude toward risk?? Skills?? Who serves?? Relationship with others?? Decision-making style??

12 Are you a corporate entrepreneur? Pinchot (1985), a quick test, answer yes or no to each question 1. Does your desire to make things work better occupy as much of your time as fulfilling your duty to maintain them the way they are? 2. Do you get excited about what you are doing at work? 3. Do you think about new business ideas while driving to work or taking a shower? 4. Can you visualize concrete steps for action when you consider ways to make a new idea happen? 5. Do you get in trouble from time to time for doing things that exceed your authority? 6. Are you able to keep your ideas under cover, suppressing your urge to tell everyone about them until you have tested them and developed a plan for implementation?

13 Are you a corporate entrepreneur? 7. Have you successfully pushed through bleak times when something you were working on looked as if it might fail? 8. Do you have a network of friends at work whom you can count on for help? 9. Do you get easily annoyed by others incompetent attempts to execute parts of your ideas? 10. Can you consider trying to overcome a natural perfectionist tendency to do all the work yourself and share the responsibility for your ideas with a team? 11. Would you be willing to give up some salary in exchange for the chance to try out your business idea if the rewards for success were adequate? If you answered more time yes than no, you are probably already behaving as a corporate entrepreneur.

14 2. Barriers of CE Strategic System Political Behavioral

15 Strategic barriers Caused by missing or unclear vision, in which direction the company should go in the future, missing strategy focusing on entrepreneurial activity inside organization, the absence of innovation goals, missing effective support from top-management

16 Strategic barriers Support requires managers who are visionary and perceive their firm and its employees, as how they can become not how they are. If you want to build a ship, don't drum up people together to collect wood and don't assign them tasks and work, but rather teach them to long for the endless immensity of the sea Antoine de Saint-Exupery quotes (French Pilot, Writer and Author of 'The Little Prince', )

17 System barriers Consequence of formal managerial systems that were developed in the organization during the years in order to provide stability and coordination Examples? Byrocratic routine reporting, necessity to sign one document by five people, preference of form to content, wrong remuneration systems, inflexible budgeting, large documentation required Hierarchical levels slow down information flow upward, good ideas get stuck somewhere, exchange of relevant information between departments is missing

18 System barriers

19 Political barriers Caused by power relations and issues of control and authority Example? Managers will not want to support somebody else project in order Managers will not want to support somebody else project in order not to loose their own influence, i.e. they can withdraw resources or not provide complete information Who will stay at the head? Top-management may want rewards for nothing. In case of concerns about own career people may leave the project Focus on cost reduction not enough resources for new projects Departments may defend their traditional areas

20 Behavioral barriers Perception of risk that my career growth will stop in case of participation in an unsuccessful project Tendency to be consumed by present issues Perception of time and own skills limits No motivation for going beyond my ordinary tasks and goals. The consequence is a hesitance to accept challenge

21 3. Innovation dilemmas

22 Innovation dilemmas 1. Seeds vs. Weeds Is it worth? Separate the wheat from the chaff Deciding the merits of innovative ideas Seeds likely to bear fruit Weeds should be cast aside Dilemma: Some innovation projects require considerable level of investment before merit can be determined What mechanisms can they use to select right innovation projects?

23 Innovation dilemmas 2. Experience vs. Initiative Who will lead the new project? Rank or enthusiasm Senior managers Have experience and credibility Tend to be more risk averse Midlevel employees May be the innovators themselves May have more enthusiasm

24 Innovation dilemmas 3. Internal vs. External staffing Social capital or fresh air Innovation projects need competent staffs to succeed People drawn from inside May have greater social capital Know the organization s culture and routines May not be able to think outside the box People drawn from outside Can bring new knowledge Are costly to recruit, hire, train May have difficulty building relationships

25 Innovation dilemmas 4. Building capabilities vs. Collaborating Organizations must choose whether to collaborate with someone outside the firm: The collaborator can share costs, bring immediate relevant expertise, and send a market signal about the project s worth. Create dependencies and inhibit internal skills development Sharing benefits of innovation may create conflict Organizations may try to develop new skills internally (and it costs time and money): Development of internal capacity is limited

26 Innovation dilemmas 5. Incremental vs. Pre-emptive launch Milestones or Full Engagement Incremental launch Less risky Requires few resources Serves as a market test Large-scale launch Requires more resources Can effectively preempt a competitive response

27 Role of individuals (1) Initiator Starts innovative activity. Champion Takes the lead. Coordinates the project. Looks for resources, stimulates interest. Keeps the project viable, overcomes barriers, leads it to implementation.

28 Role of individuals (2) Sponsor / Facilitator High-level manager advocate of entrepreneurial activity Provides advice for the champion, supports project with his authority. Functions as a buffer. Protects champion if he goes against some firm rules. Helps to find resources and information. He / She should believe in champion s vision.

29 Role of individuals (3) Devil s advocate Objectively criticises new projects, focus on weaknesses, requests for clear unemotional explanations. Must be tough. Helps the firm to save money. Member of innovation team Champion cannot make it alone he / she needs a well functioning team.

30 HP Case study Discuss in group the following questions about the case: 1. What type of Corporate Entrepreneurship is described in the case? 2. What barriers did they face to improve the processes in HP? How did they overcome these barriers? 3. Which innovation dilemmas did they experience? What decisions did they take about them? 4. What role play Cheng and Anderson in reengineering the process?

31 Organizational Entrepreneurial Intensity 1. Innovativeness:attempts to embrace creativity, experimentation and novelty. Michael H. Morris 2. Risk taking:committing a high percentage of resources to projects with uncertain outcomes, and entering unknown markets. 3. Proactiveness: Acting rather than reacting to the environment Nike slogan Just do it Distinction between the inventor and the intrapreneur.

32 Innovativeness Three Frontiers of Innovation Services new or improved services Products unique or improved Processes new or better ways to accomplish a task or function

33 Innovativeness Innovativeness to what extent is the company doing things that are novel, unique, or different Does the concept address a need that has not previously been addressed Does it change the way one goes about addressing a need Is it a dramatic improvement over conventional solutions Does it represent a minor modification or improvement to an existing product Is it just the geographic transfer of a proven product

34 Risk-taking Risk-taking Financial Technical Market Personal Social

35 Missing-the-Boat and Sinking-the-Boat Risk Total Risk Risk taking strategy Missing the boat risk curve Sinking-the-Boat Planning Time

36 Relating innovativeness to risk High Home-run strategy Risk Little to no innovative activity Radical breakthroughs Low Lots of trials and experiments / Balanced portofolio of projects Innovativeness

37 Nintendo vs. Xbox

38 Exploring the Dimensions of Entrepreneurship High Dreamer Entrepreneur Innovativeness Stuck in the Mud Wild-eyed Gambler Low Low Risk-taking High

39 Entrepreneurial Intensity: Combining Degree and Frequency of Entrepreneurship Combining Degree and Frequency The Entrepreneurial Grid

40 Frequency of Entrepreneurship High Low Entrepreneurial Intensity: Combining Degree and Frequency of Entrepreneurship Continuous/ Incremental Periodic/ Incremental Low Dynamic Revolutionary Periodic/ Discontinuous Degree of Entrepreneurship (innovativeness, risk-taking, proactiveness) High

41 Applying the Entrepreneurial Grid to Organizations The entrepreneurial grid is a useful too for managers attempting to define the role of entrepreneurship within their organizations. A company s entrepreneurial strategy is effectively defined according to where it falls on the grid.

42 Applying the Entrepreneurial Grid to Organizations High Procter & Gamble Google Frequency of Entrepreneurship 3M Low Wendy s Nucor Steel Low Degree of Entrepreneurship High

43 The World's 10 Most Innovative Companies

44 Applying the Grid at the Level of the Individual Manager The entrepreneurial grid can serve as a useful means for diagnosing entrepreneurial management profiles

45 Applying the Grid at the Level of the Individual Manager High Frequency of Entrepreneurship Richard Branson (Virgin) Ted Turner (CNN) Rich DeVos (Amyway Akio Morito(Sony) Household Products) Steven Jobs (Apple, NeXT and Pixar) Sachiro Honda Ray Kroc (Honda Motors) (McDonald s) Herb Kellehner (Southwest Airways) Howard Head (Head Skis, Prince Tennis Racquets) Low Low Degree of Entrepreneurship High

46 Google