1 unchain – corporate entrepreneurship corporate entrepreneurship unchain dr. v.e. scholten...

1UNCHAIN – Corporate Entrepreneurship

Corporate Entrepreneurship

UNCHAIN

Dr. V.E. [email protected]

2

Organized by Delft Centre for Entrepreneurship

Technology Based Entrepreneurship

Bachelor course for all TU students



Courses in ‘technopreneurship’:• Introduction to entrepreneurship and writing a

business plan (4 ec)• Essentials of technology-based business (4 ec)• Finance for entrepreneurs (3 ec)• Product Development and Innovation (3 ec)• Business Marketing for Engineers (3 ec)• Managing Start-ups (3 ec)• Integrating: Case study in technopreneurship (10

ec)

• Total program of 30 EC



• Block 1: Kick-off and intensive two weeks of introduction course • To get familiar with each other• To work in diverse groups

• Block 1: 5 weeks of 3 individual courses • entrepreneurship essentials/ finance/ product development

• Block 2: 7 weeks of 2 individual courses• Managing start-ups/ business marketing for engineers

• Block 1 & 2: Case study in technopreneurship• Integrates the individual courses in a large assignment• 10 teams of 5 students, student choose their company

• Criteria: 10-75 fte, 5+ years old, technology oriented• First block: understanding the company: technology and markets• After first block students present innovation to all teachers• Second block: implementing innovation in the company and market• After second block students present their innovation to company and external

jury


Management of Technology

• Master level program at Faculty of Technoloy, Policy and Management

• Technology Management course for engineers

• Open to technical students, 50% Dutch – 50% Foreign

• Focus is on private companies and has a company orientation

• How to remain competitive based on technological innovations


Management of Technology curriculumFirst year 2010-2011

1st semester 30 ects 2nd semester 30 ects

First course period Second course periodThird course period

Fourth course period

MoT1420

Economic Foundations

(6 ects)

MoT1512

HRM en

Leaderschip

(4 ects)

MoT1001

Integration

Moment I

(4 ects)

MoT9511

Advanced Project

Management

(5 ects)

MoT2420

Innovation

Management

(6 ects)

MoT1002

Integration

Moment II

(4 ects)

MoT 1410

Technology Dynamics

(4 ects)

MoT

Marketing

(4 ects)

MoT1431

Technology and

Strategy

(6 ects)

MoT

Corporate Finance and

Accounting

(4 ects)

MoT2310

Qantitative

Research

Methods

(4 ects)

MoT1440

Philosophy of

Science

(3 ects)

MoT1450

Decision Making

(6 ects)

Managing

Technology

The Corporation Research Methodology Integration Moment


1st semester 30 ects 2nd semester 30 ects

First course period Second course period Third course period Fourth course period

MoT1601

System Modelling

(5 ects)

MoT2320

Qualitative

Research

Methods

(4 ects)

MoT2001

Preparation for

the Master

Thesis

(4 ects)

MoT2910

MSc Thesis Project

(30 ects)MoT2410

Corporate Social

Responsibility

(3 ects)

Specialisation

(14 ects)

Managing Technology The Corporation Research Methodology Integration Moment

Management of Technology curriculumSecond year 2011-2012


Specialization Entrepreneurship•The aim is to gain in-depth knowledge and acquire The aim is to gain in-depth knowledge and acquire

practical skills with respect to entrepreneurship. practical skills with respect to entrepreneurship.

•The first part of the specialization is a general part The first part of the specialization is a general part regarding the identification of entrepreneurial regarding the identification of entrepreneurial opportunities and how technology can be used to opportunities and how technology can be used to create value. create value.

• In the second part, students can choose either to In the second part, students can choose either to follow the track on writing a business plan or follow the track on writing a business plan or corporate entrepreneurship. corporate entrepreneurship.


MOT9555:Opportunity Framing(2 ECTS)

WM0516:Turning

Technology into

Business(6 ECTS)

WM0506: Writing a Business

Plan (6 ECTS)

MOT9556:Corporate

Entrepreneurship(6 ECTS)

Skills(1 ECTS)

MOT

MSc Thesis Project

-Starting a venture-New business development-Corporate Entrepreneurship

Specialization Entrepreneurship


Specialization Entrepreneurship•Opportunity Framing explores the fundamental principles Opportunity Framing explores the fundamental principles

of identifying and recognizing entrepreneurial of identifying and recognizing entrepreneurial opportunities opportunities

•Turning Technology into Business aims at developing a Turning Technology into Business aims at developing a plan for the commercializing a patentable scientific findingplan for the commercializing a patentable scientific finding

•Writing a Business Plan is about the hands-on skills that Writing a Business Plan is about the hands-on skills that entrepreneurs need to craft a sophisticated business planentrepreneurs need to craft a sophisticated business plan

•Corporate entrepreneurship aims at understanding how to Corporate entrepreneurship aims at understanding how to foster an entrepreneurial culture, initiate strategic renewal foster an entrepreneurial culture, initiate strategic renewal in large established firms and manage corporate venture in large established firms and manage corporate venture programsprograms


Corporate Entrepreneurship

UNCHAIN

Dr. V.E. Scholten


Contents

• The need for new business and paths to grow

• Strategic renewal

• Organising internal corporate venturing

• Organising external corporate venturing

• Discussing the Xerox Technology Ventures case


The need for new business and paths to grow

Organization Environment

Sustainable competitive advantage

Role of technology innovation


Discontinuous technological innovation and firm alignment with the environment

1) Firm is aligned with environment ==> Dominant logic prevails

2) Change in environment

3) build-up of stress between changing demands of environment and inert company==> need to unlearn dom. logic

4) Stress is too large, firm renews

5) Firm is aligned with environment

Environment Firm



Why large firms have difficulty to take up more radical innovations

• Distorted perceptions• Myopia, Arrogance and denial, Grooved thinking

• Dulled motivation• Direct cost of change, Cross subsidy comforts, Installed base, cannibalization costs

• Failed creative response• Reactive mind-set, Inadequate strategic vision

• Political deadlocks• Departmental politics, Incommensurable beliefs, Vested values

• Action blockades and disconnects• Leadership inaction, Embedded routines, Collective action problems, Capability gaps

• Mostly they react by• Downsizing, outsourcing support activities, divesting non-core businesses



Disruptive technologies

• Initially unattractive

• Different package of performance attributes

• Inferior performance for mainstream market

• New markets or new applications

• Improving over time

• Performance improvement required by mainstream market

• Invasion of mainstream market



Disruptive technologies are often financially unattractive• small market, difficult to project the long term• is often seen as not meaningful contribution to corporate growth• not worth to invest in

• disruptive: unreliable estimates of the market• traditional: backing projects of which the market is

assured, fulfilling the requirements of profitable customers and reducing risk.

Disruptive technologies need a different management approach.

Source: Bower & Christensen (1995) Disruptive Technologies: Catching the Wave.



Signaling Disruptive

Innovations

• Technologies at the horizon,

signal disagreements

between marketing, financial

and technology managers.

• Pay attention to lead

customers not the

mainstream customer

• Keep the new activity loosely

coupled from mainstream

activities

• Integration leads to problems

Crossing the chasmGadgets-likes vs pragmatists require a different approach



Corporate venturing

• Managing new radical innovations using start-up ventures


Vehicles to grow

Organic growth?

Acquisitions? Alliances?

Internal growth

External growth

If unrelated than it requires a different management approach:

Field of corporate entrepreneurship


Inverted u-shape relation between scope and performance

Company performance

Company scope


Bounded rationality

Herbert Simon (1955)

• Individuals have limits:• In formulating the problem• In solving complex models• In processing (receiving, storing, retrieving, transforming)

information


Bounded Rationality• Agents with bounded rationality look for satisfying answers, which means that

agents deliberate only long enough to come up with good enough course of actions.

• It will be difficult for managers to focus on exploiting current business and exploit new emerging business

• Mechanisms to solve the exploitation exploration dilemma

• Alternating between different roganizational designs (i.e. organic and mechanistic structures) (Hedberg et al., 1976)

• Creating loosely coupled organizations (Levinthal, 1997)

• Separating distinct units (Christensen, 1998)


Corporate entrepreneurship

Strategic Renewal Innovation Corporate Venturing

Internal Corporate Venturing

External Corporate Venturing

•Struct. Autonomy•Degree of relatedness•Extent of innovation•Sponsorship

•Semi-autonomous•Less related•Pioneering innov.•Outside the corp.

New organizational forms: Joint ventures & Spin-offs

New Mindset Corporate ventures


Corporate entrepreneurship

• Strategic renewal• Significant changes in strategy or structure (Sharma and Chrisman, 1999) • Implementation of a new strategy (Covin and Miles, 1999)

• Altering the firm’s resource base (Stopford and Baden-Fuller, 1994)

• Changes in organizational structure (Guth and Ginsberg, 1990)

• Corporate venturing• Creation of new business organizations• Focus on new innovations• External corporate venturing

• Semi-autonomous entities outside the existing organizational domain

• Internal corporate venturing• New organizational entities within the organizational domain.


Leica

2002 2003 2004 2005 2008

Sales 144 mln 119 mln 98 mln +15.7% 155mln

Operating result

2.8 mln 3.0 mln -15.5 mln 0.6 mln 2.0 mln

Net income 1.5 mln -3.4 mln

Cash flow 13.3 mln 5.5 mln


LEICA

• Three Independent Global Companies Share the Leica Brand

Leica Camera AG: cameras, lenses, binoculars, projectors

Leica Geosystems AG: capture, model, and visualize spatial reality and to support bi-directional data flow

Leica Microsystems AG: vision, measurement, lithography and analysis of micro structures.


Leica: how to renew?

1. Focus on analogue photography2. Focus on digital photography3. Focus on producing parts, like lenses4. Stop, milk, and sell the camera business5. Something else??


Leica today

• Focus on Lenses • Collaboration between Leica and Panasonic

• Nurtures other global companies and Allows further growth

• Acquisition of Sinar in 2006


Organization Designs for Corporate Entrepreneurship

Special business

unit

Independent

business unit

Spin off

New business

department

New venture

division

Contracting

Direct integration Micro New

Ventures

department

Nurturing &

contracting

Strategic importance

Operational relatedness

Source: Burgelman, 1984

Unrelated

Partly related

Strongly related

Very important Not importantUncertain


Assessing Operational Relatedness

• What are the key capabilities to make this project successful?• Where, how, and when are we going to get them if we do not

have them yet, and at what cost?• Who else might be able to do this, perhaps better?• How will these new capabilities affect the capacities currently

employed in our mainstream business?Source: Burgelman, 1984

• Advantages• Sharing and leveraging resources

and capabilities• Economies of scope, scale, and

experience effects

• Disadvantages• Intrusion• Cannibalization• Less potential for radical

innovation

Issues:• More related and it can be assessed better upfront• More unrelated => less economies of scale• More unrelated => What is the benchmark? (BU/ division/ firm)


Assessing Strategic Importance

• How does this initiative maintain our capacity to move in areas where major current or potential competitors might move?

• How does this help us to find out where not to go?• How does this help us create new defensible niches?• To what extent could it put the firm at risk?Source: Burgelman, 1984

• Advantages• Direct top management support• Urgency of the venture is visible

• Disadvantages• Needs control• Battle for scarce resources• Organizational change is needed

Issues:• Need to have a clear strategic direction

• Difficult to assess upfront

36

Golden rule of venturing:

The more unrelated the venture, the more autonomous it should be!


Organizing for ICV: Process model

Definition ImpetusStrategic

context

Structural

context

Corp mgt

NVD mgt

Venture

mgr

Source: Burgelman, 1983

Techn and need linking

Strategic forcing

Strategic building

Org championing

Delineating

Rationalizing StructuringStructuring

Product

championing

SeSelectingecting

CoachingCoaching NegotiatingNegotiating

QuestioningQuestioningGatekeepingGatekeeping

AuthorizingAuthorizingMonitoringMonitoring


Issues in managing ICV

• Domain and synergy: potential for overlapSolution: a master strategy; common interests and top management

involvement

• Rewards: • Size of business is important• Successful venturing leads to neglect of quality• Who is going to run the business when it is successful

Solution: reward system should reflect the special nature of the NVD

• Lack of corporate diversification strategy• How does if affect the corporate image

Solution: Create a strategy delineated in new business fields


How to control entrepreneurial behavior in ICV

Ground rule 1: give up control to gain control• Empowerment

• Accountability

• Goal congruence

Ground rule 2: create organizational slack• Creates space to try new things

• Must not undermine operational needs

• Staged investments

Source: Morris and Kuratko, 2002


Exxon’s Two-fold Corporate Venturing Program

External financial investment alongside private VC

18 ventures

• Air pollution control

• Health care

• Advanced materials 2

• Energy conversion and storage 3

• Information systems 11

Internal ventures by special internal unit: Exxon Enterprises

19 ventures

Advanced materials, components, systems 7

Energy conversion and storage 5

Information systems and system components 7


The Failure of Exxon Enterprises

Internal ventures by special unit Exxon Enterprises

18 projects in ICV:successful(IRR 51 %)

none break even, all terminated and special ICV unit dissolved

What had happened?Source: Chesbrough, 2000


From traditional to current

Not all Internal Venturing activities are successful

More open approach to venturing is important

Emerging business requires a fundamental shift of generating and commercializing new ideas

Innovation changed from a closed approach to a open approach


ICV and Closed Innovation• Successful innovation requires control

• Attract the best and brightest scientists

• Develop and manufacture yourself

• Market and distribute yourself

• Take profits and reinvest yourself (circle of innovation)

• Control your own IP and protect it from others

• High R&D investments


Closed Innovation in Industrial R&D

Research ProjectsResearch Projects

Development ProjectsDevelopment Projects

Company BoundaryCompany Boundary

Current MarketCurrent Market


Open innovation

• Problem with closed innovation:• Not all the smart people work for us

• Commercialization of own ideas as well as from other firms

• Bring inhouse ideas outside the current business

• No lock up of IP but use in licensing, joint ventures and corporate

ventures

• Porous boundaries of the firm


Open Innovation in Industrial R&D

Current MarketCurrent Market

New MarketNew Market


fromfrom….….

Opening up the R&D Value Chain

100%100%

R&DR&D

Spin-out oftechnology, e.g.

Lasers

to….to….

Spin-in of ventures, e.g.

Systemonic

R&DR&D


Internal and External Venturing

Internal Corporate Venturing:

• Corporate venturing activities that

result in the creation of

organizational entities that reside

within an organizational domain.

External Corporate Venturing:

• Corporate venturing activities that

result in the creation of semi-

autonomous or autonomous

organizational entities that reside

outside the existing organizational

domain.

Source: Sharma & Chrisman, 1999


External Corporate Venture Process

• How to control ventures when external corporate venturing?

• If• Internal control is too tight• And you know little about managing start-ups?


External or Venture Capital

“Money provided by professionals who invest alongside management in young, rapidly growing companies that have the potential to develop into significant economic contributors.”

Source: National Venture Capital Association, 2001


Value-added Support by VCs I

1. Serving as a sounding board for the entrepreneur team

2. Helping the firms obtain alternative further sources of equity funding

3. Interfacing with the investor group

4. Monitoring financial performance

5. Helping their portfolio companies attract alternative sources of debt financing

Source: MacMillan et al., 1988


Value-added Support by VCs II

1. Help with additional financing

2. Strategic planning

3. Management recruitment

4. Operational planning

5. Introductions to potential customers and suppliers

6. Resolving compensation/ rewarding issues

Source: Gorman and Sahlman, 1989


Comparison of CVC and VC Organizational Attributes

Corporate Venture Capital (CVC)

Venture Capital (VC)

Incentive intensity Weaker Strong

Financial discipline on downside

Weaker Strong

Monitoring Internal External

Discovering alternative business models

Constrained Unconstrained

Source: Chesbrough, 2000


Comparison of CVC and VC Potential Advantages


Independent Venture Capital (IVC)

Time horizon Indefinite Tied to fund length

Scale of capital invested

Potentially large Smaller

Coordination of complementarities

Extensive Limited

Retention of group learning

Strong Weak



Comparison of CVC and IVC Advantages and Objectives


Independent Venture Capital (IVC)

Complementary assets / synergy

Yes No

Cannibalization conflict potential

Yes No

Objectives Strategic and financial

Financial



Best of Both Worlds

• Internal corporate venture• Time horizon

• Scale of capital invested

• Coordination of

complementarities

• Retention of group learning

• Venture capital

• Incentive intensity

• Financial discipline on

downside

• Monitoring

• Discovering alternative

business models



Best of both worlds

• Unilever and Langholm

• Shell, Kenda capital and Collar Capital


Xerox Tech Ventures1. PARC was set up to invent the technology of the future. Most observers would agree

that it succeed in this endeavor. Many of the most important developments in the

field of computers were profoundly influenced by the work done at PARC. However,

Xerox, which funded the research, was unable to take advantages of the commercial

potential of most these innovations. What was the reason for Xerox’s failure to

capitalize on its innovations?

2. Would you argue, despite the problems, that the XTV partnership does make sense?

Which terms and conditions seem the most interesting or problematic?

3. Do you consider the XTV an effective means for limiting the departures of existing

employees, if not what else would you propose?

4. In being spun-off as a subsidiary of Xerox, PARC is attempting to break away from a

history of missed chances. How would you think that the incorporation of PARC as a

Xerox subsidiary will allow it to better commercialize its innovations. Would you

suggest other organizations to adopt this model as well or would you propose

modifications?

1 unchain – corporate entrepreneurship corporate entrepreneurship unchain dr. v.e. scholten...

Documents

entrepreneurship block

entrepreneurship courses

ec slide

ec essentials of technology

mot1431 technology

technology dynamics

ec finance

weeks of introduction