chapter 1 – foundations of corporate entrepreneurship 1… · chapter 1 – foundations of...
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CHAPTER1–FOUNDATIONSOFCORPORATEENTREPRENEURSHIP1.1TurbulentenvironmentsandtheembattledcorporationExternalenvironmentsinfluenceinternalenvironments,it’sallaboutchange!Thischangeiscontinuousandrapidbringingnewchallengesfromexternalenvironments.Changeiscomplexandacombinationoftheenvironmentseffectmanyaspectsoftheexternalandinternalenvironment.Externalenvironmentofembattledcorporation:
1. Technological-accelerateddevelopmentofnewtechnologymakesproductsobsolete,greaterdifficultyinprotectingintellectualproperty.
2. Economic–unpredictabilityofprices,exchangerates,interestrates,taxincentiveandbusinesscycles.3. Competitive-aggressiveandinnovativecompetitionalsofromnon-traditionalsourcesandtactics.Competitors
whoarealsocustomersandpartners.4. Labour-scarcityofskilledworkers,higherlabourcosts,employeesaremoremobileandlessloyal.5. Resource-limitedresources,becomingincreasinglyspecialised,unknownsourcesofsupply.6. Customer-moredemandingandfragmentedmarkets,morenarrowlysegmented,emphasisoninvestmentin
capturingcustomers7. Legalandregulatory–Moreaggressiveregulation.Unlimitedproductliability=youareresponsible8. Global-productsaresoldanywhereanytime“internet”.Realtimecommunicationanddistribution.Therecanbe
competitiveadvantagethroughglobaloutsourcingandinternationalstrategicalliances.
Allthesechangeshaveimplicationsonhowcompaniesaremanaged;themoderncorporationfindsitembattledasitstrugglestosurvive.Thisforcescompaniestoabandonconventionalbusinesspracticesasmanagershave:
• Shorteneddecisionwindows• Diminishingopportunitystreams• Theymustactmorequicklyormissout• Theirclients,suppliers,partners,distributorsarealwayschangingsotheyneedtoperformbetter• Resourcedemandsresultinoutsourcingandleveraging• Technologythreatsmeansthecompanymustdevelopnewproductsandimprovetimetomarket• Existingproductsbecomeobsoletequicker• Nolongerarestrategies“businessasusual”sufficient
Theembattledcorporation–examplesofthewayinwhichtrendsintheenvironmentforcechangesinmanagementpractices:
1. Customers–Fragmentedmarkets,risingcustomerexpectations,costsofhigherlevelofcustomization,sustainablegrowthinnewmarkets.
2. Technology–Newinformation,productionandservicetechnologies,customermanagement,logisticsandinventory,productdevelopmenttechnologies.
3. Competitors–Creatingnewmarketplaces,theymimicanythingnew,playingbydifferentrules,competitioninnarrownichemarketsandavoidcostsassociatedwithbigproductrange.
4. Legal,regulatoryandethicalstandards–Companiesareincreasinglyaccountable1.2Anewpathtosustainablecompetitiveadvantage:howcompaniesreacttothechallenges?Threelessonscanbelearntinsustainingabusinessinacompetitiveenvironment:
1. Externalenvironmentsinfluenceinternalenvironmentsofabusiness.2. Thereisnosimpleformulaforsuccessinthecompetitiveenvironment,theyneedtoexperimentandfindthe
rightapproachtocontrol,rightleadershipstyle,andrightwaytorewardemployees.3. Thereisanupside,turbulencemeanopportunity.Changesintechnology,marketsandsegmentsmeanssome
doorscloseandothersopen.
Toremaininthegame,companiesandmanagersmustcontinuouslyre-inventthemselveswith5keycapabilities:
1. Adaptability:theabilitytoadjusttimelytoexternalenvironmentalforces“canlistthem”2. Flexibility:designcompanystrategies,processesandoperationsthatmeetevolvingrequirements3. Speed:actquicklytoemergingmarkets4. Aggressiveness:proactiveapproachtoeliminatingcompetitorsandpleasingcustomers5. Innovativeness:developingandlaunchingnewproducts/process/services:leadthemarketplace
ThechanginglandscapeCompaniesareoperatinginnewcompetitivelandscapeswithincreasedrisk,lessabilitytoforecast,fluidboundariesbetweenindustries.Strategicinflectionpointsoccurwhentheoldstrategicpicturedissolvesandgiveswaytothenew,allowingadaptiveandproactivebusinessestoascendtonewheights.Thesepointschangetheindustryandtherules,onceit’sreachedthere’snogoingback.Thefourforcesatwork
1. Changeo Largeamountofpressureonmanagementandemployeeso Thegamehaschangedcompletelyo Oldmanagementstylesofhierarchy,rules,traditionalandprocessnolongerapply
2. Complexityo Changecomesfromdifferentdirectionsandatthesametimeo Newmarketsandtechnologyo Customergroupsareshiftingo Competitionisalsoaboutcollaborationo Changeinoneareaaffectsanotherarea
3. Chaoso Chaosisconfusiono Randomeventscauseextremeconsequenceso Thereisasensitivedependenceonconditionsandsmallshockscandisruptthesystemo Incrementalchangesthatseeminsignificantcanhaveamajorimpactontheorganisation
4. Contradictionso Paradoxneedstobemanagedo Thetyrannyoforpushespeopletobelieveit’seitheraorbo Managersshouldembracecontradictionbyreplacingorwithand
1.3WhatisEntrepreneurship.Entrepreneurshipisdefinedastheprocessofcreatingvaluebybringingtogetherauniquecombinationofresourcestoexploitanopportunity.7perspectivesonthenatureofentrepreneurship
1. Creationofwealth–involvesassumingtheriskassociatedwiththefacilitationofproductioninexchangeforprofit
2. Creationofenterprise–entailsfoundingofanewbusinessventurewherenoneexistedbefore3. Creationofinnovation–concernedwithuniquecombinationofresourcesthatmakeexistingmethodsor
productsobsolete4. Creationofchange–creatingchangebyadaptingandadjusting,modifyingonesapproachesandskillstomeet
newanddifferentopportunities.5. Creationofjobs–concernedwithemploying,managinganddevelopingthefactorsofproduction,includingthe
labourforce6. Creationofvalue–processofcreatingvalueforcustomersbyexploitinguntappedopportunities7. Creationofgrowth–definedasastrongandpositiveorientationtowardgrowthinsales,income,assetsand
employment
1.4WhatisCorporateEntrepreneurship(CE)?CorporateEntrepreneurship(CE)“isthesumofacompany’sinnovation,renewalandventuringefforts”.Itistheentrepreneurshipwithinanestablishedbusinessorganisation.Thethreemostcommonphenomenathatareviewedasentrepreneurialinestablishedbusinessesare
1. thesituationswhereanestablishedorganizationentersanewbusiness:2. whenanindividualorindividualschampionnewproductideas3. whenanentrepreneurialphilosophypermeatesanentireorganization’soutlookandoperations.
TheformsCEtakesare:
• Innovation:somethingnewtothemarket• Strategicrenewal:strategicorstructuralchanges• Corporateventuring:creationofnewbusinessorganisationswithinthecorporation
CEisentrepreneurshipwithinestablishedorganisationsandinvolves:• Fosteringinnovativebehaviourinorganisations• Supportprofitmakinginnovationsbyencouragingemployeestothinklikeentrepreneurs• Givingemployeesthefreedomtopursuetheirideaswithouttheredtape• Championsbriningnewproductsorservicestomarket• Establishedorganisationsenternewbusiness• Entrepreneurialphilosophypermeatestheentireorganisationsoutlookandoperations• Corporationsthatradicallychangethemarketsandindustries• Revitalisesandinventsnewwaystoobtaincompetitiveadvantage
1.5ManagementversusEntrepreneurManagementistheprocessofsettingobjectivesandcoordinatingresourcesincludingpeople,inordertoattainthoseobjectives.Inessence,itinvolvesgettingthingsdonethroughotherpeople.Managementisconcernedwithefficiencyandeffectiveness.Itisatransformationprocesswheretechnical,humanandconceptualskillsareusedtotransforminputsintooutputs.Disciplinedmanagementrequiresfocus,attentiontobasicmanagementprinciplesandvaluesandaccountability.Managementfocusincludes:
• Efficientandeffectiveutilizationoftheresourcesundertheircontrol• Optimizingcurrentoperations• Efficiency:sameoutputlesscost• Effectiveness:choosetherightobjectivesandmeansofachievingthem
Entrepreneursarepreoccupiedwithchange,envisioningthefuture,recognisingemergingpatternsandidentifyinguntappedopportunities.Theycomeupwithinnovationstoexploitopportunitiesregardlessofresourcescontrolled.Entrepreneurshiprequiresvision,willingnesstotakerisks,focusoncreationofthefuture.ThetablebelowcanbeusedtocombinethekeyrolestocreateanEntrepreneurialManager.
TheManager • Planner• Strategist• Organiser• Director• Staffer• Motivator• Budgeter• Evaluator• Coordinator• Supervisor
TheEntrepreneur• Visionary• Opportunityseeker• Creator• Innovator• Calculatedrisktaker• Resourceleverage• Guerrillathinker• Changeagent• Adaptiveimplementerof
newideas
1.6WhyCompaniesLoseTheirEntrepreneurialWay:TheOrganisationalLifeCycleOrganisationallifecycle–crisispointsforevolution
Stage1:Startupandearlygrowth• Encompassesthelaunchingofanewventureandtheinitialpenetrationofthemarket.• Highlycreative• Workenvironmentinearlystagesisexciting,stressful,demanding,anduncertain.• Organisationruninformally• Employeesfeeltheypartofsomething• CRISIS:Greatersizerequiresmoreprofessionalisedmanagement
Stage2:Growththroughdirection• CompaniesfailbecausetheywillnotformalisesoManagementputnecessarysystemsandstructuresin
place,andaugmentstheleadershipteamwithfunctionalareaprofessionals• Anotherperiodofsustainedsuccessgrowthensues.• CRISIS:demandforgreaterautonomyonthepartoflowerlevelmanagersandemployees
Stage3:Growththroughdelegation• Delegationtakesformbycreatingsemi-autonomousproductdivisionsandstrategicbusinessunits• Organisationaltargetsaregiventoachieve.• Seniormanagementfocusesonmajorstrategicmovesandacquisitions• CRISIS:Managementlosecontroloverhighlydiversifiedfieldoperation,duplicationofworkefforts
Stage4:Growththroughcoordination• Companiesrespondtothislossofcontrolbycentralisingoperations.• Headofficestaffisdevelopedtoco-ordinateoperations• CRISIS:Centralisationovertimestendstobreedbureaucracyandacrisisofredtapeeventuallyoccurs.• Myridofproceduresandsystemswillbedevelopedthatexceedtheirutility• Procedurestakeprecedenceoverproblemsolving
Stage5:Growththroughcollaboration• Verynatureoftheenterprisehastobereinventedbytransformingthemachinebureaucracyintoan
innovationfactory• Companiesmustsimplifystructuresandprocedures,reducestaff• Creationofmatrixstructures,encourageexperimentationinallfacetsofthebusiness
1.7TheEntrepreneurialImperative:APersistentSenseofUrgencyAnewmodelofmanagementandfivequestionswhyanewmodelofmanagementisneeded:
1. Howmuchmorecostsavingscanthecompanywringoutofitscurrentbusiness?2. Howmuchmoregrowthcanthecompanysqueezeoutofitscurrentbusiness?3. Howmuchlongercanthecompanykeepproppingupitssharepricethroughsharebuybacks,spin-offsandother
formsoffinancialengineering?4. Howmanymorescaleeconomiescanthecompanygainfrommergersandacquisitions?5. Howdifferentarethestrategiesofthefourorfivelargestcompetitorsintheindustryfromthecompany?
Corporateentrepreneurshiprepresentsaframeworkforfacilitatingongoingchangeandinnovationinestablishedorganisationsandincludeseveralstrategiesthatneedtobeimplemented:
• NeedtoallowfreedomandresourcestotheCErequires.• Managementneedstobemoreflexibleandcreativeandmoretolerantoffailure,avitallearningprocess.• CE’smustbestimulated,supportedandprotected.• Companiesmustcreateaconstantsenseofurgencytochallengeassumptions,urgencytochangeandurgency
toinnovate.Innovateordissipatemustbecomethemantra.
1.8AModelofCorporateEntrepreneurshipandAGuidetoComingChaptersThestartingpointistodevelopanin-depthunderstandingofthenatureofentrepreneurshipandhowitcanbeappliedtoestablishedorganisations.Buildingonthisfoundation,companyleadersmustthenbuildaworkenvironmentthatencouragesemployeestorecogniseandactupontheirowninnateentrepreneurialpotential.Fourkeyelementsofthisworkenvironmentincludetheorganisation’s
1. Strategy2. Structure3. Culture4. Humanresourcesmanagementsystem.
Finally,theabilitytoachieveentrepreneurialperformanceonasustainablebasisrequiresaclearunderstandingoftheon-goingobstaclesthatconstrainentrepreneurship,togetherwithspecificfacilitatorsandmeasuresofentrepreneurialoutcomes.
CHAPTER2–HOWCORPORATEENTREPRENEURSHIPDIFFERS2.1IntroductionEntrepreneurshiphappensinorganisationsofallsizesandtypes.Seekingandcapitalisingonopportunity,takingrisks,havingtenacitytopushaninnovativeidea.Itisnotlimitedtoaselectpeoplebutcanbedevelopedinanyindividual.Theyareordinarypeoplewhomakechangehappenwithvision,hardworkandpassion.Ithasbothattitudinalandbehaviouraldimensionsmeaningitisawayofthinkingandacting.2.2.DispellingtheMythsandSidesteppingtheFolklore.TenmythsaboutEntrepreneur’s:1. “Entrepreneursareborn,notmade”-Keytraitsareinfluencedbyenvironmentalconditionsandanyonehasthe
potentialtobeanentrepreneur2. “EntrepreneursmustbeInnovators”-Anyonecancapitaliseonotherpeoplescreativeideas.Innovationscanbe
foundinoperatingprocess,priceapproach,packaging,anywhere3. “ThereisastandardprofileoftheEntrepreneur”-Astandardprofileishardtocompileastheenvironmentand
otherelementsresultinmanydifferenttypesofprofiles4. “AllyouneedislucktobeanEntrepreneur”-Peoplewhoarewellpreparedtoexploitanopportunityseemtobe
lucky5. “Entrepreneursareextremerisktakers”-Theyworkonmoderatecalculatedrisk6. “TheyareacademicandSocialMisfits”-Theyarenormallyveryqualifiedandhavegoodsocialskills7. “Allyouneedismoney”-moneyisnoguaranteetocombinetherightresourcesandproduceinnovationsthat
profit8. “Ignoranceisbliss”-Today’smarketsrequiredetailedplanningandpreparation9. “Mostinitiativesfail”-Astudyhasshownthatabouthalfofthemdon’t10. “Entrepreneurshipisunstructuredandchaotic”-Theyaretypicallywellorganisedindividuals
Theconclusionisthatentrepreneurshipisaplannedactivitythatcanbemanagedasaprocess,involvesriskandrequiresinnovation.Itcanbeappliedtoanyorganisationalcontext,anactivitythatrequiresdedication,perseveranceandadaptability.Anyonecandoit….
2.2EntrepreneurialRealities:UnderstandingtheProcessEntrepreneurshipisaprocessthatoccursinsixstages,namely:
1. Identifytheopportunity.2. Definingthebusinessconcept.3. Assessingtheresourcerequirements.4. Acquiringthenecessaryresources.5. Implementingandmanagingtheconcept.6. Harvestingtheventure.
1. Identifytheopportunity
§ Beginswithanopportunity§ Manyconceptsfailbecausetherewasnoopportunity§ Justbecauseitisbetterdoesnotmeanitisneeded.§ Keyquestionsinclude:source,sizeandsustainabilityofopportunity
2. Definingthebusinessconcept• Withanopportunityclearlyinmind,theentrepreneurspecifiesabusinessconcept.• Opportunitiesrepresentpotentialthatcanbecapitalisedon• ABusinessconceptisdefinedasaninnovativeapproachforcapitalisingonanopportunity• Awellconceptualisedconcepthascertaincharacteristics:
o Obviousbenefittoausero uniqueandnoteasytoimitateo Comprehensiveinthatitrepresentsanentirevaluepropositions.o Itisfeasible.
3. Assessingtheresourcerequirements• Entrepreneurialsuccessisoftenafunctionofotherresources,somewhichmoneycan’tbuy.• Needtoidentifynonfinancialneedsrequireinsight,judgementandpatience.• Obtainingendorsementfromsponsoriskey
4. Acquiringtheresources• Entrepreneursaregreatatresourceleveraging,meaningtheyknowhowtoshareandborrowresources.• Mustbeatrader,barganer,negotiator,networkerandborrower.• Leveragingmeansresourcemightberented,leased,contractedoroutsourced
5. Implementingandmanagingtheconcept.• Itistypicallyhectic,uncertainandambiguouswhencreatingthe“new”• Entrepreneurisfacedwithmyriadofdecisionsthatmustbesolvedquickly.• Obstaclesariseandassumptionscouldbewrong–leadingtoare-think• Keyatthisstageistoleranceofambiguityandadaptability• Mustsettargetandtimeframesforconceptcompletionateachstage
6. Harvestingtheventure• Weliveinageofdiminishingopportunitywindowsandshorterlifecycles.• Thereforemusthaveanexitstrategy• Harvestingisconcernedwithhowreturnswillberealised
2.3HowCorporateEntrepreneurshipDiffers
Individualsareboldandoftenthoughtofasaherowhichdoesn’tsitwellwithcorporations.Characteristicssuchasbold,aggressive,risktakingdoesn’tfitwellincompany.AsaresultthereisconfusionastothenatureofCEandifitisactuallypossiblewithinacompany.TheBasicsapplynomatterwhat.
• Basicnatureofentrepreneurshipisuniversal(usedefinitionandexpand).• Entrepreneurshipscanoccurinstart-upstolargecorporations.• Theprocesscanbeappliedanywhere.
SimilaritiesbetweenCorporateandStart-upEntrepreneurship:Bothrequire/involve/have
1. Bothinvolveopportunityrecognitionanddefinition.2. Bothrequireauniquebusinessconcept,i.e.aproduct,serviceorprocess.3. Botharedrivenbyanindividualchampionworkingwithateam.4. Bothrequireentrepreneurialbalancebetweenvision,managerialandentrepreneurialskills5. Bothinvolveconceptsthataremostvulnerableintheformativestageandrequireadaptationovertime6. Bothentailidentifyingthewindowofopportunity7. Botharebasedonvaluecreationandcustomersatisfaction8. Bothfindresistanceandobstaclesrequiringinnovativesolutions9. Bothentailriskandrequireriskmanagementstrategies10. Bothfindcreativewaystoleverageresources11. Bothinvolveambiguity12. Bothrequireharvestingstrategies
Youneedtounderstandthesimilaritiesbecause:
1. CEisnotjustafad.Sustainablecompetitiveadvantageisimpossiblewithoutentrepreneurship.2. Managementandemployeesneedtounderstandtherisksandactlikeentrepreneurs.
3. Mostoftheresearchisonstart-upscontextandexecscanlearnfromthisinformationandwhatweknowaboutthestartupcontext.
Theimportantdifferencesforstart-upandCE’s
Start-up CorporateEntrepreneurship1. Takesalltherisk 1. Companyassumesrisk2. Ownstheconcept 2. Companyownstheconcept3. Ownsthebusiness 3. Mayhavenoequityinthebusiness4. Potentialunlimitedrewards 4. Clearfinanciallimits5. Easytofail 5. Moreroomforerrors6. Vulnerabletooutsideinfluence 6. Moreinsulated7. Independent 7. Interdependenceofchampionwithotherssharingcredit8. Flexibilityinchangingcourse 8. Rulesandprocedures=lessflexible9. Speedydecisionmaking 9. Longapprovalprocesses10. Littlesecurity 10. Jobsecurity11. Nosafetynet 11. Dependablebenefitspackage12. Fewcontacts 12. Extensivenetwork
ThepoliticalfactordifferencewithCEPoliticswithinanorganisationwillbeinstrumentalinthesuccessorfailureofanyentrepreneurialinitiativewithinanestablishedcompany.Threefactorsthatneedtobeovercome:
1. Credibility:fortheconceptandtheindividual.Overcomebygivingothersareasontobelieve,buildinganetwork,gettingagoodsponsor
2. Acquiringresources:Overcomebyidentifyingunderutilisedresources,convincingresourceownerstoshare,borrowandscavengeresources.
3. Overcomingresistance:Thebiggestobstacle,peopleseechangeasathreattojobsecurityandthecurrentstatusquo
ImplicationsofthedifferencesforCE’s
1. Don’thavetostartuptheirownbusiness2. Theirmotivationisadesiretocreatesomethingsuccessfulinanideatheybelievein,puttheirmarkon
something.3. Theyhaveahealthycynicismofcompanysystemsandappreciatetheneedtobepoliticallysavvy.4. Theyenjoythesecurityofgettingasalary5. Theyareself-drivenwithself-imposedtimelinesandperformancebenchmarks6. Theymeasuresofperformanceisnotclearcut,theyneedtoidentifymeasuresthatwillinfluenceandbuildtheir
plansintoreality.Thechallengebecomesoneof:o Performingsatisfactorilyonperformancemeasureso Meetingone’sowngoalsforprojectdevelopmentandcompletiono Ensuringonesgoalsexceedthoseofseniormanagement.
7. TheytendtotakegreaterriskswithinthecompanyWhatcanmanagementdotohelpoutCE?
o Createanenvironmentwhereemployeeshaveasensethatresourcescanbeaccessedo Letanyoneinthecompanyhavetheabilitytochampionanideao Investinthedevelopmentofpeoplefirst,understandthatvaluecreationforcustomersfollows,recognise
productiveemployeesandsatisfiedcustomerscreateswealthforstockholders
RulesforFosteringanInnovativeorganisation
Rule1–Unreasonableexpectations• Whenpeoplesubscribetounreasonablegoals,theysearchforbreakthroughideas.• Therearenomatureideas,onlymanagerswhoacceptadefinitionofwhatispossible
Rule2–Elasticbusinessdefinition• Toomanycompaniesdefinethemselvesbywhattheydo,knowandwhattheyown.Beelasticandflexible.
Rule3–ACause,Notabusiness• Revolutionariesdrawstrengthfromtheirallegiancetoacausebeyondgrowth,profitsandwealth.• Thecouragetostrikeoutandacceptthatchangeisgood.
Rule4–Newvoices• Lettheyouthbeheard,listentoperiphery,letnewcomershavetheirsay.
Rule5–Anopenmarketforideas• Createamarketforentrepreneurialideasinsidethecompany• Newideasarecurrencyoftherealm
Rule6–Createanopenmarketfortalent• Makefundsavailablefornewideasandgivetheresourcesnecessary.
Rule7–Openthemarketfortalent• Provideincentivesforemployeeswhoarewillingtotakerisks.
Rule8–Low-riskExperimentation• Beingrevolutionarydoesnotmeanbeingahigh-risktaker• Cautiousfollowervs.High-risktaker.neitherislikelytopayoffintheageofrevolution.
2.4WheretoFindEntrepreneurshipWithinaCompanyCorporateentrepreneurshiptakesmanydifferentformsintheorganisationanditcanbemanifestedindifferentways.7waysinwhichentrepreneurshipismanifestedinestablishedcompaniesare:
1. TraditionalR&Do Manycompanieshavededicatedstaffwhoaretechnicallyqualifiedthatworkonimprovingexisting
productsanddevelopingnewones.o Anynumbersofprojectsareunderwayatagiventime.o Projectsarecloselytiedtostrategicdirectiono Makesiteasyforeveryoneelseinthecompanytoescaperesponsibilityforinnovation
2. Adhocventureteamo Seniormanagementcommitstoanopportunity,orfindsitselfneedingtorespondtoanimpending
competitivethreat.o Puttogetherateamofemployees,chargethemwithcomingupwithaspecificinnovationandsetthem
upautonomously,outofthemainstream.o Demandingdeadlinebutampleresourceso Goodataccomplishingmissionbutnotsustainedentrepreneurship
3. Newventuredivisionso Permanentunitisestablishedwheretheobjectiveisbreakthroughinnovationandthecreationofnew
markets.o Difficultyingettingmainstreamtoaccepttheinnovation
4. Championsandmainstreamo Entrepreneurshipcanoriginatefromanypersonincompanyo Developconceptsandattempttoselltoseniormanagement
5. Acquisitionso Achieveentrepreneurialgrowththroughacquisitionsofothercompanieso Challengeistoinstilitsvalueandcultureonacquisition
6. Outsourcinginnovationo Companiesbuyingsomeoftheintellectualcapitalofothercompaniesandindividuals
7. Hybridapproacheso Realityisthatorganisationsareexperimentingtodaytospurentrepreneurialperformance.o Tryvariousapproaches
2.5GeneralFrameworksforUnderstandingCorporateEntrepreneurshipTherearethreeintegrativeframeworksforunderstandingcorporateentrepreneurshipintheorganisation.Theseframeworksmakeitclearthatcorporateentrepreneurshipisanorganisation-widephenomenonandthatitshouldbeinterwovenwitheveryaspectoftheorganisation.Togethertheyhelppaintapictureofthekindsoffactorstheymustcometogetherforentrepreneurshiptohappen.Thethreeframeworksare:
1. Thedomainframework2. Thesustainingframework3. Thestrategicintegrationframework.
1. DomainFramework
GuthandGinsburgarguedomainofcorporateentrepreneurshiphastwotypesofprocesses:a. Internalinnovation-venturingtocreatenewbusinesswithexistingorganisationsb. StrategicRenewall–designofcorporateinitiativesthattransformorganisations
TheextentthatCEoccursandhowitismanifestedaredrivenbyfactorsorganizedintofourdomains:a. Externalenvironment:turbulenceisadriverforentrepreneurshipb. Leadershipwithinthecompanyandtheirfocusandcharacteristics.c. Aspectsofworkenvironmentsuchasstrategies,structures,processesandcultures.d. Companyperformanceandtheextentofthatperformancewhichisdrivenbyinnovativebehaviour
2. SustainingFramework
• Organisationsabilitytosustainentrepreneurshiponanon-goingbasis• Dependantonindividualsundertakinginnovativeactivitiesandpositiveperceptionsoftheorganisationand
continuingtopursuetheseinnovations• Theframeworkindicatesthatatransformationtrigger(internalorexternal)initiateneedforstrategicchanges• Themodelcentresonanindividualemployeesdecisiontobehaveentrepreneurially.• Sustainedentrepreneurialbehaviourissustainedbythebeliefthatthereistopmanagementsupport,rewards,
resourcesandflexibleboundaries.3. StrategicIntegrationFramework
• Thefocusisonon-goingintegrationofentrepreneurshipthroughouttheentireorganisationandnotviewedasadiscreteeventorbehaviour.
• Itshouldcapturetheessenceofwhatanorganisationisaboutandhowitoperates• Thismodelismanifestedthroughthepresenceofthreeelements;
1. Aentrepreneurialstrategicvision2. Apro-entrepreneurshiporganisationalarchitecture3. Aentrepreneurialprocessesandbehavioursacrosstheorganisationalhierarchy
• Thismodelhassixlinkageswhichinclude:1. Individualentrepreneurialcognitionoftheorganisationsmembers2. Externalenvironmentconditionthatinviteentrepreneurialactivity3. Topmanagementsentrepreneurialstrategicvision4. Organisationalarchitecturethatencouragesentrepreneurialprocesses.5. Theentrepreneurialprocessthatisreflectedinentrepreneurialbehaviour.6. Organisationaloutcomesthatresultfromentrepreneurialactions.
Thismodelcanbeusedtoillustratetheperspectivethatentrepreneurshipisanoverallorientationinanorganisation.Thefocusisontheintegrationofentrepreneurshipthroughouttheentireorganisation,asopposedtoviewingentrepreneurshipasadiscreteactivityorbehaviour,oraone-offevent.ThemodelillustratesthatEntrepreneurialintensityhasadirectandpositiveinfluenceoncompanyperformance.Itdoesthisbyintegratingorinterweavingthevisionandmissionofthefirm,thestrategies,Objectivesandstructuresoftheorganisation,andtheoverallorganisationalculture.
CHAPTER3–CAPTURINGTHEENTREPRENEURIALORIENTATIONOFTHEFIRMHerewefocusonhowwemeasuretheCEofanorganisationthroughthedimensionsofinnovation,risktakingandproactivenessagainstthefrequencyortimelinesthattheydoitin.Corporateentrepreneurshipisreflectedintopmanagement’srisktakingwithregardtoinvestmentdecisionsandstrategicactionsinthefaceofuncertainty,theextensivenessandfrequencyofproductinnovation,therelatedtendencytowardtechnologicalleadershipandthepioneeringnatureofthefirm,asisevidentinthepropensitytocompeteaggressivelyandproactivelywithindustryrivals.3.1ExploringtheDimensionsofEntrepreneurshipCorporateentrepreneurshipisreflectedintopmanagement’srisktakingwithregardtoinvestmentdecisionsandstrategicactionsinthefaceofuncertainty,theextensivenessandfrequencyofproductinnovation,therelatedtendencytowardtechnologicalleadershipandthepioneeringnatureofthefirm,asisevidentinthepropensitytocompeteaggressivelyandproactivelywithindustryrivals.Thethreedimensionsofcorporateentrepreneurshipare:
1. Innovativeness2. Risktaking3. Proactiveness
3.1.1Dimension:InnovativenessInnovativenessreferstotheextenttowhichanorganization,simplystated,doesthingsinnovel,differentanduniqueways.Arangeofpossibilitiesexist:
1. Neworimprovedproducts2. Neworimprovedservices.3. Processinnovation–newandbetterwaystoaccomplishatasksuchasinnovativeproductiontechniques.
Pressuretoinnovatecomesfrombothinternalandexternalforces.Externalforcesinclude:
• Emergenceofnewandimprovedtechnologies• Theglobalizationofmarketsincreasingcompetitivepressures• Fragmentationofmarketsintensifyingcustomerpressure.• Governmentregulation• Dramaticsocialchange.
Internalforcesinclude:• Pressuretocutcostanddevelopnewcapabilities• Abilitytoattractandretainhigh-qualityemployees
Thepushforinnovationmanifestsinvariousways:
• Anincreaseinthenumberofinnovationprojectsunderwaywithinacompany• Companiesmustbecomefastertoreducetimefromideainnovationtolaunch• Abilitytoinnovatefasterrequiresmoredepartmentsandfunctionalareastobeinvolvedintheprocess
Theheightenedimpactofinnovationactivityonsuccessratesislessclear,onewouldexpectthemoreacompanyinnovates,thebettertheywillgetatit.Thisisnotthecase.Maximizinginnovationsuccessratesmaybelessimportantthanminimizingthecostsofinnovationfailures,thiscanbedonebymakingresourcesavailableinstages.Managementofinnovationmaybeconsideredanoxymoron,managementisaboutcontrol,whileinnovationisunknownandunpredictable.Innovatorsoftenbreakrulestoaccomplishtasks,adilemmainthatemployeeswhobreakrulesdonotlastincompanies.
DilemmasofInnovation1. Notallentrepreneursareinnovatorsbutsuccessfulentrepreneurshipinvolvescontinuousinnovation2. Innovationisabouttheunknown,managementisaboutcontrol3. Innovationbreaksrules,peoplewhobreakrulesdon’tlastincompanies4. Successfulinnovationneedstohavebothfreedomanddiscipline,theissueofbalance5. Failureofinnovationislikely,ifcompaniesdon’tinnovatetheywillfail6. Aninnovationsucceedsbecauseitaddresscustomerneeds.7. Innovationcanberisky,notinnovatingcanberiskyto8. Innovationcanberevolutionaryorevolutionary,thecosts,risksandreturnsdifferforboth.9. Innovatingnewproductsmaymakeexistingproductsobsolete10. Someinnovationsarenotwantedbythecustomers11. Whileassociatedwithbreakingtherulesofthegame,it’saboutanentirelynewgame12. Beingfirsttomarketdoesn’talwaysmeansuccess
Thebestpracticesofcompaniesthatinnovatehavebeenidentifiedintwostudiesofinnovationsuccess:
1. Synectics2. Bestpracticesurvey(ProductDevelopmentandManagementAssociation)
Synectics,ananalysisproducedthreecategoriesoffirms:
1. Stars–High-performingcompaniesthathadsuccessfullyintegratedinnovationandcreativity.2. Seekers–Companiesthatdisplayedanumberofinnovativepracticesbutcameshortininnovative
performance.3. Spectators–Tendtoacknowledgetheimportanceofinnovationbutprovidelittlesupportforit.
Starshaveanumberofcharacteristicsthatdistinguishthemfromtheothers,Synecticsfoundtheyarecrucialsustainedinnovation,theseinclude:
1. CEOfostersinnovation2. Innovationiscriticaltolongtermsuccess3. Conceptofmanagingchange4. Havingwordsinnovationandcreativityinthemissionstatement5. Opennesstooutsideideas6. Formalprogramstoharvestideasandproblemsolving7. Focusoncrossfunctionalcommunications8. Encouragingemployeestotalktocustomers9. Moreinvestmentinresearchanddevelopment10. Creatingbudgetsforinnovation11. Providingrewardsforinnovation12. Havinghighlyproductivemeetings
Bestpracticesurvey(ProductDevelopmentandManagementAssociation)attemptedtoestablishnormsintheacrosscompaniesinthenewproductdevelopmentarea.Theresultsindicatedafewkeyfindings
• Atendencytohaveaformalinnovationstrategy• Relyheavilyoncross-functionalteams• Useformalcriteriatomeasurenewproductperformance• Firmsanticipatedthenumberofnewproductstheywouldintroduceoveratimeperiod,forevery11new
productsonly1waslaunched.
Thestudydifferentiates‘TheBest’fromthe‘TheRest’.• TheBestwereidentifiedas
o Themostsuccessfulortopthirdintheirindustrysuccessratefornewproductdevelopmento Reportedinnovationsuccessrateso Percentageofsalesandprofitsgeneratedfromnewlyintroducedproducts.
• TheRest–allthecompaniesthatfailedtomeetthesecriteria.
3.1.2Dimension:RisktakingRisktakinginvolvesthewillingnessonthepartoftheorganisationtopursueopportunitiesthathaveareasonablelikelihoodofproducinglossesorsignificantperformancediscrepancies.Lossismeasuredintermsoftheprobabilityoflossandthemagnitudeofloss.Incorporateentrepreneurshiptheemphasisisonmoderateandcalculatedrisks.Successfulinnovationsbyorganisationsareafunctionofboththesuccessaverageandthefrequencyofmarketincursions.Riskishighwhencompanies:
IgnorenewPPSopportunitiesanddon’tinnovate.• Companiesthatdon’tinnovatearefacedwithhigherriskof
marketandtechnologyshiftsexploitedbycompetitors.• Withbreakthroughinnovationsthatcreatenewmarkets
Riskislowwhencompanies:• Domoremanageabletrialanderrorexperimentsregularly• Abalancedportfolioofprojectsismanaged
Fromanentrepreneurialstandpointtherearetwosidestotheriskequation:
1. ‘SinkingtheBoat’risk–Whathappensiftheconceptdoesnotwork.Thismaybeasaresultofnotenoughplanning,poorlythoughtoutconcept,badtimingandalreadywell-satisfiedmarketandinappropriatepricelevels.
2. ‘MissingtheBoat’risk-Delayingtheactionsduetoomuchplanningandbeingtoocautiousorconservativeandoftenneedsmoresecurityintermsofadditionalmarketresearch.
3.1.3Dimension:ProactivenessPro-activenessisconcernedwithimplementation,withtakingresponsibilityandwithdoingwhateverisnecessarytobringanentrepreneurialconcepttofruition.Itusuallyinvolvesperseverance,adaptabilityandwillingnesstoassumeresponsibilityforfailure.Itsactingnotreacting,leadingandnotfollowingthemarketandcompetitors.Theproactivenessofanentrepreneurliesinrecognising,properlydefiningandeffectivelycommunicatingthepotentialoftheinventionandtheninachievingacceptancefortheinventionwithinthecompany,gettingitimplemented(ifitisaprocess),launchingit(ifitisaproduct)andachievingcommercialsuccessorfailure.
HomeRunStrategy
Littletonoactivity
INNOVATIVENESS
High
Low
RISK
LotsoftrialsandexperimentsBalancedportfolioofprojects
RELATINGINNOVATIONTORISK
Adistinctioncanbedrawnamong4innovationtypesandtheirrisks:(seerightfigure)
1. Discontinuousinnovation:breakthroughinnovationaddressinganewneedormarkete.g.Cellphone,highrisk
2. Dynamicallycontinuousinnovation:adramaticimprovementoverexistingstate-ofthe-art-solutionthatisnotdisruptivetothebuyer.e.g.Electrictoothbrush,moderaterisk
3. Continuousinnovation:incrementalinnovationenhancesexistingproductswithnewfeatures,e.g.lightbulbthatburnslonger.Companiesdevotetothistypethemost,moderaterisk
4. Imitation–copyingcompetitors,highrisk. TYPEOFINNOVATION
High
Low
RISK
RELATINGTYPEOFINNOVATIONTORISK
Imitation Continuous DynamicallyContinuous
Discontinuous
Reactivenessmanifestsin3keyways1. Seekingnewopportunitiesthatmaynotberelatedtothecurrentlineofoperations2. Introducingnewproductsandbrandsfirst3. Strategiceliminationofoperationsthatareinthematureanddecliningstages
3.1.4CombinationoftheDimensions:TheConceptofDegreeTheextenttowhicheventsareinnovative,riskyandproactive.E.g.afirmadoptsaradicallydifferent(highinnovativeness)andunproven(highrisk)productiontechnology,yetlagsbehindtheindustryleaders(lowProactiveness)Degreeofentrepreneurshipcanbethoughtofastheadditivefunctionofthedimensionsofentrepreneurshipi.e.Degreeofentrepreneurship=thedegreeofinnovativeness+thedegreeofrisk-taking+thedegreeofpro-activeness.Degreeofentrepreneurshipcanbethoughtofasthemulti-plativefunctionofthedimensionsofentrepreneurshipi.e.Degreeofentrepreneurship=thedegreeofinnovativenessxthedegreeofrisk-takingxthedegreeofpro-activeness.3.2EntrepreneurialIntensity:CombiningTheDegreeandFrequencyofEntrepreneurshipThedegreeofentrepreneurshipreferstothelevelorextenttowhicheachofthedimensions,innovativeness,risktakingandproactivenessoccursintheorganisationandcanberelatedtotechnologicalchange.Thefrequencyofentrepreneurshipreferstohowmanyentrepreneurialeventstakeplacewithinagivenperiodoftimeandcanberelatedtotheintensityofcompetition.Ifthedegreeofentrepreneurshipandthefrequencyofentrepreneurshiparecombined,wecanmeasuretheintensityofentrepreneurshipintheorganisation.
• Companiesthatdisplayalowdegreeandfrequencyofentrepreneurshipareperiodic/incrementalinentrepreneurialintensity.
• Companiesthatdisplayalowdegreeandhighfrequencyofentrepreneurshiparecontinuous/incrementalinentrepreneurialintensity.
• Companiesthatdisplayahighdegreebutlowfrequencyofentrepreneurshipareperiodic/discontinuousinentrepreneurialintensity.
• Companiesthatdisplayahighdegreeandfrequencyofentrepreneurshiparerevolutionaryinentrepreneurialintensity.
• Companiesthatdisplayanaveragedegreeandaveragefrequencyofentrepreneurshiparedynamicinentrepreneurialintensity.
Entrepreneurshipismoreevidentincompanieswithflatstructures,controlsystemscontainslack,appraisalsystemsincludeinnovationandrisktakingcriteria,jobsarebroadinscopeandrewardsystemsencourageabalanceofindividualismandgrouporientation DegreeofEntrepreneurship
Innovativeness,risk-taking,proactiveness)
High
Low
FrequencyofEntrepreneurship(numberofevents)
THEENTREPRENEURSHIPGRID
Low High
Continuous/Incremental
Periodic/Incremental
Revolutionary
Periodic/Discontinuous
Dynamic
3.3ApplyingtheEntrepreneurialGridtoOrganisations151Theentrepreneurialgridisausefultoolformanagerswhoareattemptingtodeterminetheroleofentrepreneurshipwithintheorganisation.Theentrepreneurialstrategyofacompanycanbedefinedbyplottingcompaniesonthegrid.Bothinternalandexternalfactorscandeterminewhereacompanyfallsontheentrepreneurialgrid.3.4ApplyingtheEntrepreneurialGridtotheLeveloftheIndividualManagerTheentrepreneurialgridcanbeusedtodeterminetheentrepreneurialintensityofindividualmanagers.Theentrepreneurialintensityofanindividualisnotonlydeterminedbythefrequencyanddegreeofentrepreneurship,butalsobytheindividual’sresponsetoenvironmentalcircumstancesandtheindividual’spersonalitytraits.3.5ThingsWeKnowandDoNotKnowAboutEntrepreneurialIntensity
• Entrepreneurshipinorganisationsmatters,becauseresearchhasproventhatorganisationswithastrongerentrepreneurialorientationperformbetter.Theexhibitionofentrepreneurialintensitygenerallyimprovesthefunctioningandperformanceoftheorganisation.
• Thereisnobestplaceontheentrepreneurialgrid.Theidealpointisindustryandmarketspecific.• Withincompanies,theentrepreneurialorientationcanbeexpectedtodiffersignificantlybetweenvarious
divisions,units,departmentsandareas.• Itisnotknownunderwhatconditionsentrepreneurialdegreeisthestrongestcontributortocompany
performance,orifentrepreneurialfrequencyisthestrongestcontributortocompanyperformance.• Whatisnotknownisthetypesandamountsofcostsassociatedwithentrepreneurialintensity.• Entrepreneurialintensityislikelytoplayaroleindeterminingtherelationshipsbetweenthenatureofthe
externalenvironmentoftheorganisation,thestrategyoftheorganisation,andtheinternalstructureofthecompany.Itwillalsoplayaroleinintegratingthesethreevariables.
• Itisnotclearwhetherhighlevelsofentrepreneurialintensitycanbesustained.
CHAPTER4-HOWENTREPRENEURSHIPTAKESDIFFERENTFORMSHighlevelsofentrepreneurialintensity(degreeandfrequencyofentrepreneurship)canbeachievedinmanyways.Entrepreneurshipismanifestedincompanieseitherthroughcorporateventuringorstrategicentrepreneurship.Eachoftheseconceptsisexplained.ThedifferentformsthatcorporateentrepreneurshipcantakearedelineatedinfigureCorporateventuringincludesvariousmethodsforcreating,addingto,orinvestinginnewbusiness.Strategicentrepreneurshipinvolvesinnovationsforcompetitiveadvantageinanyofthe5areasbeing:strategy,productsoffered,marketsserved,internalorganisationorthebusinessmodel.
CorporateEntrepreneurshipCorporateVenturing Strategicentrepreneurship
• Internalcorporateventuring • Strategicrenewal• Cooperativecorporateventuring • Sustainedregeneration• Externalcorporateventuring • Domainredefinition
• Organizationalrejuvenation • Businessmodelreconstruction
4.1.CORPORATEVENTURING:BRINGINGNEWBUSINESSTOTHEORGANISATION4.1.1Theconceptofcorporateventuringanditsmodes
Corporateventuringincludesvariousmethodsforcreating,addingto,orinvestinginnewbusinessandisdoneinthreeways:
1. Internalcorporateventuring:• NewbusinessisCreatedanownedbytheorganisation• TypicallyResideswithinthecorporatestructure• Occasionallymaybelocatedoutsidethefirm
2. Cooperativecorporateventuring:• Referstoentrepreneurialactivityinwhichnewbusinessesarecreatedandownedbythecorporation
togetherwithoneormoredevelopmentpartners.• Theyexistasexternalentitiesandoperatebeyondtheorganisationalboundaries
3. Externalcorporateventuring:• Entrepreneurialactivityinwhichnewbusinessesarecreatedoutsidetheorganisationandsubsequently
investedinoracquiredbytheorganisation• Newbusinessmightbedevelopedthroughasingle,doubleorallthreeventuringnodes.Afirmstotal
venturingactivityisequaltothesumoftheventuresenacted.
4.1.2.WhatisNewBusiness?Corporateventuringisessentiallythecreationofanentirelynewbusinessintheorganisation,Therearetwowaysofdefininganewbusiness.Thefirstisusingtheproduct/marketgrowthmatrix.
• Growthincurrentmarketwithnewproducts=productdevelopmentstrategy• Growthincurrentmarketwithcurrentproducts=marketpenetrationstrategy• Growthinnewmarketswithcurrentproducts=marketdevelopmentstrategy• Growthinnewmarketswithnewproducts=diversificationstrategy
Thesecond,lessrestrictive,definitionofanewbusinessincludesintermediate-levelvariationsofmarketandproductnovelty.4.1.3.MotivesforCorporateVenturingResearchhasidentifiedtwosetsofmotivesforembarkingoninternalventuring,leveragingandlearning.
1. Leveraging:Toexploitexistingcorporatecompetenciesinnewproductormarketarenas.
a. Exploitunderutilisedresources,buildanewbusinessaroundinternalcapabilitiesb. Extractfurthervaluefromexistingresourcesforproductmarketsnotcurrentlybeingservedc. Applypressureoninternalsuppliers,makenewbusinessthatbecomesthesupplierd. Spreadtheriskandcostofproductdevelopmente. Divestnoncoreactivities,newbusinesstopursueopportunitiesthatthefirmisinagoodpositiontoexploit
2. Learning:Toacquirenewknowledgethatmaybeusefulinexistingproductsandmarketarenas.a. Learnabouttheprocessofventuring,newbusinessisanexperimentb. Developnewcompetencies,newbusinessforgettingskillsandtechnologiesc. Developmanagers,newbusinessisatrainingareaforindividualdevelopments
4.1.4Corporateventurecapital
Internalcapitalfundsareusedtoinvestinexternalnewventuresthatarestrategicallyimportantorfinanciallyattractive.Externalventurefundsareownedandcontrolledbymultiplepartnersthattargetnewbusinessintechnologyproductdevelopmentareas.CVinvestmentsareeitherstrategicorfinancialobjectivesorthedegreeoftheoperationalcapabilitiesofthenewbusiness.Fourtypesofventurecapitalinvestment1. Drivinginvestments:-strategicrationalewithtightoperationallinksbetweenstart-upsandtheinvestingcompany.
Theseinvestmentsextendtheorganisationspresenceinproduct-marketortechnologicalarenas.2. Enablinginvestments:-strategicrationalewithlooseoperationallinksbetweenstart-upsandtheinvesting
company.Theseinvestmentscomplimentthestrategyofthecorporationbystimulatingdemandforitscurrentproductsthroughthedevelopmentoflargerecosystems.
3. Emergentinvestments:-financialrationaleandtightoperationallinksbetweenstart-upsandtheinvestingcompany.Theseinvestmentsaretargetedtowardsstart-upswho’ssuccessmayhavestrategicrelevance.
4. Passiveinvestments:-financialrationaleforinvestmentswithlooseoperationallinksbetweenstart-upsandtheinvestingcompany.Theseinvestmentsarediversificationactionswherethecompanyactsasamoneymanagerorinvestmentintermediary.
4.2.StrategicEntrepreneurship:InnovatinginPursuitofCompetitiveAdvantage.Strategicentrepreneurshipisasecondmajorcategoryofapproachestocorporateentrepreneurship.Essentially,itinvolvesorganisationallyconsequentialinnovationsthatareadoptedinthepursuitofcompetitiveadvantage.Theinnovationscanrepresenteitherfundamentalchangesfromtheorganisation’spaststrategiesorbasedonwhichtheorganisationisfundamentallydifferentiatedfromitsindustryrivals.Strategicentrepreneurshiptakes5forms:
1. Strategicrenewal-Seekstoredefineitsrelationshipwithitsmarketorindustrycompetitorsbyfundamentallyalteringhowitcompetes
2. Sustainedregeneration-Continuouslycreatesnewproductsandservicesorentersnewmarkets.Theyareinconstantpursuitonentrepreneurialopportunities.
3. Domainredefinition-Proactivelycreatesanewproductmarketarenathatothershavenotrecognisedoractivelysoughttoexploit.Firmsmoveintouncontestedmarkets(‘blueoceans’)whichcangiverisetonewindustriesorredefineexistingboundaries.
4. Organisationalrejuvenation–Afirmseekstosustainorimproveitscompetitivestandingbyalteringitsinternalstructureandprocesses.Theobjectiveistocreateasuperiororganizationalvehiclewhichthestrategycanbeimplemented.
5. Businessmodelredefinition-Findsthefirmapplyingentrepreneurialthinkingtothedesignorredesignofitsbusinessmodelinordertoimproveoperationaldeficienciesorotherwisedifferentiateitselfinwaysvaluedbythemarket.
4.3THEBUSINESSMODELASAVEHICLEFORCORPORATEENTREPRENEURSHIPAbusinessmodelcanbedefinedasa“conciserepresentationofhowaninterrelatedsetofdecisionvariablesintheareasofventurestrategy,architectureandeconomicswillbeaddressedtocreatesustainablecompetitiveadvantageindefinedmarkets”Thebusinessmodelshouldaddresssixquestions:
1. Howdoesthefirmcreatevalue?2. Forwhomdoesthefirmcreatevalue?3. Whatisthesourceofinternaladvantageorcorecompetency?4. Howdoesthefirmexternallydifferentiateitselfinthemarketplace?5. Whatisthemodelformakingmoney?6. Whataremanagement’sgrowthambitionsoverwhattime?
Decisionscanbemadeatthreelevelsregardingtheabovequestions:
1. Foundationlevel-managementmakesgenericdecisionsregardingwhatthebusinessisandisnot,andensuressuchdecisionsareinternallyconsistent.Thisleveladdressesbasicdecisionsineachofthesixareas.
2. Proprietarylevel–entailsinnovationthatisuniquetoaparticularentrepreneurandventure.Thislevelisstrategicspecificandtheapproachisnoteasytocopy
3. Rulelevel–Delineatesguidingprinciplesthatgovernexecutionofthedecisionsmadeatlevelsoneandtwo.Theseguidelineshelpensurethemodelsfoundationarereflectedinongoingstrategicactionsofthefirm.
4.4OPENINNOVATIONREVOLUTIONAnopeninnovationrevolutionisageneralapproachtoinnovationthatimpliesthattheorganisationisnotsolelyreliantonitsownresourcesfortechnology,productorbusinessdevelopment.Inputsininnovationareobtainedfromoutsidesources.Fourreasonswhycompaniesareincreasinglypursuinganopeninnovationmodel:
1. Importingnewideasisagoodwaytomultiplythebuildingblocksofinnovation.Externaltechnologyhelpsinnovationoutputs
2. Exportingideasisagoodwaytoraisecashandkeeptalent.Theseideascanbemarketedandcreatevalue3. Exportingideasgivescompaniesawaytomeasureaninnovation’srealvalueandtoascertainwhetherfurther
investmentisrequired.4. Exportingandimportingideashelpscompaniesclarifywhattheydobest.Helpsidentifywherethetrue
competitiveadvantagelies
TOPIC2-DESIGNINGENTREPRENEURIALORGANISATIONSTheworkofcreativeandinnovativeemployees,appropriatehumanresourcespracticesandorganisationalstrategy,structureandculturethatfosterthedevelopmentofinnovationallcontributetothecreationofanentrepreneurialorganisation.CHAPTER6CORPORATESTRATEGYANDENTREPRENEURSHIPOrganisationalstrategyattemptstodeterminewhereafirmwantstogoandhowitisgoingtogetthere.Whenentrepreneurshipisaddedtostrategy,wherethefirmcangoandhowfastitgetstherearegreatlyenhanced.Someofthereasonswhyentrepreneurshipisaddedtostrategyarebecauseofthechanginglandscapes.Theyarefilledwithchaos,complexity,contradictionandchange:
Change
Noorganisationisimmunetoimmensepressureofchange.Inthepasttheplayingfieldwaslevel,ifnottotheiradvantage.Theruleswereobviousandstructurewasthemanager’sfriend.Hierarchyprovidedcontextandorientation.Therewasalwayssufficienttime.Today’senvironmentisnothinglikethepast.Uncertaintyiscommonplace.
Complexity
Complexityisanothercriticalforceinthenewlandscape.Changecomesfrommanydifferentdirections,oftenatthesametime.Therearenewmarkets,technologies,economicrealities,demographicpatternsetc.customergroupingsareshiftingandbecomingmoredifferentiated.Competitorscomeandgo.Further,changeinoneareainteractswithchangeinotherareas.Theneteffectisthatthereismorechangetomanageanditismuchmorecomplex!
Chaos
Thecommonlanguagemeaningoftermchaosisconfusion,andconfusiondescribesthenewbusinesslandscape.Randomeventscancauseextremeconsequencesinbusiness.Smallchangesorshockstothesystem,inwhichthebusinessoperates,canhaveamajorimpactonthebusinessitself.
Contradiction
Finally,thebusinessenvironmentisfilledwithmanycontradictions,anddealingwithparadoxbecomesacriticalaspectofmanagingthenewcompetitivelandscape.
Not1oranotherbutrather1andanother.Embraceitandacceptambiguity
Dominantlogic–doesitfitthelandscape?
Dominantlogicreferstothewayinwhichmanagersconceptualisetheirbusinessandmakeresourceallocationdecisions.Accordingly,thedominantlogicthatisoptimalforanorganisationtodaymaynotbeappropriateforthatorganisationfiveyearsfromnow.
• It’stheprevailingmind-setofthebusiness• Managersfocusoncurrentclimateandonlyconsiderinformationifitbelievesitfitswiththedominantlogicof
thecompany• Willlimitfuturepotential• Capturesthecurrentcompetitiveadvantage• Mustbeperiodicallyunlearnt
• Onemeansofcreatingadynamicdominantlogicistomakeentrepreneurshipthebasisuponwhichtheorganisationisconceptualisedandresourcesareallocated.
TheroleofStrategicmanagementinCorporateStrategy
EntrepreneurshipmayserveasthedominantlogicoftheorganisationandcanplayanimportantroleinitsstrategyWhiledominantlogicsetsthecontextofthecompany’soveralldirection,strategicmanagementmorespecificallydefinesthatdirectionanddetermineshowitwillbeaccomplished
Strategicmanagementbasicallyinvolvestheformulationoflong-termplansfortheeffectivemanagementofexternalopportunitiesandthreatsinviewofthecompany’sinternalstrengthsandweaknesses.
o Processthatguideshowthebasicworkoftheorganisationisapproachedo Ensurescontinuousrenewalandgrowtho Providescontextfordevelopingandimplementingthestrategythatdrivesoperationso Isacontinuoussearchfornewsourcesofcompetitiveadvantageo Createsasenseofunityandconsistencyofactionthroughouttheorganisationo Peopleworktowardsacommonobjectiveo Seesthebigpicture3to5yearsfromnow
IntegratingEntrepreneurshipwithStrategy
Theintegrationofentrepreneurshipwithstrategyhastwoaspects,namely:• Developingacorporatestrategythatisentrepreneurial–thatis,applyingcreativityandentrepreneurialthinking
tothedevelopmentofacorestrategyfortheorganisation.o Highlyentrepreneurialstrategiesarenotobviouso Theyhaveahighrisko Corporateventuringandstrategyareweaklylinked(onedrivestheother)
• Developastrategyforentrepreneurship–thisreferstodevelopingstrategiesforentrepreneurialactivitiesintheorganisation.
ManaginganInnovationStrategyMostcompaniesdonothaveastrategyforinnovation.Theirinnovationeffortsareirregular,infrequentandoftenreactive.Ifacompanydidhaveastrategyforinnovation,specificgoalsandobjectivesforinnovationwouldexist,andthesegoalsandobjectiveswouldbemonitoredandperformancewouldbemeasured.Adjustmentswouldbemadetokeepthecompanyontrackintermsofitsinnovationstrategiesandgoals.7corecomponentsofaStrategicInnovation
1. Companycommitstofindinganddevelopingnewproducts2. Innovationisacompanywidetask3. Strategiesareformulatedforthenatureofnewproductsandinnovations4. Strategiesareformulatedforthenatureoftechnologiesutilised5. Strategiesareformulatedforthetypeofmarketstobeserved6. Clearsenseofhowaggressiveordefensivetheinnovationeffortsofthecompanyareintendedtobe7. Aplannedapproachforsourcingnewproductideas
Justasacompanymanagesaportfolioofproductsandservicesandbusinessunits,italsoneedstomanageaportfolioofinnovations.Managementshouldattempttobalanceinnovationprojectsbybalancing
o high-risk,high-returnprojectsagainstlow-risk,low-returnprojectso discontinuousordynamicallycontinuousinnovationsagainstcontinuousinnovationandimitationso productsandservicesintendedformarketsthecompanycurrentlyservesagainstonesformarketsthatare
newtothecompanyo projectswithshorterdevelopmentcyclesandpay-offsagainstoneswithlong-termoutcomeso projectsutilisingnewtechnologies
Companiesshouldmoveawayfromaprojectmentalitytoaportfoliomentalitywheninvolvedininnovationprojects.Withaportfolioapproachthecompanyisconcernedabouttheoverallsuccessofinnovationprojects,acceptingthepossibilitythatsomefailuresmayoccur.Theportfolioapproachallowstrade-offsbetweenprojectsandallowsacontinuousstreamofinnovation.Integratingentrepreneurshipandstrategywithinthecorporationrequiresanunderstandingoftheroleoftechnologyasadeterminantoforganisationalsuccess.Technology,entrepreneurshipandstrategy
Inrecentyears,technologyhasplayedabigroleineverybusiness.Infact,thehighlevelsoftechnologicaldevelopmentandproliferationhaveresultedinadriveforthecommercialisationofnewtechnologyandhighlevelsofentrepreneurship.IthasprovidedtheentrepreneurwithbothopportunityandthreatsWecandefinetechnologyasthetools;devicesandknowledgethathelptransforminputsintooutputs.
Technologyisanimportanttriggerforentrepreneurialactivity.Representsopportunityandthreat.
Innovationstrategyshouldbecomplementedbyatechnologystrategy.Technologystrategyconsistsoftheoveralldecisionsandactionsthatrelatetoacompany’sacquisitionandutilisationoftechnology.
Elementsoftechnologystrategyinclude:
• Technologicalchoices:whattypeoftechnology• TechnologicalSources:developedinternallyorboughtexternal• Competitivetiming:doweleadorfollow• Technologicalinvestmentlevel:howmuchR&Datwhatcost• Technologicalpolicies:criteriaforevaluationofR&D• R&Dfocus:whatareweworkingonPPS• Modeloftechnologicalinnovation:isthecompanyproductdriven,marketortechnologicallydriven
TechnologiespushversusMarketPull
Organisationsusuallyhaveatechnology-pushand/ormarket-pullorientationtoinnovation.Withtechnology-push,employeestrytofindtechnologicalpossibilitiesanddevelopproductsbasedonthem.Theyfocusonthetechnologyandassumethatthemarketwillwanttheproduct.Market-pullapproachestoinnovation,ontheotherhand,startwithcustomers’needs.Customersarethesourceofnewproductideasandtheirinputisinstrumentalinthedesignanddevelopmentofproducts.Usuallytechnologypushapproachesresultinbreakthroughinnovation–bothdiscontinuousanddynamicallycontinuousinnovation.Buttheseinnovationsmaynotbewhatcustomerswant.Market-pullapproachesresultinincrementaladvances–bothcontinuousinnovationandimitation.However,theseinnovationsusuallyhaveshort-termpay-offs.Managementshouldensurethatthereisamatchbetweentechnology-pushandmarket-pullinnovation.Technologicalpossibilitieshavetobeexploredwithinthelimitsofunderstandingcustomersegmentsandcustomerneedsnow,andinthefuture.
KeyStrategicConcepts:Entrepreneurshipasthedriver
Innovationisthekeytodevelopingsuccessfulexploitationofcompetitiveadvantage.Coupledwithcontinuouslearningprovidesacompetitiveedge.
Strategicformulation:
• Strategicadvantage.Thisreferstoestablishingincustomers’mindsanenduringvaluedifferencebetweentheproductsandservicesoftheorganisationandthoseofcompetitors.
• Strategicpositioning.Thisreferstothewaytheorganisationwantstobeperceivedinthemarketplace.• Strategicflexibilityandadaptation.Strategicflexibilityinvolvesawillingnesstorethinkcontinuouslyand
makeadjustmentstothecurrentactionplans,strategies,structure,cultureandmanagerialsystemsasneeded,inordertoremaincompetitive.
• Strategicleverage.Leveragingisacreativeprocessthatresultsindoingmorewithfewerresourcesbyfindingandusingresourcesmoreintelligentlyandinamorefocusedmanner.
Entrepreneurialstrategieswillfailifnotaccompaniedbymanagementpracticesthatsupportandreinforcethestrategies.
HowtomakeanEntrepreneurialStrategywork:somecontributingfactors
Developinganentrepreneurialvision
• Greatorganisationsaredrivenbyclearvisions.Itisimportantthatseniormanagementconceptualiseandcommunicateavisionoforganisationwideentrepreneurship
Increasingtheperceptionofopportunity
• Entrepreneurialbehaviourisopportunityseekingbehaviour.Entreprenurialstrategyrepresentsaquesttofindandexploituntappedopportunities.Theorganisationshouldbroadentheopportunityhorizon.
Institutionalisingchange
• Changeisgood.Itenrichespeople,addingexperienceanddeepeninginsights.Itrepresentsnewopportunities.Youmustchallengethestatusquo.
Instillingthedesiretobeinnovative
• Innovationmustbeexpectedfrompeoplewhodonotseethemselvesasinnovators.Thedesiretobeinnovativestemsfromasenseofinvolvementinandresponsibilityforinnovativeprojects.
Investinginpeople’sideas
• Ideas,togetherwithpeople’spersonalcommitmenttothem,representthesinglegreatestassetinacompany.
Sharingriskandrewardswithemployees
• Sustainableentrepreneurshiprequiresthatemployeesexperiencesomeoftheriskandmeaningfullyparticipateintherewards.
Recognisingtheimportanceoffailure
• Failureisasignofexperience,learningandprogress.Newthingsmeanexperimenting.Experimentingmeansriskoffailure.Shouldlearnfromfailure.
ImplementationIssues:FatalVisions
Flaw1:misunderstandingindustryattractiveness
Thereisatendencytoassociateattractivenesswiththoseindustriesthataregrowingrapidly.Attractivenesshasmuchmoretodowithhighbarrierstoentry,theabilitytodifferentiate,theexistenceoffeweffectivesubstitutesandtheabilitytoinfluencesuppliersandcustomers.Themorehightechandglamorousabusinessis,themorelikelytherewillbehighercompetitorsenteringthemarketandtherebymakingitunprofitable.
Flaw2:norealcompetitiveadvantage
Merelycopying,imitating,orslightlyimprovinguponthestrategyofcompetitorsisnotentrepreneurial.Itmayseemeasierandlessriskybutitmeanstheventurehasnorealcompetitiveadvantage.Tosucceed,newventuresmustbeunique.
Flaw3:pursuinganunsustainablecompetitiveposition
Companiestrytobecustomerserviceleaderswhencustomerserviceinnovationsareeasytomimic.Theyattempttobetechnologyleaderswhentheydonothavethenecessaryinternalcapacitytocontinuallyproducedesirabletechnicalinnovations.Alternatively,theypursuestrategiesthatplaceconflictingdemandsondifferentpartsofthecompany.
Flaw4:compromisingstrategyforgrowth
Acarefulbalancemustexistbetweengrowthandthecompetitivestrategythatmakesabusinesssuccessful.Pressureexistforcompaniestomaximisesalesgrowth,whichoftenmeanscapitalizingonshorttermopportunitiesthatdistractmanagementfromthecorestrategy.
Flaw5:failuretoexplicitlycommunicatestrategyinternally
Itisessentialtoclearlycommunicatethecompany’sstrategytoeveryemployee.Theassumptionthatemployeesknowthestrategyandunderstanditsimplicationsforhowtheydealwithparticularissuesordecisionsisadangerousone.Managementmustbeexplicitregardingthestrategyandwhatitmeansforeachfunctionaldepartment.
CHAPTER7-STRUCTURINGTHECOMPANYFORENTREPRENEURSHIP7.1TheComponentsofStructureStructuresarecreatedtobringorderandlogictoacompany’soperations.Start-upsbeginwithverylittlestructure,butasthecompanyevolvesandgrows,thestructurebecomesincreasinglycomplex.Organisationalstructureisdefinedasthearrangementofworkflow,communicationandauthorityrelationshipswithinanorganisation.Itincludestheorganisationofdepartmentsorworkunits.Designingastructuredealswithissuesofdifferentiationandintegration;
• Differentiation-Referstothewaysinwhichdecisionmakingauthorityisdistributed,tasksaregroupedandpeopleassignedtothetasks.
• Integration–ReferstothewaysinwhichpeopleandfunctionsarecoordinatedIndesigningtheorganisationalstructure,fourmajorpolicyareasareconsidered:
1. Specialisation–Isconcernedwiththenumberandtypesofspecialtiestobeusedinperformingtheworkofthecompany.Morespecialisationmeansmorespecifictasksandleadstointegrationissues.Environmentsthatproducediscontinuousordynamicallycontinuousinnovationsrequiremorespecialisationthancontinuousandimitationinnovations
2. Shape-Thenumberofpeopleformingdepartmentsineachareaathierarchicallevels.Morepeopleinadepartmentrequirefewerlevels.Morepeopleimplyabroaderspanofcontrolwhilefewerlevelsmeanstheorganisationisflatter.Flatterstructuresresultinbettercommunicationandfasterdecisionmaking,greaterdelegationofresponsibility.Hierarchicalstructurestendtorelyonpowertosettleissuesratherthandebate
3. Thedistributionofpower-Occursbothverticallyandhorizontally.Vertically,powerisconcentratedinthehigherlevels,suggestingmorecentralisedstructureoritcanbepusheddownintheorganisationempoweringlowerlevelstomakedecisions.Decentralisedstructuresareconsistentwiththeencouragementofindividualinitiative,experimentationandinnovationbutit’shardtocontrolalltheindividualeffortsandseeiftheyareinlinewiththestrategicdirection
4. Departmentalisation-Formingpeopleintodepartment’s,groupsandareasoncetheorganisationreachesacertainsize,normallygroupedaccordingtofunctions
7.2HowStructuresEvolveAnorganizationhastoadjustitsstructurecontinuallytoprovideforexternalpressuresandinternalpriorities.Asanewstructureisincorporatedintotheorganization,newrelationshipsbetweenthestructuralcomponents,thecompanyageandsize,thetechnologyof,theconditionsofindustry,etc.
• Initialstructureishighlyinformal,notitles• afunctionalstructureisputinplacewithcentralisedcontrol• decentralisedandgeographicalorganisationalstructuresbuiltaroundprofitcentres• movementtowardsmergedproductgroupsorstrategicbusinessunitswithcentralisedadminandstaff
functionsatheadoffice• thenmatrixstructures,crossfunctionalteamsandtheprocessofintegration
7.3TypesofStructure:LinkstoanEntrepreneurialStrategyWhenanorganizationalstructureisdesigned,itislinkedtotheorganizationalstrategyandtheexternalenvironmentinwhichtheorganizationoperates.Fourtypesofstructureexist:1. SimpleStructure
• Highlyinformalwithcoordinationoftasksaccomplishedbydirectsupervision• Strategiesdeterminedatthetop• Littlespaceforspecialisationoftasks• Norules,procedures
• Littlebureaucracy,simpleinformationsystemsandlittleintegrationneeds• Workswellinsmallrapidgrowthventuresoperatinginfragmentedindustries
2. MachineBureaucracy• Rigidstructure• Coordinationoftasksachievedthroughstandardisationofwork• Hierarchicalandbureaucratic• Formalguidelinesandplansinplace• Largetechnostructureexiststodesignandplanoperations• Technologyisintegratedintooperations• Powerisamongtopexecutives• Workwellinstablepredictableenvironments,producehighvolumesefficiently
3. Organic• Limitedhierarchyandflexiblestructure• Groupsoftrainedspecialistsfromdifferentworkareascollaboratetodesignandproducerapidlychanging
products• Emphasisisonpersoninteractionandfacetofacecommunications• Decentralisedpowerandauthorityislinkedtoexperts• Fewrules• Facilitatetheabilityofentrepreneurialstrategiestoenhancefinancialperformance
4. Divisional• Self-containedprofitcentreforproductsandmarketinglines• Candifferfromoneanotherinstructure• Pressuretoconformandformalisestandardsandprocedures• Operateindependentlyandbecomebureaucraticovertime• Decisionmakingauthorityatdivisionalmanagers• Controlledbycomplexinformationmanagementsystems• Communicationisviaheadoffice
Structuresthatenhancecorporateentrepreneurship
• Aflatandflexiblestructurewouldallowefficientcommunicationbetweenthedifferentlevelsofmanagementandbetweenstaff.Itwouldalsofacilitatecollaborationbetweenstaff.
• Decentraliseddecision-makingauthoritywouldallowemployeestotakethenecessaryactionstosolveproblemsintheirworkenvironment.
• Astructurethatallowsemployeestoexperimentwithnewproductsandthatdoesnotrequireofthemtoadhererigidlytotheirjobdescriptions.
• Astructureinwhichemployeesareencouragedtoparticipateinentrepreneurialteamsandprojects.7.4AnEntrepreneurialStructureandtheConceptofCycling.Thereisanarttodesigningentrepreneurialstructure,conventionalthoughtshouldbeabandoned.Organisationaldesignsthatfacilitatevariety,change,andspeedaresourcesofcompetitiveadvantage.Beloware20unconventionalapproaches.
1. Insistonamaximumoftwolevelsofmanagement.2. Mostbusinesscanbedoneinindependentoperatingunitsof250orfewpeople.3. Inthenextninemonths,eliminateallfist-linesupervisors4. Withinthenextyear,transferone-thirdofallstaffersatthedivisionlevelorabovetocustomerfocused
operatingunitsandthentransferanotherone-third.Thefollowingyear.5. Withinfouryears,reducecorporatestafftoamaximumoftenpeopleperbilliondollarsofrevenue.6. Requireremainingmembersofallcentralstafftoselltheirservicestolineunitsatmarketrates.7. Destroyallorganisationcharts.8. Alltopdivision/corporatemanagerspledgedaystovisitcustomers,suppliersandoutsideindustries.9. Aimforone-thirdemployeeownershipinfiveyears.
10. CEO’sanddivisionmanagersshouldpromoteapositionofsignificantresponsibilityatleastonerabblerouser.11. Nooneservesonastrategicplanningstaffformorethan24months.12. Makesureallworkteamsarelargelyself-contained.13. AllowCEO’sositonamaximumofoneoutsideboard.14. Vacateallfacilitiesmorethanthreestorieshigh.15. In24months,endallphysicalsegregationoffunctionaldepartments.16. Atalloff-sitemeeting,makesureatleast25%ofattendeesareoutsiders.17. Createcorporatevice-presidentsforvariouspositionsincompaniesover$250million.18. In4years,atleastonethirdofdivisionalchiefsshouldbe32oryounger.19. In24monthsmakesurethereisatleastonenon-US/SAboardmember.20. Letnoseniormanagerhaveanofficeofmorethan225squarefeet.
Thetypeofstructurewhereentrepreneurshipshouldflourishinclude:
• Wheretherearefewerlayersorlevelsandspansofcontrolarebroader.• Thegeneraltendencyisforamorehorizontaldesignthanvertical.• Decentralizationandempowermentarethewatchwordsofoperations,whileclearvisionandstrategycome
fromthetop.• Thedominantdirectionintermsofflowofideasisbottom-up,nottop-down.• Smallnessandsimplicitymeaningunitsoperateautonomousandteamsareempowered.• Cross-functionalinteractionsandclashofideasisalsoencouraged.• Thereislessformalizationofrolesandpositionsofthestructures.• Empowermenteffortsaredesignedtobesystematicandconsistent.• Stafffunctionsarekeptlean.
8elementstoenhancecorporateentrepreneurship(ColinandSelvin)–agoodcorporateentrepreneurshipstructure1. Managerscanfreelyvaryoperatingstyles2. Authorityisassignedbasedonindividualexpertise3. Freeadaptationoftheorganisationtochangingcircumstances4. Anemphasisonresultsratherthanprocessandprocedures5. Loose,informalcontrolswithanemphasisonnormofcooperation6. Flexibleonthejobbehaviour,shapedbyrequirementsofsituationsandemployeepersonalities7. Frequentparticipationandgroupconsensus8. Openchannelsofcommunicationwithfreeflowofinformation
Otherelementsofmechanicversusorganicorganisationalstructureinclude:
OrganicStructure MechanicStructure1. Channelsofcommunication
Openwithfreeflowinformation2. Operatingstyles
Allowedtovaryfreely3. Authorityfordecisions
Basedonexpertiseoftheindividual4. Freeadaption
Bytheorganisationtochangingcircumstances5. Emphasisongettingthingsdone
Unconstrainedbyformallylaidoutprocedures6. Loose,Informalcontrol
Emphasisonnormofcooperation7. Flexibleon-jobbehaviour
Permittedtobeshapedbytherequirementsofthesituationandpersonalityoftheindividual
8. Participationandgroupconsensususedfrequently.
1. ChannelsofcommunicationHighlystructured,restrictedinformationflow
2. OperatingstylesMustbeuniformandrestricted
3. AuthorityfordecisionsBasedonformallinemanagement
4. ReluctantadaptionInsistenceonholdingfasttriedandtestedmanagementprinciples.
5. EmphasisonformallaiddownplansRelianceontried-and-truemanagementprinciples
6. TightcontrolThroughsophisticatedcontrolsystems
7. Constrainedon-jobbehaviourRequiredtoconformtojobdescriptions
8. Superiorsmakedecisionswithminimumconsultationandinvolvementofsubordinates.
7.5StructurestoSupportNewProduct/ServiceDevelopmentProjectsStudiesofthenewproductdevelopmentprocessrevealthatfiveindividualandorganisationalrelatedfactorsarerelatedtonewproductsuccess:
1. Across-functionalnewproductdevelopmentteam2. Astrongandresponsibleprojectleader3. Anewproductdevelopmentteamresponsibleforthewholeproject4. Thecommitmentoftheprojectleaderandteammembers5. Intensivecommunicationamongteammembersduringthecourseofthenewproductdevelopmentprocess.
Structuresforproduct/servicedevelopmentTypesoforganisational
structure Description Advantages DisadvantagesNewproductdivision Largeandself-sufficient
divisionCentralisedcoordinationandcontrolTopmanagementattentionassuredResourcesadequateLong-termcommitment
CoordinationwithotherdivisionsInflexibilityduetosizeOpportunityforvestedinterests
Newproductdepartment Departmentwithindivision SpecialisationIntegrationofefforts
FewresourcesLessauthority
Newproductmanager Onemanagerwhoisresponsibleforanewproduct
Simplicity CanoverwhelmonemanagerCooperationfromothersdifficult
Productorbrandmanager Newproductresponsibilityaddedtonormalduties
Bestforlineextensionsormodifications
NotsuitedtotrulyinnovativeproductsManagertornbetweenregularandnewproductduties
Newproductcommittee Standingcommitteewithdiverserepresentation
Severalfunctionalareasinvolved
Dilutesresponsibilityacrossmembers
Cross-functionalprojectteam
Newproductgroupsetupforthedurationofaproject
Flexible,fluid,involvesdiverseperspectives
Oftenhardtogetfunctionaldepartmentsupport
Taskforceoradhoccommittee
Temporarymatrixapproach Tapspecialisedmanagersonfull-orpart-timebasis
Multipledemandsplacedongroupmembers
Ventureteam Internalaswellasexternal Bringsinoutsidersexpertise Maygarnerresources
Patternsdevelopincompaniesovertime.Thereisaneedtofitbetweenmanagementstyleandorganizationstructure.Cyclingoccurswhenthesuccessfulcompanyisabletomovebackandforthbetweencells1and3.Theinferenceisthatcompaniesmovebackandforththroughperiodsofstabilityandconservatismandperiodsofinnovationandchange.Thephenomenonofcyclingrecognisesthatorganicstructuresandmechanicstructurescaneachfacilitatetheaccomplishmentofcertaintasksrequiredforsuccessfulinnovation.
Pseudo-Entrepreneurial
Firms
EffectiveEntrepreneurial
Firms
Efficient
BureaucraticFirms
UnstructuredUnadventurous
Firms
12
43
OrganicMechanistic
Entrepreneurial
Management
Conservative
personnelused greaterthantheworthoftheproject
Outsidesuppliers Contractwithanothercompanytodevelopproduct
Utilisesspecialistsforindependentwork
CanbecostlyCoordinationandcontrolproblems
Multipleorganisationforms Useofhybridformsdependingonnatureofproject
Formdesignedtofitneedsoftheproject
Difficultiesinmanaging,coordinatingandevaluationtheseveraleffortsofseveraluniquestructuralforms.
Indecidingonthestructureoftheorganization,managementis,ineffect,decidingontheextenttowhichthestructurewillbemore:
• Simpleorcomplex• Centralizedordecentralized• Formalorinformal• Autonomousorintegrated• Highlyspecializedormoregeneralist• Fulltimeorparttime
Studiesshow,companiestodayareexperimentingwithnewstructuresandthegreatesttrendappearstobetowardtheuseofmultiplestructuralforms.7.6EntrepreneurialProjects:StructuresWithinStructuresEntrepreneurialprojectsrequireastructureinthemselvesandakeyissueistheconcernabouthowprojectstructureswillfitwithintheoverallorganisationalstructure.Companiesarerecommendedtoadoptanapproachwhereininnovationopportunitiesareproducedthroughthreedifferentinternalchannelsormechanisms.
1. Ray-of-lightprojects• resourcesobtainedinclever,creativeandinformalways• employeesareencouragedtopursuetheirideas• Theemployeeisconcernedwithformulatingtheconceptanddemonstratingtheexistenceofamarket.• Endproductisaplantobesoldtomanagement
2. Emergingpotentialprojects• Conceptsthatarebroughtaboutbyareviewcommittee• Thecommitteereviewsandapprovestheprocessesandallocatesseedcapital.• Theendproductisaformalbusinessplanthatissubmittedtodirectors,ifapproved,theemerging
potentialproductbecomesamainstreamdevelopmentproject3. Mainstreamdevelopmentprojects
• Newproduct,serviceandprocesseffortsprioritizedbyseniormanagement• Formalbudgetsareallocatedandstructureisputinplace• Systematicprocessisfollowedwithkeyperformancebenchmarksmonitoredateachstage• Endproductismajorproductlaunchbymaybedroppedorterminatedalongtheway.
Benefitsofthethreemechanisms:
1. Moreinnovationislikelytoresult2. InnovationisdefinedasacorporatewidetaskandnotjustR&D.3. Interfunctionalinvolvementandcoordinationismuchgreater4. Employeeswilltakeresponsibilityfortheinnovations,championsarelikelytoemergeandaccountabilityforthe
designandimplementation.5. Rayoflightandemergingpotentialapproachesbringmoreflexibilityandspeedtotheinnovationprocessand
costlessmoneythanmainstreamdevelopmentprojects.
7.7StructuringRelationshipsBetweenEntrepreneurialInitiativesandTheCorporation:SomeOrganizationDesignAlternativesHowcancompaniesbestructuredtosupportentrepreneurshipshouldconsidertwofundamentalissues:
1. Whethertheinitiativeshouldbepartoftheinternalorexternalstructureand2. Ifitisinternal,whattypeofstructuraldesigntoemploy.
Ninedistinctdesignpossibilitiesaresuggested,acompanycanuseoneormanyofthemifwarranted,theyare:
1. Directintegration–Highstrategicimportance,strongoperationalrelatedness.Theinitiativeisperusedinmainstreamoperations.
2. Newproduct/businessdevelopment–highstrategicimportance,partialoperationalrelatedness.Aseparatedepartmentfortheinitiativeiscreatedwhereskillsandcapabilitiescanbeshared.
3. Separatebusinessunits–highstrategicimportance,lowoperationrelatedness.Aseparatespeciallydesignedunitiscreated,operationallyanddedicatedlydistinct
4. Micronewventuresdepartment–uncertainstrategicimportance,strongoperationalrelatedness.Anewunitiscreatedwhereautonomouslyemergingentrepreneurialinitiativesareperusedwithoutconstraintofcorporationsstrategy
5. Newventuredivision–uncertainstrategicimportance,partialoperationalrelatedness.Adivisionisdesignedtohouseawiderangeofpotentiallyinterestinginitiativesthatmayormaynotfitwiththecompany.
6. Independentbusinessunits–Uncertainstrategicimportance,lowoperationalrelatedness.Aspeciallydedicatedandindependentiscreatedoutsidethecorporatestructure.
7. Nurturingpluscontracting–lowstrategicimportance,strongoperationalrelatedness.Thecompany’sknowledgeandcompetenciesareleveragedinentrepreneurialinitiativesbyoutsourcingsomepartsandconsistofstrategicassetsfortheinitiative
8. Contracting–lowstrategicimportance,partialoperationalrelatedness.Thecompany’sknowledgeandcompetenciesareleveragedinentrepreneurialinitiativesbycontractingtoanoutsidecompanywheretheknowledgeaddssomevaluetotheinitiative.
9. Completespinoff–lowstrategicimportance,lowoperationalrelatedness.Thetotalseparationoftheentrepreneurialinitiativefromthecorporation.
Akeypremiseisthatnotallentrepreneurialinitiativesarethesameandthusitshouldbereflectedinthestructuresemployedtohousetheinitiatives.Aone-size-fits-allwillnotwork.
CHAPTER8-THEPEOPLEFACTORI:FOSTERINGCREATIVITYWITHINORGANISATIONS8.1TheCreativeIndividualinaCompanyCreativitycanbedefinedastheapplicationofaperson’smentalabilityandcuriositytodiscoversomethingnew.Creativityis,therefore,thecapacitytodevelopnewideas,conceptsandprocesses.Incorporateentrepreneurship,creativityisnecessarytofindnewideasforproducts,findsponsors,obtainmanagementbuyin,formteams,acquireresourcesandovercomeobstacles.Threeperspectivesofsuccessfulcreativityinorganisations:
1. Expertise-Encompasseswhatapersonknowsandcando.Itdefinestheintellectualspaceusedtosolveproblems.
2. Motivation–Canbeextrinsic(desiretoachievecompanyrewards)orintrinsic(internal,intangiblefactors),thelatterbeingmoreimportant.Itisthepersonsinterest,passionanddesiretodosomething.
3. Creativethinkingskills–Thewaysinapproachingproblemsandsolutionsandthetechniquestheyuseforlookingatproblemsdifferently.
Managementcaninfluencetheabovecomponentsofcreativity,managerialpracticesthatresultinemployeesbeingchallenged,providefreedomandgiveaccesstoresources.Well-designedworkteamsandencouragementfromsupervisorsforcreativeoutputsthatarereinforcedbytheorganisationsvalues,systems,structures.8.2TheCreativeProcessIt’seasiertofindacreativesolutionifonefollowsalogicalprocessandthenusessomecreativeproblemsolvingtechniques.Itisafrustrating,learningprocessthatleadstomanydeadends.
Stage1:Preparation-Thecreativeprocessbeginswithaproblemorchallengewheretheindividualgathersinformationandwhereitisdefined.
Stage2:Frustration-Atthisstageasolutiontotheproblemissoughtandproblemismagnifiedbecauseofcreativeblocks.Asolutionmaybedifficulttocomebyandmaysettleforanuncreativesolution.
Stage3:Incubation-Incubationreferstoplacingtheproblem“atthebackofyourmind”oronthe“back-burner”whereyouwouldconsciouslyorunconsciouslyremovesomeofthekeyblocksandtrytofindasolutionorworkthroughtheproblem.
Stage4:Illumination-Thisisthe“aha”momentwhenyoudiscovertheoutlineorcoreofananswerwhichoftenneedstobeadapted,refined,expandedandtestedupon.Stage5:Elaboration-Atthisstagethesolutionor“aha”momentisrefined,adapted,expandedandtested.
However,thecreativeprocessmightnotbequitethatsimpleandstraightforward.Apersoncouldforawhilebestuckinastage,ortherecouldbesometoandfrobetweenthestages.Iftheideaisdiscardedatacertainstage,thepersonhastogobacktothepreviousstage.Theremaybeanumberofproblemsorcreativeblocksthatcanhampertheprocess.8.3CreativeblocksThesametypeofthinkingthatallowsapersontofunctionefficientlyonaday-to-daybasisbecomesamajorconstraintwhentryingtobecreative.Theabilitytomasterthecreativeprocessislinkedtoremovingthesecreativeblocks.
1. Therightanswer Fallacythatthereisonlyonesolution.2. That’snotlogical Thebeliefthatlogickillscreativity.3. Bepractical Theideatoallowpracticalconsiderationshaltssearchfornewideas.4. Followtherules Ignoringthefacttherevolutionaryideasaredisruptive.5. Avoidambiguity Strictadherencetooneperspectiveonasituation.6. Toerriswrong Failuretoseetheconnectionbetweenerrorandinnovation.7. Playisfrivolous Unwillingnesstoacknowledgethecreativepowerofplay.8. That’snotmyarea Restrictionofcreativitythroughthinkingthatisoverlynarrowandfocused.9. Don’tbefoolish Fearoftheunconventionalandofappearingfoolish.
10. I’mnotcreative Theworthblock.Self-condemnationthattrumpstalent,opportunityandintelligence.
Blockstocreativityoriginatefromthreesources:
1. Self-imposedblocks,thatis,theemployeemaybelievethathe/sheisnotcreative2. Creativeblocksimposedbyotheremployees,thatis,otheremployeesmayindicatethatacertainemployee
couldneverberight,orthatwhathe/sheproposesisnotlogical3. Creativeblocksimposedbytheorganisation,forexample,theorganisationmaynottoleratefailure.
Oncethecreativeblocksareremoved,thecreativeemployeecanavailhimself/herselfofanumberofproblem-solvingstylesandcreativetechniquestodevelopnewideas.8.4CreativeTechniquesandQualityThebenefitofusingcreativeproblem-solvingtechniques,suchasbrainstormingandmind-mapping,andunderstandingproblem-solvingstylesisthatitallowsasystematicapproachtoproblemsolving,whichinturnyieldsbettersolutions.Thefollowingthreestandardsforjudgingthequalityofanindividual’sorgroup’screativity:
• Obviousbenefit-Towhatextentdoestheideahaveaclearbenefitoradvantageforthecustomer/user?• Reasontobelieve-Whatsupportingevidenceistheemployeeabletoprovide?Isthecustomer/userlikelyto
believethattheconceptorideawilldeliverthesamelevelofbenefits?• Dramaticdifference-Howdifferentistheideafromconventionalsolutions?
8.5EntrepreneurialPersonalityInadditiontobeingcreativeandfindingthesolutiontoaproblem,thecorporateentrepreneurisresponsibleforimplementingthesolution.He/shehastofindresources,overcomeobstaclesandfindasponsor.Whattraitsandpersonalityshouldthecorporateentrepreneurpossesstobeasuccessintheorganisation?
• Achievementmotivation• Stronginternallocusofcontrol• Calculatedrisktaker• Toleranceofambiguity• Degreeofautonomywhenaccomplishingatask,self-motivated.• Tenaciousanddemonstratesignificantperseverance
Wecanconcludethatnosingleprototypeoftheentrepreneurexistsandthatitispossibletodevelopentrepreneurialcharacteristics.8.6MotivatingEntrepreneurialBehaviour Thedecisiontobeentrepreneurialisbasedonaperson’spersonalcharacteristics,personalgoals,personalenvironment,currentbusinessenvironmentandthenatureoftheidea.Beforeapersonactsonanidea,he/shemakesacomparisonbetweentheprobableoutcomeofsuccessfullyimplementingtheidea(basedonpastexperiencewiththecompany)andthepersonaloutcomeshe/shehasinmind(inotherwords,whathe/shewillgetoutofit).Iftheorganisationrewardsentrepreneurialeffortsandissupportiveofcorporateentrepreneurs,iftheenvironmentisconducivetotheideaandtheentrepreneurialcharacteristicsarepresentinemployees,thencorporateentrepreneurshipandinnovationwillbetheresult.8.7AreCorporateEntrepreneursDifferentCorporateentrepreneursarenotnecessarilytheinventorsofaproduct,buttheyoftenturnideasintoprofitablerealities.Theyarethedriversandteambuildersbehindanidea,i.e.ordinarypeoplewhodoextraordinarythings.Corporateentrepreneurscanbethoughtofconceptualisation(dreaming)andthenimplementation(doing)
Whenfacedwithasetbacktheyemployanoptimisticapproach:1. Theydonotadmittheyarebeaten2. Theyviewthemselvesasresponsiblefortheirowndestiny.
InsertTable8-6page230.8.8CategoriesofCorporateEntrepreneursCorporateentrepreneurstakeonvariousformsandexhibitdifferentstyles.Theydifferintermsoftheirriskprofile,sourcesofmotivation,managerialcapabilitiesandothercharacteristics,theyare:
1. Thepersonalachiever–theclassicentrepreneuro Highneedforachievemento Needforperformancefeedbacko Desiretoplanandsetgoalso Strongindividualinitiativeo Strongpersonalcommitmento Internallocusofcontrolo Workshouldbeguidedbypersonalgoals,notothers
2. Thesupersalesperson–achievessuccessthroughselling,networkingandpeopleskills.o Empathisewithotherso Desiretohelpotherso Believesinsocialprocessandinteractionandrelationshipso Needsstrongpositiverelationswithotherso Believessalesforceiscrucialtocarryingoutstrategyo Backgroundinsales
3. Therealmanager–Strongmanagerialskillscombinedwithaggressivegrowthorientationo Desiretobeacorporateleadero Desiretocompeteo Decisivenesso Desireforpowero Positiveattitudestoauthorityo Desiretostandoutfromthecrowd
4. Theexpertideagenerator–expertisecombinedwithcreativityo Desiretoinnovateo Lovesideas,curious,openmindedo Believesnewproductdevelopmentiscrucialtostrategyo Goodintelligence,thinkingcentresentrepreneurialapproacho Intelligenceasasourceofcompetitiveadvantageo Desiretoavoidtakingrisks
8.9CriticalRolesinCorporateEntrepreneurshipInordertoachievecontinuousinnovationintheorganisation,anumberofkeyroleplayersshouldbeinvolvedforanentrepreneurialeventtooccur.Thesekeyplayersareidentifiedasfollows:
1. Initiator-Triggersthenewentrepreneurialevent,recognisestheopportunityorexternalthreat.Normallyfilledbythechampion
2. Sponsor/facilitator–theleaderormajorsponsoroftheinitiative,pushingforitsacceptanceandcompletion.Isasmajoradvisorandmentoringroleinprotectingtheinitiative.Ahigh-levelpersonthatactsasabufferprotectorandmodifierofrulesandpoliciesthathelptheventureobtainresources
3. Champion–Takestheleadanddrivestheproject,overseesimplementationprocess.Sustainsthroughobstaclesandadaptskeyconceptsalongthewaytobringprojecttocompletion
4. Innovativemidwife-Translatorbetweenthelanguage,cultureandneedsofthesponsorsworldwiththelanguage,cultureandneedsofthechampionsworld.Nurturesinnovationsthatmightberejectedbytheorganisationscore
5. Supporter-Augmentstheteam,playingasecondaryroleprovidingexpertise,marketinsightsfortheinitiative.6. Reactor–Playsdevil’sadvocate.Providesmarketintelligenceandinsightsthatservetoeitherpinpoint
weaknessintheideaorwaysinwhichitshouldberevisedorrefinedOfallthese,thetwomostcriticalarethechampionandthesponsor.However,theycannotbeexpectedtowearallthehats,awell-constructedteamisimportant.Fifteenspecificresponsibilityareasmustbefilled:
1. Research/analyser-Gatherintelligence,assesspotential2. Interpreter/strategist-Identifypatterns,trendsanddrawimplicationsforproject3. Visionary/inventory-Creativeintuitiontorecogniseopportunities4. Catalystorleader-Providemotivation,getprojectofftheground5. Endorser-Lendcredibilitytoprojectchampion6. Teamplayer-Collaborativerolewithothers7. Resourceprovider-Assistwithresourcerequirements8. Problemsolver-Solvesproblemstheinnovationteamcant9. Coordinator-Coordinatesresourcesandinputsovertime10. Negotiator-Bridgedifferencesamountvariouspartiesinvolved11. Politician-Overcomeinternalresistance12. Changemanager-Changemanagementforimpactsofnew13. Missionary-Motivateandinspiremanagementaboutthenewproject14. Opportunist-Reactquicklytoemergingdevelopmentstoprovidedirection15. Critic/judge-Identifiesflaws,downsidesandrisks
8.10MythsaboutCorporateEntrepreneurs. Myths Facts1 Primarymotivationisadesireforwealth.Moneyis
theprimeobjectivePrimarymotivationistheprocessofinnovation,freedomandabilitytoinnovate
2 Theyaregamblersandhigh-risktakers Theyaremoderaterisk-takers.Smalleranalysedandcalculatedrisksarepreferredstepping-stones.
3 Theylackanalyticalskillssohavethephilosophyofluckisallyouneed
Theyarefairlyanalytical.Theyarewellprepared,understandinnovationandperceivemarketneedsverywell.
4 Theydonotactasateamplayer.Theyactlikeabullinachinashop.
Theyoftenhavestrongpoliticalskills,adeptatworkingaroundtherules,proceduresandconstraints.
5 Theylackmoralethicsduetotheirdesiretosucceed.
Theytendtobehighlyethicalandhavehighmoralconvictions.
6 Theyhaveapowerhungryattitudeandonlyinterestedinbuildinganempire.
Mostideasaresmallandrelativelyconservative.Moreinterestedinprofitorgrowthoftheventure.
CHAPTER 10 – BUILDING CULTURES IN ENTREPRENEURSHIPItcanbesaidthatthecultureofanorganisationreferstothepersonalityoftheorganisation.Oneofthe“personality”characteristicsthatweshouldtrytodevelopinorganisationsisentrepreneurship,sothattheymaybedescribedasbeingentrepreneurial.10.1TheNatureofCultureinOrganisationsCultureisasystemofsharedmeaningheldbymembersoftheorganisationthatdistinguishestheorganisationfromotherorganisations.Cultureservesasasteeringmechanismthatguidesandshapestheattitudesandbehaviourofemployees.Itallowsorganisationstodevelopacoresetofassumptions,understandingsandimplicitrulesthatgovernday-to-daybehaviourintheworkplace.Itiscollective,meaningitissharedbymostemployees,emotional.Culturesareacollectionofagroupofpeopleinteractingovertimeandareinherentlysymbolic.Culturesdifferalongsomekeydimensions:
1. Positiveversesnegative–Positiveculturesalignswithorganisationalvision,missionandstrategies.Goodfitwithcultureandcompetitiveenvironment.Turbulentenvironment’srequireculturesbuiltaroundentrepreneurship
2. Strongorweakcultures-dependinghowdeeplyfollowedwithintheorganisation3. Homogeneous(sharedbyall)versusheterogeneous(subcultureswithincultures)4. Consistentorinconsistentcultures-ifelementsconflictsuchasthethingacompanydoestoreinforce
conservatismandavoidanceoffailure.
Theroleofcultureininfluencingemployeebehaviourisincreasinglyimportantintoday’sworkplace.Organisationshavewiderspansofcontrol,flatterorganisationalstructures,empoweredemployeesandteams.Therefore,thesharedmeaningprovidedbyastrongcultureensuresthateveryoneispointedinthesamedirection.10.2PiecesandPartsofCultureClassifyingthemanycomponentsofcultureinvolvesdistinguishingamongthefollowingsixelements.
1. Values-thethingsemployeesthinkareworthhavingordoing,expresspreferenceforcertainbehavioursandoutcomes,entrepreneurialvaluesmightincludecreativity,integrity,perseverance,individualism,accountabilityandchange
2. Rulesofconduct-acceptednormsandrulesinthecompany,thebehavioursrepresentacceptedwaystoattainoutcomes,fromethicalbehaviourtowhatyouwear
3. Vocabulary-thelanguage,acronyms,jargonofthecompany4. Methodology-theperceptionofhowthingsgetdoneinacompany,rationalprocessesorrulebending5. Rituals-ceremoniesincludingrecognitionceremonies6. Mythsandstories-legendsofanorganisation,whothesuperherowas
Culturehassubstanceandform,substancereferstosharedsystemsofvalues,beliefsandnorms.Formsaretheconcretewaysinwhichthesubstancemanifestedintheorganisation.Cultureexistsatthreedifferentlevels:
1. Basicassumptions-peopleareunawareatthislevel.Whatittakestobesuccessfulandtheimportanceorunimportanceofentrepreneurship.
2. Values-peoplemoreconsciousoraware,commonlyheldvaluesandhavemeaningbutnotvisibleortangible.3. Artefactsandcreations-symbolisethecompanyculture,highlyvisibleorobservablemanifestationsofthe
cultureIfthegoalistocreateworkenvironmentsthatsupportentrepreneurship,cultureunderliesalltheothercomponentsoftheworkplace,thatis,rewardsystems,companystructures,controlsystems,thestrategicdirectionofthefirm.
10.3CoreIdeologyandEnvisionedFutureEntrepreneurialorganisationshaveavision;suchorganisationshaveasenseofwhattheyareandwheretheywanttobe.Avisionhastwoparts:
1. Whattheorganisationis–thecoreideologyTheconceptofcoreideology,whichincludescorevalues(whattheorganisationstandsfor)andthecorepurpose(thereasonsfortheorganisation’sexistence).Thecoreideologyshouldnotchangeasproductsmature,marketsevolve,technologyemerges,ortheleadershipofthecompanychanges.
2. Whattheorganisationaspirestobecome–theenvisionedfuture
Entrepreneurialorganisationsalsohaveanenvisionedfuture.Whilethecorepurposecanbeanever-endingquest,theenvisionedfutureisaboutsettingclearandchallenginggoalswhichtheorganisationiscompelledtoachieveoverthefollowingtenortwentyyears.Goalsmotivatepeopleandevokepassionandconviction.
10.4GenericCulturesTypes(prototypes)Companiesaresocialenvironments,withtribalhabits,well-definedculturalrolesforindividuals,andvariousstrategiesfordetermininginclusion,reinforcingidentity,andadaptingtochange.Culturesgenerallyfallintooneoffourprototypes:
1. ProcessCulture:littletonofeedbackwhereemployeesfindithardtomeasurewhattheydo,concentrateonhowitisdone.Tighthierarchyandcautiousemployees,avoidfailureandarebureaucratic
2. ToughguyCulture:competitiveindividualswhoregularlytakehighpersonalrisksandgetquickfeedbackonactions.Fluctuationofstructures,financialstakesofnotsucceedingarehigh,highemployeeturnover
3. Workhardplayhardculture:funandaction,employeestakefewriskswithquickfeedback,encouragesemployeestotakeahighleveloflowriskactivity,muchisdoneinthiscultureasitisactionorientated
4. Thebetthecompanyculture:bigstakesdecisionswhereconsiderabletimepassesbeforeemployeesknowiftheirdecisionspaidoff.Highrisk,slowfeedbackwithaclearcuthierarchy.On-goingpressureandproductionofmajortechnologicalbreakthroughsandhighqualityinventions.
Culturetypesthatfacilitatehighormanagedriskencourageentrepreneurialbehaviour,whileculturesthathaveastrongprocessorientationarelikelytodiscourageentrepreneurship10.5ElementsofanEntrepreneurialCultureWhileitmayappearthatavarietyofelementsareatplay,thereisacommonality.Theentrepreneurialculturehasthefollowingelements:
1. Focusonpeopleandempowerment2. Valuecreationthroughinnovationandchange3. Rewardsforinnovation4. Learningfromfailure5. Collaborationandteamwork6. Freedomtogrowandtofail7. Commitmentandpersonalresponsibility8. Emphasisonthefutureandasenseofurgency
Entrepreneurialcultureiscomplexandisnotonlyaboutidentifyingimportantvalues,butaboutchoosingbetweenvaluesthatconflictwithoneanotherandcoexistwithoneanother.Abalancemustthereforebestruckbetweenvalues.Foranorganisationtobeentrepreneurialthefollowingvaluesshouldbeadheredto:
1. Singularpurpose2. Strongfocusonexcellence3. Commonclass/groupinterests,whilerespectingdifferences4. Guidedmorebyorganisationalgoals/purposesthanpersonalpurpose5. Aleaningtowardsconsensusdecisionmaking
6. Qualitativedecisionmakingbalancedwithempiricaldecisionmaking7. Expediencybalancedbyintegrity8. Drivenmorebyperformance-basedrewardsthantenure-baserewards9. Strongercareerfocusthanjobfocus10. Intimateconcernwiththeorganisation,withoutintrudingintopeople’spersonallives
10.6EntrepreneurialDevelopmentThroughCulture:EliLilly&Co.Tosurvive,EliLillybelievesthatfourmajorelementsdirectlyinspireinnovation:
1. Aninnovativeenvironmentinwhichallstakeholdersarerewardedfortheirinnovations2. ContinuousinvestmentinR&D3. Encouragingtalentedpeoplewiththeirideas.4. World-classfacilitiestofacilitatetheinnovationprocess.
10.7ExploringaKeyValue:IndividualismEntrepreneurshiprequiresachampion–anindividualtokeeptheideaalive,keeptheentrepreneurialprojectgoing,ortofightthroughpoliticsandrejection.However,intheentrepreneurialorganisationtheremaybeadownsidetoindividualism,whichmayresultinentrepreneurspursuingtheirowngoalsattheexpenseofthegroup,projectorOrganisationalgoals.Theabilitytoachievesustainedentrepreneurshipisdependentonabalancebetweenindividualismandcollectivism.Individualism–referstoaselforientation,anemphasisonself-sufficiencyandcontrol,thepursuitofindividualgoalsandavaluesystemderivedfromtheirownaccomplishments.Collectivism–agrouporcollectiveinvolvethesubordinationsofone’sownpersonalinteresttothegoalsofthelargerworkgroup.
PositiveIndividualism Collectivism
1. Moreselfconfidence 2. Greatersynergiesfromcombinedeffortsofpeople
3. Achievementmotivation 3. Incorporatediverseperspectivesforcomprehensiveview
4. Strongersenseofpersonalresponsibility 4. Relationshipsmorepersonalisedandharmonious5. Linagebetweenpersonaleffortandrewards 5. Moreconsensusregardingdirectionandpriority
5. CreditforfailuresandsuccessNegative
1. Personalgainatothersexpense 2. Lossofgroupcollective3. Lesscommitment(loyaltyisforsale) 3. Emotionaldependenceonindividualsingroup4. Differencesamongstindividualsareemphasized 4. Lesspersonalresponsibilityforoutcomes
10.8ACulturewithaDifferentViewonFailureFailureisasteppingstonetosuccess.Althoughaconceptoranewproductorservicemayfailafewtimesbeforesucceeding,failureisalearningcurve.However,manyorganisationsthatpurporttobeentrepreneurialdonotacceptfailureorpromotesafeandtrustedmethods,andmaypunishstaffforfailure.Accordingly,thecultureoftheentrepreneurialcompanywillcelebratefailure.Therearethreetypes:
1. Moralfailure2. Personalfailure3. UncontrollableFailure
10.9CulturesWithinCultureWithinthecultureoftheorganisation,anumberofsubculturesusuallyexist.Oneislikelytofinddifferentculturesindifferentfunctions,businessunitsordivisions.Subculturescanimpactthewaysinwhichentrepreneurshipismanifested.Conflictsmayoccurwithotherpartsbuttheentrepreneurialideasareadaptedandredefinedtomakethemstronger.10.10LeadershipandCultureAdistinctionismadebetweenentrepreneurialleadershipandentrepreneurialculture.Whenanentrepreneurialleaderwhodrivesinnovativeperformanceexitsfromanorganisationthatdidnothaveanentrepreneurialculture,innovativeperformancewillleaveaswell.Visioncoupledwithlearningproducesanentrepreneurialmind-setthroughtheorganisation.Accountabilityandresponsibilityforinnovativeinitiativesisassignedandassumed,asemployeestakeownershipoftheseinitiativesandoftheorganisationitself.
CHAPTER11–DESIGNINGENTREPRENEURIALCONTROLSSYSTEMSControlsystemsinorganizationstendtostartoutsimple.Overtimetheysteadilyevolve,becomingmoresophisticatedandcomplex.Asmoreprocedures,systemsanddocumentationrequirementsareadded,managersareincreasinglyinclinedtomicromanageeachandeveryactivity,andtoestablishquantitativebenchmarksinasmanyactivityareasaspossible.Benchmarkscanbecomeendsinthemselves,whileconveyingalackoftrustinemployees.Thereisalsoanissueofefficiencyversuseffectiveness.Efficiencyisconcernedwithminimizingtheexpenditureorresourcesneededtocompleteatask,whileeffectivenessisconcernedwithensuringthatthecorrecttasksarebeingaccomplished.However,thecontrolsystemsinorganizationshaveplacedtheemphasisonefficiencyandhaveignoredeffectiveness.Controlsystemshaveaneffectonthelevelofentrepreneurshipexhibitedinanorganization.Thecrucialquestionhereishowcancontrolsystemsintheorganizationfacilitatecontroloveritsresourcesandencourageentrepreneurialbehavior?11.1TheNatureofControlinOrganizationsControlsystemscanbedefinedasthoseformalandinformalmechanismsthathelpindividualsregulatetheirjobsandallresources.Controlsensurethatpeopleperformtheirjobsinamannerthatisconsistentwiththeorganizationspurpose.Thethreeareasofcontrol:
1. Inputs-Includesthingssuchashirelingandpurchasingpolicies2. Behaviorsandprocesses–regulationtheactivitiesofmembersthroughoperatingprocedures3. Outputs–Settingtargetsformeasuringachievement,i.e.performancegoals,performancetracking
54Acontrolsystemcancompriseanumberofelements.Thevariouscontrolmeasuresandmechanismscanbegroupedintofourgeneralcategories:
1. Simplecontrol–Directpersonalsupervision2. Technologicalcontrol–Technologybasedcontrolusedinproductionandservicedeliveryprocess3. Bureaucratic/administrativecontrol–Coverstheformalrules,proceduresandpolicies.4. Concretive/culturalcontrol–Controlsbroughtaboutbysharedvalues,normsandconformancetothe
organizationsbeliefs.11.2OrganizationsOutofControl:AStoryofUnintendedConsequencesControlisvitalinorganizationsandcontrolmechanismsmaybewellintended;however,theymayhaveunintendedconsequencessuchasthefollowing:
1. Trustproblem-Employeesmayconcludethattheyarenottrusted,whichmightunderminetheirwillingnesstotaptheircreativeenergiesandcomeupwithinnovativeideas.
2. Slownessproblem-Controlscanevolvetothepointwheretheyslowtheorganizationdown.Iftherearedetaileddocumentationrequirementsandelaboratestepsthatemployeesmustfollow,thenactivitiestakelongertocompleteandpeopleworkmoreslowlyaswell.
3. Means–endproblem-Managersmaygetsocaughtupintryingtocreatecontrolmechanismsthattheylosesightofwhatthecontrolsweremeanttoaccomplish.
4. Efficiency–effectivenessproblem-Controlmeasuresmaybeabletoachieveefficiency,buttheyignoreeffectiveness.
Itisclearthatacontrolmechanismcouldbecontrollingthewrongthingornothingatall.Intermsofentrepreneurship,entrepreneurialemployeeswasteaconsiderableamountoftimeandeffortfindingwaysandmeansthroughbureaucraticcontrols;theeffortcouldbebetterspentoninventingnewproducts.
11.3DimensionofControlandEntrepreneurshipAcontrolsystemcanbecharacterizedbyanumberofkeyattributes.Theprincipaloutcomessoughtthroughthecontroleffortare:
1. Riskreduction2. Eliminationofuncertainty3. Highlyefficientoperations4. Goalperformance5. Specificroledefinitions
Tofacilitateentrepreneurship,thefocusofthesecontroloutcomesshouldshiftasfollows:
• Fromriskreductiontorisktolerance–Lessrigiditywithagreaterdegreeofempowermentandautonomy• Fromtheeliminationofuncertaintytothemanagementofuncertainty–Lessformalityandrigidnesson
planningforthefuture.Morefocusedonachievinggoalsratherthanprescribingmeans• Fromhighlyefficientoperationstoenlightenedefficiency–Wherealevelofdiscretionorsackisdeliberately
designedintocostcontrolsandbudgetingandperformanceisnotmeasuredasfixedintervals.• Fromgoalconformancetogoalcongruence–Agreaterdegreeoffreedomandautonomywhereself-control
andsocial-controlplayalargeroleinproceduralcontrols.• Fromspecificroledefinitiontoroleflexibility–Employeesareempoweredtoexercisediscretionandpersonal
initiativeandcontrolsfocusontheouterboundariesforactivitiesandbehaviors.TheEntrepreneurialPhilosophyofControlTwogeneralphilosophiesdominatethetheoryofcontrol,namely:
1. Commandandcontrol2. Nosurprises
55Thereare11elementsinherentinanentrepreneurialphilosophyofcontrol.
1. Controlbasedonnosurprises2. Looserbuteffectivecontrolelements3. Amindsetofgivingupcontroltogaincontrol4. Empowermentanddiscretionthatisbuiltintothejob5. Mutualtrust6. Emphasisonselfcontrol7. Organizationalslackintermsofresourceavailability8. Poolsofinternalventurecapital9. Varyinglevelsofcontrolbasedonthetypesofentrepreneurialbehaviorbeingsought10. Openandsharedcontrolinformation11. Simultaneousloose-tightproperties.
Theprinciplesofanentrepreneurialphilosophyofcontrolincludethefollowing:
1. Asenseoftrust2. Managersmustgiveupcontroltogaincontrolbyaddressingissuessuchasownership,accountabilityand
empowermentTherelationshipbetweenentrepreneurshipandcontrolisnotoneofgettingmoreentrepreneurshipifthereislesscontrol.Therealissueisthenatureandintentofthecontrol,andhowitisused.Furthermore,thedegreeofcontrolcanbeexpectedtovarywiththetypesofentrepreneurshipthecompanyseeks.11.4AParadox:SimultaneousLoosenessandTightnessEntrepreneurshipposesadilemmaforcontroleffortsintheorganization.Intheory,theorganizationdesignscontrolsystemsthatfacilitateeffectiveorganizationaloutcomessuchasefficiency,riskreductionandconformity.Inthe
entrepreneurialorganization,however,werequirethemanagementofuncertainty,risktolerance,empowermentandexperimentation.Giventhesetwoperspectives,itisevidentthattherehastobeabalancebetweenthetightnessandloosenessofcontrolintheorganization.Theconceptofbalanceisillustratedintermsofthreecharacteristicsofcontrolsystems,namely:
1. Administrativeformality/informality–Theextenttowhichtheorganizationreliesuponexplicit,statedordocumentedcontrolmechanisms.
2. Managerialflexibility/inflexibility–Thedegreetowhichdiscretionand/orfreedomisgiventojuniormemberstointerpretorignorerulestoperformtheirjobs.
3. Budgetarytightness/looseness–Theextenttowhichbudgetsimposestrictrestrictionsonhowresourcesareallocatedandhowperformanceisevaluated.
Itwouldseemtherelationshipbetweenthevariousdimensionsofcontrolandentrepreneurshipshouldbecurvilinear,aninverted‘U’.Entrepreneurshipwillbeatthehighestatintermediatelevelsofadministrativeformality,managerialdiscretionandresourceandbudgetarytightness.Levelsofentrepreneurshipwillbelowerwhenthingsaretooinformalorhighlyformalwherethereistotaldiscretionorvirtuallynodiscretionandwherebudgetsareextremelylooseorextremelyrigid.11.5ApproachingControlandEntrepreneurshipasComplementaryThereisatendencytoregardcontrolprocessesastheantithesistotheinterestsofcorporateentrepreneurship.However,theevidencesuggeststhatcontrolsystemscanpositivelycontributetothesuccessfulintroductionofnewproductsandtechnologies.Threeimportantimplicationsformanagingentrepreneurialactivitiesinclude:
1. Managersshoulddesignanddevelopinnovation-facilitatingandcontrol-facilitationmechanismsthatcomplementoneanothersuchthepotentialentrepreneurialpotentialresideswithintheorganization.
2. Managersshouldunderstandinnovationasaprocessthatamenabletotheapplicationsofstructured,disciplinedoversight.
3. Successfulinnovationispartproductororganizationalsystemsinwhichcontrolelementsandentrepreneurshipelementsoperateinconcert.
11.6ExpandingontheConceptofSlackOrganizationshavelimitedresources,anddepartmentsandsectionsintheorganizationcompetefortheseresources.Entrepreneurialorganizationshaveyettofindwaystomakeresourcesavailableforinformalexperimentation.Theconceptoforganizationalslack,whichimpliesadegreeofloosenessinresourcecontrolandavailability.Employeesshouldbeabletotapintoresourceswithoutgoingthroughformalapprovalprocesses.Theyshouldbeabletoborrowexpertise,research,money,materials,equipmentandotherresourcesastheydevelop,testandrefinenewideasandproducts.Waysinwhichtocreateorganizationalslackandfocusonafewissues,namely:
• Managingslackinvolvesafinebalancingact.• Slackistiedtothebudgetingprocessincompanies.• Slackdependsonthetypesofresourceinquestionandthedemandforthoseresources.
11.7InternalVentureCapitalPoolsSimplyhavingslackintheorganizationisnotenoughforentrepreneurialinitiatives;theorganizationhastomakeseedcapitalandventurecapitalavailable,sourcesoffundingforinnovativeprojectsinclude:
• Includeadealstructurewheretheemployeegetsanequitystakeintheconceptonceitdevelopspastacertainpointorsharesinreturns.
• Theemployeemayalsoshareinthedownsiderisk,shouldtheconceptfail.o Intra-capital–aresourcebankaccountawardedtoemployeeswhosuccessfullypursue
entrepreneurshipwithinthecompany.Themostimportantfundingcriterionisthestrategicfitoftheprojectwiththecompany.
11.8ControlandCosts:TheOpen-BookRevolutionTheprevalentbeliefseemstobethatemployeesmustnotknowwhatmoneyisspentoninthecompany.Open-bookmanagementstrivestogetallemployeestothinkandactlikeownersofthebusiness,tofocusonthebottomlineandtotakejointresponsibility.Thefinancialrecordsandallinformationaresharedwithalltheemployees,whoarethenexpectedtoask“why”questionstoincreasetheirunderstanding.Itisanapproachbuiltaroundthefollowingsixprinciples:
1. Everyemployeehasaccesstothecompany’sfinancialsandallothernumbersthatarecriticaltotrackingthecompany’sperformance.
2. Thereisanovertandongoingattempttogettheinformationinfrontofemployees.3. Thecompanyteachesthebasicsofbusinesstoeveryone.4. Employeeslearnthat,whateverelsetheydo,partoftheirjobistomovethenumbersintherightdirection.5. Peopleareempoweredtomakedecisionsintheirjobsbasedonwhattheyknow.6. Employeeshaveastakeinthecompany’ssuccessandshareintheriskoffailure.
11.9TheConceptofProfitPoolsTheprofit-poolconceptinvolvesanalyzingthetotalprofitearnedinanindustryatallpointsalongtheindustry’svaluechain.Allprofitandservicesegmentsinthevaluechainareidentifiedandeachisassessedintermsofitspresentandfutureprofitability.Byanalyzingwhereandhowmoneyisbeingmade,managementcandeterminewheretoconcentrateentrepreneurialefforts.Withtheprofit-poolmethod,newsourcesofrevenuewithinthevaluechaincanbeidentified,prioritiescanbeestablishedforacquisitionsandexpansions,insightcanbeobtainedfortargetingnewcustomergroupsanddistributionchannels,andinternaloperationscanberefocused.Ultimately,profitabilityisimprovedandthebusinessmodelofthefirmisenhanced.
TOPIC3-CONTINUOUSENTREPRENEURIALPERFORMANCECHAPTER13–FORCESWORKINGAGAINSTCORPORATEENTREPRENEURSHIPInthelargetraditionalorganisationmanagementpracticesarefocusedoncontrollingcosts,efficienciesandresources.Assuch,entrepreneurshipclasheswiththemainstreamoperation,becauseitrequiresflexibilityintermsofbudgetsandresourcesandchangestoplans.Therefore,traditionalmanagementandtheoperationsoftheorganisationarebarriersorobstaclestocorporateentrepreneurship,ascompaniestendtodevelopinwaysthatallowthemtomanagethepresentefficiently.Consequently,companiesarenotgearedtocreatingthefutureand,asaresult,entrepreneurshipclasheswiththemainstreamoperationsofthecompany.Whycontrolsystemsarebad?
• Trustproblem-Ascontrolmeasuresevolve,theyintrudefurtherandfurtherintothewayanemployeedoestheirjob.Theeventuallyleadsemployeestobelieveemployersdon’ttrustthemandthisunderminestheirwillingnesstotapintotheircreativeenergies.
• Trustproblem-Controlsevolvetothepointwheretheyactuallyslowtheorganisationdown.Noflexibilityandextremelydetaileddocumentationrequirements.
• Meansendproblem-Controlsystemsaremeanttobeameanstoanend.Thegoalislostandthecontrolsystemjustbecomesanendinitself.Theylookgoodinthecontrolmeasurebuttheactualgoalisnotbeingmet/enhanced.
• Efficiency–effectivenessproblem-Efficiencyisdoingthingsright,whileeffectivenessisdoingtherightthings.Sometimesefficiencyisconsideredmoreimportantthaneffectivenessandignoreshoweffectivethecontrolmeasureis.
13.1AFrameworkforUnderstandingtheObstaclesThecorporateentrepreneurfacesanumberofbarriersorconstraints.Barriersshouldbecriticallyreviewedtodeterminehowtoovercomethem.Thefollowingquestionsshouldbeansweredinthisregard:
• Whichconstraintscanbeignored?• Whichcanbeworkedaround?• Whichcanbeeliminated?• Whichcanbeconvertedintofacilitatorsofentrepreneurship?• Whichmustbeaccepted,eveniftheylimitthescopeorscaleofwhatthecorporateentrepreneurcan
accomplish?Barriersshouldbecriticallyreviewedtodeterminehowtoovercomethem.Therearesixcategoriesofobstaclesorbarriers:
1. Systems-Thereisamisdirectedrewardsandevaluationsystem.Thecontrolsystemsareoppressiveanddisplayalackoftrust.Thebudgetingsystemisinflexible.Overlyrigidplanningsystems
2. Structures-Therearetomanyhierarchicallevelsandtherearenarrowspansofcontrol.Thereisresponsibilitywithoutauthority.Thereisatopdownmanagementandrestrictedcommunicationchannels.Lackofaccountabilityforinnovationorchange.
3. Strategicdirection-Thereisanabsenceofinnovationgoals.Noformalstrategyforentrepreneurship.Novisionfromtopmanagement.Norolemodels
4. Policiesandprocedures-Thereisalongandcomplexapprovalcycle+extensiveredtapeanddocumentationrequirements.Thereareunrealisticperformancecriteria
5. People-Thereisafearoffailure,resistancetochange,turfprotectionandcomplacency.Inappropriateskillandtalentsformakingentrepreneurialchange.
6. Culture-Ill-definedvalues,lackofconsensusovervalueandnormpriorities,valuesthatconflictwithinnovativeness,risktakingandproactiveness
13.2ComingupShort:LimitationsoftheEntrepreneurApartfromthemajorsetsofobstacles,entrepreneurialinitiativescanbehamperedbecauseofanumberofshortcomingsinthecorporateentrepreneur:
1. Lackofpoliticalsavvy:learningtoworkthesystem–Toimplemententrepreneurship,aninnovativeentrepreneurmustattempttoinfluenceandidentifykeystakeholdersonwhomtheconceptdepends.
2. Lackoftime:crisismanagement–Makingtimeduringthedayawayfromthe‘job’tospendon‘petprojects’.3. Lackofincentivestoinnovate:beyondtokenism–Makingsurerewardsandrisksaresuitedtotheconceptor
venture4. Lackoffinancialcredibility:inabilitytoprojectbelievablenumbers–Successfulentrepreneursmusteitherbe
adeptatfinancialprojectionsandcalculationstodevelopaventureplan5. Lackofpeopledevelopmentskills:autocracyrules–Thedifficultyofmanagerstotrustorempoweremployees.6. Lackoflegitimacy:untestedconceptanduntestedentrepreneur–Theinternalscepticismthatisencountered.7. Lackof“seed”capital:theproblemofearlyresources–Securingthenecessaryresources,evenifconceded
withreluctanceandresentment8. Lackofopenownership:protectingturf–Theentrepreneurwilloftenruninto‘powerplays’andbattlefor
controloverdecisionmakingoccurringbetweenkeyresponsiblepeople.9. Lackofasponsor:someonetowatchoveryou–Theactascoaches,buffersagainstbureaucraticinterference
andallowtheentrepreneurtoconcentrateontheirprojectorventure.10. Lackofenergyandsharedenthusiasm:theinertiaproblem-thelackofmovement,support,envyorresistance
oftheidea.Fivecausesoftheproblemofinertia:o Indifference–Smallconceptisnotconsideredsignificantrelativetootherongoingventures.o Distraction–bytheday-to-daypressuresoftheorganisation.o Competition–theircloutdistributorsandsupplierstodenysupporttofledglingventures.o Disaffection–Resistancetotheentrepreneursprogressbecauseofenvyorjealousy.o Directthreat–Canbefrominsideoroutsidetheorganisation.
11. Lackofpersonalrenewal:theissueofreinforceddenial–Notbeingabletoadapttothechangingenvironmentduetopastventuresuccess.Paststrengthsmaynotberelevantanylonger.
12. Lackofurgency:fearasgoodandbad–Treatingfearasapositivetocreateasinceofurgencyandareminderthatfailureisnotanoption.
13. Lackofappropriatetiming:theresourcesshiftdilemma–Thetimingofresourceallocationneedstobebalancedfromtheoldtothenewtoavoidheavycosts.
13.3CorporateInnovatorsorRogueManagers:AnEthicalDilemmaManyinternationalcompaniesthathavegonebankruptinrecentyears(owingtotheunethicalbehaviouroftheirseniormanagers)werealsoentrepreneurial.Therearedistinctionsbetweenentrepreneurialbehaviourandunethicalbehaviour.Somereasonswhymanagersmayactunethicallyare:
• Theyareunethicaltobeginwith.• Theirexcessivedriveovertimeandoverlyambitiouspersonalgoalsmayresultinunethicalbehaviour.• Theydonotclearlygrasptheirprofessionalresponsibilities.• Theauthorsdiscussthreemodelsofmanagementapproachestowardbusinessethics–moral,immoraland
amoralmodels.Thethreemodelsofmanagementapproachestobusinessethics:
1. Moralmanagementmodel–Respectethicalconsiderationsandholdtheorganisationtothehighestmoralstandardsanddemonstrateastrongethicalleadershiptoallstakeholders.
2. Immoralmanagementmodel–Basedonthepremisethateconomicopportunitiesaretobeexploitedwheneverandhoweverpossible.Ethicsareseenasobstacles.
3. Amoralmanagementmodel–Whilenotnecessarilyactingwithmaliciousintent,thebeliefthatrulesofbusinessaredifferentfromthoseofthegreatersociety.
13.4OvercomingtheObstaclesForthecorporateentrepreneurtogethis/heridea/newproductconceptthroughredtapeandbureaucracy,he/sheshoulddevelopanunderstandingofthemethodsthatmaygaininfluenceandshapebehaviour.
1. Buildingsocialcapital-Corporateentrepreneursneedtorelyontheiringenuityandpersistencetobuildsocialcapital–aninventoryoftrust,gratitudeandobligationthatcanbecashedinwhenthenewproductisindemand.Socialcapitalcanbedevelopedbysharinginformation,creatingopportunitiesforpeopletodemonstratetheirskillsandcompetencebuildingandusinginfluencenetworks
2. Gaininglegitimacy-Forprojectstogainlegitimacy,thecorporateentrepreneurcanusepersonalinfluenceorinfluencenetworks,his/herexperienceorsmallsuccessestoconvincethenecessarypeopleofhis/herviabilityandcredibility.
3. Politicaltactics-Somepoliticaltacticsthattheentrepreneurcouldusetoovercomeinertiaorresistanceinclude:
• rule-orientedtactics()• rule-evadingtactics(dealingwithunreasonablerequestsfromdepartments)• personal-politicaltactics(adversesituations)• educationaltactics(explain,persuadeunreasonableviews)• organisational-interactionaltactics(gaingreaterautonomy)
4. Resourceacquisition-Byhookorbycrook,thecorporateentrepreneurhastoacquiretheresourcesneededtodevelopthenewconcept.Thefollowingstrategieshavebeenidentifiedforacquiringtheseresources:
• Borrowing-tempuseofresource• Begging-appealingtotheownersgoodwill• Scavenging-extractusagefromresourcesotherswouldnotuse• Amplifying-getmorevalueoutofexistingresource
5. Anethicalcomponentintrainingcorporateentrepreneurs-Aholisticapproachshouldbeusedtoaddressethicsintheentrepreneurialorganisationandthatethicsshouldbewovenintotheentirefabricoftheorganisation.
Examplesofobstacles1. Employeesmaynotbeinterestedinhelpingyoudevelopandimplementthenewsystem,becausetheyare
rewardedandpromotedonhowwelltheydotheirjobs,meettheirgoalsandmanageresources.2. Theremaynotbetheresourcesavailabletodevelopyournewsystemiftheorganisationrigidlyadherestoset
budgets.3. Thedevelopmentandimplementationofthenewsystemwillrequirecross-functionalcommunicationand
collaboration.Iftheorganisationalstructureisveryhierarchicalandrigid,thencross-functionalcommunicationmaynotbepossible.
4. Ifmanagersdonotbuyintoyourideaandsupportandchampionit,yourideamayneverbecomeareality.Youneedthesupportofmanagement.
5. Organisationalpoliciesandproceduresthatarebureaucraticwillhinderthedevelopmentandimplementationofthenewsystem.Therewillbelotsofdelaysandredtapetomanoeuvrethrough,whichwouldbefrustratingtoanyentrepreneur.
6. Peoplemaybepreoccupiedwiththeirday-to-daytasksandmayresistbeinginvolvedinsomethingdifferent.13.5FocusingontheRightObstaclesattheRightTime.Corporateentrepreneursshouldconsiderboththeimmediateandlong-termobjectivesoftheirnewprojects.Obstaclesthattheprojectfaceswithinthedifferenttimeframescanbeidentifiedandthentheentrepreneurcanprioritizeeffortsandsaywheretheyshouldbefocused.Itisessentialforpeopleorpartiesinvolvedintheentrepreneurialprojecttoagreeonwhattheirrespectivetaskswillbe.Theparticularissuesthatmustbeaddressedare:
1. Whowilltakewhatspecificactionagainstwhichopponent2. Whatkeyimplementationstepsmustbetaken,andhowshouldthosestepsbetimed.3. Howcanwetellifthingsarenotgoingasplanned?4. Whatmajorcontingencyplansareneeded,andwhateventwilltriggerthoseplans.
CHAPTER15–SUSTAININGTHEENTREPRENURIALCOMPANYINTHETWENTY-FIRSTCENTURYEntrepreneurshipcanbeincorporatedinthestrategy,cultureandstructureofanorganisation.Wealsofindthatentrepreneurshipvariesacrossdepartmentsandacrosstime.Organisationsgothroughcyclesandsomearecharacterisedbyagreatdealofinnovation,whileothershavenone.Someorganisationshavemasteredtheartofbeingcontinuallyentrepreneurialandothersbattletoincorporateentrepreneurship.15.1APersonalApproachtotheEntrepreneurialProcessTherearemanywaysinwhichaprojectmaybeimplementedandsuccessful.Theeffectivenessdependsontheapproachandscope,scaleoftheproject,theteam,natureoftheorganisationandconditionsintheenvironments.Thereareafewprinciplesthatapplytoallentrepreneursandchampions:8principlesrepresentingafoundationaroundapersonalmodel
1. Solidifyrelationshipswithasponsor-someonewithpowerandcredibility.2. Buildaflexibleteamstructure-useyoursocialskillstogetateamthatbelieveintheconcept.3. Insulatetheprojectandkeepitquietforaslongaspossible-vulnerableinearlystages,threateningto
stakeholders,protectedfromdetailedscrutiny,placeprojectoutsidethemainstream.4. Becomeaguerrilla-gainaccesstoresources5. Promiselessanddelivermore-manageexpectations6. Experimentandproduceearlywins-timehorizonsforentireproject,buildonsmallwins,produceevidence
thatitsworkingincrementally,getmoresponsorsonboard.7. Manageprojectmomentum8. Attempttosettheparameters-influencetherulesofthegame,workinginsomeoneelse’srulesisharderto
succeed,negotiateotherwaystowin
Asthecorporateentrepreneurdevelopsapersonalmodelorprocessformanagingentrepreneurialinitiatives,theymaywanttorefertotheCorporateInnovatorCommandmentsTheTenCommandments
1. Cometoworkeachdaywillingtogiveupyourjobforinnovation2. Circumventanybureaucraticordersaimedatstoppingyourinnovation3. Ignoreyourjobdescription4. Buildaspiritedinnovationteamthathasthefiretomakeithappen5. Keepyourinnovationundergrounduntilitispreparedfordemonstration6. Findakeyupperlevelmanagerwhobelievesinyouandyourideas,i.e.asponsor7. Permissionisrarelygranted,thusalwaysseekforgiveness8. Sharetheglory9. Conveytheinnovationsvisionthroughstrongventureplanning
15.2TheImportanceoftheSponsorHighendcorporatemanagersarewillingtoprotectchampions.Theyaidingainingaccesstoresourcesandinformation,believeinthecorporateentrepreneur’svisionandcapabilities.Theyhelphidetheprojectandprotecttheentrepreneurfrombeingfiredifrulesareviolated.Questionstoaskwhenselectingasponsor
• hasthepersonbeenchallengedandproceededanyway• doesthepersonhaveacommitmenttoinnovation• canyougaintheirrespect• howimportantisastepupintheladderforthisperson• doesthepersonknowwhentofightandwhentobegraceful• doesthepersonunderstandthecorporatedecisionmakingstructure• doesthepersonhaverespectofotherkeydecisionmakingpeople
Establishingmutualtrustwiththesponsorismostimportant.Threeaspectsoftheprojectitselfthattheentrepreneurshouldconsiderwhenchoosingasponsor
• nonfinancialresources(time,equipment)• investmentsneeded(venturemoney)• critics(politicalopposition)
15.3BewareOfThe“DarkSide”OfEntrepreneurshipThebenefitsofbeinganentrepreneurareknownbyall.Wehearofsuccessfulentrepreneursinthemediaallthetime.However,thereisadownsidetobeinganentrepreneur.Threepotentiallydestructiveaspectsthatcouldpermeatethepersonalityoftheentrepreneur:Theconfrontationwithrisk-Theentrepreneurisfacedwithvaryingcategoriesofrisk,theserisksinclude
• Financialrisk-companyknowsentrepreneurisresponsibleforlosingmoney)• Careerrisk-couldloseoutonthatsecurity• Familyandsocialrisk-notimeforfamilyorfriends• Psychicrisk-thefailurecouldbetoohardtohandle
Entrepreneurialstress-Theentrepreneurcanexperiencestressasaresultofastruggleforresources,roleoverload,timeconstraintsandworkingalone.Entrepreneurialego-Inadditiontothechallengesofriskandstress,theentrepreneurmaybecomeoverconfident.Thishasthefollowingnegativeeffects:
• anoverbearingneedforcontrol-desiretocontrolventureanddestiny,becomeobsessedforcontrolanddoingthingsontheirterms
• asenseofdistrust-distrustthemotivesofothers• anoverridingdesiretosucceed-egoandbeliefthattheyareindispensable,theprojectwillnotsucceed
withoutthem• unrealisticoptimism-toomuchthanks,Ithinkyouarefake
Thedecisiontoactentrepreneuriallyoccursasaresultofinteractionbetweenorganisationalcharacteristics,individualcharacteristics,andsomekindofprecipitatingeventortrigger.Inordertosustainentrepreneurship,theorganisationshouldbeabletoidentifyandmanagethesetriggeringevents.15.4RecognisingandManagingtheTriggerEventsTriggerEventsareeventsthattriggercorporateentrepreneurshipcanbeofeitherexternalorinternalorigin:
• Externaltriggers-Entrepreneurialmanagementandentrepreneurialideasareforthcomingwhenorganisationsfacediminishingopportunities,rapidchangesintheexternalenvironmentsandincreasinglyshortdecisionwindows.Thetriggerforcorporateentrepreneurshipinanorganisationcouldbeaggressivecompetitormoves,orchangesintheindustryormarketstructure.
• Internaltriggers-Employeessometimessaythattheypursueanideawhenitintriguesthemandtheybelieveinit,orwhentheytakeexceptiontothefactthatoneoftheirideashasbeenrejected.
Triggeringeventscanbegroupedintofivebroadcategories,namely:
1.internal/externaltriggers2.opportunity-driven/threat-driventriggers3.technology-pushed/market-pulledtriggers4.top-down/bottom-uptriggers5.Systematicordeliberatesearch/chanceoropportunism
ImplicationsofsustainableentrepreneurshipManagersneedtoidentifythetriggersinthecompanyfirstanddetermineifanykeytriggersarenotoccurringforaparticularreason.Thereisaneedtosystematicallyreviewbothsuccessfulandunsuccessfulppsthathavebeenpursuedbythecompanyoverthepast5years.Managersshouldlookforthegroupingsgivenandassociatethemwithprojectsandtheiroutcomes.Ifmanagementunderstandsthesetriggeringevents,itwillknowwhichtriggerstoemphasisegivenspecificcircumstances,howresourcesandincentivescanbeallocatedtofacilitatecertaintriggeringevents,andhoworganisationsshouldbestructuredtotakeadvantageofcertaintriggeringevents.15.5BuildinganAdaptiveOrganisationOrganisationsthatoperateincontinuouslychangingexternalenvironmentshavetoadaptcontinually,whichrequiresvariousformsofinnovation.Ultimately,adaptationandinnovationdependontheorganisation’sabilitytolearn..Learningorganisationsareorganisationsthatcontinuallyimprovethroughtheircapacitytolearnfromtheirexperiences.Learning,inthiscontext,referstotheacquisitionofnewknowledgebyemployeeswhoarewillingtoapplytheknowledgeinmakingdecisionsorinfluencingothersintheorganisation.10criticalareasthatshouldbefocusedonforlearning:
1. Stylesofchampionsthatworkanddon’t2. Ventureteamstructuresthataremosteffectivefortypesofinnovation3. Modelsofsuccessfulprojectsintermsofkeystepsofstages4. Approachestogoalsettingandmonitoringthatkeptprojectontrack5. Methodsofopportunityidentificationthattookplace6. Wayofachievingbalancebetweenautonomyandcontroloninnovation7. Venturefundingapproaches8. HRMpolicies9. Techniquesofoptimallymanagingtheallocationofresources10. Changemanagementforadoptionofinnovation
Four“rules”thatenhanceanorganisation’schancesofremainingadaptiveandinnovativeboththroughandbeyondthegrowthstage:
1. Sharetheentrepreneurialvision.2. Increasetheperceptionofopportunity.3. Institutionalisechangeastheorganisationalgoal.4. Instilthedesiretobeinnovative.
15.6CreatingaSenseofUrgencyWhenthereisacrisis,employeesfeelasenseofurgency,managementmustcreateanenvironmentwhereasenseofurgencyisfeltallthetime.Itisbuiltintothecorevaluesofthecompanyandthesurvivalofthecompanydependsonit.It’sacallforimmediateaction,pressingneedtodothingsdifferentlyandabeliefthattimeisrunningout.Thechallengeforanyorganisationthatwishestoachievesustainableentrepreneurshipandtocounteractcomplacencyistocreateanon-goingsenseofurgencythroughouttheorganisation.increatingasenseofurgency,itisimportanttorethinkthefundamentalassumptionsthatunderpinbusiness.Companieshavetoreprogramthemselvestothink:
• Ourbestemployeesandevenourgoodemployeeshaveprofessionaloptionsthatdonotinvolveourcompany.• Customerloyaltiesarefleeting–creatinga“wowexperience”forcustomersisimpossibleifwearenot
continuallyfindingnewandbetterapproaches.• Thegapbetweenusandthecompetitionissmallerthanwethinkinthosesituationswhereweareahead,and
itislargerthanwethinkinthosesituationswherewearebehind.• Thelatest,greatesttechnologyhasproblems,butwecannotaffordtoignoreit.• Ourbusinessmodelisworking,andyetitneedstobefixed.Thefirmcouldbeoutofbusinessin24months.
15.7TheNewStrategicImperative:EmbraceParadoxesInthissectionweshalllookattheparadoxesfoundinanentrepreneurialorganisation.Throughoutthetextbookwehavecomeacrossmanysuchparadoxes,forexampletheneedfortheorganisationtobeflexibledespitetheneedforcontrolintheorganisation.Wehavecomeacrosstheimportanceoftheindividualisticcharacteristicsoftheentrepreneuringettinghis/herideaacceptedanddevelopedintoamarketableproduct;yetwehavealsostudiedtheimportanceoftheventureteam(collectivism)indevelopingthenewidea.Therearenumerousotherparadoxesinmanaginganentrepreneurialorganisation.Theimperativesorchallengesthatanorganisationfaces,theseinclude:
• Theparadoxofsizeandscopeo smallercompaniesarequickandflexible,innovateontheflyo thetechnologyrevolutionhasallowedthemtooperateonalargerscaleo asaresultlargecompaniesaretransformingthemselvesintoconfederationsofsmallindependentfirmso theparadoxofeconomiesofscale
• Theparadoxofriskandreturno doingsomethinghighlyinnovativemaynotproducereturns
• Theparadoxoftheindividualandtheteamo Adedicatedteamofspecialistandgeneralistsarealsoneededaswellasavisionarychampiono TheCorporateentrepreneurwillhavetobelossofadictatorandmoreofateamplayero Theobjectistobuildaprojectbasedoncorecompetenciesandfocusoncontinueddevelopment
• Theparadoxofflexibilityandcontrolo largecompanieshavedownsizedandrestructuredtobecomefasterandflexibleo it’shardtomaintainflexibilityandasufficientlevelofcontrol
• Theparadoxofconstructiveanddestructivebehaviouro CErequiresbothstabilityandturbulenceo Entrepreneurshipisbothconstructiveanddestructivemakingexistingoperationsobsoleteo Newinnovativeproductsreplaceoldestablishedones
• Theparadoxofsuccessandfailureo entrepreneursarereplacingconventionalmanagerswhohaveaneedforsuccessbutsomeinnovations
failo withinfailurearetheseedsforsuccess
15.8TheEntrepreneurialMindsetEvenentrepreneurialmanagersmaylosetheirentrepreneurialedge.Thedemandsofday-to-dayadministrationandorganisationalpolicies,proceduresandsystemstendtoforcetheentrepreneurtobecomemoreadministrativelyoriented.Inordertomaintaintheentrepreneurialmindset,themanagermustassumefourongoingresponsibilities.Theseinclude;
• framingthechallenge-cleardefinitionofthespecificchallengeseveryoneintheinnovativeprojectshouldaddress
• absorbingtheuncertainty-makeuncertaintylessdaunting• defininggravity-whatisacceptedandwhatisnotaccepted• clearingobstacles-internalcompetitionforresources,mustsecurethem
15.9TheTwenty-FirstCenturyEntrepreneurialCompany:ADynamicIncubatorThecapabilitiesthattheorganisationsoftomorrowshouldhave.Theydifferentiatebetweenstrategicmanagementandentrepreneurship,butpointoutthatstrategicmanagementprovidesthecontextwithinwhichentrepreneurialactionsarepursued.
Theorganisationsoftomorrowwillbetheonesthatwillbecapableofmergingstrategicactionswithentrepreneurialactionsonanon-goingbasisinsixdominantdomains:
• Innovation-innovationeffortsmustbemanagedstrategically• Networks-networksofcooperationbetweenorganisations• Globalisation/internationalisation-exploitationofglobalnetworksandopportunities• Organisationallearning-strategiccommitmenttolearning• Thetopmanagementteamandgovernance-musthaveasharedentrepreneurialvision• Growthopportunities-changesinenvironments
Entrepreneurialorganisationsinthetwenty-firstcenturywillbeconceptualisedasacollectionoffourmajorportfolios:
• Portfolioofcompetencies-skillsandcapabilitieswithintheorganisationthatthestrategicdirectionwillbebuiltaround.theabilitytoinnovate,adaptandmanagechange
• portfolioofresources-financial,physical,humanrelationalandintellectualresourcesthatareinnovatingandenabling
• Portfolioofinnovations-balancebetweennewpps.Pursuemultipleinnovationsandlearnsystematically.Cyclesofrapidevolutionandperiodicrevolution
• Portfolioofventures-devolutionofthecompanyintosmalleronesthatcanbeseamlesslycoordinatedFromaportfolioperspective,theorganisationbecomesadynamicincubatorforconcepts,productsandventures.